<PAGE>
AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON FEBRUARY 28, 1997.
FILE NO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
VIALOG CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
MASSACHUSETTS 4813 04-3305282
(PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
(STATE OR OTHER CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
----------------
46 MANNING ROAD
BILLERICA, MASSACHUSETTS 01821
(508) 667-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
GLENN D. BOLDUC
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VIALOG CORPORATION
46 MANNING ROAD
BILLERICA, MASSACHUSETTS 01821
(508) 667-2000
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
DAVID L. LOUGEE, ESQ. DEAN F. HANLEY, ESQ.
JEFFREY L. DONALDSON, ESQ. DAVID H. FEINBERG, ESQ.
MIRICK, O'CONNELL, DEMALLIE & LOUGEE, FOLEY, HOAG & ELIOT LLP
LLP ONE POST OFFICE SQUARE
1700 BANK OF BOSTON TOWER BOSTON, MASSACHUSETTS 02109
100 FRONT STREET (617) 832-1000
WORCESTER, MASSACHUSETTS 01608-1477
(508) 799-0541
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
PROPOSED
TITLE OF EACH CLASS MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value............ $67,620,000 $20,491
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
----------------
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 28, 1997
PROSPECTUS
, 1997
4,200,000 SHARES
[ICON] VIALOG CORPORATION
COMMON STOCK
All of the 4,200,000 shares of Common Stock offered hereby are being sold by
VIALOG Corporation (the "Company"). Prior to this offering, there has been no
public market for the Common Stock. It is currently estimated that the initial
public offering price will be between $ and $ per share. See "Underwriting"
for a discussion of the factors considered in determining the initial public
offering price.
The Company intends to make an application to have the Common Stock listed on
the New York Stock Exchange under the symbol " ."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS (1) COMPANY (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............. $ $ $
Total(3)............... $ $ $
- -------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the Underwriters an option, exercisable within 30
days hereof, to purchase up to an aggregate of 630,000 additional shares of
Common Stock at the Price to the Public less Underwriting Discounts and
Commissions, for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to the Public,
Underwriting Discounts and Commissions, and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions, including the right of the Underwriters to
reject orders in whole or in part. It is expected that the delivery of such
shares will be made in New York, New York on or about , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
[ICON] VIALOG
GROUP COMMUNICATIONSSM
[PHOTO DESCRIPTION: PROFILE OF OPERATOR IN FOREGROUND; MAN AND WOMAN TALKING
IN BACKGROUND]
GROUP COMMUNICATIONS DEFINED.
[PHOTO DESCRIPTION: TWO MEN EXAMINING CIRCUIT BOARD]
THE BUSINESS MEETING REDEFINED.
[PHOTO DESCRIPTION: SMILING OPERATOR IN FOREGROUND]
[PHOTO DESCRIPTION: SEVERAL PERSONS
AT WORKSTATIONS]
THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WILL MAKE AVAILABLE QUARTERLY REPORTS CONTAINING UNAUDITED
SUMMARY FINANCIAL INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH
FISCAL YEAR.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
VIALOG Group Communications is a service mark of the Company. ProShare is a
registered trademark of Intel Corporation. NetMeeting is a registered
trademark of Microsoft Corporation. All other trademarks or trade names
referred to in this Prospectus are the property of their respective owners.
<PAGE>
PROSPECTUS SUMMARY
Simultaneously with the closing of the offering made by this Prospectus (the
"Offering"), VIALOG Corporation will combine, in separate transactions (the
"Acquisitions") in exchange for cash and shares of its Common Stock, seven
private conference service bureaus (each, a "Founding Company" and,
collectively, the "Founding Companies"). Unless otherwise indicated, (i) all
references to the "Company" include the Founding Companies, (ii) all references
to "VIALOG" mean VIALOG Corporation prior to the consummation of the
Acquisitions, (iii) all references to the Founding Companies include the
Founding Companies prior to the consummation of the Acquisitions and the
subsidiaries of VIALOG with which the Founding Companies will be merged or to
which the assets of the Founding Companies will be sold, and (iv) all
references to "1994," "1995" and "1996" mean, respectively, the year ended
December 31, 1994, 1995 and 1996 with respect to the Company and each of the
Founding Companies.
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the pro forma combined and
individual historical financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, all share,
per share and financial information set forth in this Prospectus (i) has been
adjusted to give effect to the Acquisitions and (ii) assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
VIALOG was founded on January 1, 1996 with the intention of becoming a
leading provider of value-added electronic group communications services. These
services include audio, video and data teleconferencing. Through the
combination of seven private conference service bureaus simultaneously with the
closing of this Offering, the Company will establish one of the largest and
most geographically diverse networks of sales and operations centers focused
solely on the electronic group communications market. The Company intends to
establish its brand, VIALOG, as synonymous with superior electronic group
communications services. The Company believes it will increase its market share
by emphasizing superior customer service, enhanced and customized services,
targeted marketing and relationship selling. The Company has approximately
10,000 ports of teleconferencing capability (one "port" is required for each
conference participant) with which it services its customers. These customers
include Fortune 500 companies and several telecommunications providers as well
as medium and small businesses and institutions. The Founding Companies had a
combined compound annual growth rate in net revenues of 31.5% during the three-
year period ended December 31, 1996 and pro forma combined net revenues of
$50.6 million in 1996.
The Company's objective is to facilitate effective teleconferences through a
combination of technology, enhanced services and superior customer service.
Operator-assisted audio teleconferencing is the cornerstone of the Company's
business and the principal service which builds customer loyalty. The Company
also offers enhanced services such as digital replay of teleconferences,
broadcast fax and fulfillment services such as follow-up mailings or calls.
Additionally, the Company offers customized communications solutions, which
include event planning and training in teleconferencing skills. The Company
derived approximately 85%, 10% and 5% of its 1996 net revenues from audio
teleconference services, related enhanced services and customized
communications solutions, respectively.
According to estimates from the International Teleconferencing Association
("ITCA"), the market for domestic teleconferencing services has more than
doubled in size from $700 million in 1992 to $1.6 billion in 1996. This growth
has been driven by a number of factors, including technological advances that
have increased the quality and number of available conferencing features, the
globalization of business operations, and the increased acceptance of
teleconferencing as an effective business tool. Competitors in this market
include (i) the inter-exchange carriers ("IXCs"), or long distance telephone
companies, which are the largest service providers
3
<PAGE>
in the industry and generally market teleconferencing services as part of a
"bundled" service offering, (ii) approximately 20 private conference service
bureaus ("PCSBs") (excluding the Founding Companies), which are generally
smaller companies that focus on audio teleconferencing, and (iii) the
independent local exchange carriers ("LECs") which, like the IXCs, offer
teleconferencing as one of many services. In addition, the Regional Bell
Operating Companies ("RBOCs") will be allowed to provide long distance
services, which the Company believes may lead to their entry into the
teleconferencing market, if they individually meet certain requirements of the
Telecommunications Act of 1996.
STRATEGY
The Company's objective is to become a leading provider of premium electronic
group communications services. Management plans to achieve this goal by:
Creating a brand identity. The Company intends to establish its brand,
VIALOG, as synonymous with expertise in, and a focus on, electronic group
communications. The Company intends to distinguish its brand from those of the
IXCs and other competitors through the Company's responsive customer service,
focused service offerings and selling strategy.
Focusing on superior customer service. The Company expects to continue to
differentiate itself from competitors through its customer service philosophy,
which stresses operator training, personalized service and anticipation of
customer needs. The Company plans to combine the best aspects of each of the
Founding Companies' customer service practices into a uniform standard of
excellence in the industry.
Offering a comprehensive range of value-added services. Management believes
that, after the Acquisitions, the Company will offer one of the most
comprehensive selections of audio teleconferencing services in its industry,
with features and pricing options to meet varying customer needs. The Company
intends to remain at the forefront of the electronic group communications
industry by continuing to augment its existing service offerings through the
development and introduction of additional enhanced services and customized
communications solutions.
Establishing a national sales network. The Company will establish a national
sales network with a total staff of approximately 70 salespeople, including 40
field salespeople, 10 national accounts salespeople and 20 salespeople
dedicated to telemarketing. The field salespeople will form the core of the
Company's selling effort. This group will be deployed throughout the United
States and will focus on increasing usage at the local level under any national
contracts as well as focus on sales to regional accounts. The national accounts
salespeople will focus their efforts on obtaining national contracts with the
Company's top customers, which include many Fortune 500 companies. The Company
also intends to market its services vertically within select industries, such
as pharmaceutical, finance, and technology, in order to capitalize on its
industry-specific knowledge.
Capitalizing on opportunities to provide outsourced services. The Company
intends to expand its customer base for outsourced services to include
additional IXCs and independent LECs as well as RBOCs. Management believes the
broad trend among these companies to outsource services such as telemarketing
and billing is likely to extend to teleconferencing as these companies continue
to move away from labor intensive activities. Additionally, should the RBOCs
become long distance providers, management believes that some may choose to
outsource their teleconferencing requirements in order to gain rapid entry into
this market.
Expanding through acquisitions. One element of the Company's strategy is to
continue consolidating the electronic group communications services industry in
order to increase market share, broaden geographic coverage and add new service
offerings. The Company will seek to acquire companies that provide high quality
4
<PAGE>
service, have a significant customer base and utilize high quality technology.
Management believes its acquisition experience in combining the Founding
Companies and its knowledge of the industry will be instrumental in identifying
and successfully negotiating additional acquisitions.
Capitalizing on consolidation benefits. The Company expects to capitalize on
the benefits of its increased size, the combined experience of the Founding
Companies and its diverse customer base. The Company believes that its size
will result in stronger bargaining power in areas such as long distance
telecommunications, equipment, employee benefits, financing and marketing. The
Company also intends to improve allocation of personnel and equipment and to
streamline internal practices through coordination among the Founding
Companies. Management also intends to cross-market services developed by any
one of the Founding Companies to all of its customers and to maximize capacity
utilization and pricing strategy.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company.................... 4,200,000 shares
Common Stock to be outstanding after the Offering (1).. 9,148,604 shares
Use of proceeds........................................ To pay the cash portion
of the purchase price
for the Founding
Companies, to repay
approximately $480,000
of indebtedness of the
Founding Companies, to
repay $500,000 of notes
issued by VIALOG prior
to the Offering, and for
working capital and
general corporate
purposes, which may
include future
acquisitions.
NYSE symbol............................................
</TABLE>
- --------
(1) Upon completion of the Offering, the number of shares outstanding will
consist of (i) 1,399,650 shares issued and outstanding as of February 28,
1997, (ii) 3,548,954 shares to be issued as consideration in the
Acquisitions, and (iii) the 4,200,000 shares being offered hereby. Such
share number does not include (i) an aggregate of 507,566 shares subject to
options outstanding under the Company's 1996 Stock Plan, (ii) 1,027,934
additional shares reserved for issuance under the Company's 1996 Stock
Plan, and (iii) an aggregate of 55,555 shares issuable upon exercise of
warrants issued by the Company in connection with a bridge financing. See
"Organization and Acquisition of the Founding Companies", "Management--
Executive Compensation," "Management--1996 Stock Plan" and "Certain
Transactions--Organization of the Company."
