<PAGE>
As filed with the Securities and Exchange Commission on March 29, 1999
Registration No. 333-71733
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 1
to
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
foreignTV.com, Inc.
(Exact name of registrant as specified in its charter)
Delaware 4899 13-4037641
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation Classification Code) Number)
or organization)
162 Fifth Avenue, Suite 1005A
New York, New York 10010
(212) 206-1121
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
JONATHAN BRAUN, Chief Executive Officer
foreignTV.com, Inc.
162 Fifth Avenue, Suite 1005A
New York, New York 10010
(212) 206-1121
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
IRA I. ROXLAND, ESQ. LAW OFFICES OF
STEPHEN E. FOX, ESQ. VICTOR EDWIN STEWART, ESQ.
COOPERMAN LEVITT WINIKOFF 269 South Irving Street
LESTER & NEWMAN, P.C. Ridgewood, New Jersey 07450
800 Third Avenue (201) 445-3661
New York, New York 10022 Fax: (201) 445-5301
(212) 688-7000
Fax: (212) 755-2839
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission becomes effective. This +
+preliminary prospectus is not an offer to sell these securities nor does it +
+seek offers to buy these securities in any jurisdiction where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
foreignTV.com, Inc.
-----------
This is an initial public offering of our securities. Westminster Securities
Corporation, our underwriter, acting as our exclusive agent, is offering for
sale a minimum of 850,000 units and a maximum of 1,700,000 units. The
underwriter has agreed to exert its best efforts to sell the units on our
behalf, but has not committed to purchase any of the units for itself.
Each unit consists of:
. one share of common stock, and
. one warrant, which
. entitles the holder to purchase one share of common stock at a price
of $9.00 at any time
through , 2002.
. may be redeemed by us, under certain circumstances, at $0.05 per
warrant at any time prior to
its expiration.
-----------
We are still in the planning stages of our development and have not as yet
commenced any operations. These are speculative securities. Please read the
Risk Factors beginning on page 5 before making a decision to invest in our
securities.
-----------
The underwriter will deposit all investor funds in an escrow account that
will be established at Citibank, N.A., 120 Broadway, New York, New York 10271.
. If the underwriter cannot sell at least 850,000 units by , 1999,
unless extended to , 1999, this offering will be terminated and all
investor funds in the Citibank escrow account will be promptly returned
to investors, with interest.
. If the underwriter is able to sell at least 850,000 units by , 1999,
unless extended to , 1999, we will receive all investor funds in the
Citibank escrow account, less the underwriter's commissions and expense
reimbursements, and this offering will continue as to the remaining units
until , 1999.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. It is illegal for any person to tell
you otherwise.
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<TABLE>
<CAPTION>
Total
----------------------
Per Unit Minimum Maximum
-------- ---------- -----------
<S> <C> <C> <C>
Public offering price.......................... $6.00 $5,100,000 $10,200,000
Underwriting commissions....................... $ .54 $ 459,000 $ 918,000
Proceeds, before expenses, to foreignTV.com.... $5.46 $4,641,000 $ 9,282,000
</TABLE>
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- --------------------------------------------------------------------------------
We have applied to the Nasdaq SmallCap Market to list our units, common stock
and warrants under the symbols FNTVU, FNTV and FNTVW. If we do not satisfy the
Nasdaq SmallCap Market's initial listing requirements, we intend to have our
units, common stock and warrants quoted on the OTC Bulletin Board.
-----------
Westminster Securities Corporation
-----------
, 1999
<PAGE>
SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all the information that is important to you. To understand
our proposed business and this offering fully, you should read this entire
prospectus carefully, including the financial statements and related notes
beginning on page F-1.
Our Proposed Business
We aim to become a leading Internet broadcaster, initially specializing in
the origination of compelling foreign content, which we believe is not
currently available in a similar format on the Internet. We propose to develop
a number of related Internet Web sites, commonly called a network, utilizing
geographic location-specific site addresses that we have licensed for our
exclusive use for an initial term of 25 years. Each site on our proposed
foreignTV.com network will be accessible either directly by its own site
address or through our network's primary site at foreignTV.com. Each site will
offer original programming, in English, about local events, news, politics,
entertainment, business and culture, with a strong human interest appeal to
provide viewers with a sense of what it is like to not only visit but actually
live and work in that particular location. We initially intend to hire
freelance reporters, anchors and producers to develop and produce content for
each site. Ultimately, we intend to create additional channels for locations in
the United States and for special interest programming.
Our programming will be viewable on the Internet by means of currently
available streaming video technology, which allows a viewer to watch
programming without the time consuming task of first downloading content from a
Web site to the viewer's computer hard drive. As streaming technology is
perfected, we anticipate that watching a program on the foreignTV.com network
will be similar to watching a program on network or cable television. We will
not own the broadcasting technology used to transmit our content over the
Internet. Rather, we intend to license such technology from others, and to
contract with Internet service providers for network support.
We expect to offer a comprehensive, informative and entertaining experience.
A visitor to our proposed parisTV.com site, for instance, may view an exclusive
video news report about current events in Paris, produced in Paris but in
English and from an American-style human interest angle; watch an interview
with a local personality; go on a video tour of the streets of Paris; preview
an award-winning French film; or buy the latest novel or non-fiction book about
Paris, sample and purchase French music or make airline, hotel, and restaurant
reservations.
Our belief in the viability of our proposed business is based upon
assumptions that we have made about the public's willingness to treat streaming
video as an alternative to broadcast television and its acceptance of the
Internet as an advertising media and not upon independent feasibility studies
and assessments. Our assumptions may not be accurate or well-founded.
Our Concept
We will attempt to attract viewers to our foreignTV.com Web sites by
offering original real-time or on-demand programming that we believe a viewer
presently cannot find through other sources due to the American media's trend
towards featuring local news to the exclusion of "non-sensational" foreign
news. Additionally, we believe that viewers will be attracted to foreignTV.com
because of our niche programming, i.e., our concept that viewers prefer
channels that offer a particular subject matter as opposed to being grouped
into one-size-fits-all categories, and our human interest approach to the
subject matter, which will further differentiate us from conventional news and
travel sites.
We intend to offer access to the foreignTV.com network and its programming
free of charge to viewers. Our intention is to derive revenues from selling
advertising space on our Web sites using targeted marketing efforts. We also
intend to obtain commission revenues from electronic commerce tie-ins.
1
<PAGE>
We are still in the planning stages of our development and have not as of
yet created any of the content to be offered on the foreignTV.com network or
established any of our contemplated network Web sites. We intend to devote our
initial efforts to developing our primary site at foreignTV.com which will
offer viewers information about our evolving business and a convenient means to
connect to our network Web sites as well as streaming video programming of
daily video briefings, film clips and feature stories from a diversity of
foreign locations. We will endeavor to complete our primary site at
foreignTV.com by the end of 1999. We also intend to establish and commence
operation prior to June 30, 2000 of two foreignTV.com network sites for London,
England and Paris, France if the minimum number of units that we are offering
are sold, and an additional two sites which we anticipate will be for Berlin,
Germany and Tokyo, Japan if all of the units that we are offering are sold.
Our History
We were incorporated in Delaware on November 12, 1998. Our offices are
located at 162 Fifth Avenue, Suite 1005A, New York, New York 10010, and our
telephone number is (212) 206-1121. Our primary Internet site can be accessed
at "http://www.foreigntv.com."
2
<PAGE>
The Offering
<TABLE>
<C> <S>
Securities offered 1,700,000 units, at $6.00 per unit, each
unit consisting of one share of common
stock and one warrant to purchase one share
of common stock. The common stock and
warrants will begin to trade separately on
, 1999 or on such earlier date as may
be determined by the underwriter.
Common stock outstanding prior to 8,300,000 shares
this offering
Common stock to be outstanding 9,150,000 shares (minimum)
after this offering(1) 10,000,000 shares (maximum)
Warrants:
Number to be outstanding after 850,000 warrants (minimum)
this offering(1) 1,700,000 warrants (maximum)
Exercise period The exercise price of each warrant is $9.00
per share, subject to adjustment in certain
circumstances.
Exercise period The warrants will be exercisable at any
time, until they expire on , 2002.
Redemption We may redeem the outstanding warrants in
whole or in part, at any time upon at least
30 days prior written notice to the
registered holders, at a price of $.05 per
warrant, provided that the closing bid
price of the common stock was at least
$12.00 for the 20 consecutive trading days
ending on the third business day prior to
our giving notice of redemption to the
warrantholders, and provided there is then
a current registration statement in place
for the shares underlying the warrants.
Proposed Nasdaq
SmallCap Market(2) Symbols for
common stock, FNTV
warrants FNTVW
and units FNTVU
</TABLE>
- --------
(1) We have reserved additional shares of our common stock for issuance upon
the occurrence of the following:
. 1,700,000 shares upon exercises of the maximum number of warrants
included in the units.
. 170,000 shares upon exercise of the Underwriter's unit warrants.
. 170,000 shares upon exercises of the warrants included in the
Underwriter's units.
. 400,000 shares upon exercises of options available for grant under our
Stock Option Plan.
(2) We have applied to the Nasdaq SmallCap Market to list our units, common
stock and warrants. If we do not satisfy the Nasdaq SmallCap Market's initial
listing requirements, we intend to have our units, common stock and warrants
quoted on the OTC Bulletin Board. We cannot assure investors that our
securities will be listed on the Nasdaq SmallCap Market.
3
<PAGE>
Summary Financial Information
The following data have been derived from our financial statements and
should be read in conjunction with those statements, which are included in this
prospectus. The "As Adjusted" financial information gives effect to the sale of
both the minimum and maximum number of units as if such sale had occurred at
December 31, 1998.
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------
Actual(1) As Adjusted(1)
--------- ---------------------
Minimum Maximum
---------- ----------
<S> <C> <C> <C>
Balance Sheet Data:
Total assets.................................. $83,000 $4,622,000 $9,161,000
Total liabilities............................. $ 6,670 $ 0 $ 0
Stockholders' equity.......................... $ 0 $4,622,000 $9,161,000
</TABLE>
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(1) The "as adjusted" data gives effect to our receipt subsequent to December
31, 1998 of $83,000 in stock subscriptions receivables.
4
<PAGE>
RISK FACTORS
An investment in our securities involves certain risks. To understand these
risks and to evaluate an investment in our securities, you should read this
entire prospectus, including the following risk factors.
We do not have any operating history upon which you may evaluate us
We are a newly formed company with no operating history. To achieve and
sustain profitability, we believe that we must, among other things
. provide compelling and unique content that is attractive to Internet
users.
. establish and maintain relationships with Internet service providers,
streaming video broadcast hosts, advertisers and e-commerce businesses.
. respond to competitive developments.
. attract, retain and motivate qualified personnel.
We can offer no assurance to investors that we can successfully address
these factors, and the possibility that we may fail to do so makes the
prediction of future operating results difficult, if not impossible.
We expect to incur significant losses for the foreseeable future
We expect to incur significant losses on both a quarterly and an annual
basis for the foreseeable future. We cannot assure investors that we will ever
achieve profitability.
We will be unable to generate revenues if the public does not accept our
proposed services
We will be unable to attract advertisers and electronic commerce tie-ins to
our Web sites if the public does not accept our proposed services, with a
consequent inability to generate revenues.
Our success in attracting viewers to our Web sites will depend on, among
other things, the following
. our ability to differentiate our services from traditional news sources.
. our ability to create compelling content.
. our ability to market the foreignTV.com brand name.
. the reliability of our services and the technology to view streaming
video.
We cannot assure investors that our business concept will prove to be
attractive to viewers. Additionally, the Internet is rapidly evolving and we
are not able to assure investors that a new market entrant with a similar
format may not compete with foreignTV.com in the foreseeable future or a new
technology will not evolve that will render streaming technology obsolete.
We will be unable to attract viewers to our Web sites if the public rejects
streaming technology
Our success will depend upon market acceptance of streaming technology as an
alternative to broadcast television. Without streaming technology, viewers of
our proposed on-demand programming would not be able to initiate its playback
until such programming was downloaded in its entirety, resulting in significant
waiting times. The acceptance of streaming technology is dependant on a number
of factors, including
. market acceptance of streaming players such as RealNetworks'
RealPlayer/R/ and Microsoft's Windows Media Player/TM/.
5
<PAGE>
. technological improvements to the Internet infrastructure to allow for
improved video and audio quality and a reduction in Internet usage
congestion.
. the ability of Internet users to acquire sufficient skill and experience
to download and operate streaming players.
. reconfiguration of older Web browsers to handle the inclusion of
streaming players.
Early streaming technology suffered from poor audio quality, and current
video streaming is of lower quality than conventional media broadcasts. In
addition, Internet congestion may interrupt audio and video streams, resulting
in user dissatisfaction. Our prospects will be adversely affected if streaming
media technology fails to achieve or maintain broad acceptance.
We will be unable to generate revenues if the Internet fails as an advertising
medium
We anticipate deriving revenues from the sale of advertisements on our
network. Internet advertising is a new and rapidly evolving industry whose
demand and market acceptance has not as yet been proven. Furthermore, standards
have as yet been widely accepted for the measurement of the effectiveness of
Web-based advertising. Our ability to generate advertising revenue will depend
upon a number of factors, including
. pricing of advertising on other Web sites.
. the amount of traffic on our proposed Web sites.
. our ability to demonstrate user demographic characteristics that are
attractive to advertisers.
. the establishment of desirable advertising agency relationships.
Acceptance of the Internet among advertisers and advertising agencies will
also depend, to a large extent, on the level of Internet use by consumers and
upon growth in the commercial use of the Internet. Because global commerce and
the on-line exchange of information is new and evolving, we are unable to
predict with any assurance whether the Internet will prove to be a viable
commercial marketplace in the long term. Our prospective revenues would be
adversely affected if widespread commercial use of the Internet does not
develop or is substantially delayed, or if the Internet does not develop as an
effective and measurable advertising medium.
We will be unable to generate revenues if the Internet fails as a retail medium
Besides advertising, our only other intended source of revenue is from
electronic commerce tie-ins.E-commerce has only recently begun to develop and
is rapidly evolving. As is typical in a new and rapidly evolving industry,
demand and market acceptance for recently introduced services and products are
subject to a high level of uncertainty. Consumer satisfaction from shopping
over the Internet has been mixed and we cannot assure investors that e-commerce
will continue to grow. Our ability to derive revenues from arrangements with e-
commerce businesses depend upon a number of factors, including
. acceptance by the general public of the Internet as a convenient and
safe shopping forum.
. the offer of quality products at competitive process.
. our ability to attract viewers and direct such viewers to our e-commerce
business tie-ins.
We cannot predict our future revenues
We do not expect to be able to attract advertisers or derive e-commerce
commissions until we attract a substantial amount of viewers to our Web sites.
We cannot assure investors that our proposed programming content will attract
and retain a sufficient number of advertisers or produce a sufficient level of
e-commerce
6
<PAGE>
end-sales that will generate meaningful revenues. Our expense levels may prove
to be greater than our revenue expectations. Our potential revenues also may be
affected by external factors, such as
. lack of advertisers or e-commerce businesses on the Internet in general.
. more Internet sites competing for advertisers' dollars.
. pricing changes for Internet advertisements as the medium becomes more
competitive.
. the lack of user traffic on the foreignTV.com network or the Internet in
general.
. acceptance by the general public of the Internet as a convenient and
safe shopping forum.
. the offer by e-commerce businesses of quality services and products at
competitive prices to attract shoppers on-line.
. our ability to direct viewers to click through to specific e-commerce
businesses' Web sites.
. technical difficulties with respect to the use of streaming technology.
. the failure of streaming technology to advance enough to make streaming
video pleasurable to watch by ordinary household viewers.
Any curtailment of free access to streaming technology may affect our ability
to attract viewers
At present, prospective viewers can download streaming software off the
Internet, in most instances at no charge. We cannot assure investors that
streaming software will continue to be made available to the public free of
charge. If users are charged to acquire streaming software, streaming
technology may not be widely accepted by Internet users.
Our operations may be adversely affected by Internet infrastructure failures
Our success will depend in large part upon the development and maintenance
of the Internet infrastructure, such as a reliable network with the necessary
speed, data capacity and security, or timely development of complementary
products such as high speed modems, for providing reliable Internet access and
services. To the extent that the Internet continues to grow, we cannot assure
investors that the Internet infrastructure will continue to be able to support
the demands placed on it or that its performance or reliability will not be
adversely affected. Furthermore, the Internet has experienced a variety of
outages and other delays as a result of damage to portions of its
infrastructure, including those resulting from the inability of certain
computers or software to distinguish dates in the 21st century from those in
the 20th century. In addition, the Internet could lose its viability due to
delays in the development or adoption of new standards and protocols of use to
handle increased levels of activity or due to increased governmental
regulation.
Service disruptions attributable to telecommunications carriers may limit
accessibility to our Web sites
We will have to rely on local and long-distance telecommunications companies
to provide us with data communications capacity. These providers may experience
service disruptions or have limited capacity, which could disrupt our provision
of streaming video content to our viewers. We may not be able to replace or
supplement these services on a timely basis, if at all. In addition, because we
must rely on third-party telecommunications services providers for our
connection to the Internet, we may not be able to control decisions regarding
the availability of, or our access to, services at any particular time.
Our Internet content may not attract viewers with demographic characteristics
valuable to our advertisers
Our future success depends upon our ability to deliver compelling content
about foreign locations that will attract viewers with demographic
characteristics valuable to our advertisers. If we are unable to develop
content that attracts and retains a viewer base possessing demographic
characteristics that are attractive to advertisers, it may materially adversely
affect our ability to generate meaningful advertising revenues.
7
<PAGE>
We may not be able to establish or maintain relationships with third parties
upon whom we will depend to provide us with streaming technology, which could
result in our inability to provide content to our viewers
We do not intend to develop our own streaming technology. We intend to
license such technology from companies such as RealNetworks or Microsoft in
order to deliver our proposed content over the Internet. We cannot assure
investors that we will be able to do so.
Our success is dependent on our key personnel who we may not be able to retain
and we may not be able to hire enough additional personnel to meet our needs
Our success will depend to a large degree upon the efforts of our
management, our technical and marketing personnel and the reporter/anchors who
will be staffing our content bureaus. Our success will also depend on our
ability to attract and retain additional qualified management, technical and
marketing personnel and reporter/anchors. Hiring employees with the combination
of skills and attributes required to carry out our strategy is extremely
competitive. We do not have "key person" life insurance policies upon any of
our officers or other personnel. Our loss of the services of key personnel,
particularly either or both of Jonathan Braun, our vice chairman and chief
executive officer, and our president, Albert T. Primo, or our inability to
attract qualified replacements, could adversely affect our prospective growth.
We will compete for both viewers and advertisers with numerous larger and well-
financed companies
We expect to compete with
. other Web sites, Internet access providers and Internet broadcasters that
provide content to attract users.
. on-line services, other Web site operators and advertising networks, as
well as traditional media such as television, radio and print, for a
share of advertisers' total advertising budgets.
. traditional media such as broadcast television, cable television, radio
and print with international content.
To compete successfully, we will have to provide sufficiently compelling and
popular content to generate users and support advertising intended to reach
such users. We believe that the principal competitive factors in attracting
Internet users include the quality of service and the relevance, timeliness,
depth and breadth of content and services offered.
We also expect to compete with on-line services, other Web site operators
and advertising networks, as well as traditional media such as television,
radio and print for a share of advertisers' total advertising budgets. We
believe that the principal competitive factors for attracting advertisers
include
. the number of users accessing our Web sites.
. the demographics of our users.
. our ability to deliver focused advertising and interactivity through our
Web sites.
. the overall cost-effectiveness and value of advertising on our network.
. our ability to achieve recognition of the foreignTV.com name.
Our inability to successfully compete, whether expressed in terms of the
number of viewers attracted to our Web sites or in our ability to attract
advertising revenues, could materially adversely affect our likelihood of
ultimately achieving profitability.
There are major risks associated with establishing international operations
Our intended establishment of operations centers in foreign countries and
hiring freelance reporter/anchors will entail significant expenditures and some
knowledge of each country's national and local laws, including
8
<PAGE>
tax and labor laws. Only two of our executive officers have any experience in
conducting business operations in foreign countries, and such experience is not
directly related to our proposed foreign activities. Furthermore, there are
certain risks inherent in conducting business internationally, including, among
others, regulatory requirements, legal uncertainty regarding liability,
difficulties in staffing and managing foreign operations, longer payment
cycles, different accounting practices, currency exchange rate fluctuations,
tariffs and other trade barriers, political instability and potentially adverse
tax consequences, any of which could adversely affect our growth opportunities.
Furthermore, we intend to hire English-speaking, experienced freelance
reporter/anchors to create the content for each of our Web sites. We cannot
assure investors that we will be able to attract and retain such hires.
We may not be able to protect our proprietary rights
We regard our copyrights, trade secrets and similar intellectual property as
significant to our growth and success. We rely upon a combination of copyright
and trademark laws, trade secret protection, confidentiality and non-disclosure
agreements and contractual provisions with our employees and with third parties
to establish and protect our proprietary rights. We have applied for federal
trademark protection for "foreignTV.com" and intend to apply for federal
trademark protection for all domain names used in the foreignTV.com network.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving. We are unable to assure investors as to the
future viability or value of any of our proprietary rights or those of other
companies within the industry. We are also unable to assure investors that the
steps taken by us to protect our proprietary rights will be adequate.
Furthermore, we can give no assurance that our proposed business activities
will not infringe upon the proprietary rights of others, or that other parties
will not assert infringement claims against us.
We will need significant additional financing to grow our proposed network
Even if we are able to sell all of the units, the net proceeds will be
insufficient to enable us to develop, establish and operate more than five
foreignTV.com Web sites, including our primary site at foreignTV.com. We will
require substantial additional financing in order to seek to expand our network
beyond these initial sites, and to become a meaningful competitor in the
Internet broadcast industry. We have no current arrangements with respect to,
or sources of, additional financing and there can be no assurance that any such
financing will be available to us on commercially reasonable terms, or at all.
Moreover, if we raise this additional capital through borrowing or other debt
financing, we would incur substantial interest expense. Sales of additional
equity securities will dilute on a pro rata basis the percentage ownership of
all holders of common stock. Any inability to obtain additional financing will
materially adversely affect us, including possibly requiring us to
significantly curtail operations.
Limitations upon our ability to produce programming may adversely affect our
viewer base
We expect to have limited resources for the foreseeable future to produce
original programming. The lack of original programming, with a consequent
inability to attract and maintain a significant viewer base, could adversely
affect our prospects.
We may be subject to legal liability for Internet content
We may be subject to claims under both United States and foreign law for
defamation, libel, invasion of privacy, negligence, copyright or trademark
infringement, or other theories based on the nature and content of our proposed
programming. Although we intend to acquire and maintain general liability
insurance, it is possible that such insurance may not cover potential claims of
this type or may not be adequate to indemnify us for all liabilities that may
be imposed upon us. If we incur any liability in excess of our insurance
coverage, our proposed business and operating results may be adversely
affected.
Government regulation of the Internet could slow its growth
Although there are currently few laws and regulations directly applicable to
the Internet, it is likely that new laws and regulations will be adopted in the
United States and elsewhere covering issues as music
9
<PAGE>
licensing, copyrights, privacy, pricing, sales taxes and characteristics and
quality of Internet services. The adoption of restrictive laws and regulations
could slow Internet growth or its use as a commercial or advertising medium.
Security concerns may limit Internet growth and our ability to generate
revenues
Inappropriate use of the Internet by third parties could potentially
jeopardize the security of confidential information which could deter certain
foreignTV.com viewers from making e-commerce purchases, thereby adversely
impacting a potentially significant source of our anticipated revenue. We
cannot assure investors that users of our programming or persons accessing e-
commerce businesses from our network will not assert claims of liability
against us as a result of any such failures or breaches. Further, until more
comprehensive security technologies are developed, the security concerns of
actual and potential users may inhibit the growth of the Internet service
industry in general and our revenue prospects in particular.
The Year 2000 issue could adversely affect our proposed operations
The Year 2000 issue is the result of computer programs only being able to
use two digits rather than four to define the applicable year. Thus, date-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. System failures caused by the Year 2000 issue could cause
miscalculations and disruptions of operations, including, among others, a
temporary inability to process transactions, send invoices or engage in similar
normal business activities. We have reviewed our existing systems and we have
determined that there are no significant Year 2000 issues that need to be
addressed. As we have not as yet established strategic relationships with any
Internet service providers or streaming video broadcasters, we are unable to
predict the extent to which the Year 2000 issue will affect their rendition of
services on our behalf. We also cannot assure investors that the service or
product offering of our hardware or software suppliers are Year 2000 compliant.
The interests of our controlling shareholders may conflict with our interests
and the interests of our other shareholders
We license most of the Internet addresses that we intend to use in our
proposed business from either Jonathan Braun, our chief executive officer, or
from a not-for-profit organization which is controlled by Mr. Braun and certain
of our other officers and directors. These relationships may give rise to
future conflicts of interest, which may work to our detriment and to that of
our other shareholders and to the benefit of these officers and directors. We
do not as yet have any independent directors who might otherwise be in a
position to impartially resolve any such conflicts.
Our underwriter lacks experience
Our underwriter has relatively limited experience as a lead underwriter of
public equity offerings. This lack of experience may adversely impact both the
future liquidity and market price of our securities.
The book value of your common stock will be substantially diluted
The public offering price of the common stock component of the units,
assuming no value is assigned to the warrant component, will be substantially
higher than the pro forma tangible book value per share of outstanding common
stock. Purchasers of common stock in this offering will therefore experience
immediate and substantial dilution in tangible book value per share, and the
existing stockholders will receive a material increase in the tangible book
value per share of their shares of common stock. The dilution to investors in
this offering will be $5.50 per share assuming the minimum number of units are
sold and $5.08 per share assuming all of the units are sold.
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<PAGE>
The large number of shares of common stock available for future sale could
adversely affect the price of our publicly traded common stock
All of the shares of common stock sold in this offering will be freely
tradeable without further restriction or further registration under the
Securities Act. However, shares owned by our affiliates, as this term is
defined in the Securities Act, will be restricted and subject to the
limitations of SEC Rule 144. Subject to certain contractual limitations,
holders of restricted shares generally will be entitled to sell these shares in
the public market without registration either pursuant to Rule 144 or any other
applicable exemption under the Securities Act. Sales of substantial amounts of
restricted shares when they become available for public sale, or the
anticipation of such sales, could adversely affect the then prevailing market
price of our common stock and may also impair our future ability to raise
equity capital.
Our right to issue preferred stock could prevent our acquisition by a third
party.
Our board has the authority to issue up to 5,000 shares of preferred stock
and to determine the price, rights, preferences, privileges and restrictions,
including voting right, of these shares without approval of our stockholders.
Any future issuance of shares of preferred stock could delay, defer or prevent
a change in control of foreignTV.com, may discourage bids for the common stock
at a premium above the market price of the common stock, and may adversely
affect the market price of, and the voting and other rights of, the holders of
common stock. We have no present plans to issue any shares of preferred stock.
