SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): January 14, 2000
EDUCATIONAL VIDEO CONFERENCING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 001-14827 06-1488212
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(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
35 EAST GRASSY SPRAIN ROAD, SUITE 200, YONKERS, NEW YORK 10710
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(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (914) 787-3500
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 14, 2000, registrant's newly formed wholly-owned
subsidiary, Interboro Holding, Inc., acquired all of the outstanding stock of
Interboro Institute, Inc. ("Interboro") from Bruce R. Kalisch.
Interboro's sole business consists of owning and operating Interboro
Institute, a two-year college located in New York City, that was founded in
1884. Interboro Institute is currently authorized by the New York State Board of
Regents to grant the Associate of Occupational Studies Degree in business
administration (accounting and business management), ophthalmic dispensing,
paralegal studies, administrative secretarial arts (executive, legal,
correspondence or medical secretary) and security services and management. It
also offers a concentration in computer technology in its business management
program. Most of the Interboro Institute's student body consists of
non-traditional students who pay their tuition using Federal (Pell) and New York
State (TAP) tuition grants.
The purchase price for the outstanding stock of Interboro is $672,500 plus
50% of Interboro's earnings before interest, taxes, depreciation, and
amortization, as determined by registrant's auditors ("EBITDA") during the three
fiscal years commencing July 1, 2000 (or January 1, 2001 if registrant changes
Interboro's fiscal year to a calendar year). The purchase price is payable out
of between 20% and 50% of EBITDA that is allocated first to the fixed and then
to the contingent portion of the purchase price. Any earned and unpaid
contingent portion becomes payable in eight quarterly installments after the
fixed portion has been fully paid. Registrant has infused $1,000,000 into
Interboro, out of its own funds, for working capital and in order to satisfy
certain net worth and other financial requirements. In addition, registrant has
agreed to issue to Mr. Kalisch warrants to purchase up to 25,000 shares of
registrant's common stock at the rate of 5,000 warrants per year provided
Interboro has at least $500,000 of EBITDA for the applicable fiscal year during
the five year period commencing July 1, 2001 (or January 1, 2002 if registrant
charges Interboro's fiscal year to a calendar year).
The acquisition will be accounted for under the purchase method of
accounting and, accordingly, the results of operations will be included in the
financial statements as of the date of the acquisition, and the assets and
liabilities will be recorded based upon their fair values at the date of the
acquisition. Registrant has allocated the excess purchase price over the fair
value of net tangible assets acquired to approximately $580,000 of goodwill,
which will be amortized on a straight-line basis over a period of ten years.
Additional Information regarding Interboro and Interboro Institute is
included in the press release filed as Exhibit 99.1 to this report.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
--------------------
The Financial Statements required by this item are not
included in this initial report on Form 8-K and will be filed by amendment not
later than 60 days after the date of this report.
EXHIBITS
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10.1 Stock Purchase Agreement dated as of January 14, 2000
among Bruce R. Kalisch, Interboro Holding, Inc. and
Interboro Institute, Inc.
Schedules (Copies will be provided to the Commission upon
request)
3.5 - Consents
3.6 - Compliance with Law
3.7 - Financial Records; Statements
3.9 - Taxes
3.12(a) - Inventory - Categories of items
exceeding $10,000 in value
3.12(b) - Equipment
3.13 - Contracts
3.14 - Employees
3.15 - Employee Benefit Plans
3.16 - Insider/Affiliate Arrangements; Shareholder
Debt
3.17 - Litigation
3.18 - Insurance
3.19 - Absence of Change
3.21 - Intellectual Property Rights
3.22(a) - Student Enrollment
3.23 - Student Financial Assistance
3.25 - Powers of Attorney and Suretyship
10.2 Warrant Agreement dated as of January 14, 2000
between Educational Video Conferencing, Inc.
and Bruce R. Kalisch.
10.3 Escrow Agreement dated January 14, 2000 among
Bruce R. Kalisch, Interboro Holding, Inc. and
Fischbein Badillo Wagner Harding.
99.1 Press Release of Educational Video Conferencing, Inc.
dated January 20, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EDUCATIONAL VIDEO CONFERENCING, INC.
DATED: JANUARY 31, 2000 BY: /s/ Richard Goldenberg
---------------------------------
Name: Richard Goldenberg
Title: Chief Financial Officer
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STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 14th day of January, 2000, by and among Bruce
R. Kalisch, residing at 66 Church Lane, Scarsdale, New York 10583 ("Seller"),
Interboro Holding, Inc., a Delaware corporation with offices at c/o Educational
Video Conferencing, Inc., 35 East Grassy Sprain Road, Suite 200, Yonkers, New
York 10710 ("BUYER") and Interboro Institute, Inc., with Offices at 450 West
56th Street, New York, New York 10019 (collectively, with the Institute, the
"Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is a post-secondary two-year college that is
authorized by the New York State Board of Regents to grant the Associate of
Occupational Studies degree in business administration (with majors in
accounting and management), opthalmic dispensing, paralegal studies,
administrative secretarial arts (with majors in executive, medical and legal)
and security services and management (the "Institute");
WHEREAS, Seller owns 100 shares (the "Shares"), constituting 100% of
the Company's issued and outstanding common stock, no par value (the "Common
Stock"); and
WHEREAS, Buyer desires to purchase and Seller desires to sell the
Shares;
NOW, THEREFORE, in consideration of the premises and the respective
representations and warranties, agreements and covenants hereinafter set forth,
the parties agree as follows:
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ARTICLE I.
DEFINITIONS
1.1. CERTAIN DEFINITIONS. Except as otherwise expressly provided in
this Agreement, or unless the text of this Agreement otherwise requires, in
addition to the other terms defined herein, the following shall apply:
(a) "AGREEMENT" means this Stock Purchase Agreement, including
the Disclosure Schedules and Exhibits and any amendments thereto, unless the
context otherwise requires.
(b) "BUYER'S RECOUPMENT AMOUNT" means the total amount Buyer
reasonably determines is required to be invested by Buyer in the Company to
satisfy (i) the net worth requirement of subparagraph 51E of the Lease in order
for Buyer to acquire the Shares under this Agreement without the consent of the
Landlord being required or the Landlord having any right to terminate or change
the Lease or recapture any portion of the premises covered by the Lease and (ii)
any further financial requirements, if any, of federal or New York State
agencies providing student financial aid to students of Interboro.
(c) "CLOSING" AND "CLOSING DATE" mean the closing and date of
closing referred to in Section 2.3(a) of this Agreement.
(d) "CONSENTS" mean all licenses, permits, franchises, approvals,
acknowledgments, registrations, authorizations, consents or order of, or filing
with, any governmental authority, (whether foreign, federal, state or local), or
accreditation or membership organization or any other party, necessary or
desirable for the present and continued conduct of, or relating to the
consummation of the transactions contemplated by this Agreement or the operation
of, the Company's business.
(e) "CONTRACT" means any agreement, contract, lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license agreement,
instrument, obligation or commitment to which the Company is a party or by which
it is bound, whether oral or written.
(f) "CUMULATIVE EBITDA" means total EBITDA since December 31,
1999.
(g) "DISCLOSURE SCHEDULES" mean all of the schedules referred to
in this Agreement and delivered by Seller and the Company to Buyer
simultaneously with the execution and delivery of this Agreement and containing
the information required to be included therein pursuant to this Agreement.
(h) "EBITDA" means earnings before interest, taxes, depreciation
and amortization determined in accordance with GAAP by the independent auditors
of the Company.
(i) "EVCI" means Educational Video Conferencing, Inc., a Delaware
Corporation and the parent of Buyer.
(j) "GAAP" means generally accepted accounting principles in
general use by significant segments of the U.S. accounting profession.
(k) "LANDLORD" means 444 Realty Company, L.L.C.
(l) "LEASE" means the lease between the Landlord and the Company
dated July 27, 1983, as subsequently amended, including the Second Amendment and
Lease Extension Agreement dated February 1, 1983, which contains in paragraph 8
thereof the provisions of subparagraph 51E.
(m) "SELLERS RECOUPMENT AMOUNT" means that portion of the Price
equal to the amount of the Shareholder Debt minus $22,500.
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1.2. OTHER DEFINITIONS. The following terms have the meanings provided
for in the Sections set forth below.
TERM SECTION
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Accounts Payable Schedule 3.7
Accreditations 3.5
Audited Financial Statements 3.7
Breaching Party 8.2(d)
Buyer Preamble
Common Stock Second WHEREAS clause
Company Preamble
EBITDA Period 2.2(b)
Employee Plan 3.15
Equipment 3.12(b)
ERISA 3.15
Escrow Agreement 6.5
50% EBITDA Period 2.2(a)
50% EBITDA Portion 2.2(a)
Harmed Party 8.2(d)
Indemnifying Party 8.2(c)
Indemnitee 8.2(c)
Institute First WHEREAS clause
Inventory 3.12(a)
Losses 8.2(a)
Memberships 3.5
Price 2.2(a)
Prior Period Disallowance 8.2(e)
Receivables Schedule 3.7
Seller Preamble
Seller's Non-compete 2.2(a)
Seller's Non-compete Area 9.1(a)
SFA Programs 3.24
Shareholder Debt 3.16
Shares Second WHEREAS clause
Unaudited Balance Sheet 3.7
Unaudited Financial Statements 3.7
ARTICLE II.
PURCHASE AND SALE OF SHARES
2.1. PURCHASE AND SALE. Seller agrees that, at the Closing, it will
sell, assign, transfer and deliver the Shares to Buyer, free and clear of any
lien charge, claim, pledge or encumbrance of any kind, and Buyer agrees it will
purchase the Shares.
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2.2. PRICE AND PAYMENT.
(a) The total purchase price (the "Price") for the Shares and
Seller's non-compete agreement pursuant to Article IX ("Seller's Non-compete")
shall equal, and be limited to, the sum of (i) Seller's Recoupment Amount and
(ii) 50% of EBITDA, if any, for the three fiscal years of the Company ending
June 30, 2001, 2002 and 2003; provided, however, if, for any reason, in the
Company's sole discretion, it changes its fiscal year to a calendar year, the
foregoing dates shall be December 31, 2001, 2002 and 2003, respectively. The
portion of the Price exceeding Seller's Recoupment Amount is defined as the "50%
EBITDA Portion" and the three fiscal years of the Company referred to in the
immediately preceding sentence is defined as the "50% EBITDA Period."
(b) The Price shall be allocated 95% to the purchase of the
Shares and 5% to Seller's Non-compete. In addition, the execution and delivery
by EVCI of the Warrant Agreement referred to in Section 6.5 shall be deemed
additional consideration for Seller's Non-compete.
(c) Each portion of the Price shall be calculated and such
calculation shall be given to Seller within 100 days after the close of the
period to which it relates. The calculation of EBITDA shall be based on the
Company's audited financial statements. Each calculation of the Price shall be
accompanied by the financial statements to which such payment relates. The
financial statements shall be accompanied by a certificate of the Company's
Chief Financial Officer showing the calculation in reasonable detail of EBITDA
for the applicable fiscal year of the Company.
