<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1999
REGISTRATION NO. 333-66085
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
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 200, 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, SUITE 200, 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. / /
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 FEBRUARY 10, 1999
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. The common stock has been approved for listing on the Nasdaq
SmallCap Market under the symbol "EVIC." We have applied for listing of the
common stock on the Pacific Exchange and the Boston Stock Exchange under the
symbol "EVI."
------------------------
THESE ARE SPECULATIVE SECURITIES AND THIS
INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------
<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 our executive officers 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 our executive
officers. We will not receive any of the proceeds from the sale of shares, if
any, purchased by the underwriters from our executive officers. 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>
[Graphic Appears Here]
A map of the United States showing the cities where EVC is offering courses.
Photographs of students in classrooms equiped with video conferencing equipment
appear on the upper right side (outside the map) and inside the map. Lines
connect the classroom picture outside the map to the cities where courses are
offered.
CERTAIN PERSON PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWIDE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
BY ENTERING STABALIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR
IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<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 believe that our
interactive video conferencing systems enable students to experience more
closely an actual classroom environment than any other distance learning system
currently available.
We currently offer courses to employees of Citibank, N.A., American
International Group, Inc., Merrill Lynch, & Co., Inc., Travelers Indemnity
Company, Zurich Insurance Company (U.S. Branch), Reliance National, General
Reinsurance Corporation and, in a pilot program, to employees of CNA Financial
Corp. In the third quarter of 1999, we expect to begin offering courses in
Europe to employees of some of our corporate customers.
We currently deliver courses given by Adelphi University, The College of
Insurance and Mercy College. In the first quarter of 1999, we began delivering
an executive development course from the University of Notre Dame and began
offering graduate computer engineering courses given by Manhattan College.
We have agreements with AT&T Corp. to co-market our courses and programs
with AT&T's telecommunications services and with VSI Enterprises, Inc. to market
its interactive video conferencing systems.
Our business strategy is to become the leading world-wide provider of
college, university and training courses and programs via interactive video
conferencing systems.
We were organized in March 1997. Our principal executive offices are
located at 35 East Grassy Sprain Road, Suite 200, 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.
About the market for our services
Recent developments in interactive teleconferencing technology, the
emphasis on locational convenience and 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. According to the U.S.
Department of Education, in 1994, about 40% of adults (76 million people)
participated in adult education activities.
Certain economic, demographic and social trends are contributing to the
growing demand for career-oriented education:
o Corporations are investing in intellectual development of employees in
order to gain competitive advantages.
o The ongoing transformation of the U.S. economy from an industrial economy
to a knowledge-based economy requires employees to be better educated.
o We believe there is increased recognition among adults that
post-secondary education leads to significant improvements in their
financial and employment prospects.
o Education providers recognize that adult enrollment is a significant
source of revenue and important to their economic growth.
2
<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 our executive officers)
Total Shares Outstanding Prior to Offering............. 3,008,909
Total Shares Outstanding After Offering................ 4,208,909 shares
Total Shares Outstanding After Offering and Exercise of
all Options and Warrants............................. 5,017,495 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 and 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
Nasdaq SmallCap Symbol................................. EVCI
Proposed PCX Symbol.................................... EVI
Proposed BSE Symbol.................................... EVI
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:
o gives effect to our reincorporation in Delaware in April 1998;
o assumes no exercise of the underwriters' over-allotment option, the
representative's warrants or outstanding options and warrants; and
o 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.
3
<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 and for
the year ended December 31, 1998 are derived from the audited financial
statements of EVC, included elsewhere in this prospectus, by Goldstein Golub
Kessler LLP, independent public accountants. 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."
The balance sheet data below as of December 31, 1998 has been 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 Plan of Operations" and "Capitalization."
<TABLE>
<CAPTION>
MARCH 4, 1997
(DATE OF
INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
------------- --------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................................................. $ -- $ 352
Interest income............................................................. -- 56
----------- ----------
Total revenue............................................................... -- 408
Operating expenses:
Cost of sales............................................................. -- 210
Salaries and benefits..................................................... 334 1,435
Marketing, brochure and student registration costs........................ 158 592
Professional fees......................................................... 61 97
Interest and financing costs.............................................. 59 106
Depreciation.............................................................. -- 235
Other..................................................................... 110 461
----------- ----------
Operating expenses.......................................................... 722 3,136
----------- ----------
Net loss.................................................................... $ (722) $ (2,728)
----------- ----------
----------- ----------
Basic loss per share of common stock........................................ $ (.38) $ (1.03)
----------- ----------
----------- ----------
Weighted-average number of shares of common stock outstanding............... 1,922,951 2,641,636
----------- ----------
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
DECEMBER 31, 1997 ACTUAL AS ADJUSTED
----------------- ------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets....................................................... $ 829 $1,222 $ 13,618
Current liabilities.................................................. 745 921 356
------- ------ --------
Working capital...................................................... 84 301 13,262
Total assets......................................................... 2,115 3,535 15,031
------- ------ --------
Long-term liabilities................................................ 235 -- --
Total liabilities.................................................... 980 921 356
------- ------ --------
Stockholders' equity................................................. $ 1,135 $2,614 $ 14,675
------- ------ --------
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. Please also note that there may be 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.
WE HAVE HAD LIMITED REVENUES AND ANTICIPATE CONTINUING SIGNIFICANT LOSSES
From our inception in March 1997 through December 31, 1997, we had no
revenues and incurred losses of $722,000. Our revenue for the year ended
December 31, 1998 was $352,000 and our accumulated losses at December 31, 1998
were $3,451,000. We believe we may be unable to generate enough revenues to
offset our operating costs and, therefore, expect losses through 1999. However,
we cannot assure you that we will ever generate sufficient revenues to achieve
or sustain profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview Results of Operations" for a
discussion of our developmental activities, sources of revenue and operating
costs.
OUR CONTINUED NEGATIVE CASH FLOW COULD MATERIALLY IMPEDE OUR ABILITY TO OPERATE
Since the billing for tuition by most of our education providers does not
occur until a course is completed and there is a protracted collection cycle,
we have experienced, and expect to continue to experience, negative cash flow
from operations for the foreseeable future. Our negative cash flow from
operations was $176,000 in 1997 and $2,305,000 in 1998. We expect our negative
cash flow to increase substantially which may limit our ability to continue to
implement our business strategy. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Operational Overview--Results of
Operations--Liquidity and Capital Resources" for more information about our
negative cash flow and a discussion about our contractual commitments.
OUR INABILITY TO CONTROL OR EXPEDITE TUITION BILLING AND COLLECTION IS A
MATERIAL IMPEDIMENT TO IMPROVING OUR CASH FLOW
Our education providers control the entire billing and collection process
and we do not receive our share of tuition until they receive payment. In most
cases, we have been receiving our share more than 90 days after completion of
courses and, in some cases, more than nine months after completion of courses.
We believe this is caused mostly by the inability of education providers to
expedite billing procedures and of corporate customers to expedite processing
requests for payment from their employees. The requirement by most of our
corporate customers that they receive evidence of satisfactory completion of
courses by their employees, before requests for payment can be processed, also
contributes significantly to these delays. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Operational
Overview--Revenue and Accounts Receivable" for additional information regarding
tuition billing and collection.
OUR SUCCESS MAY DEPEND ON OUR ABILITY TO OBTAIN SUBSTANTIAL ADDITIONAL FINANCING
FOLLOWING THIS OFFERING
From our inception in March 1997 through December 1998, we have received
net proceeds from offerings of our debt and equity securities of $6,065,000. As
of December 31, 1998, we had working capital of $301,000. Based on current plans
and assumptions relating to our operations, we believe the proceeds of this
offering will be sufficient to satisfy our cash requirements for at least the
next 12 months. After that, we expect to require additional funding in order to
grow. If, however, we are underestimating our cash needs, we will require
additional debt or equity financing sooner. 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. See "Use of Proceeds and Plan of Operations" regarding the
purposes for which we expect to use the proceeds of this offering.
OUR DEPENDENCE ON A LIMITED NUMBER OF CORPORATE CUSTOMERS FOR STUDENTS COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
We currently depend on seven corporate customers for students. Our success
depends upon our ability to establish and maintain relationships with employers
that will provide us with sufficient numbers of students for
5
<PAGE>
our course offerings. If our strategy of leveraging relationships with major
corporations to generate interest within an industry is not successful, we may
continue to be reliant on a limited number of corporate customers. This would
seriously hamper our growth and ability to become profitable. For the year ended
December 31, 1998, 91% of our tuition revenue was attributable to courses
attended by employees of AIG, Citibank and Travelers. Accordingly, the loss of
any of these corporate customers could have a material adverse affect on our
business and financial results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations" and
"Business--Business Strategy" for more information about our sources of revenue
and costs and our strategy.
THE SUBSTANTIAL TIME AND EFFORT REQUIRED TO OBTAIN AND IMPLEMENT CONTRACTS WITH
OUR CORPORATE CUSTOMERS IS IMPEDING OUR GROWTH AND ABILITY TO BECOME PROFITABLE
We have found that to obtain agreements with corporations it takes a long
and uncertain period of time and substantial effort by our personnel,
principally because of our limited operating history and 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. Once initiated, it
generally takes between four and five months to conclude a contract and an
average of another three months to begin offering courses. We have been in
discussions with several potential corporate customers for more than 12 months.
Our ability to conclude contracts with corporate customers is also affected by
the reputation and academic standing of our education providers and their
ability to offer the courses and programs our corporate customers want for their
employees. For the foreseeable future, this concerted effort and long cycle time
is expected to continue to limit our growth and ability to become profitable,
while depleting our cash resources. See "Business--Marketing and Sales" for more
information about how we market our services.
OUR STUDENT ENROLLMENT COULD QUICKLY AND MATERIALLY DECLINE AS A RESULT OF
CHANGES IN EDUCATION POLICIES OF OUR CORPORATE CUSTOMERS
Our contracts with our corporate customers do not give us protection
against subsequent changes in their corporate tuition reimbursement policies or
shifts in their attitudes toward higher education opportunities for employees.
During economic downturns in a particular industry sector or the economy in
general, if tuition reimbursement is materially curtailed by our corporate
customers, 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 kinds of
courses students can take;
o the failure of our corporate customers to actively endorse and promote
our programs; and
o competition from courses given by our corporate customers or others.
See "Business--Services, Corporate Customers and Education
Providers--Competition" for summaries of our contracts with our corporate
customers and education providers and for information about our competition.
OUR DEPENDENCE ON A LIMITED NUMBER OF EDUCATION PROVIDERS FOR COURSES AND
PROGRAMS COULD LIMIT OUR ABILITY TO INCREASE STUDENT ENROLLMENT TO PROFITABLE
LEVELS
We currently depend on four education providers for courses and programs.
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 multi-year 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. We cannot
be certain that our education providers will offer the courses or programs
desired by our corporate customers and their employees. For the year ended
December 31, 1998, our share of tuition from courses given by Adelphi, The
College of Insurance and Mercy College accounted for 100% of our net revenue.
Accordingly, the loss of any of these education providers could have a material
adverse affect on our business and financial results. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" for more discussion about the sources of our
net revenue.
6
<PAGE>
THE TIME AND EFFORT REQUIRED TO OBTAIN EDUCATION PROVIDERS IS LIMITING OUR
ABILITY TO OBTAIN CORPORATE CUSTOMERS
We have found that for us to conclude agreements with colleges and
universities, it takes a long and uncertain period of time and substantial
effort by our personnel, principally because of the number of each education
provider's administrative personnel involved in the decision-making process and
the need for us to learn the policies and procedures of each education provider.
We primarily rely on our employees and consultants to initiate contact with
potential education providers. Once contact is initiated, it generally has been
taking between three and four months to conclude a contract. It takes longer to
reach agreement with education providers that have better reputations, primarily
because they do not have as great a need for supplemental tuition and are more
concerned about protecting their status and reputation. See "Business--Marketing
and Sales" regarding our marketing and sales staff and activities and our
co-marketing agreements.
THE LACK OF EXCLUSIVITY AND NON-COMPETE PROVISIONS COULD MATERIALLY IMPAIR THE
VALUE OF OUR CORPORATE CUSTOMER AGREEMENTS
None of our agreements with corporate customers gives us an exclusive right
to deliver courses to their employees and we do not foresee being able to obtain
such exclusivity. There are no restrictions in our agreements with corporate
customers, and none is contemplated, to prohibit them from competing with us or
from using products or services that compete with us. Accordingly, corporate
customers could materially impair our ability to enroll their employees in our
courses and programs by actively encouraging employee enrollment in competing
courses and programs. See "Business--Services, Corporate Customers and Education
Providers" for a summary of our corporate customer agreements.
EDUCATION VIA VIDEO CONFERENCING IS NOT YET WIDELY ACCEPTED
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. See "Use of Proceeds and Plan of Operations" and
"Business--Interactive Video Conferencing Systems" for information about the
video conferencing equipment we use.
WE DEPEND ON OUR CHAIRMAN, PRESIDENT AND OTHER SENIOR MANAGEMENT TO OPERATE AND
GROW
We believe 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, are essential to our operations
and growth. The loss of the services of Drs. Buntzman and McGrath would
materially adversely affect us. 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. See "Management--Executive Officers, Directors and Key
Employees" for biographies of our senior management and summaries of their
employment agreements.
TO SUCCEED, WE NEED TO ATTRACT AND RETAIN SKILLED ADMINISTRATORS AND TECHNICIANS
IN A HIGHLY COMPETITIVE LABOR MARKET
Our business 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 would be adversely affected. See "Use of Proceeds and Plan of
Operations--Plan of Operations" regarding the additional personnel we intend to
hire following this offering.
7
<PAGE>
WE FACE SUBSTANTIAL COMPETITION FROM EDUCATION PROVIDERS AND OTHERS
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. 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 addition, recent amendments to the
Higher Education Act encourage more competition by providing government
incentives for distance learning.
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, video
and audio cassettes, CD-roms and Internet-based instruction. 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. See
"Business--Competition" regarding the basis on which we compete and for more
discussion about our competitors.
OUR AGREEMENTS AND RELATIONSHIPS WITH OUR EDUCATION PROVIDERS MAY HELP THEM 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. By teaching our education providers how to
deliver courses and programs via interactive video conferencing, we may be
helping them to compete with us, even during the terms of their agreements with
us. See "Business--Services, Corporate Customers and Education Providers" for
more information about our services and education provider agreements.
WE MAY NEED TO REPLACE OBSOLETE EQUIPMENT AT SUBSTANTIAL UNANTICIPATED COSTS
Our success will depend on our ability to adapt timely and effectively to
rapidly occurring technological advances in telecommunications and video
conferencing equipment. To remain competitive, we may need to make substantial
capital investments in new equipment that has made our existing equipment
obsolete, including equipment bought with the proceeds of this offering. We
anticipate that, if interactive video conferencing is widely accepted as an
effective means of providing educational and training programs, the video
conferencing equipment and telecommunications industries will evolve even more
rapidly than it has to date. In addition, other technologies developed by
competitors may significantly reduce demand for our services or render our
services obsolete. See "Use of Proceeds and Plan of Operations" for information
about the equipment we expect to purchase.
REGULATORY CHANGES MAY IMPOSE CONSTRAINTS, ADDITIONAL COSTS OR OTHER BURDENS ON
EVC AND EDUCATION PROVIDERS
State and local governments have primary responsibility for the regulation
of education. Because distance learning often entails the transmission of
educational programming beyond local and state boundaries, local, state and
federal agencies are currently evaluating proposed regulations that could have a
significant impact on our business. It is uncertain to what extent this impact
will be favorable or adverse, or when regulatory authorities will take action.
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. If state or local agencies impose new or more
burdensome licensing requirements on our education providers, we may be unable
to attract or retain the education providers on which our business depends.
In addition to state and local review of licensing requirements, federal
agencies and independent accreditation organizations are conducting their own
reviews. For example, the copyright office is considering whether or not to
extend special copyright exemptions to, or impose special requirements on, the
use of content in distance learning programs. If an exemption is not extended,
the prospect of fines, penalties or royalty
8
<PAGE>
payments could discourage education providers from participating in distance
learning. Additional regulation, if any, resulting from these reviews, may
materially adversely affect us. See "Business--Government Regulation of Distance
Learning" for information about the potential impact on our business of the
Higher Education Act and Digital Millennium Copyright Act.
OUR CHAIRMAN AND OUR EXISTING STOCKHOLDERS CAN ACT TOGETHER TO CONTROL OUR
BUSINESS AND POLICIES WITHOUT THE APPROVAL OF OTHER STOCKHOLDERS
After the offering, all of our current stockholders will, as a group, be
able to vote approximately 72% of the common stock (68% if the underwriters
fully exercise their over-allotment option). In addition, as a result of voting
agreements our chairman has with our president and chief financial officer,
after the offering, our chairman will have the power to direct the vote of
approximately 36% of the common stock (34% if the underwriters fully exercise
their over-allotment option). This will probably be sufficient for Dr. Buntzman
to control the outcome of any stockholder vote. See footnote (2) to the table in
"Principal Stockholders" for summaries of these voting agreements.
OUR ABILITY TO CHANGE THE USES OF THE OFFERING PROCEEDS MAY INCREASE THE RISK
THAT THEY WILL NOT BE USED EFFECTIVELY
Although we anticipate utilizing the proceeds of this offering as stated in
"Use of Proceeds and Plan of Operations," management will have broad discretion
as to the actual uses of such proceeds without having to seek the approval of
the investors in this offering. Future events may cause us to reallocate our
resources, including cash, for uses not presently contemplated by us.
SALES, OR THE EXPECTATION OF SALES, OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK
AFTER THIS OFFERING COULD DECREASE OUR STOCK PRICE
After this offering, 3,008,909 shares (2,967,243 shares if the underwriters
fully exercise their over-allotment option) will become eligible for resale by
our current stockholders. An additional 1,026,252 shares of common stock
reserved for issuance pursuant to our stock incentive plan and outstanding
warrants may also become eligible for resale. See "Shares Eligible for Future
Sale" for information about resales under Rule 144 and future registration
statements filed by EVC and stockholder lock-up agreements.
THE FAILURE TO BE YEAR 2000 COMPLIANT COULD MATERIALLY ADVERSELY AFFECT US
We believe our software is year 2000 compliant because we use "off the
shelf" software applications and operational programs that are certified by the
manufacturers to be year 2000 compliant. However, we cannot be entirely sure we
will not have a year 2000 problem.
We believe it is for more likely that the year 2000 problem may impact
other entities with which we transact business, including corporate customers
and education providers, but we cannot predict the affect of the year 2000
problem on such entities or the economy in general, or the resulting affect on
us. As a result, if preventative or corrective actions by those companies with
which we do business are not made in a timely manner, year 2000 non-compliance
could have a material adverse affect on our business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance" for additional
information concerning the year 2000 problem.
THE INITIAL PUBLIC OFFERING PRICE MAY BE TOO HIGH
The initial public offering price was determined through negotiations
between the underwriters and us. This price may be materially higher than
investors are willing to pay for our shares soon after the offering. You should
read the "Underwriting" section for a more complete discussion of the factors
considered in determining the initial public offering price.
9
<PAGE>
OUR SHARE PRICE MAY BE VERY VOLATILE IN THE FUTURE
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.
THERE WILL BE 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 $8.51 (71%) in the net tangible book value per share of
common stock from the price you pay for the common stock, based on an assumed
offering price of $12.00 per share. In addition, because our existing
stockholders paid an average of $2.25 per share, new investors will have a much
greater risk of loss. See "Dilution" for more details about the calculation of
dilution and such average price.
PRIME CHARTER LTD., THE REPRESENTATIVE OF THE UNDERWRITERS, MAY EXERT UNDUE
INFLUENCE OVER ANY DECISION BY US TO SEEK ADDITIONAL FINANCING
Prime Charter has the following continuing rights:
o to appoint a board member or observer to attend Board meetings following
the offering;
o to receive warrants to purchase up to 120,000 shares of common stock;
o to exercise its demand and piggyback registration rights;
o to exercise its right of first refusal with respect to any sales of
securities made by EVC or its affiliates, other than individual
stockholders, during the three years following the offering; and
o to give its consent to release shares from lock-up agreements prior to
the expiration of 12 months of this offering;
These rights may give Prime Charter leverage over EVC and its management that
could interfere with or otherwise influence the cost and timing of raising
capital we may need in the future. See "Underwriting" for more discussion about
Prime Charter's continuing rights and "Shares Eligible For Future Sale" for
more information about such lock-up agreements.
PROVISIONS OF LAW AND AN AGREEMENT WITH OUR CHIEF EXECUTIVE OFFICER MAY PREVENT
TAKE-OVERS OF EVC AND DEPRESS THE PRICE OF OUR SHARES
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, because they believe our
management can defeat a take-over of our company that could be very beneficial
to non-management stockholders.
10
<PAGE>
OUR CLASSIFIED BOARD LIMITS STOCKHOLDER VOTING FOR ELECTION AND REMOVAL OF
DIRECTORS
Our board of directors is divided into three classes. The director(s) in
each class will be elected for three year terms when their class stands for
election at a stockholders meeting. This staggering of director terms protects
directors from being removed from office by anyone engaged in a proxy contest
for control of the board of directors and dilutes the ability of stockholders to
influence corporate governance policies. Furthermore, our stockholders can only
vote to remove a director for cause as a result of our classified board. See
"Management--Classified Board" for a listing of the directors in each class and
when their terms of office expire.
INDEMNIFICATION AND LIMITATION OF LIABILITY OF OUR OFFICERS AND DIRECTORS MAY
INSULATE THEM FROM ACCOUNTABILITY TO STOCKHOLDERS AT SUBSTANTIAL COST TO EVC
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 also
limits a director's liability for monetary damages for breach of fiduciary duty,
including gross negligence. In addition, we have agreed to advance the legal
expenses of our officers and directors who are required to defend against
claims. 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. See "Management--Limitation on
Liability and Indemnification of Officers and Directors" for a discussion of
these provisions and agreements.
FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS MAY PROVE TO BE MATERIALLY
INACCURATE
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 executive
officers 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.
EVC estimates that $762,000 of the working capital portion of the net
proceeds may be used during the next 12 months to pay the salaries of EVC's
current officers. See "Management--Employment Agreements" for summaries of
employment agreements with EVC officers.
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.
11
<PAGE>
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, which is expected to require $1,200,000 of the
proceeds of this offering. EVC expects to spend an additional $700,000
for direct mail and other advertising, $400,000 for independent sales
consultants and $500,000 for market research and trade shows.
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 and are currently estimated to include: teacher stations,
$300,000; student room stations, $1,500,000; student PC systems,
$2,100,000; and multi-point conferencing units, $2,400,000. See
"Business--Interactive Video Conferencing Systems" for a description of
this equipment.
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.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of EVC as of
December 31, 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 $12.00
per share and the application of the net proceeds therefrom. This table should
be read with the other financial information presented elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
--------------------------------------
ACTUAL AS ADJUSTED
----------------------- -----------
<S> <C> <C>
Stockholders' equity:
Preferred stock--$.0001 par value; authorized 1,000,000 shares, none issued
Common stock--$.0001 par value; authorized 20,000,000 shares, issued and
outstanding 3,008,909 shares and 4,208,909 shares after this offering.......... $ 301 $ 421
Additional paid-in capital........................................................ 6,064,920 18,124,800
Accumulated deficit............................................................... (3,450,560) (3,450,560)
----------- -----------
Stockholders' equity.............................................................. $ 2,614,661 $14,674,661
----------- -----------
Total capitalization.............................................................. $ 2,614,661 $14,674,661
----------- -----------
----------- -----------
</TABLE>
The common stock outstanding excludes 356,000 shares reserved for issuance
under the 1998 incentive plan, 550,252 shares issuable upon exercise of
additional options and warrants and 120,000 shares issuable upon exercise of the
representative's warrants.