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
5
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
VIALOG will combine the Founding Companies simultaneously with and as a
condition to the consummation of this Offering. However, ATS (one of the
Founding Companies) has been identified as the accounting acquirer for
financial statement presentation purposes. The following summary unaudited pro
forma financial data presents certain data for the Company, as adjusted for (i)
the effects of the Acquisitions on an historical basis, (ii) the effects of
certain pro forma adjustments to the historical financial statements, and
(iii) except with respect to pro forma balance sheet data, the consummation of
the Offering. See "Selected Financial Data" and the Unaudited Pro Forma
Combined Financial Statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
YEAR ENDED
DECEMBER 31, 1996
-----------------
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C>
STATEMENT OF EARNINGS DATA (UNAUDITED) (1)(2):
Net revenues................................................. $ 50,609
Gross profit (3)............................................. 22,503
Selling, general and administrative expenses (4)............. 17,255
Goodwill amortization (5).................................... 1,539
---------
Operating income............................................. 3,709
Interest expense, net........................................ (740)
---------
Earnings before income taxes................................. 2,969
Provision for income taxes................................... 1,687
---------
Net earnings................................................. $ 1,282
=========
Pro forma earnings per share (6)............................. $ .13
=========
Shares used in computing pro forma earnings per share (6).... 9,604,611
=========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
PRO AS
FORMA (7) ADJUSTED (8)
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (UNAUDITED) (1):
Cash and cash equivalents................................ $ 2,013
Working capital (deficit)................................ (37,858)
Total assets............................................. 63,001
Total debt, including current portion.................... 10,585
Stockholders' equity..................................... 6,388
</TABLE>
- --------
(1) The pro forma combined statement of earnings data and the pro forma
combined balance sheet data assume that the Acquisitions occurred on
January 1, 1996 and December 31, 1996, respectively, and are not
necessarily indicative of the results the Company would have obtained had
these events actually then occurred or of the Company's future results. The
pro forma combined financial information (i) is based on preliminary
estimates, available information and certain assumptions that management
deems appropriate and (ii) should be read in conjunction with the other
financial statements and notes thereto included elsewhere in this
Prospectus.
(2) Computed on the basis described in Note 5 to the Unaudited Pro Forma
Combined Financial Statements.
(3) Reflects a reduction of approximately $1.5 million in long distance charges
as a result of contracts recently entered into by certain of the Founding
Companies as if such contracts had been in effect as of January 1, 1996.
(4) Reflects certain reductions of approximately $2.0 million in compensation
for the owners and certain key employees and consultants of the Founding
Companies to specified amounts that the individuals have agreed to accept
subsequent to the Acquisitions.
(footnotes continued on following page)
6
<PAGE>
(5) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions over a 25-year period and computed on the basis described in
Notes 3, 4(b) and 5(h) to the Unaudited Pro Forma Combined Financial
Statements.
(6) Computed on the basis described in Note 5(k) to the Unaudited Pro Forma
Combined Financial Statements. Includes warrants to purchase 55,555 shares
of Common Stock exercisable 180 days after the closing of the Offering, an
aggregate of 507,566 shares subject to options outstanding under the
Company's 1996 Stock Plan less 107,114 shares assumed to be repurchased
using the treasury stock method, and 52,000 shares issued upon exercise of
stock options.
(7) Computed on the basis described in Notes 3, 4(a) and (b) to the Unaudited
Pro Forma Combined Financial Statements.
(8) Computed on the basis described in Notes 3, 4(c) and (d) to the Unaudited
Pro Forma Combined Financial Statements and reflects the closing of this
Offering and the Company's application of the net proceeds therefrom. See
"Use of Proceeds."
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
The following table presents summary statement of financial data for each of
the Founding Companies (see "The Company" for the complete names of each) for
the three most recent fiscal years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
ATS
Net revenues......................................... $12,996 $17,012 $22,347
Gross profit......................................... 5,946 7,545 7,900
Selling, general and administrative expenses......... 5,371 6,646 8,300
ACCESS
Net revenues......................................... $ 5,114 $ 6,508 $ 9,073
Gross profit......................................... 2,291 3,089 5,002
Selling, general and administrative expenses......... 1,745 2,582 3,455
CSI
Net revenues......................................... $ 2,331 $ 3,808 $ 5,868
Gross profit......................................... 1,216 2,382 3,660
Selling, general and administrative expenses......... 1,083 1,388 1,621
CALL POINTS
Net revenues......................................... $ 8,537 $ 6,852 $ 7,509
Gross profit......................................... 2,397 1,521 1,611
Selling, general and administrative expenses......... 2,035 1,820 1,873
TCC
Net revenues......................................... $ 1,515 $ 2,329 $ 3,396
Gross profit......................................... 699 1,200 1,583
Selling, general and administrative expenses......... 510 889 1,329
AMERICO
Net revenues......................................... $ 772 $ 1,227 $ 1,679
Gross profit......................................... 437 602 825
Selling, general and administrative expenses......... 345 514 889
CDC
Net revenues......................................... $ 1,121 $ 1,131 $ 1,480
Gross profit......................................... 412 366 594
Selling, general and administrative expenses......... 337 377 655
</TABLE>
7
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk factors,
as well as the other information contained in this Prospectus. This Prospectus
contains certain forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result
of any number of factors, including the risk factors set forth below and
factors described elsewhere in this Prospectus.
ABSENCE OF COMBINED OPERATING HISTORY; DIFFICULTY OF INTEGRATING THE FOUNDING
COMPANIES
VIALOG was founded on January 1, 1996 and to date has conducted no
operations and generated no revenues. VIALOG has entered into agreements to
combine the Founding Companies simultaneously with the closing of this
Offering. The Founding Companies have operated, and will continue to operate
prior to the closing of the Acquisitions, as separate, independent businesses.
Additionally, the Company will use the purchase method of accounting to record
the Acquisitions. Consequently, the pro forma and combined financial
information contained in this Prospectus may not be indicative of the
Company's future operating results and financial condition. The successful and
timely integration of the operations of the Founding Companies is critical to
the Company's future financial performance. To date, the Founding Companies
have used different accounting practices and procedures and management
information systems. Until the Company establishes centralized accounting and
other administration systems, it will rely on the separate systems of the
Founding Companies. The Company has only very recently established systems and
controls at the parent company level and, prior to this Offering, had not
attempted to prepare financial statements that combined or consolidated the
operations of the seven Founding Companies.
The integration of the operations of the Founding Companies will require the
Company, among other things, to retain key employees, assimilate diverse
corporate cultures and manage geographically dispersed operations, each of
which could pose significant challenges to the Company and its management. The
Company also proposes to adopt certain new business strategies, such as
placing greater emphasis on face-to-face sales than on telephone sales, that
may be ineffective or more costly than the Company anticipates. Moreover, the
Acquisition agreements place limitations for a two year period following the
closing of this Offering on the Company's ability, among other things, to
reduce the workforce or terminate employees (except as related to employee
performance, the contemplated reorganization of the combined sales and
marketing staff and the consolidation of certain accounting functions) without
the approval of a majority in interest of the former stockholders of the
affected Founding Company. Such limitations could restrict the Company's
ability to integrate the operations of the Founding Companies successfully and
could limit the Company's ability to respond to competitive pressures on its
labor costs. There can be no assurance that the Company will be successful in
integrating any of the operations of the Founding Companies or, if integrated,
that such combined operations will not demonstrate significant operating
inefficiencies. The failure of the Company to integrate the operations of the
Founding Companies successfully will have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Billing and Management Information Systems" and "Organization and
Acquisition of the Founding Companies."
PRETAX LOSSES
Four of the Founding Companies, ATS, Call Points, Americo and CDC, incurred
aggregate pretax losses in 1996 of approximately $1.2 million. Call Points and
CDC incurred aggregate pretax losses in 1995 of approximately $399,000. There
can be no assurance that such Founding Companies will achieve profitability in
1997 or thereafter. The failure of such Founding Companies to achieve
profitability will have a material adverse effect on the Company's business,
financial condition and results of operations. See "Selected Individual
Founding Company Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
8
<PAGE>
COMPETITION
The teleconferencing services industry is highly competitive and subject to
rapid change. The Company currently competes with the following categories of
companies: (i) IXCs, such as AT&T Corporation ("AT&T"), MCI Communications
Corporation ("MCI"), Sprint Corporation ("Sprint"), Frontier Corporation
("Frontier") and Cable & Wireless, Inc. ("Cable & Wireless"), and non-
facilities based long distance providers, such as Excel Communications, Inc.
("Excel"), (ii) independent LECs, such as GTE Corporation ("GTE") and Southern
New England Telephone Company ("SNET"), and (iii) other PCSBs. The IXCs
currently serve approximately 80% of the audio teleconferencing market. Under
the Telecommunications Act of 1996, the RBOCs will also be allowed to provide
long distance services upon the satisfaction of certain conditions, which the
Company believes will lead to their entry into the teleconferencing market. If
the Company is able to expand its video and data teleconferencing service
offerings, it will encounter additional competition, not only from existing
providers of audio teleconferencing, but also from competitors dedicated to
video and/or data teleconferencing.
Many of the Company's current and potential competitors have substantially
greater financial, sales, marketing, managerial, operational and other
resources, as well as greater name recognition, than the Company. As a result,
potential competitors may be able to respond more effectively than the Company
to new or emerging technologies and changes in customer requirements, to
initiate or withstand significant price decreases or to devote substantially
greater resources than the Company in order to develop and promote new
services. Because Multipoint Control Units ("MCUs") are not prohibitively
expensive to purchase or maintain, companies previously not involved in
teleconferencing could choose to enter the marketplace and compete with the
Company. There can be no assurance that new competitors will not enter the
Company's markets or that consolidations or alliances among current
competitors will not create significant new competition. In order to remain
competitive, the Company will be required to provide superior customer service
and to respond effectively to the introduction of new and improved services
offered by its competitors. In addition, customers of the Company could decide
to use other service providers based on the premise that lower prices outweigh
superior customer service. Any failure of the Company to accomplish these
tasks or otherwise to respond to competitive threats could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Competition."
FAILURE TO ESTABLISH A BRAND
The Company's business strategy depends to a significant extent on the
Company's ability to establish and maintain a single brand identity for its
services that customers will associate with superior customer service. On
February 28, 1997, the Company filed applications to register the mark "VIALOG
Group Communications" as a service mark in the United States. There can be no
assurance that the Company's applications for service mark registration will
be granted, that any issued registrations will assure the Company exclusive
rights to use the service mark with respect to any of its electronic group
communications services, or that the Company will not be adversely affected by
a third party's claim to superior trademark rights in one or more
jurisdictions. Failure to obtain registration and exclusive rights to the
service mark could require the Company to alter or abandon the mark or to pay
third parties monetary damages and could adversely affect the success of the
Company's branding strategy. In addition, although each of the Founding
Companies has conducted business operations for several years, none has
managed to establish a national brand identity for its services and there can
be no assurance that the Company will have the resources or ability to do so.
The failure of the Company to establish and maintain such a national brand
identity could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Growth
Strategy."
CONCENTRATION OF REVENUES
In 1994, 1995 and 1996, the Company derived approximately 90%, 90% and 85%,
respectively, of its net revenues from audio teleconferencing services. The
Company expects to continue to derive substantially all of
9
<PAGE>
its net revenues for the foreseeable future from audio teleconferencing. There
can be no assurance that these services will not become subject to competitive
price pressures similar to those that have substantially eroded prices for
other telephone services, both domestically and internationally. Competitive
price pressure may result in loss of customers or price erosion. These and
other factors adversely affecting the demand for the Company's audio
teleconferencing services could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--The Company's Electronic Group Communications
Services."
OUTSOURCING FOR IXCS AND LECS
The Company currently derives approximately 10% of its net revenues from
IXCs and LECs which outsource teleconferencing services provided to their
respective customers. These telecommunications companies have the financial
capability and expertise to deliver these teleconferencing services
internally. There can be no assurance that the Company's current IXC and LEC
customers will not insource the teleconferencing services currently provided
by the Company and pursue such market actively and in direct competition with
the Company. Moreover, the Company expects to derive a portion of its future
revenues from RBOCs that enter the long distance market and outsource their
teleconferencing services. There can be no assurance that the RBOCs will be
able to enter the long distance market on a timely basis, if at all; that any
RBOC entering the long distance market will offer teleconferencing services;
or that any IXC, LEC or RBOC offering such services will outsource services or
choose the Company as the provider of such outsourced teleconferencing
services. The failure of any of such events to occur would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Competition."
SIGNIFICANT CUSTOMERS INSOURCE
Many of the Company's current and prospective customers have sufficient
resources to purchase the equipment and hire the personnel necessary to
establish and maintain teleconferencing capabilities sufficient to meet their
respective teleconferencing needs. Moreover, technological improvements will
further enhance the ability of these customers to establish internal
teleconferencing facilities. There can be no assurance that any of the
Company's customers will not establish internal teleconferencing facilities or
expand existing facilities and cease to use the Company's services. The loss
of any one or more of such customers could cause a significant and immediate
decline in net revenues, which would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Customers" and "Business--Competition."