(d) Buyer's Recoupment Amount shall be deemed paid to Buyer out
of 80% of EBITDA for each fiscal year of the Company beginning after December
31, 1999. Buyer's Recoupment Amount shall be paid in full before any of the 50%
EBITDA Portion is paid to Seller.
(e) Each installment payment of Seller's Recoupment Amount shall
equal 20% of EBITDA for each fiscal year of the Company beginning after December
31, 1999, except to the extent the last installment is less than 20% of EBITDA
for the applicable fiscal year. Installment payments of Seller's Recoupment
Amount shall be made to Seller when the calculation of EBITDA to which such
payment relates is delivered to Seller pursuant to Section 2.2(c). If, however,
Seller's Recoupment Amount is not paid in full by the time Buyer's Recoupment
Amount is paid in full, the balance of Seller's Recoupment Amount shall continue
to be paid out of 20% of EBITDA and, in addition, commencing the Company's
fiscal year immediately following the Company's fiscal year in which 80% of
Cumulative EBITDA equals or exceeds Buyer's Recoupment Amount and continuing
through the fiscal year in which 20% of Cumulative EBITDA equals or exceeds
Seller's Recoupment Amount, 30% of EBITDA for the fiscal year shall be used to
pay any 50% EBITDA Portion that is earned in such fiscal year or, if such fiscal
year is not within the 50% EBITDA Period, such 30% of EBITDA shall be used to
pay the accrued 50% EBITDA Portion. Payment of such 30% of EBITDA shall be made
when the calculation of EBITDA for the period to which it relates is delivered
to Seller pursuant to Section 2.2(c).
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(f) In addition, if all or substantially all the assets of the
Company are sold, or if the stock of the Company is disposed of, in a
transaction where Buyer receives cash of other property (the "Transaction
Consideration"), Seller shall be entitled to receive, upon the Closing of such
transaction, the portion of the Transaction Consideration as equals the sum of:
(i) the lesser of 20% thereof and the unpaid balance of Seller's
Recoupment Amount,
(ii) to the extent, if any, Buyer's Recoupment Amount has been
paid in full by the application of 80% of the Transaction Consideration, or
otherwise, but there remains an unpaid balance of Seller's Recoupment Amount,
the lesser of 50% of the Transaction Consideration and the unpaid balance of
Seller's Recoupment Amount, and
(iii) if there is any Transaction Consideration remaining after
the payments pursuant to the immediately preceding clauses (i) and (ii), the
lesser of 50% of such remaining Transaction Consideration or the amount required
to pay the accrued 50% EBITDA Portion in full.
(g) Payment of installments of the 50% EBITDA Portion that have
been accrued and remain unpaid as of the end of the Company's fiscal year in
which 20% of Cumulative EBITDA equals or exceeds Seller's Recoupment Amount,
shall be paid to Seller in equal eight quarterly installments on each March 31,
June 30, September 30, and December 31, commencing the quarterly payment date
immediately following such fiscal year. All 50% EBITDA Portions earned during
the fiscal years, if any, of the 50% EBITDA Period commencing after the fiscal
year when 20% of Cumulative EBITDA equals or exceeds Seller's Recoupment Amount,
shall be paid to Seller together with the delivery of the calculation of EBITDA
to which each such 50% EBITDA Portion relates until all such 50% EBITDA Portions
are paid in full.
(h) Notwithstanding any other provision of this Agreement, in the
event that, as of September 30, 2000, the Company has not collected, or does not
have reasonable assurance of collecting by October 31, 2000, tuition totaling
$1,732, 500 (from sources other than loans by the Institute) that is
attributable solely to student enrollment at the Institute during the current
Spring 2000 semester, Seller's Recoupment Amount shall be reduced by the amount
that such tuition collections and anticipated collections are less than
$1,732,500.
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2.3. CLOSING.
(a) The Closing of the sale and purchase of the Shares shall take
place at the offices of Fischbein Badillo Wagner Harding, 909 Third Avenue, New
York, NY 10022, on January 14, 2000, commencing at 10:00 A.M., or at such other
time and place as the parties shall mutually agree.
(b) Subject to the satisfaction or waiver of the conditions of
the Closing specified in Articles VI and VII hereof, at the Closing, Seller
shall deliver to Buyer the certificate(s) representing the Shares, duly endorsed
to Buyer by Seller or accompanied by a stock power duly endorsed to Buyer by
Seller.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants the following to Buyer:
3.1. CORPORATE ORGANIZATION AND QUALIFICATION; BUSINESS.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York, has full corporate
power and authority to carry on its business as it is now being conducted and to
own the properties and assets it now owns. The Company is not qualified as a
foreign corporation or licensed to do business as a foreign corporation in any
other jurisdiction because the character and location of its assets and nature
of its business do not require it to be so qualified or licensed. The copies of
the Company's Certificate of Incorporation and By-Laws provided to Buyer are
complete and correct copies of such instruments as presently in effect.
(b) The Company's sole business activity consists of operating
the Institute.
3.2. AUTHORIZED AND OUTSTANDING SHARES; NO SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of 200
shares of Common Stock, of which 100 shares of Common Stock are issued and
outstanding and owned of record and beneficially solely by Seller. All of the
issued and outstanding shares of Common Stock are duly authorized, validly
issued, fully paid and non-assessable.
(b) Except for the Shares, no other stock is issued and there are
no outstanding options, warrants, agreements, restrictions, contracts, calls,
demands, understandings, obligations (contingent or otherwise) or other
commitments of any kind relating to the issuance or ownership of any equity
interest in the Company, other than as provided in this Agreement.
(c) The Company has no subsidiaries.
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3.3. TITLE TO SHARES. Seller owns the Shares beneficially and of record
and free and clear of all liens, charges, claims, pledges and encumbrances of
any kind whatsoever. Seller has the complete and unrestricted power to sell and
deliver to Buyer all of the Shares in accordance with this Agreement. The Shares
acquired by Buyer under this Agreement will be acquired free and clear of any
and all liens, charges, claims, pledges and encumbrances of any kind whatsoever,
including any claim for payment of any transfer or other similar taxes, if any,
which shall be Seller's obligation to pay.
3.4. AUTHORIZATION; BINDING EFFECT; NO CONFLICT. The execution,
delivery and performance of this Agreement has been duly and validly authorized
by all necessary action on the part of the Company. The Company has the full
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and the Company. This Agreement is the valid and binding
obligation of Seller and the Company enforceable in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The execution, delivery and performance of this Agreement by
Seller and the Company does not (i) violate or conflict with any statute, law,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
of any court or governmental authority; (ii) violate the Certificate of
Incorporation or By-Laws of the Company; and (iii) violate, conflict with, or
constitute a default under, or result in the acceleration of any debt of the
Company or the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of the Company, under any Consent or
Contract to which Seller or the Company is a party or by which Seller or the
Company is bound.
3.5. CONSENTS.
(a) Schedule 3.5 lists and attaches evidence of all Consents,
including those required by all federal, state, county and local governmental
(including New York State Board of Regents), accreditation organizations
(collectively, "Accreditations") and membership organizations (collectively,
"Memberships") held or required by the Company in order to operate the
Institute's business described in the Interboro Institute College Catalogue
1999-2001. Except as disclosed in Schedule 3.5, to the best knowledge of Seller
and the Company, the Company has complied and is in compliance in all material
respects with the terms and conditions of all such Consents, Accreditations and
Memberships and no notice of noncompliance has been received by the Company nor
does Seller or the Company know of, or aware of any basis for, any event which,
with the lapse of time, would result in such a notice being given to the
Company.
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(b) Except as disclosed in Schedule 3.5, no further Consent is
necessary for the execution, delivery and consummation of this Agreement as of
the Closing. Except as disclosed in Schedule 3.5, all Consents referred to in
this Agreement and the Disclosure Schedules are in full force and effect and are
valid, binding and enforceable in accordance with their terms; neither Seller
nor the Company is aware of, or knows of any basis for, any existing defaults,
or incurred violations that could result in a default, in the material terms
thereof, which defaults, individually or in the aggregate, could reasonably be
expected to materially adversely affect the business, assets, properties or
prospects of the Company.
3.6. COMPLIANCE WITH LAW. Except as disclosed in Schedule 3.6, Seller
and the Company do not know, nor are they aware of any basis, of a failure by
the Company to conduct its operations in accordance with all applicable laws,
regulations and other requirements of all governmental, regulatory and other
authorities, having jurisdiction over the Company, except for violations which
individually and in the aggregate could not reasonably be expected to have a
material adverse affect on the assets, business or prospects of the Company.
Except as disclosed in Schedule 3.6, during the last 36 months, the Company has
not received any notification of any alleged present or past failure by the
Company to comply with such laws, rules or regulations.
3.7. FINANCIAL RECORDS; STATEMENTS. The Company has delivered to Buyer:
(i) a schedule of notes and accounts receivable dated January 13, 2000 (the
"Receivables Schedule"); (ii) a schedule of accounts payable dated January 13,
2000 (the "Accounts Payable Schedule"); (iii) the Company's unaudited balance
sheet as of December 31, 1999 (the "Unaudited Balance Sheet") and the related,
statements of income, retained earnings and cash flows (collectively, with the
Unaudited Balance Sheet, the "Unaudited Financial Statements") and (iv) the
Company's audited financial statements for the fiscal year ended June 30, 1999
(the "Audited Financial Statements"). The Receivables Schedule and the Accounts
Payable Schedule are, in all material respects, complete and accurate, as of
their respective dates, and the Unaudited Financial Statements and the Audited
Financial Statements fairly present the Company's financial position, as of the
respective dates of the balance sheets included therein, and the Company's
results of its operations and cash flows for the respective periods ended on
such dates, in accordance with GAAP (except, in the case of unaudited
statements, for normally recurring year-end adjustments, which adjustments will
not be material either individually or in the aggregate).
3.8. NO UNDISCLOSED LIABILITIES. Except as disclosed in the Unaudited
Balance Sheet, the Accounts Payable Schedule and the Disclosure Schedules, the
Company does not have any liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise).
3.9. TAXES. Except as disclosed in Schedule 3.9, the Company has duly
filed all tax reports and returns required to be filed by it and has duly paid
all taxes and other charges due or claimed to be due from it by federal, state,
local or other taxing authorities. Except as disclosed in Schedule 3.9, there
are no tax liens upon any property or assets of the Company except liens for
current taxes not yet due. There are no audits of the Company's tax returns
pending and there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax returns for any period.
Except as disclosed in Schedule 3.9, a complete and correct copy of the income
tax returns for the Company (federal and state) with respect to the fiscal years
ended December 31, 1996, 1997 and 1998 have been delivered to Buyer.