13
<PAGE>
DILUTION
The net tangible book value (total assets less total liabilities and net
intangible assets) of the common stock at December 31, 1998 was $1,714,661 or
$.57 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
December 31, 1998 would have been $14,674,661, or $3.49 per share. This
represents an immediate increase in net tangible book value to existing
stockholders of $2.92 per share and an immediate dilution of $8.51 per share to
purchasers of the common stock in this offering. Dilution to new investors would
be $8.28 assuming the underwriters' over-allotment option is exercised in full.
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.................................................................. $ .57
Increase in net tangible book value per share attributable to new
investors................................................................. 2.92
-----
Net tangible book value per share after giving effect to this
offering.................................................................. 3.49
------
Dilution per share to new investors......................................... $ 8.51
------
------
</TABLE>
The following table summarizes, as of December 31, 1998, after giving
effect to this offering, the number of shares of common stock purchased from
EVC, the total consideration paid and the average price per share 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................. 3,008,909 71.5% $ 6,767,700 32.0% $ 2.25
New investors......................... 1,200,000 28.5 14,400,000 68.0 12.00
--------- ----- ----------- ----
Total............................ 4,208,909 100% $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 and for the year ended December 31, 1998 are derived from the financial
statements of EVC, included elsewhere in the prospectus, audited by Goldstein
Golub Kessler LLP, independent public accountants. 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."
The balance sheet data below as of December 31, 1998 has been 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.
<TABLE>
<CAPTION>
MARCH 4, 1997
(DATE OF
INCEPTION) TO YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.............................................................. $ -- $ 352
Interest income.......................................................... -- 56
----------- ----------
Total revenue.............................................................. -- 408
----------- ----------
Operating expenses:
Cost of sales.......................................................... -- 210
Salaries and benefits.................................................. 334 1,435
Marketing, brochure and student registration costs..................... 158 592
Professional fees...................................................... 61 97
Interest and financing costs........................................... 59 106
Depreciation........................................................... -- 235
Other.................................................................. 110 461
----------- ----------
Operating expenses....................................................... 722 3,136
----------- ----------
----------- ----------
Net loss................................................................. $ (722) $ (2,728)
----------- ----------
----------- ----------
Basic loss per share of common stock....................................... $ (.38) $ (1.03)
----------- ----------
----------- ----------
Weighted-average number of shares of common stock outstanding(1)........... 1,922,951 2,641,636
----------- ----------
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
DECEMBER 31, 1997 ACTUAL AS ADJUSTED(2)
----------------- ------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets...................................................... $ 829 $1,222 $ 13,618
Current liabilities................................................. 745 921 356
----------- ------ --------
Working capital..................................................... 84 301 13,262
----------- ------ --------
Total assets........................................................ 2,115 3,535 15,031
----------- ------ --------
Long-term liabilities............................................... 235 -- --
Total liabilities................................................... 980 921 356
----------- ------ --------
Stockholders' equity................................................ $ 1,135 $2,614 $ 14,675
----------- ------ --------
</TABLE>
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 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 from the employees of certain corporate customers advance tuition
payments: Adelphi, 50% and Notre Dame, 100%. However, EVC cannot predict whether
this new policy will adversely impact its student enrollment and, therefore, its
cash flow. Accordingly, the continuation and further implementation of this
policy will depend on its acceptance by students and their employers.
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.
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
16
<PAGE>
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 year ended December 31, 1998 was $351,000. Tuition
payments received or receivable from Adelphi, the College of Insurance and Mercy
College constituted 64%, 19% and 17%, respectively, of such net revenue. Such
net revenue relates to tuition payments and accounts receivable from corporate
customers that are attributable to employees of EVC's corporate customers as
follows: AIG, 41%; Citibank, 37%; Merrill Lynch, 13% and Travelers, 9%. EVC did
not deliver any courses or generate revenue in 1997. EVC has incurred losses
from inception through December 31, 1998 of $3,451,000. These losses have
resulted primarily from:
o salaries and related benefits and expenses of $1,769,000,
o cost of sales of $210,000,
o marketing costs of $750,000,
o professional fees of $158,000,
o interest and financing fees of $164,000,
o depreciation of $235,000 and
o other expenses of $572,000.
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 current plans and
assumptions relating to its operations, that the proceeds from this offering
will be sufficient to satisfy its cash requirements for at least the next
12 months. After that, EVC expects to require additional funding in order to
grow. If, however, EVC is underestimating its cash requirements, EVC will
require additional debt or equity financing sooner. There can be no assurance
that any such required debt or equity financing will be available on acceptable
terms.
YEAR 2000 COMPLIANCE
The year 2000 problem is the result of a widespread programming technique
that causes computer systems to identify a date based on the last two numbers of
a year, with the assumption that the first two numbers of the year are "19." As
a result, the year 2000 would be stored as "00," causing computers to
incorrectly interpret the year as 1900. Left uncorrected, the year 2000 problem
may cause information technology systems (e.g. computer databases) and
non-information systems (e.g. elevators) to produce incorrect data or cease
operating completely.
EVC uses recent releases of "off the shelf" software applications and
operational programs that are certified by the manufacturers to be year 2000
compliant. EVC has contingency plans to deal with unanticipated year 2000
problems, including backing up its database and financial and accounting records
and alternative ways of handling scheduling problems resulting from a failure of
its multipoint conferencing unit.
EVC has been advised by its educational providers that they are year 2000
compliant and that they have contingency plans in place to at least back up
their accounting and financial records.
Publicly available or other information obtained by EVC about its
corporate customers and telecommunications providers indicates they are making
significant efforts to be year 2000 compliant and are also developing
contingency plans to deal with unanticipated problems.
At this time, EVC fully expects to be year 2000 compliant and believes that
its education providers and corporate customers and its significant vendors
have taken, or are taking, the steps necessary to be in compliance by the year
2000. Nevertheless, significant uncertainties remain about the affect on EVC of
third parties who are not year 2000 compliant.
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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 people) 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 goal is to become the leading provider of college, university and
training courses and programs that are offered at geographically dispersed sites
throughout the world using interactive video conferencing systems. 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. Increasing in stages the
number of employees of EVC's corporate customers to whom courses are
offered 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.
EVC is currently offering courses from Adelphi University, The College of
Insurance and Mercy College to employees of Citibank, AIG, Travelers, Zurich
Insurance, Merrill Lynch, Reliance National, General Reinsurance and, on a pilot
basis, CNA. In the first quarter of 1999, EVC began delivering an executive
development course 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 perform the
important functions of conference management, video switching, audio mixing and
data routing and are the key components 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 courses. 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 December 31, 1998, EVC had 18 full-time employees. EVC also engages
part time personnel during recruiting periods and, as of December 31, 1998, had
three 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 currently utilizes approximately 3,500 square feet of space in Yonkers,
New York for its corporate and administrative offices, of which 1,900 square
feet are occupied under a lease expiring August 31, 2002 and the remaining space
is occupied under an oral lease. A written lease for the entire space is being
negotiated and is expected to have a term expiring on August 31, 2002 and
require rent of $7,074 per month, EVC's current rent, subject to annual
escalations. Additional space is readily available. EVC's multi-point
conferencing units are located and serviced in Bohemia New York under an
agreement expiring in December 2000 and currently requiring payments of $11,110
per month subject to increase as equipment and digital data lines are added.
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 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.
The registration statement, and the exhibits and schedules thereto, 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, 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)........................... 53 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
Royce N. Flippin, Jr.(2)........................ 64 Director designee
Arthur H. Goldberg(2)........................... 56 Director designee
</TABLE>
- ------------------
(1) executive officer
(2) The board of directors has elected Messrs. Flippin and Goldberg to, and they
have agreed to become members of, the board of directors effective upon the
commencement 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
27
<PAGE>
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.
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 and, from 1992 to April 1997, he served as staff director/producer of
distance learning of NYNEX.
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.
Royce N. Flippin, Jr. has served, since 1992, as president of Flippin
Associates, a consulting firm focusing on the development of resources, programs
and new markets and human resource management for career planning, communication
and leadership skills. After serving as a tenured professor and director of
athletics at MIT from 1980 to 1992, he has been a director of program
advancement at MIT from 1992 to the present, in which capacity he has been
providing consulting services to the MIT Office of Individual Giving--Resource
Development regarding projects that include technology transfers, individual
gift bequests and the planned MIT athletic center. Mr. Flippin is a trustee or
board member of several profit and non-profit organizations, including Ariel
Capital Management Mutual Funds (trustee since 1986), Radkowsky Thorium Power
Corporation, a privately-held company that is developing non-proliferative
nuclear fuels (director since 1994 and chairman from 1995 to 1997), Kinematic,
Inc., a privately-held company that is developing a virtual environment training
system for the improvement of human motor skills under an exclusive license from
MIT (director since 1994), Newark Boys Chorus School (trustee since 1993) and
Asphalt Green Aqua Center, New York, NY (director since 1993). Mr. Flippin holds
an A.B. degree from Princeton University and a M.B.A degree from Harvard
University Graduate School of Business Administration.
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.
28
<PAGE>
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 date
of this prospectus.
o Class 2, at the second annual meeting of stockholders following the
closing of this date of this prospectus.
o Class 3, at the third annual meeting of stockholders following the date
of this prospectus.
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 Royce N. Flippin, Jr.; and Class 3, Richard Goldenberg and Arthur H.
Goldberg.
The underwriting agreement provides that Prime Charter 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 Prime Charter's nominee to EVC's
board of directors. Prime Charter has not designated an observer or a director
nominee.
EVC believes Arthur H. Goldberg will be deemed an independent director even
though he may earn a commission and has received options under a consulting
agreement with EVC that is discussed under "Certain Transactions."
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 Royce N. Flippin, Jr.
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
29
<PAGE>
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 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.
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<PAGE>
EXECUTIVE COMPENSATION
The following table shows compensation paid to our executive officers for
the years ended December 31, 1998 and 1997.
<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.............. 1998 $210,000 $70,000 $ 780(1)
1997 136,250 35,600 7,020(1)
John J. McGrath,
president...................................................... 1998 126,500 5,750 2,725(1)
1997 50,000 -- 2,700(1)
Richard Goldenberg,
chief financial officer........................................ 1998 102,000 4,750 13,200(3)
1997 18,750 -- 11,100(2)
</TABLE>
- ------------------
(1) car allowance
(2) consulting fees prior to becoming a full-time employee
(3) consulting fees prior to becoming a full-time employee that were not paid
until 1998
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.
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<PAGE>
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 during the term of the agreement. A
change of control means any of the following:
o any person becomes the beneficial owner of 25% or more of EVC's voting
securities; or
o during any consecutive three years, EVC's directors at the beginning of
such three year period and any new director whose election was approved
by at least 2/3 of the directors, cease to constitute a majority of the
board; or
o EVC's stockholders approve a merger or consolidation other than one where
EVC's outstanding voting securities before the transaction constitute 50%
or more of the outstanding securities of the entity surving the
transaction or where a recapitalization is effected in which no person
acquires 25% or more of EVC's voting securities; or
o EVC's stockholders approve a total liquidation of EVC or sale of all or
substantially all of EVC's assets.
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:
o assisting it in recruiting and retaining employees and non-employee
directors, advisors and independent consultants with ability and
initiative;
o providing greater incentive for employees and consultants of EVC; and
o 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 are
eligible 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.
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.
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<PAGE>
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.
The 1998 incentive plan also provides that, upon completion of this
offering, each director that is not also an officer or employee of EVC will be
automatically granted an option to purchase 5,000 shares of common stock on the
date on which such person first becomes a non-employee director. Each
non-employee director will also be automatically granted an option to purchase
5,000 shares on March 1 of each year, provided he or she is then a non-employee
director and, as of such date, he or she has served on the board of directors
for at least the preceding six months. Options granted to non-employee directors
vest in three annual installments commencing on the first anniversary of the
date of grant and have a term of ten years. The exercise price of options
granted to non-employee directors will be 100% of the fair market value per
share of common stock on the date of grant. A non-employee director who has been
granted stock or options by EVC under a consulting or other arrangement is
ineligible to receive any subsequent automatic grants unless the compensation
committee determines otherwise. Accordingly, Royce N. Flippin, Jr., a director
designee, will receive options to purchase 5,000 shares of common stock upon
commencement of this offering, while Arthur H. Goldberg, another director
designee, will not. See "Certain Transactions" regarding options granted to
Mr. Goldberg.
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.
In March 1998, EVC entered into a three year consulting agreement with
Arthur H. Goldberg, who will become a director of EVC upon the commencement 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
33
<PAGE>
agreement. The agreement also grants Mr. Goldberg seven year options to purchase
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 an additional 75,000 shares of common stock
at $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.
The transactions described above between EVC and each of Tayside, B&H and
Mr. Goldberg were consummated when such companies and individuals were 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 two independent 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 February 1, 1999, 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) ....................................... 367,705(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
Royce N. Flippin, Jr.*........................................ -- -- --
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 117,705 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
Effective the date of this prospectus, the authorized common stock of EVC
will consist of 20,000,000 shares, par value $.0001 per share. In addition EVC
has authorized preferred stock of 1,000,000 shares, par value $.0001 per share.
The 3,008,909 currently outstanding shares of EVC common stock are owned by 36
holders of record. Upon consummation of this offering, 4,208,909 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.
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"
36
<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
commencement 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
The common stock has been approved for listing on the Nasdaq SmallCap
Market under the symbol "EVCI." EVC has applied for listing of the common stock
on the Pacific Exchange and the Boston Stock Exchange under the symbol "EVI."
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.
Upon consummation of this offering, EVC will have 4,208,909 shares of
common stock outstanding (4,347,243 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 3,008,909 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 representative's warrants, holders of 1,197,909 shares of the common
stock and warrants to purchase 385,252 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.
37
<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 670,252 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.
EVC and its existing security holders have agreed that they will not,
without the prior written consent of Prime Charter, for a period of 12 months
after the date of this prospectus, directly or indirectly 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 securities of EVC held by them. 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-allotments.
38
<PAGE>
UNDERWRITING
Subject to the terms and conditions of 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 underwriters named below, acting through Prime
Charter, as representative, have severally agreed to purchase from EVC, and
EVC has agreed to sell, an aggregate of 1,200,000 shares of common stock. The
underwriters' obligations to pay for and accept delivery of the shares of common
stock are subject to certain conditions set forth in the underwriting agreement,
including, but not limited to, satisfactory completion of due diligence,
delivery of a comfort letter from EVC's auditors, receipt of an opinion of EVC's
counsel and other closing conditions. The underwriters are committed to purchase
all of the shares of common stock if any shares are purchased. Under certain
circumstances, the commitments of non-defaulting underwriters may be increased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- -------------------------------------------------------------------------------- ----------
<S> <C>
Prime Charter...................................................................
----------
Total...................................................................... 1,200,000
----------
----------
</TABLE>
The underwriters propose to offer the shares of common stock 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 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 Prime Charter a non-accountable expense allowance of
3% of the aggregate offering price of the shares of common stock sold 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 liabilities under the
Securities Act of 1933 in connection with this offering.
The underwriting agreement provides that, during the three years after the
date of this prospectus, Prime Charter, has the right to designate a person to
observe meetings of EVC's board of directors or, during the five years after the
date of this prospectus, require EVC to use its best efforts to elect Prime
Charter's nominee to EVC's board of directors.
EVC has agreed to sell to Prime Charter 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 date of the
consummation of this offeringat a per share exercise price equal to 165% 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 of this prospectus, except to officers or
partners of the underwriters. During the period beginning one year from the date
of the consummation of this offering 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
date of this prospectus, EVC has agreed to include such shares of common stock
in any appropriate registration statement 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.
EVC and its affiliates, other than individual stockholders, will grant
Prime Charter 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 date of this prospectus.
39
<PAGE>
EVC and Drs. Buntzman and McGrath and Mr. Goldenberg, EVC's executive
officers, have granted to the underwriters options, exercisable during the
45-day period after the date of this prospectus, 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. Generally, to the extent that these options are
exercised, each underwriter will become obligated 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 as set forth
above.
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 Prime Charter. 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 underwriters are 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 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 underwriters may reduce the short
position by purchasing common stock in the open market. Prime Charter may also
elect to reduce any short position by exercising all or part of the
over-allotment option described above. In addition, Prime Charter may impose a
penalty bid on certain underwriters and selling group members. This means that
if Prime Charter 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 ofthe common stock.
In addition, neither Prime Charter nor any of the underwriters makes any
representation that Prime Charter or any such underwriter will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The underwriters have informed EVC that sales to any account over which the
underwriters exercise discretionary authority will not exceed 1% of this
offering.
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
December 31, 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 December 31, 1998......................................... F-3
Statement of Operations for the Period from March 4, 1997 (date of inception) to December 31, 1997
and for the Year Ended December 31, 1998.......................................................... F-4
Statement of Stockholders' Equity for the Period from March 4, 1997 (date of inception) to
December 31, 1997 and for the Year Ended December 31, 1998........................................ F-5
Statement of Cash Flows for the Period from March 4, 1997 (date of inception) to December 31, 1997
and for the Year Ended December 31, 1998.......................................................... F-6
Notes to Financial Statements....................................................................... F-7--F-13
</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. ("EVC") as of December 31, 1997 and 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 year
ended December 31, 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 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 year ended December 31, 1998 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that EVC will
continue as a going concern. As discussed in Note 8 to the financial statements,
EVC has had limited revenue, little working capital, recurring losses and an
accumulated deficit that raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 8. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
January 21, 1999
F-2
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................................... $ 127,279 $ 914,700
Accounts receivable, net of allowance for doubtful accounts of $35,000 at
December 31, 1998............................................................... -- 226,776
Subscriptions receivable........................................................... 690,000 --
Prepaid expenses................................................................... 11,238 80,846
---------- -----------
Total current assets................................................................. 828,517 1,222,322
Property and Equipment, net of accumulated depreciation of $234,984 at December 31,
1998............................................................................... 1,190,251 1,405,150
Deferred Income Tax Asset, net of valuation allowance of $77,000 and
$520,000, respectively............................................................. -- --
Other Assets......................................................................... 14,292 7,832
Debt Issue Costs..................................................................... 81,903 --
Deferred Offering Costs.............................................................. -- 900,000
---------- -----------
Total Assets......................................................................... $2,114,963 $ 3,535,304
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses.............................................. $ 534,648 $ 920,643
Current portion of notes payable................................................... 210,177 --
---------- -----------
Total current liabilities............................................................ 744,825 920,643
Notes Payable, net of current portion................................................ 235,000 --
---------- -----------
Total liabilities.................................................................... 979,825 920,643
---------- -----------
Commitments
Stockholders' Equity:
Preferred stock--$.0001 par value; authorized 1,000,000 shares, none issued........ -- --
Common stock--$.0001 par value; authorized 20,000,000 shares, issued and
outstanding 2,329,278 shares and 3,008,909 shares, respectively................. 233 301
Additional paid-in capital......................................................... 1,857,027 6,064,920
Accumulated deficit................................................................ (722,122) (3,450,560)
---------- -----------
Stockholders' equity................................................................. 1,135,138 2,614,661
---------- -----------
Total Liabilities and Stockholders' Equity........................................... $2,114,963 $ 3,535,304
---------- -----------
---------- -----------
</TABLE>
The accompanying notes and independent auditor's report
should be read in conjunction with the financial statements
F-3
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 4, 1997
(DATE OF INCEPTION) YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
1997 1998
------------------- -------------------
<S> <C> <C>
Net revenue.................................................................. -- $ 351,598
Interest income.............................................................. -- 56,369
----------- -----------
Total revenue................................................................ -- 407,967
----------- -----------
Operating expenses:
Cost of sales.............................................................. -- 210,326
Salaries and benefits...................................................... $ 333,661 1,435,525
Marketing, brochures and student registration costs........................ 158,486 591,827
Professional fees.......................................................... 60,842 96,915
Interest and financing costs............................................... 58,536 105,681
Depreciation............................................................... -- 234,984
Other...................................................................... 110,597 461,147
----------- -----------
Operating expenses........................................................... 722,122 3,136,405
----------- -----------
Net loss..................................................................... $ (722,122) $(2,728,438)
----------- -----------
----------- -----------
Basic loss per common share.................................................. $ (.38) $ (1.03)
----------- -----------
----------- -----------
Weighted-average number of common shares outstanding......................... 1,922,951 2,641,636
----------- -----------
----------- -----------
</TABLE>
The accompanying notes and independent auditor's report
should be read in conjunction with the 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>
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......................... 125,455 13 620,987 -- 621,000
Net loss..................................... -- -- -- $ (722,122) (722,122)
--------- ---- ---------- ----------- ----------
Balance at December 31, 1997................... 2,329,279 233 1,857,027 (722,122) 1,135,138
Issuance of common stock for cash............ 533,334 53 3,599,954 -- 3,600,007
Issuance of common stock in connection with
private placement......................... 69,546 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..................................... -- -- -- (2,728,438) (2,728,438)
--------- ---- ---------- ----------- ----------
Balance at December 31, 1998................... 3,008,909 $301 $6,064,920 $(3,450,560) $2,614,661
--------- ---- ---------- ----------- ----------
--------- ---- ---------- ----------- ----------
</TABLE>
The accompanying notes and independent auditor's report
should be read in conjunction with the financial statements
F-5
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
MARCH 4, 1997
(DATE OF INCEPTION) YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
1997 1998
------------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss...................................................................... $(722,122) $ (2,728,438)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation............................................................. -- 234,984
Amortization of debt issue costs......................................... 36,819 81,903
Allowance for doubtful accounts.......................................... -- 35,000
Common stock issued for services......................................... -- 10,500
Changes in operating assets and liabilities:
Increase in accounts receivable.......................................... -- (261,776)
Increase in prepaid expenses............................................. (11,238) (69,608)
(Increase) decrease in other assets...................................... (14,292) 6,460
Increase in accounts payable and accrued expenses........................ 534,648 385,995
--------- ------------
Net cash used in operating activities........................................... (176,185) (2,304,980)
--------- ------------
Cash flows used in investing activity--purchase of property and equipment....... (695,074) (449,883)
--------- ------------
Cash flows from financing activities:
Proceeds from issuance of notes payable....................................... 350,000 --
Debt issue costs.............................................................. (118,722) --
Net proceeds from issuance of common stock.................................... 767,260 4,639,144
Deferred offering costs....................................................... -- (900,000)
Repayment of notes payable.................................................... -- (160,177)
Expenses incurred in the conversion of notes payable to common stock.......... -- (36,683)
--------- ------------
Net cash provided by financing activities....................................... 998,538 3,542,284
--------- ------------
Net increase in cash and cash equivalents....................................... 127,279 787,421
Cash and cash equivalents at beginning of period................................ -- 127,279
--------- ------------
Cash and cash equivalents at end of period...................................... $ 127,279 $ 914,700
--------- ------------
--------- ------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest...................................... $ -- $ 47,979
--------- ------------
--------- ------------
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>
The accompanying notes and independent auditor's report
should be read in conjunction with the financial statements
F-6
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS
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. It 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 eight-week
to 16-week periods meeting one or two times a week.
