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): September 22, 2000
EDUCATIONAL VIDEO CONFERENCING, INC.
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(Exact name of registrant as specified in its charter)
Delaware 001-14827 06-1488212
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) 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 September 22, 2000, Educational Video Conferencing, Inc.
("EVCI") created a new series of preferred stock designated Series B 7%
Convertible Preferred Stock. The Series B Preferred consists of 200,000 shares,
each having a stated value of $100 per share. The Series B Preferred is being
offered privately, together with Warrants to purchase EVCI's common stock, to
selected investment entities at $100 per share. To date, EVCI has received gross
proceeds of $13,000,000 from issuances of Series B Preferred and Warrants as
follows:
<TABLE>
<CAPTION>
Shares of Series B Shares of Common Stock Underlying Issue
Buyer Preferred Warrants Date
-------------------------- ------------------------ ------------------------------------- ----------
<S> <C> <C> <C>
Paloma Strategic Fund 100,000 555,556 9/22/00
L.P.
Seneca Capital 13,080 72,667 9/27/00
International, Ltd.
Seneca Capital, L.P. 6,920 38,444 9/27/00
Merced Partners Limited 5,000 27,778 9/29/00
Partnership
Lakeshore International, 5,000 27,778 9/29/00
Ltd. ______ _______
130,000 722,223
======= =======
</TABLE>
The terms of the Series B Preferred permit EVCI to continue to
sell the remaining 70,000 shares and related Warrants, until March 22, 2000, on
the same terms as those specified below. Alternatively, EVCI may, until such
date, issue other securities for up to $7,000,000 of gross proceeds provided the
holders of Series B Preferred are given the opportunity to exchange their Series
B Preferred and Warrants for such other securities.
After paying offering expenses, the net proceeds is
approximately $12,850,000 from the sale of 130,000 shares of Series B Preferred
and Warrants. Of such proceeds, $3,220,000 was used to redeem all outstanding
shares of EVCI's Series A 7.5% Convertible Preferred Stock and the balance of
approximately $9,630,000 is for capital expenditures and general corporate
purposes.
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A brief summary of the terms of the Series B Preferred and
Warrants follows.
SERIES B PREFERRED
RANK. The Series B Preferred ranks senior, as to dividends, liquidation
and voting rights, to all capital stock of EVCI, except that it would rank PARI
PASSU with any series of parity preferred stock that is included in the other
securities that EVCI is permitted to issue until March 22, 2000.
DIVIDENDS. Holders of Series B Preferred will be entitled to receive
semi-annual cumulative cash dividends at an annual rate of 7% of the stated
value, in preference to any dividend on EVCI's common stock or any other series
of junior preferred stock, and PARI PASSU with any parity preferred stock.
LIQUIDATION PREFERENCE. In the event of the liquidation, merger or sale
of all or substantially all of the assets of EVCI, Series B Preferred holders
will be entitled to receive 100% of the stated value of their shares plus
accrued and unpaid dividends, in preference to the holders of EVCI's common
stock and any series of junior preferred stock and PARI PASSU with any parity
preferred stock.
VOTING RIGHTS. Except as permitted by Delaware law, and with respect to
the protective provisions referred to below, the Series B Preferred has no
voting rights.
OPTIONAL CONVERSION. Prior to the September 22, 2003, the Series B
Preferred will be convertible at any time at the option of the holder, in whole
or in part, into shares of EVCI common stock. The initial conversion price is
$13.50 per share of common stock, subject to adjustment. In addition to the
antidilution adjustments discussed below, on September 22, 2001, the conversion
price will be reset to the lower of (a) $13.50 and (b) the 10-day average
closing bid price for EVCI's common stock for the period ending on September 22,
2001, but to not lower than $6.75.
AUTOMATIC CONVERSION. On September 22, 2003, any outstanding Series B
Preferred will automatically convert into common stock of EVCI at a conversion
price equal to the lower of (a) the reset conversion price as of September 22,
2001 and (b) the 10-day average closing bid price for EVCI's common stock for
the period ending on September 22, 2003, but to not lower than 50% of such reset
conversion price.