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3.10. TITLE TO PROPERTIES; ENCUMBRANCES. The Company has good, valid
and marketable title to all the properties and assets which it purports to own,
except for personal property having an aggregate book value not in excess of
$1,000, free and clear of, all title defects or objections, liens, claims,
charges, security interests or other encumbrances of any nature whatsoever,
except for encumbrances in the nature of leases affecting the specific Equipment
which is the subject of such leases. The rights, properties and other assets
presently owned, leased or licensed by the Company and described elsewhere in
this Agreement include all rights, properties and other assets necessary to
permit the Company to conduct its business in all material respects in the same
manner as its business has been conducted prior to the date hereof.
3.11. RECEIVABLES. All notes and accounts receivable of the Company
reflected in the Receivables Schedule represent receivables actually due in the
ordinary course of business and are believed by Seller, based solely on Seller's
knowledge of the Company's collection experience, to be collectible in full,
without setoff or deduction, net of any reserves shown on the Receivables
Schedule.
3.12. INVENTORY; EQUIPMENT.
(a) Schedule 3.12(a) sets forth a complete and accurate list of
each category of items exceeding a total of $10,000 in value of the Company's
inventory ("Inventory") and the cost thereof. All Inventory is reflected on the
Unaudited Balance Sheet, and consists of a quality and quantity usable an
salable in the ordinary course of business, except for obsolete items and items
of below-standard quality, all of which have been written down in the Unaudited
Balance Sheet to realizable market value or for which adequate reserves have
been provided therein. Except as disclosed in Schedule 3.12(a), the quantities
of all Inventory are reasonable and warranted in the present circumstances of
the Company's business.
(b) Schedule 3.12(b) lists all of the equipment used by the
Company in connection with the business of the Company, including any office
furniture and leased equipment (collectively, the "Equipment"). All of the
Equipment is, as of the date of this Agreement, in generally good operating
condition and repair and is adequate for the uses to which it is being put; and,
except as disclosed in Schedule 3.12(b), none of the Equipment, as of the date
of this Agreement, is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs which are not material in nature or cost. At the
Closing, Buyer is accepting the Equipment "as is."
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3.13. CONTRACTS.
(a) Schedule 3.13(a) is an accurate list of all material
Contracts to which the Company is a party, or by which it, or any of its
property is bound. Except as disclosed on Schedule 3.13(a), to Seller's or the
Company's knowledge, all such Contracts are in full force and effect and no
party is in material breach of, or default under, any such Contract. Each
Contract is a valid and binding obligation to the Company enforceable in
accordance with its terms. The Company has delivered to Buyer a complete and
correct copy of each Contract (including the Lease) that is identified on
Schedule 3.13 as having been delivered to Buyer.
(b) Except as disclosed in Schedule 3.13(b), (i) all fixed rent
and additional rent presently due and owing to the Landlord pursuant to the
Lease has been paid, (ii) neither Seller nor the Company knows of, or is aware
of any basis for, the occurrence of any event which is, or with the giving of
notice or passage of time or both will become, a condition of limitation under
the Lease, on the part of either the Institute or the Landlord, (iii) the
Company is currently the sole tenant under the Lease and the Lease is presently
in full force and effect, and (iv) the Company has not received any notices of
default citing any defaults under the Lease which remain uncured.
3.14. EMPLOYEES.
(a) Schedule 3.14 sets forth a complete and correct list of the
names, current annual rates of salary, bonus, employee benefits, accrued
vacation times and pay, sick pay, and other compensation of all the present
officers, employees, and agents of Seller.
(b) Except as set forth in Schedule 3.14, all of the Company's
employees may be terminated at will without any liability or obligation of the
Company except for compensation earned prior to such termination and owed
pursuant to the terms of their employment, as disclosed in Schedules 3.14 and
3.15, prior to such termination. Neither Seller nor the Company knows of, or is
aware of any basis for, any claim against the Company by any employee or agent
of the Company as a result of the Company's execution, delivery or performance
of this Agreement.
(c) The Company is not a party to any labor agreement with
respect to its employees with any union or similar labor organization. Neither
Seller nor the Company knows of, or is aware of any basis for, any employee
unions (nor any similar labor or employee organizations) under any statute,
custom or practice governing the Company's employees in their capacity as the
Company's employees. There is no labor strike or disturbance pending, or to
Seller's or the Company's knowledge, threatened against the Company nor is any
labor grievance currently being asserted against the Company. Within the last
three years there has been no union organization campaign involving the Company.
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3.15. EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 3.15, the
Company has no bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, group insurance or any other fringe
benefit plan, arrangement or practice, whether formal or informal (each, an
"Employee Plan"). Schedule 3.15 contains an accurate description of, and sets
forth the annual amount payable pursuant to, each Employee Plan. Each Employee
Plan, if any, that is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA") has been administered in compliance with ERISA and
all other applicable laws, rules, and regulations, and any necessary
governmental approvals of the Employee Plan have been obtained. True and
complete copies of the Employee Plans and reports filed with any governmental
agency with respect thereto and the amount of contributions made by Seller to
any such Employee Plans for the last three fiscal years of the Company have been
furnished to Purchaser by Seller. Except as set forth in Schedule 3.15, the
Company does not have any obligations, contingent or otherwise, past or present,
under applicable laws, rules, or regulations or the terms of any Employee Plan.
3.16. INSIDER/AFFILIATE ARRANGEMENTS; SHAREHOLDER DEBT. The Company is
not a party to any transaction or understanding with any officer or director or
Seller (or any relative thereof) of the Company that cannot be terminated
without liability to the Company. The total amount of indebtedness of the
Company to each of Seller, Bruce Advertising and any relative or other affiliate
of Seller (collectively, the "Shareholder Debt") is disclosed in Schedule 3.16.
3.17. LITIGATION. Except as disclosed in Schedule 3.17, neither Seller
nor the Company knows of any action, suit, inquiry, student complaint,
proceeding or investigation pending or threatened by or before any court or
governmental or other regulatory or administrative agency, or commission or
Membership organization, or any Accreditation or student financial assistance
agency or organization, involving the Company or which questions or challenges
the validity of this Agreement or any action taken or to be taken by Seller or
the Company pursuant to this Agreement or in connection with the transactions
contemplated hereby; and neither Seller nor the Company know of any basis for
any such action, lawsuit, inquiry, student complaint, proceeding or
investigation. The liability claims against the Company disclosed on Schedule
3.17 are fully covered by insurance.
3.18. INSURANCE. Schedule 3.18 contains an accurate summary of all
material policies of fire, liability, workmen's compensation and other forms of
insurance owned or held by the Company. All such policies are in full force and
effect, and, except as disclosed in Schedule 3.18, all premiums with respect
thereto have been paid when due or before the grace period thereunder has
elapsed, and no notice of cancellation or termination has been received with
respect to any such policy. Such policies are sufficient for compliance with all
requirements of law and of all agreements to which the Company is a party;
provide adequate insurance coverage for the assets and operations of the
Company; will remain in full force and effect through the respective dates set
forth in Schedule 3.18; and will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement. Schedule
3.18 identifies all types of material risks for which the Company is
self-insured.
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3.19. ABSENCE OF CHANGE. Except as disclosed in Schedule 3.19, since
the date of the Unaudited Balance Sheet, there has not been any:
(a) transaction by the Company except in the ordinary course of
the Company's business;
(b) material adverse change in the financial condition,
liabilities, assets, business or prospects of the Company;
(c) destruction, damage to, or loss or impairment of any material
asset of Consent of the Company (whether or not covered by insurance);
(d) labor dispute or other event or condition of any character
materially and adversely affecting the financial condition, business, assets, or
prospects of the Company;
(e) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rate) by the
Company;
(f) except in accordance with past practice, increase in the
salary or other compensation payable or to become payable by the Company to any
of its officers, directors, or employees, or the declaration, payment, or
commitment or obligation of any kind for the payment, by the Company, of a bonus
or other additional salary or compensation to any such person;
(g) amendment or termination of any Contract to which the Company
is a party, or by which it or any of its assets or properties are subject,
except in the ordinary course of the Company's business;
(h) waiver or release of any right or claim of the Company,
except in the ordinary course of the Company's business;
(i) declaration of, or agreement to make, any distribution of any
assets of any kind whatsoever;
(j) citations, notices, or communications received by the Company
for any violations of any law, rule or regulation or Consent of any governmental
agency or other authority or Accreditation or Membership organization;
(k) claim incurred by the Company for damages or alleged damages
for actual or alleged negligence or other tort or breach of contract which is
not fully covered by insurance underwritten by responsible insurers;
(l) sales, transfers, disposals of or agreements to sell,
transfer or otherwise dispose of any of the assets, properties or rights of the
Company, except as incurred in the ordinary course of business consistent with
the past practices of the Company;
(m) agreements entered into by the Company granting any
preferential rights to purchase any of the assets, properties or rights of the
Company (including management and control thereof); or
(n) agreement by Seller to do any of the things described in the
preceding clauses (a) through (m).
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3.20. BOOKS AND RECORDS. All of the Company's books and records,
including, without limitation, its books of account, corporate records, minute
book and stock certificate book are up to date and complete and reflect
accurately and fairly the conduct of its business in all material respects since
its date of incorporation.
3.21. INTELLECTUAL PROPERTY RIGHTS. Schedule 3.21 lists and briefly
describes all patents, trademarks, servicemarks, tradenames, copyrights, and
applications therefor registered in the name of the Company or in which the
Company has any right, license, or other interest. Except as disclosed in
Schedule 3.21, the Company is not a party to any license agreements whether
written or oral, either as licensor or licensee, with respect to any patents,
trademarks, servicemarks, tradenames, or copyrights or applications therefor.
Neither Seller nor the Company has any reason to believe that (i) the Company
does not have good and marketable title to, or the right to use, such patents,
trademarks, service marks, tradenames, trade secrets and know-how necessary for
the operation of the Company's business, without the payment of any royalty or
similar payment or (ii) that the Company is infringing on any patent, trademark,
servicemark, tradename, or copyright of others, and neither Seller nor the
Company is aware of any infringement by others of any such rights owned by the
Company.
3.22. STUDENT ENROLLMENT.
(a) The information disclosed in Schedule 3.22(a) regarding
student enrollments at the Institute by semester, from Fall 1994 through Fall
1999, including information about TAP and PELL grants and student loans, is
accurate and complete in all material respects.
(b) The information disclosed in Schedule 3.22(b) regarding the
number of students majoring in each of the degree programs offered by the
Institute, by semester from Spring 1996 through Fall 1999, is accurate and
complete in all material respects.
3.23. STUDENT FINANCIAL ASSISTANCE. Except as disclosed in Schedule
3.23, (i) the Company is not subject to disallowance of funds advanced or to be
reimbursed to the Company with respect to any current or prior semester under
any federal or state financial aid programs ("SFA Programs") and (ii) there is
no basis for any disallowance. The amounts remaining to be repaid as a result of
all prior disallowances under SFA Programs and the due dates of such repayments
are disclosed in Schedule 3.23. Except as disclosed in Schedule 3.23, neither
Seller nor the Company knows of, or is aware of any basis for, pending or
threatened claims, assessments, notices, proposals to assess, or audits with
respect to any funds disbursed to the Company under SFA Programs or for which
the Company has applied for disbursement.