The market for our common stock and warrants after this offering may be
volatile
The market price of our securities following this offering may be highly
volatile as has been usual with the securities of other small capitalization
companies and Internet stocks in general. Factors such as our operating
results, announcements as to technological developments and various factors
affecting streaming technology and the Internet industry in general may have a
significant impact on the market price of our securities. In addition, in
recent months the stock market has experienced a high level of price and volume
volatility, especially with respect to Internet stocks, and the market prices
for the securities of many companies, particularly of small and emerging growth
companies, which trade in the over the counter market have experienced high
price fluctuation which have not necessary been related to the operating
performance of such companies.
We may be subject to the SEC's "penny stock" rules if our common stock falls
below $5.00 per share
If the trading price of our common stock was to fall below $5.00 per share,
trading in our securities would be subject to the requirements of the SEC's
penny stock rules. These rules require the delivery prior to any penny stock
transaction of a disclosure schedule explaining the penny stock market and all
associated risks and impose various sales practice requirements on broker-
dealers who sell penny stocks to persons other than established customers and
accredited investors, which are generally defined as institutions or an
investor with a net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with the spouse. For these types of transactions
the broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to sale. In addition, broker-dealers must disclose commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities they offer. The additional burdens imposed upon broker-
dealers by such requirements may discourage broker-dealers from effecting
transactions in our common stock which could severely limit its market price
and liquidity.
Investors may not have any significant impact on controlling our affairs
Upon completion of this offering, our current stockholders, including our
officers and directors, collectively, will own approximately 91% of the then
issued and outstanding shares of our common stock if the minimum number of
units are sold and approximately 83% if all of the units are sold. Stockholders
are not
11
<PAGE>
entitled to cumulate their votes for the election of directors. Accordingly, it
is likely that our current stockholders will be able to elect all of the
members of our board and otherwise direct our affairs.
Our inability to achieve a Nasdaq listing for our securities could adversely
affect both their liquidity and market price
If we do not satisfy the initial listing requirements of the Nasdaq SmallCap
Market, we expect the units, common stock and warrants will be traded in the
over-the-counter market. We anticipate that they will be quoted on the OTC
Bulletin Board, an NASD sponsored and operated inter-dealer automated quotation
system for equity securities not included in The Nasdaq Stock Market, as well
as in the NQB Pink Sheets. The OTC Bulletin Board was introduced as an
alternative to "pink sheet" trading of over-the-counter securities. Although we
believe that the OTC Bulletin Board has been recognized by the brokerage
community as an acceptable alternative to the NQB Pink Sheets, we cannot assure
investors that the liquidity and prices of our securities in the secondary
market will not be adversely affected.
Warrantholders may be unable to exercise their warrants in the absence of an
effective registration statement
We will be able to issue shares of our common stock upon exercise of the
warrants only if there is a then-current prospectus relating to the common
stock issuable upon the exercise of the warrants under an effective
registration statement filed with the SEC, and only if such common stock is
qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdictions in which the various holders of warrants
reside. Although we have agreed to use our best efforts to meet such
requirements, we cannot assure investors that we will be able to do so. The
warrants may be deprived of any value and the market for the warrants may be
limited if a then current prospectus covering the common stock issuable upon
the exercise of the warrants is not effective pursuant to an effective
registration statement or if such common stock is not qualified or exempt from
qualification in the jurisdictions in which the holders of the warrants reside.
Forward looking statements
This prospectus contains certain forward-looking statements and information
relating to foreignTV.com, Inc. and its proposed business. We have identified
forward-looking statements in this prospectus using words such as "believes,"
"intends," "expects," "predicts," "may," "will," "should," "contemplates,"
"anticipates," or similar statements.
These statements are based on our beliefs as well as assumptions we made
using information currently available to us. Because these statements reflect
our current views concerning future events, these statements involve certain
risks, uncertainties and assumptions. Actual future results may differ
significantly from the results discussed in the forward-looking statements.
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<PAGE>
USE OF PROCEEDS
We anticipate that the net proceeds from the sale of the minimum number of
units, after deducting underwriting commissions and other expenses of this
offering, will aggregate $4,346,000, and $8,857,000 if all of the units are
sold. We currently intend to use such net proceeds for the following purposes:
<TABLE>
<CAPTION>
Minimum Maximum
------------------- -------------------
<S> <C> <C> <C> <C>
Development and establishment of net-
work sites.......................... $ 300,000 (6.9)% $ 600,000 (6.8)%
Establishment of foreign-based "con-
tent' bureaus and development of
programming......................... 2,000,000 (45.9)% 4,000,000 (45.1)%
Network promotion and advertising.... 200,000 (4.6)% 1,500,000 (16.9)%
Payment of Web address license
fees(1)............................. 158,000 (3.6)% 158,000 (1.8)%
Working capital and general corporate
purposes, including payment of offi-
cers' salaries...................... 1,688,000 (38.8)% 2,599,000 (29.4)%
$4,346,000 (100.0)% $8,857,000 (100.0)%
========== ======== ========== ========
</TABLE>
- --------
(1) Represents payment of license fees to Jonathan Braun, our chief executive
officer, and to a not-for-profit organization controlled by Mr. Braun and
certain of our other officers and directors for a period of two years from
the date of this prospectus.
The foregoing represents our best estimate of our use of the net proceeds
from the sale of units, based upon our present planning, Internet industry
conditions and our estimated future revenues and expenditures. We may change
our intended use of such net proceeds in response to unanticipated events such
as increased expenses, accelerated growth or stronger than anticipated
competition, which may cause us to redirect our current priorities and re-
allocate or use portions of such net proceeds for other purposes.
We anticipate that the net proceeds that we will receive from the sale of
the minimum number of units will be adequate to fund our currently proposed
activities for at least 18 months. Pending our use of such net proceeds, we
intend to invest such net proceeds in short-term, investment grade, interest-
bearing instruments.
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<PAGE>
DILUTION
The difference between the public offering price per share of our common
stock, assuming no value is attributed to the warrants included in the units,
and the pro forma net tangible book value per share of our common stock after
this offering constitutes the dilution to investors in this offering. Net
tangible book value per share is determined by dividing our net tangible book
value, which represents our total tangible assets less our total liabilities,
by the number of outstanding shares of common stock.
At December 31, 1998 and after giving retroactive effect to our sale in
January 1999 of 8,300,000 shares of our common stock at $.01 per share, or an
aggregate of $83,000, our net tangible book value was $83,000, or $(.01) per
share of common stock. After giving effect to the sale of a minimum of 850,000
and a maximum of 1,700,000 shares of common stock included in the units, less
the estimated expenses of this offering, our pro forma net tangible book value
at December 31, 1998 would have been $4,622,000, or $.50 per share if the
minimum number of units is sold or $9,161,000 or $.92 per share if the maximum
number of units is sold, representing an immediate increase in our net tangible
book value of $.49 per share (minimum) and $.91 per share (maximum) to current
stockholders and an immediate dilution of $5.50 per share (minimum) and $5.08
per share (maximum) to new investors. The following table illustrates the
foregoing information with respect to dilution to new investors on a per share
basis, assuming no value is attributed to the warrants included in the units:
<TABLE>
<CAPTION>
Minimum Maximum
------------ ------------
<S> <C> <C> <C> <C>
Public offering price............................ $6.00 $6.00
Net tangible book value before offering........ $(.01) $(.01)
Increase attributable to new investors......... .49 .91
----- -----
Pro forma net tangible book value after offer-
ing............................................. .50 .92
----- -----
Dilution to new investors........................ $5.50 $5.08
===== =====
</TABLE>
The following table sets forth, with respect to our current stockholders and
new investors, a comparison of the number of shares of common stock acquired
from us, the percentage ownership of such shares, the total consideration paid,
the percentage of total consideration paid and the average price per share (1):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
-------------------- -------------------------------------- Average Price
Amount Percentage Amount Percent Per Share
-------------------- --------------- ---------------------- --------------- ---------------
Minimum Maximum Minimum Maximum Minimum Maximum Minimum Maximum Minimum Maximum
--------- ---------- ------- ------- ---------- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Existing Stockholders... 8,300,000 8,300,000 90.7% 83.0% $ 83,000 $ 83,000 1.6% 0.8% $0.01 $ .01
New Investors........... 850,000 1,700,000 9.3% 17.0% $5,100,000 $10,200,000 98.4% 99.2% $6.00 $6.00
Total................... 9,150,000 10,000,000 100.0% 100.0% 5,183,000 $10,283,000 100.0% 100.0%
</TABLE>
- --------
(1) Does not include the issuance of up to 2,440,000 shares of our common stock
which we have reserved for issuance upon future exercises of options and
warrants.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at December 31, 1998 and
as adjusted to give effect to the sale of the units and the application of the
estimated net proceeds derived from the sale of the minimum and maximum number
of units offered by this prospectus.
<TABLE>
<CAPTION>
As Adjusted(1)(2)
--------- ---------------------
Actual(1) Minimum Maximum
--------- ---------- ----------
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares
authorized; -0- shares issued and
outstanding................................. -- -- --
Common stock, $.01 par value, 30,000,000
shares authorized; 8,300,000 shares issued
and outstanding; 9,150,000 and 10,000,000
shares issued and outstanding, as adjusted.. $ 83,000 $ 91,500 $ 100,000
Capital in excess of par value............... 0 4,530,500 9,061,000
Accumulated deficit.......................... 0 0 0
Less stock subscriptions receivable.......... $(83,000) $ 0 $ 0
-------- ---------- ----------
Total stockholders' equity................ $ 0 $4,622,000 $9,161,000
======== ========== ==========
</TABLE>
- --------
(1) The "as adjusted" data gives effect to our receipt subsequent to December
31, 1998 of $83,000 in stock subscriptions receivables.
(2) Does not include up to 2,440,000 shares of our common stock that we have
reserved for issuance upon future exercises of options and warrants.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are in a developmental stage. We have not generated any revenues to date.
Our entire activity since our inception has been to prepare for our proposed
fundraising through an offering of our equity securities.
We will be unable to begin our proposed operations unless and until we are
able to sell a minimum of 850,000 units. We expect to receive net proceeds from
such sale of approximately $4,356,000, which we intend to primarily utilize for
the development of our primary site at foreignTV.com and for the development
and establishment of two Web sites, for the establishment of a European
operations base and for program development, as well as for the other purposes
set forth under "Use of Proceeds" elsewhere in this prospectus. Our first two
location-specific Web sites are expected to be london-TV.com and parisTV.com.
If we are able to sell all of the units, we expect to receive net proceeds
of approximately $8,867,000, which we intend to primarily utilize for the
development and establishment of two additional network sites, which we expect
to be berlinTV.com and the tokyoTVchannel.com., for a total of five sites. We
will also substantially increase our expenditures to promote our proposed
foreignTV.com network in an effort to develop advertising revenues and e-
commerce tie-in commissions.
We intend to commence broadcasting on the primary site at foreignTV.com
shortly after we sell the minimum number of units. The primary site at
foreignTV.com will contain daily news briefings from locations around the world
as well as other programming. Most programming found on the primary site at
foreignTV.com will also be found on its corresponding location-specific Web
site, as and when operational. We intend to launch two location-specific Web
sites, if the minimum number of units are sold, and four location-specific Web
sites, if the maximum number of units are sold, by March 31, 2000, and
additional Web sites at staged intervals thereafter, upon the successful
completion of additional financing or if our proposed business becomes
profitable.
Our business plan, which assumes that we will not derive any significant
revenues from either advertising sales or e-commerce for at least 12 months
after our first sale of units, contemplates that the net proceeds that we
expect to receive from the sale of a minimum of 850,000 units should be
sufficient to sustain our proposed operations for at least 18 months after our
receipt of such net proceeds.
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<PAGE>
PROPOSED BUSINESS
foreignTV.com
We aim to become a leading Internet broadcaster, initially specializing in
the origination of compelling international content, which we believe is not
currently available in a similar format on the Internet. We propose to develop
a network of Internet Web sites, utilizing geographic location-specific Web
site addresses that we have licensed for our exclusive use for an initial term
of 25 years, to offer viewers foreign newscasts and other programming produced
in various locations worldwide. Each site, or "channel," on our proposed
foreignTV.com network, will be accessible either directly by its own Web site
address or through our network's primary site at foreignTV.com. Each site will
offer original programming, in English, of local events, politics,
entertainment, business and culture, with a strong human interest appeal to
provide viewers with a sense of what it is like to not only visit but actually
live and work in that particular location. We initially intend to hire
freelance reporters, anchors and producers to produce the content for each
site. Ultimately, we intend to create additional channels for locations in the
United States and for special interest programming.
Our programming will be viewable on the Internet by means of currently
available streaming video technology, which allows a viewer to watch live or
on-demand programming without the time consuming demands of downloading video
directly onto the viewer's computer hard drive. As this technology is
perfected, we anticipate that watching a program on the foreignTV.com network
will be similar to watching a program on network or cable television.
We expect to offer a comprehensive, informative and entertaining experience,
which will enable a visitor to our proposed parisTV.com web site, for instance,
to view an exclusive video news report about current events in Paris, produced
in Paris but in English and from an American-style human interest angle; watch
an interview with a local personality; go on a video tour of the streets of
Paris; preview an award-winning French film; or buy the latest novel or non-
fiction book about Paris, sample and purchase French music or make airline,
hotel, and restaurant reservations.
We will not own the broadcasting technology used to transmit our content
over the Internet. Rather, we intend to license such technology from streaming
media broadcast hosts, and contract with Internet service providers for network
support.
Industry Background
The Internet
The Internet is a global web of computer networks. Developed over 25 years
ago, this "network of networks" allows any computer attached to the Internet to
talk to any other using the Internet Protocol. The Internet has traditionally
been subsidized by the U.S. federal government. As the number of commercial
entities that rely on the Internet for business communications and commerce has
increased, the level of federal subsidies has significantly diminished, and
funding for the Internet infrastructure and backbone operations has shifted
primarily to the private sector. Further, the Internet has historically been
used by academic institutions, defense contractors and government agencies
primarily for remote access to host computers and for sending and receiving e-
mail.
Individuals are connecting directly to the Internet through Internet access
services such as those provided by MCI, NETCOM, PSINet and UUNET. These
services are growing as easy-to-use software package make accessing the
Internet as easy as getting onto the popular on-line services. To compete with
these direct Internet access providers, consumer on-line services including
AOL, CompuServe and Prodigy, have also introduced Internet access gateways for
their existing subscribers. With these gateways, the on-line services
effectively become large Internet "on-ramps," bringing large numbers of
subscribers onto the Internet.
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World Wide Web
Much of the recent growth in Internet use by businesses and individuals has
been driven by the emergence of a network of servers and information available
on the Internet called the World Wide Web. The Web, based on a client/server
model and a set of standards for information access and navigation, can be
accessed using software that allows non-technical users to exploit the
capabilities of the Internet. The Web enables users to find, retrieve and link
information on the Internet in a consistent way that makes the underlying
complexities transparent to the user. Electronic documents are published on Web
servers in a common format described by the hypertext markup language commonly
referred to as "html". Web client software can retrieve these documents across
the Internet by making requests using a standard protocol called Hypertext
Transfer Protocol, commonly referred to as "http".
The proliferation of Web clients has created significant demand for software
to enable Internet servers and private servers on corporate networks to
function as Web servers. These servers are used by organizations to offer their
products and services on the Internet and to publish confidential company
information to employees inside the enterprise. Web usage is expected to be
further fueled by advances in Web client, server and application software, in
concert with technological developments that drive cost reductions and
performance enhancements.
Internet Commerce
The Internet provides organizations and individuals with new means to
conduct business. Commercial uses of the Internet include business-to-business
and business-to-consumer transactions, product marketing, advertising,
entertainment, electronic publishing, electronic services and customer support.
The Internet offers a new and powerful medium for traditional retail and mail
order businesses to target and manage a wider customer base more rapidly,
economically and productively. We believe that only a small fraction of this
retail business is currently conducted electronically but we expect it to grow
substantially. Another important application for Internet commerce is
electronic publishing through advertiser supported and fee-based Internet
services. Electronic publishing offers substantial savings as compared to
publishing on paper or computer discs. In addition, Web software permits the
publishing of audio files and video clips as well as text and graphical data.
In addition to retailers and publishers, other new businesses are appearing
on the Web as it provides access to a growing base of home, business and
education customers. Financial service institutions are providing on-line
banking information, stock information and trading services. Companies from
many industries are publishing product and company information to their channel
partners and customers, providing customer support via the Web, allowing
customers to immediately buy products on-line, and collecting customer feedback
and demographic information interactively.
Streaming Technology
Until quite recently, all Internet sites were text-based with little or no
movement or sound. It was possible to view a video clip, but it required
downloading the video onto the viewer's computer. Technology introduced in 1995
called "streaming" changed this by introducing sound, video and animation to
sites all over the Internet, either as "on demand" or live broadcasts.
Streaming addresses three major problems that downloading multimedia files
onto a viewer's computer are plagued with
. the entire file needs to be downloaded before the viewer can play back
the file.
. lack of sufficient data-carrying capacity, or bandwidth.
. some content developers do not want their multi-media files to be
downloaded and stored. Streaming addresses copyright issues because the
files cannot be downloaded.
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<PAGE>
Downloading
Streaming reduces the time a viewer needs to wait while an audio or video
digital file is downloaded onto the viewer's computer. Before streaming
technology, a viewer wishing to watch a video clip while on the Internet had to
download the entire file before any part of it could be viewed. For a PC owner
using a 28.8kbs narrow bandwidth modem, the most common speed of household PC
modems, it could take between 5-10 minutes to download a 30 second to one
minute audio file or a 5 seconds to 45 second video file. Larger files would
take even longer to download, during which time the viewer was left to do
nothing else but watch a status meter. When a user opens or accesses an audio
or video file that uses streaming technology, a portion of the data is first
downloaded into a form of computerized holding pen, usually in a matter of
seconds. When the holding pen is full, the data starts to play, while
additional data is continuously downloaded to keep the holding pen full.
Technology
Streaming multimedia is created by taking standard video tape formats and
digitizing and compressing the information using encoder software on a Pentium-
class PC. The final product--a digital file--is then placed on a server where a
user can link to it using streaming software.
Although software is required to view streaming video, many browsers now
come with built in players. Additionally, programs such as RealNetwork's
RealPlayer/R/ or Microsoft's Windows Media Player/TM/ which play streaming
multimedia clips, can be downloaded from the Internet for free. It is estimated
that more than 40 million users have downloaded these and similar programs
since 1996. The technology has advanced to the point where the quality of audio
streaming over a 28.8kbps modem, such as listening to your favorite radio
station over the Internet, rivals FM radio and over a T1 line, which is most
often found in offices, rivals compact disk quality. Video, which requires much
more data to download than audio streaming, can now also be viewed over
28.8kbps modems, although not without legitimate complaints as to quality. T1
lines allow for improved picture quality, however it still does not rival the
quality of a television broadcast.
Streaming technology requires large amounts of bandwidth due to the immense
amount of data contained in each video clip. Bandwidth technologies have not
yet progressed to the point to implement a full-scale video network allowing a
viewer to watch his or her favorite movies or television shows over the
Internet, but we believe that technological improvements will make that a
reality in the near future. Technological improvements to compression,
bandwidth and the introduction of multi-casting--where a broadcaster can send a
single data stream to a virtually unlimited number of users--will allow
streaming video quality, and subsequently, viewers, to increase dramatically.
Increased viewers to Internet sites utilizing such technology will give a
competitive edge over sites that do not utilize streaming technology.
Additionally, the introduction of cable modems, which rival the speed of T1
lines, are introducing higher quality streaming videos into people's homes.
According to Dataquest, as reported in Wired News, sales of cable modems more
than doubled in 1998 and worldwide shipments of cable modems will hit 492,000,
up from 214,000 units in 1997. Worldwide shipments are estimated to reach 2.4
million units by 2002. Further advances in PC-based technologies are also
increasing the likelihood that streaming video that rivals television picture
quality will someday be ubiquitous in people's homes. For instance, Compaq
recently announced that it will market a PC with pre-installed high speed
Internet access equipment, which is being billed as a bid to extend the powers
of the Internet to US consumers and to accelerate development of a mass market
for high speed Internet use.
Although the quality of streaming video is not yet comparable with
television, we believe that most users have positive experiences with or
recognize the potential of streaming at this early stage of technology and will
continue to use it as the technology matures.
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<PAGE>
The Internet as Television
An additional advantage of streaming multimedia is that it allows a user to
view content on his or her own time, not just on television network schedules.
The borderless nature of the Internet lets viewers watch what they want when
they want it. We believe that once the picture quality improves to rival
today's television broadcasts, the average PC user will prefer the convenience
and ease of calling up a program over the Internet instead of traditional
broadcast or cable television.
Broadcasting audio and video content over the Internet offers certain other
advantages that are not generally available from traditional media sources.
Currently available analog technology and government regulations limit the
ability of radio and television stations to broadcast beyond certain geographic
areas and radios and televisions are not widely used in office buildings and
other workplaces, where Internet access has become commonplace.
Our Growth Strategy
We will attempt to create a network of Web sites which will broadcast
original programming using streaming video technology through the Internet.
Each individually accessible Web site will also be linked to our primary site
at foreignTV.com which we intend to also broadcast content, so if a user logs
onto foreignTV.com, he or she will have the option of clicking through to any
one of our other sites. Each site will deliver content produced in different
locations world-wide and will broadcast programming only related to that
location. Although the programming will be produced in that specific location,
it will be sent back to our offices in New York for editing and eventual
transmittal over the Internet.
We intend to attract viewers to our foreignTV.com Web sites by offering
original programming that we believe a viewer presently cannot find anywhere
else. According to publications such as the Economist and the New York Times,
the current trend in the news media is away from foreign reporting towards
domestic, from politics to human interest and from issues to people. We will
seek to capitalize on this trend by filling the void left by the US news media
with our original, foreign-based programming.
We believe that in-depth network news coverage of world affairs is
diminishing in both quantity and quality; with the exceptions of wars,
terrorist incidents, disasters and the like, the sensation-seeking networks are
turning away from the world.
This is in part due to a feeling of relative calm following the end of the
Cold War as well as a rich-world insularity. Although specific examples of
global unrest still prevail, the collapse of southeast Asian and Latin American
economies and the Balkan crisis for example, we believe the inward-bound
reflections of the major news networks is continuing. An example of these
cutbacks can be seen in the lack of on-the-scene reporting which sacrifices the
depth and perspective that only an on-the-scene reporter can give. We believe
that the increased competition between journalism and entertainment, along with
what appears to be a widespread belief held by producers that American
audiences are no longer as interested in daily events happening beyond the
United States' borders, is causing a decline of international-oriented news.
Americans who require or demand international-oriented news must now turn to
new media to satisfy their cravings.
An additional trend we will seek to capitalize upon is the concept that as
more and more channels are beamed into people's homes, people will no longer
watch one-size-fits-all programming and will instead focus on channels that
offer a particular subject matter, such as a television station that solely
broadcasts golf and golf-related shows.
We are still in the planning stages of our development and have not as yet
created any of the content to be offered on the foreignTV.com network or
develop any of the Web sites to view such content. We intend to initially
develop, establish and operate our primary site at foreignTV.com, which, in
addition to providing information about us and our business and, eventually,
serving as a gateway to other foreignTV.com Web sites, will feature its own
programming. We also intend by March 31, 2000, to develop, establish and
operate two
20
<PAGE>
foreignTV.com Web sites for London, England and Paris, France if we are able to
sell the minimum number of units, and an additional two Web sites, which we
anticipate will be for Berlin, Germany and Tokyo, Japan, if we are able to sell
all of the units.
Upon the consummation of this offering, we intend to feature on our primary
site at foreignTV.com, daily video briefing from select foreign cities which we
will commission from freelance correspondents, as well as interviews of foreign
personalities, foreign film clips, feature stories and other news and
entertainment programming. We intend to create daily briefings for London,
Paris, Berlin, Tokyo, Tel Aviv and Dublin if the minimum number of units in
this offering are sold, and an additional six, presently undetermined cities if
all of the units are sold. When the corresponding Web site to the daily
briefing is operational, we intend for the briefing to be found on both the
location-specific Web site and our primary site at foreignTV.com.
We intend for all Web sites on the foreignTV.com network to have a similar
appearance, which will make our network immediately recognizable. For example,
each Web site will feature regularly scheduled segments specifically devoted to
living, working, shopping and playing in that specific location, in addition to
being able to access previously "televised" programming at will. We also intend
to augment our original broadcasting with free-of-charge content, such as
promotional foreign film trailers, satellite press tours and interviews, as
well as Web-based e-mail services and special interest search engines acquired
through licensing and partnering agreements.
We intend to launch each foreignTV.com Web site according to a three-stage
process as follows
. once the design and initial content of a site is developed, we will
invite participants, using a special Internet address allowing
limited access to the site, to view and review the design and
content of the site for comments and feedback. This testing period
is expected to last approximately four to six weeks.
. we intend thereafter to "soft launch" that site for full viewing by
the general public, meaning the launch will not be widely publicized
or promoted. This will enable us to test the load capacity for our
on-line service providers, and generate additional comments and
feedback. Once we have received such feedback, we intend to do a
full-scale launch with maximum publicity on the Internet and other
media. It is at this time that we intend to open discussions with
other Web sites and the general media to create cross-promotional
opportunities.
. after the full-scale launch, we will seek to direct traffic to the
site through a combination of cross-promotions, advertising and the
quality of our programming.
We intend to offer access to the foreignTV.com network and its programming
free of charge to viewers. Our intention is to derive revenues from the sale of
advertising, as well as from commissions arising from e-commerce tie-ins, with
the anticipation that such revenues will increase if, as and when we create and
offer more programming and more viewers log onto the network.
Content Bureaus
We intend to establish "virtual" content bureaus in principal cities around
the world, meaning there will be no permanent office or full time employees,
which will be the equivalent of a foreign news bureau to a broadcast television
station. Each foreignTV.com Web site will have its own content bureau to
provide the original content to be shown on that site.
Each content bureau will be staffed by qualified freelance Americans or
English speaking nationals who have a background in production, journalism or
reporting, to produce content under the direction of our home office in the
United States. It is our intention to initially employ up to four freelance
reporter/anchors for each
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content bureau. These reporter/anchors will not only create the programming,
either entirely on their own or pursuant to agreements with local production
studios, but will also star in the programs, as interviewers, news anchors or
hosts. The raw footage created by the reporter/anchors will then be sent back
to our offices in New York where it will be edited and formatted for viewing
over the Internet.
Licensing of Internet Addresses
License Agreement with The Center of Contemporary Diplomacy
The Center of Contemporary Diplomacy, Inc. is a New York not-for-profit,
tax-exempt organization formed in 1997 for the purpose promoting and preserving
world peace through public awareness and understanding of diplomacy in
international relations. Among the Center's activities is the monitoring and
observation of elections in third-world countries and emerging democracies,
especially in the African continent.
The Center, which is a corporate member of the Council on Foreign Relations
based in New York City, was founded by I. William Lane, our chairman, and
Jonathan Braun, our vice chairman and chief executive officer. Dr. Lane is
currently serving as the Center's chairman and Mr. Braun is the Center's
president. Additionally, Mr. Albert T. Primo, our president, and Mr. Marc D.