During the year ended December 31, 1998, three education providers
accounted for 100% (64%, 19% and 17%) 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 1998, respectively.
Deferred offering costs represent costs attributable to a proposed initial
public offering ("IPO") (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 and their financial amounts at year-end). EVC provides a valuation
allowance that reduces deferred tax assets to their net realizable value.
F-7
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
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, EVC'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 6).
During the year ended December 31, 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,
------------------------ ESTIMATED
1997 1998 USEFUL LIFE
---------- ---------- -----------
<S> <C> <C> <C>
Furniture and fixtures......................................... $ 10,286 $ 58,187 7 years
Office computers............................................... 26,439 182,865 5 years
Video teaching equipment....................................... 1,153,526 1,292,813 5 years
Computer software.............................................. -- 83,946 5 years
Automobile..................................................... -- 22,233 5 years
---------- ----------
1,190,251 1,640,044
Less accumulated depreciation.................................. -- 234,894
---------- ----------
$1,190,251 $1,405,150
---------- ----------
---------- ----------
</TABLE>
F-8
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Accounts payable................................................................ $ 55,258 $101,652
Accrued bonuses................................................................. 35,600 77,445
Accrued professional fees....................................................... 22,091 586,285
Accrued marketing brochures..................................................... -- 74,405
Accrued computer and video equipment............................................ -- 80,856
Payable to video equipment provider............................................. 308,349 --
Accrued interest................................................................ 21,000 --
Accrued finder's fees........................................................... 92,350 --
-------- --------
$534,648 $920,643
-------- --------
-------- --------
</TABLE>
4. NOTES PAYABLE:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
-------- -----
<S> <C> <C>
Promissory notes payable(a).......................................................... $115,000 $--
Convertible notes payable(b)......................................................... 235,000 --
Note payable--equipment loan, noninterest-bearing and equipment note payable due on
September 30, 1998................................................................. 95,177 --
-------- ---
Total notes payable................................................................ 445,177 --
Less current portion................................................................. 210,177 --
-------- ---
Notes payable, net of current portion.............................................. $235,000 $--
-------- ---
-------- ---
</TABLE>
- ------------------
(a) In June 1997, EVC completed a private placement in which it received in the
aggregate gross proceeds of $115,000 for 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 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
was repaid in October 1998. 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)
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,
---------------------
1997 1998
-------- ---------
<S> <C> <C>
Net operating losses........................................................... $ 77,000 $ 520,000
Less valuation allowance....................................................... (77,000) (520,000)
-------- ---------
Deferred tax assets............................................................ $ -0- $ -0-
-------- ---------
-------- ---------
</TABLE>
As of December 31, 1998, EVC had net operating loss carryforwards available
to offset future taxable income of approximately $3,400,000 which expire in
various years through 2013. Between October 1997 and August 1998, EVC completed
private offerings of securities. EVC intends to have an 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 December 31,
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>
Year ending December 31,
1999........................................................................................... $258,717
2000........................................................................................... 264,549
2001........................................................................................... 153,418
2002........................................................................................... 105,527
--------
$782,211
--------
--------
</TABLE>
Rent expense charged to operations for the period from March 4, 1997 (date
of inception) to December 31, 1997 and for the year ended December 31, 1998
amounted to approximately $7,700 and $160,000, respectively.
EVC has entered into employment agreements with executive officers of EVC
which provide for compensation and other benefits as defined in the agreements.
Aggregate compensation under the agreements is as follows:
<TABLE>
<S> <C>
Year ending December 31,
1999......................................................................................... $ 682,000
2000......................................................................................... 682,000
2001......................................................................................... 682,000
----------
$2,046,000
----------
----------
</TABLE>
EVC has a consulting agreement with an individual which entitles the
consultant 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 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.
F-10
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. COMMITMENTS:--(CONTINUED)
EVC has a consulting agreement with another individual who will become a
director of EVC upon the commencement of the proposed IPO. The agreement
entitles the consultant to 5% of revenue received by EVC from activities, if
any, with an 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 are vested and options to purchase an additional 25,000
shares of common stock vest each March of the years 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, EVC'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's 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 $6.00 per share.
As of December 31, 1997, EVC had received subscriptions for an aggregate of
$690,000 to purchase 125,000 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
51,752 shares of common stock for $6.00 per share were issued as a finder's fee
in connection with these transactions.
F-11
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. STOCKHOLDERS' EQUITY:--(CONTINUED)
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 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, nonqualified stock options and shares of common stock to employees,
nonemployee directors and others. The option price cannot be less than the fair
market value of the shares of the 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 1998:
<TABLE>
<CAPTION>
WARRANTS
OUTSTANDING
EXERCISE DECEMBER 31,
PRICE PER ------------------
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
January 2003..................................................................... 6.00 86,252 88,252
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
------- ------- -------
308,752 385,252
------- -------
------- -------
</TABLE>
The following table summarizes information for options currently
outstanding and exercisable at December 31, 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
F-12
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. STOCKHOLDERS' EQUITY:--(CONTINUED)
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
(DATE OF INCEPTION) YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
1997 1998
------------------- ------------
<S> <C> <C>
Reported net loss............................................................... $(722,122) $ (2,728,438)
--------- ------------
Pro forma net loss.............................................................. $(746,018) $ (2,805,468)
--------- ------------
Reported net loss per common share.............................................. $ (.38) $ (1.03)
--------- ------------
Pro forma net loss per common share............................................. $ (.39) $ (1.06)
--------- ------------
</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
(DATE OF INCEPTION) YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
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>
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 AND GOING CONCERN:
The accompanying financial statements have been prepared assuming EVC will
continue as a going concern. EVC has had limited revenue, little working
capital, recurring losses and an accumulated deficit that raise substantial
doubt about EVC's ability to continue as a going concern.
EVC is in the process of filing a registration statement on Form SB-2 under
the Securities Act of 1933. The registration statement contemplates an IPO of
common stock having a value of approximately $13,200,000 to $15,600,000.
Management believes that the successful completion of the proposed IPO will
allow EVC to continue as a going concern. If the proposed IPO is not
successfully completed or additional financing cannot be obtained, EVC would be
materially and adversely affected and there is substantial doubt about EVC's
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if EVC is unable to continue as a going
concern.
F-13
<PAGE>
[Graphic Appears Here]
Names of education providers, corporate customers, and co-marketing partners,
arranged around pictures of planets in orbit, with a photograph of students in a
classroom equiped with video conferencing equipment and another photograph of a
student using a desktop computer to access EVC cources.
<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................................... 5
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........................... 33
Principal Stockholders......................... 35
Description of Capital Stock................... 36
Shares Eligible for Future Sale................ 37
Underwriting................................... 39
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 warrants to
purchase 23,500 shares of common stock at $4.00 per share. In connection
with such issuances
- ------------------
** Gives effect to the one-for-two reverse stock split.
II-1
<PAGE>
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 51,752
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>
<S> <C> <C>
*1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Registrant.
*3.1.1 -- Form of Certificate of Amendment to Certificate of Incorporation of the Registrant.
*3.2 -- Amended and Restated 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).
*4.5 -- Form of Common Stock certificate
*5 -- Opinion of FischbeinoBadillooWagneroHarding re: validity of securities.
+10.1 -- Agreement between Educational Video Conferencing, Inc. and Adelphi University for the Offering of
Interactive Televideo Courses dated May 13, 1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
+10.2 -- Agreement between Educational Video Conferencing, Inc. and The College of Insurance for the Offering
of Interactive Televideo Courses dated September 16, 1997.
+10.3 -- Agreement between Educational Video Conferencing, Inc. and Mercy College for the Offering of
Interactive Video Conferenced and Computer Courses dated March 10, 1998.
10.4 -- Agreement between Educational Video Conferencing, Inc. and Reliance National for the Offering of
Interactive Televideo courses and Distance Learning Programs dated October 7, 1998.
10.5 -- Agreement between Educational Video Conferencing, Inc. and Citibank dated May 20, 1997.
10.6 -- Agreement between Educational Video Conferencing, Inc. and American International Group dated
May 21, 1997.
10.7 -- Agreement between Educational Video Conferencing, Inc. and Merrill Lynch for the Offering of
Interactive Televideo Courses and Distance Learning Programs dated June 3, 1998.
10.8 -- Agreement for Interactive Televideo Courses and Distance Learning Programs between Educational Video
Conferencing, Inc. and Travelers Indemnity Company dated July 24, 1998.
10.9 -- Agreement between Educational Video Conferencing, Inc. and Zurich Insurance Company, U.S. dated
August 12, 1998 Branch for the Offering of Interactive Televideo Courses and Distance Learning
Programs dated August 12, 1998.
10.10 -- Memorandum of Understanding between Educational Video Conferencing, Inc. and VSI Enterprises, Inc.
dated September 30, 1997.
10.11 -- Lease Agreement between Educational Video Conferencing, Inc. and Realty Co. (doing business as Royal
Realty) dated September 5, 1997.
10.12 -- Employment Agreement between the Registrant and Dr. Arol I. Buntzman dated October 1, 1998.
10.13 -- Employment Agreement between the Registrant and Dr. John J. McGrath dated October 1, 1998.
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 -- Amended and Restated 1998 Incentive 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.
**10.29 -- Agreement between Arol I. Buntzman and John J. McGrath dated March 4, 1997.
**10.30 -- Supplement to Agreement between Arol I. Buntzman and John J. McGrath dated May 18, 1998.
*23.1 -- Consent of Goldstein Golub Kessler LLP.
*23.2 -- Consent of FischbeinoBadillooWagneroHarding (contained in opinion to be filed as Exhibit 5).
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
23.3 -- Consent of Arthur H. Goldberg.
*23.4 -- Consent of Royce N. Flippin, Jr.
24.1 -- Power of Attorney (set forth on page II-5).
*27 -- Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** Refiled under a new exhibit number.
+ 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
day of February, 1999.
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
- ------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ AROL I. BUNTZMAN Chairman of the Board and February 10, 1999
- ----------------------------------------- Chief Executive Officer
Arol I. Buntzman
/S/ JOHN J. MCGRATH President and Director February 10, 1999
- -----------------------------------------
John J. McGrath
/s/ RICHARD GOLDENBERG Chief Financial Officer, Secretary and February 10, 1999
- ----------------------------------------- Director (Principal Financial Officer and
Richard Goldenberg Principal Accounting Officer)
* February 10, 1999
- -----------------------------------------
Attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- -------- ---------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
*1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Registrant.
*3.1.1 -- Form of Certificate of Amendment to Certificate of Incorporation of the Registrant.
*3.2 -- Amended and Restated 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).
*4.5 -- Form of Common Stock certificate
*5 -- Opinion of FischbeinoBadillooWagneroHarding re: validity of securities.
+10.1 -- Agreement between Educational Video Conferencing, Inc. and Adelphi University for the
Offering of Interactive Televideo Courses dated May 13, 1997.
+10.2 -- Agreement between Educational Video Conferencing, Inc. and The College of Insurance for
the Offering of Interactive Televideo Courses dated September 16, 1997.
+10.3 -- Agreement between Educational Video Conferencing, Inc. and Mercy College for the
Offering of Interactive Video Conferenced and Computer Courses dated March 10, 1998.
10.4 -- Agreement between Educational Video Conferencing, Inc. and Reliance National for the
Offering of Interactive Televideo courses and Distance Learning Programs dated
October 7, 1998.
10.5 -- Agreement between Educational Video Conferencing, Inc. and Citibank dated May 20, 1997.
10.6 -- Agreement between Educational Video Conferencing, Inc. and American International Group
dated May 21, 1997.
10.7 -- Agreement between Educational Video Conferencing, Inc. and Merrill Lynch for the
Offering of Interactive Televideo Courses and Distance Learning Programs dated June 3,
1998.
10.8 -- Agreement for Interactive Televideo Courses and Distance Learning Programs between
Educational Video Conferencing, Inc. and Travelers Indemnity Company dated July 24,
1998.
10.9 -- Agreement between Educational Video Conferencing, Inc. and Zurich Insurance Company,
U.S. dated August 12, 1998 Branch for the Offering of Interactive Televideo Courses and
Distance Learning Programs dated August 12, 1998.
10.10 -- Memorandum of Understanding between Educational Video Conferencing, Inc. and VSI
Enterprises, Inc. dated September 30, 1997.
10.11 -- Lease Agreement between Educational Video Conferencing, Inc. and Realty Co. (doing
business as Royal Realty) dated September 5, 1997.
10.12 -- Employment Agreement between the Registrant and Dr. Arol I. Buntzman dated October 1,
1998.
10.13 -- Employment Agreement between the Registrant and Dr. John J. McGrath dated October 1,
1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- -------- ---------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
10.14 -- Employment Agreement between the Registrant and Richard Goldenberg dated October 1,
1998.
10.15 -- Employment Agreement between the Registrant and Wallace J. Caven dated October 1, 1998.
10.16 -- Employment Agreement between the Registrant and James H. Mollitor dated October 1, 1998.
10.17 -- Consulting Agreement between the Registrant and Arthur H. Goldberg dated March 4, 1998.
10.18 -- 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 -- Amended and Restated 1998 Incentive 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.
**10.29 -- Agreement between Arol I. Buntzman and John J. McGrath dated March 4, 1997.
**10.30 -- Supplement to Agreement between Arol I. Buntzman and John J. McGrath dated May 18, 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 Royce N. Flippin, Jr.
24.1 -- Power of Attorney (set forth on page II-5).
*27 -- Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** Refiled under a new exhibit number.
+ Confidential treatment has been granted with respect to the redacted 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
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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) The Company will, at the option of the Representative, (i)
during a period of five years from the Effective Date, 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) during a period of three years
from the Effective Date, 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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<PAGE>
(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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<PAGE>
(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
25
<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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<PAGE>
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
27
<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
33
<PAGE>
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 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 (v) 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 (vi) 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 (vii) 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, representations 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>
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION OF
EDUCATIONAL VIDEO CONFERENCING, INC.
Pursuant to Section 242 of the General Corporation Law of the State of
Delaware (the "GCL"), Educational Video Conferencing, Inc., a Delaware
corporation (the "Corporation"), does hereby certify as follows:
1. The Certificate of Incorporation is amended by striking Article FOURTH
and inserting in lieu thereof the following:
"FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 21,000,000 shares, consisting
of:
(a) 20,000,000 shares of common stock, par value $0.0001; and
(b) 1,000,000 shares of preferred stock, par value $0.0001.
The Board of Directors of the Corporation (the "Board") is expressly
authorized to fix by resolution or resolutions the designations and the
powers (including voting powers), preferences and rights, and the
qualifications, limitations, or restrictions permitted by Section 151 of
the General Corporation Law of the State of Delaware in respect of any
class or classes of stock or any series of any class of stock of the
Corporation which may be desired but which shall not be fixed by this
Certificate of Incorporation. Such grant of authority includes the power to
specify the number of shares in any series.
At the effective time (the "Effective Time") of this Certificate of
Amendment, all outstanding shares of the Corporation's common stock shall
be automatically combined at the rate of one-for-two (the "Reverse Split")
without the necessity of any further action on the part of the holders
thereof or the Corporation; provided, however, that the Corporation shall,
through its transfer agent, exchange certificates representing common stock
outstanding immediately prior to the Reverse Split (the "Existing Common")
for new certificates representing the appropriate number of shares of
common stock resulting from the Reverse Split ("New Common"). No fractional
shares, but only whole shares of New Common, shall be issued to any holder
of any number of shares which, when divided by two, does not result in a
whole number. In lieu of any fractional share, the Corporation has arranged
for its transfer agent to issue one additional full share of the
Corporation's common stock.
The par value of the common stock shall remain as otherwise provided
in this Article FOURTH and shall not be modified as a result of the Reverse
Split. From and after the Effective Time, certificates representing shares
of Existing Common
- 1 -
<PAGE>
shall represent only the right of the holders thereof to receive New
Common, including, as provided herein, for any fractional shares of
Existing Common.
From and after the Effective Time, the term "New Common" as used in
this Article FOURTH shall mean common stock as provided in this Certificate
of Incorporation."
2. The Certificate of Incorporation is amended by striking Article SIXTH
and inserting in lieu thereof the following:
"SIXTH: The number of directors constituting the entire Board shall be
as fixed from time to time by vote of a majority of the entire Board;
provided, however, that the number of directors shall not be reduced so as
to shorten the term of any director at the time in office, and, provided
further, that the number of directors constituting the entire Board shall
be five until otherwise fixed by a majority of the entire Board.
The Board shall be divided into three classes, as nearly equal in
number as the then total number of directors constituting the entire Board
permits, with the term of office of one class expiring each year.
At the first annual meeting of stockholders following the Effective
Time, the terms of office of the directors of the first class shall expire.
At the second annual meeting of stockholders following the Effective Time,
the terms of office of the directors of the second class shall expire. At
the third annual meeting of stockholders following the Effective Time, the
terms of office of the directors of the third class shall expire. Any
vacancies in the Board for any reason, and any directorships resulting from
any increase in the number of directors, may be filled by the Board, acting
by a majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next election of
the class for which such directors shall have been chosen and until their
successors shall be elected and qualified. Subject to the foregoing, at
each annual meeting of stockholders, the successors to the class of
directors whose term shall then expire shall be elected to hold office for
a term expiring at the third succeeding annual meeting."
3. The Certificate of Incorporation is amended by striking Article TWELFTH
and inserting in lieu thereof the following:
"TWELFTH: The Corporation expressly elects to be governed by Section
203 of the General Corporation Law of the State of Delaware."
4. By the resolution duly adopted by the Board by unanimous written
consent, the foregoing amendments were declared to be advisable and directed to
be submitted for the consideration of the stockholders of this Corporation,
pursuant to Section 242 of the GCL, and, thereafter, such amendments were
approved by written consent of the holders of a majority of the outstanding
stock entitled to vote thereon and prompt notice was given, pursuant to Section
228 of the GCL, to those stockholders of this Corporation entitled to vote
thereon who did not so approve such amendments by written consent.
- 2 -
<PAGE>
5. The Effective Time of this Certificate of Amendment shall be the date
and hour of its filing by the Secretary of State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to its Certificate of Incorporation to be executed by a duly
authorized officer this ___ day of February, 1999.
---------------------------------------------
Dr. Arol I. Buntzman, Chairman
and Chief Executive Officer
- 3 -
<PAGE>
AMENDED AND RESTATED BY-LAWS*
OF
EDUCATIONAL VIDEO CONFERENCING, INC.
ARTICLE I
---------
Stockholders
------------
Section 1.1. Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors on such date and at such place as shall be
fixed from time to time by the Board of Directors. Any other proper business may
be transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors that has been duly designated by the Board
of Directors and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these by-laws, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. If
any notice addressed to a stockholder at the address of that stockholder
appearing on the records of the corporation is returned to the corporation by
the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice to the stockholder at that
address, then all future notices or reports shall be deemed to have been duly
given without further mailing if the same shall be available to the stockholder
on written demand of the stockholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
- --------------------
*As of February 1, 1999.
<PAGE>
Section 1.4. Adjournments. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days or, if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. Except as otherwise provided by law, the certificate
of incorporation or these by-laws, at each meeting of stockholders the presence
in person or by proxy of the holders of shares of stock having a majority of the
votes which could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute
a quorum. In the absence of a quorum, the stockholders so present may, by
majority vote, adjourn the meeting from time to time in the manner provided in
Section 1.4 of these by-laws until a quorum shall attend. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, or, in his or her absence, by the Vice Chairman of
the Board, if any, or in his or her absence by the President, or in his or her
absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his or her absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Except as otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy, but no
such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or by delivering
a proxy in accordance with applicable law bearing a later date to the Secretary
of the corporation.
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Voting at meetings of stockholders need not be by written ballot and,
unless otherwise required by law, need not be conducted by inspectors of
election unless so determined by the holders of shares of stock having a
majority of the votes which could be cast by the holders of all outstanding
shares of stock entitled to vote thereon which are present in person or by proxy
at such meeting.
At all meetings of stockholders for the election of directors a plurality
of the votes cast shall be sufficient to elect directors. All other elections
and questions shall, unless otherwise provided by law, the certificate of
incorporation or these by-laws, be decided by the vote of the holders of shares
of stock having a majority of the votes which could be cast by the holders of
all shares of stock outstanding and entitled to vote thereon.
Section 1.8. Fixing Date for Determination of Stockholders of Record. In
order that the corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any fights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action.
If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
Upon the willful neglect or refusal of the directors to produce such a list
at any meeting for the election of directors, they shall be ineligible for
election to any office at such meeting.
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the books of
the corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 1.10. Action By Consent of Stockholders. Unless otherwise
restricted by the certificate of incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered by hand or by certified or registered mail, return receipt requested)
to the corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of minutes of
stockholders are recorded.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
Section 1.11. Conduct of Meetings. The Board of Directors of the
corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (1) the establishment of an agenda
or order of business for the meeting; (2) rules and procedures for maintaining
order at the meeting and the safety of those present; (3) limitations on
attendance at or participation in the meeting to stockholders of record of the
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corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (4) restrictions on entry to the
meeting after the time fixed for the commencement thereof; and (5) limitations
on the time allotted to questions or comments by participants. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with the
rules of parliamentary procedure.
ARTICLE II
----------
Board of Directors
------------------
Section 2.1. Number; Qualifications. The Board of Directors shall consist
of one or more members, the number thereof to be determined from time to time by
resolution of the Board of Directors. Directors need not be stockholders.
Section 2.2. Election; Resignation; Removal; Vacancies. The Board of
Directors shall initially consist of the persons named as directors by the
incorporator, and each director so elected shall hold office until the first
annual meeting of stockholders or until his or her successor is elected and
qualified.
Except as otherwise provided in the certificate of incorporation, at the
first annual meeting of stockholders and at each annual meeting thereafter, the
stockholders shall elect directors each of whom shall hold office for a term of
one year or until his or her successor is elected and qualified. Any director
may resign at any time upon written notice to the corporation.
Any newly created directorship or any vacancy occurring in the Board of
Directors for any cause may be filled by a majority of the remaining members of
the Board of Directors, although such majority is less than a quorum, or by a
plurality of the votes cast at a meeting of stockholders, and each director so
elected shall hold office until the expiration of the term of office of the
director whom he or she has replaced or until his or her successor is elected
and qualified.
Section 2.3. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined notices thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the Chairman of the Board, President, any Vice President, the
Secretary, or by any two members of the Board of Directors. Notice of a special
meeting of the Board of Directors shall be given by the person or persons
calling the meeting at least twenty-four hours before the special meeting.
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Section 2.5. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the whole Board of Directors shall constitute a
quorum for the transaction of business. Except in cases in which the certificate
of incorporation or these by-laws otherwise provide, the vote of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, or, in his or her absence by the
Vice Chairman of the Board, if any, or in his or her absence by the President,
or in their absence by a chairman chosen at the meeting. The Secretary shall act
as secretary of the meeting but, in his absence, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.8. Informal Action by Directors. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or such committee.
ARTICLE III
-----------
Committees
----------
Section 3.1. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of the
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member.
Any such committee, to the extent permitted by law and to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it.
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Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these by-laws.
ARTICLE IV
----------
Officers
--------
Section 4.1. Executive Officers; Election; Term of Office; Resignation;
Removal; Vacancies. The Board of Directors shall elect a Chairman of the Board,
a President, a Chief Financial Officer and a Secretary, and it may, if it so
determines, choose a Vice Chairman of the Board from among its members. The
Board of Directors may also choose one or more Vice Presidents, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Any
number of offices may be held by the same person.