POTENTIAL ACQUISITIONS
One element of the Company's business strategy is to acquire additional
electronic group communications service businesses. However, the Company is
aware of only a limited number of potential acquisition candidates. Certain of
the Company's principal competitors have each recently acquired a PCSB, which
may increase competition for the remaining acquisition opportunities in the
teleconferencing industry. Continued consolidation in the industry, and the
potential entry of RBOCs into the teleconferencing industry, may intensify
such competition and increase the price which the Company would have to pay in
connection with any future acquisitions. Except for the Acquisitions, the
Company's management has limited experience in identifying appropriate
acquisitions and in integrating new businesses or operations into existing
operations. The identification, evaluation, negotiation and integration of any
such acquisition may divert the time, attention and resources of the Company,
particularly its management. There can be no assurance that the Company will
be able to identify, acquire or profitably manage additional businesses or
successfully integrate acquired businesses, if any, into the Company without
substantial costs, delays or other operational or financial problems. The
inability of the Company to implement its acquisition strategy successfully or
the failure to integrate new businesses or operations into its current
operations could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," and "Business Growth Strategy."
10
<PAGE>
NEW MANAGEMENT TEAM; RELIANCE ON KEY PERSONNEL
The Company's senior management team has been in place for only a relatively
short period of time. The Company's success will depend on the ability of its
executive officers to establish and integrate themselves into the Company's
daily operations as well as to gain the confidence of the Presidents and
employees of the Founding Companies. The Company's operations are also
substantially dependent on the continued efforts of the senior management and
sales personnel of the Founding Companies. Although the Company has entered
into employment agreements, effective upon the closing of this Offering, with
its executive officers and senior management of the Founding Companies, there
can be no assurance that any such employee will continue in his or her present
capacity or in any other capacity with the Company for any particular period
of time. The loss of the services of any of these individuals could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company believes that its future success will also
depend significantly on its ability to attract, motivate and retain additional
highly skilled technical, operational, managerial and marketing personnel.
There can be no assurance that the Company will be successful in attracting,
assimilating and retaining the personnel necessary to maintain or improve the
Company's operations. The Company does not intend to obtain or maintain key
executive life insurance covering its executive officers or other members of
senior management. See "Management."
RECENT ENTRANCE INTO VIDEO AND DATA TELECONFERENCING MARKETS
The Company introduced its video teleconferencing services in 1996. The
Company's revenues for video teleconferencing for 1996 were approximately
$13,000. Only one of the Founding Companies has invested in video
teleconferencing MCUs or servers. The Company introduced its data
teleconferencing services in 1997, and only one of the Founding Companies has
a data teleconferencing MCU (which is a beta site for the manufacturer of the
MCU). The Company has limited capacity and experience to handle video and data
teleconferencing. Additionally, few sales people, reservationists, operators
and technical support people are trained in video and data teleconferencing.
There can be no assurance that the Company will be able to obtain significant
business from video and data teleconferencing services or, if obtained, that
the Company has the ability to service such business. See "Business--The
Company's Electronic Group Communications Services."
TECHNOLOGICAL CONSIDERATIONS
The Company currently derives a substantial portion of its net revenues from
the sale of audio teleconferencing services. If the manufacturers of private
branch exchanges ("PBXs"), the equipment used by most businesses and
institutions to handle their internal telephone requirements, develop
improved, cost-effective PBX capabilities for handling teleconferencing calls
with the quality and functionality of existing MCUs used in the
teleconferencing business, the Company's customers could choose to purchase
such equipment and hire the personnel necessary to service their
teleconferencing needs through internal telephone systems. The loss of such
customers could have a material adverse effect on the Company's business,
financial condition and results of operations. Additionally, if Internet
technology can be modified to accommodate multipoint voice transmission with
audio quality comparable to that of MCUs used in the teleconferencing
business, the availability of such technology could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Competition."
LONG DISTANCE SERVICES CONTRACTS
A significant portion of the Company's direct costs are attributable to the
purchase of local and long distance telephone services. There can be no
assurance that competition in the long distance services market will continue
to increase, that any increased competition will reduce the cost of long
distance services or that the Company's purchasing strategy will result in
cost savings. If the costs of long distance services increase over time, the
Company's current purchasing strategy, which calls for shorter-term contracts,
may place it at a competitive disadvantage with respect to competitors that
have entered into longer-term contracts for long distance services. There can
be no assurance that the Company's analysis of the future costs of long
distance services will be accurate, and the failure to predict future cost
trends accurately could have a material adverse effect on the
11
<PAGE>
Company's business, financial condition and results of operations. Certain of
the Company's existing contracts have remaining terms in excess of one year
and require the Company to pay premiums over current market rates for long
distance services. These contracts impose substantial monetary penalties for
early termination. Although the Company intends to attempt to renegotiate
these contracts to obtain more favorable rates, there can be no assurance that
the Company will be able to do so. The failure of the Company to renegotiate
these contracts will require the Company to continue to pay premiums over
current market rates for long distance services. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business--
Suppliers."
POTENTIAL FLUCTUATION IN QUARTERLY RESULTS
Quarterly net revenues are difficult to forecast because the market for the
Company's services is competitive and subject to variation. In addition, the
consolidation of the Founding Companies may result in unanticipated
operational difficulties. The Company's expenses are based, in part, on its
expectations as to future net revenues. If net revenues are below
expectations, the Company may be unable or unwilling to reduce expenses, and
the failure to do so may have a material adverse effect on the Company's
business, financial condition and results of operations. As a result, the
Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES
As part of the purchase price for the Founding Companies, approximately
$28.9 million, or approximately % of the estimated net proceeds of this
Offering, and an aggregate of 3,548,954 shares of Common Stock will be paid to
stockholders of the Founding Companies who are or are expected to become
officers, Directors or five percent stockholders of the Company upon
completion of the Offering. In addition, approximately $500,000 of the
proceeds from this Offering will be used to repay indebtedness of the Founding
Companies guaranteed by certain stockholders of the Founding Companies. See
"Use of Proceeds" and "Organization and Acquisition of the Founding
Companies."
REGULATION
In general, the telecommunications industry is subject to extensive
regulation by federal, state and local governments. Although there is little
or no direct regulation in the United States of the core electronic group
communications services offered by the Company, various government agencies,
such as the Federal Communications Commission (the "FCC"), have jurisdiction
over some of the Company's current and potential suppliers of
telecommunications services, and government regulation of those services may
have a direct impact on the cost of the Company's electronic group
communications services. The Telecommunications Act of 1996 is being contested
both administratively and in the courts, and opinions vary widely as to the
effects and timing of various aspects of the law. There can be no assurances
at this time that the Telecommunications Act of 1996 will create any
opportunities for the Company, that local access services will be provided by
the IXCs, or that the RBOCs will be able to offer long distance services
including teleconferencing. The Telecommunications Act of 1996 has effected
significant changes in the telecommunications industry and the Company is
unable to predict the extent to which such changes or the implementation of
the Telecommunications Act of 1996 by the FCC may ultimately affect its
business. There can be no assurance that the FCC or other government agencies
will not seek in the future to regulate the prices, conditions or other
aspects of the electronic group communications services offered by the
Company, that the FCC will not impose registration, certification or other
requirements on the provision of those services, or that the Company would be
able to comply with any such requirements. In addition, the Company is subject
to laws and regulations that affect its ability to provide certain of its
enhanced services, such as those relating to privacy and the recording of
telephone calls. Changes in the current federal, state or local legislation or
regulation could have a material adverse effect on the Company's business,
financial
12
<PAGE>
condition and results of operations. Moreover, government regulations in
countries other than the United States vary widely and may restrict the
Company's ability to offer its services in those countries. See "Business--
Regulation."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the completion of the Acquisitions and this Offering, the
Company's executive officers and Directors of the Founding Companies will
beneficially own approximately 41.0% of the outstanding shares of Common
Stock. These persons, if acting in concert, may be able to continue to
exercise control over the Company's affairs, to elect the entire Board of
Directors and to control the disposition of matters submitted to a vote of
stockholders. This concentration of ownership may enable such persons to cause
or prevent a change in control of the Company without the approval of the
other stockholders of the Company, including purchasers of Common Stock in
this Offering. There can be no assurance that this concentration of ownership
will not have a material adverse effect on the market price of the Common
Stock. See "Principal Stockholders."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common
Stock. Therefore, the initial public offering price of the Common Stock
offered hereby will be determined by negotiations between the Company and the
representatives of the Underwriters and may bear no relationship to the price
at which the Common Stock will trade after the Offering. The market price of
the Common Stock could be subject to wide fluctuations in response to the
announcement of operating results below those of financial analysts'
projections, changes in such projections, quarterly variations in operating
results, the emergence of new competitors, announcements of technological
innovations or new services by the Company or its competitors, trends or
changes in the electronic group communications industry, and other events or
factors. In addition, the stock market has experienced extreme price and
volume fluctuations that have particularly affected the market prices of many
communications companies. This market volatility has had a substantial effect
on the market prices of securities issued by companies for reasons unrelated
to the operating performance of such companies. These broad market
fluctuations may have a material adverse effect on the market price of the
Common Stock. See "Underwriting."
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON
STOCK
The market price of the Common Stock and the Company's ability to raise
capital through sales of equity securities may be adversely affected by the
sale, or availability for sale, of substantial amounts of Common Stock in the
public market following this Offering. Simultaneously with the closing of this
Offering, the stockholders of the Founding Companies will receive, in the
aggregate, 3,548,954 shares of Common Stock (the "Acquisition Shares") as a
portion of the consideration for the sale of their businesses to the Company.
Upon completion of the Acquisitions and this Offering, there will be 9,148,604
shares of Common Stock outstanding (assuming no exercise of options or
warrants after February 28, 1997), of which the 4,200,000 shares being sold in
this Offering will be freely tradable in the United States without restriction
under the Securities Act of 1933, as amended (the "Securities Act") unless
acquired by "affiliates" of the Company (as defined in Rule 144 under the
Securities Act). The remaining 4,948,604 shares of Common Stock outstanding
are "restricted securities" (as defined in Rule 144 and Rule 701 under the
Securities Act) (the "Restricted Shares") and may not be sold unless
registered under the Securities Act or sold pursuant to an exemption from
registration, such as the exemption provided by Rule 144. All of the holders
of the Restricted Shares are subject to lock-up agreements, pursuant to which
they have severally agreed that, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation (and, except as may be
disclosed in this Prospectus), will not announce or disclose any intention to
sell, offer to sell, solicit an offer to buy, contract to sell, grant any
option to purchase, or otherwise transfer or dispose of, any shares of Common
Stock, or any securities convertible into or exercisable or exchangeable for
Common Stock, for a period of 180 days after the date of this Prospectus.
Donaldson, Lufkin & Jenrette Securities Corporation may, in its sole
discretion and at any time without notice, release all or a portion of the
Restricted Shares from the restrictions imposed by such agreements. As of 180
days after the date of this Prospectus, 1,209,650 of the Restricted Shares
will be eligible for sale in the public market pursuant to
13
<PAGE>
Rule 144 and Rule 701. The stockholders who receive the Acquisition Shares
will not be eligible to sell any such shares in the public market pursuant to
Rule 144 for one year following the closing of the Acquisitions.The holders of
the Acquisition Shares and the principal holders of other Restricted Shares,
including the officers and Directors of the Company, will also have certain
demand registration rights with respect to such shares, beginning one year
after the closing of this Offering, as well as certain piggyback registration
rights with respect to such shares. In addition, the Company intends to file
one or more registration statements on Form S-8 with respect to 1,625,000
shares of Common Stock issued or issuable under its stock option plan. Shares
covered by any such registration statement will be eligible for sale in the
public market upon the effectiveness of such registration statement. See
"Management--1996 Stock Plan," "Description of Capital Stock--Registration
Rights" and "Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
The initial public offering price is substantially higher than the net
tangible book value per share of the Common Stock. Investors purchasing shares
of Common Stock in this offering will therefore incur immediate and
substantial net tangible book value dilution, in the amount of $ per share.
To the extent that outstanding options to purchase shares of Common Stock are
exercised, there will be further dilution. See "Dilution."
EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS AND ANTI-TAKEOVER PROVISIONS;
POSSIBLE ISSUANCES OF PREFERRED STOCK
The Company's Articles of Organization, its By-Laws and certain
Massachusetts laws contain provisions that may discourage acquisition bids for
the Company and that may reduce temporary fluctuations in the trading price of
the Company's Common Stock which may be caused by accumulations of stock,
thereby depriving stockholders of certain opportunities to sell their stock at
temporarily higher prices. The Company's Articles of Organization provide for
a classified Board of Directors, and Directors who are so classified may be
removed by the stockholders only for cause. The Company's Articles of
Organization also permit the issuance of 10,000,000 shares of Preferred Stock
without stockholder approval and upon such terms as the Board of Directors may
determine. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
a majority of the outstanding stock of the Company. The Company has no present
plans to issue any shares of Preferred Stock. See "Description of Capital
Stock--Preferred Stock" and "Description of Capital Stock--Provisions of
Massachusetts Law and the Company's Articles of Organization and By-Laws."
ABSENCE OF DIVIDENDS
The Company intends to retain future earnings, if any, for use in the
development of its business and does not anticipate paying any cash dividends
on the Common Stock in the foreseeable future. See "Dividend Policy."
14
<PAGE>
THE COMPANY
VIALOG was founded on January 1, 1996 with the intention of becoming a
leading provider of value-added electronic group communications services.
These services include audio, video and data teleconferencing. VIALOG has
entered into agreements to combine, simultaneously with the closing of this
Offering, the seven Founding Companies, all of which will become wholly-owned
subsidiaries of VIALOG. See "Organization and Acquisition of the Founding
Companies." A brief description of each of the Founding Companies is set forth
below. For a discussion of results of operations for each of the Founding
Companies, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Risk Factors--Operating Losses."
AMERICAN TELECONFERENCING SERVICES, LTD. ("ATS"): ATS is headquartered in
Overland Park, Kansas, and maintains operations centers in Overland Park and
Colorado Springs, Colorado. Founded in 1984, ATS had net revenues of
approximately $8.5 million in 1993 and of approximately $22.3 million in 1996,
a three-year compounded annual growth rate of 37.9%. ATS provides a full range
of audio teleconferencing services and specializes in investor relations calls
and in the delivery of customized communications solutions, the latter of
which accounted for approximately 25.0% of its net revenues in 1996. The
founder of ATS, Robert A. Cowan, will become Chairman of the Board of
Directors of the Company upon the closing of this Offering. As of December 31,
1996, ATS had approximately 327 employees and approximately 4,300 ports of
teleconferencing capability.
TELEPHONE BUSINESS MEETINGS, INC. ("ACCESS"): Access is headquartered and
maintains its operations center in Reston, Virginia. Founded in 1987, Access
had net revenues of approximately $3.8 million in 1993 and of approximately
$9.1 million in 1996, a three-year compounded annual growth rate of 33.8%.
Access specializes in providing electronic group communications services to
numerous organizations, including financial institutions, government agencies,
trade associations and professional service firms. Access is also a leader
among the Founding Companies in the development of video teleconferencing
services. C. Raymond Marvin, a founder of Access, will continue to serve as
President of Access after the Acquisitions. As of December 31, 1996, Access
had approximately 100 employees and approximately 1,000 ports of
teleconferencing capability.
CONFERENCE SOURCE INTERNATIONAL, INC. ("CSI"): CSI is headquartered and
maintains its operations center in Atlanta, Georgia. Founded in 1992, CSI had
net revenues of approximately $1.2 million in 1993 and of approximately $5.9
million in 1996, a three-year compounded annual growth rate of 70.0%. CSI
specializes in providing electronic group communications services to certain
facilities-based carriers and non-facilities-based telecommunications
providers. Judy B. Crawford, a founder of CSI, will continue to serve as
President of CSI after the Acquisitions. As of December 31, 1996, CSI had
approximately 56 employees and approximately 1,300 ports of teleconferencing
capability.
CALL POINTS, INC. ("CALL POINTS"): Call Points is headquartered and
maintains its operations center in Montgomery, Alabama. Founded in 1988, Call
Points had net revenues of approximately $7.0 million in 1993 and of
approximately $7.5 million in 1996, a three-year compounded annual growth rate
of 2.3%. Call Points specializes in providing electronic group communications
services to the retail industry. As of December 31, 1996, Call Points had
approximately 91 employees and approximately 2,300 ports of teleconferencing
capability.
KENDALL SQUARE TELECONFERENCING, INC. ("TCC"): TCC is headquartered and
maintains its operations center in Cambridge, Massachusetts. Founded in 1987,
TCC had net revenues of approximately $343,000 in 1993 and of approximately
$2.6 million in 1996 (after adjustment discussed in Note 5 to the Unaudited
Pro Forma Combined Financial Statements), a three-year compounded annual
growth rate of 96.4%. TCC services a general business clientele. TCC is also a
beta site for a data teleconferencing system which will allow remote
sequential modification of shared data or documents during a teleconference.
The founder of TCC, Courtney Snyder, will continue to serve as President of
TCC after the Acquisitions. As of December 31, 1996, TCC had approximately 32
employees and approximately 450 ports of teleconferencing capability.
15
<PAGE>
AMERICAN CONFERENCING COMPANY, INC. ("AMERICO"): Americo is headquartered
and maintains its operations center in Ridgewood, New Jersey. Founded in 1987,
Americo had net revenues of approximately $500,000 in 1993 and of
approximately $1.7 million in 1996, a three-year compounded annual growth rate
of 50.4%. Americo services a general business clientele. The founder of
Americo, David Lipsky, will continue to serve as President of Americo after
the Acquisitions. As of December 31, 1996, Americo had approximately 26
employees and approximately 250 ports of teleconferencing capability.
COMMUNICATION DEVELOPMENT CORPORATION ("CDC"): CDC is headquartered and
maintains its operations center in Danbury, Connecticut. Founded in 1991, CDC
had net revenues of approximately $891,000 in 1993 and of approximately $1.5
million in 1996, a three-year compounded annual growth rate of 19.0%. CDC
specializes in providing a range of electronic group communications services
and customized communications solutions to the pharmaceutical industry. Patti
R. Bisbano, a co-founder of CDC, will continue to serve as President of CDC
after the Acquisitions. As of December 31, 1996, CDC had approximately 19
employees and approximately 250 ports of teleconferencing capability.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,200,000 shares of
Common Stock offered hereby, after deducting underwriting discounts and
commissions and estimated offering expenses, are estimated to be approximately
$ million ($ million if the Underwriters' over-allotment option is
exercised in full).
Of the net proceeds, approximately $38.6 million will be used to pay the
cash portion of the purchase price for the Founding Companies. Approximately
$28.9 million of such amount will be paid to former stockholders of the
Founding Companies who are expected to become officers, Directors, key
employees or five percent stockholders of the Company. Approximately $500,000
of such amount will be used to repay notes issued by VIALOG prior to the date
of this Offering. Such notes bear interest at the rate of 8% per annum and are
payable on the earlier of 10 days following the closing of the Offering or one
year from their issue date. In addition, approximately $480,000 will be used
to repay certain indebtedness of the Founding Companies which had been
incurred to fund the working capital needs of such Founding Companies. Such
indebtedness bears interest varying from prime plus 1% to 11% per annum and
matures between 1997 and 2001. See "Organization and Acquisition of the
Founding Companies," "Certain Transactions--Organization of the Company" and
"Underwriting."
The approximate $ million of net proceeds remaining will be used for
working capital and for general corporate purposes, which may include future
acquisitions. Pending such uses, the net proceeds will be invested in short-
term, interest-bearing, investment grade securities.
The Company currently has no binding agreements to effect any acquisitions
other than with respect to the Founding Companies. Although the Company is
currently in discussions with several acquisition candidates, the Company has
not entered into any acquisition agreements other than the Acquisitions as set
forth under "Business--Organization and Acquisition of the Founding
Companies." During the course of negotiating and planning the Acquisitions,
VIALOG entered into discussions with a number of PCSBs, including the Founding
Companies, regarding their possible participation in the combination of the
Founding Companies. Discussions with any company not participating in the
Acquisitions could resume at any time and one or more acquisitions could occur
within a short period of time thereafter.
DIVIDEND POLICY
The Company intends to retain all of its earnings, if any, to finance its
business and for general corporate purposes, including possible future
acquisitions, and does not anticipate paying any cash dividends on its Common
Stock for the foreseeable future. Any payment of future dividends will be at
the discretion of the Board of Directors and will depend upon, among other
factors, the Company's earnings, financial condition, capital requirements,
level of indebtedness, contractual restrictions with respect to the payment of
dividends and other considerations that the Company's Board of Directors deems
relevant.
17
<PAGE>
CAPITALIZATION
The following table sets forth the current maturities of long-term
obligations and capitalization at December 31, 1996 (i) of the Company on a
pro forma basis to give effect to the Acquisitions and the issuance of
3,548,954 shares of Common Stock pursuant thereto and (ii) of the Company, pro
forma as adjusted, to give effect to the Acquisitions, this Offering and the
application of the estimated net proceeds therefrom. See "Unaudited Pro Forma
Combined Financial Statements" and "Use of Proceeds." This table should be
read in conjunction with the Unaudited Pro Forma Combined Financial Statements
of the Company and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------
PRO FORMA
PRO FORMA (1) AS ADJUSTED (2)
------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term obligations...... $ 2,632 $
======== ====
Long-term obligations, less current maturities... 7,918
Stockholders' equity(3):
Preferred Stock: $.01 par value, 10,000,000
shares authorized; none issued or
outstanding................................... -- --
Common Stock: $.01 par value, 30,000,000 shares
authorized; 4,948,604 shares issued and
outstanding, pro forma; and 9,148,604 shares
issued and outstanding, pro forma as
adjusted(4)................................... 49
Additional paid-in capital....................... 24,224
Accumulated deficit.............................. (17,885)
-------- ----
Total stockholders' equity................... 6,388
-------- ----
Total capitalization....................... $ 14,306 $
======== ====
</TABLE>
- --------
(1) Computed on a basis described in Notes 4(a) and (b) to the Unaudited Pro
Forma Combined Financial Statements.
(2) Computed on a basis described in Notes 4(c) and (d) to the Unaudited Pro
Forma Combined Financial Statements.
(3) Adjusted to reflect an increase in the authorized capital of the Company
pursuant to Articles of Amendment to the Company's Articles of
Organization effective as of February 27, 1997.
(4) Does not reflect (i) 517,566 shares issuable upon the exercise of options
outstanding as of December 31, 1996, (ii) the grant subsequent to December
31, 1996 of options to purchase 42,000 shares of Common Stock, (iii) the
exercise subsequent to December 31, 1996 of options to purchase 52,000
shares of Common Stock, and (iv) the issuance subsequent to December 31,
1996 of warrants to purchase 55,555 shares of Common Stock. See
"Management--1996 Stock Plan" and "Description of Capital Stock--
Warrants."
18
<PAGE>
DILUTION
The deficit in pro forma net tangible book value of the Company as of
December 31, 1996 was approximately $(32,804,000) or approximately $(6.07) per
share of Common Stock. The deficit in pro forma net tangible book value per
share represents the amount by which the Company's pro forma total liabilities
exceed the Company's pro forma net tangible assets divided by the number of
shares of Common Stock to be outstanding after giving effect to the
Acquisitions. After giving effect to the sale of the 4,200,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $ per
share, and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, the Company's pro forma net tangible
book value at December 31, 1996 would have been approximately $ or
approximately $ per share. This represents an immediate increase in pro forma
net tangible book value of approximately $ per share to existing stockholders
and an immediate dilution of approximately $ per share to new investors
purchasing the shares in this Offering. The following table illustrates this
pro forma dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $
Pro forma deficit in net tangible book value per share before
the Offering.................................................. $(6.07)
Increase in pro forma net tangible book value per share
attributable to new investors.................................
------
Pro forma net tangible book value per share after the
Offering......................................................