Leve, our vice president-legal affairs, secretary and treasurer, are officers
of the Center. Its Web site is "www.centerfordiplomacy.org."
The Center currently owns the right, which it has licensed to us, to use 91
different Internet Web site addresses that combine prefixes ending in or
incorporating the word TV with the .com, .org or .net suffix and 4 Internet Web
site addresses that either incorporate the word "channel" or contain a country
name in the prefix. As with all Internet addresses, the names are not case
sensitive--the letters TV are capitalized for design purposes only. We believe
this library to be the largest of its kind. These addresses are, in
alphabetical order:
airtravelTV.com foreignTV.org norwayTV.com
amsterdamTV.com foreignaffairsTV.com osloTV.com
asiaTVonline.com genevaTV.com pacificTV.com
athensTV.com globalvillageTV.com palestineTV.com
australia-TV.com globalvillageTV.net panafricanTV.com
bakuTV.com globalvillageTV.org parisTV.com
beijingTV.com harlemTV.com polandTV.com
berlinTV.com havanaTV.com pragueTV.com
bombayTV.com helsinkiTV.com publicaffairsTV.com
brazil-TV.com holylandTV.com puertoricoTV.com
brusselsTV.com hongkong-TV.com quebecTV.com
budapest-TV.com icelandTV.com romeTV.com
caspianTV.com icelandicTV.com saigonTV.com
copenhagenTV.com irelandTV.com scandinavianet.com
cracowTV.com istanbulTV.com scandinaviaTV.com
danishTV.com italianTV.com scandinavianTV.com
davosTV.com italy-TV.com scotlandTV.com
denmarkTV.com jamaica-TV.com seoulTV.com
diplomacyTV.com korea-TV.com southamericaTV.com
dublin-TV.com krakowTV.com southamericanTV.com
ecochannel.com london-TV.com spychannel.com
europeTV.com lisbonTV.com stockholmTV.com
explorationchannel.com madridTV.com swedenTV.com
explorationTV.com milanTV.com swedishTV.com
finlandTV.com monacoTV.com taipeiTV.com
foreignTV.net mongoliaTV.com tehranTV.com
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telavivTV.com veniceTV.com worldreligionTV.com
turkishTV.com viennaTV.com worldTVchannel.com
tokyoTVchannel.com warsawTV.com worldTVnetwork.com
trinidadTV.com worldaffairsTV.com worldTVonline.com
tuscanyTV.com worldhistoryTV.com zurichTV.com
unitednationsTV.com worldnewsTV.com
We anticipate that "TV" incorporated in an Internet address, whether in the
specific part prior to the "." or the more general term after the ".",
ultimately will be recognized as the mark of Internet sites utilizing streaming
technology. We therefore believe that our license to use the Center's large
collection of such addresses will afford us the potential to enhance the
likelihood of attracting casual Internet viewers to our proposed Web sites.
We have entered into an agreement with the Center which affords us a 25-year
exclusive license for unlimited use of these addresses, including the right to
sublicense their use to others. This agreement requires us to pay the Center an
annual license fee of $600 per address for each of the first five years of such
25-year term, increasing by 5% a year thereafter through the 13th year, by 7%
per year thereafter through the 21st year, by 10% per year through the 24th
year and at a rate of $2,500 per address for the final year. These fees are
payable to the Center irrespective of whether or not we use any or all of such
addresses . The initial annual cost to us will be $57,000, increasing to
$237,500 for the final year of this 25-year license.
In addition, we are obligated to pay the annual maintenance fee for the
addresses, currently $35 per address, to InterNIC Registration Services for the
25-year term of this agreement. We are also obligated to indemnify the Center
against any and all claims asserted against the Center relating to our use of
the addresses.
The license will automatically renew upon its scheduled expiration for an
additional term of 25 years unless we and the Center otherwise agree, except
that we may unilaterally terminate the license at any time by paying the Center
a sum equal to (i) the aggregate license fees payable to the Center in the year
in which we so terminate the license and (ii) the aggregate license fees we
would have been required to pay to the Center in the immediately subsequent
year.
The Center has agreed that for the term of our license, it will not register
any further addresses containing the letters "TV" or which states or implies
streaming or any other similar aspect of foreignTV.com's proposed business. The
Center has also agreed that should it license any further addresses to us for
our exclusive use, our license fee shall be equal to the initial registration
fee paid by the Center for its rights to such addresses.
License Agreement with Jonathan Braun
We have entered into a substantially identical license agreement with
Jonathan Braun, our Vice Chairman and Chief Executive Officer, who owns or has
exclusive rights to 36 additional addresses, at an initial annual cost to us of
$21,600, increasing to $90,000 for the final year of this 25-year license.
These addresses are, in alphabetical order:
arthistoryTV.com siliconvalleyTV.com mauiTV.com
beverlyhillsTV.com southbeachTVchannel.com medium4TV.com
bluesTV.com swimchannel.com nantucket-TV.com
collegetownTV.com taosTV.com nicheTV.com
hamptonsTV.com vermont-TV.com popcultureTV.com
maineTV.com westernTV.com santafeTV.com
martialartsTV.com aspenTV.com smalltownTV.com
medium4.com bigeasyTV.com streamingUSA.com
multichannelTV.com californiastreaming.com swimmingTV.com
newenglandTV.com emergencyTV.com texasTV.com
offroadTV.com jacksonholeTV.com vinyardTV.com
ruralTV.com manhattanTV.com wildernessTV.com
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In addition to our efforts to develop the foreignTV.com network, we intend
to eventually develop a domestic streaming video network of Web sites produced
in U.S. locations and a special interest streaming video network of Web sites,
which will be similar in structure to the foreignTV.com network. We intend to
undertake such development only if and when we are able to complete at least 12
fully-developed foreignTV.com Web sites, which is subject to the future
availability of adequate financing.
Additional Internet Addresses
In addition to the Internet addresses we are licensing from the Center and
Mr. Braun, we have registered, under foreignTV.com's name, the following
Internet addresses:
albertaTV.com foreignTVfashion.com luxembourgTV.com
argentina-TV.com foreignTVfilm.com marakeshTV.com
acapulcoTV.com foreignTVfitness.com melbourneTV.com
baliTV.com foreignTVforum.com mexico-TV.com
barcelona-tv.com foreignTVgifts.com mexicocityTV.com
beirut-TV.com foreignTVhealth.com mideast-TV.com
bigskyTV.com foreignTVholidays.com mideasTV.com
buenosairesTV.com foreignTVmail.com montecarloTV.com
caracasTV.com foreignTVmall.com munichTV.com
casablancaTV.com foreignTVmusic.com myforeignTV.com
cinemaTV.com foreignTVnews.com newfoundlandTV.com
deauvilleTV.com foreignTVpeople.com patagoniaTV.com
dutyfreeTV.com foreignTVradio.com railtravelTV.com
edinburghTV.com foreignTVsearch.com reykjavikTV.com
fgnTV.com foreignTVsports.com riodejaneiroTV.com
foreignfilmclips.com foreignTVstore.com saopauloTV.com
foreignchat.com foreignTVstyle.com stjohnsTV.com
foreignradio.com foreignTVtalk.com stmoritzTV.com
foreignmall.com foreignTVtravel.com surfsideTV.com
foreignshopping.com foreignTVweather.com sydney-TV.com
foreign-TV.com frgn.com tahitiTV.com
foreignTVbooks.com glasgowTV.com themeparkTV.com
foreignTVbriefings.com kathmanduTV.com tunisTV.com
foreignTVbusiness.com keywest-TV.com venezuela-TV.com
foreignTVbuzz.com k9TV.com year2000TV.com
foreignTVchat.com lucerneTV.com
foreignTVevents.com luganoTV.com
We are only required to pay the annual maintenance fee for the use of such
names.
We do not intend to create programming for all of our owned or licensed
Internet addresses. We have registered some of the names to prevent third
parties from acquiring Web addresses that are similar to our addresses, which
could confuse our viewers and dilute the value of our name, network and
programming.
Advertising and E-commerce
Advertising
We expect to derive our revenues from the sale of advertising space on our
Web sites and from commissions to be paid to us by e-commerce businesses for
originating click-through sales of their services and products.
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With respect to advertising, we intend to offer prospective advertisers the
opportunity to place customized ads on our Web sites. Some of the choices we
intend to provide include
. the ability to brand entire sections of our Web sites which may include
rotating and permanent placement of buttons, logos and Web site links,
integrated gateway ads, multimedia banner ads and mentions on the
foreignTV.com home page and location-specified Web site home pages.
. inclusion in an e-mail newsletter, which we intend to make available on a
subscription basis to viewers of our network sites at no cost, containing
highlights of upcoming events and new programming.
. the integration of audio and video into text and graphics banner ads
which will play when the user clicks on the banner. We believes that
video can increase the impact of a banner ad, which can in turn be sold
at a higher cost than traditional banner ads.
We do not intend to initially employ a direct advertising sales force.
Instead, we plan to engage a leading Internet ad sales rep firm, such as the
industry leader, DoubleClick Inc.
E-commerce
Besides advertising, our other intended source of revenue is from e-commerce
tie-ins with e-commerce businesses. We intend to enter into agreements with
such businesses so that we would receive a commission upon each sale of their
services or products to a buyer who clicked through to such e-commerce
businesses from the foreignTV.com network.
We believe that retail sales over the Internet will grow substantially over
the next few years as more people log onto the Internet in general, more
services market and sell their services or products on-line and safety concerns
about transmitting confidential data are addressed. According to Forrester
Research, Inc., world-wide e-commerce sales will reach as high as $3.2 trillion
in the year 2003 and on-line travel reservations will produce up to 29.5
billion in revenue in the year 2003. By entering into alliances with e-commerce
companies while the industry is young, we hope to grow along with such
companies as the industry matures.
Network Promotion
Our marketing efforts will include hiring and training a public relations
staff, which will be responsible for news releases targeted to major print and
broadcast media, and the production and on-air placement of high-quality,
professional video news releases aimed at major-market US and overseas TV
stations and cable networks.
We also intend to market the foreignTV.com network by exchanging banner ads
with high-traffic Web sites and develop and distribute free e-mail newsletters
to our registered users to highlight upcoming events and content.
We also intend to enter into strategic relationships with other content
providers, key Internet companies, and technology and bandwidth providers, as
we believe such relationships may enable us to increase traffic and brand
awareness.
We hope that by gaining share in the market for streaming video at this
early stage, the foreignTV.com network will gain in brand recognition when
streaming multimedia becomes more commonplace over the Internet. Greater brand
recognition, in turn, may translate into a steadily building user base with
great potential value for advertisers, e-commerce companies, other content
providers and any company with an interest in attracting and aggregating a
growing audience of Internet users.
In addition, the Center is currently in negotiations to develop and produce
a half-hour, weekly foreign affairs cable TV magazine-style program entitled
"The World This Week," which it hopes to air on leased
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access type stations on cable television networks in New York, Washington, DC
and select additional markets. We intend to utilize this program as a
traditional media vehicle for promoting and advertising foreignTV.com and as a
tool for creating content for the foreignTV.com network by interviewing
international personalities in government, industry and entertainment.
Competition
The market for Internet broadcasting is highly competitive and we expect
that such competition will continue to intensify. We will compete with
. other Web sites, Internet portals and Internet broadcasters that provide
content to attract users.
. on-line services, other Web site operators and advertising networks, as
well as traditional media such as television, radio and print, for a
share of advertisers' total advertising budgets.
. local radio and television stations and national radio and television
networks for sales of advertising spots.
We will compete against a variety of businesses that provide content through
one or more mediums, such as print, radio, television, cable television and the
Internet. Although traditional media companies have not established a
significant streaming media presence on the Internet, they may expend resources
to establish a more significant presence in the future. To compete
successfully, we will have to provide sufficiently compelling and popular
content to attract viewers and support advertising intended to reach such
users. We believe that the principal competitive factors in attracting Internet
users include the quality of service and the relevance, timeliness, depth and
breadth of content and services offered.
We expect competition from on-line services, other Web site operators and
advertising networks, as well as traditional media such as television, radio
and print for a share of advertisers' total advertising budgets. We believe
that the principal competitive factors for attracting advertisers include
. the number of users accessing our Web sites.
. the demographics of our users.
. our ability to deliver focused advertising and interactivity through our
Web sites.
. the overall cost-effectiveness and value of advertising on our network.
There is intense competition for the sale of advertising on high-traffic Web
sites, which has resulted in a wide range of rates quoted by different vendors
for a variety of advertising services, making it difficult to project levels of
Internet advertising that will be realized generally or by any specific
company. Any competition for advertisers among present and future Web sites, as
well as competition with other traditional media for advertising placements,
could result in significant price competition.
We also expect to compete for traditional media advertising sales with
national radio and television networks, as well as local radio and television
stations. Initially, local radio and television content providers and national
radio and television networks in virtually all instances will have larger and
more established sales organizations than us. These companies, initially, will
also have greater name recognition and more established relationships with
advertisers and advertising agencies than us. Such competitors may be able to
undertake more extensive marketing campaigns, obtain a more attractive
inventory of ad spots, adopt more aggressive pricing policies and devote
substantially more resources to selling advertising inventory.
We believe there is no similar content-based network of original
international programming that would compete with foreignTV.com. However, there
are a number of Internet companies that aggregate and broadcast streaming video
and audio, including music, music videos, movie trailers, sports, news and
business events. The largest of these companies is broadcast.com, which went
public in 1998. Although broadcast.com has
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exclusive and non-exclusive licences to broadcast a wide range of events, we do
not believe we will compete with broadcast.com directly, or any other streaming
content provider, based upon subject matter as we are not aware of any other
streaming content provider which produces its own programming and focuses on
local events, politics, entertainment, business and culture in locations around
the world. However, our ability to market our name and services and to
differentiate ourselves from broadcast.com and other will have a direct impact
on the number of viewers we will be able to obtain. We can give no assurance to
investors that broadcast.com or any another streaming media site will not focus
internationally to directly compete with foreignTV.com. As the Internet becomes
more ubiquitous, and quality streaming content becomes more accessible, there
will be additional competitors seeking to broadcast content over the Internet
which can detract from foreignTV.com's potential audience.
Intellectual Property
We regard our copyrights, trade secrets and similar intellectual property as
significant to our growth and success. We rely upon a combination of copyright
and trademark laws, trade secret protection, confidentiality and non-disclosure
agreements and contractual provisions with our employees and with third parties
to establish and protect our proprietary rights. We have applied for federal
trademark protection for "foreignTV.com" and intend to apply for federal
trademark protection for all domain names used in the foreignTV.com network.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving. We are unable to assure investors as to the
future viability or value of any of our proprietary rights or those of other
companies within the industry. We are also unable to assure investors that the
steps taken by us to protect our proprietary rights will be adequate.
Furthermore, we can give no assurance that our proposed business activities
will not infringe upon the proprietary rights of others, or that other parties
will not assert infringement claims against us.
Government Regulation
There are few laws or regulations directly applicable to the Internet. The
appeal of the Internet makes it likely, however, that state or national laws
may be implemented in the future covering such issues as taxes, intellectual
property and property ownership, privacy, defamation and freedom of speech.
Most laws were adopted prior to the advent of the Internet, and their
applications are uncertain. Any new law or regulation may have the effect of
limiting the use of the Internet and its growth as a new medium to communicate.
Employees
We do not presently have any employees other than our executive officers. If
we are able to sell the minimum number of units, we intend to hire up to four
full-time computer programmers, Web designers and editors to be based in our
New York office and an as yet to be determined number of freelance
reporter/anchors to create the content for each site.
Facilities
We have maintained our executive offices, since January 1999, on a rent-free
basis in premises of approximately 300 square feet that we share with Y Design,
Ltd., a new media design firm which was founded by Mr. Yeon S. Hong, our vice
president-creative. If we are able to sell the minimum number of units, we have
agreed to reimburse Mr. Hong for his rental costs for these premises of
approximately $500 per month from that time forward until we can locate, lease
and occupy approximately 7,000 square feet of office space, which we presently
anticipate will be situated in the Borough of Manhattan in New York City, and
thereafter through the expiration of Mr. Hong's present lease in August 1999.
We also intend to open an office in Paris to serve as our European
operations center, as well as lease space in the New York City suburbs to house
our editors and to allow for satellite feeds at lower rates than if we
established corresponding facilities in New York City. We do not know at this
time what our requirements are with respect to the square footage of such
facilities.
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MANAGEMENT
Directors and Executive Officers
Our current directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
I. William Lane.................. 76 Chairman of the board of directors
Jonathan Braun................... 48 Vice chairman, chief executive
officer and director
Albert T. Primo.................. 63 President and director
Bruno Finel...................... 39 Senior vice president--European
operations and director
Marc D. Leve..................... 42 Vice president--legal affairs,
secretary, treasurer and director
Yeon S. Hong..................... 29 Vice president--creative
Elorian C. Landers............... 51 Vice president--corporate
development
</TABLE>
I. William Lane, PhD has been our chairman of our board since our inception.
Dr. Lane has served as a consultant to Lane Labs, a natural medicine company
founded upon Dr. Lane's principles and teachings, primarily dealing with cancer
research, since 1994. He has been the chairman of Cartilage Consultants, Inc.,
a company that researches and provides consulting services for the use of shark
cartilage and other natural medicines, since 1989. Dr. Lane is also chairman of
the Center. Dr. Lane received his B.S. and Masters in Nutritional Science from
Cornell University and his PhD. in Agricultural Biochemistry and Nutrition from
Rutgers University.
Jonathan Braun founded and has been our vice chairman and chief executive
officer since our inception. Mr. Braun is the originator of the foreignTV.com
concept. From 1995 to 1997, Mr. Braun was the president of Marinex Multimedia
Corporation, a CD-rom publishing and Internet content provider company. From
1991 to 1995 Mr. Braun was the President of Marinex, Inc., a public relations
firm he founded. Mr. Braun began his career as a journalist working for such
publications as Parade Magazine, The Jewish Week, and the New York Daily News
and currently serves on the editorial board of Midstream, a monthly journal
specializing in Israel and the Middle East. Mr. Braun is also president of the
Center. Mr. Braun received his M.S. from the Columbia University School of
Journalism and his B.A. in Political Science from the City College of New York,
where he graduated phi beta kappa and magna cum laude.
Albert T. Primo has been one of our directors and our president since our
inception. Mr. Primo is the president of Primo Newservice, a company that has
provided advice to television and cable systems on news production and
marketing since 1976, the executive producer/narrator of Sci-Tech TV, a thirty
minute TV magazine devoted to science and technology since 1994 and the
executive producer of Newsworthy, a weekly television feature magazine
syndicated to 58 television stations and 1,200 cable systems since 1989.
According to articles which have appeared in The Wall Street Journal, USA Today
and Advertising Age, Mr. Primo is credited with being the author of the
"eyewitness news" format that is currently widely used in the television news
industry. He has produced programming and worked in the broadcast industry for
over 40 years, including stints as the executive producer of prime-time
television specials and investigative news series, the owner of a radio station
and a weekly newspaper in Connecticut and the vice president, news of ABC-TV
from 1972 to 1974. He received his B.A. from the University of Pittsburgh.
Bruno Finel has been one of our directors and vice president-european
operations since our inception. Mr. Finel is the managing director and
principal stockholder of Cablevision, a ten-year old Paris-based company that
produces programs for African, French and European television and provides
communication and investment counseling on behalf of the governments of
Namibia, the Ivory Coast, Togo and Tunisia. In addition, Mr. Finel created and
is managing, through Cablevision, the official public information Web sites of
Namibia, Togo and Tunisia and has created news and information related Web
sites devoted to Sudan and Tunisia.
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Marc D. Leve has been one of our directors, vice president-legal affairs,
secretary and treasurer since our inception. Mr. Leve is, and has been an
attorney with Yerushalmi & Associates, LLP, a New York law firm, and its
predecessor firm, since 1995. He was an associate at Yerushalmi, Shiboleth,
Ysraeli & Roberts, LLP from 1993 to 1995. Mr. Leve has been general counsel,
vice president, secretary and a director of the Center since shortly after its
inception. Mr. Leve received an LLB in 1984 from Bar Ilan University in Israel.
He is admitted to practice law in Israel and in the State of New York.
Yeon Hong has been our vice president-creative since our inception. Mr. Hong
is the founder, president and creative director of Y Design, Ltd., a new media
design firm that services Fortune 500 companies such as Samsung America and EDS
since 1997. Mr. Hong also works as a freelance art/creative director for such
companies as Time Warner, MCI, Beverly Hills Polo Club, Barron's Weekly News,
Columbia House and Waters Design since 1991. Mr. Hong was vice president and
creative director of Marinex Multimedia Corporation from 1994 to 1995. Mr. Hong
served as the creative director for CBC Media, Inc., where he launched The Web
Stop, an Internet portal Web site from 1995 to 1997. Mr. Hong received his B.A.
in Communications Arts from the University of Buffalo and has also studied
engineering and computer programming from the Rochester Institute of
Technology.
Elorian C. Landers has been vice president-corporate development since our
inception. Mr. Landers is the managing partner of South Coast Venture Group, a
venture capital firm in Houston, Texas, since 1991 and is a founder and the
acting president of Fyrglas, Inc., an innovator in fiber optic imaged gifts and
promotional items. Mr. Landers has over 20 years experience in marketing,
advertising and public relations. Mr. Landers received his B.A. in Marketing
and Advertising from Art Center College in Pasadena, California.
All of our directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Our
directors receive no compensation for serving on our board other than
reimbursement of reasonable expenses incurred in attending meetings. Officers
are elected annually by the board and serve at the discretion of the board.
Our board intends to create a compensation committee and an audit committee
upon the consummation of this offering. Each committee will consist of two or
more independent directors. We are currently searching for qualified
independent directors. The compensation committee will review our compensation
policies and administer our stock option plan. The audit committee will review
the scope of our audit, the engagement of our independent auditors and their
audit represents.
Executive Compensation
We do not presently pay compensation to any of our officers and directors,
although we do reimburse them on an accountable basis for any reasonable
expenditures made on our behalf.
We intend to enter into five year employment agreements with each of
Jonathan Braun, Albert T. Primo and Bruno Finel, effective upon the sale of the
minimum number of units, retroactive to January 1, 1999 in the case of Mr.
Braun, which will require each such person to devote substantially his full
time efforts to our affairs and will provide for each to receive an initial
minimum base salary of $150,000 per annum, annually increasing thereafter at a
rate of not less than 10%. Additionally, each such person will receive a one-
time bonus of $25,000 if and when we first achieve profitability.
Each such employment agreement will also provide for the payment of
severance in the event of our termination of employment other than for "cause"
in an aggregate lump sum equal to one year's minimum base salary for the
affected employee at the rate prevailing at the date of his termination,
augmented by a like amount for each year of prior employment, to be
appropriately pro-rated for partial years.
Messrs. Braun, Primo and Finel will also be entitled to participate in such
benefit plans, including life insurance, hospitalization, pension or profit-
sharing plans, as we may adopt from time to time. Messrs. Braun, Primo and
Finel will also be precluded from, subject to certain exceptions, entering into
the employ of, or investing in an Internet company for a period of 2 years
following the expiration of their respective employment terms. Mr. Braun will
additionally receive a vehicle allowance of $575 per month and we will pay for
his office parking.
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We also intend to enter into substantially similar employment agreements
with Marc Leve and Yeon Hong upon the closing of the minimum offering, which
will afford Messrs. Leve and Hong minimum annual compensation levels of
$100,000 each. Mr. Leve will additionally be entitled to continue his private
law practice, so long as such practice does not conflict with his duties as our
Vice President, Secretary and Treasurer. Additionally, pursuant to Mr. Hong's
employment agreement, we have agreed, commencing upon our sale of the minimum
number of units, to thereafter reimburse Mr. Hong on a dollar-for-dollar basis
for the rent currently paid by Mr. Hong's company, Y Design, Ltd., for leased
office space that we currently share with such company until the end of the
lease term in August 1999.
Stock Option Plan
Our stock option plan was adopted by both our board and a majority in
interest of our stockholders in January 1999. The plan provides for the
granting of options which are intended to qualify either as incentive stock
options within the meaning of section 422 of the Internal Revenue Code of 1986
or as nonstatutory stock options which are not intended to meet the
requirements of section 422. The total number of shares of common stock
reserved for issuance under the plan is 400,000. Options to purchase shares may
be granted under the plan to persons who, in the case of incentive stock
options, are our employees and officers, or, in the case of nonstatutory stock
options, are employees and officers or non-employee directors.
Our plan provides for its administration by our board of directors or a
committee chosen by the board of directors, which has discretionary authority,
subject to certain restrictions, to determine the number of shares issued
pursuant to incentive stock options and nonstatutory stock options and the
individuals to whom, the times at which and the exercise price for which
options will be granted.
The exercise price of all incentive stock options granted under the plan
must be at least equal to the fair market value of such shares on the date of
the grant or, in the case of incentive stock options granted to the holder of
more than 10% of our common stock, at least 110% of the fair market value of
such shares on the date of the grant. The maximum exercise period for which
incentive stock options may be granted is ten years from the date of grant or
five years in the case of an individual owning more than 10% of our common
stock. The aggregate fair market value as determined at the date of the option
grant of shares with respect to which incentive stock options are exercisable
for the first time by the holder of the option during any calendar year shall
not exceed $100,000.
No options have been granted under the plan as of the date of this
prospectus.
CERTAIN TRANSACTIONS
Each of our executive officers, directors and other initial stockholders
acquired their respective shares of our common stock in January 1999 at a price
of $.01 per share, or an aggregate of $83,000.
As discussed elsewhere in this prospectus, we have entered into licensing
arrangements for use of certain domain names owned by the Center. Messrs. Lane,
Braun and Leve are officers of the Center. We have also entered into a
substantially similar licensing arrangement with Mr. Braun for certain other
domain names owned by him. Although we believe that the terms of the respective
licensing arrangements are no less favorable to us than those we could have
negotiated with persons having no relation to us, these arrangements should be
viewed by investors as being non-arms-length in their nature.
30
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the number and percentage of outstanding
shares of our common stock included in both the minimum number of units and in
all of the units which we are offering for sale that were owned as of January
31, 1999 and that will be owned following completion of this offering, based on
information obtained from the persons named below, by
. each person known by us to be the owner of more than 5% of the
outstanding shares of common stock.
. each director and officer.
. all officers and directors as a group.
<TABLE>
<CAPTION>
Percentage of
Outstanding Shares Owned
Amount and ------------------------
Nature of After Offering
Name and Address of Beneficial Before ---------------
Beneficial Owner Ownership(1) Offering Minimum Maximum
- ------------------- ------------ -------- ------- -------
<S> <C> <C> <C> <C>
I. William Lane......................... 2,700,000 32.5% 29.% 27.0%
80 Woodland Avenue
Short Hills, NJ 07078
Jonathan Braun.......................... 3,100,000 37.3% 33.9% 31.0%
24 Holly Hill Lane
Katonah, NY 10536
Albert T. Primo......................... 750,000 9.0% 8.2% 7.5%
182 Sound Beach Avenue
Old Greenwich, CT 06870
Bruno Finel............................. 600,000 7.2% 6.6% 6.0%
15, rue Ambroise Thomas
Paris 75009 France
Elorian C. Landers...................... 500,000 6.0% 5.5% 5.0%
9307 West Sam Houston Parkway
Houston, TX 77099
Marc D. Leve............................ 200,000 2.4% 2.2% 2.0%
264 Lexington Avenue
New York, NY 10016
Yeon Hong............................... 200,000 2.4% 2.2% 2.0%
622A Bruce Street
Ridgefield, NJ 07657
All officers and directors as a group (7
persons)............................... 8,050,000 97.0% 88.0% 80.5%
</TABLE>
- --------
(1) Unless otherwise noted, we believe that all persons named in the table have
sole voting and investment power with respect to all shares of our common
stock beneficially owned by them.