3.24. BANKING FACILITIES, CASH. Schedule 3.24 lists:
(a) each bank, savings and loan, brokerage or similar financial
institution in which the Company has an account or safety deposit box and
numbers of the accounts or safety deposit boxes maintained by the Company
thereat;
(b) the names of all signatories authorized to draw on each such
account or to have access to any such safety deposit box facility, together with
a description of the authority (and conditions thereof, if any) of each such
signatory with respect thereto.
(c) the cash, securities and other property on deposit or
maintained in a brokerage account at or invested through each such financial
institution as of January 12, 2000.
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3.25. POWERS OF ATTORNEY AND SURETYSHIPS. Except as set forth on
Schedule 3.25, the Company does not have any general or special powers of
attorney outstanding (whether as grantor or grantee thereof) or any obligation
or liability (whether actual, accrued, accruing, contingent or otherwise) as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any person or entity except as endorser or maker of
checks endorsed or made in the ordinary course of business.
3.26. ILLEGAL PAYMENTS. The Company has not directly or indirectly,
paid or delivered any fee, commission or other sum of money or item or property,
however characterized, to any finder, agent, government official or other party,
in the United States or any other country, which is in any manner related to the
business or operations of the Company and which is, or may be with the passage
of time or discovery, illegal under any federal, state or local laws of the
United States (including, without limitation, the U.S. Foreign Corrupt Practices
Act) or any other country having jurisdiction; and the Company has not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential students.
3.27. NO BROKERS. Neither the Company, nor Seller or any officers,
directors, employees or affiliates of the Company has employed or made any
agreement with any third party which obligates the Company or Seller or any of
their Affiliates to pay any finder's fee, brokerage fees or commission or
similar payment in connection with the transactions contemplated hereby, other
than Dr. Benjamin Weissman and for which Seller shall be solely responsible.
3.28. DISCLOSURE. No representations or warranties by Seller in this
Agreement and no statements contained in any document, certificate, or other
writing furnished or to be furnished by Seller or the Company to Buyer or any of
its representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Company as follows:
4.1. ORGANIZATION, ETC. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full power and authority to carry on its business as it is now contemplated and
to own the properties and assets it now owns and contemplates owning.
4.2. AUTHORIZATION; BINDING EFFECT. Buyer has full power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. This Agreement is a valid and binding agreement of Buyer enforceable in
accordance with its terms except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.3. NO VIOLATION. Neither Buyer's execution and delivery of this
Agreement nor its consummation of the transactions contemplated hereby will (i)
violate the Certificate of Incorporation or By-Laws of Buyer; or (ii) violate,
or be in conflict with, or constitute a default under, or cause the acceleration
of the maturity of any debt or obligation pursuant to, any Contract to which
Buyer is a party or by which Buyer is bound.
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4.4. LEASE.
(a) By the Closing, Buyer will have the financial ability to
satisfy the net worth requirements of subparagraph 51E of the Lease, provided
the representations and warranties of Seller in Section 3.23 are not breached.
(b) Representatives of Buyer will cooperate with representatives
of the Company in negotiating the final disposition of all claims of the
Landlord under the Lease that are disclosed in Schedule 3.13(b).
4.5. DUE DILIGENCE. With Seller's and the Company's cooperation,
Buyer's representatives have conducted, but not completed, due diligence
(without waiving any claims hereunder) regarding, among other matters, the
Lease, the continuation of the Institute's state and federal Consents, the
Company's books and records and previous disallowances under SFA Programs.
ARTICLE V.
COVENANTS OF SELLER AND THE COMPANY
The Company and Seller hereby covenant and agree with Buyer that:
5.1. FULL ACCESS. The Company has afforded and shall continue to afford
to Buyer, its counsel, accountants and other representatives full access to
books and records of the Company on reasonable notice and during the Company's
normal business hours so that Buyer may have full opportunity to make such
investigations as it shall desire to make of the affairs of the Company and the
Company shall cause its officers and accountants to furnish such additional
reasonable financial and operating data and other information as is customarily
kept or prepared by the Company and as Buyer shall from time to time request.
5.2. SUPPLEMENTS TO DISCLOSURE SCHEDULES. At or prior to the Closing,
Seller and the Company will supplement or amend the Disclosure Schedules with
respect to any matters hereafter arising which, individually or in the aggregate
are material, and if existing or occurring at the date of this Agreement, would
have been required to be disclosed in the Disclosure Schedules. No supplement or
amendment of the Disclosure Schedules made pursuant to this section shall be
deemed to cure any breach of any representation of or warranty made in this
Agreement unless Buyer specifically agrees thereto in writing.
5.3. SATISFACTION OF ALL CONDITIONS PRECEDENT. From the date hereof to
the Closing, the Seller and the Company shall use their best efforts to cause to
be satisfied all conditions precedent to the obligations of Buyer to close
hereunder.
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5.4. CONDUCT OF BUSINESS. Through the Closing Date, the Company shall
conduct its business substantially in the manner in which it is presently
conducted.
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF SELLER AND THE COMPANY
Each and every obligation of Seller and the Company under this Agreement to
be performed on or before the Closing shall be subject to the satisfaction, on
or before the Closing of each of the following conditions, unless waived in
writing by Seller or the Company:
6.1. NO GOVERNMENT PROCEEDING OR LITIGATION. Except as disclosed in
Schedule 3.17, no suit, action, investigation, inquiry or other legal or
administrative proceeding by any governmental authority, Accreditation or
Membership organization, or other party shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated hereby
or could reasonably result in the foregoing.
6.2. REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Buyer contained herein and in any certificate or document
delivered and to be delivered by Buyer shall be in all material respects true
and accurate as of the date when made and at and as of the Closing Date as
though such representations and warranties were made at and as of such dates,
except for changes expressly permitted or contemplated by this Agreement, and
Buyer shall have executed and delivered to Seller a certificate to such effect.
6.3. PERFORMANCE. Buyer shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by Buyer, on or prior to the Closing, and Buyer shall
have executed and delivered to Seller a certificate to such effect.
6.4. WARRANT AGREEMENT. Seller and EVCI shall have entered into the
Warrant Agreement in the form of Exhibit A to this Agreement.
6.5. ESCROW AGREEMENT. Seller, the Company, Buyer and
Fischbein Badillo Wagner Harding shall have entered into the Escrow Agreement
in the form of Exhibit B to this Agreement (the "Escrow Agreement").
6.6. INVESTMENT. Buyer shall have invested at least $500,000 in cash in
the Company by means of loans or contributions to equity.
6.7. DEBT REPAYMENT. Seller shall have received repayment, by wire
transfer to an account designated by Seller, of $22,500 of the Shareholder Debt,
without interest.
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ARTICLE VII.
CONDITIONS TO OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be performed on
or before the Closing shall be subject to the satisfaction, on or before the
Closing of each of the following conditions, unless waived in writing by Buyer:
7.1. CONSENTS. All Consents required in order to consummate the
transactions contemplated by this Agreement shall have been obtained.
7.2. NO GOVERNMENT PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other legal or administrative proceeding by any
governmental body, Accreditation or Membership organization or other party shall
have been instituted or threatened which questions or affects the validity,
legality or value of the transactions contemplated hereby or which could
reasonably result in the foregoing or, except as disclosed in the Disclosure
Schedules, could have a material adverse affect on Seller or the Company.
7.3. REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Seller and the Company contained in this Agreement, the Disclosure
Schedules and in any certificates and other documents delivered and to be
delivered by Seller and/or the Company, pursuant hereto, or in connection with
the transactions contemplated hereby, shall be true, complete and accurate in
all material respects as of the date when made and at and as of the Closing Date
as though such representations and warranties were made at and as of such dates,
except for changes expressly permitted or contemplated by the terms of this
Agreement, and Seller shall have executed and delivered to Buyer a certificate
to such effect.
7.4. PERFORMANCE. Seller and the Company shall have performed and
complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date, and Seller shall have executed and delivered to Buyer a certificate to
such effect.
7.5. FINANCIAL STATEMENTS. The Company shall have provided Buyer with
audited financial statements for its fiscal year ended June 30, 1999 and
unaudited financial statements for its six months ending December 31, 1999, in
such form as Buyer's auditors shall reasonably request to ensure their
compliance with applicable requirements of Regulations S-B and S-X of the
Securities and Exchange Commission.
7.6. ENROLLMENT. For the Spring 2000 semester, at least 550 full-time
students shall be enrolled at the Institute who have or, Buyer is satisfied will
have, their tuition fully paid from sources other than loans from the Institute.
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7.7. SHAREHOLDER DEBT. Except for the $22,500 repaid to Seller at the
Closing, all of the Shareholder Debt shall have been contributed to the equity
of the Company.
7.8. ESCROW AGREEMENT. Seller, the Company, Buyer and Fischbein Badillo
Wagner Harding shall have entered into the Escrow Agreement.
7.9. OTHER CLOSING DELIVERIES. Buyer shall have received: (a) a long
form certificate of good standing of the Company or such other evidence
reasonably satisfactory to Buyer, regarding the Company's good standing and a
copy of the Company's charter documents on file with, and certified by, the New
York Department of State and (b) an opinion of Seller's and the Company's
counsel, in form reasonably satisfactory to Buyer's counsel, with respect to the
matters set forth in Exhibit C to this Agreement.
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1. INVESTIGATIONS; SURVIVAL OF WARRANTIES.
(a) The respective representations and warranties of the parties
contained herein or in any certificates or other documents delivered prior to or
at the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party hereto. Furthermore, the disclosure to Buyer in
the Disclosure Schedules or otherwise of an investigation, audit, failure to
file, liability claim or other event, which is not disclosed on a Disclosure
Schedule as a liquidated dollar amount, shall not relieve Seller of any
liability for Losses resulting from such investigation, audit, failure to file,
liability claim or other event; provided, however, that (i) the full extent of
Seller's liability for any such Losses resulting from New York State Education
Department and U.S. Department of Education investigations or audits shall be
limited to reduction of the unpaid portion of the Price by offset pursuant to
Section 8.2; (ii) Seller shall have no responsibility, and have no liability,
for any Losses arising from any regulatory or administrative review, assessment
or determination of the Company's compliance with any laws, rules or regulations
of any kind relating to facts or circumstances existing at any point after the
Closing; and (iii) Seller shall have no liability whatsoever for Losses in
connection with the Company's non-compliance with any legal, regulatory or
administrative notice, filing or other requirement after the Closing.
(b) All representations and warranties (other than with respect
to taxes in Section 3.9, Employee Plans in the last sentence of Section 3.15 and
disallowances under SFA Programs in Section 3.23), shall survive the execution
and delivery hereof and the Closing hereunder for one year following the Closing
Date and shall thereupon expire together with any right to indemnification in
respect thereof (except to the extent a notice asserting a claim for breach of
any such representation or warranty shall have been given prior to such date)
Representations and warranties with respect to taxes in Section 3.9, Employee
Plans in the last sentence of Section 3.15 and disallowances under SFA Programs
in Section 3.23 shall survive the execution and delivery hereof and the Closing
until the expiration of any applicable statute of limitations, including any
extensions thereof, and shall thereupon expire together with any right to
indemnification in respect thereof (except to the extent a notice assenting a
claim for breach or any such representation or warranty shall have been given
prior to such date).