ANTIDILUTION ADJUSTMENTS. The conversion price is subject to customary
antidilution adjustments for stock splits and stock dividends. The conversion
price is also subject to a customary, weighted average adjustment as a result of
issuances in private placements of EVCI's common stock, or securities
exercisable for or convertible into EVCI's common stock, in each case at a price
below the conversion price, other than issuances of Excluded Shares, as defined.
REDEMPTION. The Series B Preferred is not redeemable at EVCI's option.
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If EVCI issues its securities for cash and/or indebtedness, for a price
below the conversion price and the result is a change of control that is
reportable pursuant to Schedule 14A of the proxy rules, holders of Series B
Preferred will have a one-time option to require EVCI to redeem the Series B
Preferred at a price of 105% of the stated value, plus accrued dividends.
Unless EVCI obtains stockholder approval of the Series B Preferred and
Warrant terms, EVCI would be required to redeem at 120% of their stated value,
plus accrued dividends, all shares of Series B Preferred that upon conversion
would result in holders of Series B Preferred owning more than 19.99% of EVCI's
common stock outstanding on September 22, 2000.
REGISTRATION RIGHTS OF SERIES B PREFERRED AND WARRANTS. By October 22,
2000, EVCI must file a shelf registration statement, under the Securities Act of
1933, covering the resale of shares of EVCI's common stock issuable upon
conversion of Series B Preferred and exercise of Warrants. EVCI must use its
best efforts to cause the registration statement to become effective by December
21, 2000. In any event, the registration statement must be declared effective by
the 150th day after the initial filing of such registration statement.
Non-compliance with these deadlines subjects EVCI to an 18% per annum cash
penalty based on the aggregate stated value of the outstanding Series B
Preferred. The Series B Preferred holders will also be able to effect an
underwritten offering off of the shelf registration statement and to have the
common stock underlying their Series B Preferred and Warrants registered in
EVCI's underwritten offerings, subject to customary underwriter cutbacks.
CO-SALE RIGHTS OF SERIES B PREFERRED. Holders of Series B Preferred
have certain co-sale rights in connection with sales of Common Stock in private
transactions by the member of EVCI management owning more than 10% of EVCI's
Common Stock on the date of the Amended and Restated Co-Sale Agreement.
PROTECTIVE PROVISIONS. Without the vote or consent of the holders of
two-thirds of the then-outstanding shares of Series B Preferred (determined on
an as converted basis) EVCI cannot take certain action, including the following:
o issue shares of Series B Preferred after March 21, 2001;
o increase or decrease the total authorized shares of any series
of EVCI's preferred or common stock;
o effect a merger or sale of all of substantially all the assets
of EVCI or any of its subsidiaries;
o declare or pay any dividends to EVCI's common stockholders;
o incur indebtedness of more than $15,000,000; or
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o issue any additional shares of EVCI's capital stock at a
discount to the average closing bid price of EVCI's common
stock for the 10 trading days prior to such issuance, except
for issuances of Excluded Shares.
WARRANTS
AMOUNT. Warrants are issuable with the Series B Preferred to purchase
the number of shares of EVCI's common stock as equals 75% of the total stated
value of Series B Preferred issued to a holder divided by $13.50.
TERM. Warrants expire on the third anniversary of their issue date.
EXERCISE PRICE. Initially, Warrants are exercisable at $20.25 per
share. Warrants permit customary cashless exercise.
ANTIDILUTION ADJUSTMENTS. The Warrant exercise price is subject to
customary antidilution adjustments for stock splits and stock dividends. The
exercise price is also subject to a customary weighted average adjustment as a
result of issuances of EVCI's common stock or securities convertible into or
exercisable for EVCI's common stock, below fair market value (as determined in
good faith by EVCI's board of directors), other than issuances of Excluded
Shares.
ITEM 7. EXHIBITS
Exhibit No. Description of Exhibits
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3.6 Certificate of Designations of Series B 7% Convertible
Series B Preferred of the Registrant
3.6(a) Certificate of Correction of Certificate of
Designations of the Series B 7% Convertible Series B
Preferred of the Registrant
4.9 Form of Common Stock Purchase Warrant
10.56 Form of Series B Stock Purchase Agreement
SCHEDULES (Omitted from this filing. Copies will be
provided to the Commission upon request.)