Messrs. Lane, Braun and Primo may be deemed to be our "parents" and
"promoters", as such terms are defined under the federal securities laws.
31
<PAGE>
DESCRIPTION OF SECURITIES
General
Our authorized capitalization consists of 30,000,000 shares of common stock,
par value $.01 per share, and 5,000 shares of preferred stock, par value $.01
per share. As of the date of this prospectus, 8,300,000 shares of common stock
are outstanding, held of record by 15 persons. No shares of preferred stock are
currently outstanding.
Units
Each unit consists of one share of common stock and one warrant, each
warrant entitling the holder to purchase one share of common stock. The common
stock and warrants will become separable and transferable 90 days after the
date of this prospectus, or on such earlier date as may be determined by the
underwriter.
Common Stock
Each stockholder of record is entitled to one vote for each share of our
common stock owned by that stockholder on all matters properly submitted to the
stockholders for their vote. Our certificate of incorporation does not provide
for cumulative voting for the election of our directors, with the result that
stockholders owning or controlling more than 50% of the shares voted for the
election of directors can elect all of the directors. Subject to the dividend
rights of holders of preferred stock, holders of common stock are entitled to
receive dividends when, as and if declared by our board out of funds legally
available for this purpose. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to receive on a pro rata
basis any assets remaining available for distribution after payment of our
liabilities and after provision has been made for payment of liquidation
preferences to all holders of preferred stock. Holders of common stock have no
conversion or redemption provisions or preemptive or other subscription rights.
The outstanding shares of common stock are, and the shares of common stock
included in the units, when issued and paid for as set forth in this
prospectus, will be, fully paid and nonassessable.
Preferred Stock
Our certificate of incorporation authorizes us to issue 5,000 shares of so-
called "blank check" preferred stock having rights senior to our common stock.
Our board is authorized, without further stockholder approval, to issue
preferred stock in one or more series and to fix the stock's rights,
preferences, privileges and restrictions, including dividend rights, conversion
rights, voting rights, redemption terms and liquidation preferences, and to fix
the number of shares constituting any series and the designations of these
series.
The issuance of preferred stock may have the effect of delaying or
preventing a change of control of our management. Additionally, the issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to the holders of common stock or could adversely affect the
voting power or other rights of the holders of common stock. We currently have
no plans to issue any shares of preferred stock.
Warrants
Each warrant entitles the holder of record to purchase one share of our
common stock at a price of $9.00 per share, subject to adjustment in certain
circumstances, at any time until the warrants expire at 5:00 p.m., New York
City time, on , 2002.
We may redeem the warrants, in whole and not in part, at our option, at a
price of $.05 per warrant at any time after their issuance upon not less than
30 days' prior written notice to the warrantholders, provided that the reported
closing bid price of the common stock equals or exceeds $12.00 per share, for
the 20 consecutive trading days ending on the third business day prior to our
giving notice of redemption to warrantholders. The warrantholders shall have
exercise rights until the close of business on the date fixed for redemption.
32
<PAGE>
The warrants will be issued in registered form under a warrant agreement
between us and American Stock Transfer & Trust Company, as warrant agent. We
refer you to the Warrant Agreement, which has been filed as an exhibit to the
Registration Statement on Form S-1 of which this prospectus is a part, for a
complete description of the terms and conditions of the warrants.
The exercise price and number of shares of common stock issuable on exercise
of the warrants are subject to adjustment upon the occurrence of certain events
such as stock dividends, or if we recapitalize, reorganize, merge with another
company or consolidate. However, the warrants are not subject to adjustment for
issuances of common stock at a price below their exercise price.
We have the right, in our sole discretion, to decrease the exercise price of
the warrants for a period of not less than 30 days on not less than 30 days'
prior written notice to the warrantholders. In addition, we have the right, in
our sole discretion, to extend the expiration date of the warrants on five
business days' prior written notice to the warrantholders.
Warrantholders may exercise warrants by surrendering the certificates
evidencing warrants on or prior to the warrants' expiration date at the offices
of the warrant agent, with the exercise form on the reverse side of such
certificate completed and executed as indicated, accompanied by full payments
of the exercise price, by certified check payable to foreignTV.com, Inc., to
the warrant agent for the number of warrants being exercised. Warrantholders do
not have the rights or privileges of holders of common stock.
You will be unable to exercise your warrants unless we have filed with the
SEC a current prospectus covering our shares of common stock underlying your
warrants and such shares have been registered or qualified or deemed to be
exempt under the securities laws of your state of residence. We will use our
best efforts to have all shares so registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until the
expiration of the warrants, subject to the terms of the warrant agreement.
While it is our intention to do so, we cannot assure investors that we will be
able do so.
No fractional shares will be issued upon exercise of the warrants. However,
if a warrantholder exercises all warrants then owned of record by him, we will
pay to such warrantholder, in lieu of the issuance of any fractional share
which is otherwise issuable to such warrantholder, an amount in cash based on
the market value of the common stock on the last trading day prior to the
exercise date.
Dividends
We have not paid any dividends on our common stock to date. Our payment of
dividends in the future, if any, will be contingent upon our revenues and
earnings, if any, capital requirements and general financial condition. The
payment of any future dividends will be within the discretion of our board. It
is the present intention of our board to retain all earnings, if any, for use
in our business operations and, accordingly, we do not anticipate declaring any
dividends in the foreseeable future.
Limitation of Liability
As permitted by the Delaware General Corporation Law, our Certificate of
Incorporation provides that our directors shall not be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to us or our stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, relating to unlawful
payment of dividends or unlawful stock purchases or redemption of stock or (iv)
for any transaction from which the director derives an improper personal
benefit. As a result of this provision, we and our stockholders may be unable
to obtain monetary damages from a director for breach of his or her duty of
care.
33
<PAGE>
Our certificate of incorporation and bylaws provide for the indemnification
of our directors and officers and, to the extent authorized by the board in its
sole and absolute discretion, employees and agents, to the fullest extent
authorized by, and subject to the conditions set forth in the Delaware General
Corporation Law, except that we will indemnify a director or officer in
connection with a proceeding initiated by such person only if the proceeding
was authorized by our board. The indemnification provided under our certificate
of incorporation and bylaws includes the right to be paid the expenses,
including attorneys' fees, in advance of any proceeding for which
indemnification may be had, provided that the payment of such expenses incurred
by a director, officer, employee or agent in advance of the final disposition
of a proceeding may be made only upon delivery to us of an undertaking by or on
behalf of the director, officer, employee or agent to repay all amounts so paid
in advance if it is ultimately determined that the director or officer is not
entitled to be indemnified.
Under our bylaws, we have the power to purchase and maintain insurance on
behalf of any person who is or was one of our directors, officers, employees or
agents, against any liability asserted against the person or incurred by the
person in any such capacity, or arising out of the person's status as such, and
related expenses, whether or not we would have the power to indemnify the
person against such liability under the provisions of the Delaware General
Corporation Law. We currently have no plans to purchase director and officer
liability insurance on behalf of our directors and officers.
Transfer Agent
The transfer agent for our common stock and the warrant agent for our
warrants is American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York 10005.
Shares Eligible for Future Sale
Upon completion of this offering, we will have 9,150,000 shares of common
stock outstanding if we sell the minimum number of units and 10,000,000 shares
if all of the units are sold. Of these shares, 850,000 shares, assuming the
minimum number of units are sold and 1,700,000 shares if all of the units are
sold, will be freely tradeable without restriction or further registration
under the Securities Act, except that any shares purchased by our affiliates,
generally persons who have a control relationship with a company, will be
subject to limitations of Rule 144. The remaining 8,300,000 shares will be
restricted shares under the Securities Act. In addition, all holders of record
of 10,000 or more restricted shares are subject to lock-up agreements with the
underwriter which provide that their respective shares cannot be publicly
offered for sale absent the underwriter's prior consent prior to , 2002. The
underwriter has advised us that it has no general policy with respect to the
release of shares prior to the end of the lock-up period and has no present
intention to waive or modify any of these restrictions.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, including an affiliate of the Company, who has
owned restricted shares of common stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the common stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the date upon which
notice of the sale is filed with the SEC, provided certain requirements
concerning availability of public information, manner of sale and notice of
sale are satisfied. A person who has not been one of our affiliates for at
least the three months immediately preceding the sale and who has beneficially
owned restricted shares for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the requirements described above.
There has been no market for the common stock prior to this offering. We
cannot predict what effect, if any, that either sales of restricted common
stock or its availability for sale will have from time to time on then
prevailing market prices. Nevertheless, the possibility that substantial
amounts of common stock may be sold in the public market may adversely affect
the market price for such common stock and could impair our ability to raise
capital through the sale of our equity securities.
34
<PAGE>
UNDERWRITING
As of the date of this prospectus, we will enter into an underwriting
agreement with Westminster Securities Corporation, 19 Rector Street, New York,
New York 10006, which will provide that the underwriter, acting on our behalf
as our exclusive agent, will use its best efforts to sell a minimum of 850,000
units on an "all or none" basis. Such minimum number of units must be sold
within a period of 90 days from the date of this prospectus, subject to an
extension by mutual agreement for an additional period of up to 90 days, plus
an additional 10 business days to permit clearing of funds deposited prior to
the beginning of such 10-day period, or this offering will be terminated. If
the underwriter successfully sells the minimum number of units, the underwriter
will use its best efforts to sell up to an additional 850,000 units. The
underwriter has made no commitment to purchase any of the units. The
underwriting agreement also includes provisions providing for its termination
by the underwriter upon the occurrence of certain conditions including, in the
opinion of the underwriter, such adverse market conditions so as to make
proceeding with this offering impractical.
All subscriptions for units are to be made by wire transfer or check payable
to "Citibank, N.A., as Escrow Agent for foreignTV.com, Inc." and, when remitted
to the underwriter, are to be deposited by the underwriter by noon of the next
business day following receipt in an escrow account with Citibank, N.A., 120
Broadway, New York, New York 10271, as escrow agent, pursuant to the terms of
an escrow agreement entered into by us, the underwriter and the escrow agent.
During the subscription period, subscribers for units will not be entitled to a
return of their subscriptions. If payment for the minimum number of units is
not deposited with the escrow agent within the subscription period, all
escrowed funds will be promptly returned to subscribers, with interest. If
payment for the minimum number of units is deposited with the escrow agent
within the subscription period, such funds will be paid to us, less commissions
and expense reimbursements payable to the underwriter. Until such time as the
proceeds from the sale of units are actually received by us and certificates
evidencing the common stock and warrants comprising the units delivered to
purchasers, such purchasers will be deemed subscribers and not securityholders.
Subject to the sale of the minimum number of units, we have agreed to pay
the underwriter a cash commission of $.54 for each unit sold. In addition, we
have agreed to pay the underwriter a non-accountable expense allowance of two
percent of the gross proceeds from the sale of the units and to pay all
expenses in connection with qualifying the units and their underlying
securities under the laws of such states as the underwriter may reasonably
designate.
The underwriter has advised us that it proposes to offer the units to the
public at the public offering price set forth on the cover page of this
prospectus. The underwriter has the right to offer the units through members of
the National Association of Securities Dealers, Inc. and to foreign dealers who
agree to be bound by the NASD's Rules of Fair Practice and may pay such dealers
concessions for units sold by them as the underwriter may determine. The
underwriter has informed us that it does not expect sales to its discretionary
accounts to exceed five percent of the minimum number of units.
The underwriter may sell a substantial portion of the units to purchasers
who reside outside the United States. The effect of any such sales may decrease
the size and scope of the domestic market for the units and their component
securities, thereby limiting their liquidity.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act.
We have granted the underwriter the right for a period of 3 years from the
date of this prospectus to have a representative of the underwriter present at
all meetings of our board. Such representative will be entitled to receive the
same notices and communications sent by us to our directors and to attend
directors' meetings, but will not be entitled to vote at any such meetings.
John O'Shea, the underwriter's president, will serve as the underwriter's
representative.
35
<PAGE>
We have engaged the underwriter to act as our exclusive solicitation agent
in connection with the exercise of the warrants. Upon the exercise of the
warrants more than one year after the date of this prospectus, and to the
extent not inconsistent with the guidelines of the NASD and the Rules and
Regulations of the SEC, we have agreed to pay the underwriter a commission
equal to 3% of the proceeds received by us from the exercise of the warrants.
However, we will pay no compensation to the underwriter in connection with the
exercise of the warrants if (a) the market price of the underlying shares of
common stock is lower than the exercise price, (b) the warrants are held in a
discretionary account, or (c) the warrants are exercised in an unsolicited
transaction. In addition, absent an exemption afforded by the provisions of
Regulation M under the Exchange Act, the underwriter will be prohibited from
engaging in any market making activities or solicited brokerage activities with
regard to any of our securities until the later of the termination of such
solicitation activity or the termination by waiver or otherwise of any right
the underwriter may have to receive a fee for the exercise of the warrants
following such solicitation. The underwriter may employ subagents for such
solicitation activity.
In connection with this offering, we have agreed to sell to the underwriter,
at nominal cost, an option to purchase up to 170,000 units. These units are
substantially identical to those being publicly offered by us except that the
warrants comprising a part of these units cannot be redeemed. Further, the
underwriter's units are exercisable initially at $9.60 per unit for a period of
four years commencing one year from the date of this prospectus. The exercise
price of these units may be adjusted upon the occurrence of certain events,
including any recapitalization, reclassification, stock dividend, stock split,
stock combination or similar transaction. The units and their underlying
securities will be restricted from sale, transfer, assignment or hypothecation
for a period of one year from the date of this prospectus, except to officers
or partners of the underwriter and members of the selling group and their
officers or partners. We have agreed to use our best efforts to maintain an
effective registration statement with respect to the underwriter's units and
their underlying securities. In addition, the holders of these units have been
granted one demand registration right under the Securities Act at our expense
for a period of 6 years from the date of this prospectus, and "piggy back"
registration rights under the Securities Act for a period of 4 years from the
date of this prospectus with respect to those securities directly and
indirectly issuable upon exercise of the units.
Pricing of this Offering
Prior to this offering there has been no public market for any of our
securities. Accordingly, the public offering price of the units and the terms
of the warrants was determined by negotiation between us and the underwriter.
Among the factors considered in determining the public offering price were
. estimates of our business potential.
. prevailing market conditions in the U.S. economy and in the industry in
which we propose to compete.
. the market capitalization and stages of other companies which the
underwriter believes to be comparable to us.
. an assessment of our management.
LEGAL MATTERS
The validity of our securities will be passed upon on our behalf by
Cooperman Levitt Winikoff Lester & Newman, P.C., New York, New York. Certain
legal matters will be passed upon for the Underwriter by Victor Edwin Stewart,
Esq., Ridgewood, New Jersey. Members of Cooperman Levitt beneficially own
40,000 shares of our common stock.
EXPERTS
The financial statements included in this prospectus have been audited by
Martin A. Weiselberg, independent certified public accountant, as indicated in
his report with respect thereto, and are included herein in reliance upon his
authority as an expert in accounting and auditing in giving said report.
Reference is made to said report which includes an explanatory paragraph with
respect to the fact that our ability to commence operations is dependent upon,
among other factors, the success of this offering or other fundraising
activities.
36
<PAGE>
ADDITIONAL INFORMATION
We have filed a registration statement, including exhibits, schedules and
amendments, with the SEC pursuant to the Securities Act with respect to this
offering of our securities. This prospectus is part of the registration
statement but does not contain all of the information in the registration
statement. We refer you to the registration statement for further information
about us, our securities and this offering. Statements in this prospectus about
documents filed as exhibits to the registration statement are necessarily
summaries of these documents, and each of these statements is qualified in its
entirety by reference to the copy of the applicable document filed with the
SEC. The registration statement is available for inspection at the SEC's Public
Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may
obtain information about the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that
contains the registration statement. The address of the SEC's Internet site is
"http://www.sec.gov."
37
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO foreignTV.com, Inc.
We have audited the accompanying balance sheet of foreignTV.com, Inc. (a
corporation in the development stage) as of December 31, 1998, and the related
statement of changes in shareholder's equity for the period from November 12,
1998 (date of inception) to December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of foreignTV.com, Inc. as of
December 31, 1998, and changes in shareholders' equity for the period from
November 12, 1998 (date of inception) to December 31, 1998 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As shown in the accompanying
financial statements the company is a development stage enterprise with no
significant operating results to date. The factors discussed in Note 1 to the
financial statements raise substantial doubt as to the ability of the Company
to continue as a going concern. Management's plans in regards to those matters
are also described in Note 1. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty.
Martin A. Weiselberg, CPA
January 28, 1998
New York, New York
F-1
<PAGE>
foreignTV.com, Inc.
(a corporation in the development stage)
BALANCE SHEET
DECEMBER 31,1998
ASSETS
<TABLE>
<S> <C>
Current Assets
Deferred Offering Costs.............................................. $ 6,670
-------
Total Assets....................................................... $ 6,670
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Due To Officer......................................................... 6,670
-------
Total Liabilities................................................ 6,670
-------
Shareholders' equity
Preferred Stock, $.01 par value;
Authorized 5,000 shares, issued and outstanding -0- shares......... --
Common Stock, $.01 par value;
Authorized 30,000,000 shares, issued and outstanding 8,300,000..... 83,000
Additional Paid In Capital............................................. --
-------
83,000
Less Subscriptions Receivable.......................................... (83,000)
-------
Total Shareholders Equity........................................ --
-------
$ 6,670
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
foreignTV.com, Inc.
(a corporation in the development stage)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 12, 1998 (date of inception)
TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional Total
----------------- Paid In Shareholders'
Shares Amount Capital Equity
--------- ------- ---------- -------------
<S> <C> <C> <C> <C>
Beginning Balance -- -- -- --
Issuance Of Common Stock for
Subscriptions.................... 8,300,000 $83,000 $ -- $83,000
Less subscriptions receivable..... -- (83,000) -- (83,000)
Balance at December 31,1998....... 8,300,000 $ -- $ -- $ --
========= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ForeignTV.com Inc.
NOTES TO FINANCIAL STATEMENTS
1--Organization
foreignTV.com, Inc. (the "Company"), a Delaware corporation in the
development stage, was founded on November 12, 1998. The Company was organized
to develop opportunities as an Internet broadcaster specializing in
international content not available from other sources. The Company proposes
to develop a network of Internet web sites, using domain names that will be
licensed or otherwise acquired to offer viewers foreign newscasts and other
programming produced in various locations throughout the world.
The Company is currently in the development stage. All activities of the
Company to date relates to its formation and proposed fund raising. For the
period from November 12, 1998 (date of inception) through December 31, 1998
there were no material operations or cash activities on the part of the
Company.
The Company's ability to commence operations is contingent upon its ability
to obtain financing through a public offering (the "Proposed Offering") of the
Company's common stock. Note 8 discusses the details of the Proposed Offering.
Upon completion of the Proposed Offering the Company will not satisfy the
criteria for qualifying its securities in the NASDAQ system. The Company's
securities will be traded in the over the counter market. It is anticipated
that they will be quoted on the OTC Bulletin Board, an NASD sponsored and
operated inter-dealer automated quotation system for equity securities not
included on the NASDAQ stock market, as well as in the NQB Pink Sheets
published by National Quotation Bureau Incorporated. The OTC Bulletin Board
was introduced as an alternative to "pink sheet" trading of over the counter
securities. Although the Company believes that the OTC Bulletin Board has been
recognized by the brokerage community as an acceptable alternative to the NQB
Pink Sheets, there can be no assurance that the liquidity and prices of the
Units and their component securities in the secondary market will not be
adversely affected.
2--Summary Of Significant Accounting Policies
Income Taxes
The Company account for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, " Accounting For Income
Taxes" ("SFAS 109"). SFAS 109 requires a company to recognize deferred income
tax liabilities and assets for the expected future tax consequences of events
that have been recognized in a company's financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based
on the difference between the financial statement carrying amounts and the tax
basis of assets and liabilities using enacted tax rates in effect in the year
in which the differences are expected to reverse. At December 31, 1998 there
are no such differences.
Use Of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
Effect Of Recently Issued Accounting Standards
In June 1997 the Financial Accounting Standards Board ("FASB") issued two
new disclosure standards.
F-4
<PAGE>
ForeignTV.com Inc.
NOTES TO FINANCIAL STATEMENTS--(Continued)
SFAS No. 130 ("SFAS No. 130") "Reporting Comprehensive Income" established
standards for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investment by owners and distributions to
owners.
SFAS No. 131 ("SFAS No. 131") "Disclosure About Segments of an Enterprise
and Related Information", which supersedes SFAS No.14 "Financial Reporting for
Segments of a Business Enterprise", establishes standards for the way that
public enterprises report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. The Company's results of operations and
financial position will be unaffected by implementation of these new standards.
During February 1998 the FASB issued SFAS No.132 ("SFAS No. 132") "Employers
Disclosure about Pensions and Other Postretirement Benefits", which
standardizes the disclosure requirements for pension and other postretirement
benefits. The adoption of SFAS No.132 in 1998 is not expected to impact the
Company's current disclosure.
3--Preferred Stock
The Company is authorized to issue preferred stock and to fix the rights,
preferences, privileges, and restrictions thereof, including dividend rights,
conversion rights, voting rights, redemption terms and liquidation preferences.
4--Subscriptions Receivables
Subsequent to December 31, 1998, substantially all stock subscriptions were
paid in full.
5--Supplemental Cash Flow Information
No cash was paid for interest or income taxes for the period from November
12, 1998 (date of inception) through December 31, 1998.
Noncash investing and financing activities for the period from November 12,
1998 (date of inception) through December 31, 1998 include the following:
<TABLE>
<S> <C>
Payment by shareholders of offering costs on behalf of the
Company....................................................... $ 6,670
</TABLE>
6--License Agreements
The Company entered into two license agreements with related parties for the
sole and absolute use of certain Internet domain names. One of the agreements
is with an officer and director of the Company and the other is with a not-for-
profit organization whose board of directors is substantially identical to that
of the Company. The term of the agreements is twenty five years through
December 31, 2023 with an additional renewal period of twenty five years
thereafter. The agreements require the Company to pay license fees which begin
at $600 per domain name and escalate to $2,500 per domain name through the
twenty fifth year of the agreement. Thereafter, the fee increase is based on
the Consumer Price Index. The agreement with the not-for-profit organization
also requires the Company to provide office space, on its premises, for up to
four employees of the not-for-profit organization for up to three years.
F-5
<PAGE>
ForeignTV.com Inc.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7--Stock Option Plan
The Company's Board of Directors has approved a stock option plan (the
"Plan"). The Plan, which is subject to shareholder approval, provides for
issuance of up to 400,000 options (the "Options') to acquire shares of the
Company's Common Stock.
The Options are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986 or as options which are not intended to meet the
requirements of such section ("Nonstatutory Stock Options"). The Options may be
granted under the Plan to persons who, in the case of Incentive Stock Options,
are key employees (including officers) of the Company or, in the case of
Nonstatutory Stock Options, are key employees (including officers) and
nonemployee directors of the Company, except that Nonstatutory Stock Options
may not be granted to a holder of more than 10% of the total voting power of
the Company.
The exercise price of all Incentive Stock Options granted under the Plan
must be at least equal to the fair market value of such shares on the date of
grant or, in the case of Incentive Stock Options granted to the holder of 10%
or more of the Company's Common Stock, at least 110% of the fair market value
of such shares on the date of grant. The exercise price of all Nonstatutory
Stock Options granted under the Plan shall be determined by the Board of
Directors of the Company at the time of grant. The maximum exercise period for
which the Options may be granted is ten years from the date of grant (five
years in the case of Incentive Stock Options granted to an individual owning
more than 10% of the Company's Common Stock). The aggregate fair market value
(determined at the date of the option grant) of such shares with respect to
which Incentive Stock Options are exercisable for the first time by the holder
of the option during any calendar year shall not exceed $100,000.
The FASB issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123"), which will require
companies either to reflect in their financial statements or reflect as
supplemental disclosure the impact on earnings and earnings per share of the
fair value of stock based compensation using certain pricing models for the
option component of stock option plans. As of December 31, 1998, no options
have been granted under the Plan. Disclosure, as required SFAS 123, will be
made upon the issuance of options.
8--Proposed Initial Public Offering
The Proposed Offering calls for the Company to offer for public sale up to
1,700,000 units (the "Units") at a price of $6.00 per Unit. Each Unit consists
of one share of Common Stock, $.01 par value, and one redeemable warrant. Each
warrant entitles the holder to purchase from the Company one share of Common
Stock at an exercise price of $9.00. The warrants will be exercisable at any
time, until they expire three years after the effective date of the Proposed
Offering. The warrants may be redeemed by the Company, in whole or in part, at
any time upon at least 30 days prior written notice to the registered holders,
at a price of $.05 per warrant, provided that the closing bid price of the
Common Stock was at least $12.00 for the 20 consecutive trading days ending on
the third business day preceding the date of the Company's giving of notice of
redemption to the warrantholders, and provided there is then a current
registration statement in effect for the shares underlying the warrants.
The Units are being offered for public sale on the Company's behalf by the
Underwriter, as the Company's exclusive agent, on a "best efforts, all or none"
basis as to the first 850,000 Units and, if such 850,000 Units are sold, on a
"best efforts" basis as to the remaining 850,000 Units. The Underwriter has not
committed to purchase any of the Units for its own account.
F-6
<PAGE>
ForeignTV.com Inc.
NOTES TO FINANCIAL STATEMENTS--(Continued)
In connection with the Proposed Offering, the Company will sell to the
Underwriter, for nominal consideration, warrants to purchase Units (the
"Underwriter's Unit Warrants") at the rate of one Underwriter's Unit Warrant
for each ten Units sold in the Proposed Offering, up to a maximum of 170,000
Underwriter's Unit Warrants. The units issuable upon exercise of the
Underwriter's Unit Warrants are substantially identical to the Units except
that they are not redeemable by the Company and expire five years after the
effective date of the Proposed Offering. The Underwriter's Unit Warrants are
exercisable at $6.60 per unit.
As of December 31, 1998 the Company had recorded deferred charges of $6,670
relating to various expenses incurred in connection with the Proposed Offering.
Upon consummation of the Proposed Offering these costs will be charged to
equity. Should the Proposed Offering prove to be unsuccessful these deferred
costs, as well as any other additional expenses that may be incurred, will be
charged to operations.
9--Contingency
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter an expense allowance on a non-accountable
basis equal to 2% of the gross proceeds derived from the sale of the Units.