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8.2. INDEMNIFICATION.
(a) SELLER'S OBLIGATION. Seller agrees to indemnify and hold
harmless Buyer and its stockholders, officers, directors and affiliates against
and in respect to all damages, claims, losses and expenses (including, without
limitation to, attorneys' fees and disbursements) reasonably incurred (all such
amounts being hereinafter sometimes referred to as "Losses") arising out of (i)
any misrepresentation or breach of any representation or warranty made by the
Seller or the Company in this Agreement or pursuant hereto; and (ii) the
non-performance or breach of any covenant, agreement or obligation of Seller or
the Company contained in this Agreement. Notwithstanding any other provision of
this Agreement, the sole source for payment or reimbursement of Buyer for Losses
resulting from Seller's breach of Section 3.23 shall be by reduction of the
Price by offset pursuant to Section 8.2 or by payment to Buyer from funds
deposited in escrow, plus accrued interest, pursuant to the Escrow Agreement.
(b) BUYER'S OBLIGATION. Buyer shall indemnify, defend and hold
harmless the Company and its stockholder, officers, directors and affiliates
from and against any Losses arising out of or due to a breach of any
representation, warranty, covenant or agreement of Buyer contained in this
Agreement or in any document or other writing delivered pursuant to this
Agreement.
(c) THIRD PARTY CLAIMS. If either Seller or Buyer (the
"Indemnitee") receives notice of any claim or the commencement of any action or
proceeding with respect to which the other is obligated to provide
indemnification (the "Indemnifying Party") pursuant to such Sections (a) or (b)
hereof, the Indemnitee shall promptly give the Indemnifying Party written notice
thereof. The failure to give such notice shall not relieve the Indemnifying
Party of its indemnification obligation hereunder (except as set forth in
Section 8.1). The Indemnifying Party may compromise, settle or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
any such matter involving the asserted liability of the Indemnitee if the
Indemnifying Party has agreed to pay 100% of any liability of Indemnitee
resulting from such defense, settlement or compromise. In the event the
Indemnifying Party has not agreed to assume 100% of any such liability for which
Indemnitee is seeking indemnification hereunder, the parties hereto agree in
good faith to jointly choose and control counsel to defend, settle or compromise
such claim and, the fees of such joint counsel shall jointly be shared until the
resolution of such claim and a determination of the extent of liability, if any,
of the Indemnifying Party hereunder. Thereupon, if the claim made hereunder is
found to have been one as to which the Indemnifying Party is responsible for
hereunder, it shall be liable for all of such counsel fees and if found not to
be so liable hereunder, the Indemnitee shall be responsible for all such counsel
fees; provided, however, that if more than one claim is involved in a lawsuit or
if both the Indemnitee and Indemnifying Party are found to be liable, then the
right to recover counsel fees shall be shared equitably and in proportion to the
claims which are finally determined to be subject to indemnification hereunder
and the parties liable therefor. The Indemnitee shall not be entitled to
reimbursement for its counsel fees in an indemnification claim except as
hereinabove provided in this Section 8.2 and in the event Indemnitee
successfully makes a claim for indemnification against the Indemnifying Party to
recover any sum pursuant to a claim for indemnification under this Agreement. In
any event, the Indemnitee, the Indemnifying Party and the Indemnifying Party's
counsel shall cooperate in the compromise of, or defense against, any such
asserted liability. If the Indemnifying Party chooses to defend any claim, the
Indemnitee shall make available to the Indemnifying Party any books, records or
other documents within its control that are necessary or appropriate for such
defense and the Indemnitee shall not be entitled to reimbursement for its
counsel fees which are incurred after the Indemnifying Party has agreed to pay
100% of any liability resulting from a claim made hereunder.
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(d) INTEREST. If any party to this Agreement ("Breaching Party")
breaches any of its obligations to any other party to this Agreement ("Harmed
Party") under this Article VIII and such breach causes the Harmed Party to pay
or expend money, such expended sum shall bear interest at the rate of 12% per
annum from the date the Harmed Party is required to pay or expend such sum to
the date the Breaching Party pays such sum to the Harmed Party.
(e) OFFSET RIGHT. Buyer shall have the right to cause the offset
of any amounts due from Seller under this Section 8.2 against amounts owed to
Seller by Buyer pursuant to the Agreement that remain unpaid. Such offset
amounts include any Losses resulting from any and all disallowances made under
any SFA Program with respect to any period prior to the Closing (each a "Prior
Period Disallowance"). In this connection, notwithstanding any other provision
of this Agreement or any disclosure in any Disclosure Schedule, the amount of
Losses resulting from any and all Prior Period Disallowances and Losses, if any,
specifically referred to in Section 8.1(a) shall reduce the Price except to the
extent of any portion of the Price that has been paid to Seller. However, if the
Company receives any notice of a proposed investigation or audit of the Company,
or such an investigation or audit is commenced without notice, under any SFA
Program, any 50% EBITDA Portion that is required to be paid to Seller shall
instead be paid to, and thereafter released by, the Escrow Agent pursuant to the
terms of the Escrow Agreement.
ARTICLE IX.
SELLER'S NON-COMPETE
9.1. NON-COMPETE. Seller agrees that he shall not, from and after the
Closing, until the fifth anniversary of the Closing Date:
(a) directly or indirectly own, engage in, manage, operate, join, control,
or participate in the ownership, management, operation, or control of, or be
connected as a stockholder, director, officer, employee, agent, partner, joint
venturer, member, beneficiary or otherwise with any corporation, limited
liability company, partnership, sole proprietorship, association, business,
trust, or other organization, entity or individual which in any way is then
competing with the Company (i) within a 100 mile radius of the Institute or any
of its branches or extensions wherever located, or (ii) by delivering courses by
video conferencing or other distance learning services to any geographic
location where the Company delivers competitive courses ((i) and (ii) being
"Sellers Non-compete Area"), provided, however, that Seller may own, directly or
indirectly, securities of any entity traded on any national securities exchange
or listed on Nasdaq if Seller does not, directly or indirectly, own 3% or more
of any class of equity securities, or securities convertible into or exercisable
or exchangeable for 3% or more of any class of equity securities, of such
entity;
(b) aid, abet or otherwise assist any business, or other
organization or entity in competing with the Company in Seller's Non-compete
Area;
(c) directly or indirectly request or advise any present or
future students or vendors of the Institute to cancel any contracts with the
Institute or curtail their dealings with the Institute;
(d) directly or indirectly request or advise any present or
future service provider or financial resource of the Institute or the Company to
withdraw, curtail, or cancel the furnishing of such service or resource;
(e) directly or indirectly disclose or communicate to any other
person, firm, or corporation, the names of any past, present or future students
of the Institute;
(f) directly or indirectly induce or attempt to influence any
employee of the Institute or the Company to terminate his or her employment.
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9.2. INJUNCTIVE RELIEF. Seller agrees that a violation of Seller's
Non-compete, or any provision thereof, will cause irreparable injury to the
Company and Buyer and that the Company or Buyer shall be entitled, in addition
to any other rights and remedies it may have, at law or in equity, to seek an
injunction enjoining and restraining Seller from violating or attempting to
violate any provision of the Seller's Non-compete.
9.3. BLUE PENCILING. In the event any provision of Seller's Non-compete
as applied to any circumstances shall be adjudged by a Court to be invalid or
unenforceable, such invalidity shall in no way affect any other provision of
Seller's Non-compete or the application of any such provision in any other
circumstance, or the validity or enforceability of this Agreement. Seller and
Buyer intend Seller's Non-compete to be enforced as written. However, in the
event any provision, or any part of Seller's Non-compete, is adjudged by a Court
to be unenforceable because of the duration of such provision or the area
covered thereby, Seller and Buyer agree that the Court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases (generally referred to as blue
penciling), and, in its reduced or blue penciled form, such provision shall then
be enforceable and shall be enforced.
ARTICLE X.
MISCELLANEOUS PROVISIONS
10.1. TERMINATION.
(a) TERMINATION BY MUTUAL WRITTEN CONSENT. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of Seller, the Company and Buyer.
(b) TERMINATION BY THE COMPANY OR BUYER. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of Seller or Buyer if (i) the Closing shall not have occurred at or prior to
5:00 P.M., New York City time, on January 31, 1999 (the "Latest Closing Date")
provided, however, that the right to terminate this Agreement pursuant to this
Section 9.1(b) shall not be available to any party whose failure to fulfill any
of its obligations under this Agreement has been the cause of or has resulted n
the failure of the Closing to occur at or before such time and date; provided,
further, However, that if the Closing shall not have occurred on or prior to the
Latest Closing Date, the Closing may only occur after the Latest Closing Date
with the written consent of Buyer.
(c) TERMINATION BY BUYER. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by Buyer at any time prior
to the Closing Date, if (i) Seller or the Company shall have failed to comply,
in any material respect, with any of its covenants or agreements contained in
this Agreement, (ii) there shall have been a material breach of any
representation or warranty made by Seller in this Agreement, (iii) there shall
have occurred any event or development, or there shall be in existence any
condition, having or reasonably likely to have a material adverse effect on the
Company, or (iv) Seller or the Company shall have failed to satisfy the
conditions provided in Article VII hereof.
(d) TERMINATION BY SELLER AND THE COMPANY. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by Seller
and the Company at any time prior to the Closing Date, if Buyer shall have
failed to comply with any of its covenants or agreements or breached any
representation or warranty made by it in this Agreement.
(e) EFFECT ON TERMINATION. In the event of the termination of
this Agreement pursuant to this Section 10.1, this Agreement shall thereafter
become void and have no effect, and no party hereto shall have any liability or
obligation to any other party hereto in respect of this Agreement, except that
the provisions of Article XIII and Sections 10.1, 10.2, 10.5, 10.6, 10.8 and
10.10-10.14 shall survive any such termination; provided, however, that no party
shall be released from any liability hereunder if this Agreement is terminated
and the transactions contemplated hereby abandoned by reason of (i) willful
failure of such party to perform its obligations hereunder or (ii) any
misrepresentation made by such party of any matter set forth herein.
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10.2. CONFIDENTIALITY.
(a) PRE-CLOSING. Each party hereto will hold and will cause its
or their employees, consultants and advisors to hold in strict confidence the
negotiations regarding and the existence of this Agreement and all other
documents and information (collectively, "Confidential Information") concerning
the other parties furnished it by such other parties or its or their
representatives in connection with the transactions contemplated by this
Agreement (except to the extent that Confidential Information can be shown to
have been (i) previously known by the party to which it was furnished, (ii) in
the public domain through no fault of such party, or (iii) later lawfully
acquired from other sources by the party to which it was furnished); provided,
however, Buyer shall have the right to disclose or cause others to disclose
Confidential Information to the extent Buyer deems reasonably necessary to
respond to oral or written requests or inquiries from federal or state
regulators or in order to obtain any Consent. Each party will not disclose
Confidential Information, except to its auditors, attorneys, financial advisors,
bankers and other consultants and advisors on a "need to know" basis, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its or their counsel, by other requirements of law. This covenant shall
survive the consummation of the transactions contemplated by this Agreement or
the earlier termination of this Agreement for a period of one year. Written
Confidential Information shall be returned to the party or parties providing it
promptly after written request therefor.