3 (a) - Subsidiaries
3 (c) - Capitalization
3 (e) - Conflicts
3 (g) - Material Changes
3 (h) - Litigation
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3 (l) - Union Membership
3 (m) - Intellectual Property
3 (o) - Liens
3 (t) - Tax Status
3 (u) - Certain Transactions
Exhibits
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A - Certificate of Designations (see Exhibit
3.6 to this Report)
B - Form of Common Stock Purchase Warrant
(see Exhibit 4.8 to this Report)
C - Registration Rights Agreement (see
Exhibit 10.57 to this Report)
D - Form of Opinion on Removal of Legend
E - Form of Irrevocable Transfer Agent
Instructions
F - Form of Opinion of Company Counsel
(omitted from this filing)
G - Form of Company Board of Director
Resolutions (omitted from this filing)
H - Co-Sale Agreement (see Exhibit 10.58 to
this Report)
I - Series A Waiver Letter
10.57 Amended and Restated Registration Rights Agreement,
dated September 27, 2000, between Paloma Strategic
Fund L.P. ("Paloma"), Seneca Capital International,
Ltd. ("Seneca Ltd.), Seneca Capital, L.P. ("Seneca
L.P."), Merced Partners Limited Partnership
("Merced"), Lakeshore International, Ltd.
("Lakeshore") and the Registrant
10.58 Amended and Restated Co-Sale Agreement, dated
September 29, 2000, among Dr. Arol I. Buntzman, the
Registrant, Paloma, Seneca Ltd., Seneca L.P., Merced
and Lakeshore
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Current Report to be signed on its behalf by
the undersigned hereunto duly authorized.
EDUCATIONAL VIDEO CONFERENCING, INC.
Dated: October 6, 2000 By: /s/ Richard Goldenberg
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Name: Richard Goldenberg
Title: Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Description of Exhibits
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3.6 Certificate of Designations of Series B 7% Convertible
Series B Preferred of the Registrant
3.6(a) Certificate of Correction of Certificate of
Designations of the Series B 7% Convertible Series B
Preferred of the Registrant
4.9 Form of Common Stock Purchase Warrant
10.56 Form of Series B Stock Purchase Agreement
SCHEDULES (Omitted from this filing. Copies will be
provided to the Commission upon request.)
3 (a) - Subsidiaries
3 (c) - Capitalization
3 (e) - Conflicts
3 (g) - Material Changes
3 (h) - Litigation
3 (l) - Union Membership
3 (m) - Intellectual Property
3 (o) - Liens
3 (t) - Tax Status
3 (u) - Certain Transactions
EXHIBITS
A - Certificate of Designations (see Exhibit
3.6 to this Report)
B - Form of Common Stock Purchase Warrant
(see Exhibit 4.8 to this Report)
C - Registration Rights Agreement (see
Exhibit 10.57 to this Report)
D - Form of Opinion on Removal of Legend
E - Form of Irrevocable Transfer Agent
Instructions
F - Form of Opinion of Company Counsel
(omitted from this filing)
G - Form of Company Board of Director
Resolutions (omitted from this filing)
H - Co-Sale Agreement (see Exhibit 10.58 to
this Report)
I - Series A Waiver Letter
<PAGE>
10.57 Amended and Restated Registration Rights Agreement,
dated September 27, 2000, between Paloma Strategic
Fund L.P. ("Paloma"), Seneca Capital International,
Ltd. ("Seneca Ltd.), Seneca Capital, L.P. ("Seneca
L.P."), Merced Partners Limited Partnership
("Merced"), Lakeshore International, Ltd.
("Lakeshore") and the Registrant
10.58 Amended and Restated Co-Sale Agreement, dated
September 29, 2000, among Dr. Arol I. Buntzman, the
Registrant, Paloma, Seneca Ltd., Seneca L.P., Merced,
and Lakeshore