F-7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied on as having been authorized by the Company or by the Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy the Units offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or is unlawful. The delivery of
this Prospectus shall not, under any circumstances create any implication that
the information herein is correct as of any time subsequent to the date of the
Prospectus.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 13
Dilution................................................................. 14
Capitalization........................................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Proposed Business........................................................ 17
Management............................................................... 28
Certain Transactions..................................................... 30
Principal Stockholders................................................... 31
Description of Securities................................................ 32
Underwriting............................................................. 35
Legal Matters............................................................ 36
Experts.................................................................. 36
Additional Information................................................... 37
Financial Statements..................................................... F-1
</TABLE>
----------------
Until , 1999, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
Prospectus. This is in addition to the dealers' obligation to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
foreignTV.com, Inc.
1,700,000 Units
-------------
PROSPECTUS
-------------
WESTMINSTER SECURITIES CORPORATION
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth various expenses, other than underwriting
commissions, which will be incurred in connection with the offering. Other than
the SEC registration fee, NASD filing fee and the non-accountable expense
allowance of Westminster Securities Corporation (the "Underwriter"), all
amounts set forth below are estimates:
<TABLE>
<CAPTION>
Minimum Maximum
----------- -----------
<S> <C> <C>
SEC registration fee............................. $ 7,826.26 $ 7,826.26
NASD filing fee.................................. 3,315.20 3,315.20
Underwriter's nonaccountable expense allowance... 102,000.00 204,000.00
Blue sky fees and expenses....................... 12,000.00 12,000.00
Printing and engraving expenses.................. 50,000.00 50,000.00
Legal fees and expenses.......................... 90,000.00 120,000.00
Accounting fees and expenses..................... 10,000.00 10,000.00
Transfer and Warrant Agent fees.................. 5,000.00 5,000.00
NASDAQ listing fee............................... 10,000.00 10,000.00
Miscellaneous expenses........................... 4,858.54 2,858.54
----------- -----------
$295,000.00 $425,000.00
----------- -----------
</TABLE>
Item 14. Indemnification of Directors and Officers
Article FIFTH of the Certificate of Incorporation of foreignTV.com
("Registrant") provides that Registrant shall indemnify to the fullest extent
permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation
Law, as amended from time to time, each of its officers and directors, such
right to indemnification being expressed in said Article FIFTH as a contractual
right, and may so indemnify such other persons that such Sections grant
Registrant the power to indemnify. Article FIFTH of the Certificate of
Incorporation of Registrant also provides that no director shall be liable to
the corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except with respect to (1) a breach of the
director's duty of loyalty to the corporation or its stockholders, (2) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Section 174 of the Delaware
General Corporation Law or (4) a transaction from which the director derived an
improper personal benefit.
Reference is made to Section 9 of the Underwriting Agreement, which provides
for indemnification of the officers and directors of Registrant under certain
circumstances.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
The following sets forth information relating to all securities of
Registrant sold by it since November 12, 1998, the date of Registrant's
inception, all such sales having occurred in January 1999:
<TABLE>
<CAPTION>
Number of Consideration
Name Shares Per Share
---- --------- -------------
<S> <C> <C>
Jonathan Braun.......... 3,100,000 $0.01
I. William Lane......... 2,700,000 $0.01
Albert T. Primo......... 750,000 $0.01
Bruno Finel............. 600,000 $0.01
Yeon S. Hong............ 200,000 $0.01
Marc D. Leve............ 200,000 $0.01
Elorian C. Landers...... 500,000 $0.01
Junichi Watanabe........ 50,000 $0.01
Klaus Kraemer........... 50,000 $0.01
Rubin Shur.............. 20,000 $0.01
Norma Sacks............. 20,000 $0.01
E. Gabriel Perle........ 60,000 $0.01
Cooperman Levitt
Winikoff Lester &
Newman, P.C............ 40,000 $0.01
Seymour Stauber......... 7,000 $0.01
Ann Morrell............. 3,000 $0.01
</TABLE>
Exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act"), is claimed for the sales of Common Stock referred to
above in reliance upon the exemption afforded by Section 4(2) of the Securities
Act for transactions not involving a public offering. Each certificate
evidencing such shares of Common Stock bears an appropriate restrictive legend
and "stop transfer" orders are maintained on Registrant's stock transfer
records thereagainst. None of these sales involved participation by an
underwriter or a broker-dealer.
Item 16. Exhibits and Financial Statement Schedules
(a) The following is a list of Exhibits filed herewith as part of the
Registration Statement:
<TABLE>
<CAPTION>
<C> <S>
Revised Form of Underwriting Agreement between Registrant and the
1.1** Underwriter
3.1* Amended and Restated Certificate of Incorporation of Registrant
3.2* By-laws of Registrant
4.1* Form of certificate evidencing shares of Common Stock
4.2** Form of certificate evidencing Common Stock Purchase Warrant
4.4** Form of Unit Purchase Option between Registrant and the Underwriter
<CAPTION>
<C> <S>
4.5* Form of Warrant Agreement between Registrant and American Stock
Transfer & Trust Company, as warrant agent
5.1** Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C.
10.1* 1999 Stock Option Plan
License Agreement between Registrant and the Center for Contemporary
10.2* Diplomacy, Inc.
10.3* License Agreement between Registrant and Jonathan Braun
10.4** Escrow Agreement by and between Registrant and CitiBank, N.A.
Proposed Form of Employment Agreement between Registrant and
10.5* Jonathan Braun
Proposed Form of Employment Agreement between Registrant and Albert
10.6* Primo
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
Proposed Form of Employment Agreement between Registrant and Bruno
10.7* Finel
Proposed Form of Employment Agreement between Registrant and Marc
10.8* Leve
Proposed Form of Employment Agreement between Registrant and Yeon
10.9* Hong
23.1* Consent of Martin A. Weiselberg & Co.
Consent of Cooperman Levitt Winikoff Lester & Newman, P.C. (included
23.2** in Exhibit 5.1)
Power of Attorney (included on the signature page of Part II of this
24.1* Registration Statement)
27.1* Financial Data Schedule
</TABLE>
- --------
*Previously filed.
**Filed herewith.
(b) Financial Statement Schedules.
None.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of Prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective registration statement;
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(4) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
II-3
<PAGE>
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(6) To provide to the Underwriter at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriter to permit prompt delivery to
each purchaser.
(7) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of Registrant pursuant to Item 14 of this Part II to the
Registration Statement, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this Registration Statement or amendments, thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 26th day of March, 1999.
foreignTV.com, Inc.
/s/ Marc D. Leve
By___________________________________
Marc D. Leve
Secretary
----------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman March 26, 1999
____________________________________
I. William Lane
/s/ Jonathan Braun Chief Executive Officer and March 26, 1999
____________________________________ Director
Jonathan Braun
* President and Director March 26, 1999
____________________________________ (Chief Operating Officer)
Albert T. Primo
/s/ Marc D. Leve Vice President-Legal, March 26, 1999
____________________________________ Secretary, Treasurer and
Marc D. Leve Director (Chief Accounting
and Financial Officer)
* Senior Vice President- March 26, 1999
____________________________________ European Operations and
Bruno Finel Director
</TABLE>
- --------
* Marc Leve, pursuant to Powers of Attorney (executed by each of the officers
and directors listed above and indicated as signing above, and filed with the
Securities and Exchange Commission), by signing his name hereto does hereby
sign and execute this Amendment to the Registration Statement on behalf of
each of the persons referenced above.
<TABLE>
<S> <C>
/s/ Marc Leve
March 26, 1999 ---------------
Marc Leve
</TABLE>
II-5
<PAGE>
EXHIBIT 1.1
850,000 Units
foreignTV.com, Inc.
Each Unit consisting of One (1) Share of Common Stock
and
One (1) Redeemable Common Stock Purchase Warrant
UNDERWRITING AGREEMENT
----------------------
, 1999
Westminster Securities Corporation
19 Rector Street
New York, New York 10006
Ladies and Gentlemen:
foreignTV.com Inc., a Delaware corporation (the "Company"), hereby confirms
its agreement with you as follows:
1. Introduction. The Company proposes to offer for sale through you, as
------------
its exclusive agent, an aggregate of 1,700,000 Units (the "Units"), each Unit
consisting of one (1) share of Common Stock, par value $.01 per share, of the
Company (the "Shares") and one (1) Redeemable Common Stock Purchase Warrant (the
"Warrants"), each Warrant exercisable to purchase one (1) additional share of
Common Stock of the Company, on a "best efforts, all or none" basis as to the
first 850,000 Units and on a "best efforts" basis as to an additional 850,000
Units.
The Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement") to be dated as of the Closing Date (as hereinafter defined) between
the Company and American Stock Transfer & Trust Company, as warrant agent (the
"Warrant Agent").
The Company may redeem the Warrants, in whole and not in part, at its
election, at a redemption price of $.05 per Warrant at any time after the
Warrants become exercisable upon not less than thirty (30) days prior written
notice (the "Redemption Notice") to the several holders of the Warrants,
provided that the reported closing bid price for the Common Stock equaled or
exceeded $12.00 per share for the twenty (20) consecutive trading days ending on
the third day prior to giving notice of redemption to Warrantholders, and
provided further that an effective Registration Statement covering the Warrants
is on file with the Securities and Exchange Commission and that such
Registration Statement remains in full force and effect throughout the
redemption period. The Warrantholders shall have
<PAGE>
exercise rights until the close of business on the date fixed for redemption.
The Company also proposes to issue and sell to you, at a price of $.001 per
warrant, for your account and that of your designees, warrants (the
"Underwriter's Unit Warrants") to purchase one (1) Unit for each ten (10) Units
sold by you on the Company's behalf pursuant to this Agreement (the
"Underwriter's Units"). The Underwriter's Unit Warrants are exercisable
initially at a price of $9.60 per Underwriter's Unit for a period of four years
commencing one year from the effective date of the Registration Statement. The
exercise price of the Underwriter's Unit Warrant may be adjusted upon the
occurrence of certain events, including any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction. We agree
to use our best efforts to maintain an effective registration statement with
respect to the Underwriter's Unit Warrants and their underlying securities, and
have granted you certain demand and piggyback registration rights, all as more
fully described in the Underwriter's Unit Warrant Agreement. The Underwriter's
Units are identical to those being publicly offered by the Company, except that
the warrants comprising a part of these Units (the "Underwriter's Warrants")
cannot be redeemed by the Company. The sale of the Underwriter's Unit Warrants
will be consummated in accordance with the terms and conditions of the form of
Underwriter's Unit Warrant Agreement filed as an exhibit to the Registration
Statement (as hereinafter defined). The shares of Common Stock issuable upon
exercise of the Warrants, the Underwriter's Unit Warrants and the Underwriter's
Warrants are hereinafter sometimes collectively referred to as the "Underlying
Shares".
The Units, Shares, Warrants, Underwriter's Unit Warrants, and Underwriter's
Warrants (hereinafter sometimes collectively referred to as the "Securities")
are more fully described in the Prospectus referred to below.
2. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to, and agrees with, you that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and an amendment or amendments
thereto, on Form S-l (No. 33-71733), including any related preliminary
prospectus ("Preliminary Prospectus"), for the registration of the Securities
under the Securities Act of 1933, as amended (the "Act"). The Company will not,
before such registration statement becomes effective (the "Effective Date"),
file any other amendment thereto to which you shall reasonably object in writing
after being furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the
2
<PAGE>
prospectus, financial statements, schedules, exhibits and all other documents
filed as a part thereof), is herein called the "Registration Statement", and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
General Rules and Regulations of the Commission under the Act (the
"Regulations") is herein called the "Prospectus".
(b) Each Preliminary Prospectus, at the time of filing thereof,
contained all material statements which are required to be stated therein in
accordance with the Act and the Regulations, and conformed in all material
respects with the requirements of the Act and the Regulations and did not
include any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
Each Preliminary Prospectus was endorsed with the legend required by Item
501(c)(3) of Regulation S-K of the Regulations and, if applicable, Rule 430A of
the Regulations. The Registration Statement at the time it becomes effective and
the Prospectus at the time it is filed with the Commission pursuant to Rule
424(b) and on the Closing Date (and the Additional Closing Date, if any,
determined as hereinafter provided in Section 3) will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations, and will in all material respects conform to the
requirements of the Act and the Regulations, and the Registration Statement and
the Prospectus will not, on such dates, include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representations or
warranties are made with respect to statements or omissions made in reliance
upon and in conformity with written information furnished to the Company with
respect to you by or on behalf of you expressly for use in the Registration
Statement or Prospectus or any amendment or supplement thereto.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company is duly qualified and in good standing as a foreign corporation in all
jurisdictions where the character or location of its properties (owned or
leased) or the nature of its business makes such qualification necessary, except
where the failure so to qualify would not have a material adverse effect on the
business, properties or operations of the Company. The Company has all
requisite corporate power and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies, to own its properties and conduct
its business as described in the Prospectus, and the Company has all such power,
authority, authorizations, approvals, orders, licenses, certificates and permits
to enter into this Agreement, the escrow agreement contemplated by
3
<PAGE>
Section 3 hereof (the "Escrow Agreement") and the Warrant Agreement and to carry
out the provisions and conditions hereof and thereof. The Company owns, or
possesses adequate rights to use, all patents, trademarks, service marks,
copyrights, trade secrets, confidential information, processes and formulations
used and proposed to be used in its business as described in the Prospectus
(collectively the "Intangibles"). To the knowledge of the Company, the Company
has not infringed and is not infringing with the right of others with respect to
the Intangibles, and neither the Company nor any officer or director of the
Company has received any notice of conflict with the asserted rights of others
with respect to the Intangibles which might, singly or in the aggregate,
materially adversely affect the business and prospects of the Company, and none
knows any basis therefor.
(d) The Company has either good and marketable title in fee simple to,
or valid and enforceable leasehold estates in, all items of real property and
personal property which are stated in the Prospectus to be owned or leased by
it, in each case free and clear of all liens, encumbrances, claims, security
interests, subleases and defects, other than those referred to in the Prospectus
and those which do not have a material adverse effect upon the operations of the
Company. The Company has the right to operate all of its facilities in their
present locations and the operation of such facilities does not violate the
provisions of any lease with respect thereto to which the Company is a party.
(e) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company, threatened against, or involving the properties or
business of, the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race and no labor disturbance by the employees of the
Company exist, which might materially and adversely affect the value, prospects
(financial or otherwise) or operation of any of such properties or the business
of the Company, except as referred to in the Prospectus.
(f) All contracts, agreements, documents and other instruments
required to be filed as exhibits to the Registration Statement have been filed
with the Commission.
(g) The financial statements and related schedules of the Company
included in the Registration Statement and Prospectus present fairly the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements and related Schedules have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved. The summary financial data in the Registration Statement and
Prospectus present fairly the information shown therein and have been compiled
on a basis consistent with that of the audited and unaudited
4
<PAGE>
financial statements included in the Registration Statement and Prospectus. The
capitalization of the Company, as set forth under the caption "Capitalization"
in the Prospectus, was as so described on the date of which it is set forth
therein.
(h) Martin A. Weiselberg & Co., whose report is filed with the
Commission as a part of the Registration Statement and Prospectus, are
independent accountants as required by the Act and the Regulations.
(i) The Company does not own any shares of capital stock or any other
securities of any corporation nor does the Company have any equity interest in
any firm, partnership, association or other entity, except as referred to in the
Prospectus.
(j) There has been no material adverse change in the condition,
business, properties, or prospects (financial or otherwise) of the Company from
that on the latest dates as of which such condition, business or prospects are
set forth in the Registration Statement and the Prospectus except as referred to
therein; and the outstanding debt, the properties and the business of the
Company conform in all material respects to the descriptions thereof contained
in the Registration Statement and Prospectus.
(k) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a default, in the due performance and
observance of any term, covenant or condition of any indenture, mortgage, deed
of trust, note, bank loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company or any of its
properties may be bound or affected, which default would have a material adverse
effect on the Company, except defaults which the Company has disclosed to you in
writing and for which the Company has received written waivers.
(l) The Company is not in breach of any term or provision of its
Certificate of Incorporation, by-laws or other charter documents or, to the
Company's knowledge, in violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation. The Company is not, to its
knowledge, in violation of any laws, ordinances, governmental rules or
regulations to which it is subject and the Company has not failed to obtain any
licenses, permits, franchises or other governmental authorizations materially
necessary to the ownership of its properties or to the conduct of its business.
(m) Neither the execution and delivery of this Agreement, the Escrow
Agreement, the Underwriter's Unit Warrant Agreement and the Warrant Agreement,
nor the consummation of the transactions herein and therein contemplated, nor
compliance with the terms and provisions hereof and thereof will conflict with,
or result in a
5
<PAGE>
breach of, any of the terms, provisions or conditions of the Certificate of
Incorporation, by-laws or other charter documents of the Company. The execution
and delivery of this Agreement, the Escrow Agreement, the Underwriter's Unit
Warrant Agreement and the Warrant Agreement, the consummation of the
transactions herein and therein contemplated, and compliance with the terms and
provisions hereof and thereof will not conflict with, or result in a breach of,
or constitute a default under any of the terms, provisions or conditions of any
agreement or instrument to which the Company is a party or by which the Company
is bound or violate any franchise, license, permit, judgment, decree, order,
statute, rule or regulation of any government, governmental authority or court
having jurisdiction over the Company.
(n) All of the issued and outstanding shares of Common Stock are duly
and validly authorized, issued and outstanding, fully paid and nonassessable.
None of the outstanding Common Stock has been issued in violation of the
preemptive rights of any stockholder of the Company. None of the holders of the
outstanding Common Stock is subject to personal liability solely by reason of
being such a holder. The offers and sales of the outstanding Common Stock were
at all relevant times either registered under the Act and the applicable state
securities or "blue sky" laws or exempt from such registration requirements.
The Company's capital stock conforms in all material respects to all statements
in relation thereto contained in the Registration Statement and Prospectus.
Based on the assumptions stated in the Registration Statement and Prospectus,
the Company will have on the Closing Date the adjusted stock capitalization set
forth therein. Except as set forth in the Registration Statement and
Prospectus, on the Effective Date, on the Closing Date and on the Additional
Closing Date (as hereinafter defined), as the case may be, there will be no
outstanding options or warrants for the purchase of, or other outstanding rights
to purchase Common Stock or securities convertible into or exchangeable for
Common Stock.
(o) The issuance and sale of the Shares and the Underlying Shares have
been duly authorized and, when paid for, issued and delivered as contemplated by
this Agreement, the Warrants, the Underwriter's Unit Warrants and the
Underwriter's Warrants, as the case may be, the Shares and the Underlying Shares
will be validly issued, fully paid and nonassessable. The holders of the Shares
and the Underlying Shares will not be subject to personal liability solely by
reason of being such holders and none of such securities will be subject to
preemptive rights of any stockholder of the Company.
(p) The issuance and sale of the Warrants, the Underwriter's Unit
Warrants and the Underwriter's Warrants have been duly authorized and, when paid
for, issued and delivered as contemplated by this Agreement, the Warrants, the
Underwriter's Unit Warrants and the Underwriter's Warrants will constitute valid
and
6
<PAGE>
binding obligations of the Company, enforceable in accordance with their terms.
The Underlying Shares have been duly reserved for issuance upon exercise of the
Warrants, the Underwriter's Unit Warrants and the Underwriter's Warrants in
accordance with their respective terms. The Shares and the Warrants offered by
the Prospectus have been duly authorized by the Company to be offered in the
form of Units. The Units, Shares, Warrants, Underwriter's Unit Warrants and
Underwriter's Warrants will conform to the descriptions thereof contained in the
Registration Statement and Prospectus.
(q) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities except securities as provided herein or in the Registration
Statement, or incurred any material liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any material transaction not
in the ordinary course of business, (iii) entered into any transaction with an
affiliate of the Company, or (iv) declared or paid any dividend on its shares of
Common Stock.
(r) No consent, authorization or approval is required from any
Federal, state or local governmental agency or body in order to consummate the
transactions contemplated herein or in the Registration Statement and
Prospectus, other than such consents, authorizations or approvals as have been
obtained.
(s) No person holds a right to require or participate in the
registration under the Act of any securities of the Company to be effected by
the Registration Statement, which right has not been duly waived by the holder
thereof as of the date hereof.
(t) The Company has timely filed all Federal, state, and local tax
returns which are required to be filed, other than its tax returns for fiscal
1998 that might not yet have become due as of the date of this Underwriting
Agreement, and has paid all taxes shown on such returns and all assessments
received by it to the extent that the same have become due.
(u) To the knowledge of the Company's officers and directors (such
officers and directors having made reasonable investigation with respect
thereto), neither the Company nor any officer, director or employee of the
Company has made any payment of funds of the Company or purchased any property
with Company funds in a manner prohibited by law, and no funds of the Company or
property purchased with Company funds have been set aside to be used for any
payment prohibited by law. The Company's internal accounting controls and
procedures are sufficient to cause the Company to comply in all material
respects with the Foreign Corrupt Practices Act of 1977, as amended.
7
<PAGE>
(v) The Company has reviewed the requirements for the use of Form S-l
under the Act and has determined that it qualifies for the use of such Form
thereunder.
(w) Except as set forth in the Registration Statement and Prospectus,
the Company does not know of any claims for services in the nature of a finders
fee, brokerage fee or otherwise with respect to this offering for which the
Company or you may be responsible.
(x) The Company has obtained from all of its stockholders, other than
two individuals whose aggregate combined holdings of Common Stock are not, as of
the date of this Underwriting Agreement, in excess of 10,000 shares, their
written agreement that for a period of eighteen (18) months from the date of the
Prospectus, they will not, without your prior written consent, publicly sell,
contract to sell, or grant any option for the sale of or otherwise dispose of
directly or indirectly, any shares of Common Stock of the Company (or any
securities convertible or exercisable into or exchangeable for such shares of
Common Stock) owned by them, whether pursuant to Rule 144 of the Regulations or
otherwise, except as provided herein or in the Registration Statement.
The Company will deliver the aforementioned undertakings to you at or
prior to the Effective Date.
3. Representations and Warranties of Westminster Securities Corporation.
--------------------------------------------------------------------
You represent and warrant to, and agree with, the Company that:
(a) You have been duly organized and are validly existing as a
corporation in good standing under the laws of the State of New York. You are
duly qualified and in good standing as a foreign corporation in all
jurisdictions where the character or location of your properties (owned or
leased) or the nature of your business makes such qualification necessary,
except where the failure so to qualify would not have a material adverse effect
on your business, properties or operations. You have all requisite corporate
power and authority, and all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies, to own your properties and conduct your business and you
have all such power, authority, authorizations, approvals, orders, licenses,
certificates and permits to enter into this Agreement, the Underwriter's Warrant
Agreement and the Selected Dealer Agreement and to carry out the provisions and
conditions hereof and thereof.
(b) You are not, to your knowledge, in violation of any securities
laws, ordinances, governmental rules or regulations to which you are subject,
including, without limitation, the Rules of
8
<PAGE>
Fair Practice and Procedure of the National Association of Securities Dealers,
Inc. ("NASD").
4. Purchase, Sale and Delivery. On the basis of the representations and
---------------------------
warranties of the Company herein contained, but subject to the terms and
conditions herein set forth:
(a) Appointment as Agent. The Company hereby appoints you as its
--------------------
exclusive agent for a period of ninety (90) days from the Effective Date, which
period may be extended for an additional period of ninety (90) days if so agreed
in writing by you and the Company (the "Offering Period"), to sell the Units,
and you accept such appointment and agree to use your best efforts to find
purchasers for the Units. The price at which you shall sell the Units to the
public, as exclusive agent for the Company, and the commission to be allowed to
you by the Company on account of any such sales of the Units shall be Six
Dollars ($6.00) and fifty-four cents ($.54), respectively.
(b) Delivery and Payment. Delivery of certificates evidencing the
--------------------
Shares and the Warrants comprising the Units shall be made by certified or
official bank check in New York Clearing House funds or similar next day funds,
payable to the order of the Company at your offices, or such other place as
shall be agreed upon between us. Such delivery and payment shall be made at
10:00 A.M., New York time, on such date after the Registration Statement has
become effective as you shall designate, but only if a minimum of 850,000 Units
shall have been sold, on at least five (5) full business days prior notice by
you to the Company. The hour and date of such delivery and payment are herein
called the "Closing Date". Delivery of certificates evidencing the Shares and
the Warrants comprising the Units sold by you in excess of 850,000 Units shall
be made at your offices, or such other place as shall be agreed upon between us,
on such date subsequent to the Closing Date as you shall designate, on at least
two (2) full business days prior written notice by you to the Company, but in no
event later than four (4) business days after the expiration of the Offering
Period (the "Additional Closing Date"). Payment for any Units sold in excess of
850,000 Units shall be made on the Additional Closing Date in the same manner as
that for the first 850,000 Units.
(c) Certificates. Certificates evidencing the Shares and the Warrants
------------
comprising the Units shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two (2) business
days prior to each of the Closing Date and the Additional Closing Date,
respectively. The Company will permit you to examine and package such
certificates at least one (1) full business day prior to each of the Closing
Date and the Additional Closing Date, respectively.
9
<PAGE>
(d) Escrow Arrangements. It is a condition of this Agreement that you
-------------------
shall use your best efforts to sell all of the Units on behalf of the Company,
that any and all funds received from such sale without deduction therefrom
whatsoever, including but not limited to any underwriting commission or selling
group concession or otherwise, shall be forthwith deposited in an escrow account
to be established with a banking institution reasonably satisfactory to you (the
"Escrow Agent" ). All subscribers' checks shall be made payable to the Escrow
Agent and you shall transmit all such checks to the Escrow Agent by noon of the
next business day following their receipt by you. You shall further, with
respect to the handling and transmission of subscribers' funds, at all times
comply with Rule l5c2-4 of the Exchange Act. In the event at least 850,000 Units
are not sold within the Offering Period, then all sums so deposited shall be
returned to the subscribers without interest thereon and without any charge
thereon or deduction therefrom.
(e) Warrant Solicitation Fees. We hereby engage you to act as our
-------------------------
exclusive solicitation agent in connection with the exercise of the Warrants.
You may employ subagents for such solicitation activity. Upon the exercise of
the Warrants, and to the extent not inconsistent with the guidelines of the NASD
and the Rules and Regulations of the SEC, we agree to pay you a commission equal
to three percent (3%) of the proceeds received by us from the exercise of the
Warrants. We shall pay no compensation to you, however, if: (i) the market price
of the underlying Shares is lower than the exercise price; (ii) the Warrants are
held in a discretionary account; or (iii) the Warrants are exercised in an
unsolicited transaction. In addition, unless granted an exemption by the SEC
from Regulation M under the Exchange Act, you agree not to engage in any market
making activities or solicited brokerage activities with regard to any of our
Securities until the later of the termination of such solicitation activity or
the termination by waiver or otherwise of any right you might have to receive a
fee for the exercise of the Warrants following such solicitation.
5. Offering. In offering the Units for public sale, you shall offer
--------
same solely as exclusive agent for the Company and such offer shall be made
solely on the terms and subject to the conditions set forth in the Prospectus.