Each such officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders next succeeding his election,
and until his successor is elected and qualified or until his earlier
resignation or removal.
Any officer may resign at any time upon written notice to the corporation.
The Board of Directors may remove any officer with or without cause at any
time, but such removal shall be without prejudice to the contractual rights of
such officer, if any, with the corporation.
Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise may be filled for the unexpired portion of the
term by the Board of Directors at any regular or special meeting.
Section 4.2. Powers and Duties of Executive Officers. The officers of the
corporation shall have such powers and duties in the management of the
corporation as may be prescribed in a resolution by the Board of Directors or
any employment agreements approved by resolution of the Board of Directors and,
to the extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board of Directors may
require any officer, agent or employee to give security for the faithful
performance of his duties.
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ARTICLE V
---------
Stock
-----
Section 5.1. Certificates. Every holder of stock shall be entitled to have
a certificate signed by or in the name of the corporation by the Chairman of the
Board or Vice Chairman of the Board, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the corporation certifying the number of shares owned
by such stockholder in the corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
Section 5.2. Lost Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or such owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
----------
Indemnification
---------------
Section 6.1. Right to Indemnification. The corporation shall, to the
maximum extent and in the manner permitted by the General Corporation Law of the
State of Delaware and the corporation's certificate of incorporation indemnify
and hold harmless any person against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit,
or proceeding in which such person was or is a party or is threatened to be made
a party by reason of the fact that such person is or was a director, officer,
employee or agent of the corporation.
The Board of Directors is expressly authorized to enter into
indemnification agreements, with such persons as the Board of Directors deems
appropriate, to effectuate the rights set forth in this Article VI and in the
corporation's certificate of incorporation.
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ARTICLE VII
Miscellaneous
Section 7.1. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
Section 7.2. Seal. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 7.4. Interested Directors; Quorum. No contract or transaction
between the corporation and one or more of its directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
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Section 7.5. Form of Records. Any records maintained by the corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time.
Section 7.6. Amendment of By-Laws. These by-laws may be altered or
repealed, and new bylaws made, by the Board of Directors, but the stockholders
may make additional by-laws and may alter and repeal any by-laws whether adopted
by them or otherwise.
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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
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<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
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<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.
9
<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>
WARRANT AGREEMENT, dated as of ______ __, 1999 (the "Effective Date"),
between EDUCATIONAL VIDEO CONFERENCING, INC., a Delaware corporation (the
"Company"), and PRIME CHARTER LTD., a Delaware corporation ("Prime Charter").
The Company proposes to sell to Prime Charter and/or its designee(s)
warrants (the "Warrants") to purchase an aggregate of _______ shares (the
"Warrant Shares") of the Company's common stock, par value $.0001 per share (the
"Common Stock"), in connection with a public offering by the Company of ______
shares of Common Stock (the "Offering") pursuant to a registration statement
(the "Registration Statement") on Form SB-2 (File No. 333-66085) filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act").
THEREFORE, in consideration of the mutual undertakings contained
herein, the Company and Prime Charter hereby agree as follows:
1. Issuance of Warrants. Concurrently with the initial closing (the
"Closing") under the Underwriting Agreement of even date herewith between the
Company and Prime Charter, as representative of the several underwriters named
therein (the "Underwriting Agreement"), related to the Offering, the Company
shall issue, sell and deliver the Warrants to Prime Charter and/or, at Prime
Charter's direction, to one or more underwriters or other members of the
National Association of Securities Dealers, Inc. that participate in the
Offering and/or the bona fide officers or partners of Prime Charter or such
other participants (each a "Permitted Designee") for a purchase price of $.001
per Warrant. Each certificate for Warrants (a "Warrant Certificate") shall be
substantially in the form of Annex A attached hereto.
2. Registration. The Company shall maintain a register for the
Warrants at its principal executive offices for the registration of the issuance
and transfer of Warrants. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person. The Warrants shall be
registered initially in the name of Prime Charter and/or one or more Permitted
Designees in such denominations as Prime Charter may request not less than two
business days prior to the scheduled date of the Closing as set forth in the
Underwriting Agreement.
3. Transfer and Exchange of Warrants. Any Warrant shall be
transferable only upon surrender thereof at the Company's principal executive
offices duly endorsed by its Holder or by such Holder's duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment
or authority to transfer. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the persons entitled thereto. In addition,
a Warrant Certificate may be exchanged, at the option of the Holder thereof, for
another Warrant Certificate or Warrant Certificates of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares upon surrender at the Company's principal executive
offices. Notwithstanding the foregoing, the Warrants may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until after the
first anniversary of the Effective Date, except to a Permitted Designee, by
operation of law or by reason of a reorganization of the Company. Thereafter,
the Warrants and any Warrant Shares shall be freely transferable, subject only
to compliance with applicable securities laws.
<PAGE>
4. Exercise of Warrants.
4.1 Exercise Price and Term. Each Warrant shall entitle the Holder
thereof to purchase from the Company one Warrant Share at a purchase price per
share of $ ____ (the "Exercise Price"), as such purchase price and number of
Warrant Shares may be adjusted from time to time pursuant to the provisions of
Section 8 hereof, payable in full at the time of exercise of such Warrant. The
Warrants may be exercised, in whole or in part, at any time or from time to time
during the four-year period commencing on the first anniversary of the Effective
Date and ending at 5:00 p.m., New York City time, on the fifth anniversary of
the Effective Date (the "Expiration Date"). After the Expiration Date, any
unexercised Warrants shall be void and all rights of the Holders with respect
thereto shall cease.
4.2 Payment of Exercise Price. At the election of any Holder, the
aggregate Exercise Price for any Warrants being exercised may be paid: (a) in
cash in the amount of the aggregate Exercise Price then in effect for the number
of Warrants being exercised, (b) by surrender to the Company of shares of Common
Stock having an aggregate Fair Market Value (as defined below) on the date of
exercise equal to the aggregate Exercise Price then in effect for the number of
Warrants being exercised, (c) by a surrender of Warrants covering a number of
Warrant Shares having an aggregate Fair Market Value, net of the applicable
aggregate Exercise Price therefor, equal to the aggregate Exercise Price then in
effect for the number of Warrants being exercised, or (d) by a combination of
the aforementioned methods of payment. For purposes of this Agreement, the "Fair
Market Value" per share of Common Stock on a given date shall be: (i) if the
Common Stock is listed on a national securities exchange or included on the
Nasdaq National Market, the closing price per share of Common Stock on such date
(or, if there was no trading on such date, on the next preceding day on which
there was trading); (ii) if the Common Stock is not listed on a national
securities exchange or included on the Nasdaq National Market, the average of
the closing bid and asked quotations per share of Common Stock as reported by
Nasdaq (or the National Quotation Bureau Incorporated or any similar
organization) on such date (or, if there were no quotations for the Common Stock
on such date, on the next preceding day on which there were quotations) as
provided by such organization; and (iii) if the Common Stock is not traded on a
national securities exchange or included on the Nasdaq National Market and bid
and asked quotations are not provided by Nasdaq (or the National Quotation
Bureau Incorporated or any similar organization), as determined by the agreement
of the parties in good faith or, in the absence of such agreement, as determined
pursuant to arbitration under the auspices of the American Arbitration
Association.
4.3 Exercise Procedure. Warrants may be exercised by their surrender
at the Company's principal executive offices, with the Election to Purchase form
attached thereto duly completed and executed, accompanied by payment of the
aggregate Exercise Price for the Warrant Shares to be purchased upon such
exercise. Payment for the Warrant Shares shall be made (a) if payment is to be
made in cash, by a certified or bank cashier's check payable to the order of the
Company or by wire transfer to an account designated by the Company, (b) if
payment is to be made through a surrender of shares of Common Stock, by
surrender of certificates duly endorsed for transfer (with all transfer taxes
paid or provided for), and (c) if payment is to be made by a surrender of
Warrants, by surrender of certificates representing such Warrants. Promptly
after the exercise of any Warrants, upon compliance with Section 5 hereof, the
Company shall issue a certificate or certificates, for the number of full
Warrant Shares to which the Holder thereof is entitled, registered in accordance
with the instructions set forth in the Election to Purchase, together with cash
as provided in Section 10 of this Warrant Agreement payable in respect of
fractional shares and (if applicable) a new Warrant Certificate or
2
<PAGE>
Certificates representing all remaining unexercised Warrants. All Warrant Shares
shall be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights, and free from all liens and charges other than those created
by the Holder. Upon compliance with Section 5 hereof, certificates representing
such Warrant Shares and remaining unexercised Warrants shall be issued by the
Company in such names and denominations, and shall be delivered to such persons,
as are specified by written instructions of the Holder.
4.4 Record Holder. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have become the
holder of record of the Warrant Shares represented thereby on the date upon
which such Warrants were surrendered for exercise, accompanied by payment of the
aggregate Exercise Price as aforesaid, irrespective of the date of issuance or
delivery of such certificate for Warrant Shares; provided, however, that if, at
the date of the surrender of such Warrants and payment of the aggregate Exercise
Price, the transfer books for the Common Stock or any other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares or for shares of such other class of stock in respect of
which such Warrants are then exercisable shall be issuable as of the date on
which such books shall next be opened (whether before or after the Expiration
Date) and, until such date, the Company shall be under no duty to deliver any
certificate for such Warrant Shares or for shares of such other class of stock;
and, provided, further, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 20
days.
5. Payment of Taxes. The Company shall promptly pay all documentary
stamp taxes attributable to the issuance of Warrants or the issuance of Warrant
Shares upon the exercise of any Warrants, except that any transfer taxes payable
in connection with the issuance of Warrants or Warrant Shares in any name other
than that of the Holder of the Warrants surrendered shall be paid by such Holder
and, if any such tax would otherwise be payable by the Company, no such issuance
or delivery shall be made unless and until the person requesting such issuance
has paid to the Company the amount of any such tax or it is established to the
reasonable satisfaction of the Company that any such tax has been paid.
6. Replacement Warrants. In case any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the lost, stolen or destroyed
Warrant Certificate, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate, together with an appropriate agreement regarding indemnification of
the Company relating to the issuance of a replacement Warrant Certificate.
7. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available for issuance the number of its authorized but
unissued shares of Common Stock or other stock sufficient to permit the exercise
in full of the Warrants and any transfer agent for the Common Stock or other
stock issuable upon the exercise of Warrants shall be directed at all times to
reserve such number as shall be sufficient for such purpose. The Company will
keep a copy of this Warrant Agreement on file with each such transfer agent and
will supply such transfer agent with duly executed stock certificates for such
purpose and will provide or otherwise make available any cash that may be
payable as provided in Section 10 hereof. All Warrants surrendered upon the
exercise thereof shall be canceled. After the Expiration Date, no shares shall
be subject to reservation in respect of any unexercised Warrants.
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8. Adjustments.
8.1 Adjustment of Exercise Price.
8.1.1 Initial Exercise Price. The Exercise Price, which
initially will be as provided in Section 4.1, shall be adjusted and readjusted
from time to time as provided in this Section 8.1 and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 8.1.
8.1.2 Issuance of Additional Shares of Common Stock. In case
the Company, at any time after the date of the Closing, shall issue additional
shares of Common Stock for no consideration in connection with a dividend, stock
split or other distribution on the Common Stock (including, without limitation,
any distribution of Common Stock by way of spin-off, reclassification or
corporate rearrangement), then, and in each such case, the Exercise Price shall
be reduced concurrently with such issuance to a price (calculated to the nearest
cent) determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance, and
(b) the denominator shall be the number of shares of Common Stock
outstanding immediately after such issuance.
8.1.3 Dividends and Distributions. In case the Company, at any
time after the Effective Date, shall pay or make a dividend or other
distribution on the Common Stock (including, without limitation, any
distribution of stock (other than Common Stock) or other securities, including
securities that are convertible into or exchangeable or exercisable for Common
Stock, property or options by way of dividend, spin-off, reclassification or
corporate rearrangement) then, and in each such case, the Exercise Price in
effect immediately prior to the close of business on the record date fixed for
the determination of the holders of the Common Stock entitled to receive such
dividend or other distribution shall be reduced, effective as of the close of
business on such record date, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to the close of business on such record date minus the value
of such dividend or other distribution (as determined in good faith by the Board
of Directors of the Company) applicable to one share of Common Stock, and
(b) the denominator shall be such Exercise Price in effect
immediately prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this Section
8.1.3 for a dividend payable in shares of Common Stock (which is subject to
Section 8.1.2) or payable in cash or other property and declared out of the
earned surplus (i.e., retained earnings) of the Company (excluding any portion
thereof resulting from a revaluation of property) or which is declared but is
then not paid or made. For purposes of the foregoing, a dividend or distribution
payable other than in cash shall be considered payable out of earned surplus
only to the extent that such earned surplus is charged an
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amount equal to the fair value of such dividend or distribution at the time of
payment as determined in good faith by the Board of Directors of the Company. If
a dividend or distribution covered under this Section 8.1.3 is declared prior to
the Expiration Date but not paid by such date, the Expiration Date shall be
extended until the payment thereof
8.1.4 Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall be
proportionately increased concurrently with the effectiveness of such
combination or consolidation.
8.1.5 Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this Section 8.1 would be
less than $.01, such amount shall be carried forward, and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment that, together with such amount an any other amount or amounts so
carried forward, shall aggregate at least $.01.
8.1.6 Minimum Exercise Price. Notwithstanding anything to the
contrary set forth herein, no adjustment provided for in this Section 8.1 shall
reduce the Exercise Price below the par or stated value of the Common Stock and
the Company shall have no obligation to change such value to permit a further
reduction of the Exercise Price; provided, however, that, except in the event of
any transactions of the type contemplated under Section 8.1.4 hereof, the
Company agrees not to change the par or stated value of the Common Stock.
8.2 Adjustment of Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of Section 8.1, the number of
Warrant Shares that the Holder of a Warrant shall be entitled to receive upon
exercise thereof shall be adjusted to equal that number of Warrant Shares
determined by multiplying the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to such adjustment of the Exercise Price by a
fraction of which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and
(b) the denominator shall be the Exercise Price in effect
immediately following such adjustment of the Exercise Price.
8.3 Notice, Evidence of Adjustments. Whenever the Exercise Price is
adjusted as herein provided, the Company shall promptly cause a notice setting
forth the adjusted Exercise Price and adjusted number of Warrant Shares,
issuable upon exercise of each Warrant to be mailed to the Holders, at their
last addresses appearing in the Warrant register, and shall cause a copy thereof
to be mailed to each transfer agent for the Common Stock. The Company shall
retain a firm of independent public accountants of recognized standing selected
by the Board of Directors (who may be the regular accountants employed by the
Company) to make any computation required by this Section 8, and a certificate
signed by such firm shall accompany said notice and shall be conclusive evidence
of the correctness of such adjustments.
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9. Consolidation, Merger, Sale of Assets, Reorganization, etc.
9.1 General Provisions. In case the Company at any time after the
Effective Date (a) shall consolidate with or merge into any other person and not
be the continuing or surviving person of such consolidation or merger, or (b)
shall permit any other person to consolidate with or merge into the Company and
the Company shall be the continuing or surviving person but, in connection with
such consolidation or merger, the Common Stock or other securities then issuable
upon exercise of the Warrants shall be changed into or exchanged for cash, stock
or other securities or property, or (c) shall transfer, directly or indirectly,
all or substantially all its properties and assets to any other person, or (d)
shall effect a capital reorganization or reclassification of the Common Stock or
other securities then issuable upon exercise of the Warrants (other than a
capital reorganization or reclassification resulting in an adjustment of the
Exercise Price as provided in Section 8.1), then, and in the case of each such
transaction, the Company shall make proper provision such that, upon the terms
and in the manner provided in this Warrant Agreement, the Holder of each
Warrant, upon the exercise thereof at any time after the consummation of such
transaction, shall be entitled to receive, at the Exercise Price then in effect,
in lieu of the Common Stock or other securities issuable upon such exercise
immediately prior to such transaction, the amount of cash, stock or other
securities or property to which such Holder would have been entitled if such
Warrant had been exercised in full immediately prior to such transaction,
subject to adjustments subsequent to such transaction as nearly equivalent as
possible to the adjustments provided for in Section 8 and this Section 9.
9.2 Assumption of Obligations. Notwithstanding anything contained in
this Warrant Agreement to the contrary, the Company shall not effect any of the
transactions described in Section 9.1(a), (b), (c) or (d) unless, prior to the
consummation thereof, the person (other than the Company) that may be required
to deliver any cash, stock or other securities or property upon exercise of any
Warrant as provided herein shall assume, by written instrument delivered to the
Holders of the Warrants, (a) the obligations of the Company under this Warrant
Agreement and the Warrants (and if the Company shall survive the consummation of
any such transaction, such assumption shall not release the Company from any
continuing obligations of the Company under this Warrant Agreement and the
Warrants) and (b) the obligation to deliver to such Holder such cash, stock or
other securities or other property as such Holder may be entitled to receive in
accordance with the provisions of this Section 9; provided, however, that this
Section 9.2 shall not be applicable to any transaction described in Section 9.1
if all such cash, stock, property or other consideration receivable upon
consummation of such transaction is delivered to the Company at such time. Such
person shall similarly deliver to the Company an opinion of counsel to the
effect that this Warrant Agreement and the Warrants shall continue in full force
and effect after any such transaction and that the terms hereof (including,
without limitation all of the provisions of Section 8 and this Section 9.2) and
thereof shall be applicable to the cash, stock or other securities or property
that such person may be required to deliver upon any exercise of the Warrants.
9.3 No Dilution or Impairment. The Company shall not, by amendment of
its certificate of incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant Agreement or
the Warrants, but will at all times, whether or not requested to do so, in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holders against dilution or other impairment. Without limiting the generality of
the foregoing, the Company agrees that it shall take all such reasonable action
as may be necessary
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or appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of stock upon the exercise of all Warrants from
time to time outstanding.
10. Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock upon the exercise of any Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
Holder, the number of Warrant Shares that shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant, the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Fair Market Value of one share
of Common Stock on the date of exercise.
11. Restrictions on Dispositions. The Warrants and the Warrant Shares
have been registered under the Act pursuant to the Registration Statement;
however, Prime Charter acknowledges that the Warrants and the Warrant Shares may
not be transferred except pursuant to (i) a post-effective amendment to the
Registration Statement, (ii) an effective registration statement under the Act
or (iii) any available exemption from registration under the Act permitting such
disposition of securities and upon delivery to the Company of an opinion of
counsel, reasonably satisfactory to counsel for the Company, that such exemption
from registration is available. Prime Charter agrees that the certificates
representing the Warrants and Warrant Shares shall bear an appropriate
restrictive legend to such effect.
12. Registration Rights.
12.1 Demand Registration. Upon written request of the Holder(s) of at
least a majority of the then outstanding Warrants and Warrant Shares made at any
time within the period commencing one year and ending five years after the
Effective Date, the Company shall file within a reasonable period of time and,
in any event within the time period provided in Section 12.3(a) after receipt of
such written request on one occasion, a registration statement (or a
post-effective amendment to a registration statement) under the Act registering
the Warrant Shares. Within 15 days after receiving any such notice, the Company
shall give notice to the other Holders of the Warrants and the Warrant Shares
advising that the Company is proceeding with such registration statement or
post-effective amendment (the "Demand Registration Statement"), and offering to
include therein the Warrant Shares of such other Holders. The Company shall not
be obligated to include the Warrant Shares of any such other Holder in such
registration unless such other Holder shall accept such offer by notice in
writing to the Company within 15 days after receipt of such notice from the
Company. The Company shall use its reasonable best efforts to file and cause the
Demand Registration Statement to become effective as promptly as practicable and
to remain effective for the period of time provided in Section 12.3, to reflect
in the Demand Registration Statement financial statements that are prepared in
accordance with Section 10(a)(3) of the Act, and to amend or supplement the
Demand Registration Statement to reflect any facts or events arising that,
individually or in the aggregate, represent a material change in the information
set forth in the Demand Registration Statement to enable any Holders of Warrants
to exercise warrants and/or sell the underlying Warrant Shares during such time
period provided in Section 12.3. If any registration pursuant to this Section
12.1 is an underwritten offering, the Holders of a majority of the Warrant
Shares to be included in such registration will select an underwriter (or
managing underwriter if such offering should be syndicated) approved by the
Company, such approval not to be unreasonably withheld. Notwithstanding anything
in this Warrant Agreement to the contrary, the Company shall be entitled to
postpone for a reasonable period of time (not exceeding 60 days in any 12-month
period) the filing or effectiveness of the Demand Registration Statement
otherwise required to be prepared and filed by it pursuant to
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this Section 12.1 if the Company's Board of Directors determines, in its
reasonable discretion, that such registration and offering would adversely
affect any financing, acquisition, corporate reorganization or other material
transaction involving the Company and the Company promptly gives the Holders
written notice of such determination specifying the grounds therefor and an
estimate of the anticipated delay. If the Company shall so postpone the filing
of the Demand Registration Statement, a majority-in-interest of the requesting
Holders shall have the right to withdraw the request for demand registration by
giving written notice to the Company within 30 days after receipt of the notice
of postponement.
12.2 Piggyback Registration. If, at any time within the period
commencing one year and ending seven years after the Effective Date, the Company
proposes to register any voting equity securities under the Act in a primary
registration on behalf of the Company and/or in a secondary registration on
behalf of holders of such securities, and the registration form to be used may
be used for registration of the Warrant Shares, the Company shall give prompt
written notice (which, in the case of a registration pursuant to the exercise of
demand registration rights other than those provided in Section 12.1, shall be
within 10 business days after the Company's receipt of notice of such exercise
and, in any event, shall be at least 30 days prior to the date of such filing)
to the Holders of Warrants and/or Warrant Shares (regardless of whether some of
the Holders shall have theretofore availed themselves of the demand rights
provided in Section 12.1) of its intention to effect registration and shall
offer to include in such registration such number of Warrant Shares with respect
to which the Company has received written requests for inclusion therein within
10 business days after receipt of such, notice from, the Company upon generally
the same terms and conditions as the person or persons for whom such
registration is being effected has agreed to. This Section 12.2 is not
applicable to any registration statement to be filed by the Company on Forms S-4
or S-8 or any successor forms. The Company shall not be obligated to cause to be
effective any registration statement as to which it has given notice to the
Holders of Warrants and/or Warrant Shares and shall have discretion to withdraw
any such registration without liability to Holders of Warrants and/or Warrant
Shares.
Notwithstanding the foregoing, if the managing underwriter of the
offering shall determine in good faith and advise the Company in writing that
the inclusion of the Warrant Shares and other securities being offered in such
registration would materially and adversely affect the marketability of the
offering, then the Company and the managing underwriter may reduce the number of
Warrant Shares to be registered on a pro rata basis proportionate to the
reduction of all other holders of securities participating in such registration
pursuant to the exercise of piggyback registration rights. In such event, the
Company may reduce the number of Warrant Shares to be registered to zero as long
as no other securities are registered in such registration statement pursuant to
an exercise of piggyback registration rights.