(b) POST-CLOSING. Seller acknowledges that Confidential
Information concerning the business affairs of Interboro will be the property of
the Company and not Seller following the Closing. Therefore, Seller agrees that
he will not disclose to any person or use for his own account any of such
Confidential Information unless and to the extent that it is already or becomes
generally known to and available for use by the public otherwise than as a
result of Seller's act or omission to act or is required to be disclosed by
Seller to a court of law or pursuant to lawful subpoena or summons, provided
Seller has given the Company and Buyer reasonable notice of any attempt to
legally compel Seller to disclose any such information, observations or data.
Seller agrees to deliver to the Company, at any time the Company may request,
all memoranda, notes, plans, records, reports, and other documents (and copies
thereof) constituting Confidential Information relating to the Company's
business.
10.3. FURTHER ASSURANCES. The parties shall from time to time, at the
reasonable request of another party, and without further cost or expense to such
requesting party, execute and deliver such other documents and instruments and
take such other actions as may be reasonably requested, in order to fully
consummate the transactions contemplated hereby.
10.4. AMENDMENT AND MODIFICATION. This Agreement may only be amended,
modified and supplemented by written agreement of the parties.
10.5. EXPENSES. Except as otherwise provided herein, Seller and the
Company agree that all fees and expenses incurred by them in connection with
this Agreement shall be borne by them and Buyer agrees that all fees and
expenses incurred by it in connection with this Agreement shall be borne by it.
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10.6. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given and received if delivered by hand, receipt acknowledged, or fax,
receipt confirmed or, if mailed, four days after having been mailed, certified
or registered mail with postage prepaid:
(a) If to Seller or the Company, to each of them at their
respective addresses set forth in the first paragraph of this Agreement with a
copy to David M. Levy, Esq., Levy, Boonshoft & Lichtenberg LLP, 477 Madison
Avenue, New York, NY 10022, or to such other person(s) or address(es) as Seller
and the Company shall furnish to Buyer in writing.
(b) If to Buyer, to it at its address set forth in the first
paragraph of this Agreement, with a copy to Joseph D. Alperin, Esq.,
Fischbein Badillo Wagner Harding, 909 Third Avenue, New York, NY 10022, or to
such other person or address as Buyer shall furnish to Seller and the Company in
writing.
10.7. ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by Seller or
the Company or, following the Closing, by Buyer or the Company without the
written consent of Seller (which Seller shall not unreasonably withhold or
delay).
10.8. GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York.
10.9. COUNTERPARTS. This Agreement may be executed simultaneously 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.
10.10. HEADINGS. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
10.11. ENTIRE AGREEMENT. This Agreement, including the Disclosure
Schedules, Exhibits hereto, and the other documents and certificates delivered
pursuant to the terms hereof, set forth the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein, and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto.
10.12. JOINTLY DRAFTED AGREEMENT. The parties acknowledge that each of
them, and their attorneys, have had the opportunity to draft and comment upon
this Agreement and have in fact done so, and that this Agreement is the joint
product of negotiation among them. The parties agree that, in construing this
Agreement, each term shall be given its ordinary meaning. The parties waive
application of the doctrine of construction against the drafter and acknowledge
that, for purposes of construction of this Agreement, they shall jointly be
considered to be the drafters of the Agreement and of each term contained
herein.
10.13. THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein, expressed or implied, is intended or shall be construed
to confer upon or give to any person or entity other than the parties hereto and
their successors or permitted assigns, any rights or remedies under or by reason
of this Agreement.
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10.14. SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, legality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
10.15. DISPUTE RESOLUTION. Any and all disputes, claims or
controversies arising out of or relating to this Agreement that are not resolved
within ten (10) business days shall be submitted to final and binding
arbitration in New York City before J-A-M-S/ENDISPUTE, or its successor,
pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1 et seq. Any party
hereto may commence the arbitration process called for in this Agreement by
filing a written demand for arbitration with J-A-M-S/ENDISPUTE, with a copy to
the other party. The arbitration will be conducted in accordance with the
provisions of J-A-M-S/ENDISPUTE's Streamlined Arbitration Rules and Procedures
in effect at the time of filing of the demand for arbitration. The parties will
cooperate with J-A-M-S/ENDISPUTE and with one another in selecting an arbitrator
from J-A-M-S/ENDISPUTE's panel of neutrals, and in scheduling the arbitration
proceedings so that a final determination can be made within thirty (30) days
after submission to arbitration. The parties covenant that they will participate
in the arbitration in good faith, and that they will share equally in its costs.
However, except as otherwise provided in Section 8.2(c), once an award is
rendered, the arbitrator shall determine the allocation of costs and expenses of
the arbitration, including attorneys fees, between the parties. The provisions
of this Section 10.15 may be enforced by any Court of competent jurisdiction,
and the party seeking enforcement shall be entitled to an award of all costs,
fees and expenses, including attorneys' fees, to be paid by the party against
whom enforcement is ordered.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
/s/ Bruce R. Kalisch
------------------------------------
Bruce R. Kalisch
INTERBORO HOLDING, INC.
By: /s/ Arol I. Buntzman
_______________________________
Dr. Arol I. Buntzman, Chairman
INTERBORO INSTITUTE, INC.
By: /s/ Bruce R. Kalisch
_______________________________
Bruce R. Kalisch, President
25
WARRANT AGREEMENT, dated as of January 14, 2000 (the "Effective Date"),
between EDUCATIONAL VIDEO CONFERENCING, INC., a Delaware corporation (the
"Company"), and BRUCE R. KALISCH ("Kalisch").
The Company has agreed to issue to Kalisch warrants ("Warrants") to
purchase an aggregate of up to 25,000 shares ("Warrant Shares") of the Company's
common stock, par value $.0001 per share (the "Common Stock"), in connection
with the closing of a Stock Purchase Agreement (the "Purchase Agreement") among
Kalisch, the Company and Interboro Institute, Inc. ("Interboro").
THEREFORE, in consideration of the mutual undertakings contained
herein, the Company and Kalisch hereby agree as follows:
1. ISSUANCE OF WARRANTS. Subject to the conditions precedent in the
next two sentences, the Company shall issue, as of each of July 1, 2001, 2002,
2003, 2004 and 2005, and deliver within 100 days of each such date, Warrants to
purchase 5,000 Warrant Shares or, in case Interboro changes the last day of its
fiscal year to a calendar year, such issuance shall be as of January 1, 2002,
2003, 2004, 2005 and 2006 (each such date is a "Warrants Issue Date"). No
Warrants shall be issued on a Warrants Issue Date unless Interboro has at least
$500,000 of EBITDA (calculated as provided in the Purchase Agreement) for the
fiscal year of Interboro ending immediately prior to the Warrants Issue Date
(each, a "Measuring Year"). However, in the event that EBITDA is less than
$500,000 in any Measuring Year, the Warrants that cannot then be issued as of
the next Warrants Issue Date, will be issued on a subsequent Warrants Issue Date
provided cumulative EBITDA for all of the preceding Measuring Years is not less
than the product $500,000 and the number of such preceding Measuring Years.
Each certificate evidencing 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 in the name of Kalisch.
3. TRANSFER AND EXCHANGE OF WARRANTS. Subject to compliance with
applicable securities laws, 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.
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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 25.00 per share (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 issued
pursuant to Section 1 hereof may be exercised, in whole or in part, at any time
or from time to time commencing on the Warrants Issue Date and ending at 5:00
p.m., New York City time on the sixth anniversary of the date of this Warrant
Agreement (the "Expiration Date"). After the Expiration Date, any unexercised
Warrants shall be void and all rights of the Holder(s) 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 surrender to the Company 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 or Small Cap Markets, 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
or Small Cap Markets, 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 or Small Cap Markets 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), or (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 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, and applicable securities
laws, 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.
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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 30
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 hereof, 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 date hereof, 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:
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(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 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 $.05, 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 and any other amount or amounts so
carried forward, shall aggregate at least $.05.
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.
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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 each Holder, at the
Holder's last address 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, absent manifest
error.
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.
6
<PAGE>
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
Holder(s) 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
Holder(s) 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 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.
7
<PAGE>
11. RESTRICTIONS ON DISPOSITIONS. Kalisch acknowledges that the
Warrants and the Warrant Shares have not been registered under the Securities
Act of 1933, as amended (the "Act") and accordingly that the Warrants and the
Warrant Shares may not be transferred except pursuant to (i) an effective
registration statement under the Act or (ii) 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.
Kalisch agrees that the certificates representing the Warrants and Warrant
Shares shall bear an appropriate restrictive legend to such effect and that the
Company has no obligation to register the Warrants and Warrant Shares under the
Act except as provided in Section 12.
12. REGISTRATION RIGHTS.
12.1 PIGGYBACK REGISTRATION. If, at any time within the period
commencing after the first Warrants Issue Date and ending at 5:00 p.m., New York
City time, on the Expiration 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 shall be
at least 30 days prior to the date of the initial filing of the applicable
registration statement) to the Holders of Warrants and/or Warrant Shares 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 12.1 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 with the 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.
8
<PAGE>
12.2 REGISTRATION PROCEDURES. If and whenever the Company is required
by the provisions of this Section 12 to effect the registration of any Warrant
Shares under the Act, the Company will:
(a) furnish to each seller of Warrant Shares 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;
(b) 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;
(c) 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;
(d) immediately notify each seller of Warrant Shares, 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; and
(e) 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.
9
<PAGE>
12.3. SELLER COVENANTS. 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, each seller of Warrant Shares
agrees 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.
Each seller of Warrant Shares severally agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 12.2 (d), such seller will immediately discontinue
disposition of Warrant Shares pursuant to the registration statement until such
seller's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 12.2 (d) hereof, and, if so directed by the Company,
such seller will deliver to the Company all copies, other than permanent file
copies then in such seller's possession, of the most recent prospectus covering
such Warrant Shares at the time of receipt of such notice. If the Company shall
give such notice, the Company shall extend the period during which the
registration statement shall be maintained effective by the number of days
during the period from and including the date of the giving of notice pursuant
to Section 12.2 (d) to the date when the Company shall make available to such
seller a prospectus supplemented or amended to conform with the requirements of
Section 12.2 (d).
Each seller of Warrant Shares agrees that, if requested, such
seller will enter into an agreement containing customary indemnification and
contribution provisions as a condition to registration of such seller's Warrant
Shares.