You shall commence making such offer as exclusive agent for the Company on the
Effective Date or as soon thereafter as you may deem advisable.
6. Covenants of the Company. The Company covenants that it will:
------------------------
(a) Use its best efforts to cause the Registration Statement to become
effective and will notify you immediately, and confirm the notice in
writing, (i) when the Registration Statement, or any post-effective
amendment
10
<PAGE>
thereto, shall have become effective, (ii) of the issuance by the
Commission of any stop order or of the initiation or the threatening
of any proceedings for that purpose, and (iii) of the receipt of any
comments by the Commission. The Company will use its best efforts to
prevent the issuance of any stop order or any order preventing or
suspending the use of the Registration Statement or Prospectus and, if
such order is issued, to obtain the lifting thereof as promptly as
possible.
(b) During the time when a prospectus is required to be delivered
under the Act, comply so far as it is able with all requirements imposed
upon it by the Act, as now and hereafter amended, and by the Regulations,
as from time to time in force, so far as necessary to permit the
continuance of sales or of dealings in the Units in accordance with the
provisions hereof and the Prospectus. If at any time when a prospectus
relating to the Units is required to be delivered under the Act, an event
shall have occurred as a result of which, in the reasonable opinion of
counsel for the Company or your counsel, the Registration Statement or
Prospectus, as then amended or supplemented, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or it is
necessary at any time to amend or supplement the Registration Statement or
Prospectus to comply with the Act, the Company will notify you promptly and
prepare and file with the Commission an appropriate amendment or supplement
(in form reasonably satisfactory to you).
(c) Deliver to you, without charge, such number of copies of each
Preliminary Prospectus as you may reasonably request and, as soon as the
Registration Statement, or any amendment or supplement thereto, becomes
effective, deliver to you two (2) signed copies of the Registration
Statement, including exhibits, and all amendments and post-effective
amendments thereto, including exhibits, and such number of copies of the
Prospectus, the Registration Statement and amendments and supplements
thereto, if any, without exhibits, as you may reasonably request for the
purposes contemplated by the Act.
(d) Endeavor in good faith, in cooperation with you, at or prior to
the time the Registration Statement becomes effective, to qualify the Units
for offering and sale under the securities laws relating to the offering or
sale of the Units of such jurisdictions as you may reasonably
11
<PAGE>
designate, provided, however, that no such qualification shall be required
in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or qualification to do business as a
foreign corporation doing business in such jurisdiction. In each
jurisdiction where the qualification of the Units shall be effected, the
Company will, unless you agree that such action is not at the time
necessary or advisable, file and make such statements or reports at such
times as are or may reasonably be required by the laws of such
jurisdiction.
(e) Make generally available to its security holders, in the manner
specified in Rule 158(b) under the Act, and deliver to you as soon as
practicable, and in any event not later than 40 days after the end of its
fiscal quarter in which the first anniversary date of the Effective Date
occurs, an earnings statement (which need not be certified by independent
certified public accountants unless required by the Act or the Regulations,
but which shall satisfy the provisions of Rule 158(a) under the Act
covering a period of at least twelve (12) months beginning after the
Effective Date.
(f) For a period equal to the greater of (i) the period from the
Effective Date to the expiration or redemption of all of the Warrants or
(ii) one year from the Effective Date, furnish you the following:
(i) as soon as practicable after they have been filed with the
Commission, a copy of each annual, quarterly and current report on
Forms lO-K, lO-Q, lO-C and 8-K and exhibits thereto, as soon as
practicable after they have been sent by the Company to its security
holders, a copy of any communications sent by it to its security
holders generally;
(ii) as soon as practicable, a copy of any Schedule l3D, l3G,
l4D-l or 13E-3 received or prepared by the Company from time to time;
(iii) as soon as practicable, a copy of every press release and
every material news items and article in respect of the Company or its
affairs which was released by the Company;
(iv) such additional documents and information with respect to
the Company and its affairs as you may from time to time reasonably
request.
12
<PAGE>
(g) Apply the net proceeds from the offering received by the Company
in the manner set forth under "Use of Proceeds" in the Prospectus and
comply with Rule 463 under the Act.
(h) Furnish to you as early as practicable prior to the Closing Date
and the Additional Closing Date, as the case may be, but no later than two
(2) full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company which have been read
by the Company' s independent public accountants, as stated in their letter
to be furnished pursuant to subsection (f) of Section 8 hereof.
(i) Not file any amendment or supplement to the Registration Statement
or Prospectus after the Effective Date to which you shall reasonably object
in writing after being furnished a copy thereof.
(j) Furnish to its security holders annual reports containing audited
financial statements and such other periodic reports as it may determine to
be appropriate or as may be required by law.
(k) Cause the Units, Shares and Warrants to be registered on the OTC
Bulletin Board and if all or a substantial number of the Units are sold, to
use our best efforts to have the Units, Warrants and Shares listed on the
Nasdaq Small-Cap Market, and to maintain such inclusion for at least five
(5) years from the Closing Date; provided, however, that the Warrants need
be maintained therein only until the earlier of their redemption or
expiration, as the case may be.
(l) Use its best efforts to be included in Standard & Poors'
Corporations Records and Moodys' OTC Industrial Manual as soon as possible
following the Closing Date and to continue to be included in both of such
manuals for at least five (5) years from the Closing Date.
(m) appoint a transfer agent for the Common Stock and a warrant agent
for the Warrants (which may be the same as the transfer agent), each
reasonably acceptable to you, and for three (3) years from the Closing Date
furnish to you, at the Company's sole cost and expense, with copies of,
respectively, daily Common Stock and Warrant transfer sheets and with
copies of all Depository Trust Company weekly reports with respect thereto,
(n) maintain and continue to maintain a system of internal accounting
controls sufficient to provide reasonable assurances that: (i) transactions
are executed in
13
<PAGE>
accordance with management's general or specific authorization; (ii)
transactions are recorded as necesary in order to permit preparation of
financial statements in accordance with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(o) for as long as any of the Warrants or Underwriter's Warrants
remain outstanding, permit you to have a representative present at all
meetings of our Board of Directors. Such representative will be entitled to
receive the same notices and communications sent by us to our directors and
to attend directors' meetings, but will not be entitled to vote at any such
meetings.
(p) not later than four (4) months following the Closing Date, cause
to be delivered to each of you and your counsel, Victor Edwin Stewart,
Esq., a bound volume containing therein all filings, including exhibits,
and correspondence to and from the Commission, NASD and all states or other
jurisdictions concerning the offering of the Units, underwriting documents
and closing documents, plus any other relevant material.
14
<PAGE>
7. Payment of Expenses.
-------------------
(a) The Company hereby agrees to pay, whether or not the transactions
contemplated hereunder are consummated, all expenses in connection with: (i) the
preparation, printing, filing and mailing of the Registration Statement
(including financial statements and exhibits) and Prospectus, including the cost
of all copies thereof and of the Preliminary Prospectus and any amendments or
supplements thereto supplied to you in quantities as hereinabove stated, and the
Selected Dealer Agreement; (ii) the issuance, transfer and delivery of the
Shares and Warrants comprising the Units, including any transfer or other taxes
payable thereon; (iii) the fees, expenses and other costs of qualifying the
Units for sale under state or foreign securities or "blue sky" laws, including
the costs of printing and mailing a "blue sky" survey and the fees and
disbursements of counsel in connection therewith; (iv) the fees of your special
securities counsel, consisting of $5,000 already paid as an advance to such
counsel and, in the event that the underwriting contemplated herein is
terminated prior to the Closing, a further $5,000 to such counsel, including
reasonable disbursements; (v) fees payable to the NASD attendant to securing any
required review; (vi) the costs of placing "Tombstone" advertisements in any
publications which may be reasonably selected by you; and (vii) all other costs
and expenses incident to the Company's performance of its obligations hereunder
which are not otherwise specifically provided for in this Section 6.
(b) On the Closing Date and on the Additional Closing Date, as the
case may be, you shall deduct from the payment for the Units sold for the
Company's account in each such instance two percent (2%) of the gross proceeds
of the offering as payment of your expense allowance relating to the
transactions contemplated hereby.
(c) Anything in this Agreement to the contrary notwithstanding, if
this Agreement shall not become effective by reason of an election of the
Company pursuant to Section 11, or if this Agreement shall not be carried out
within the time specified herein by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied, the sole liability of the Company to you, in
addition to the obligations assumed by the Company pursuant to this Section 7,
will be to reimburse you on an accountable basis for such reasonable out-of-
pocket expenses (including the reasonable fees and disbursements of your
counsel) as shall have been incurred by you in connection with this Agreement
and the proposed offering of the Units and, upon demand, the Company will pay
the full amount thereof to you. If this Agreement shall not become effective by
reason of an election by you pursuant to Section 11 or if this Agreement shall
be
15
<PAGE>
terminated or otherwise not carried out within the time specified herein for any
reason other than the failure on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement by it to be performed or
satisfied, the Company shall have no liability to you other than for obligations
assumed by the Company pursuant to this Section 7. All fees and disbursements
paid by the Company pursuant to clause (iii) of Subsection 7(a) hereof shall be
non-refundable.
8. Conditions of Your Obligations. Your obligation to pay for the
------------------------------
Units, as provided herein, shall be subject in, all material respects to the
continuing accuracy of the representations and warranties of the Company as of
the date hereof and as of the Closing Date (and the Additional Closing Date, as
the case may be), to the performance by the Company of its obligations hereunder
and to the following conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M., New York City time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you and, at the Closing
Date and the Additional Closing Date, no stop order shall have been issued or
proceeding therefor initiated or threatened by the Commission;
(b) At the Closing Date and the Additional Closing Date, as the case
may be, you shall have received the favorable opinion of Cooperman Levitt
Winikoff Lester & Newman, P.C., counsel for the Company, dated the Closing Date
or the Additional Closing Date, as the case may be, addressed to you and
substantially in the form set forth as Exhibit A, which is attached hereto and
incorporated herein.
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the sale of the Units hereunder as
your counsel may reasonably request. Such opinion shall state that any opinion
given therein qualified by the phrase "to such counsel's knowledge" is being
given by such counsel after reasonable investigation of the matters therein
discussed. In rendering the opinions set forth in Exhibit A hereto, such counsel
may rely upon certificates of officers of the Company and of public officials as
to matters of fact. In giving the foregoing opinions, such counsel may rely on
such other counsel as it deems advisable; provided that such counsel shall state
that, in such counsel's opinion, you are justified in relying on such opinions
of other counsel. Copies of all such opinions and certificates shall be
furnished to your counsel on the Closing Date and the Additional Closing Date,
as the case may be.
(c) On or prior to the Closing Date and the Additional Closing Date,
as the case may be, you shall have been furnished such
16
<PAGE>
documents, certificates and opinions as you may reasonably require for the
purpose of enabling you to review the matters referred to in subsection (b) of
this Section 8, and in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained.
(d) Prior to the Closing Date and the Additional Closing Date, as the
case may be, (i) there shall have been no material adverse change in the
condition, business activities or prospects, financial or otherwise, of the
Company from that as of the latest date as of which such condition is set forth
in the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus, other than
transactions referred to or contemplated therein or herein, or to which you have
given your written consent; (iii) the Company shall not be in default (nor shall
an event have occurred which, with notice, or lapse of time or both would
constitute a default or acceleration) under any provision of any agreement,
understanding or instrument relating to any indebtedness, except defaults which
the Company has disclosed to you in writing and for which the Company has
received written waivers; (iv) no material amount of the assets of the Company
shall have been pledged or mortgaged, except as set forth in the Registration
Statement and Prospectus; (v) no action, suit or proceeding, at law or in
equity, shall have been pending or, to the knowledge of the Company, threatened
against the Company or affecting any of its properties or business before or by
any court or federal, state or other jurisdictional commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding would
materially adversely affect the business, operations, prospects or financial
condition or income of the Company except as set forth in the Registration
Statement and Prospectus; and (vi) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated or threatened by
the Commission.
(e) At the Closing Date and the Additional Closing Date, as the case
may be, you shall have received a certificate of the President and the principal
financial or accounting officer of the Company, dated the Closing Date and the
Additional Closing Date, as the case may be, to the effect that the conditions
set forth in subsection (d) above have been satisfied and as to the truth and
accuracy, as of the Closing Date and the Additional Closing Date, as the case
may be, of the representations and warranties of the Company set forth in
Section 2 hereof.
(f) At the time this Agreement is executed and at the Closing Date and
the Additional Closing Date, as the case may be, you shall have received a
letter, addressed to you in form and substance reasonably satisfactory to you in
all respects (including the
17
<PAGE>
non-material nature of the changes or decreases, if any, referred to in clause
(iii) below), from Martin A. Weiselberg & Co., dated as of the date of this
Agreement and as of the Closing Date and the Additional Closing Date, as the
case may be:
(i) confirming that they are independent public accountants with
respect to the Company within the meaning of the Act and the
Regulations;
(ii) stating that in their opinion, the financial statements and
related supplemental schedules of the Company included in the
Registration Statement examined by them comply as to form in all
material respects with the applicable accounting requirements of the
Act and the Regulations;
(iii) stating that, on the basis of a review (but not an
examination made in accordance with generally accepted auditing
standards) which included a reading of the latest available unaudited
interim financial statements of the Company (with an indication of the
date of the latest available unaudited interim financial statements),
a reading of the latest available minutes of the stockholders and
Board of Directors of the Company and committees, if any, of such
Board and inquiries to certain officers and other employees of the
Company responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their
attention that would cause them to believe that (A) the unaudited
financial statements and related schedules of the Company included in
the Registration Statement (i) do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and Regulations, or (ii) were not fairly presented in conformity
with generally accepted accounting principles on a basis substantially
consistent with that of the audited financial statements included in
the Registration Statement and Prospectus; (B) at a specified date not
more than five (5) business days prior to the date of such letter,
there was any change in the long-term debt or capital stock of the
Company as compared with the amounts shown in the , 1999 balance sheet
of the Company included in the Registration Statement and Prospectus,
other than as set forth in or contemplated by the Registration
Statement and Prospectus, or, if there was any change, setting forth
the amount of such change; or (C) during the period from , 1999 to a
specified date not more than five (5) business days prior to the date
of such letter, there was any decrease in net sales,
18
<PAGE>
net operating income, net income or earnings per common share of the
Company, or contemplated by the Registration Statement and Prospectus,
or, if there was any decrease, setting forth the amount of such
decrease; and
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, and other
information pertaining to the Company set forth in the Prospectus,
which have been specified by you prior to the date of this Agreement,
to the extent that such amounts, numbers, percentages, and other
information may be derived from the general accounting records of the
Company, and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter, and
found them to be in agreement.
(g) All proceedings taken in connection with the sale of the Units as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to your counsel.
(h) There shall have been duly tendered to you certificates
representing the Shares and the Warrants comprising the Units agreed to be sold
by the Company on the Closing Date and the Additional Closing Date, as the case
may be.
(i) No order suspending the sale of the Units in any jurisdiction
designated by you pursuant to subsection (d) of Section 6 hereof, shall have
been issued on the Closing Date or the Additional Closing Date, as the case may
be, and no proceedings for that purpose shall have been instituted or to your
knowledge or that of the Company shall be contemplated.
Any certificate signed by any duly authorized officer of the Company
in such capacity and delivered to you or your counsel shall be deemed a
representation and warranty by the Company to you as to the statements made
therein. If any material condition to your obligations hereunder to be
fulfilled prior to or at the Closing Date or the Additional Closing Date, as the
case may be, is not so fulfilled, you may terminate this Agreement or, if you so
elect, waive any such conditions which have not been fulfilled or extend the
time for their fulfillment.
9. Indemnification
---------------
19
<PAGE>
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless you and each person, if any, who controls you within
the meaning of Section 15 of the Act or Section 2O(a) of the Exchange Act,
against any and all loss, liability, claim, dunnage and expense whatsoever
(including, but not limited to any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(x) in any Preliminary Prospectus, the Registration Statement or the Prospectus
(as from time to time amended and supplemented) or (y) in any application or
other document (in this Section 9 collectively called "application") executed by
the Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Units under the
securities laws thereof or filed with the Commission or any securities exchange,
or the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading;
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to you by or on
behalf of you expressly for use in the Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application or in any communication to the Commission, as the case may be.
If any action is brought against you or a controlling person in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, you shall promptly notify in writing the party or parties
against whom indemnification is to be sought of the institution of such action
and the indemnifying parties shall assume the defense of such action, including
the employment of counsel (reasonably satisfactory to you or such controlling
person) and payment of expenses. You or such controlling person shall have the
right to employ your own counsel in any such case, but the fees and expenses of
such counsel shall be at your expense or the expense of such controlling person
unless the employment of such counsel shall have been authorized in writing by
the indemnifying parties in connection with the defense of such action or the
indemnifying parties shall not have employed counsel to have charge of the
defense of such action or counsel for such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the indemnifying
parties (in which case the indemnifying parties shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent. The Company agrees
promptly to notify you of the
20
<PAGE>
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the issue and sale of the Units or in
connection with such Preliminary Prospectus, Registration Statement or
Prospectus, or any amendment or supplement thereto, or any such application.
With respect to any untrue statement or alleged untrue statement made in, or
omission or alleged omission from, any Preliminary Prospectus, the indemnity
agreement contained in this subsection (a) with respect to such Preliminary
Prospectus shall not inure to your benefit (or the benefit of any person
controlling you), if the Prospectus (or the Prospectus as amended or
supplemented if the Company shall have made any amendments thereof or
supplements thereto which shall have been furnished to you prior to the time of
confirmation of such sale) does not contain such statement, alleged statement,
omission or alleged omission, and a copy of such Prospectus shall have been sent
or given to such person at or prior to the written confirmation of such sale to
such person.
(b) You agree to indemnify and hold harmless the Company, each of the
directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement and each other person, if any, who controls
the Company within the meaning of Section l5 of the Act or Section 2O(a) of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
you but only with respect to statements or omissions, or alleged statements or
omissions, if any, made in any Preliminary Prospectus, Registration Statement or
Prospectus or any amendment or supplement thereto or any application in reliance
upon, and in conformity with, written information furnished to the Company with
respect to you by or on behalf of you for use in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any application, as the case may be. In case any action shall be brought
against the Company or any person so indemnified, based on any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or any application, and in respect of which indemnity may be
sought against you, you shall have the rights and duties given to the Company
and the Company and each other person so indemnified shall have the rights and
duties given to you by the provisions of subsection (a) above.
(c) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable to such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and you on the other
from the offering of the Units. If, however, the allocation provided by the
immediately preceding sentence is not
21
<PAGE>
permitted by applicable law or if the indemnified party failed to give the
notice required above in this Section 9, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and you on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and you on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting commissions
received by you, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or you on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and you agree that it would not
be just and equitable if contribution pursuant to this subsection (c) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
subsection (c). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (c) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (c), you shall not be required to contribute any
amount in excess of the amount by which the total price at which the Units
underwritten by you and distributed to the public were offered to the public
exceeds the amount of any damages which you have otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission; and no person guilty of fraudulent misrepresentation (within the
meaning of Section 11 of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
10. Representations and Agreements to Survive Delivery. Except as
--------------------------------------------------
the context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and the Additional Closing Date, and such
representations, warranties and agreements of you and the Company, including the
indemnity and contribution agreements contained in Section 9 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of you or any controlling person,
22
<PAGE>
or by or on behalf of the Company or any controlling person, and shall survive
termination of this Agreement and/or delivery of the Units to you.
11. Effective Date of this Agreement; Termination Thereof.
-----------------------------------------------------
(a) This Agreement shall become effective at 9:30 A.M., New York Time,
on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by you
of the Units, whichever is earlier. The time of the initial public offering,
for the purpose of this Section 11, shall mean the time, after the Registration
Statement becomes effective, of the release by you for publication of the first
newspaper advertisement which is subsequently published relating to the Units or
the time, after the Registration Statement becomes effective, when the Units are
first released by you for offering by you or dealers by letter or telegram,
whichever shall first occur. You or the Company may prevent this Agreement from
becoming effective without liability of any party to any other party, except as
noted below, by giving the notice indicated below in Section l1(c) before the
time this Agreement becomes effective,
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the Additional Closing Date, as the case may be,
if, after the date of this Agreement, any domestic or international event or act
or occurrence has materially disrupted or, in the exercise of your reasonable
judgment, will in the immediate future materially disrupt, securities markets in
the United States; or trading on the New York Stock Exchange shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required, on the New
York Stock Exchange by such Exchange or by order of the Commission or any other
governmental authority having jurisdiction; or the United States shall have
become involved in a war or major hostilities; or a banking moratorium has been
declared by a New York or Federal authority; or the Company shall have sustained
a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not said loss shall have
been insured, will, in your reasonable opinion, interfere materially and
adversely with the conduct of the business and operations of the Company; or
there shall have been such material adverse change in the condition or prospects
of the Company or the market for its and similar securities as in your
reasonable judgment would make it inadvisable to proceed with the offering, sale
and delivery of the Units.
(c) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this
23
<PAGE>
Section 11, the Company shall be notified promptly by you by telephone or
telegram, confirmed by letter. If the Company elects to prevent this Agreement
from becoming effective, you shall be notified promptly by the Company by
telephone or telegram, confirmed by letter.
(d) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 10 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof,
12. Notices. All communications hereunder, except as herein
-------
otherwise specifically provided, shall be in writing and, if sent to you, shall
be mailed, delivered or telegraphed and confirmed to Westminster Securities
Corporation, 19 Rector Street, New York, New York 10006, Attention: President,
and if sent to the Company, shall be mailed, delivered or telegraphed and
confirmed to foreignTV.com, Inc., 162 Fifth Avenue, Suite 1005A, New York, New
York 10010, Attention: CEO.
13. Parties. This Agreement shall be binding upon you, the Company,
-------
and the controlling persons, directors and officers referred to in Section 9
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
14. Construction. This Agreement shall be construed in accordance
------------
with the laws of the State of New York.
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
foreignTV.com, Inc.
By:_____________________________
Jonathan Braun, CEO
24
<PAGE>
Accepted as of the date first
above written:
WESTMINSTER SECURITIES CORPORATION
By:____________________________
John P. O'Shea, President
25
<PAGE>
EXHIBIT 4.2
NUMBER VOID AFTER , 2002 WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK
foreignTV.com, Inc.
CUSIP
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns
(the "Registered Holder") is the owner of the number of Redeemable Common Stock
Purchase Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, $.01 par
value, of foreignTV.com, Inc., a Delaware corporation (the "Company"), at any
time from the Commencement Date (as hereinafter defined) to the Expiration Date
(as hereinafter defined) upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of American Stock Transfer & Trust Company, 40 Wall Street,
New York, New York 10005, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $9.00, subject to adjustment (the "Purchase
Price"), in lawful money of the United States of America in cash or by check
made payable to the Warrant Agent for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated as of , 1999, by
and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Commencement Date" shall mean , 1999. The term "Expiration
Date" shall mean 5:00 P.M. (New York City time) on , 2002. If each such date
shall in the State of New York be a holiday or a day on which the banks are
authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York
City time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, to
keep such registration statement current, if required under the Act, while any
of the Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this Warrant.
This Warrant shall not be exercisable by a Registered Holder in any state where
such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.05 per
Warrant, at any time commencing after the Commencement Date, provided that (1)
the high bid price for the Company's Common Stock as reported by the National
Association of Securities Dealers Automated Quotation System, or (ii) the
closing price on the primary exchange on which the Common Stock is traded, if
the Common Stock is traded on a securities exchange, shall have, for twenty (20)
consecutive trading days immediately prior to the notice of redemption, equaled
or exceeded $12.00 per share (subject to adjustment in the event of any stock
splits or other similar events). Notice of redemption shall be given not less
than the thirtieth day before the date fixed for redemption, all as provided in
the Warrant Agreement. On and after the date fixed for redemption the Registered
Holder shall have no rights with respect to this Warrant except to receive the
$.05 per Warrant upon surrender of this Certificate.
In accordance with and subject to the Warrant Agreement, Westminster
Securities Corporation shall be entitled to receive a commission equal to 3% of
the proceeds received by the Company from the exercise of the Warrants more than
one year after the Commencement Date.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated:
foreignTV.com, Inc.
By
[SEAL] By
SECRETARY
CHAIRMAN OF THE BOARD
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By
Authorized Officer
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
[ ]
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
and be delivered to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was solicited
by Westminster Securities Corporation. [_]
2. The exercise of this Warrant was solicited
by_______________________________________________ [_]
3. The exercise of this Warrant was not solicited. [_]
Dated:______________________ X_______________________________
________________________________
________________________________
________________________________
Address
________________________________
________________________________
Social Security or Taxpayer
Identification Number
________________________________
Signature Guaranteed
ASSIGNMENT
FOR VALUE RECEIVED,______________ hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
[ ]
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
________________________________________________________________ of the Warrants
represented by this Warrant Certificate, and hereby irrevocably constitutes
and appoints
_______________________________________________________________________ Attorney
to transfer this Warrant Certificate on the books of the Company,
with full power of substitution in the premises.
Dated:_____________________________ X___________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM 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 AND
MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF
THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE
OR MIDWEST STOCK EXCHANGE.
<PAGE>
UNDERWRITER'S UNIT WARRANT AGREEMENT
dated as of 1999 between
foreignTV.COM, Inc., a Delaware
corporation (the "Company"), and
WESTMINSTER SECURITIES CORPORATION,
a New York corporation (the
"Underwriter").
----------------------------------
The Company proposes to issue to the Underwriter and its designees,
warrants (the "Underwriter's Unit Warrants") to purchase units (the "Units"),
each Unit consisting of one (1) share of Common Stock, par value $.01 per share,
of the Company (the "Common Stock") and one (1) Common Stock Purchase Warrant
(the "Underwriter's Common Stock Warrants"), each Underwriter's Common Stock
Warrant exercisable to purchase one (1) additional share of Common Stock at
$9.00 per share, at any time and from time to time commencing on , 2000
and expiring on , 2004 at a price of $9.60 per Unit, in an amount equal to
ten percent (10%) of the units sold in connection with a public offering by the
Company (the "Public Offering") under Registration Statement No. 333-71733 (the
"Registration Statement"), up to a maximum of 170,000 Units. The Units, which
have been included in the Registration Statement, are similar but not identical
to the units sold in the Public Offering (the "Public Units") and neither the
Underwriter's Unit Warrants nor the Underwriter's Common Stock Warrants
comprising a portion thereof are redeemable by the Company. The Common Stock
and the shares of Common Stock issuable upon exercise of the Underwriter's
Common Stock Warrants are hereinafter collectively referred to as the "Shares".
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and for the purpose
of defining the terms and provisions of the Underwriter's Unit Warrants and the
respective rights and obligations thereunder of the Company, the Underwriter and
any subsequent Holder as provided in Section 1.3 hereof, the Company and the
Underwriter hereby agree as follows:
Section 1. Transferability and Form of Warrant.
-----------------------------------
1.1. Registration. The Underwriter's Unit Warrants shall be numbered
------------
and shall be registered on the books of the Company when issued.