---
Dilution per share to new investors............................ $
===
</TABLE>
The following table sets forth, on a pro forma basis to give effect to the
Acquisitions as of December 31, 1996, the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by existing stockholders and the new investors purchasing shares
of Common Stock from the Company in this Offering (before deducting
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE
----------------- --------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 4,948,604 54.1% $ (32,804,000) % $ (6.07)
New investors........... 4,200,000 45.9 $
--------- ----- -------------- -------
Total................... 9,148,604 100.0% 100.0%
========= ===== ============== =======
</TABLE>
- --------
(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the Company and the Founding Companies before the
Offering, adjusted to reflect (i) the cash portion of the consideration
payable to the stockholders of the Founding Companies in connection with
the Acquisitions, (ii) the transfer by a Founding Company of selected
assets to, and the assumption by a Founding Company of selected liabilities
of, certain stockholders of such Founding Company in connection with the
Acquisitions, (iii) the distribution of certain of the Founding Companies'
S corporation accumulated adjustment accounts, and (iv) a liability for
deferred income taxes. See "Use of Proceeds," "Capitalization" and
"Organization and Acquisition of the Founding Companies."
19
<PAGE>
SELECTED FINANCIAL DATA
VIALOG will acquire the Founding Companies simultaneously with and as a
condition to the consummation of the Offering. However, ATS has been
identified as the accounting acquirer for financial statement presentation
purposes. The following selected historical financial data of ATS as of
December 31, 1995 and 1996 and for each of the years in the three-year period
ended December 31, 1996 have been derived from the audited financial
statements of ATS included elsewhere in this Prospectus. The following
selected historical financial data for ATS as of December 31, 1992, 1993 and
1994, and for the years ended December 31, 1992 and 1993, have been derived
from unaudited financial statements of ATS, which have been prepared on the
same basis as the audited financial statements and, in the opinion of the
Company, reflect all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of such data. The following selected
unaudited pro forma combined financial data presents certain data for the
Company as of December 31, 1996 and for the year ended December 31, 1996, as
adjusted for (i) the effects of the Acquisitions on an historical basis, (ii)
the effects of certain pro forma adjustments to the historical financial
statements, and (iii) except with respect to pro forma balance sheet data, the
consummation of the Offering. See the Unaudited Pro Forma Combined Financial
Statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1992 1993 1994 1995 1996
------ ------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ATS STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $6,027 $8,459 $12,996 $17,012 $22,347
Gross profit.......................... 3,298 4,181 5,946 7,545 7,900
Selling, general and administrative
expenses............................. 2,831 3,808 5,371 6,646 8,300
------ ------ ------- ------- -------
Operating income (loss)............... 467 373 575 899 (400)
Interest expense, net................. 13 30 77 216 320
------ ------ ------- ------- -------
Earnings before income taxes.......... 454 343 498 683 (720)
Provision for income taxes............ 174 143 196 295 (315)
------ ------ ------- ------- -------
Net income (loss)..................... $ 280 $ 200 $ 302 $ 388 $ (405)
====== ====== ======= ======= =======
<CAPTION>
DECEMBER 31,
--------------------------------------
1992 1993 1994 1995 1996
------ ------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ATS BALANCE SHEET DATA:
Working capital (deficit)............. $ 219 $ 154 $ 272 $ (191) $ 384
Total assets.......................... 1,783 3,171 5,013 7,976 10,291
Total debt, including current
portion.............................. 373 849 1,746 3,064 5,932
Stockholders' equity.................. 1,009 1,142 1,302 1,693 1,288
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
YEAR ENDED
DECEMBER 31,
1996
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
STATEMENT OF EARNINGS DATA (UNAUDITED) (1)(2):
Net revenues............................................ $ 50,609
Gross profit (3)........................................ 22,503
Selling, general and administrative expenses (4)........ 17,255
Goodwill amortization (5)............................... 1,539
---------
Operating income........................................ 3,709
Interest expense, net................................... (740)
---------
Earnings before income taxes............................ 2,969
Provision for income taxes.............................. 1,687
---------
Net earnings............................................ $ 1,282
=========
Pro forma earnings per share (6)........................ $ .13
=========
Shares used in computing pro forma earnings per share
(6).................................................... 9,604,611
=========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------
PRO FORMA (7) AS ADJUSTED (8)
------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (UNAUDITED) (1):
Cash and cash equivalents........................ $ 2,013 $
Working capital (deficit)........................ (37,858)
Total assets..................................... 63,001
Total debt, including current portion............ 10,585
Stockholders' equity............................. 6,388
</TABLE>
- --------
(1) The pro forma combined statement of earnings data and the pro forma
combined balance sheet data assume that the Acquisitions occurred on
January 1, 1996 and December 31, 1996, respectively, and are not
necessarily indicative of the results the Company would have obtained had
these events actually then occurred or of the Company's future results.
The pro forma combined financial information (i) is based on preliminary
estimates, available information and certain assumptions that management
deems appropriate and (ii) should be read in conjunction with the other
financial statements and notes thereto included elsewhere in this
Prospectus.
(2) Computed on the basis described in Note 5 to the Unaudited Pro Forma
Combined Financial Statements.
(3) Reflects a reduction of approximately $1.5 million in long distance
charges as a result of contracts recently entered into by certain of the
Founding Companies as if such contracts had been in effect as of January
1, 1996.
(4) Reflects certain reductions of approximately $2.0 million in compensation
for the owners and certain key employees and consultants of the Founding
Companies to specified amounts that the individuals have agreed to accept
subsequent to the Acquisitions.
(5) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions over a 25-year period and computed on the basis described in
Notes 3, 4(b) and 5(h) to the Unaudited Pro Forma Combined Financial
Statements.
(6) Computed on the basis described in Note 5(k) to the Unaudited Pro Forma
Combined Financial Statements. Includes warrants to purchase 55,555 shares
of Common Stock exercisable 180 days after the closing of the Offering, an
aggregate of 507,566 shares subject to options outstanding under the
Company's 1996 Stock Plan less 107,114 shares assumed to be repurchased
using the treasury stock method, and 52,000 shares issued upon exercise of
stock options.
(7) Computed on the basis described in Notes 3, 4(a) and (b) to the Unaudited
Pro Forma Combined Financial Statements.
(8) Computed on the basis described in Notes 3, 4(c) and (d) to the Unaudited
Pro Forma Combined Financial Statements and reflects the closing of this
Offering and the Company's application of the net proceeds therefrom. See
"Use of Proceeds."
21
<PAGE>
SELECTED INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
The following table presents selected statement of operations data for each
of the Founding Companies for the years ended December 31, 1994, 1995 and
1996. See the financial statements of each of the Founding Companies, the
related notes thereto and the other information relating to the Founding
Companies contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
ATS
Net revenues......................................... $12,996 $17,012 $22,347
Gross profit......................................... 5,946 7,545 7,900
Selling, general and administrative expenses......... 5,371 6,646 8,300
ACCESS
Net revenues......................................... $ 5,114 $ 6,508 $ 9,073
Gross profit......................................... 2,291 3,089 5,002
Selling, general and administrative expenses......... 1,745 2,582 3,455
CSI
Net revenues......................................... $ 2,331 $ 3,808 $ 5,868
Gross profit......................................... 1,216 2,382 3,660
Selling, general and administrative expenses......... 1,083 1,388 1,621
CALL POINTS
Net revenues......................................... $ 8,537 $ 6,852 $ 7,509
Gross profit......................................... 2,397 1,521 1,611
Selling, general and administrative expenses......... 2,035 1,820 1,873
TCC
Net revenues......................................... $ 1,515 $ 2,329 $ 3,396
Gross profit......................................... 699 1,200 1,583
Selling, general and administrative expenses......... 510 889 1,329
AMERICO
Net revenues......................................... $ 772 $ 1,227 $ 1,679
Gross profit......................................... 437 602 825
Selling, general and administrative expenses......... 345 514 889
CDC
Net revenues......................................... $ 1,121 $ 1,131 $ 1,480
Gross profit......................................... 412 366 594
Selling, general and administrative expenses......... 337 377 655
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and related notes thereto and "Selected Financial Data" and
"Selected Individual Founding Company Financial Data" appearing elsewhere in
this Prospectus.
INTRODUCTION
The Company's net revenues are primarily derived from fees charged to
customers for audio and enhanced teleconferencing services. Cost of revenues
consists primarily of long distance telephone charges, salaries and benefits
for operators, and depreciation and maintenance of telephone bridging
equipment. Selling, general and administrative expenses consist primarily of
compensation and benefits to executive officers and certain employees,
marketing expenses, occupancy costs and professional fees.
The Founding Companies have been managed throughout the periods presented as
independent private companies, and, as such, their results of operations
reflect different tax structures (S corporations and C corporations) which
have influenced, among other things, their levels of historical compensation.
Certain officers and employees have agreed to reductions in their compensation
and benefits in connection with the organization of the Company and the
Acquisitions. The differential between the previous compensation and benefits
of these individuals and the compensation and benefits they have agreed to
accept subsequent to the Acquisitions is referred to as "Compensation
Differential." This Compensation Differential and the related income tax
effect have been reflected as pro forma adjustments in the Company's pro forma
financial statements included elsewhere in this Prospectus. See "Management--
Employment and Noncompetition Agreements."
VIALOG, which has conducted no operations to date other than in connection
with this Offering and the Acquisitions, intends to integrate certain
operations and administrative functions of the Founding Companies over a
period of time. This integration process may present opportunities to reduce
costs through the elimination of duplicative functions and through economies
of scale, particularly from expected reductions in long distance telephone
charges as existing agreements entered into by the Founding Companies lapse
and are replaced with new contracts negotiated by the Company. The Company is
currently unable to quantify these savings. It is anticipated that these
savings will be partially offset by the costs of being a public company and
the incremental costs related to the Company's new management. In addition, it
is anticipated that increased marketing costs will initially be required to
establish the Company's brand name in the marketplace. As a result of these
various costs and possible cost-savings, comparisons of historical operating
results may not be meaningful, and such results may not be indicative of
future performance.
ATS has been identified as the accounting acquirer for financial statement
preparation purposes. See "Results of Operations--Combined Founding
Companies."
ATS
Founded in 1984, ATS provides a full range of audio teleconferencing
services and specializes in audio teleconferencing services, enhanced services
and customized communications solutions. ATS is headquartered in Overland
Park, Kansas, and maintains operations centers in Overland Park and Colorado
Springs, Colorado.
23
<PAGE>
RESULTS OF OPERATIONS--ATS
The following table sets forth certain historical financial data of ATS and
such data as a percentage of net revenues for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues................... $12,996 100.0% $17,012 100.0% $22,347 100.0%
Cost of revenues............... 7,050 54.2 9,467 55.6 14,447 64.6
------- ----- ------- ----- ------- -----
Gross profit................... 5,946 45.8 7,545 44.4 7,900 35.4
Selling, general and
administrative expenses....... 5,371 41.3 6,646 39.1 8,300 37.1
------- ----- ------- ----- ------- -----
Operating income (loss)........ $ 575 4.5% $ 899 5.3% $ (400) (1.7)%
======= ===== ======= ===== ======= =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased $5.3 million, or 31.4%, from $17.0
million in 1995 to $22.3 million in 1996. This increase in net revenues
resulted primarily from additional sales of audio teleconferencing and
enhanced services to existing customers and sales to new customers.
Cost of revenues. Cost of revenues increased $5.0 million, or 52.6%, from
$9.5 million in 1995 to $14.5 million in 1996. As a percentage of net
revenues, cost of revenues increased 9.0 percentage points from 55.6% in 1995
to 64.6% in 1996. This percentage increase was primarily attributable to the
addition of 78 employees in operations, management and training positions as
well as increases in vendor expenses.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.7 million, or 24.9%, from $6.7 million in
1995 to $8.3 million in 1996. This dollar increase was primarily attributable
to additional administrative costs arising from a new facility in Colorado
Springs and non-recurring compensation to certain management personnel. As a
percentage of net revenues, selling, general and administrative expenses
decreased 2.0 percentage points from 39.1% in 1995 to 37.1% in 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. Net revenues increased $4.0 million, or 30.9%, from $13.0
million in 1994 to $17.0 million in 1995. This increase was primarily
attributable to additional sales of audio teleconferencing and enhanced
services to existing customers and sales to new customers.