12.4 EXPENSES. All expenses incurred by the Company in complying with
Sections 12.1 and 12.2, 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, but
excluding any Selling Expenses, are herein referred to as "Registration
Expenses." "Selling Expenses," as used herein, means all underwriting discounts
and selling commissions applicable to the sale of Warrant Shares and expenses of
counsel for the sellers of Warrant Shares.
10
<PAGE>
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 Section 12.1. All Selling Expenses in connection
with each registration statement under Section 12.1 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 as they
may agree.
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 Holder(s) 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.
13.2 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 the Holder's 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.
11
<PAGE>
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 200
Yonkers, New York 10710
Telephone: 914.787.3500
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as
of the date first set forth above.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Arol I. Buntzman
-------------------------------------
Name: Dr. Arol I. Buntzman
Title: Chairman
/s/ Bruce R. Kalisch
------------------------------------
BRUCE R. KALISCH
13
<PAGE>
ANNEX A
THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"); AND, NONE OF SUCH SECURITIES MAY BE OFFERED, OR SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR (ii) 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 JANUARY 14, 2000 BETWEEN
EDUCATIONAL VIDEO CONFERENCING, INC. AND BRUCE R. KALISCH.
No. ___ ______ Warrants
Void After 5:00 p.m. New York City Time
On ____________
Educational Video Conferencing, Inc.
Warrant Certificate
THIS CERTIFIES THAT, for value received, BRUCE R. KALISCH, 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
_________________ and prior to 5:00 p.m., New York City time, on ____________
(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 $25.00 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
January 14, 2000 between the Company and Bruce R. Kalisch, 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.
14
<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 shall 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
15
<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.
16
<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:_________________, 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.
17
ESCROW AGREEMENT, dated January 14, 2000 by and among Bruce R. Kalisch, an
individual residing at 66 Church Lane, Scarsdale, New York 10583 ("Seller"),
Interboro Holding, Inc., a Delaware corporation ("Buyer") and Fischbein
Badillo Wagner Harding, having its principal office at 909 Third Avenue, New
York, New York 10022 ("Escrow Agent"). Capitalized terms not defined herein
shall have the same meaning as defined in the Agreement referred to below.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Seller and Buyer are parties to that certain Stock Purchase
Agreement dated January 13, 2000 (the "Agreement"); and WHEREAS, Section 8.2(e)
of the Agreement provides that in the event the Company receives notice of a
proposed audit of the Company, or such audit is commenced without notice under
an SFA program, any 50% EBITDA Portion that remains unpaid to the Seller under
the Agreement (the "Unpaid Purchase Price") shall be deposited by Buyer into
escrow in lieu of paying such funds to Seller; and
WHEREAS, Escrow Agent is willing to receive and retain such funds as escrow
agent upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
agreements, representations and warranties contained herein, the parties hereby
agree as follows:
1. Seller and Buyer hereby appoint Escrow Agent to serve as the escrow
agent under this Escrow Agreement and Escrow Agent accepts such appointment,
subject to the terms and conditions hereof.
<PAGE>
2. Escrow Agent agrees to hold all cash, deposited into escrow, plus
interest accruing on such Unpaid Purchase Price (the Unpaid Purchase Price and
interest accruing thereon collectively the "Escrowed Property"), in accordance
with the terms and conditions of this Escrow Agreement.
3. Pending the payment of any Escrowed Property out of escrow, as provided
for herein, Escrow Agent will hold all of the Escrowed Property as segregated
funds in its attorneys' interest bearing trust account (the "Escrow Account").
4. The Escrow Agent will promptly give written acknowledgement of the
receipt of each deposit of Unpaid Purchase Price into the Escrow Account to
Seller and Buyer.
5. (a) To assert a right of offset against the Escrow Property pursuant to
Article 8 of the Agreement, Buyer shall simultaneously provide Seller and the
Escrow Agent with written notice (all notices required under this Escrow
Agreement being given consistent with the requirements of Section 10.6 of the
Agreement) setting forth the basis and amount of the offset being claimed (the
"Notice of Offset").
(b) Upon receipt of a Notice of Offset, Escrow Agent shall take no
action until it receives either:
(i) a letter signed by Seller and Buyer jointly directing it to
deliver the Escrowed Property in accordance with the terms
set forth in such letter; or
(ii) a final agency determination which quantifies the sum of
money to be repaid by the school in the context of the
subject audit; or
(iii)a final determination by a court of law, arbitration panel
or similar adjudicative body specifying the manner in which
the Escrowed Property is to be turned over by Escrow Agent
6. If Seller does not give written notice of objection to any portion of
Buyer's Notice of Offset to Buyer and Escrow Agent within fifteen (15) days
after the Notice of Offset was given (in accordance with Article 10.6 of the
Agreement), Escrow Agent shall promptly release to Buyer that portion of the
Escrowed Property as equals the amount(s) not so objected to by Seller. 7. (a)
To demand payment of the Escrow Property consistent with its rights under the
Agreement, Seller shall simultaneously provide Buyer and the Escrow Agent with
written notice setting forth the basis of its demand and the amount or the
period for which payment is being claimed (the "Notice of Payment"). (a) Upon
receipt of a Notice of Payment, Escrow Agent shall take no action until it
receives either: (b) a letter signed by Seller and Buyer jointly directing it to
deliver the Escrowed Property in accordance with the terms set forth in:
2
<PAGE>
(i) a letter signed by Seller and Buyer jointly directing it to
deliver the Escrowed Property in accordance with the terms
set forth in such letter; or
(ii) a final agency determination which quantifies the sum of
money to be repaid by the school in the context of the
subject audit; or
(iii)a final determination by a court of law, arbitration panel
or similar adjudicative body specifying the manner in which
the Escrowed Property is to be turned over by Escrow Agent.
(c) If Buyer does not give written notice of objection to any portion
of Seller's Notice of Payment to Seller and Escrow Agent within fifteen (15)
days after the Notice of Payment was given (in accordance with Section 10.6 of
the Agreement), Escrow Agent shall promptly release to Seller that portion of
the Escrowed Property as equals the amount(s) not so objected to by Buyer. 8.
Escrow Agent shall not be under any duty to give the Escrowed Property any
greater degree of care than it gives its own similar property, and it shall have
no liability hereunder, except for the willful breach of its duties hereunder.
9. Escrow Agent shall have no duties or responsibilities except those expressly
set forth herein, and no implied duties or obligations should be read into this
Escrow Agreement against Escrow Agent. Escrow Agent need not refer to, and will
not be bound by, the provisions of any other agreement including, but not
limited to, the Agreement. In no event, shall Escrow Agent be responsible to
Seller or Buyer for any claim that interest earned on the Escrowed Property
while in escrow is inadequate.
10. Escrow Agent may consult with counsel and shall be fully protected with
respect to any action taken or omitted by it in good faith on advice of counsel.
11. Escrow Agent makes no representation as to the validity, value,
genuineness or the collectibility of any document or instrument held by or
delivered to it.
12. Escrow Agent will receive no compensation for its services hereunder.
13. In the event that Escrow Agent shall be uncertain as to its duties or
rights hereunder, or shall receive instructions from Seller or Buyer with
respect to the Escrowed Property, which, in its opinion, are in conflict with
any of the provisions hereof (i) it shall be entitled to refrain from taking any
action, and in doing so shall not become liable in any way or to any person for
its failure or refusal to comply with such conflicting demands, and it shall be
entitled to continue so to refrain from acting and so refuse to act until it
shall be directed otherwise, in writing, jointly by Seller and Buyer or until it
shall receive a final determination of a court of law, arbitration panel, or
similar adjudicative body, or (ii) it may commence an inter-pleader type action
before J-A-M-S/ENDISPUTE in accordance with Section 13 of this Escrow Agreement
to adjudicate the rights of Seller and Buyer.
3
<PAGE>
14. (a) Any and all disputes, claims or controversies arising out of or
relating to this Escrow Agreement that are not resolved within ten (10) business
days shall be submitted to final and binding arbitration in New York City before
J-A-M-S/ENDISPUTE, or its successor, pursuant to the United States Arbitration
Act, 9 U.S.C. Sec. 1 et seq.
(b) Any party hereto may commence the arbitration process called for
in this Agreement by filing a written demand for arbitration with
J-A-M-S/ENDISPUTE, with a copy to the other parties. The arbitration will be
conducted in accordance with the provisions of J-A-M-S/ENDISPUTE's Streamlined
Arbitration Rules and Procedures in effect at the time of filing of the demand
for arbitration. The parties will cooperate with J-A-M-S/ENDISPUTE and with one
another in selecting an arbitrator from J-A-M-S/ENDISPUTE's panel of neutrals,
and in scheduling the arbitration proceedings so that a final determination can
be made within thirty (30) days after submission to arbitration. The parties
covenant that they will participate in the arbitration in good faith.
(c) In connection with an inter-pleader type action brought by the
Escrow Agent, Buyer and Seller agree that the Escrowed Property may be deposited
with or delivered to J-A-M-S/ENDISPUTE and held by them pending a final
determination of the arbitration. Buyer and Seller agree that they will share
equally the costs of any arbitration under this Escrow Agreement.
(d) Once an award is rendered, the arbitrator shall determine the
allocation of costs and expenses of the arbitration, including attorneys' fees,
between the parties, except that Escrow Agent shall have no liability for any
costs or expenses of any other party and shall be paid all of its costs and
expenses by Buyer and Seller pursuant to Section 17 of this Escrow Agreement.
The provisions of this arbitration clause may be enforced by any Court of
competent jurisdiction, and the party seeking enforcement shall be entitled to
an award of all costs, fees and expenses, including attorneys' fees, to be paid
by the party against whom enforcement is ordered.
15. For the purpose of this Escrow Agreement, a determination will be
deemed final once Escrow Agent receives a written notification from counsel that
no appeal of the determination is permitted, or that the time to appeal has
expired.
16. Escrow Agent may act in reliance upon any notice, instruction,
certificate, statement, request, consent, confirmation, agreement, judicial
decision, arbitration award or other document or instrument which it believes in
good faith to be genuine and to have been signed or rendered by a proper person
or persons, and may assume that any officer of Buyer purporting to act on behalf
of Buyer in giving any such notice or other instrument in connection with the
provisions hereof has been duly authorized to do so.
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<PAGE>
17. In the event that Escrow Agent, by written notice, requests jointly
executed instructions from Seller and Buyer regarding any matter arising in
connection with this Escrow Agreement and Seller and Buyer do not deliver
reasonably satisfactory written instructions to Escrow Agent in relation to such
matter, within fifteen (15) days after the giving of such notice, Escrow Agent
may retain counsel to advise it in such connection or act pro se.