12.3 Registration Procedures. If and whenever the Company is required
by the provisions of this Section 12 to use its reasonable best efforts to
effect the registration of any Warrant Shares under the Act, the Company will,
as expeditiously as possible:
(a) in connection with any registration pursuant to Section
12.1, prepare and file with the Commission a registration statement (which shall
be filed as soon as practical after receipt of requisite requests from Holders
of Warrant Shares for registration, but not more than 90 days in the case of a
registration statement on Form S-1 or SB-2, or 45 days in the case of any other
form) with respect to the Warrant Shares and use its reasonable best efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as
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hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 12.3(a) and comply with the provisions of the
Act with respect to the disposition of all Warrant Shares covered by such
registration statement in accordance with the Holders' intended method of
disposition set forth in such registration statement for such period (so long as
such registration statement was filed pursuant to Section 12.1);
(c) furnish to each seller of Warrant Shares and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Warrant Shares covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Warrant Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as each seller shall request, and do any and
all other acts and things which may be necessary under such securities or blue
sky laws to enable such seller to consummate the public sale or other
disposition in such jurisdictions of the securities to be sold by such seller,
except that the Company shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not
qualified or to file any general consent to service of process;
(e) use its reasonable best efforts to list the Warrant Shares
covered by such registration statement with any securities exchange or automated
quotation system on which the Common Stock of the Company is then listed;
(f) immediately notify each seller of Warrant Shares and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Act, of the happening of
any event of which the Company has knowledge as result of which the prospectus
contained in such registration statement, as then in effect, included an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(g) enter into such agreements (including an underwriting
agreement, if applicable) and take all such other actions reasonably necessary
in connection therewith in order to expedite and facilitate the disposition of
the Warrant Shares to be registered;
(h) whether or not the offering is underwritten and at the
request of any seller of Warrant Shares, furnish: (i) such representations and
warranties to such seller and the underwriters, if any, as are customary in
primary underwritten offerings, (ii) an opinion of counsel representing the
Company for the purposes of such registration, addressed to the underwriters, if
any, and to such seller of Warrant Shares, dated the effective date of such
registration statement and in form and substance as is customarily given to
underwriters in an underwritten public offering and to such other effect as
reasonably may be requested by counsel for the underwriters or by such seller of
Warrant Shares or its counsel and (iii) a letter dated such effective date from
the independent public accountants retained by the Company, addressed to the
underwriters, if any, and to such seller of Warrant Shares, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, and such letter shall
additionally
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cover such other financial matters (including information as to the period
ending no more than five business days prior to the date of such letter) with
respect to such registration as such underwriters reasonably may request;
(i) make available upon reasonable notice for inspection by each
seller of Warrant Shares, any underwriter participating in any distribution
pursuant to such registration statement, and any attorney, accountant or other
agent retained by such seller of Warrant Shares or underwriter, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, but not later than 18 months
after the effective date of the registration statement, an earnings statement
covering the period of at least 12 months beginning with the first full month
after the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Act.
For purposes of Section 12.3(a) and (b), the period of
distribution of Warrant Shares in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed the distribution
of all securities purchased by it, and the period of distribution of Warrant
Shares in any other registration shall be deemed to extend until the earlier of
the sale of all Warrant Shares covered thereby and 120 days after the effective
date thereof.
In connection with each registration hereunder the sellers of
Warrant Shares will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary and shall be requested by the Company in order to comply with
federal and applicable state securities laws.
In connection with each registration pursuant to this Section 12
covering an underwritten public offering, the Company and each seller of Warrant
Shares agree to enter into a written agreement with the managing underwriter
(unless the Holder is the managing underwriter) in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
12.4 Expenses. All expenses incurred by the Company in complying
with Sections 12.1, 12.2 and 12.3, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance and reasonable fees and disbursements of counsel for the sellers of
Warrant Shares, but excluding any Selling Expenses, are herein referred to as
"Registration Expenses." "Selling Expenses," as used herein, mean all
underwriting discounts and selling commissions applicable to the sale of Warrant
Shares.
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The Company will pay or cause to be paid all Registration
Expenses of the participating sellers of Warrant Shares in connection with each
registration statement under Sections 12.1 and 12.2. All Selling Expenses in
connection with each registration statement under Sections 12.1 and 12.2 shall
be borne by the participating sellers of Warrant Shares in proportion to the
number of Warrant Shares sold by each, or by such participating sellers of
Warrant Shares other than the Company (except to the extent the Company shall be
a seller of Common Stock) as they may agree.
12.5 No Conflicts. The Company will not enter into any agreement
granting registration rights to any person or entity on terms which conflict
with the provisions of this Section 12.
12.6 Indemnification and Contribution. (a) In the event of a
registration of any Warrant Shares under the Act pursuant to this Section 12,
the Company will indemnify and hold harmless, to the fullest extent permitted by
law, each Holder selling Warrant Shares thereunder, each underwriter thereunder,
and each other person, if any, who controls such selling Holder of Warrant
Shares or underwriter within the meaning of the Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
damages, liabilities and expenses, joint for several, to which such selling
Holder, underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such Warrant Shares were registered under the Act pursuant to
Section 12, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will pay or reimburse each such selling Holder, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company (i) will not be liable
in any such case if and to the extent that (A) any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such selling Holder, any such underwriter or any such
controlling person, as the case may be, in writing specifically for use in such
registration statement, prospectus, amendment or supplement or (B) in respect to
such statement, alleged statement omission or alleged omission with respect to
which such loss, claim, damage or liability directly relates, the final
prospectus for such registration statement corrected in all material respects
such statement alleged statement, omission or alleged omission and a copy of
such final prospectus was not sent or given by or on behalf of such Holder (or
otherwise delivered in accordance with applicable law or regulation) at or prior
to the confirmation of the sale of Warrant Shares of such Holder and (ii) will
not be liable for amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, such consent not to be unreasonably withheld or delayed.
(b) In the event of a registration of any Warrant Shares under
the Act pursuant to this Section 12, each Holder selling Warrant Shares
thereunder, severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Act, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect
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thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement or omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, made in reliance upon and in conformity with information
pertaining to such selling Holder, as such, furnished in writing to the Company
by such selling Holder specifically for use in such registration statement under
which such Warrant Shares was registered under the Act pursuant to this Section
12, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, and will pay or reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably by them in connection with investigating or defending
any such loss, claim, damage liability or action or (ii) any statement, alleged
statement, omission or alleged omission made by the Company with respect to
which such loss, claim, damage or liability directly relates, if the final
prospectus for such registration statement corrected in all material respects
such statement, alleged statement, omission or alleged omission and a copy of
such final prospectus was not sent or given by or on behalf of such Holder (or
otherwise delivered in accordance with applicable law or regulation) at or prior
to the confirmation of the sale of Warrant Shares of such Holder, provided,
however, that (A) the liability of each selling Holder hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the Warrant
Shares sold by such selling Holder under such registration statement bears to
the total public offering price of all securities sold thereunder, but not in
any event to exceed the net proceeds received by such selling Holder from the
sale of Warrant Shares covered by such registration statement and (B) no selling
Holder shall be liable for amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of such selling Holder, such consent not to be unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of any claim or the commencement of any action or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party,
except to the extent the indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and the indemnified party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 12.6(c) for any legal or
other professional expenses subsequently incurred by such indemnified party in
connection with the defense thereof. No indemnifying party, in the defense of
any such claim or litigation against an indemnified party, shall consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation, unless such indemnified party shall otherwise consent in writing. An
indemnifying party who elects to assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim (in addition
to any local counsel), unless any indemnified party reasonably concludes that
there may be legal defenses available to such indemnified party with respect to
such claim which are different from or additional to those available to any
other of such indemnified parties or that a conflict of interest may exist
between such indemnified party and any other of such
12
<PAGE>
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the reasonable fees and expenses of such
additional counsel or counsels.
(d) In order to provide for just and equitable contribution in
any case in which either (i) any Holder exercising registration rights under
this Section 12, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 12.6, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and following the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 12.6 provides for indemnification in
such case or (ii) contribution under the Act may be required on the part of any
such Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 12.6, then, and in each such
case, the Company and such Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect both the relative
benefit received by such Holder and the relative fault of the Company and such
Holder; provided, however, that, in any such case, (A) no Holder will be
required to contribute any amount in excess of the public offering price of all
such Warrant Shares offered by it pursuant to such registration statement and
(B) no person or entity guilty of fraudulent misrepresentation (within, the
meaning of Section 11(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation. For
purposes of the preceding sentence, the relative benefit received by the Holder
of Warrant Shares shall be deemed to be in the same proportion as the public
offering price of its Warrant Shares offered by the registration statement bears
to the public offering price of all securities offered by such registration
statement; and the relative fault of the Company and such Holder shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission of a material fact relates to
information supplied by the Company or by the Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
12.7 Securities Law Compliance. The Company covenants that it will
timely file all reports required to be filed by it under the Act and the
Exchange Act. So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the Company covenants to make publicly
available such information as may be necessary to permit the sale of Warrant
Shares without registration under the Act pursuant to the exemption provided by
Rule 144 under the Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Warrants or Warrant Shares at any time, if applicable the
Company will deliver to such Holder or such Holder's prospective transferee such
information as may be necessary to permit the sale of Warrants or Warrant Shares
pursuant to Rule 144A under the Act, as such rule may be amended from time to
time. Upon request of any Holder of Warrants or Warrant Shares, the Company will
deliver to such Holder a written statement as to whether it has complied with
such information requirements.
13. Notices to Holders.
13.1 Nothing contained in this Warrant Agreement or in any of the
Warrants shall be construed as conferring upon the Holders thereof as such the
right to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter or any other rights whatsoever as
stockholders of the Company.
13
<PAGE>
13.2 In the event the Company intends to:
(a) make any distribution on or with respect to its Common Stock
(or other securities that may then be issuable in lieu thereof upon the exercise
of Warrants), including without limitation any dividend or distribution from
earned surplus, any dividend or distribution of stock, assets or evidences of
indebtedness, or any similar distribution,
(b) issue subscription rights or warrants to holders of its
Common Stock,
(c) consolidate or merge with or into another entity,
(d) liquidate, dissolve or sell or otherwise dispose of
substantially all its assets, or
(e) take any other action that would result in an adjustment to
the Exercise Price or an adjustment to the number of Warrant Shares that the
Holder of a Warrant shall be entitled to receive upon exercise thereof, then the
Company shall cause a notice of its intention to take such action to be sent by
first-class mail, postage prepaid, at least 20 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such distribution or issuance or to vote upon such
proposed consolidation, merger, liquidation, sale or conveyance to each Holder
at its address appearing on the Warrant register, but failure to mail or to
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any action taken in connection with such distribution,
issuance, consolidation, merger, liquidation, sale or conveyance.
14. Notices. Any notice or demand required by this Warrant Agreement
to be given or made by any Holder to or on the Company shall be sufficiently
given or made if sent by registered or certified mail, postage prepaid, or by
facsimile transmission address as follows:
Educational Video Conferencing, Inc.
35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10710
Telephone: 914.395.3501
Facsimile: 914.395.3498
Attention: Dr. Arol I. Buntzman
Any notice or demand required by this Warrant Agreement to be given or made by
the Company to or on the Holder of any Warrant shall be sufficiently given or
made, whether or not such Holder receives the notice, if sent by first-class
mail, postage prepaid, addressed to such Holder at his last address as shown on
the books of the Company.
15. Governing Law. The validity, interpretation and performance of
this Warrant Agreement, of each Warrant issued hereunder and of the respective
terms and provisions thereof shall be governed by the laws of the State of New
York without giving effect to principles of conflicts of law.
16. Counterparts. This Warrant Agreement may be executed in two
counterparts, each of which when so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant
Agreement as of the date first set forth above.
EDUCATIONAL VIDEO CONFERENCING, INC.
By
----------------------------------
Name:
Title:
PRIME CHARTER LTD.
By
----------------------------------
Name:
Title:
15
<PAGE>
ANNEX A
THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"); HOWEVER, NONE OF SUCH SECURITIES MAY BE OFFERED OR SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT UNDER WHICH SUCH SECURITIES WERE REGISTERED UNDER THE
ACT; (ii) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (iii) AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES AND UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE. IN ADDITION, THE WARRANTS REPRESENTED
HEREBY MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE WARRANT AGREEMENT DATED AS OF ______ ___, 1998 BETWEEN
EDUCATIONAL VIDEO CONFERENCING, INC. AND PRIME CHARTER LTD.
No. 1 _______ Warrants
Void After 5:00 p.m. New York City Time
On ______ ___, 2004
Educational Video Conferencing, Inc.
Warrant Certificate
THIS CERTIFIES THAT, for value received, Prime Charter Ltd., or
registered assigns, is the Holder of the number of Warrants set forth above,
each Warrant entitling the owner thereof to purchase at any time after ______
___, 2000 and prior to 5:00 p.m., New York City time, on ______ ___, 2004 (the
"Expiration Date"), one fully paid and non-assessable share of common stock, par
value $.0001 per share ("Common Stock"), of Educational Video Conferencing,
Inc., a Delaware corporation (the "Company"), at a purchase price per share (the
"Exercise Price") initially equal to $ ___, upon presentation and surrender of
this Warrant Certificate with the Form of Election to Purchase (attached hereto)
duly executed. The number of Warrants evidenced by this Warrant Certificate (and
the number of shares that may be purchased upon exercise hereof (the "Warrant
Shares") set forth above and the Exercise Price set forth above are the number
and Exercise Price as of the date of original issuance of this Warrant
Certificate, based on the Common Stock as constituted at such date. As provided
in the Warrant Agreement referred to below, the Exercise Price and the number or
kind of shares that may be purchased upon the exercise of the Warrants evidenced
by this Warrant Certificate are subject to modification and adjustment upon the
happening of certain events.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of the Warrant Agreement dated
as of _____ ___, 1998 between the Company and Prime Charter Ltd., which Warrant
Agreement is hereby incorporated herein reference and made a part hereof and to
which reference is hereby made for a full description of the rights, limitations
of rights, duties and immunities hereunder of the Company and the Holders of the
Warrant Certificates. A copy of the Warrant Agreement is on file at the
principal office of the Company.
<PAGE>
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor, evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
The Exercise Price may be paid in cash or by surrender of the
appropriate number of Warrants or shares of Common Stock in a cashless exercise
or in a combination thereof as provided in Section 4.2 of the Warrant Agreement.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made as provided in the Warrant Agreement.
No Holder of this Warrant Certificate, as such, shall be entitled to
vote or to receive dividends or to consent or to receive notice as a stockholder
of the meetings of stockholders for the election of directors of the Company or
any other matter or to any rights whatsoever as stockholder of the Company,
until the Warrant or Warrant evidenced by this Warrant Certificate shall have
been exercised and the Warrant Shares shall have been delivered as provided in
the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Common Stock or other class
of stock issuable upon exercise of this Warrant Certificate are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares issuable upon such exercise until the date of the reopening of said
transfer books as provided in the Warrant Agreement.
IN WITNESS WHEREOF, Educational Video Conferencing, Inc. has caused the
signature (or facsimile signature) of its Chairman and Secretary to be printed
hereon.
EDUCATIONAL VIDEO CONFERENCING, INC.
By
----------------------------------
Name:
Title:
Attest:
- ------------------------------------
Secretary
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder desires to transfer this Warrant
Certificate).
TO EDUCATIONAL VIDEO CONFERENCING, INC.
FOR VALUE RECEIVED, __________________________________________ hereby
sells assigns and transfers unto ________________________ this Warrant
Certificate, together with all rights, title and interest therein, and does
hereby irrevocably constitute and appoint ______________________, to transfer
the within Warrant Certificate on the books of the within- named Company, with
full power of substitution.
DATED:_____________________
Signature__________________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants evidenced by this
Warrant Certificate).
TO EDUCATIONAL VIDEO CONFERENCING, INC.
The undersigned hereby (1) irrevocably elects to exercise ______________________
_____________ Warrants represented by this Warrant Certificate to purchase
__________ shares of Common Stock issuable upon the exercise of such Warrants,
(2) makes payment in full of the aggregate Exercise Price for such Warrants by
enclosure of a bank cashier's check or money order therefor or by surrendering
Warrants or shares of Common Stock for application to the aggregate Exercise
Price, upon condition that new Warrants be issued for the balance of the
Warrants remaining, and (3) requests that certificates for shares and Warrants
be issued in the name of.
(Please insert social security or other
identifying number)_________________________
__________________________________________________
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number)_________________________
__________________________________________________
(Please print name and address)
DATED:______________________________, 19/20___
Signature__________________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing election to purchase must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
EVC
EDUCATIONAL VIDEO CONFERENCING, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 281505 10 7
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.0001 EACH OF THE
COMMON STOCK OF EDUCATIONAL VIDEO CONFERENCING, INC. transferable on the books
of the Corporation in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. This certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
Witness the seal of the Corporation and the facsimile signatures of its duly
authorized officers.
Dated:
SECRETARY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSEY CITY, N.J.)
BY TRANSFER AGENT AND REGISTRAR
AUTHORIZED OFFICER
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT-(Cust) Custodian (Minor)
under Uniform Gifts to Minors
Act (State)
Additional abbreviations may also be used though not in the above list.
Educational Video Conferencing, Inc.
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof of
the Corporation and the qualifications, limitations or restrictions of such
preferences and/or rights.
For value received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
shares of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint Attorney to transfer the
said stock on the books of the within named Corporation with full power of
substitution in the premises. Dated
Notice:
The signature to this assignment must correspond with the name as written upon
the face of the certificate in every particular, without alteration or
enlargement or any change whatever.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
[LETTERHEAD OF FISCHBEIN BADILLO WAGNER HARDING]
February 10, 1999
Educational Video Conferencing Inc.
35 East Grassy Sprain Road, Suite 200
Yonkers, New York 10710
Gentlemen:
We have acted as counsel for Educational Video Conferencing, Inc., a
Delaware corporation (the "Company"), in connection with the Company's
Registration Statement on Form SB-2 (File No. 333-66085) filed with the
Securities and Exchange Commission on October 23, 1998 and amended on November
12, 1998, November 20, 1998, December 23, 1998 and on the date hereof (the
"Registration Statement"). In accordance with Item 601 of Regulation SB, we are
setting forth our opinion to be filed as Exhibit 5 to the Registration
Statement. Terms used herein and not otherwise defined shall have the same
meanings ascribed to them in the Registration Statement.
We have examined the originals or photocopies of certified copies of
such records of the Company, certificates of officers of the Company and public
officials and such other documents as we have deemed relevant and necessary as a
basis for the opinions hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as certified copies or photocopies and the authenticity of the
originals of such latter documents.
<PAGE>
February 10, 1999
Page 2
Based upon and subject to the foregoing, we are of the opinion that
the Company's shares of common stock, $.0001 par value, have been duly
authorized and, when issued and delivered to and paid for by the underwriters in
accordance with the underwriting agreement to be entered into by the Company and
the underwriters (in the form substantially as set forth in Exhibit 1.1 to the
Registration Statement), will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement and to the reference made to this firm under the
caption "Legal Matters" in the prospectus constituting part of the Registration
Statement.
Very truly yours,
/s/Fischbein Badillo Wagner Harding
<PAGE>
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this 5th day of September 1997, between GCS
Realty Co., Inc. d/b/a Royal Realty, 55 East Grassy Spring Road, Yonkers, New
York 10710,party of the first part, hereinafter referred to as OWNER, and
Educational Video Conferencing, Inc. 325 Mile Square Road, Yonkers, New York
10701, party of the second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
in the building known as 35 East Grassy Sprain, Road in the Borough of Yonkers,
State of New York, for the term of five (5) years (or until such term shall
sooner cease and expire as hereinafter provided) to commence on the 1st day of
September nineteen hundred and ninety seven, and to end on the
day of and
both dates inclusive, at an annual rental rate of
See Rent Schedule
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and due public and private, at the time of
payment, in equal monthly installments in advance on the first day of each month
during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this lease
be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder the
same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent: 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises for general office
use and for no other purpose.
<PAGE>
Tenant 3. Tenant shall make no changes in or to the
Alterations: demised premises of any nature without Owner's
prior written consent. Subject to the prior written
consent of Owner, and to the provisions of this article, Tenant, at Tenant's
expense, may make alterations, installations, additions or improvements which
are non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved in each instance by Owner. Tenant shall,
before making any alterations, additions, installments or improvements, at its
expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filed against the demised premises, or
the building of which the same forms a part, for work claimed to have been done
for, or materials furnished to Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within thirty days thereafter,
at Tenant's expense, by payment or filing the bond required by law. All fixtures
and all paneling, partitions, railings and like installations, installed in the
premises at any time, either by Tenant or by Owner on Tenant' s behalf, shall,
upon installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to Tenant no later
than twenty days prior to the date fixed as the termination of this lease,
elects to relinquish Owner's right thereto and to have them removed by Tenant,
in which event the same shall be removed from the premises by Tenant prior to
the expiration of the lease, at Tenant's expense. Nothing in this Article shall
be construed to give Owner title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment, but upon removal of any such
from the premises or upon removal of other installations as may be required by
Owner, Tenant shall immediately and at its expense, repair and restore the
premises to the condition existing prior to installation and repair any damage
to the demised premises or the building due to such removal. All property
permitted or required to be removed, by Tenant at the end of the term remaining
in the premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or may be removed from
the premises by Owner, at Tenant's expense.
Maintenance 4. Tenant shall, throughout the term of this lease,
and take good care of the demised premises and the
Repairs: fixtures and appurtenances therein. Tenant shall be
responsible for all damage or injury to the demised
-2-
<PAGE>
premises or any other part of the building and the systems and equipment hereof,
whether requiring structural or nonstructural repairs caused by or resulting
from carelessness, omission, neglect or improper conduct of Tenant, Tenant's
subtenants, agents, employees, invitees or licensees, or which arise out of any
work, labor, service or equipment done for or supplied to Tenant or any
subtenant or arising out of the installation, use or operation of the property
or equipment of Tenant or any subtenant. Tenant shall also repair all damage to
the building and the demised premises caused by the moving of Tenant's fixtures,
furniture and equipment. Tenant shall promptly make, at Tenant's expense, all
repairs in and to the demised premises for which Tenant is responsible, using
only the contractor for the trade or trades in question, selected from a list of
at least two contractors per trade submitted by Owner. Any other repairs in or
to the building or e facilities and systems thereof for which Tenant is
responsible shall be performed by Owner at the Tenant's expense. Owner shall
maintain in good working order and repair the exterior and the structural
portions of the building, including the structural portions of its demised
premises, and the public portions of the building interior and the building
plumbing, electrical, heating and ventilating systems (to the extent such
systems presently exist) serving the demised premises. *Tenant agrees to give
prompt notice of any defective condition in the premises for which Owner may be
responsible hereunder. There shall be no allowance to Tenant for diminution of
rental value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or others making repairs,
alterations, additions or improvements in or to any portion of the building or
the demised premises or in and to the fixtures, appurtenances or equipment
thereof. It is specifically agreed that Tenant shall not be entitled to any
setoff or reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this Lease. Tenant agrees that Tenant'
s sole remedy at law in such instance will be by way of an action for damages
for breach of contract. The provisions of this Article 4 shall not apply in the
case of fire or other casualty which are dealt with in Article 9 hereof.
Window 5. Tenant will not clean nor require, permit, suffer
Cleaning: or allow any window in the demised premises to be
cleaned from the outside in violation of Section 202
of the Labor Law or any other applicable law or of the Rules of the Board of
- --------
* In order to enable the air-condition system to function properly Tenant shall
keep all windows closed and shall lower and close window covering when necessary
because of the of the sun's position. Tenant shall comply with all regulations
and requirements Landlord may establish for the functioning and protection of
the HVAC system.