Cost of revenues. Cost of revenues increased $2.4 million, or 34.3%, from
$7.1 million in 1994 to $9.5 million in 1995. As a percentage of net revenues,
cost of revenues increased 1.4 percentage points from 54.2% in 1994 to 55.6%
in 1995. The dollar and percentage increases are primarily attributable to the
addition of 80 employees in operations positions.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.3 million, or 23.7%, from $5.4 million in
1994 to $6.7 million in 1995. As a percent of net revenues, selling, general
and administrative expenses decreased 2.2 percentage points from 41.3% in 1994
to 39.1% in 1995. This percentage decrease was primarily due to the spreading
of such costs over a larger revenue base.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES--ATS
The following table sets forth selected financial information from ATS'
statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities............................. $ 822 $ 1,525 $ 457
Investing activities............................. (1,535) (2,765) (3,388)
Financing activities............................. 755 1,236 2,868
------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... $ 42 $ (4) $ (63)
======= ======= =======
</TABLE>
ATS had a positive cash flow from operations in each of 1994, 1995 and 1996.
Cash used in investing activities in 1994, 1995 and 1996 related solely to the
acquisition of property and equipment. Cash provided by financing activities
in 1994, 1995 and 1996 was derived primarily from new loans less principal
repayments and dividends. As of December 31, 1996, ATS had working capital of
$384,000.
VIALOG CORPORATION
VIALOG was incorporated on January 1, 1996. VIALOG incurred a net loss in
1996 of $1.3 million from general and administrative expenses. These expenses
consisted of legal, travel and consulting fees related to the organization of
VIALOG and the consummation of business combination agreements and the
Acquisition agreements with the Founding Companies.
COMBINED FOUNDING COMPANIES
The Combined Founding Companies Statements of Operations data for the years
ended December 31, 1994, 1995 and 1996 do not purport to present the financial
results or the financial condition of the combined Founding Companies in
accordance with generally accepted accounting principles. Such data represents
merely a summation of the net revenues, cost of revenues and selling, general,
and administrative expenses of the individual Founding Companies on an
historical basis, and excludes the effects of pro forma adjustments. This data
will not be comparable to and may not be indicative of the Company's post-
combination results of operations because (i) the Founding Companies were not
under common control or management and had different tax structures
(S corporations and C corporations) and (ii) the Company will use the purchase
method of accounting to record the Acquisitions.
RESULTS OF OPERATIONS--COMBINED FOUNDING COMPANIES
The following table sets forth certain unaudited combined data of the
Founding Companies on an historical basis and such data as a percentage of net
revenues, excluding the effects of pro forma adjustments for the periods
presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues..................... $32,386 100.0% $38,867 100.0% $51,352 100.0%
Cost of revenues................. 18,988 58.6 22,162 57.0 30,177 58.8
Selling, general and
administrative expenses......... 11,426 35.3 14,216 36.6 18,122 35.3
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. All Founding Companies reflected an increase in net revenues
during 1996. Combined net revenues increased by $12.5 million, or 32.1%, from
$38.9 million in 1995 to $51.4 million in 1996. The major components of this
increase were (i) an increase in ATS' net revenues of $5.3 million, or 31.4%,
from $17.0
25
<PAGE>
million in 1995 to $22.3 million in 1996 which was primarily attributable to
additional sales of audio teleconferencing and enhanced services to existing
and new customers, (ii) an increase in Access' net revenues of $2.6 million,
or 39.4%, from $6.5 million in 1995 to $9.1 million in 1996 resulting from
additional sales of audio teleconferencing services to existing customers and
sales to new customers, and (iii) an increase in CSI's revenues of $2.1
million, or 54.1%, from $3.8 million in 1995 to $5.9 million in 1996 resulting
from a $2.2 million increase in net revenues from two significant customers.
Cost of revenues. Cost of revenues increased by $8.0 million, or 36.2%, from
$22.2 million in 1995 to $30.2 million in 1996 and increased as a percentage
of net revenues from 57.0% in 1995 to 58.8% in 1996. The overall increase in
cost of revenues as a percentage of net revenues was primarily attributable to
additional costs associated with an expansion in capacity necessary to support
anticipated growth in net revenues. The dollar increase in cost of revenues
was primarily attributable to (i) an increase of $5.0 million, or 52.6%, in
the cost of revenues of ATS from $9.5 million in 1995 to $14.5 million in 1996
which resulted primarily from the addition of 78 employees in operations,
management and training positions, as well as increases in vendor expenses,
(ii) an increase in CSI's cost of revenues of $782,000, or 54.8%, from $1.4
million in 1995 to $2.2 million in 1996 resulting from increased
telecommunications costs associated with increased call volumes and costs
associated with the addition of nine operators, and (iii) an increase in
Access' cost of revenues of $652,000, or 19.1%, from $3.4 million in 1995 to
$4.1 million in 1996 resulting from increased telecommunications and occupancy
costs.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $3.9 million, or 27.5%, from $14.2
million in 1995 to $18.1 million in 1996 and decreased as a percentage of net
revenues from 36.6% in 1995 to 35.3% in 1996. The dollar increase in selling,
general and administrative expenses was primarily attributable to (i) an
increase of ATS' selling, general and administrative expenses of $1.7 million,
or 24.9%, from $6.7 million in 1995 to $8.3 million in 1996 resulting
primarily from additional administrative costs to support a new facility in
Colorado Springs and non-recurring compensation to certain management
personnel, (ii) an increase in Access' selling, general and administrative
expenses of $873,000, or 33.8%, from $2.6 million in 1995 to $3.5 million in
1996 resulting primarily from increases in occupancy costs and non-recurring
executive compensation and bad debt expense and (iii) an increase in TCC's
selling, general and administrative expenses of $440,000, or 49.5%, from
$889,000 in 1995 to $1.3 million in 1996 primarily attributable to the
addition of two salespeople, increased commissions and the hiring costs
associated with additional staff. The overall decrease in selling, general and
administrative expenses as a percentage of net revenues, from 36.6% in 1995 to
35.3% in 1996, is attributable to the spreading of such costs over a larger
base of revenues.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. All Founding Companies, with the exception of Call Points,
experienced an increase in net revenues in 1995. Overall net revenues
increased by $6.5 million, or 20.0%, from $32.4 million in 1994 to $38.9
million in 1995. This overall increase was primarily due to (i) an increase in
ATS' net revenues of $4.0 million, or 30.9%, from $13.0 million in 1994 to
$17.0 million in 1995, primarily attributable to additional sales of audio
teleconferencing and enhanced services to existing customers and sales to new
customers, (ii) an increase in CSI's net revenues of $1.5 million, or 63.4%
from $2.3 million in 1994 to $3.8 million in 1995 resulting from a $1.4
million increase in net revenues from CSI's two major existing customers, and
(iii) an increase in Access' net revenues of $1.4 million, or 27.3%, from $5.1
million in 1994 to $6.5 million in 1995 resulting from additional sales of
audio teleconferencing services to existing customers and sales to new
customers. Offsetting these increases was a decrease in Call Points, net
revenues of $1.7 million, or 19.7%, from $8.5 million in 1994 to $6.9 million
in 1995, primarily attributable to the loss of a significant customer.
Cost of revenues. Cost of revenues increased by $3.2 million, or 16.7%, from
$19.0 million in 1994 to $22.2 million in 1995 and decreased as a percentage
of net revenues from 58.6% in 1994 to 57.0% in 1995. The dollar increase in
cost of revenues was primarily attributable to (i) an increase in ATS' cost of
net revenues of $2.4 million, or 34.3%, from $7.1 million in 1994 to $9.5
million in 1995 resulting primarily from the costs associated
26
<PAGE>
with the addition of 80 employees and (ii) an increase in Access' cost of
revenues of $596,000, or 21.1%, from $2.8 million in 1994 to $3.4 million in
1995 resulting primarily from the costs of new equipment and salaries and
benefits for additional operators. Partially offsetting these increases was an
$809,000 decrease in cost of revenues at Call Points, attributable to the loss
of a significant customer. The decrease in cost of revenues as a percentage of
net revenues was attributable to the ability of the Founding Companies to
support the growth in net revenues without adding significant layers of
additional costs.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $2.8 million, or 24.4%, from $11.4
million in 1994 to $14.2 million in 1995 and increased as a percentage of net
revenues from 35.3% in 1994 to 36.6% in 1995. The dollar increase was
attributable to (i) an increase in ATS' selling, general and administrative
expenses of $1.3 million, or 23.7% , from $5.4 million in 1994 to $6.7 million
in 1995 and (ii) an increase in Access' selling, general and administrative
expenses of $837,000, or 48.0%, from $1.7 million in 1994 to $2.6 million in
1995 resulting primarily from moving and occupancy cost associated with
Access' relocation of facilities in 1995.
LIQUIDITY AND CAPITAL RESOURCES--COMBINED FOUNDING COMPANIES
The following table sets forth selected financial information from the
Founding Companies' cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities............................... $ 2,551 $ 4,144 $ 5,245
Investing activities............................... (2,966) (4,779) (4,457)
Financing activities............................... 454 1,272 (475)
------- ------- -------
Net increase in cash and cash equivalents............ $ 39 $ 637 $ 313
======= ======= =======
</TABLE>
All the Founding Companies had positive cash flow from operating activities
in 1994, 1995 and 1996. Cash used in investing activities related primarily to
the acquisition of property and equipment. Net cash provided by financing
activities represents borrowings on long-term debt and credit lines and
capital lease obligations to finance the acquisition of capital equipment.
Cash used in financing activities was applied to the repayment of long-term
debt and capital lease obligations and to the payment of dividends. The
Founding Companies had working capital of $1.2 million at December 31, 1996.
On the closing of this Offering, the Company intends to repay or refinance
an aggregate of approximately $1.2 million of indebtedness and other
obligations of the Founding Companies. See "Use of Proceeds."
The Company anticipates that its cash flow from operations will meet or
exceed its working capital needs, debt service requirements and planned
capital expenditures for property and equipment. On a combined basis, the
Founding Companies made capital expenditures of $4.7 million and $4.5 million
in 1995 and 1996, respectively.
The Company intends to continue pursuing attractive acquisition
opportunities. The timing, size or success of any acquisition and the
associated potential capital commitments are unpredictable. The Company plans
to fund future acquisitions primarily through a combination of working
capital, cash flow from operations and borrowings, as well as issuances of
additional equity securities.
Due to the relatively low levels of inflation experienced in 1994, 1995 and
1996, inflation did not have a significant effect on the results of the
combined Founding Companies in those years.
27
<PAGE>
INDIVIDUAL FOUNDING COMPANIES
The selected historical financial information presented in the tables below
for the individual Founding Companies is derived from, and should be read in
conjunction with, the respective audited financial statements and related
notes thereto of the individual Founding Companies included elsewhere herein
and "Selected Individual Founding Company Financial Data."
ACCESS
Founded in 1987, Access specializes in providing electronic group
communications services to numerous organizations, including financial
institutions, government agencies, trade associations and professional service
companies. Access is headquartered and maintains its operations center in
Reston, Virginia.
RESULTS OF OPERATIONS--ACCESS
The following table sets forth certain historical financial data of Access
and such data as a percentage of net revenues for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................ $5,114 100.0% $6,508 100.0% $9,073 100.0%
Cost of revenues.................... 2,823 55.2 3,419 52.5 4,071 44.9
------ ----- ------ ----- ------ -----
Gross profit........................ 2,291 44.8 3,089 47.5 5,002 55.1
Selling, general and administrative
expenses........................... 1,745 34.1 2,582 39.7 3,455 38.1
------ ----- ------ ----- ------ -----
Operating income.................... $ 546 10.7% $ 507 7.8% $1,547 17.0%
====== ===== ====== ===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased $2.6 million, or 39.4%, from $6.5
million in 1995 to $9.1 million in 1996. This increase was primarily
attributable to additional sales of teleconferencing services to existing
customers and sales to new customers.
Cost of revenues. Cost of revenues increased $652,000, or 19.1%, from $3.4
million in 1995 to $4.1 million in 1996. This increase was primarily
attributable to increased telecommunications and occupancy costs. As a
percentage of net revenues, cost of revenues decreased 7.6 percentage points
from 52.5% in 1995 to 44.9% in 1996.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $873,000, or 33.8%, from $2.6 million in
1995 to $3.5 million in 1996. As a percentage of net revenues, selling,
general and administrative expenses decreased 1.6 percentage points from 39.7%
in 1995 to 38.1% in 1996. The dollar and percentage increases resulted
primarily from increased occupancy costs and non-recurring executive
compensation and bad debt expense.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. Net revenues increased $1.4 million, or 27.3%, from $5.1
million in 1994 to $6.5 million in 1995. This increase was primarily
attributable to additional sales of teleconferencing services to existing
customers and sales to new customers.