--- --
18. (a) In the event that Escrow Agent retains counsel or otherwise incurs
any legal fees by virtue of any provision of this Escrow Agreement, the
reasonable fees and disbursements of such counsel and any other liability, loss
or expense which it may thereafter reasonably suffer or incur in connection with
this Escrow Agreement or the performance or attempted performance in good faith
of its duties hereunder shall be paid (or reimbursed to it) by Seller and Buyer,
jointly and severally. In the event that Escrow Agent becomes a party to any
litigation in connection with its functions as escrow agent pursuant to this
Escrow Agreement, whether such litigation is brought by or against it, the
reasonable fees and disbursements of counsel to Escrow Agent and the amounts
attributable to services rendered by members or associates of Escrow Agent at
the then prevailing hourly rates charged by them and disbursements incurred by
them, together with any other liability, loss or expense which it may reasonably
suffer or incur in connection therewith, shall be paid (or reimbursed to it) by
Seller and Buyer, jointly and severally, unless such loss, liability or expense
is due to the willful breach by Escrow Agent of its duties hereunder. Seller and
Buyer, shall each be responsible for one-half of any amounts payable jointly and
severally by them to, or on behalf of, Escrow Agent pursuant to this Agreement.
(b) Seller and Buyer jointly and severally hereby unconditionally
agree to indemnify Escrow Agent and hold it harmless from and against any and
all expenses, damages, actions, suits or other charges incurred by or brought or
assessed against if except as a result of its willful breach of its duties under
this Escrow Agreement, for (i) anything done or omitted by it in the performance
of its duties hereunder, or (ii) on account of its acting in its capacity as an
escrow agent or stakeholder hereunder.
(c) All reasonable expenses incurred by Escrow Agent in connection
with the performance of its duties hereunder will be paid (or reimbursed to it)
by Seller and Buyer, jointly and severally.
(d) The agreements contained in this paragraph 17 shall survive any
termination of the duties of Escrow Agent hereunder.
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19. Escrow Agent may resign at any time and be discharged from its duties
as Escrow Agent hereunder by giving Seller and Buyer at least fifteen (15) days'
prior written notice thereof (the "Resignation Notice"). As soon as practicable
after its resignation, Escrow Agent shall turn over to the successor Escrow
Agent appointed by Seller and Buyer the Escrowed Property then held by Escrow
Agent upon presentation of the document appointing the new Escrow Agent and its
acceptance thereof. If no new Escrow Agent is so appointed within thirty (30)
days following the Resignation Notice, Escrow Agent may deposit the Escrowed
Property with, and commence an inter-pleader or other appropriate action in, any
court of competent jurisdiction.
20. The terms and provisions of this Escrow Agreement may not be waived,
discharged or terminated orally, but only by an instrument in writing signed by
the person or persons against whom enforcement of the discharge, waiver or
termination is sought.
21. Escrow Agent shall not be bound by any modification of the provisions
of this Escrow Agreement, unless such modification is in writing and signed by
Seller and Buyer, and, with respect to any modification in its duties or rights
hereunder, it shall have given its prior written consent thereto.
22. From time to time, Seller and Buyer will, execute such documents and
perform such acts as Escrow Agent may reasonably request and as may be necessary
to enable Escrow Agent to perform its duties hereunder or effectuate the
transactions contemplated by thus Escrow Agreement.
23. The rights created by this Escrow Agreement shall inure to the benefit
of, and the obligations created hereby shall be binding upon, the heirs,
successors, assigns and personal representatives of Escrow Agent, Seller and
Buyer.
24. This Escrow Agreement shall be governed by, and its provisions
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be duly executed as of the day and year first above written.
/s/ Bruce R. Kalisch
-----------------------------------
Bruce R. Kalisch
INTERBORO HOLDING, INC.
By:/s/ Richard Goldenberg
--------------------------------
Richard Goldenberg,
Chief Financial Officer
FISCHBEIN BADILLO WAGNER HARDING
By: /s/ Joseph D. Alperin
--------------------------------
Joseph D. Alperin, Partner
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For:
Educational Video Conferencing, Inc. Financial Communications Associates,Inc.
For More Information Contact: Analyst Contact: David R. Evanson
Dr. Arol I. Buntzman, Chairman & Media Contact: Peter Winicov
Chief Executive Officer (610) 649-3604
(914) 787-3500
For Immediate Release
EVCI Acquires 111-Year-Old Interboro Institute
Interboro Institute acquisition to assist EVCI's offering of specialized
coursework--including computer training--to non-traditional and economically
disadvantaged students
YONKERS, N.Y.--(BUSINESS WIRE)--Jan. 20, 2000-- Educational Video
Conferencing, Inc. (Nasdaq: EVCI; PCX: EVI; BSE: EVI), the leading broadband and
Internet aggregator of educational content delivered via live, two-way
interactive, high-speed multipoint connections, has enhanced its ability to
deliver a career-based college education by purchasing Interboro Institute on
January 14, 2000.
Interboro Institute, founded in 1888, is a two-year college at 456 West
56th St. in mid-town Manhattan, New York. It is currently authorized by the New
York State Board of Regents to grant several degrees, including the Associate of
Occupational Studies Degree in Business Administration (accounting and business
management), Ophthalmic Dispensing, Paralegal Studies, Administrative
Secretarial Arts (executive, legal, correspondence or medical secretary) and
Security Services and Management. It also offers a concentration in computer
technology in its business management major. The student body primarily consists
of non-traditional students who pay their tuition using federal (PELL) and New
York State (TAP) tuition grants. Expanding EVCI's educational content.
"Acquiring this education provider was motivated primarily by EVCI's
increasing need for additional sources of educational content in order to
service its rapidly expanding outreach programs and, additionally EVCI's belief
that Interboro can contribute meaningful revenues and income to EVCI's
consolidated results," according to Dr. Arol I. Buntzman, EVCI Chairman and CEO.
As part of its business construct, EVCI now services non-traditional and
economically disadvantaged students through interactive, video-conferenced
courses distributed via high-speed Internet connections to churches, Head Start
facilities and schools throughout the New York City area and in Rochester, NY.
"Acquiring Interboro further extends our comprehensive, degree-program
offerings into highly specialized areas," notes Dr. John J. McGrath, EVCI's
president. "It also allows EVCI to encourage non-traditional students, once they
complete their two-year degree, to further advance their education by applying
that work to one of the four-year degree programs in our rapidly growing network
of educational providers," he adds.
Marriage of old and new
"This is a perfect marriage of the old and the new that will greatly
enhance the growth of both organizations," says Dr. Buntzman. "We are very
fortunate to be able to take advantage of this unique opportunity," Buntzman
continued, noting that "Interboro compliments perfectly with our strategic
business plan. This school pioneered providing quality education to
non-traditional students, just as EVCI is doing today."
<PAGE>
Helping EVCI's top and bottom lines
EVCI expects the acquisition of Interboro to significantly increase
consolidated revenues and contribute to its bottom line as soon as the first
quarter of 2000. Interboro Institute is emerging from a difficult financial
period in the wake of a long-standing dispute with New York State authorities
regarding student eligibility for state financial aid during student school
years 1989-1992. Six million dollars in disallowance of TAP funds resulted from
a dispute with the state, which disallowed certain TAP grants. TAP grants are
contingent on the recipients achieving certain scores on standardized tests. The
school and the state differed on whether all criteria had been met. After
protracted and expensive litigation spearheaded by the former owner of
Interboro, New York State's audit findings were upheld.
Because of the TAP disallowance by state authorities, Interboro reported a
$3.5 million loss, rather than a $1.3 million pre-tax income, on sales of $6.1
million after accounting for disallowance of TAP funds for the fiscal year ended
June 30, 1999.
All but $789,000 of the disputed $6 million, which includes interest, has
been repaid by Interboro by December 31, 1999. However, the former owner decided
either to sell or to close Interboro, thus creating an opportunity for EVCI to
acquire the school through utilization of the school's cash flow. EVCI has
reached an oral agreement with the State of New York to offset the remaining
liability out of future reimbursable TAP funds. Based on current enrollment,
EVCI believes this obligation will be satisfied in full by the second quarter of
2000. Management believes that all past tracing shortfalls that led to the
disallowance have been corrected. Under EVCI management Interboro will carefully
monitor compliance with PELL and TAP programs.
Prior years' revenues and profits
Without the difficulties engendered by the former owner's disallowance with
the state, the school would have continued to maintain its profitability. The
most recent financial statements (unaudited), for example, show that in the six
months ended December 1999, Interboro reported approximately $800,000 in pre-tax
profits on sales of $3.4 million.
Purchase Price
The purchase price for all of the outstanding stock of Interboro Institute
consists of liabilities in excess of assets of approximately $580,000, a payment
of $672,000 in the future, and 50% of the Institute's earnings before interest,
taxes, debt and amortization (EBITDA) during the three fiscal years beginning
July 1, 2000 or January 1, 2001 (if EVCI elects to change Interboro's fiscal
year to a calendar year). Payments of the $672,000 may begin in the year 2001,
if certain goals as described in the purchase agreement are achieved. Payments
of the 50% of EBITDA may begin no earlier than the fourth quarter of 2001. Any
governmental tuition grant disallowances relating to periods prior to the
acquisition will reduce the unpaid portion of the purchase price to the seller
dollar for dollar. EVCI also has infused into Interboro approximately $1,000,000
for working capital in order to satisfy certain net worth and other financial
requirements.
Near-term benefits to EVCI and to Interboro
Because EVCI will provide Interboro with high-speed, Internet video
conferencing technology equipment, as well as know-how regarding video
conferencing teaching methods, Interboro will be positioned to offer its degree
programs beyond New York City to a much larger target market. The distribution
of this educational content will inure to the benefit of both EVCI and
Interboro. For example, Interboro will also be able to provide throughout New
York state continuing education recently required by the state in the fields of
ophthalmic dispensing and security management, both of which are areas of
Interboro concentration. EVCI also expects to significantly increase enrollment
on campus.
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More About Educational Video Conferencing, Inc.
EVCI is a leading high bandwidth and Internet aggregator of educational
content. EVCI delivers accredited college courses, certificates and degree
programs, as well as professional development programs to corporations,
government agencies, community groups, and the public at large. With live
interactive multimedia video conferencing, the instructor can see and hear the
students as the students see and hear each other and the instructor. EVCI can
deliver courses and programs to conference and training rooms equipped for video
conferencing and to any personal computer equipped with video conferencing
capability. EVCI at present offers more than 100 degree programs, including over
1,000 courses.
EVCI clients include Merrill Lynch, Citibank, N.A., Lockheed Martin Corp.,
AIG, Travelers, among other Fortune 100 companies. Educational institutions that
provide content include St. John's University, Adelphi University, Manhattan
College, The College of Insurance, Mercy College, Concordia College, Kaplan
Educational Centers, Dearborn Institute, Touro College/Touro University
(including Touro Law School), and Interboro Institute. EVCI also has multi-year
co-marketing agreements with We Media, Inc. and Bell Atlantic, among others.
# # #
Statements in this press release about expected growth, revenues and cash
flow, repayment of remaining TAP debt, other near term benefits to EVCI and
Interboro, increases in Interboro's campus enrollment and prospects for
lnterboro's offering continuing education programs constitute forward-looking
information. Factors that could affect actual results include the risk of
insufficient demand for Interboro courses and programs via video conferencing,
the possibilities of PELL and TAP disallowances, competition and other factors
discussed in EVCI's prospectus dated