-3-
<PAGE>
Requirements 6. Prior to the commencement of the lease term, if
of Law, Tenant is then in possession, and at all
Fire Insurance, thereafter, Tenant, at Tenant's sole cost and
Floor Loads: expense, shall promptly comply with all present
and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters, Insurance
Services Office, or any similar body which shall impose any violation, order or
duty upon Owner or Tenant with respect to the demised premises, whether or not
arising out of Tenant's use or manner of use thereof, (including Tenant's
permitted use) or, with respect to the building if arising out of Tenant's use
or manner of use of the premises or the building (including the use permitted
under the lease). Nothing herein shall require Tenant to make structural repairs
or alterations unless Tenant has, by its manner of use of the demised premises
or method of operation therein, violated any such laws, ordinances, orders,
rules, regulations or requirements with respect thereto. Tenant may, after
securing Owner to Owner's satisfaction against all damages, interest, penalties
and expenses, including, but not limited to, reasonable attorney's fees, by cash
deposit or by surety bond in an amount and in a company satisfactory to Owner,
contest and appeal any such laws, ordinances, orders, rules, regulations or
requirements provided same is done with all reasonable promptness and provided
such appeal shall not subject Owner to prosecution for a criminal offense or
constitute a default under any lease or mortgage under which Owner may be
obligated, or cause the demised premises or any part thereof to be condemned or
vacated. Tenant shall not do or permit any act or thing to be done in or to the
demised premises which is contrary to law, or which will invalidate or be in
conflict with public liability, fire or other policies of insurance at any time
carried by or for the benefit of Owner with respect to the demised premises or
the building of which the demised premises form a part, or which shall or might
subject Owner to any liability or responsibility to any person or for property
damage. Tenant shall not keep anything in the demised premises except as now or
hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire
Insurance Rating Organization or other authority having jurisdiction, and then
only in such manner and such quantity so as not to increase the rate for fire
insurance applicable to the building, nor use the premises in a manner which
will increase the insurance rate for the building or any property located
therein over that in effect prior to the commencement of Tenant's occupancy.
Tenant shall pay all costs, expenses, fines, penalties, or damages, which may be
imposed upon Owner by reason of Tenant's failure to comply with the provisions
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of this article and if by reason of such failure the fire insurance rate shall,
at the beginning of this lease or at any time thereafter, be higher than it
otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of all fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant. In any
action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up" of rate for the building or demised premises issued by the New York
Fire Insurance Exchange, or other body making fire insurance rates applicable to
said premises shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which it was designed to
carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Owner's judgement, to absorb and prevent
vibration, noise and annoyance.
Subordination: 7. This lease is subject and subordinate to all
ground or underlying leases and to all
mortgages which may now or hereafter affect such leases or the real property of
which demised premises are a part and to all renewals, modifications,
consolidations, replacements and extensions of any such underlying leases and
mortgages. This clause shall be self-operative and no further instrument of
subordination shall be required by any ground or underlying lessor or by any
mortgagee, affecting any lease or the real property of which the demised
premises are a part. In confirmation of such subordination, Tenant shall from
time to time execute promptly any certificate that Owner may request.
Property Loss 8. Owner or its agents shall not be liable for any
Damage, Reimbursement damage to property of Tenant or of others
Indemnity: entrusted to employees of the building, nor for loss
of or damage to any property of Tenant by theft or
otherwise, nor for any injury or damage to persons or property resulting from
any cause of whatsoever nature, unless caused by or due to the negligence of
Owner, its agents, servants or employees. Owner or its agents will not be liable
for any such damage caused by other tenants or persons in, upon or about said
building or caused by operations in construction of any private, public or quasi
public work. If at any time any, windows of the demised premises are temporarily
closed, darkened or bricked up (or permanently closed, darkened or bricked up,
if required by law) for any reason whatsoever including, but not limited to
Owner's own acts, Owner shall not be liable for any damage Tenant may sustain
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thereby and Tenant shall not be entitled to any compensation therefor nor
abatement or diminution of rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed by
insurance, including reasonable attorneys fees, paid, suffered or incurred as a
result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.
Destruction, 9. (a) If the demised premises or any part
Fire and Other thereof shall be damaged by fire or other
Casualty: casualty, Tenant shall give immediate notice
thereof to Owner and this lease shall continue in
full force and effect except as hereinafter set forth. (b) If the demised
premises are partially damaged or rendered partially unusable by fire or other
casualty, the damages thereto shall be repaired by and at the expense of Owner
and the rent and other items of additional rent, until such repair shall be
substantially completed, shall be apportioned from the day following the
casualty according to the part of the premises which is usable. (c) If the
demised premises are totally damaged or rendered wholly, unusable by fire or
other casualty, then the rent and other items of additional rent as hereinafter
expressly provided shall be proportionately paid up to the time of the casualty
and thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner (or sooner reoccupied in part by Tenant then rent
shall be apportioned as provided in subsection (b)above), subject to Owner's
right to elect not to restore the same as hereinafter provided. (d) If the
demised premises are rendered wholly unusable or (whether or not the demised
premises are damaged in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within 90 days after such fire or casualty, or 30 days after adjustment of
the insurance claim for such fire or casualty, whichever is sooner, specifying a
date for the expiration of the lease, which date shall [Rider to be added if
necessary] not be more than 60 days after the giving of such notice, and upon
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the date specified in such notice the term of this lease shall expire as fully
and completely as if such date were the date set forth above for the termination
of this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner shall serve a termination notice as provided for herein,
Owner shall make the repairs and restorations under the conditions of (b) and
(c) hereof, with all reasonable expedition, subject to delays due to adjustment
of insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory, and moveable equipment, furniture, and other property. Tenant's
liability or rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
including Owner's obligation to restore under subparagraph (b) above, each party
shall look first to any insurance in its favor before making any claim against
the other party for recovery for loss or damage resulting from fire or other
casualty, and to the extent that such insurance is in force and collectible and
to the extent permitted by law, Owner and Tenant each hereby releases and waives
all right of recovery with respect to subparagraphs (b), (d), and (e) above,
against the other or any one claiming through or under each of them by way of
subrogation or otherwise. The release and waiver herein referred to shall be
deemed to include any loss or damage to the demised premises and/or to any
personal property, equipment, trade fixtures, goods and merchandise located
therein. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefiting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
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Eminent 10. If the whole or any part of the demised
Domain: premises shall be acquired or condemned by Eminent
Domain for any public or quasi public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease and assigns to
Owner, Tenant's entire interest in any such award. Tenant shall have the right
to make an independent claim to the condemning authority for the value of
Tenant's moving expenses and personal property, trade fixtures and equipment,
provided Tenant is entitled pursuant to the terms of the lease to remove such
property, trade fixture and equipment at the end of the term and provided
further such claim does not reduce Owner's award.
Assignment, 11. Tenant, for itself, its heirs, distributees,
Mortgage, executors, administrators, legal representative,
Etc.: successor and assigns, expressly covenants that it
shall not assign, mortgage or encumber this
agreement, nor underlet, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant or the
majority partnership interest of a partnership Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, undertenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
Electric 12. Rates and conditions in respect to submetering
Current: or rent inclusion, as the case may be, to be added
in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current
shall not exceed the capacity of existing feeders to the building or the risers
or wiring installation and Tenant may not use any electrical equipment which, in
Owner's opinion, reasonably exercised, will overload such installations or
interfere with the use thereof by other tenants of the building. The change at
any time of the character of electric service shall in no wise make Owner liable
or responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
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Access to 13. Owner or Owner's agents shall have the right
Premises: (but shall not be obligated) to enter the demised
premises in any emergency at any time, and, at other
reasonable times, to examine the same and to make such repairs, replacements and
improvements as Owner may deem necessary and reasonably desirable to the demised
premises or to any other portion of the building or which Owner may elect to
perform. Tenant shall permit Owner to use and maintain and replace pipes and
conduits in and through the demised premises and to erect new pipes and conduits
therein provided they are concealed within the walls, floor, or ceiling. Owner
may, during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants. If Tenant is not present to open and permit an entry into the demised
premises, Owner or Owner's agents may enter the same whenever such entry may be
necessary or permissible by master key or forcibly and provided reasonable care
is exercised to safeguard Tenant's property, such entry shall not render Owner
or its agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of the term Tenant shall have
removed all or substantially all of Tenant's property therefrom Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
Vault, 14. No Vaults, vault space or area, whether or not
Vault Space, enclosed or covered, not within the property line of
Area: the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant.
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Occupancy: 15. Tenant will not at any time use or occupy the
demised premises in violation of the certificate of
occupancy issued for the building of which the demised premises are a part.
Tenant has inspected the premises and accepts them as is, subject to the riders
annexed hereto with respect to Owner's work, if any. In any event, Owner makes
no representation as to the condition of the premises and Tenant agrees to
accept the same subject to violations, whether or not of record.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the
contrary notwithstanding, this lease may be can-
celled by Owner by the sending of a written notice to Tenant within a reasonable
time after the happening of any one or more of the following events: (1) the
commencement of a case in bankruptcy or under the laws of any state naming
Tenant as the debtor; or (2) the making by Tenant of an assignment or any other
arrangement for the benefit of creditors under any state statute. Neither Tenant
nor any person claiming through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession of the premises
demised but shall forthwith quit and surrender the premises. If this lease shall
be assigned in accordance with its terms, the provisions of this Article 16
shall be applicable only to the party then owning Tenant's interest in this
lease.
(b) it is stipulated and agreed that in the event of
the termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the fair and reasonable rental value of the demised premises
for the same period. In the computation of such damages the difference between
any installment of rent becoming due hereunder after the date of termination and
the fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be re-let by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such re- letting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
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and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of the
covenants of this lease other than the covenants for
the payment of rent or additional rent; or if the demised premises become vacant
or deserted; or if any execution or attachment shall be issued against Tenant or
any of Tenant's property whereupon the demised premises shall be taken or
occupied by someone other than Tenant; or if this lease be rejected under {}235
of Title 11 of the U.S. Code (bankruptcy code); or if Tenant shall fail to move
into or take possession of the premises within thirty (30) days after the
commencement of the term of this lease, then, in any one or more of such events,
upon Owner serving a written fifteen (15) days notice upon Tenant specifying the
nature of said default and upon the expiration of said fifteen (15) days, if
Tenant shall have failed to comply with or remedy such default, or if the said
default or omission complained of shall be of a nature that the same cannot be
completely cured or remedied within said fifteen (15) day period, and if Tenant
shall not have diligently commenced curing such default within such fifteen (15)
day period, and shall not thereafter with reasonable diligence and in good
faith, proceed to remedy or cure such default, then Owner may serve a written
five (5) days' notice of cancellation of this lease upon Tenant, and upon the
expiration of said five (5) days this lease and the term thereunder shall end
and expire as fully and completely as if the expiration of such five (5) day
period were the day herein definitely fixed for the end and expiration of this
lease and the term thereof and Tenant shall then quit and surrender the demised
premises to Owner but Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the
term shall expire as aforesaid; or if Tenant shall make default in the payment
of the rent reserved herein or any item of additional rent herein mentioned or
any part of either or in making any other payment herein required; then and in
any of such events an Owner may without notice, re-enter the demised premises
either by force or otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other occupant of demised
premises and remove their effects and hold the premises as if this lease had not
been made, and Tenant hereby waives the service of notice of intention to
re-enter or to institute legal proceedings to that end. If Tenant shall make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Owner may cancel and terminate such renewal or
extension agreement by written notice.
Remedies of 18. In case of any such default, re-entry, expira-
Owner and tion and/or dispossess by summary proceedings or
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Waiver of otherwise, (a) the rent shall become due thereupon
Redemption: and be paid up to the time of such re-entry,
dispossess and/or expiration, (b) Owner may re-let
the premises or any part or parts thereof, either in the name of Owner or
otherwise, for a term or terms, which may at Owner's option be less than or
exceed the period which would otherwise have constituted the balance of the term
of is lease and may grant concessions or free rent or charge a higher rental
than that in this lease, and/or (c) Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this lease. The failure of Owner to
re-let the premises or any part or parts thereof shall not release or affect
Tenant's liability for damages. In computing such liquidated damages there shall
be added to the said deficiency such expenses as Owner may incur in connection
with re-letting, such as legal expenses, reasonable attorneys' fees, brokerage,
advertising and for keeping the demised premises in good order or for preparing
the same for re-letting. Any such liquidated damages shall be paid in monthly
installments by Tenant on the rent day specified in this lease and any suit
brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgement, considers advisable and necessary
for the purpose of re-letting the demised premises, and the making of such
alterations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to re-let the demised
premises, or in the event that the demised premises are re-let, for failure to
collect the rent thereof under such re-letting, and in no event shall Tenant be
entitled to receive any excess, if any, of such net rents collected over the
sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed for
any cause, or in the event
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of Owner obtaining possession of demised premises, by reason of the violation by
Tenant of any of the covenants and conditions of this lease, or otherwise.
Fees and 19. If Tenant shall default in the observance or
Expenses: performance of any term or covenant on Tenant's
part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, after notice if
required and upon expiration of any applicable grace period if any, (except in
an emergency), then, unless otherwise provided elsewhere in this lease, Owner
may immediately or at any time thereafter and without notice perform the
obligation of Tenant thereunder. If Owner, in connection with the foregoing or
in connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or recurs any obligations for the payment of money,
including but not limited to reasonable attorneys' fees, in instituting,
prosecuting or defending any action or proceeding, and prevails in any such
action or proceeding then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within ten (10) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner, as damages.
Building 20. Owner shall have the right at any time without
Alterations the same constituting an eviction and without
Management: incurring liability to Tenant therefor to change
the arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets or other
public parts of the building and to change the name, number or designation by
which the building may be known. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or other
Tenants making any repairs in the building or any such alterations, additions
and improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of such controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deem necessary
for the security of the building and its occupants.
No Repre- 21. Neither Owner nor Owner's agents have made
sentations any representations or promises with respect to the
by Owner: physical condition of the building, the land upon
which it is erected or the demised premises, the
rents, leases, expenses of operation or any other matter or thing
affecting or related to the premises except as herein expressly set
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forth and no rights, easements or licenses are acquired by Tenant by implication
or otherwise except as expressly set forth in the provisions of this lease.
Tenant has inspected the building and the demised premises and is thoroughly
acquainted with their condition and agrees to take the same "as is" and
acknowledges that the taking of possession of the demised premises by Tenant
shall be conclusive evidence that the said premises and the building of which
the same form a part were in good and satisfactory condition at the time such
possession was so taken, except as to latent defects. All understandings and
agreements heretofore made between the parties hereto are merged in this
contract, which alone fully and completely expresses the agreement between Owner
and Tenant and any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect an abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
End of 22. Upon the expiration or other termination of the
Term: term of this lease, Tenant shall quit and surrender
to Owner the demised premises, broom clean, in good
order and condition, ordinary wear and damages which Tenant is not required to
repair as provided elsewhere in this lease excepted, and Tenant shall remove all
its property. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this lease. If the last day of
the term of this Lease or any renewal thereof, falls on Sunday, this lease shall
expire at noon on the preceding Saturday unless it be a legal holiday in which
case it shall expire at noon on the preceding business day.
Quiet 23. Owner covenants and agrees with Tenant that
Enjoyment: upon Tenant paying the rent and additional rent and
observing and performing all the terms, covenants
and conditions, on Tenant's part to be observed and performed, Tenant may
peaceably and quietly enjoy the premises hereby demised, subject, nevertheless,
to the terms and conditions of this lease including, but not limited to, Article
31 hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure 24. If Owner is unable to give possession of the
to Give demised premises on the date of the commencement
Possession: of the term hereof, because of the holding-over
or retention of possession of any tenant,
undertenant or occupants or if the demised premises are located in a building
being constructed, because such building has not been sufficiently completed to
make the premises ready for occupancy or because of the fact that a certificate
of occupancy has not been procured or for any other reason, Owner shall not be
subject to any liability for failure to give possession on said date and the
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validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the term of this lease, but the rent
payable hereunder shall be abated (provided Tenant is not responsible for
Owner's inability to obtain possession or complete construction) until after
Owner shall have given Tenant written notice that the Owner is able to deliver
possession in condition required by this lease. If permission is given to Tenant
to enter into the possession of the demises premises or to occupy premises other
than the demised premises prior to the date specified as the commencement of the
term of this lease, Tenant covenants and agrees that such possession and/or
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease except the obligation to pay the fixed annual rent set
forth in the preamble to this lease. The provisions of this article are intended
to constitute "an express provision to the contrary" within the meaning of
Section 223-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for viola-
tion of, or to insist upon the strict performance of
any covenant or condition of this lease or of any of the Rules or Regulations,
set forth or hereafter adopted by Owner, shall not prevent a subsequent act
which would have originally constituted a violation from having all the force
and effect of an original violation. The receipt by Owner of rent and/or
additional rent with knowledge of the breach of any covenant of this lease shall
not be deemed a waiver of such breach and no provision of this lease shall be
deemed to have been waived by Owner unless such waiver be in writing signed by
Owner. No payment by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement of any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. No act or thing done by Owner or Owner's
agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises, and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of 26. It is mutually agreed by and between Owner and
Trial by Tenant that the respective parties hereto shall and
Jury: they hereby do waive trial by jury in any action
proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or
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property damage) on any matters whatsoever arising out of or in any way
connected with this lease, the relationship of Owner and Tenant, Tenant's use of
or occupancy of said premises, and any emergency statutory or any other
statutory remedy. It is further mutually agreed that in the event Owner
commences any proceeding or action for possession including a summary proceeding
for possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4 except for statutory mandatory counterclaims.
Inability to 27. This Lease and the obligation of Tenant to pay
Perform: rent hereunder and perform all of the other
covenants and agreements hereunder on part of Tenant
to be performed shall in no wise be affected, impaired or excused because Owner
is unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment,
fixtures, or other materials if Owner is prevented or delayed from so doing by
reason of strike or labor troubles or any cause whatsoever including, but not
limited to, government preemption or restrictions or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions which have been or are affected, either
directly or indirectly, by war or other emergency.
Bills and 28. Except as otherwise in this lease provided, a
Notices: bill, statement, notice or communication which Owner
may desire or be required to give to Tenant, shall
be deemed sufficiently given or rendered if, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
[Rider to be added if necessary] building of which the demised premises form a
part or at the last known residence address or business address of Tenant or
left at any of the aforesaid premises addressed to Tenant, and the time of the
rendition of such bill or statement and of the giving of such notice or
communication shall be deemed to be the time when the same is delivered to
Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant
to Owner must be served by registered or certified mail addressed to Owner at
the address first hereinabove given or at such other address as Owner shall
designate by written notice.
Services 29. As long as Tenant is not in default under any
Provided by of the covenants of this lease beyond the applicable
Owners: grace period provided in this lease for the curing
of such defaults, Owner shall provide: (a) necessary
elevator facilities on business days from 8 a.m. to 6 p.m. and have
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one elevator subject to call at all other times; (b) heat to the demised
premises when and as required by law, on business days from 8 a.m. to 6 p.m.;
(c) water for ordinary lavatory purposes, but if Tenant uses or consumes water
for any other purposes or in unusual quantities (of which fact Owner shall be
the sole judge), Owner may install a water meter at Tenant's expense which
Tenant shall thereafter maintain at Tenant's expense in good working order and
repair to register such water consumption and Tenant shall pay for water
consumed as shown on said meter as additional rent as and when bills are
rendered; (d) cleaning service for the demised premises on business days at
Owner's expense provided that the same are kept in order by Tenant. If, however,
said premises are to be kept clean by Tenant, it shall be done at Tenant's sole
expense, in a manner reasonably satisfactory to Owner and no one other than
persons approved by Owner shall be permitted to enter said premises or the
building of which they are a part for such purpose. Tenant shall pay Owner the
cost of removal of any of Tenant's refuse and rubbish from the building; (e) If
the demised premises are serviced by Owner's air conditioning/cooling and
ventilating system, air conditioning/cooling will be furnished to tenant from
May 15th through September 30th on business days (Mondays through Fridays,
holidays excepted) from 8:00 a.m. to 6:00 p.m., and ventilation will be
furnished on business days during the aforesaid hours except when air
conditioning/cooling is being furnished as aforesaid. If Tenant requires air
conditioning/cooling or ventilation for more extended hours or on Saturdays,
Sundays or on holidays, as defined under Owner's contract with Operating
Engineers Local 94-94A, Owner will furnish the same at Tenant's expense. [RIDER
to be added in respect to rates and conditions for such additional service;] (f)
Owner reserves the right to stop services of the heating, elevators, plumbing,
air-conditioning, electric, power systems or cleaning or other services, if any,
when necessary by reason of accident or for repairs, alterations, replacements
or improvements necessary or desirable in the judgment of Owner for as long as
may be reasonably required by reason thereof. If the building of which the
demised premises are a part supplies manually Operated elevator service, Owner
at any time may substitute automatic control elevator service and proceed
diligently with alterations necessary therefor without in any wise affecting
this lease or the obligation of Tenant hereunder.
Captions: 30. The Captions are inserted only as a matter of
convenience and for reference and in no way define,
limit or describe the scope of this lease nor the intent of any provisions
thereof.
Definitions: 31. The term "office", or "offices", wherever used
in this lease, shall not be construed to mean
premises used as a store or stores, for the sale or display, at any time, of
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goods, wares or merchandise, of any kind, or as a restaurant, shop, booth,
bootblack or other stand, barber shop, or for other similar purposes or for
manufacturing. The term "Owner" means a landlord or lessor, and as used in this
lease means only the owner, or the mortgagee in possession, for the time being
of the land and building (or the owner of a lease of the building or of the land
and building) of which the demised premises form a part, so that in the event of
any sale or sales of said land and building or of said lease, or in the event of
a lease of said building, or of the land and building, the said Owner shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Owner hereunder, and it shall be deemed and construed without further agreement
between the parties or their successors in interest, or between the parties and
the purchaser, at any such sale, or the said lessee of the building, or of the
land and building, that the purchaser or the lessee of the building has assumed
and agreed to carry out any and all covenants and obligations of Owner,
hereunder. The words "re-enter" and "re-entry" as used in this lease are not
restricted to their technical legal meaning. The term "business days" as used in
this lease shall exclude Saturdays, Sundays and all days as observed by the
State or Federal Government as legal holidays and those designated as holidays
by the applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to HVAC service. Wherever
it is expressly provided in this lease that consent shall not be unreasonably
withheld, such consent shall not be unreasonably delayed.
Adjacent 32. If an excavation shall be made upon land
Excavation- adjacent to the demised premises, or shall be autho-
Shoring: rized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work as
said person shall deem necessary to preserve the wall or the building of which
demised premises form a part from injury or damage and to support the same by
proper foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
Rules and 33. Tenant and Tenant's servants, employees,
Regulations: agents, visitors, and licensees shall observe faith-
fully, and comply strictly with, the Rules and Regu-
lations and such other and further reasonable Rules and Regulations as Owner or
Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given in such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additional Rule or Regulation hereafter made
or adopted by Owner or Owner's agents, the parties hereto agree to submit the
question of the reasonableness of such Rule or Regulation for decision to the
New York office of the American Arbitration Association, whose determination
shall be final and conclusive upon
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the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within fifteen
(15) days after the giving of notice thereof. Nothing in this lease contained
shall be construed to impose upon Owner any duty or obligation to enforce the
Rules and Regulations or terms, covenants or conditions in any other lease, as
against any other tenant and Owner shall not be liable to Tenant for violation
of the same by any other tenant, its servants, employees, agents, visitors or
licensees.