1.2. Transfer. The Underwriter's Unit Warrants shall be registered
--------
for transfer only on the books of the Company maintained at its then principal
office, presently located in New York, New York, upon delivery thereof duly
endorsed by a Holder (as defined below) thereof or by its 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 execute and deliver new Underwriter's Unit Warrants to the person
entitled thereto.
1.3. Limitations on Transfer of the Warrants. For a period of one (1)
---------------------------------------
year from the date hereof, the Underwriter's designees for the purposes of
acquiring Underwriter's Unit Warrants shall be limited to, and the Underwriter's
Unit Warrants shall not be sold, transferred, assigned or hypothecated by the
Underwriter or its designees except to (i) one
2
<PAGE>
or more persons, each of whom on the date of transfer is an officer of the
Underwriter; (ii) a partnership or partnerships, the general Partners of which
are the Underwriter and one or more persons, each of whom on the date of
transfer is an officer of the Underwriter; (iii) one or more members of the
selling group assembled by the Underwriter for the Public Offering, or any
officers or partners thereof, or (iv) any person receiving the Underwriter's
Unit Warrants from one or more of the persons listed in this Section 1.3 at such
person's or persons' death pursuant to will, trust or the laws of intestate
succession. The Underwriter's Unit Warrants may be divided or combined, upon
request to the Company by a Holder thereof, into a certificate or certificates
evidencing the same aggregate number of Shares issuable thereunder. Unless the
context indicates otherwise, the term "Holder" shall mean and include the
Underwriter and any transferee or transferees of Underwriter's Unit Warrants
pursuant to this Section 1.3, and the term "Underwriter's Unit Warrants" shall
include any and all Underwriter's Unit Warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer pursuant to this Agreement.
1.4. Form of Underwriter's Unit Warrants. The text of the
-----------------------------------
Underwriter's Unit Warrants and of the form of election to purchase Units shall
be substantially as set forth in Exhibit A attached hereto. The price of Shares
and the number of Shares issuable upon
3
<PAGE>
exercise of Underwriter's Unit Warrants are subject to adjustment upon the
occurrence of certain events, all as herein-after provided. The Underwriter's
Unit Warrants shall be executed on behalf of the Company by its President or one
of its Vice Presidents, under its corporate seal reproduced thereon attested by
its Secretary or an Assistant Secretary.
Underwriter's Unit Warrants bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the Company, shall
bind the Company, notwithstanding that such individuals or any one of them shall
have ceased to hold such offices prior to the delivery of such Underwriter's
Unit Warrants or did not hold such office on the date of this Agreement.
Underwriter's Unit Warrants shall be dated as of the date of
countersignature thereof by the Company either upon initial issuance or upon
division, exchange, substitution or transfer.
1.5. Legend on Underwriter's Unit Warrant Shares. Each certificate
-------------------------------------------
for Shares initially issued upon exercise of an Underwriter's Unit Warrant,
unless at the time of exercise such Shares are subject to a currently effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
shall bear the following legend:
"The securities represented by this certificate have not been registered under
the Securities Act of 1933 and may not be sold, exchanged, hypothecated or
transferred in any manner except in compliance with Section 11 of the
Underwriter's Warrant Agreement pursuant to which they were issued."
4
<PAGE>
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to an effective registration statement under
the Act of the securities represented thereby) shall also bear the above legend
unless in the opinion of Cooperman Levitt Winikoff Lester & Newman, P.C., or
such other counsel as shall be reasonably acceptable to the Company, the
securities represented thereby need no longer be subject to such restrictions.
Section 2. Exchange of Underwriter's Unit Warrant Certificates.
---------------------------------------------------
Underwriter's Unit Warrant certificates may be exchanged for another certificate
or certificates entitling the Holder thereof to purchase a like aggregate number
of Units as the certificate or certificates surrendered then entitle such Holder
to purchase. Any Holder of an Underwriter's Unit Warrant desiring to exchange
Underwriter's Unit Warrant certificates shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate or certificates evidencing the Underwriter's Unit Warrant or
Underwriter's Unit Warrants to be so exchanged. Thereupon, the Company shall
execute and deliver to the person entitled thereto a new Underwriter's Unit
Warrant certificate or certificates, as the case may be, as so requested.
Section 3. Term of Underwriter's Unit Warrants; Exercise of Underwriter's
--------------------------------------------------------------
Unit Warrants. Subject to the terms of this
- -------------
5
<PAGE>
Agreement, each Holder shall have the right, at any time during the period
commencing at 9:00 A.M., New York City time, on , 2000 until 5:30 P.M.,
New York City time on , 2004 (the "Termination Date"), to purchase
from the Company that number of Units to which the Holder may at the time be
entitled to purchase pursuant to such Underwriter's Unit Warrants, upon
surrender to the Company at its then principal office, of the certificate or
certificates evidencing the Underwriter's Unit Warrants to be exercised,
together with the form of election to purchase on the reverse thereof duly
completed and signed, and upon payment to the Company of the Underwriter's
Warrant Price (as defined in and determined in accordance with the provisions of
Sections 7 and 8 hereof), for the number of Units in respect of which such
Underwriter's Unit Warrants are then exercised. Payment of the aggregate
Underwriter's Warrant Price shall be made in cash or by certified or bank
cashier's check.
Subject to Section 4 hereof, upon such surrender of Underwriter's Unit
Warrants and payment of the Underwriter's Warrant Price as aforesaid, the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full Shares and
Underwriter's Common Stock Warrants so purchased upon the exercise of such
Underwriter's Unit Warrants, together with cash, as provided in
6
<PAGE>
Section 9 hereof, in respect of any fractional Shares and Underwriter's Common
Stock Warrants otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Shares and Underwriter's Common Stock Warrants as of the date of the surrender
of such Underwriter's Unit Warrants and payment of the Underwriter's Warrant
Price, as aforesaid; provided, however, that if, at the date of surrender of
such Underwriter's Unit Warrants and payment of such Underwriter's Warrant
Price, the transfer books for the Shares or other class of securities
purchasable upon the exercise of such Underwriter's Unit Warrants shall be
closed, the certificates for the Shares and Underwriter's Common Stock Warrants
in respect of which such Underwriter's Unit Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened (whether before
or after the Termination Date) and until such date the Company shall be under no
duty to deliver any certificate for such Shares and Underwriter's Common Stock
Warrants; provided further, however, that the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a period
longer than twenty (20) days. The rights of purchase represented by the
Underwriter's Unit Warrants shall be exercisable at the election of the Holders
thereof either in full or from time to time in part and, in the event that a
certificate evidencing Underwriter's Unit Warrants is exercised in
7
<PAGE>
respect of less than all of the Shares and Underwriter's Common Stock Warrants
specified therein at any time prior to the date of expiration of the
Underwriter's Unit Warrants, a new certificate evidencing the remaining
Underwriter's Unit Warrant or Warrants will be issued.
Section 4. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes, if any, attributable to the initial issuance of Shares issuable
upon the exercise of Underwriter's Unit Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue or delivery of any Underwriter's
Unit Warrants or certificates for Shares.
Section 5. Mutilated or Missing Warrants. In case any of the
-----------------------------
certificates evidencing the Underwriter's Unit Warrants shall be mutilated,
lost, stolen or destroyed, the Company may, in its discretion, issue and deliver
in exchange and substitution for and upon cancellation of the mutilated
Underwriter's Unit Warrant certificate, or in lieu of and substitution for the
Underwriter's Unit Warrant certificate lost, stolen or destroyed, a new
Underwriter's Unit Warrant certificate of like tenor and representing an
equivalent right or interest; but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Underwriter's Unit
Warrant and indemnity, if requested, also satisfactory to it.
8
<PAGE>
Section 6. Reservation of Shares. There have been reserved, and the
---------------------
Company shall at all times keep reserved, out of its authorized Common Stock
that number of shares of Common Stock sufficient to provide for the exercise of
the rights of purchase represented by the outstanding Underwriter's Unit
Warrants (including the rights of purchase represented by the Underwriter's
Common Stock Warrants comprising a portion of the Underwriter's Unit Warrants).
The Transfer Agent for the Common Stock and every subsequent transfer agent for
any shares of the Company's capital stock issuable upon the exercise of any of
the rights of purchase aforesaid will be irrevocably authorized and directed at
all times to reserve such number of authorized shares as shall be requisite for
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent for the Common Stock and with every subsequent transfer agent for
any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Underwriter's Unit Warrants and the
Underwriter's Common Stock Warrants. The Company will supply such Transfer Agent
with duly executed stock certificates for such purpose and will provide or
otherwise make available any cash which may be payable as provided in Section 9
hereof.
Section 7. Underwriter's Unit Warrant Price. The initial price at
--------------------------------
which Units shall be purchasable upon exercise of Underwriter's Unit Warrants
shall be $6.60 per Unit (the
9
<PAGE>
"Underwriter's Warrant Price"), subject in each case to adjustment pursuant to
Section 8 hereof as if such price had been the Underwriter's Warrant Price on
the date the Underwriter's Unit Warrants were first issued.
Section 8. Adjustments. The number and kind of securities
-----------
purchasable upon the exercise of each Underwriter's Unit Warrant (assuming for
the purposes of this Section 8 the concurrent exercise of the Underwriter's
Common Stock Warrants) and the Underwriter's Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
8.1. The number of Shares purchasable upon the exercise of each
Underwriter's Unit Warrant and the Underwriter's Warrant Price shall be subject
to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of Shares purchasable upon exercise of each Underwriter's Unit
Warrant immediately prior thereto shall be adjusted so that the Holder of each
Underwriter's Unit Warrant shall be entitled to receive the kind and number of
Shares or other securities of the Company which he would have owned or have been
entitled to receive after the happening
10
<PAGE>
of any of such event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) In case the Company shall issue rights, options or warrants to all
or substantially all holders of its shares of Common Stock, without any charge
to such holders, entitling them to subscribe for or purchase shares of Common
Stock at a price per share which is lower at the record date mentioned below
than the greater of the current market price per share of Common Stock (as
defined in clause (d) of this Section 8.1 below) and the then Underwriter's
Warrant Price, the number of Shares thereafter purchasable upon the exercise of
each Underwriter's Unit Warrant shall be determined by multiplying the number of
Shares theretofore purchasable upon exercise of each Underwriter's Unit Warrant
by a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options or warrants
plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options or warrants
plus the number of shares which the aggregate offering price of the total number
of shares of Common Stock so offered would purchase at the greater of such
current market price or the then existing Underwriter's Warrant
11
<PAGE>
Price. Such adjustment shall be made whenever such rights, options or warrants
are issued, and shall become effective retroactively immediately after the
record date for the determination of stockholders entitled to receive such
rights, options or warrants.
(c) In case the Company shall distribute to all or substantially all
holders of its shares of Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights, options
or warrants or convertible securities containing the right to subscribe for or
purchase shares of Common Stock (excluding those referred to in clause (b) of
this Section 8.1 above), then in each case the number of Shares thereafter
purchasable upon the exercise of each Underwriter's Unit Warrant shall be
determined by multiplying the number of Shares theretofore purchasable upon
exercise of the Underwriter's Unit Warrant, by a fraction, of which the
numerator shall be the then current market price per share of Common Stock (as
defined in clause (d) of this Section 8.1 below) on the date of such
distribution, and of which the denominator shall be such current market price
per share of Common Stock, less the then fair value (as determined by the Board
of Directors of the Company, whose determination shall be conclusive) of the
portion of the assets or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such convertible securities
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and
12
<PAGE>
shall become effective on the date of distribution retroactive to the record
date for the determination of shareholders entitled to receive such
distribution.
(d) For the purposes of this Agreement, the current or closing market
price per share of Common Stock of the Company at any date shall be deemed to be
(i) if the shares of Common Stock are traded in the over-the-counter market and
not on any national securities exchange and not in the NASDAQ National Market
System, the average of the mean between the bid and asked prices per share, as
reported by NASDAQ or if not available by the National Quotation Bureau,
Incorporated, or an equivalent generally accepted reporting service, for the
twenty (20) consecutive trading days immediately preceding the date for which
the determination of current or closing market price is to be made, or, (ii) if
the shares of Common Stock are traded on a national securities exchange or in
the NASDAQ National Market System, the average daily per share closing price on
the principal national securities exchange on which they are so listed or in the
NASDAQ National Market System, as the case may be, for the twenty (20)
consecutive trading days immediately preceding the date for which the
determination of current or closing market price is to be made. The closing
price referred to in subclause (ii) above shall be the last reported sales price
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices, in either case on the national
13
<PAGE>
securities exchange on which the shares of Common Stock are then listed or in
the NASDAQ National Market System.
(e) No adjustment in the number of Shares purchasable hereunder shall
be required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of Shares purchasable upon the exercise of
each Underwriter's Unit Warrant or Underwriter's Common Stock Warrant; provided,
however, that any adjustments which by reason of this clause (e) of Subsection
8.1 are not required to be made shall be carried forward and taken into account
in any subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of
each Underwriter's Unit Warrant is adjusted, as herein provided, the
Underwriter's Warrant Price per Unit payable upon exercise of each Underwriter's
Unit Warrant shall be adjusted by multiplying such Underwriter's Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Shares purchasable upon the exercise of each Underwriter's Unit
Warrant immediately prior to such adjustment, and of which the denominator shall
be the number of Shares so purchasable immediately thereafter.
(g) In case the Company shall sell and issue shares of Common Stock,
or rights, options, warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock, at a price per share of Common
Stock (determined in the case
14
<PAGE>
of such rights, options, warrants or convertible securities, by dividing (i) the
total amount received or receivable by the Company in consideration of the sale
and issuance of such rights, options, warrants or convertible securities, plus
the total consideration payable to the Company upon exercise or conversion
thereof, by (ii) the total number of shares of Common Stock covered by such
rights, options, warrants or convertible securities) lower than the greater of
the current market price (as defined in clause (d) of Section 8.1 above) in
effect immediately prior to such sale and issuance and the then Underwriter's
Warrant Price, then the Underwriter's Warrant Price shall be reduced to a price
(calculated to the nearest cent) determined by dividing (i) an amount equal to
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such sale and issuance multiplied by the greater of the current market
price and the then existing Underwriter's Warrant Price, plus (B) the
consideration received by the Company upon such sale and issuance, by (ii) the
total number of shares of Common Stock outstanding immediately after such sale
and issuance. The number of Shares purchasable upon the exercise of each
Underwriter's Unit Warrant and Underwriter's Common Stock Warrant shall be that
number determined by multiplying the number of Shares issuable upon exercise
immediately prior to such adjustment by a fraction, of which the numerator is
the Underwriter's Warrant Price in effect immediately prior to such adjustment
and the denominator is the Underwriter's
15
<PAGE>
Warrant Price as so adjusted. For the purposes of such adjustments, the shares
of Common Stock which the holders of any such rights, options, warrants or
convertible securities shall be entitled to subscribe for or purchase shall be
deemed to be issued and outstanding as of the date of such sale and issuance and
the consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants or
convertible securities, plus the consideration or premiums stated in such
rights, options, warrants or convertible securities to be paid for the shares of
Common Stock, covered thereby. In case the Company shall sell and issue shares
of Common Stock or rights, options, warrants, or convertible securities
containing the right to subscribe for or purchase shares of Common Stock for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the "price per share of Common Stock" and
the "consideration received by the Company" for purposes of the first sentence
of this clause (g) of Subsection 8.1, the Board of Directors shall determine, in
its discretion, the fair value of said property and such determination, if made
in good faith, shall be binding upon all Holders of Underwriter's Unit Warrants.
There shall be no adjustment of the Underwriter's Warrant Price pursuant to this
clause (g) of Subsection 8.1 if the amount of such adjustment would be less than
$.05 per Share; provided, however, that any adjustment which by reason of this
16
<PAGE>
provision is not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(h) Whenever the number of Shares purchasable upon the exercise of
each Underwriter's Unit Warrant or the Underwriter's Warrant Price of such
Shares is adjusted, as herein provided, the Company shall cause to be promptly
mailed by first class mail, postage prepaid, to each Holder of an Underwriter's
Unit Warrant or Warrants notice of such adjustment or adjustments together with
a certificate of a firm of independent public accountants selected by the Board
of Directors of the Company (who may be the regular accountants employed by the
Company) setting forth the number of Shares purchasable upon the exercise of
each Underwriter's Unit Warrant and Underwriter's Common Stock Warrant and the
Underwriter's Warrant Price of such Shares after such adjustment, a brief
statement of the facts requiring such adjustment and the computation by which
such adjustment was made. Such certificate shall be conclusive evidence of the
correctness of such adjustment.
(i) For the purpose of this Section 8.1, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value, In the event that at any time, as a result of an
adjustment
17
<PAGE>
made pursuant to this Section 8.1, the holders of an Underwriter's Unit Warrant
or Warrants shall become entitled to purchase any shares of the Company other
than shares of Common Stock, thereafter the number of such other shares so
purchasable upon exercise of each Underwriter's Unit Warrant and the
Underwriter's Warrant Price of such shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in clauses (a) through (h),
inclusive, of this Section 8.1 above, and the provisions of Section 3 and
Sections 8.2 through 8.5, inclusive, with respect to the Shares shall apply on
like terms to any such other shares.
(j) Upon the expiration of any rights, options, warrants or conversion
privileges, if any thereof shall not have been exercised, the number of shares
purchasable upon exercise of an Underwriter's Unit Warrant or Underwriter's
Common Stock Warrant and the Underwriter's Warrant Price to the extent the
Underwriter's Unit Warrants and Underwriter's Common Stock Warrants shall not
then have been exercised, shall, upon such expiration, be readjusted and shall
thereafter be such as they would have been had it been originally adjusted (or
had the original adjustment not been required, as the case may be) on the basis
of (A) the only shares of Common Stock so issued were the shares of Common
Stock, if any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion rights and (B) such shares of Common Stock, if
any, were
18
<PAGE>
issued or sold for the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the Company for
the issuance, sale or grant of all of such rights, options, warrants or
conversion rights whether or not exercised; provided, further, that no such
readjustment shall have the effect of increasing the Underwriter's Warrant Price
by an amount in excess of the amount of the adjustment initially made in respect
of the issuance, sale or grant of such rights, options, warrants or convertible
rights.
8.2. No Adjustment for Dividends. Except as provided in Section 8.1,
---------------------------
no adjustment in respect of any dividends shall be made during the term of the
Underwriter's Unit Warrants or upon the exercise of the Underwriter's Unit
Warrants.
8.3. No Adjustment in Certain Cases. Anything herein to the contrary
------------------------------
notwithstanding, no adjustment shall be made in respect of (i) the issuance of
shares of Common Stock pursuant to the sale of Public Units as contemplated by
the Registration Statement, (ii) the issuance of shares of Common Stock pursuant
to the exercise of the Company's Redeemable Common Stock purchase warrants
comprising a portion of the Public Units, or (iii) the issuance of shares of
Common Stock upon exercise in accordance with their terms of any options, or
warrants issued on or before the date hereof, as the same may be extended or
modified subsequent hereto to increase their respective exercise prices.
19
<PAGE>
8.4. Preservation of Purchase Rights upon Reclassifica- tion,
-------------------------------------------------- -----
Consolidation, etc. In case of any consolidation of the Company with or merger
- -------------------
of the Company into another corporation or in case of any sale or conveyance to
another corporation or entity of the property, assets or business of the Company
as an entirety or substantially as an entirety, the Company or such successor or
purchasing corporation or entity, as the case may be, shall execute with the
Holder of Underwriter's Unit Warrants an agreement that each Holder of an
Underwriter's Unit Warrant shall have the right thereafter upon payment of the
Underwriter's Warrant Price in effect immediately prior to such action to
purchase upon exercise of each Underwriter's Unit Warrant the kind and amount of
shares and other securities and property (including cash) which such Holder
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had such Underwriter's Unit Warrant
been exercised immediately prior to such action. Such agreement shall provide
for adjustments, which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 8. The Company shall mail by first
class mail, postage prepaid, to the Holder of each Underwriter's Unit Warrant,
notice of the execution of any such agreement. The provisions of this Section
8.4 shall similarly apply to successive consolidations, mergers, sales or
conveyances.
8.5. Statement on Underwriter's Unit Warrants.
----------------------------------------
20
<PAGE>
Irrespective of any adjustments in the Underwriter's Warrant Price or the number
or kind of shares purchasable upon the exercise of the Underwriter's Unit
Warrants, Underwriter's Unit Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Underwriter's Unit Warrants initially issuable pursuant to this
Agreement.
Section 9. Fractional Interests. The Company shall not be required
--------------------
to issue fractional Shares upon the exercise of either Underwriter's Unit
Warrants or the Underwriter's Common Stock Warrants. If more than one
Underwriter's Unit Warrant or Underwriter's Common Stock Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by the
Underwriter's Unit Warrants or Underwriter's Common Stock Warrants so presented.
If any fraction of a Share would, except for the provisions of this Section 9,
be issuable on the exercise of any Underwriter's Unit Warrant or Underwriter's
Common Stock Warrant (or specified portion thereof), the Company shall pay an
amount in cash equal to the current market price per Share (as defined in clause
(d) of Section 8.1 above) multiplied by such fraction.
Section 10. No Right as Stockholders; Notices to Underwriter's
--------------------------------------------------
Warrant Holders. Nothing contained in this Agreement or in any of the
- ---------------
Underwriter's Unit Warrants or the Underwriter's
21
<PAGE>
Common Stock Warrants shall be construed as conferring upon the Holders or their
transferees the right to vote or to receive dividends or to consent or to
receive notice as stockholders in respect of any meeting of stockholders for the
election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company. If, however, at any time prior to the
expiration of the Underwriter's Unit Warrants or the Underwriter's Common Stock
Warrants and prior to their exercise, any of the following events shall occur:
(a) any action which would require an adjustment pursuant to Sections
8.1 or 8.4, or
(b) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, or sale of all or
substantially all of its property, assets, and business as an entirety)
shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Holders as provided in Section 14 hereof at least twenty
(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
dividend, distribution, or subscription rights, or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be.
22
<PAGE>
Section 11. Registration Rights.
-------------------
11.1. The Underwriter's Unit Warrants, the Underwriter's Common Stock
Warrants and the Shares (hereinafter collectively referred to as the
"Underwriter's Securities") have been included in the Registration Statement
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Act. By acceptance of the Underwriter's Unit Warrants,
each Holder agrees that prior to making any disposition of any of the
Underwriter's Securities, such Holder shall give written notice to the Company
describing briefly the manner in which any such proposed disposition is to be
made; and no such disposition shall be made if the Company has notified such
Holder that in the opinion of counsel reasonably satisfactory to the Holder a
post-effective amendment to the Registration Statement or other registration or
notification under the Act is required with respect to such disposition and no
such post-effective amendment or other registration or notification has been
filed by the Company and declared effective, if necessary, by the Commission,
11.2. The Company shall be obligated to the Holders of the
Underwriter's Securities (hereinafter collectively referred to as the "Holders")
and Shares to file such post-effective amendment or other registration or
notification only as follows:
(a) Whenever during the four (4) year period commencing on the first
anniversary of the effective date of the Registration Statement (the "Effective
Date"),
23
<PAGE>
Public Offering (the "Closing Date"), the Company proposes to file with the
Commission a post-effective amendment or other registration or notification of
its securities (other than as to the Underwriter's Securities or as to
securities issued pursuant to an employee benefit plan or as to a transaction
subject to Rule 145, promulgated under the Act), it shall, at least thirty (30)
days prior to such filing, give written notice of such proposed filing to the
Holders at the addresses appearing on the records of the Company, and shall
offer to include and shall include in such filing any proposed disposition of
the Underwriter's Securities upon receipt by the Company, not less than ten (10)
days prior to the proposed filing date, of requests from Holders therefor
setting forth the facts with respect to such proposed disposition.
If on the first occasion hereafter when the Company determines to file
a registration statement with respect to an underwritten public offering of
shares of Common Stock or other debt or equity securities of the Company, the
managing underwriter of such public offering shall furnish its written opinion
to the Holders that in its judgment inclusion of any of the Underwriter's
Securities in such offering would exceed the maximum amount of securities (as
specified in such opinion) which could then be marketed at a price reasonably
related to the then current market value of such securities and without
materially and adversely affecting such proposed offering, then, in such event,
the Company shall have the
24
<PAGE>
option of including all or any part of the Underwriter's Securities as to which
such inclusion has been requested (i) in the registration statement filed by the
Company (in which event the Company may require that each such Holder agree that
he, she or it, as the case may be, will not sell his, her or its respective
portion of the Underwriter's Securities for ninety (90) days from the effective
date of such registration statement or such shorter period as the Company may
permit), or (ii) in a separate registration statement filed by the Company
within a period of sixty (60) days after the effective date of the Company's
registration statement contemplated by clause (i) of this Section ll.2(a).
(b) In addition to any registration rights pursuant to Section 11.2
(a) above, on any one (1) occasion during the six (6) year period commencing on
the first anniversary of the Effective Date, the Company will, upon receipt of a
written request from Holders of at least fifty percent (50%) of the Under-
writer's Securities (including for this purpose Shares issuable upon exercise of
all the Underwriter's Unit Warrants and the Underwriter's Common Stock Warrants,
whether or not theretofore exercised), prepare and file as promptly as
practicable (but in any event within sixty (60) days of any such request), at
its own expense, a post-effective amendment or such other registration or
notification
25
<PAGE>
with the Commission sufficient to permit the public offering of all of the
Underwriter's Securities, and will use its best efforts at its own expense
through its officers, directors, auditors and counsel, in all matters necessary
or advisable, to cause such post-effective amendment or other registration or
notification to become effective as promptly as practicable.
(c) Except as specifically provided in clause (b) of Section 11.2, (i)
all fees, disbursements and out-of-pocket expenses in connection with any filing
required under this Section 11 and in complying with applicable securities and
Blue Sky laws shall be borne by the Company, excluding brokerage commissions,
transfer taxes, if any, and charges of Holders' counsel, and (ii) the Company at
its expense will supply the Holders with copies of such post-effective amendment
or other registration statement or notification and the prospectus or offering
circular included therein and other related documents in such quantities as may
be reasonably requested by such Holders.
(d) The Company shall not be required by this Section 11 to file such
post-effective amendment or registration or other notification if, in the
reasonable opinion of counsel for both the Holders and the Company (or, should
they not agree, in the opinion of another counsel experienced in securities law
matters reasonably acceptable to counsel for the Holders and the Company), the
proposed public offering or other transfer as to which such post-effective
26
<PAGE>
amendment or other registration or notification is requested is exempt from
applicable federal and state securities laws and would result in all purchasers
or transferees obtaining securities which are not "restricted securities", as
defined in Rule 144 under the Act.
(e) The Company agrees that until all of the Underwriter's Securities
shall have been sold under a registration statement or other notification or
pursuant to Rule 144 under the Act, it will keep current in filing all materials
required to be filed with the Commission in order to permit the holders thereof
to sell such securities under such Rule 144.
Section 12. Indemnification.