Cost of revenues. Cost of revenues increased $596,000, or 21.1%, from $2.8
million in 1994 to $3.4 million in 1995. This dollar increase was primarily
attributable to the costs of new equipment and salaries and benefits for
additional operators. As a percentage of net revenues, cost of revenues
decreased 2.7 percentage points from 55.2% in 1994 to 52.5% in 1995.
28
<PAGE>
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $837,000, or 48.0%, from $1.7 million in
1994 to $2.6 million in 1995. As a percentage of net revenues, selling,
general and administrative expenses increased 5.6 percentage points from 34.1%
in 1994 to 39.7% in 1995. This percentage increase was primarily attributable
to moving expenses and increased occupancy costs associated with relocating to
a new facility.
LIQUIDITY AND CAPITAL RESOURCES--ACCESS
The following table sets forth selected financial information from Access'
statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities............................... $ 592 $ 821 $ 2,048
Investing activities............................... (557) (1,432) (795)
Financing activities............................... 22 771 (839)
------ -------- -------
Net increase in cash and cash equivalents............ $ 57 $ 160 $ 414
====== ======== =======
</TABLE>
Access had a positive cash flow from operations in each of 1994, 1995 and
1996. Cash used in investing activities in 1994, 1995 and 1996 related
primarily to the acquisition of property and equipment. Net cash provided by
financing activities in 1994 and 1995 was primarily the result of borrowings
on notes payable to finance the acquisition of capital equipment. During 1995,
$300,000 in cash was used to redeem stock from a former owner. Net cash used
by financing activities in 1996 is primarily the result of distributions
totaling $584,000 to Access' stockholders. Access had working capital of
$759,000 as of December 31, 1996.
CSI
Founded in 1992, CSI specializes in providing audio teleconferencing
services and enhanced services to certain facilities-based and non-facilities-
based telecommunications providers. CSI is headquartered and maintains its
operations center in Atlanta, Georgia.
RESULTS OF OPERATIONS--CSI
The following table sets forth certain historical financial data of CSI and
such data as a percentage of net revenues for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................ $2,331 100.0% $3,808 100.0% $5,868 100.0%
Cost of revenues.................... 1,115 47.8 1,426 37.4 2,208 37.6
------ ----- ------ ----- ------ -----
Gross profit........................ 1,216 52.2 2,382 62.6 3,660 62.4
Selling, general and administrative
expenses........................... 1,083 46.5 1,388 36.5 1,621 27.6
------ ----- ------ ----- ------ -----
Operating income.................... $ 133 5.7% $ 994 26.1% $2,039 34.8%
====== ===== ====== ===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased $2.1 million, or 54.1%, from $3.8
million in 1995 to $5.9 million in 1996. Virtually all of this increase was
the result of a $2.2 million increase in net revenues from two significant
customers of CSI.
29
<PAGE>
Cost of revenues. Cost of revenues increased $782,000, or 54.8%, from $1.4
million in 1995 to $2.2 million in 1996 and remained constant as a percentage
of net revenues. As a percentage of net revenues, cost of revenues increased
0.2 percentage points from 37.4% in 1995 to 37.6% in 1996. The dollar increase
was primarily attributable to increased telecommunications expenses associated
with increased call volumes and costs associated with the addition of nine
operators.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $233,000, or 16.8%, from $1.4 million in
1995 to $1.6 million in 1996. As a percentage of net revenues, selling,
general and administrative expenses decreased 8.9 percentage points from 36.5%
in 1995 to 27.6% in 1996. This percentage decrease was primarily attributable
to spreading fixed costs over a larger revenue base.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. Net revenues increased $1.5 million, or 63.4%, from $2.3
million in 1994 to $3.8 million in 1995. Virtually all of this increase was
the result of a $1.4 million increase in net revenues from two significant
customers of CSI.
Cost of revenues. Cost of revenues increased $311,000, or 27.9%, from $1.1
million in 1994 to $1.4 million in 1995. As a percentage of net revenues, cost
of revenues decreased 10.4 percentage points from 47.8% in 1994 to 37.4% in
1995. This percentage decrease was primarily attributable to a reduction in
local access charges, telecommunications expenses and the termination of a
lease for network access.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $305,000, or 28.2%, from $1.1 million in
1994 to $1.4 million in 1995. As a percentage of net revenues, selling,
general and administrative expenses decreased 10.0 percentage points from
46.5% in 1994 to 36.5% in 1995. This percentage decrease was primarily
attributable to spreading such costs over a larger revenue base.
LIQUIDITY AND CAPITAL RESOURCES--CSI
The following table sets forth selected financial information from CSI's
statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities........................... $ 53 $ 721 $ 2,128
Investing activities........................... (476) (225) (41)
Financing activities........................... 426 (144) (2,144)
------- ------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... $ 3 $ 352 $ (57)
======= ======= =========
</TABLE>
CSI had a positive cash flow from operations in each of 1994, 1995 and 1996.
Cash used in investing activities in 1994, 1995 and 1996 related solely to the
acquisition of property and equipment. Cash provided by financing activities
consisted of the proceeds of borrowings on long-term debt and from the
refinancing of capital lease obligations. Cash used in financing activities
consisted of repayments of long-term debt and capital lease obligations and
distributions to stockholders. As of December 31, 1996, CSI had working
capital of $469,000.
CALL POINTS
Founded in 1988, Call Points specializes in providing operator-attended
audio teleconferencing services to the retail industry. Call Points is
headquartered and maintains its operations center in Montgomery, Alabama.
30
<PAGE>
RESULTS OF OPERATIONS--CALL POINTS
The following table sets forth certain historical financial data of Call
Points and such data as a percentage of net revenues for the periods
presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................... $8,537 100.0% $6,852 100.0% $7,509 100.0%
Cost of revenues................ 6,140 71.9 5,331 77.8 5,898 78.5
------ ----- ------ ----- ------ -----
Gross profit.................... 2,397 28.1 1,521 22.2 1,611 21.5
Selling, general and
administrative expenses........ 2,035 23.8 1,820 26.6 1,873 24.9
------ ----- ------ ----- ------ -----
Operating income (loss)......... $ 362 4.3% $ (299) (4.4)% $ (262) (3.4)%
====== ===== ====== ===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased $657,000, or 9.6%, from $6.9 million in
1995 to $7.5 million in 1996. This increase in net revenues resulted from
additional sales of audio teleconferencing services to existing customers and
sales to new customers. Call Points' management believes that improvements in
the quality of services contributed to this increase.
Cost of revenues. Cost of revenues increased $567,000, or 10.6%, from $5.3
million in 1995 to $5.9 million in 1996. As a percentage of net revenues, cost
of revenues remained virtually unchanged between the periods. Cost of revenues
were high in 1995 and 1996 compared to those of the other Founding Companies
due to unfavorable telecommunication contracts and royalty payments to two
previous owners.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $53,000, or 2.9%, from $1.8 million in 1995
to $1.9 million in 1996. As a percentage of net revenues, selling, general and
administrative expenses decreased 1.7 percentage points from 26.6% in 1995 to
24.9% in 1996. This percentage decrease was primarily due to the spreading of
fixed costs over a larger revenue base and a reduction in executive
compensation.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. Net revenues decreased $1.7 million, or 19.7%, from $8.5
million in 1994 to $6.9 million in 1995. This decrease was attributable to the
loss of a significant customer representing approximately 15.0% of Call
Points' net revenues in 1994. This customer elected to provide its own
teleconferencing services and ceased to use Call Points' services.
Cost of revenues. Cost of revenues decreased $809,000, or 13.2%, from $6.1
million in 1994 to $5.3 million in 1995. As a percentage of net revenues, cost
of revenues increased 5.9 percentage points from 71.9% in 1994 to 77.8% in
1995. This percentage increase is primarily attributable to a time lapse
between the loss of a major customer and related labor reductions and to the
spreading of fixed depreciation costs over a smaller revenue base.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $215,000, or 10.6%, from $2.0 million in
1994 to $1.8 million in 1995. As a percent of net revenues, selling, general
and administrative expenses increased 2.8 percentage points from 23.8% in 1994
to 26.6% in 1995. This percentage increase was due to higher commissions paid
to sales agents and the spreading of selling, general and administrative costs
over a smaller revenue base.
31
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES--CALL POINTS
The following table sets forth selected financial information from Call
Points' statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995 1996
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities............................ $ 820 $ 841 $ 220
Investing activities............................ (148) (105) (50)
Financing activities............................ (695) (677) (288)
------- ------- --------
Net increase (decrease) in cash and cash
equivalents...................................... $ (23) $ 59 $ (118)
======= ======= ========
</TABLE>
Call Points had a positive cash flow from operations in each of 1994, 1995
and 1996. Cash used in investing activities in 1994, 1995 and 1996 related
solely to the acquisition of property, plant and equipment. Cash used in
financing activities in 1994, 1995 and 1996 was the result of repayment of
notes payable to lenders and related parties. As of December 31, 1996, Call
Points had working capital deficit of $380,000.
TCC
Founded in 1987, TCC provides audio teleconferencing services and enhanced
services to a general business clientele. TCC is headquartered and maintains
its operations center in Cambridge, Massachusetts.
On December 2, 1996, TCC distributed to its stockholders certain assets
unrelated to its core operations. Revenues associated with these assets were
$642,000, $727,000 and $707,000 for the years ended December 31, 1994 and 1995
and the 11-month period ended December 2, 1996, respectively. Operating income
associated with these assets was $75,000, $42,000 and $48,000 in such years
and period, respectively. See Note 1(a) to Notes to Financial Statements of
Kendall Square Teleconferencing, Inc. included elsewhere in this Prospectus.
RESULTS OF OPERATIONS--TCC
The following table sets forth certain historical financial data of TCC and
such data as a percentage of net revenues for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................ $1,515 100.0% $2,329 100.0% $3,396 100.0%
Cost of revenues.................... 816 53.9 1,129 48.5 1,813 53.4
------ ----- ------ ----- ------ -----
Gross profit........................ 699 46.1 1,200 51.5 1,583 46.6
Selling, general and administrative
expenses........................... 510 33.7 889 38.2 1,329 39.1
------ ----- ------ ----- ------ -----
Operating income.................... $ 189 12.4% $ 311 13.3% $ 254 7.5%
====== ===== ====== ===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased $1.1 million, or 45.8%, from $2.3
million in 1995 to $3.4 million in 1996. This increase resulted from
additional sales of audio teleconferencing services to existing customers and
sales to new customers. This increase was due, in part, to two new salespeople
added in 1996.
Cost of revenues. Cost of revenues increased $684,000, or 60.6%, from $1.1
million in 1995 to $1.8 million in 1996. As a percentage of net revenues, cost
of revenues increased 4.9 percentage points from 48.5% in 1995 to 53.4% in
1996. The dollar and percentage increases resulted primarily from an increase
in telecommunications expenses.
32
<PAGE>
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $440,000, or 49.5%, from $889,000 in 1995 to
$1.3 million in 1996. As a percentage of net revenues, selling, general and
administrative expenses increased 0.9 percentage points from 38.2% in 1995 to
39.1% in 1996. The dollar increase was primarily attributable to the costs of
the addition of two salespeople, increased commissions to sales personnel and
hiring costs associated with additional staff.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. Net revenues increased $814,000, or 53.7%, from $1.5 million
in 1994 to $2.3 million in 1995. This increase resulted from additional sales
of audio teleconferencing services to existing customers and sales to new
customers. This increase was due, in part, to the addition of a salesperson in
the Washington, D.C. area.