Security: 34. Tenant has deposited with Owner the sum of
$ as security for the faithful
performance and observance by Tenant of the terms,
provisions and conditions of this lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
lease, including, but not limited to, the payment of rent and additional rent,
Owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or any other sum as to which Tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect of
any of the terms, covenants and conditions of this lease, including but not
limited to, any damages or deficiency in the re-letting of the premises, whether
such damages or deficiency accrued before or after summary proceedings or other
re-entry by Owner. In the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this lease, the
security shall be returned to Tenant after the date fixed as the end of the
Lease and after delivery of entire possession of the demised premises to Owner.
In the event of a sale of the land and building or leasing of the building, of
which the demised premises form a part, Owner shall have the right to transfer
the security to the vendee or lessee and Owner shall thereupon be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look to the new Owner solely for the return of said security, and it is agreed
that the provisions hereof shall apply to every transfer or assignment made of
the security to [Space to be filled in or deleted] a new Owner. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and that neither Owner nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
Estoppel 35. Tenant, at any time, and from time to time, upon
Certificate: at least 10 days' prior notice by Owner, shall
execute, acknowledge and deliver to Owner, and/or
to any other person, firm or corporation specified by Owner, a statement
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certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the rent and
additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and, if so, specifying each such default.
Successors 36. The covenants, conditions and agreements con-
and Assigns: tained in this lease shall bind and inure to the
benefit of Owner and Tenant and their respective
heirs, distributees, executors, administrators, successors, and except as
otherwise provided in this lease, their assigns. Tenant shall look only to
Owner's estate and interest in the land and building, for the satisfaction of
Tenant's remedies for the collection of a judgment (or other judicial process)
against Owner in the event of any default by Owner hereunder, and no other
property or assets of such Owner (or any partner, member, officer or director
thereof, disclosed or undisclosed), shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies under or with
respect to this lease, the relationship of Owner and Tenant hereunder, or
Tenant's use and occupancy of the demised premises.
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[Space to be filled in or deleted.]
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner:
- ---------------------------------------
Witness for Tenant:
- ---------------------------------------
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ACKNOWLEDGEMENTS
CORPORATE OWNER
STATE OF NEW YORK, ss.:
County of
On this day of , 19 ,
before me personally came ,
to me known, who being by me duly sworn, did depose and say that
he resides in ;
that he is the of
the corporation described in and which executed the foregoing
instrument, as OWNER; that he knows the seal of said corporation;
the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
---------------------------------
CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of
On this day of , 19 ,
before me personally came ,
to me known, who being by me duly sworn, did depose and say that
he resides in ;
that he is the of
the corporation described in and which executed the foregoing
instrument, as TENANT; that he knows the seal of said
corporation; the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of
Directors of said corporation, and that he signed his name
thereto by like order.
---------------------------------
INDIVIDUAL OWNER
STATE OF NEW YORK, ss.:
County of
On this day of , 19 ,
before me personally came
to be known and known to me to be the individual
described in and who, as OWNER, executed the foregoing instrument
and acknowledged to me that he
executed the same.
---------------------------------
INDIVIDUAL OWNER
STATE OF NEW YORK, ss.:
County of
On this day of , 19 ,
before me personally came
to be known and known to me to be the individual
described in and who, as TENANT, executed the foregoing
instrument and acknowledged to me that he
executed the same.
---------------------------------
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RIDER TO LEASE DATED September 5th 1997
BY AND BETWEEN
GCS REALTY CO.,INC. d/b/a ROYAL REALTY COMPANY, as Landlord
and
EDUCATIONAL VIDEO CONFERENCING, Inc., as Tenant
PREMISES: 35 E. Grassy Sprain Road, Yonkers, N.Y.
37. If the provisions of this Rider conflict in any way with the
provisions of the printed form lease to which this Rider is attached, the
provisions of this Rider shall control.
38. This Lease constitutes the entire agreement between the parties and
any all prior understanding, representations, agreement and contracts, written
or oral, are merged herein, and no statement, representation, claim or warranty
not set forth herein shall be binding upon the party against whom the same may
be asserted.
39. The Tenant expressly covenant, represent, warrant and agree that it
shall use and occupy the demised premises for the express and limited uses in
this Lease specifically specified only and for no other use or purpose. The
Tenants make this covenant, warranty, representation and agreement knowing that
the Landlord is entering into this Lease in reliance thereon that such covenant,
warranty, representation and agreement is the essence of this agreement. In the
event of a breach or threatened breach by Tenants or anyone claiming under it of
this article, Landlord shall have the right of injunction and the right to
invoke any and all remedies under this lease and any remedies allowed at law or
equity by reason of such breach or threatened breach by Tenants.
40. The Tenant agrees to pay as rent in addition to the rent set forth
heretofore and hereafter in this lease, the following:
In the event there should be any increase in the amount of
real property taxes payable by the Landlord to any municipal government
having power to tax said premises, or any special assessments, on the
entire premise during any tax year commencing during any lease year of
the term of this lease, over the tax payable in the base year, the
Tenant shall pay as additional rent, a proportionate share of the
amount of such increase, if any, during each lease year of the term of
this lease. Such additional rent shall be payable to the Landlord
within Thirty (30) days after demand by the Landlord. The term "Base
tax year" shall mean fiscal tax year 1997/98 for taxes payable on a
fiscal year basis, or calendar year 1997 for those payable on a
calendar year basis. Tax increases for the last year of this lease,
shall be apportioned. The term "A proportionate share of the amount of
increase" for the purposes of this paragraph shall mean such part of
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the increase obtained by multiplying the increase by a fraction of
which the numerator shall be the area in square feet of the office
space leased by Tenant, and the denominator shall be the area in
square feet of all rentable space in existence in the entire premises,
including Tenant's space, during the lease year in question. Basement
space shall not be included in the aforesaid computation. For the
purpose of this paragraph, the % shall be 1.80%.
If landlord elects to add on to the building, the calculation
determining Tenant rent tax percentage in paragraph 40 shall be
adjusted accordingly to reflect the increase in the total square
footage of the building.
In event of a reduction in real estate taxes applicable to the
period tenant is in occupancy and Tenant has paid its proportionate
share of taxes as provided herein Tenant shall be entitled to a rent
tax rebate proportionate to the percentage of space occupied by Tenant
in the building during said period less Tenant's proportionate share of
legal fees, appraisals, administrative expense and other costs and
disbursements attributable to the tax reduction. Said rebate shall be
paid in a timely manner.
41. Tenant shall keep the premises in good, clean condition including
its use of the bathroom facilities. Tenant shall be responsible for and shall,
at its sole cost and expense, make all needed replacement of cracked or broken
glass, windows and doors, floor covering and hung ceiling for damages caused by
tenant. At the expiration of this lease, Tenant shall surrender the Premises in
good condition, reasonable wear and tear and loss by fire or other casualty
excepted and shall surrender all keys for the Premises to Landlord and shall
inform Landlord of all combinations of door locks which lead to and from the
demised premises. Upon moveout by Tenant, should the Premises require any
repairs which are the responsibility of Tenant hereunder, Landlord shall have
the right to make such repair at Tenant's sole cost.
42. Intentionally Deleted.
43. The common area plumbing facilities shall not be used for any
purpose other than that for which they are constructed, and no foreign substance
of any kind or grease or any materials containing grease, shall be thrown
therein, and the expense of any breakage, stoppage or damage resulting from a
violation of this provision shall be borne by Tenant, who shall, or whose
employees, agents or invitees shall have caused it.
44. Electric Current: Electricity is included in rent.
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General Conditions
1. Landlord shall not be liable to Tenant for any loss or damage
or expense which Tenant may sustain or incur if either the
quantity or character of electric service is changed or is no
longer available or suitable for Tenant's requirements.
2. Tenant covenants and agrees that at all times its use of
electric current shall never exceed the capacity of existing
feeders to Tenant's floor(s) or space (if less than an entire
floor) or the capacity of the risers or wiring installation in
the building. Tenant agrees not to connect any additional
electrical equipment to the building electric distribution
system, other than lamps, typewriters, personal computers, video
conferencing equipment, photocopy machines, other small office
machines which consume comparable amounts of electricity, without
Landlord's prior written consent. Any riser or risers to supply
Tenant's electrical requirements, upon written request of Tenant
but subject to the prior written approval of Landlord in each
instance, will be installed by Landlord, at Tenant's sole cost
and expense, if the same are reasonably deemed necessary by
Landlord and will not cause permanent damage or injury to the
building or demised premises or cause or create a dangerous or
hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb
other tenants or occupants.
45. Landlord hereby reserves the right at any time to make alterations
or additions to and to build additional stories on the building in which the
premises are contained and to building adjoining the same. Landlord also
reserves the right to construct other buildings or improvements on the subject
premises from time to time and to make alterations thereof or additions thereto
and to build additional stories on any such building or buildings and to build
adjoining same, provided the use and occupancy of the demised premises are not
substantially impaired.
46. Tenant covenants to provide and keep in force during the term of
this lease for the benefit of Landlord and Tenant general liability policies of
insurance in standard form, protecting the Landlord against any liability
whatsoever, occasioned by and acts, or omissions of the Tenant, its agents,
representatives, or employees on or about the demised premises or any
appurtenances thereto. Such policies are to be written by good and solvent
insurance companies, satisfactory to Landlord in the amount of TWO MILLION
($2,000,000) DOLLARS for each occurrence and naming the Landlord as an
additional insured. Said policy shall provide for 20 days notice of cancellation
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to Landlord. Additionally, Tenant hereby agrees to waive any right of which it
may have against the Landlord, and Tenant agrees to obtain said provision in its
insurance policy herein. A certificate of all such insurance shall be delivered
to the Landlord when procured. In case of default by the Tenants in having such
policies of insurance issued, Landlord may cause said policies to be issued at
the expense of the Tenant. On default by the Tenant of the payment of any of the
premiums on such policies when payment thereof shall be due and payable, or
shall be demanded by the Landlord whether said insurance is procured by Landlord
or by Tenant, Landlord may thereupon pay them and Tenant agrees on demand to
repay to the Landlord the monies so paid, together with interest thereon at the
rate of nine (9) percent per annum, from the date or dates of payment, by
Landlord, and upon the failure so to pay upon such demand, the sum or sums so
paid by Landlord with interest thereon at the rate of nine (9) percent per annum
and all costs and charges including attorney's fees and other expenses shall be
and are hereby declared to be rent payable on the rent day next ensuing or at
the option of the Landlord on any subsequent rent day, and shall be collected as
additional rent in the same manner and with the same remedies as if it had been
originally reserved hereunder.
47. Tenant shall not, without Landlord's prior written consent, keep
anything within the premises for any purpose which increases the insurance
premium cost or invalidates any insurance policy carried on the premises or
other part of the shopping center. Tenant shall pay as additional rental, upon
demand of Landlord, any such increased premium cost due to Tenant's use or
occupation of the premises. All property, including the property of others,
kept, stored, or maintained within the premises by Tenant shall be at the
Tenant's sole risk. Notwithstanding the above, in no event shall tenant be
permitted to store property of others at the demised premises for any reason.
48. The Landlord has not conveyed to the Tenant any rights in or to the
outer side of the outside walls of the building of which the demised premises
form a part, and the Tenant shall not display or erect any lettering, signs,
advertising, awnings or other projections or do any borings or cuttings,
stringing of wires or make any alterations, declarations, additions or
improvements in or to the outside of the demised premises, including the
windows, or in or to the building of which they form a part, without the prior
written consent of the Landlord.
49. Tenant shall procure, at its sole expense, any permits and licenses
and pay all fees required for the transaction of business in the Premises and
otherwise comply with all local, state, federal and applicable laws, ordinances
and governmental regulations, and pay all fines imposed for any violations.
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50. The Tenant shall indemnify and hold harmless the Landlord from any
and all liability, damage, expense, cause of action, suits, claims, penalties or
judgments arising from injury to person or property or from loss of life or
property sustained by anyone whomsoever in and about said demised premises, or
any part thereof, or in or upon adjacent property or adjoining sidewalks and
streets of any and every nature and from any matter or thing growing out of the
alteration or repair of tenant's demised premises in the building now or at any
time hereafter, or any part thereof, and/or arising from any act or acts or
omission or omissions of the tenant or its use or occupation of the said demised
premises. The Tenant shall, at its own cost and expense, defend any and all
suits or actions which may be brought against the Landlord or in which the
Landlord may be impleaded with others upon any such above mentioned matter,
claim or claims and in the event of the failure of the Tenants so to do, the
Landlord (at its option, but without being obliged to do so) may at the cost and
expense of the tenants and upon proper written notice to the tenants defend any
and all such suits or actions and the Tenants shall satisfy, pay and discharge
any and all judgments that may be brought against the Landlord or in which the
Landlord may be impleaded with others and in the event of failure of the tenants
to pay the amount or amounts for which the Landlord shall become liable, as
aforesaid, the Landlord may pay the same and the amount or amounts so paid with
interest thereon, shall become due and payable by the Tenants as additional rent
with the next installment of rent which shall become due under this lease.
51. Landlord reserves the right to review and revise any insurance
coverage required to be supplied by the Tenant pursuant to this Lease, with
regard to the option period herein, provided such revised insurance limits are
consistent with insurance being requested at that time from other tenants in the
office building.
52. Landlord herewith represents that it presently has, and will
maintain in effect, a general liability insurance policy or policies with
coverage for bodily injury and property damage in the minimum amount of Two
Million ($2,000,000.00) Dollars, combined single limit. In the event of a claim
by Tenant against Landlord for any liability within the coverage of said policy
or policies, Tenant agrees that Landlord's liability shall be limited to
recovery out of the proceeds of said insurance policy or policies.
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53. Except as herein provided, Tenant shall have no power to do any
act or make any contract which may create or be the foundation for any lien upon
the reversion of Landlord, the premises herein demised or the building or
improvement of which said premises are a part. If any mechanics or other lien or
order for payment of money or any notice of intention to file a lien shall be
filed against the demised premises, or the building or improvement of which said
premises form a part, by reason of or arising out of any labor or material
furnished or alleged to have been furnished, or to be furnished to or for the
demised premises or any occupant thereof or for or by reason of any change,
alteration or the cost or expense thereof, or any contract relating thereto, or
against the interest of Landlord, Tenant at Landlord's direction shall cause the
same to be cancelled and discharged of record by bond or otherwise as allowed by
law at the expense of Tenant within ten (10) days after notice thereof; and
Tenant shall also defend on behalf of Landlord, at Tenant's sole cost and
expense, any action, suit or proceeding which may be brought thereon or for the
enforcement of such lien, liens, or orders, and Tenant will pay any damage and
satisfy and discharge any judgment entered thereon and save harmless Landlord
from any claim or damage resulting therefrom.
Any work performed at the demised premises by an outside contractor
must be performed with the prior written consent of the Landlord as well as
proper advance notice to the Landlord as to the scheduling of any such work.
Certificate of Insurance must be submitted to the office of the Landlord prior
to commencement of any work at the demised premises. The Certificate of
Insurance must set forth GCS Realty Co., Inc. d/b/a Royal Realty Company as an
additional insured.
54. All rental and additional rental shall be payable at the office of
the Landlord to the Landlord's designated agent, the Business Manager, currently
located at 55 East Grassy Sprain Rd., Yonkers, New York, without any set-off or
deduction whatsoever.
55. In the event that there is any dispute under the terms of this
lease (other than with regard to the payment of the rent reserved), or if there
is any disagreement as to its construction and effect, the parties hereto agree
that the tenant shall continue to pay the full fixed rental and additional
rental as hereinbefore provided without any offset or deduction whatsoever. The
tenant shall, under no circumstances, have the right of offset or counterclaim
with regard to the payment of fixed rent or any item of additional rent or to
withhold payment of all or any part thereof, all of which shall be due and
payable at once when due.
56. Rent payments, including additional rent, are due the first of
each month. If for any reason the payment is received later than the 10th of the
month, then a $50 late charge must accompany payment. If the charge does not
accompany the payment, then the Tenant will be deemed in arrears the following
month. The late charges will be considered as additional rent. This provision
shall also apply to any increase in the security as required by this lease.
In the event that any check received for the payment of rent or
additional rent due under this lease is returned by the Tenant's bank for
insufficient or uncollected funds, then in that event, there shall be a charge
of $20.00 for any such returned check.
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57. If the Tenant shall at any time be in default hereunder, and if
the Landlord shall institute an action of summary proceeding against the Tenant
based upon such default, then the Tenant will reimburse the Landlord for the
expense of attorneys' fees and disbursements thereby incurred by the Landlord,
so far as the same are reasonable in amount. Also, so long as the Tenant shall
be a Tenant hereunder the amount of such expenses shall be deemed to be
"additional rent" hereunder and shall be due from the Tenant to the Landlord on
the first day of the month following the incurring of such respective expenses.
58. Intentionally Deleted.
59. Rent security will be increased and be payable on the first (1st)
day of each lease year in which the rent is increased so that the rent security
at all times will be equal to one months rent. Failure to pay the increase in
security as provided for herein when due shall be subject to the late payment
fees as provided in this lease.
At the termination of the lease, Landlord shall be entitled to deduct
from the security deposit, the Tenant's portion of the real estate taxes as
provided in Paragraph 40.
60. Tenant shall not have the right to sublet all or part of the
demised premises. If the Tenant wishes to sublet the premises, the Tenant first
shall notify Landlord, in writing, specifying name of the proposed subtenant,
the name and character of its business, the terms, including the proposed rental
charge, of proposed sublease and current information as to the financial
responsibility and standing of the proposed subtenant and shall provide Landlord
with such other information as it reasonably requests. If the proposed rent is
greater than the base rent contained in this lease, the landlord shall be
entitled to receive 50% of any excess in rent above the base rent. Tenant and
the prospective sub-tenant shall execute an affidavit as to the undue rent. Any
attempt to subvert this provision shall constitute a default under the terms of
this lease. Provided the Tenant complies with the above requirements, the
Landlord agrees not unreasonably to withhold its consent.
61. Any claim for brokerage commission for the leasing of the premises
shall be paid by the Tenant. In the event that there is any litigation
pertaining to broker's commission each of the parties shall be responsible for
their own legal fees and expenses in defense of any such action.
62. The failure of the Tenants to remove their fixtures or furniture
property at the termination of the term of this lease, or on Tenants otherwise
vacating the premises, shall be deemed an abandonment of said property at the
option of the Landlord.
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<PAGE>
63. Landlord shall have the right to enter upon the Premises at any
reasonable time for the purpose of inspecting the same, or of making repairs to
the Premises, or of making repairs, alterations or additions to adjacent
premises, or of showing the Premises to prospective purchasers or lenders.
During the last six months of the lease term the landlord shall have the right
to show the premises to prospective tenants. Use of the roof above the Premises
is reserved to Landlord. Tenant shall not be allowed on the roof without
Landlord's prior written consent.
64. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Landlord the demises, broom clean, in
good order and condition, ordinary wear excepted.
65. Tenant agrees that Landlord may amend, modify, delete or add new
and additional reasonable rules and regulations for the demise and care of the
premises, the building of which the premises are a part, provided they do not
impair the right to use and occupy the premises as intended.
66. Landlord reserves the right to promulgate rules and regulations
with respect to parking area by Tenants, Tenants' employees, and Tenants'
customers.
67. The building, of which the demised premises forms a part, shall be
open from 8:00 a.m. to 6:00 p.m. from Monday through Friday and from 8:00 a.m.
to 1:00 p.m. on Saturdays, National Holidays excepted. For the purpose of this
paragraph, National Holidays shall be, New Year's Day, Washington's Birthday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Thanksgiving
Friday, and Christmas.
68. The Tenant shall notify the Landlord prior to moving in or moving
out of the demised premises or, in the event that the Tenant expects a large
delivery, which would necessitate the use of the elevator, for proper
preparation of the elevator for such use. In all such events, the moving hours
shall be Monday - Friday, between the hours 8:00 A.M. - 4:00 P.M. only. There
shall be no moving in or moving out on weekends.
Any damages to the elevator and/or building premises, shall be the
direct responsibility of the Tenant, notwithstanding the fact that the Tenant
may utilize the services of a third party and/or moving company.
69. Tenant will not use any part of the premises for the generation,
transport, storage or treatment of any hazardous or toxic materials.
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70. Tenant shall comply with any recycling program imposed by any
municipalities having jurisdiction thereof.
71. (a) If, in connection with obtaining or renewing financing for the
Real Property, an institutional lender shall request modifications in this lease
as a condition to such financing, Tenant will not withhold, delay or defer its
consent thereto, provided that such modifications neither increase the monetary
obligations of Tenant nor decrease the size of the demised premises or the
services required to be provided by Landlord.
(b) Tenant agrees, within a reasonable time after being
requested, to submit such financial information as pertaining to monthly rental
and additional rent as may be reasonably required by Landlord's mortgagee(s).
72. Tenant acknowledges that possession of the demised premises must
be surrendered at the expiration or sooner termination of the term, time being
of the essence. Tenant shall indemnify, defend and save Landlord harmless
against all liabilities, obligations, damages, penalties, claims, costs, charges
and expenses, including reasonable attorney's fees and claims made by a
successor Tenant based upon the failure or refusal of Tenant to surrender the
demised premises in a timely fashion. The parties agree that the damage to
Landlord resulting from failure by Tenant to surrender possession of the demised
premises on a timely basis will he extremely substantial, will exceed the amount
of rent payable hereunder and will be impossible of accurate measurement. Tenant
shall pay Landlord, as liquidated damages for each month and for any portion of
a month during which Tenant holds over in the demised premises after expiration
or sooner termination of the term of this lease, a sum equal to 200% of the
average rent which was payable per month under this lease during the last 3
months of the term. Such liquidated damages shall not limit Tenant's
indemnification with respect to claims made by any succeeding Tenant founded
upon Tenant's failure or refusal to surrender the demised premises. Nothing
contained herein shall be deemed to authorize Tenant to remain in occupancy of
the demised premises after the expiration or sooner termination of the term. The
foregoing provisions of this paragraph are in addition to and do not affect
Landlord's rights of re-entry or any other rights of Landlord hereunder or as
otherwise provided by law.
73. Tenant shall not be permitted to maintain and operate a microwave
oven or any other cooking appliances or heating appliances at the demised
premises.
74. Tenant agrees to notify Landlord, in writing, within sixty (60)
days of the expiration of this lease as to whether or not Tenant intends to
renegotiate a new lease with the Landlord.
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75. Upon execution of this lease by Tenant, Tenant shall remit
$3,584.16 representing one (1) month security and the first month's rent.
76. Upon execution of this lease and full payment of the first month's
rent and security Landlord shall, at no cost to Tenant:
A. Perform renovation work to the premises to include providing access
to corner office and relocating three walls, per Tenant's plans, installing
electrical outlets, per code and one dedicated outlet for Tenant's office
equipment.
B. Supply and install carpet and paint suite (moonstone color). The
carpet shall be the same or a substantially similar color as that in dentist's
office.
C. Tenant will be permitted to access the premises as soon as
renovation are completed prior to lease commencement for the purpose of phone
installation and furniture delivery.