---------------
12.1. In the event of the filing of any post-effective amendment or
other registration or notification with respect to the Underwriter's Securities
pursuant to Section 11 above:
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holders and each person, if any, who controls
the Holder within the meaning of Section 15 of the Act or Section 2O(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any
and all loss, liability, claim, damage and expense whatsoever (including, but
not limited to any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon any
27
<PAGE>
untrue statement or alleged untrue statement of a material fact contained (x) in
any such registration statement, notification, preliminary prospectus,
prospectus or offering circular (as from time to time amended and supplemented)
or (y) in any application or other document (in this Section 12 collectively
called "application") executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Underwriter's Securities under the securities laws thereof or filed
with the Commission or any securities exchange, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading; unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to the Holders by or on behalf of the Holders
expressly for use such registration statement, notification, preliminary
prospectus, prospectus or offering circular, or any amendment or supplement
thereto, or in any application or in any communication to the Commission, as the
case may be.
If any action is brought against any Holder or a controlling person in
respect of which indemnity may be sought against the Company pursuant to clause
(a) of this Section 12.1, such Holder shall promptly notify in writing the party
or parties against whom indemnification is to be sought of the institution of
such action and the indemnifying parties shall assume the defense of such
28
<PAGE>
action, including the employment of counsel (reasonably satisfactory to such
Holder or such controlling person) and payment of expenses. Such Holder or such
controlling person shall have the right to employ his, her or its own counsel in
any such case, but the fees and expenses of such counsel shall be at such
Holder's expense or the expense of such controlling person unless the employment
of such counsel shall have been authorized in writing by the indemnifying
parties in connection with the defense of such action or the indemnifying
parties shall not have employed counsel to have charge of the defense of such
action or counsel for such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the indemnifying parties (in which case
the indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this clause (a) of Section 12.1 to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its written consent. The Company agrees promptly to notify the Holders
of the commencement of any litigation or proceedings against the Company or any
of its officers or directors in connection with such registration statement,
notification, preliminary prospectus, or prospectus or offering circular, or any
amendment or supplement
29
<PAGE>
thereto, or any such application. With respect to any untrue statement or
alleged untrue statement made in, or omission or alleged omission from, any
preliminary prospectus, the indemnity agreement contained in this clause (a) of
Section 12.1 with respect to such preliminary prospectus shall not inure to the
Holders' benefit (or the benefit of any person or persons controlling the
Holders), if the prospectus (or the prospectus as amended or supplemented if the
Company shall have made any amendments thereof or supplements thereto which
shall have been furnished to the Holders prior to the time of confirmation of
such sale) does not contain such statement, alleged statement, omission or
alleged omission, and a copy of such prospectus shall not have been sent or
given to such person at or prior to the written confirmation of such sale to
such person.
(b) Each Holder, severally and not jointly, agree to indemnify and
hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed such registration statement and
each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 2O(a) of the Exchange Act to the same extent as
the foregoing indemnify from the Company to such Holder but only with respect to
statements or omissions, or alleged statements or omissions, if any, made in any
such registration statement, notification, preliminary prospectus, prospectus or
any amendment or supplement thereto or any application in reliance upon, and in
conformity with, written
30
<PAGE>
information furnished to the Company with respect to such Holder by or on behalf
of such Holder for use in any such registration statement, notification,
preliminary prospectus, prospectus or offering circular or any amendment or
supplement thereto or in any application, as the case may be. In case any action
shall be brought against the Company or any person so indemnified, based on any
registration statement, notification, preliminary prospectus, prospectus or
offering circular or any amendment or supplement thereto or any application, and
in respect of which indemnity may be sought against such Holder, that Holder
shall have the rights and duties given to the Company and the Company and each
other person so indemnified shall have the rights and duties given to that
Holder by the provisions of clause (a) of Section 12.1 above.
(c) If the indemnification provided for in this Section 12 is
unavailable or insufficient to hold harmless an indemnified party under clauses
(a) or (b) of Section 12.1 above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable to such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Holders on the
other from the offering of the Underwriter's Securities. If, however, the
allocation provided by the immediately
31
<PAGE>
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required above in this Section 12, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Holders on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Holders on the other
shall be deemed to be in the same proportion as the total offering price of all
of the Company's securities covered by such registration statement or
notification (including such of the Underwriter's Securities as are covered
thereby) bears to the offering price of such of the Underwriter's Securities as
are covered thereby. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Holders on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and equitable if contribution
pursuant to this clause (c) of Section 12.1
32
<PAGE>
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
such clause (c). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this clause (c) of Section 12,1 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this clause (c) of Section 12.1, the Holders
shall not be required to contribute any amount in excess of the amount by which
the offering price of all of the Underwriter's Securities covered by such
registration statement or notification exceeds the amount of any damages which
the Holders would have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission; and no person
guilty of fraudulent misrepresentation (within the meaning of Section 11 of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Section 13. Notices. Any notice pursuant to this Agreement by the
-------
Company or by any Holder or Holders shall be in writing and shall be deemed to
have been duly given if delivered or mailed certified mail, return receipt
requested:
(a) If to the Underwriter - addressed to Westminster Securities
Corporation, 19 Rector Street, New York, New York 10006,
33
<PAGE>
Att: President;
(b) If to the Company - addressed to it at foreignTV.COM, 162 Fifth
Avenue, Suite 1005A, New York, New York 10010, Att: President; and
(c) If to the Holders addressed to such Holders at their respective
addresses on the books of the Company.
Each party hereto may from time to time change the address to which
notices to it are to be delivered or mailed hereunder by notice in accordance to
the other party.
Section 14. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Holders shall bind and
inure to the benefit of their respective successors
and assigns hereunder.
Section 15. Merger or Consolidation of the Company. The Company will
--------------------------------------
not merge or consolidate with or into any other corporation unless the
corporation resulting from such merger or consolidation (if not the Company)
shall expressly assume, by supplemental agreement satisfactory in form to the
Underwriter and duly executed and delivered to the Underwriter, the due and
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Company.
Section 16. Survival. All statements contained in any schedule, any
--------
exhibit, certificate or other instrument delivered by or on behalf of the
parties hereto, or in connection with the
34
<PAGE>
transactions contemplated by this Agreement, shall be deemed to be
representations and warranties hereunder. Notwithstanding any investigations
made by or on behalf of the parties to this Agreement, all representations,
warranties and agreements made by the parties to this Agreement or pursuant
hereto shall survive, except that if a party hereto has actual knowledge at the
date hereof of facts which would constitute a breach of the representations and
warranties contained herein, such breaches shall be waived by such party if such
party consummated the transactions contemplated by this Agreement.
Section 17. Applicable Law. This Agreement and each Underwriter's
--------------
Unit Warrant issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State.
Section 18. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or Corporation other than the Company
and the Holders of any legal or equitable right, remedy or claim under this
Agreement and this Agreement shall be for the sole and exclusive benefit of the
Company and the Holders.
Section 19. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each such counterpart shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 20. Captions. The captions of Sections and
--------
35
<PAGE>
clauses of this Agreement have been inserted for convenience only and shall have
no substantive effect.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
Attest foreignTV.COM, Inc.
By: _________________________
- --------------------
WESTMINSTER SECURITIES CORPORATION
Attest
By: _________________________
- --------------------
37
<PAGE>
EXHIBIT A
No.
WARRANT TO PURCHASE UNITS
(Each Unit consisting of one (1) Share of Common Stock
and one (1) Common Stock Purchase Warrant, each
exercisable to purchase one (1) Additional Share
of Common Stock through , 2004)
VOID AFTER 5:30 P.M., NEW YORK CITY TIME, ON , 2004
foreignTV.com, Inc.
This certifies that, for value received,
, the holder hereof or registered assigns (the "Holder"), is entitled
to purchase from foreignTV.com, Inc., a Delaware corporation (the "Company"), at
any time during the period commencing at 9:00 A.M., New York City time, on
, 1999 and ending at 5:30 P.M., New York City time, on , 2004, at
an initial purchase price of $6.60 per Unit (the "Underwriter's Warrant Price")
up to the number of Units set forth above. The number of Units purchasable upon
exercise of this Warrant and the Underwriter's Warrant Price per share shall be
subject to adjustment from time to time as set forth in the Underwriter's Unit
Warrant Agreement referred to below.
This Warrant may be exercised in whole or in part by presentation of this
Warrant with the Purchase Form on the reverse
<PAGE>
side hereof duly executed and simultaneous payment of the Underwriter's Warrant
Price (subject to adjustment) at the principal office of the Company. Payment of
such price shall be made at the option of the Holder hereof in cash or by
certified check or bank cashier's check.
This Warrant is one of a duly authorized issue of Warrants evidencing
the right to purchase up to a maximum of Units, each Unit consisting of
one (1) share of Common Stock, par value $.01 per share, of the Company and one
(1) Common Stock Purchase Warrant, each Common Stock Purchase Warrant
exercisable to purchase one (1) additional Share of Common Stock of the Company,
at a price of $6.60 per share through , 2004 and is issued under and in
accordance with an Underwriter's Unit Warrant Agreement dated as of
, 1999 (the "Underwriter's Unit Warrant Agreement") between the Company and
Westminster Securities Corporation and is subject to the terms and provisions
contained in the Underwriter's Unit Warrant Agreement, all of which are hereby
consented to by the Holder by acceptance hereof. A copy of the Underwriter's
Unit Warrant Agreement may be obtained for inspection by the Holder upon written
request to the Company.
Upon any partial exercise of this Warrant, there shall be
countersigned and issued to the Holder a new Warrant in respect of the Units as
to which this Warrant shall not have been exercised. This Warrant may be
exchanged at the office of the Company by surrender of this Warrant properly
endorsed either separately or in
<PAGE>
combination with one or more other Warrants for one or more new Warrants of the
same aggregate number of Units evidenced by the Warrant or Warrants exchanged.
No fractional securities will be issued upon the exercise of rights to purchase
hereunder, but the Company shall pay the cash value of any fraction upon the
exercise of one or more Warrants. This Warrant is transferable at the office of
the Company in the manner and subject to the limitations set forth in the
Underwriter's Unit Warrant Agreement.
The Holder may be treated by the Company and all other persons dealing with
this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented hereby, or to the registration of
transfer hereof on the books of the Company any notice to the contrary
notwithstanding, and until such registration of transfer on such books, the
Company may treat the Holder as the owner for all purposes.
This Warrant does not entitle any Holder to any of the rights of a
stockholder of the Company.
Dated: , 1999
foreignTV.com, Inc.
By: ______________________________
<PAGE>
foreignTV.com, Inc.
PURCHASE FORM
-------------
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
Units provided for therein, and requests that certificates for the shares of
Common Stock and Underwriter's Common Stock Warrants (as defined in the
Underwriter's Unit Warrant Agreement) comprising the Units be issued in the name
of:
- --------------------------------------------------------------------------------
(please print name, address, and social security number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and, if said number of Units shall not be all the shares purchasable thereunder,
that a new Warrant Certificate for the balance remaining of the Units
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Holder or his Assignee as below indicated and delivered to the
address stated below.
DATED: ,
<PAGE>
Name of Warrantholder
or Assignee __________________________________________
(please print)
Address Signature: __________________________________________
NOTE: THE ABOVE SIGNATURE MUST
Signature CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS
WARRANT CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATEVER, UNLESS THIS WARRANT
HAS BEEN ASSIGNED.
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto __________________________________________________
- --------------------------------------------------------------------------------
(name and address of assignee must be printed or typewritten)
the within Warrant, hereby irrevocably constituting and
appointing ______________________________________________________
Attorney to transfer said Warrant on the books of the Company with
full power of substitution in the premises.
Dated: ,
------------------------------
SIGNATURE OF REGISTERED HOLDER
NOTE: THE SIGNATURE OF THIS ASSIGNMENT
Signature MUST CORRESPOND WITH THE NAME AS
Guaranteed: IT APPEARS UPON THE FACE OF THE
WITHIN WARRANT CERTIFICATE IN
EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
<PAGE>
EXHIBIT 5
[Letterhead of]
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
March 26, 1999
foreignTV.com, Inc.
162 Fifth Avenue, Suite 1005A
New York, New York 10010
Re: Registration Statement on Form S-1
Under the Securities Act of 1933
----------------------------------
Ladies and Gentlemen:
In our capacity as counsel to foreignTV.com, Inc., a Delaware corporation
(the "Company"), we have been asked to render this opinion in connection with a
Registration Statement on Form S-1, as amended, heretofore filed by the Company
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Registration Statement"), covering (i) 1,700,000 shares of Common
Stock (the "Shares"), (ii) 1,700,000 common stock purchase warrants to purchase
an identical number of shares of Common Stock (the "Warrants"), (iii) 1,700,000
shares of Common Stock issuable upon exercise of the Warrants (the "Warrant
Stock"), (iv) warrants issuable to the underwriter named in the Registration
Statement to purchase Units (the "Underwriter's Unit Warrants"), consisting of
(A) 170,000 shares of Common Stock (the "Underwriter's Stock") and (B) 170,000
warrants to purchase an identical number of shares of Common Stock (the
"Underwriter's Warrants"), (v) 170,000 shares of Common Stock issuable upon
exercise of the Underwriter's Warrants (the "Underwriter's Warrant Stock").
In that connection, we have examined the Certificate of Incorporation, as
amended to date, and the By-Laws of the Company, the Registration Statement,
corporate proceedings of the Company relating to the issuance of the Shares,
Warrants, Warrant Stock, Underwriter's Unit Warrants, Underwriter's Stock,
Underwriter's Warrants and Underwriter's Warrant Stock, respectively, and such
other instruments and documents as we have deemed relevant under the
circumstances.
In making the aforesaid examinations, we have assumed the genuineness of
all signatures and the conformity to original documents of all copies furnished
to us as original or photostatic copies. We have also assumed that the
corporate records furnished to us by the Company include all corporate
proceedings taken by the Company to date.
Based upon and subject to the foregoing, we are of the opinion
<PAGE>
that:
(1) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(2) The Shares, Warrant Stock, Underwriter's Stock and Underwriter's
Warrant Stock have each been duly and validly authorized and, when issued
and paid for as described in the Registration Statement, will be duly and
validly issued, fully paid and non-assessable.
(3) The Warrants, Underwriter's Unit Warrants and Underwriter's Warrants
have each been duly and validly authorized and, when issued and paid for as
described in the Registration Statement, will be duly and validly issued.
We hereby consent to the use of our opinion as herein set forth as an
exhibit to the Registration Statement and to the use of our name under the
caption "Legal Matters" in the prospectus forming a part of the Registration
Statement.
Very truly yours,
COOPERMAN LEVITT WINIKOFF
LESTER & NEWMAN, P.C.
By: /s/Ira Roxland
--------------------------------
A Member of the Firm
<PAGE>
EXHIBIT 10.4
THIS ESCROW AGREEMENT is made this _________ day of March, 1999 among
foreignTV.com, Inc. (the "Issuer" herein), Westminster Securities Corporation
(the "Underwriter" herein) and CITIBANK, N.A. (the "Escrow Agent" herein).
The above-named parties appoint said Escrow Agent with the duties and
responsibilities and upon the terms and conditions provided in schedule A
annexed hereto and made apart hereof.
ARTICLE FIRST: The above-named parties agree that the following provisions
shall control with respect to the rights, duties, liabilities, privileges and
immunities of the Escrow Agent:
a) The Escrow Agent shall neither be responsible for or under, nor chargeable
with knowledge of, the terms and conditions of any other agreement,
instrument or document executed between/among the parties hereto, except as
may be specifically provided in Schedule A annexed hereto. This Agreement
sets forth all of the obligations of the Escrow Agent, and no additional
obligations shall be implied from the terms of this Agreement or any other
agreement, instrument or document.
b) The Escrow Agent may act in reliance upon any instructions, notice,
certification, demand, consent, authorization, receipt, power of attorney or
other writing delivered to it by any other party without being required to
determine the authenticity or validity thereof or the correctness of any
fact stated therein, the propriety or validity of the service thereof, or
the jurisdiction of the court issuing any judgment or order. The Escrow
Agent may act in reliance upon any signature believed by it to be genuine,
and may assume that such person has been properly authorized to do so.
c) Each of the parties, jointly and severally, agrees to reimburse the Escrow
Agent on demand for, and to indemnify and hold the Escrow Agent harmless
against and with respect to, any and all loss, liability, damage or expense
(including, but without limitation, attorneys' fees, costs and
disbursements) that the Escrow Agent may suffer or incur in connection with
this Agreement and its performance hereunder or in connection herewith,
except to the extent such loss, liability, damage or expense arises from its
willful misconduct or gross negligence as adjudicated by a court of
competent jurisdiction. The Escrow Agent shall have the further right at any
time and from time to time to charge, and reimburse itself from, the
property held in escrow hereunder.
d) The Escrow Agent may consult with legal counsel of its selection in the
event of any dispute or question as to the meaning or construction of any of
the provisions hereof or its duties hereunder, and it shall incur no
liability and shall be fully protected in acting in accordance with the
opinion and instructions of such counsel. Each of the parties, jointly and
severally, agrees to reimburse the Escrow Agent on demand for such legal
fees, disbursements and expenses and in addition, the Escrow Agent shall
have the right to reimburse itself for such fees, disbursements and expenses
from the property held in escrow hereunder.
e) The Escrow Agent shall be under no duty to give the property held in escrow
by it hereunder any greater degree of care than it gives its own similar
property.
f) The Escrow Agent shall invest the property held in escrow in such a manner
as directed in Schedule A annexed hereto, which may include deposits in
Citibank and mutual funds advised, serviced or made available by Citibank or
its affiliates even though Citibank or its affiliates may receive a benefit
or profit therefrom.
The parties to this agreement acknowledge that non-deposit investment
products are not obligations of, or guaranteed, by Citibank/Citicorp nor any
of its affiliates; are not FDIC insured; and are subject to investment
risks, including the possible loss of principal amount invested. Only
deposits in the United States are subject to FDIC insurance.
g) In the event of any disagreement between/among any of the parties to this
agreement, or between/among them or either or any of them and any other
person, resulting in adverse claims or demands being made
<PAGE>
in connection with the subject matter of the Escrow, or in the event that
the Escrow Agent, in good faith, be in doubt as to what action it should
take hereunder, the Escrow Agent may, at its option, refuse to comply with
any claims or demands on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not become liable in any way or to any person
for its failure or refusal to act, and the Escrow Agent shall be entitled to
continue so to refrain from acting until (i) the rights of all parties shall
have been fully and finally adjudicated by a court of competent
jurisdiction, or (ii) all differences shall have been adjusted and all doubt
resolved by agreement among all of the interested persons, and the Escrow
Agent shall have been notified thereof in writing signed by all such
persons. The Escrow Agent shall have the option, after 30 days' notice to
the other parties of its intention to do so, to file an action in
interpleader requiring the parties to answer and litigate any claims and
rights among themselves. The rights of Escrow Agent under this paragraph are
cumulative of all other rights which it may have by law or otherwise.
h) The Escrow Agent is authorized, for any securities at any time held
hereunder, to register such securities in the name of its nominee(s) or the
nominees of any securities depository, and such nominee(s) may sign the name
of any of the parties hereto to whom or to which such securities belong and
guarantee such signature in order to transfer securities or certify
ownership thereof to tax or other governmental authorities.
i) Notice to the parties shall be given as provided in Schedule A annexed
hereto.
ARTICLE SECOND: The Escrow Agent shall make payments of income earned on the
escrowed property as provided in Schedule A annexed hereto. Each such payee
shall provide to the Escrow Agent an appropriate W-9 form for tax identification
number certification or a W-8 form for non-resident alien certification. The
Escrow Agent shall be responsible only for income reporting to the Internal
Revenue Service with respect to income earned on the escrowed property.
ARTICLE THIRD: The Escrow Agent may, in its sole discretion, resign and
terminate its position hereunder at any time following 60 days written notice to
the parties to the Escrow Agreement herein. Any such resignation shall
terminate all obligations and duties of the Escrow Agent hereunder. On the
effective date of such resignation, the Escrow Agent shall deliver this Escrow
Agreement together with any and all related instruments or documents to any
successor Escrow Agent agreeable to the parties, subject to this Escrow
Agreement herein. If a successor Escrow Agent has not been appointed prior to
the expiration of 60 days following the date of the notice of such resignation,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent, or other appropriate relief.
Any such resulting appointment shall be binding upon all of the parties to this
Agreement.
ARTICLE FOURTH: The Escrow Agent shall receive the fees provided in Schedule B
annexed hereto. In the event that such fees are not paid to the Escrow Agent
within 60 days of presentment to the party responsible for such fees as set
forth in said Schedule B, then the Escrow Agent may pay itself such fees from
the property held in escrow hereunder.
ARTICLE FIFTH: Any modification of this Agreement or any additional obligations
assumed by any party hereto shall be binding only if evidenced by a writing
signed by each of the parties hereto.
ARTICLE SIXTH: In the event funds transfer instructions are given (other than in
writing at the time of execution of this Agreement), whether in writing, by
telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call back to the person or persons designated in
Schedule A annexed hereto, and the Escrow Agent may rely upon the confirmations
of anyone purporting to be the person or persons so designated. To assure
accuracy of the instructions it receives, the Escrow Agent may record such call
backs. If the Escrow Agent is unable to verify the instructions, or is not
satisfied with the verification it receives, it will not execute the
instruction until all issues have been resolved. The persons and telephone
numbers for call backs may be changed only in writing actually received and
acknowleged by the Escrow Agent. The parties agree to notify the Escrow Agent
of any errors, delays or other problems within 30 days
<PAGE>
after receiving notification that a transaction has been executed. If it is
determined that the transaction was delayed or erroneously executed as a result
of the Escrow Agent's error, the Escrow Agent's sole obligation is to pay or
refund such amounts as may be required by applicable law. In no event shall the
Escrow Agent be responsible for any incidental or consequential damages or
expenses in connection with the instruction. Any claim for interest payable
will be at the Escrow Agent's published savings account rate in effect in New
York, New York.
ARTICLE SEVENTH: This Agreement shall be governed by the law of the State of New
York in all respects. The parties hereto irrevocably and unconditionally submit
to the jurisdiction of a federal or state court located in the Borough of
Manhattan, City, County and State of New York, in connection with any
proceedings commenced regarding this Escrow Agreement, including but not limited
to, any interpleader proceeding or proceeding for the appointment of a successor
escrow agent the Escrow Agent may commence pursuant to this Agreement, and all
parties irrevocably submit to the jurisdiction of such courts for the
determination of all issues in such proceedings, without regard to any
principles of conflicts of laws, and irrevocably waive any objection to venue or
inconvenient forum.
ARTICLE EIGHTH: This Agreement may be executed in one or more counterparts, each
of which counterparts shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Agreement.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
CITIBANK, N.A.
as Escrow Agent
By
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(Signature)
Title
-------------------------------
Date
--------------------------------
PARTY A PARTY B
By By
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Title Title
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Date Date
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<PAGE>
Schedule A
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Citibank, N.A.
The Citibank Private Bank
Preferred Custody Services
120 Broadway, 2nd Floor
New York, New York 10271
Ladies and Gentlemen:
Westminster Securities Corporation (hereinafter called the "Underwriter"),
and foreignTV.com, Inc., a Delaware corporation (hereinafter called the
"Issuer"), have entered into an underwriting agreement pursuant to which the
Underwriter has been employed to use its best efforts, as agent for the Issuer,
to sell and distribute a maximum of 1,700,000 units ("Units"), each Unit
consisting of one (1) share of Common Stock, $.01 par value, of the Issuer
("Common Stock"), and one (1) Warrant to purchase one (1) share of Common Stock
at $9.00 per Warrant. The nature of the underwriting commitment is such that,
unless at least 850,000 Units have been subscribed and paid for within ninety
(90) days after the prospectus relating to such offering first becomes available
for public distribution, or within an additional 90 days if the Underwriter and
Issuer so agree, the employment of the Underwriter will be terminated and all
funds will be returned to the Under writer for refund in full to the respective
subscribers, with interest and without deduction.
The public offering is required to be commenced promptly after receipt of
notice that the Securities and Exchange Commission has declared the Registration
Statement containing the prospectus effective (the "Effective Date").
The Underwriter will deposit the gross proceeds from all sales of the Stock
with you as Escrow Agent on the terms and conditions hereafter set forth:
1. Persons subscribing to purchase the Units will be instructed to remit
the purchase price by wire transfer as instructed by you or the Underwriter or
in the form of checks, drafts, money orders or other instruments for the payment
of money (collectively, "Instruments of Payment"), payable to the order of
"Citibank, N.A., as Escrow Agent for foreignTV.com, Inc.". Instruments of
Payment will be remitted directly to the Underwriter by the subscribers, or by
selected dealers through whom the
<PAGE>
Underwriter may offer the Units, and each day's receipts will be delivered by
the Underwriter to you before 12:00 P.M., on the following business day,
accompanied by a letter of transmittal in duplicate setting forth as to each
subscriber, the name, address, number of Units purchased, tax ID number or
social security number, as applicable, and the amount remitted.
2. The Instruments of Payment are to be collected by you, and the
proceeds thereof are to be held in escrow until the total amount of such cash
and proceeds reaches the sum of $5,100,000 (which represents the proceeds from
the sale of 850,000 Units). Such funds shall be invested by you in a money
market deposit account until either the end of the period set forth in the first
unnumbered paragraph on this Schedule (plus a ten (10) day collection period) or
upon the receipt of the aforesaid sum of $5,100,000.
3. In the event you do not receive from the Underwriter within the period
set forth in the first unnumbered paragraph of this Schedule, Instruments of
Payment in the aggregate sum of $5,100,000 or in the event that such Instruments
of Payment in the aggregate sum of $5,100,000 are received but not collected
within the aforesaid period and a 10-day collection period, you shall issue and
deliver by wire transfer, to the Underwriter amounts equal to the aggregate
amounts received from it and collected by you, together with accrued interest
thereon. You shall notify the Underwriter and the Issuer of your distribution
of funds received and collected by you, as aforementioned, provided, however,
that such distribution shall be made only in respect of funds in hand, in cash,
with you at such time.
4. Upon collection by you of $5,100,000 within the period set forth in
the first unnumbered paragraph of this Schedule (plus a ten (10) day collection
period), which sum of $5,100,000 represents the proceeds from the sale of
850,000 Units, you shall immediately notify the Issuer and the Underwriter of
such fact in writing and you will continue to hold the said $5,100,000 in escrow
until given instructions in writing by the Underwriter as to the disposition of
said funds. Upon such instructions being given you in writing by the
Underwriter, you will deliver at a time fixed by the Underwriter said $5,100,000
in the following manner:
(a) to the Issuer in the amount of $4,641,000 by wire transfer
instructions to be provided by the Issuer.
(b) to the Underwriter in the amount of $459,000 representing
commissions, by wire transfer instructions to be provided by the Underwriter.
5. All notices hereunder shall be mailed by ordinary first class mail
in a sealed post-paid wrapper, at the addresses set forth below:
If to the Issuer: If to the Underwriter:
ForeignTV.com, Inc. Westminister Securities
162 Fifth Avenue Corporation
Suite 1005A 19 Rector Street
New York, New York 10010 Suite 1105
Attn: Jonathan Braun New York, New York 10006
Telephone No.: (212) 206-1121 Attn: Jonathan O'Shea
Facsimile No.: (914) 232-5662 Telephone No.: (212) 480-2507
Facsimile No.: (212) 480-2549
If to the Escrow Agent:
At the address set forth above
2