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RENTRIDER TO LEASE DATED SEPTEMBER 5, 1997
BY AND BETWEEN GCS REALTY CO., INC.
d/b/a ROYAL REALTY COMPANY
as Landlord, and
EDUCATIONAL VIDEO CONFERENCING, Inc.
as Tenant
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The annual rent shall be as follows:
From 09/01/97 to 08/31/98 at the rate of $21,504.96 per annum
($1,792.08 per month);
From 09/01/98 to 08/31/99 at the rate of $22,440.00 per annum
($1,870.00 per month);
From 09/01/99 to 08/31/00 at the rate of $23,375.04 per annum
($1,947.92 per month);
From 09/01/00 to 08/31/01 at the rate of $24,309.96 per annum
($2,025.83 per month);
From 09/01/01 to 08/31/02 at the rate of $25,245.00 per annum
($2,103.75 per month).
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EDUCATIONAL VIDEO CONFERENCING, INC.
AMENDED AND RESTATED 1998 INCENTIVE PLAN
-------------------
ARTICLE I.
---------
DEFINITIONS
1.01 Administrator means the Board and any delegate of the Board that is
appointed in accordance with Article III.
1.02 Agreement means a written agreement (including any amendment or
supplement thereto) between the Corporation and a Participant specifying the
terms and conditions of a Stock Award or Option granted to such Participant.
1.03 Board means the Board of Directors of the Corporation.
1.04 Change in Control shall mean an event or series of events that would
be required to be described as a change in control of the Corporation in a proxy
or information statement distributed by the Corporation pursuant to Section 14
of the Exchange Act in response to Item 6(e) of Schedule 14A promulgated
thereunder or otherwise adopted. The determination whether and when a change in
control has occurred or is about to occur shall be made by the Board in office
immediately prior to the occurrence of the event or series of events
constituting such change in control.
1.05 Code means the Internal Revenue Code of 1986, and any amendments
thereto.
1.06 Common Stock means the common stock, $.0001 per value, of the
Corporation.
1.07 Corporation means Educational Video Conferencing, Inc.
1.08 Control Change Date means the occurrence of the event or series of
events constituting a Change in Control as determined by the Board.
1.09 Exchange Act means the Securities Exchange Act of 1934, as amended and
as in effect on the date of this Plan.
1.10 Fair Market Value means, on any given date, the closing price (or, if
there is none, the average of the closing bid and asked price) of the Common
Stock on such quotation system or principal securities exchange on which the
Common Stock is traded on such day, or, if the Common Stock is not so traded on
such day, then on the next preceding day that the Common Stock was traded, all
as reported by such source as the Administrator may select.
1.11 Forfeitable Shares shall have the meaning set forth in Section 9.04 of
this Plan.
<PAGE>
1.12 Non-Employee Director means a member of the Board who is not an
employee of the Corporation or a Related Entity.
1.13 Option means a stock option that entitles the holder to purchase from
the Corporation a stated number of shares of Common Stock at the price set forth
in an Agreement.
1.14 Option Exchange Program shall mean a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
1.15 Participant means an employee of and non-employee director, advisor
and independent consultant to the Corporation or a Related Entity, including an
employee who is a member of the Board, who satisfies the requirements of Article
IV and is selected by the Administrator to receive a Stock Award, an Option or a
combination thereof.
1.16 Plan means the Corporation's 1998 Incentive Plan.
1.17 Related Entity means any entity that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Corporation.
1.18 Stock Award means Common Stock awarded to a Participant under Article
IX.
1.19 Stockholders means the stockholders of the Corporation.
ARTICLE II.
----------
PURPOSES
The Plan is intended to assist the Corporation and Related Entities in
recruiting and retaining employees, directors, officers, consultants and
advisors, and in compensating such individuals by enabling such individuals to
participate in the future success of the Corporation and the Related Entities
and to associate their interests with those of the Corporation and its
Stockholders. The Plan is intended to permit the grant of Stock Awards and the
grant of both Options qualifying under Section 422 of the Code ("incentive stock
options") and Options not so qualifying, as determined by the Administrator at
the time of grant. No Option that is intended to be an incentive stock option
shall be invalid for failure to qualify as an incentive stock option. The
proceeds received by the Corporation from the sale of Common Stock pursuant to
this Plan shall be used for general corporate purposes.
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<PAGE>
ARTICLE III.
------------
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have authority to grant Stock Awards and Options upon such terms (not
inconsistent with the provisions of this Plan) as the Administrator may consider
appropriate. Such terms may include conditions (in addition to those contained
in this Plan) on the exercisability of all or any part of an Option or on the
transferability or forfeitability of a Stock Award, including by way of example
and not limitation, conditions on which Participants may defer receipt of
benefits under the Plan, requirements that the Participant complete a specified
period of employment with or service to the Corporation or a Related Entity,
that the Corporation achieve a specified level of financial performance or that
the Corporation achieve a specified level of financial return. Notwithstanding
any such conditions, the Administrator may, in its discretion, accelerate the
time at which any Option may be exercised, or the time at which a Stock Award
may become transferable or nonforfeitable. In addition, the Administrator shall
have complete authority to determine Fair Market Value, to interpret all
provisions of this Plan, to institute an Option Exchange Program, to prescribe
the form of Agreements, to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Administrator shall not
be construed as limiting any power or authority of the Administrator. Any
decision made, or action taken, by the Administrator or in connection with the
administration of this Plan shall be final and conclusive. Neither the
Administrator nor any member of the Board shall be liable for any act done in
good faith with respect to this Plan or any Agreement, Option or Stock Award.
All expenses of administering this Plan shall be borne by the Corporation.
The Board, in its discretion, may appoint a committee of the Board and
delegate to such committee all or part of the Board's authority and duties with
respect to the Plan. The Board may revoke or amend the terms of a delegation at
any time but such action shall not invalidate any prior actions of the Board's
delegate or delegates that were consistent with the terms of the Plan.
ARTICLE IV.
-----------
ELIGIBILITY
Section 4.01 General. Any employee, director, officer, consultant or
advisor to the Corporation or a Related Entity (including a corporation that
becomes a Related Entity after the adoption of this Plan) is eligible to
participate in this Plan if the Administrator, in its sole discretion,
determines that such person has contributed significantly or can be expected to
contribute significantly to the profits or growth of the Corporation or a
Related Entity. Directors of the Corporation who are employees of the
Corporation or a Related Entity may be selected to participate in this Plan.
Section 4.02 Grants. The Administrator will designate individuals to whom
Stock Awards and Options are to be granted and will specify the number of shares
of Common Stock subject to each award or grant. All Stock Awards and Options
granted under this Plan shall be evidenced by Agreements which shall be subject
3
<PAGE>
to the applicable provisions of this Plan and to such other provisions as the
Administrator may adopt. No Participant may be granted incentive stock options
(under all incentive stock option plans of the Corporation and any Related
Entity) which are first exercisable in any calendar year for stock having an
aggregate Fair Market Value (determined as of the date an Option is granted)
that exceed the limitation prescribed by Code section 422(d). The preceding
annual limitation shall not apply with respect to Options that are not incentive
stock options.
ARTICLE V.
----------
STOCK SUBJECT TO PLAN
Section 5.01 Shares Issued. Upon the award of shares of Common Stock
pursuant to a Stock Award, the Corporation may issue shares of Common Stock from
its authorized but unissued Common Stock or reacquired Common Stock. Upon the
exercise of any Option, the Corporation may deliver to the Participant (or the
Participant's broker if the Participant so directs), shares of Common Stock from
its authorized but unissued Common Stock or reacquired Common Stock.
Section 5.02 Aggregate Limit. The maximum aggregate number of shares of
Common Stock that may be issued under this Plan shall not exceed 356,000 shares.
Section 5.03 Reallocation of Shares. If an Option is terminated, in whole
or in part, for any reason other than its exercise, or if a Stock Award is
forfeited in whole or in part, the number of shares of Common Stock allocated to
the Option or Stock Award or portion thereof may be reallocated to other Options
and Stock Awards to be granted under this Plan.
ARTICLE VI.
----------
OPTION EXERCISE PRICE
The price per share for Common Stock purchased on the exercise of an Option
shall be determined by the Administrator on the date of grant; provided,
however, that the price per share for Common Stock purchased on the exercise of
an Option that is an incentive stock option shall not be less than the Fair
Market Value on the date the Option is granted.
ARTICLE VII.
-----------
EXERCISE OF OPTIONS
Section 7.01 Maximum Option Period. The maximum period in which an Option
may be exercised shall be determined by the Administrator on the date of grant,
except that no Option that is an incentive stock option shall be exercisable
after the expiration of ten years from the date such Option was granted. The
terms of any Option that is an incentive stock option may provide that it is
exercisable for a period less than such maximum period.
4
<PAGE>
Section 7.02 Nontransferability. Any Option granted under this Plan shall
be nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the Option must be transferred to the same
person or person(s). During the lifetime of the Participant to whom the Option
is granted, the Option may be exercised only by the Participant. No right or
interest of a Participant in any Option shall be liable for, or subject to, any
lien, obligation, or liability of such Participant.
Section 7.03 Employee Status. For purposes of determining the applicability
of Section 422 of the Code (relating to incentive stock options), or in the
event that the terms of any Option provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Administrator may decide to what extent leaves of absence for governmental
or military service, illness, temporary disability, or other reasons shall not
be deemed interruptions of continuous employment.
Section 7.04 Change in Control. Section 7.01 to the contrary
notwithstanding, after a Control Change Date each Option shall be fully
exercisable thereafter in accordance with the terms of the applicable Agreement.
If not sooner exercisable under the terms of the applicable Agreement, a
Participant's Option shall be fully exercisable (i) as of his termination of
employment if his employment terminates after a Control Change Date and he is
terminated without cause or following his refusal to move to another location or
(ii) as of the date that there is a material reduction in the Participant's
compensation or duties if such reduction occurs after a Control Change Date. For
purposes of the preceding sentence the term "cause" means a willful neglect of
responsibilities to the Corporation or a Related Entity.
ARTICLE VIII.
------------
METHOD OF EXERCISE
Section 8.01 Exercise. Subject to the provisions of Articles VII and XII,
an Option may be exercised in whole at any time or in part from time to time at
such times and in compliance with such requirements as the Administrator shall
determine. An Option granted under this Plan may be exercised with respect to
any number of whole shares less than the full number for which the Option could
be exercised. A partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the Option.
Section 8.02 Payment. Unless otherwise provided by the Agreement, payment
of the Option exercise price shall be made in cash. If the Agreement provides,
or in the discretion of the Board, payment of all or part of the Option price
may be made by surrendering shares of Common Stock to the Corporation, including
by allowing the Corporation to deduct from the number of shares of Common Stock
deliverable upon exercise of the Option, a number of such shares which has an
aggregate Fair Market Value, determined as of the day preceding the date of
exercise of the Option, equal to the aggregate Option exercise price. If Common
Stock is used to pay all or part of the Option price, the shares surrendered
must have a Fair Market Value (determined as of the day preceding the date of
exercise) that is not less than such price or part thereof.
5
<PAGE>
Section 8.03 Installment Payment. If the Agreement provides, and if the
Participant is employed by the Corporation on the date the Option is exercised,
payment of all or part of the Option price may be made in installments. In that
event the Corporation may, if so determined by the Administrator, lend the
Participant an amount equal to not more than 90% of the Option price of the
shares acquired by the exercise of the Option. This amount shall be evidenced by
the Participant's promissory note and shall be payable in not more than five
equal annual installments, unless the amount of the loan exceeds the maximum
loan value for the shares purchased, which value shall be established from time
to time by regulations of the Board of Governors of the Federal Reserve System.
In that event, the note shall be payable in equal quarterly installments over a
period of time not to exceed five years.
The Participant shall pay interest on the unpaid balance at the minimum
rate necessary to avoid imputed interest or original issue discount under the
Code. All shares acquired with cash borrowed from the Corporation shall be
pledged to the Corporation as security for the repayment thereof. In the
discretion of the Administrator, shares of stock may be released from such
pledge proportionately as payments on the note (together with interest) are
made, provided the release of such shares complies with the regulations of the
Federal Reserve System relating to securities credit transactions then
applicable. While shares are so pledged, and so long as there has been no
default in the installment payments, such shares shall remain registered in the
name of the Participant, and he shall have the right to vote such shares and to
receive all dividends thereon.
Section 8.04 Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to an Option until the date of
exercise of such Option.
ARTICLE IX.
----------
STOCK AWARDS
Section 9.01 Awards. In accordance with the provisions of Article IV, the
Administrator will designate each individual to whom a Stock Award is to be made
and will specify the number of shares of Common Stock covered by such awards.
Section 9.02 Vesting. The Administrator, on the date of the award, may
prescribe that a Participant's rights in the Stock Award shall be forfeitable or
otherwise restricted for a period of time set forth in the Agreement. By way of
example and not of limitation, the restrictions may postpone transferability of
the shares or may provide that the shares will be forfeited if the Participant
separates from the service of the Corporation and its Related Entities before
the expiration of a stated term or if the Corporation and its Related Entities
or the Participant fails to achieve stated objectives.
Section 9.03 Change in Control. Section 9.02 to the contrary
notwithstanding, after a Control Change Date each Stock Award will become
transferable and nonforfeitable in accordance with the terms of the applicable
Agreement. If not sooner transferable and nonforfeitable under the terms of the
applicable Agreement, a Participant's interest in a Stock Award shall be
transferable and nonforfeitable (i) as of his termination of employment if his
employment terminates after a Control Change Date and he is terminated without
6
<PAGE>
cause or following his refusal to move to another location or (ii) as of the
date that there is a material reduction in the Participant's compensation or
duties if such reduction occurs after a Control Change Date. For purposes of the
preceding sentence the term "cause" means a willful neglect of responsibilities
to the Corporation or a Related Entity.
Section 9.04 Stockholder Rights. If all or any portion of a Stock Award is
forfeitable pursuant to the Agreement, at all times prior to a forfeiture
thereof, a Participant will have all rights of a Stockholder with respect to
forfeitable shares of the Stock Award (the "Forfeitable Shares"), including the
right to receive dividends and vote the Forfeitable Shares; provided, however,
that (i) a Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of the Forfeitable Shares, (ii) the Corporation shall retain
custody of the certificates evidencing the Forfeitable Shares, and (iii) the
Participant will deliver to the Corporation a stock power, endorsed in blank,
with respect to the Forfeitable Shares. The limitations set forth in the
preceding sentence shall not apply after the Forfeitable Shares are no longer
forfeitable.
ARTICLE X.
---------
AUTOMATIC OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
Section 10.01 First Option. Each Non-Employee Director shall be
automatically granted an Option to purchase 5,000 shares of Common Stock (the
"First Option") on the date on which the later of the following events occurs:
(A) the consummation of the Corporation's initial public offering of Common
Stock, or (B) the date on which such person first becomes a Non-Employee
Director, whether through election by the stockholders of the Corporation or
appointment by the Board to fill a vacancy; provided, however, that a member of
the Board who ceases to be an employee of the Corporation but who remains a
member of the Board shall not receive a First Option and, in addition, a
Non-Employee Director who has been granted stock or options by the Corporation
under a consulting or other arrangement shall be ineligible to receive any
subsequent automatic grants under this Article X unless the Administrator
determines otherwise.
Section 10.02 Subsequent Option. Each Non-Employee Director shall be
automatically granted an Option to purchase 5,000 shares of Common Stock (the
"Subsequent Option") on March 1st of each year provided he or she is then a
Non-Employee Director and if, as of such date, he or she shall have served on
the Board for at least the preceding six months.
Section 10.03 Terms of Options. The term of First Options and Subsequent
Options granted hereunder shall be as follows:
(A) the term of Options granted pursuant to this Article X shall be ten
years;
(B) the exercise price per share shall be 100% of the Fair Market Value per
share of Common Stock on the date of grant. In the event that the date of grant
is not a trading day, the exercise price per share of Common Stock shall be the
Fair Market Value on the next trading day immediately following the date of
grant;
7
<PAGE>
(C) one-third of the shares of Common Stock subject to the Option shall
vest on the date of grant and 1/3 of the shares subject to the Option shall vest
on the anniversary of the date of grant in each year thereafter so that 100% of
the shares subject to the option shall be vested two years from the grant date.
ARTICLE XI.
-----------
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options that are incentive stock
options may be granted under this Plan shall be proportionately adjusted, and
the terms of outstanding Stock Awards and Options shall be adjusted, as the
Board shall determine to be equitably required in the event that (a) the
Corporation (i) effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares or (ii) engages in a transaction to
which Section 424 of the Code applies or (b) there occurs any other event which,
in the judgment of the Board necessitates such action. Any determination made
under this Article XI by the Board shall be final and conclusive.
The issuance by the Corporation of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Corporation convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to,
outstanding Stock Awards or Options.
The Board may make Stock Awards and may grant Options in substitution for
performance shares, phantom shares, stock awards, stock options, stock
appreciation rights, or similar awards held by an individual who becomes an
employee of the Corporation or a Related Entity in connection with a transaction
described in clause (ii) of the first paragraph of this Article XI.
Notwithstanding any provision of the Plan (other than the limitation of Article
V), the terms of such substituted Stock Award(s) or Option grant(s) shall be as
the Board, in its discretion, determines is appropriate.
ARTICLE XII.
------------
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Corporation is a party, and
the rules of all domestic stock exchanges on which the Corporation's shares may
be listed. The Corporation shall have the right to rely on an opinion of its
counsel as to such compliance. Any share certificate issued to evidence Common
Stock when a Stock Award is granted or for which an Option is exercised may bear
such legends and statements as the Administrator may deem advisable to assure
8
<PAGE>
compliance with federal and state laws and regulations. No Common Stock shall be
issued, no certificate for shares shall be delivered and no payment shall be
made under this Plan until the Corporation has obtained such consent or approval
as the Administrator may deem advisable from regulatory bodies having
jurisdiction over such matters.
ARTICLE XIII.
------------
GENERAL PROVISIONS
Section 13.01 Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any individual any right to continue in the employ or
service of the Corporation or a Related Entity or in any way affect any right
and power of the Corporation or a Related Entity to terminate the employment or
service of any individual at any time with or without assigning a reason
therefor.
Section 13.02 Disposition of Stock. A Participant shall notify the
Administrator of any sale or other disposition of Common Stock acquired pursuant
to an Option that was an incentive stock option if such sale or disposition
occurs (i) within two years of the grant of an Option or (ii) within one year of
the issuance of the Common Stock to the Participant. Such notice shall be in
writing and directed to the Secretary of the Corporation.
Section 13.03 Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
Section 13.04 Employee Status. In the event that the terms of any Stock
Award or the grant of any Option provide that shares may be issued or become
transferable and nonforfeitable thereunder only after completion of a specified
period of employment, the Administrator may decide in each case to what extent
leaves of absence for governmental or military service, illness, temporary
disability, or other reasons shall not be deemed interruptions of continuous
employment.
Section 13.05 Limitation on Awards. Notwithstanding any other provision of
the Plan, if any award under this Plan, either alone or together with payments
that a Participant has the right to receive from the Corporation or a Related
Entity, would constitute a "parachute payment" (as defined in section 280G of
the Code), all such payments shall be reduced to the largest amount that will
result in no portion being subject to the excise tax imposed by section 4999 of
the Code.
9
<PAGE>
ARTICLE XIV.
-----------
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment shall, without a Participant's consent, adversely
affect any rights of such Participant under any Stock Award or Option
outstanding at the time such amendment is made.
ARTICLE XV.
----------
DURATION OF PLAN
No Stock Award or Option may be granted under this Plan more than ten years
after the date the Plan is adopted by the Board.
ARTICLE XVI.
------------
EFFECTIVE DATE OF PLAN
Stock Awards and Options may be granted under this Plan upon its adoption
by the Board, provided that no incentive stock option will continue to be
effective unless this Plan is approved by a majority of the votes entitled to be
cast by the Stockholders, voting either in person or by proxy, at a duly held
Stockholders' meeting or by the consent of stockholders owning more than 50% of
shares of the Common Stock within twelve months of such adoption.
10
<PAGE>
December 21, 1998
Arol I. Buntzman
325 Mile Square Road
Yonkers, New York 10701
Dear Arol:
This will confirm our agreement regarding the shares of capital stock of
Educational Video Conferencing, Inc. owned by us. Until March 1, 2000 all of
such shares shall be voted as you direct on any matter requiring the vote or
consent of shareholders.
Sincerely yours,
/s/
Richard and Bonnie Goldenberg
AGREED:
/s/
- --------------------
Arol I. Buntzman
<PAGE>
March 4, 1997
Arol I. Buntzman
325 Mile Square Road
Yonkers, New York 10701
Dear Arol:
This will confirm our agreement regarding the shares of capital stock
of Educational Video Conferencing, Inc. owned by me. Until March 1, 2000 (i) all
of such shares shall be voted as you direct on any matter requiring the vote or
consent of shareholders; (ii) you shall have a right of first refusal to
purchase such shares if I elect to sell all or any portion of them prior to
March 1, 2000; and (iii) if I leave the employ of EVC for any reason prior to
March 1, 2000, you shall have the option to purchase such chares from me for the
lower of $2.00 per share or the average trading price of such shares during the
30 days prior to my leaving EVC.
Sincerely yours,
/s/ John J. McGrath
-------------------
John J. McGrath
AGREED:
/s/ Arol I. Buntzman
- ---------------------------------
Arol I. Buntzman
<PAGE>
May 18, 1998
Arol I. Buntzman
325 Mile Square Road
Yonkers, New York 10701
Dear Arol:
This will supplement our agreement dated March 4, 1997 regarding the
shares of Educational Video Conferencing, Inc. ("EVC") owned by me. You will not
have the option to purchase such shares if I leave the employ of EVC on account
of my death, permanent disability or termination of employment by EVC without
cause.
Sincerely yours,
/s/ John J. McGrath
-------------------
John J. McGrath
AGREED:
/s/ Arol I. Buntzman
- -----------------------------------
Arol I. Buntzman
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
To the board of directors
Educational Video Conferencing, Inc.
We hereby consent to the use in the prospectus constituting part of the
registration statement on Form SB-2 of our report dated January 21, 1999 on the
financial statements related to the balance sheets of Educational Video
Conferencing, Inc. as of December 31, 1997 and 1998 and the related statements
of operations, stockholders' equity, and cash flows for the period from
March 4, 1997 (date of inception) through December 31, 1997 and for the year
ended December 31, 1998, 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
February 10, 1999
<PAGE>
CONSENT OF DIRECTOR DESIGNEE
----------------------------
To The Board of Directors
Educational Video Conferencing, Inc.
The undersigned hereby consents to the use of my name and the statements
with respect to me appearing under the headings "Management" and "Principal
Stockholders" included in the Registration Statement.
/s/ ROYCE N. FLIPPIN, JR.
Royce N. Flippin, Jr.
New York, New York
February 3, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 914,700
<SECURITIES> 0
<RECEIVABLES> 261,776
<ALLOWANCES> (35,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,222,322
<PP&E> 1,640,134
<DEPRECIATION> (234,984)
<TOTAL-ASSETS> 3,535,304
<CURRENT-LIABILITIES> 920,643
<BONDS> 0
0
0
<COMMON> 301
<OTHER-SE> 2,614,360
<TOTAL-LIABILITY-AND-EQUITY> 3,535,304
<SALES> 351,598
<TOTAL-REVENUES> 407,967
<CGS> 210,326
<TOTAL-COSTS> 2,412,431
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,681
<INCOME-PRETAX> (2,728,438)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,728,438)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,728,438
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)
</TABLE>