Cost of revenues. Cost of revenues increased $313,000, or 38.4%, from
$816,000 in 1994 to $1.1 million in 1995. As a percentage of net revenues,
cost of revenues decreased 5.4 percentage points from 53.9% in 1994 to 48.5%
in 1995. This percentage decrease was primarily attributable to the spreading
of such costs over a larger revenue base.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $379,000, or 74.3%, from $510,000 in 1994 to
$889,000 in 1995. As a percentage of net revenues, selling, general and
administrative increased 4.5 percentage points from 33.7% in 1994 to 38.2% in
1995. The additional costs consisted primarily of increased marketing expenses
incurred to support TCC's growth and costs associated with the addition of the
salesperson in the Washington, D.C. area.
LIQUIDITY AND CAPITAL RESOURCES--TCC
The following table sets forth selected financial information from TCC's
statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities............................. $ 62 $ 211 $ 159
Investing activities............................. (20) (231) (156)
Financing activities............................. (84) 68 40
------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... $ (42) $ 48 $ 43
======= ======= =======
</TABLE>
TCC had a positive cash flow from operations in each of 1994, 1995 and 1996.
Cash used in investing activities in 1994, 1995 and 1996 related solely to the
acquisition of property and equipment. Net cash used by financing activities
consisted of the repayment of debt and acquisition of treasury stock. Cash
provided by financing activities included proceeds from borrowings under a
note payable and net proceeds from capital lease obligations. As of December
31, 1996, TCC had a working capital deficit of $50,000.
AMERICO
Founded in 1987, Americo services a general business clientele. Americo is
headquartered and maintains its operations center in Ridgewood, New Jersey.
33
<PAGE>
RESULTS OF OPERATIONS--AMERICO
The following table sets forth certain historical financial data of Americo
and such data as a percentage of net revenues for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
---------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................ $772 100.0% $1,227 100.0% $1,679 100.0%
Cost of revenues.................... 335 43.4 625 50.9 854 50.9
---- ----- ------ ----- ------ -----
Gross profit........................ 437 56.6 602 49.1 825 49.1
Selling, general and administrative
expenses........................... 345 44.7 514 41.9 889 52.9
---- ----- ------ ----- ------ -----
Operating income (loss)............. $ 92 11.9% $ 88 7.2% $ (64) (3.8)%
==== ===== ====== ===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased $452,000, or 36.8%, from $1.2 million
in 1995 to $1.7 million in 1996. This increase was primarily attributable to
increases in sales of audio teleconferencing services to existing customers
and sales to new customers.
Cost of revenues. Cost of revenues increased $229,000, or 36.6%, from
$625,000 in 1995 to $854,000 in 1996. As a percentage of revenues, cost of
revenues remained constant at 50.9% of net revenues.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $375,000, or 73.0%, from $514,000 in 1995 to
$889,000 in 1996. As a percentage of revenues, selling, general, and
administrative expense increased 11.0 percentage points from 41.9% in 1995 to
52.9% in 1996. The additional costs consisted primarily of increased executive
compensation as well as the cost of employee benefit plans established in
1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. Net revenues increased $455,000, or 58.9%, from $772,000 in
1994 to $1.2 million in 1995. This increase was primarily attributable to
increases in sales of audio teleconferencing services to existing customers
and sales to new customers.
Cost of revenues. Cost of revenues increased $290,000, or 86.6%, from
$335,000 in 1994 to $625,000 in 1995. As a percentage of sales, cost of
revenues increased 7.5 percentage points from 43.4% in 1994 to 50.9% in 1995.
This percentage increase is primarily attributable to the increase in long-
distance telephone charges and the cost of additional operators.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $169,000, or 49.0%, from $345,000 in 1994 to
$514,000 in 1995. As a percentage of net revenues, selling, general and
administrative expenses decreased 2.8 percentage points from 44.7% in 1994 to
41.9% in 1995. The additional costs consisted primarily of increased marketing
personnel costs.
LIQUIDITY AND CAPITAL RESOURCES--AMERICO
The following table sets forth selected financial information from Americo's
statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities............................. $ 43 $ 17 $ 90
Investing activities............................. (47) (17) (25)
Financing activities............................. (1) 17 (43)
------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... $ (5) $ 17 $ 22
======= ======= =======
</TABLE>
34
<PAGE>
Americo had a positive cash flow from operations in each of 1994, 1995 and
1996. Cash used in investing activities in 1994, 1995 and 1996 related solely
to the acquisition of property and equipment. Cash provided by financing
activities resulted from borrowings under a line of credit. Cash used in
financing activities consisted of principal payments under capital lease
obligations and dividends. As of December 31, 1996 Americo had a working
capital deficit of $58,000.
CDC
Founded in 1991, CDC specializes in providing a range of electronic group
communications services and customized communications solutions, primarily to
the pharmaceutical and health-care industries. CDC is headquartered and
maintains its operations center in Danbury, Connecticut.
RESULTS OF OPERATIONS--CDC
The following table sets forth certain historical financial data of CDC and
such data as a percentage of net revenues for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................... $1,121 100.0% $1,131 100.0% $1,480 100.0%
Cost of revenues................ 709 63.2 765 67.6 886 59.9
------ ----- ------ ----- ------ -----
Gross profit.................... 412 36.8 366 32.4 594 40.1
Selling, general and
administrative expenses........ 337 30.1 377 33.3 655 44.2
------ ----- ------ ----- ------ -----
Operating income (loss)......... $ 75 6.7% $ (11) (.9)% $ (61) (4.1)%
====== ===== ====== ===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased $349,000, or 30.9%, from $1.1 million
in 1995 to $1.5 million in 1996. These additional sales were generated, in
part, by an increase in net revenues of $183,000 from two significant
customers of CDC.
Cost of revenues. Cost of revenues increased $121,000, or 15.8%, from
$765,000 in 1995 to $886,000 in 1996. As a percentage of net revenues, cost of
revenues decreased 7.7 percentage points from 67.6% in 1995 to 59.9% in 1996.
The percentage decrease was due to reductions in telecommunications expense
and improved utilization of existing capacity.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $278,000, or 73.7%, from $377,000 in 1995 to
$655,000 in 1996. As a percentage of net revenues, selling, general and
administrative expenses increased 10.9 percentage points from 33.3% in 1995 to
44.2% in 1996. This percentage increase was primarily attributable to the
addition of a sales manager and increases in executive compensation.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues. Net revenues remained virtually unchanged between 1995 and
1994. Although CDC experienced increases in net revenues from new and existing
customers, CDC's net revenues from its largest two customers declined by
$30,000.
Cost of revenues. Cost of revenues increased $56,000, or 7.9%, from $709,000
in 1994 to $765,000 in 1995. As a percentage of net revenues, cost of revenues
increased 4.4 percentage points from 63.2% in 1994 to 67.6% in 1995. The
increase resulted from the addition of operators and the doubling of office
space in anticipation of additional volume.
35
<PAGE>
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $40,000, or 11.9% from $337,000 in 1994
to $377,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES--CDC
The following table sets forth selected financial information from CDC's
statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995 1996
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities.............................. $ 159 $ 8 $ 143
Investing activities.............................. (183) (4) (2)
Financing activities.............................. 31 1 (69)
-------- ------ -------
Net increase in cash and cash equivalents........... $ 7 $ 5 $ 72
======== ====== =======
</TABLE>
CDC had a positive cash flow from operations in each of 1994, 1995 and 1996.
Cash used in investing activities in 1994, 1995 and 1996 related solely to the
acquisition of property and equipment. Cash provided by financing activities
included borrowings under a line of credit and long-term debt. Cash used in
financing activities included of repayments of borrowings under a line of
credit and repayments of long-term debt. As of December 31, 1996, CDC had
working capital of $70,000.
36
<PAGE>
BUSINESS
GENERAL
VIALOG was founded on January 1, 1996 with the intention of becoming a
leading provider of value-added electronic group communications services.
These services include audio, video and data teleconferencing. Through the
combination of seven PCSBs simultaneously with the closing of this Offering,
the Company will establish one of the largest and most geographically diverse
networks of sales and operations centers focused solely on the electronic
group communications market. The Company intends to establish its brand,
VIALOG, as synonymous with superior electronic group communications services.
The Company believes it will increase its market share by continuing to
emphasize superior customer service, enhanced and customized services,
targeted marketing and relationship selling. The Company has approximately
10,000 ports of teleconferencing capability and a skilled staff with which it
services its customers, which include Fortune 500 companies and several
telecommunications providers as well as medium and small businesses and
institutions.
The Company has differentiated itself from its competitors through its
customer service philosophy and broad range of service offerings. The Company
attracts and retains customers through a team approach to customer service,
which stresses operator training, personal service and anticipation of
customer needs. Management believes that the Company will offer one of the
most comprehensive selections of audio teleconferencing services in its
industry, with features and pricing options to meet varying customer needs.
These competitive advantages have contributed to the Company's combined
compound annual growth rate in net revenues of 31.5% during the three-year
period ended December 31, 1996 and pro forma combined net revenues of
approximately $50.6 million in 1996.
The Company's objective is to facilitate effective teleconferences through a
combination of technology, enhanced services and superior customer service.
Operator-assisted teleconferencing is the cornerstone of the Company's
business and the principal service which builds customer loyalty. The Company
also offers enhanced services, such as digital replay of teleconferences,
broadcast fax and fulfillment services such as follow-up mailings or calls.
Additionally, the Company offers customized communications solutions, which
include event planning and client training in teleconferencing skills. The
Company derived approximately 85%, 10% and 5% of its 1996 net revenues from
audio teleconference services, related enhanced services and customized
communications solutions, respectively.
INDUSTRY OVERVIEW
SERVICES
The electronic group communications industry provides a range of services to
facilitate multiparty communications with participants in different locations.
Through electronic group communications services, customers conduct routine
meetings, run training sessions, and share information where the traveling
associated with assembling a group frequently or on short notice makes face-
to-face meetings too costly, impractical or inconvenient. The ITCA estimates
that total teleconferencing industry net revenues (including hardware,
services and network net revenues) in North America increased from $1.8
billion in 1992 to $4.9 billion in 1996. Industry sources estimate that total
industry net revenues will exceed $10 billion by the year 2000. The primary
electronic group communications services available today are audio, video and
data teleconferencing.
Audio teleconferencing. Industry sources estimate that total audio
teleconferencing net revenues were approximately $2 billion in 1996, with the
service segment (the segment in which the Company competes) constituting
approximately $1.6 billion. Industry sources estimate that total audio
teleconferencing net revenues will exceed $5 billion by the year 2000.
An audio teleconference is established through specialized telephone
equipment known as a Multipoint Control Unit ("MCU") or "bridge." Prior to the
introduction of full duplex MCU technology in 1984, audio teleconferencing was
generally considered ineffective because only one person could speak at a
time. Using MCU technology, the number of participants in an audio
teleconference can now vary from three to thousands.
37
<PAGE>
The maximum number of participants is limited by the number of conference
"ports" available to the operator, with each participant using one port. Calls
may be established manually by an operator who places calls to, or receives
calls from, conference participants, each of whom occupies a single telephone
line and port. These lines are then "bridged" together through an MCU, which
permits simultaneous speaking by all participants, filters out the "echo" of
each participant's own speech, and equalizes sound volume and clarity.
Advances in MCU technology have not only eliminated many of the problems
associated with early audio teleconferencing, such as "clipping" (the loss of
initial or ending syllables of words) and loss of quality as lines were added,
but also have increased the number of available enhanced features. These
technological advances, combined with the greater overall awareness and
acceptance of audio teleconferencing as a business tool, have contributed to
the increased usage of teleconferencing over the last five years.
The demand for audio teleconferencing services has increased as a result of
a wide range of trends, including globalization of operations, increased
workforce training requirements, the advent of geographically dispersed work
teams, shared decision-making, and the growing role of strategic partnerships.
Users of audio teleconferencing are able to replace travel to existing
meetings, with attendant savings of actual and opportunity costs, and increase
communication with parties with whom they would otherwise not meet, thereby
yielding greater organizational productivity. The facilities, network and
labor costs associated with audio teleconferencing services, combined with a
lack of expertise and a desire to focus on their core businesses, have caused
most organizations to outsource audio teleconferencing.
Video teleconferencing. Total video teleconferencing net revenues were
approximately $2.2 billion in 1996, and industry sources estimate that such
net revenues will exceed $5 billion by the year 2000. Of the $2.2 billion in
1996, less than $100 million was attributable to the service segment in which
the Company competes, the majority of which was attributed to dedicated
network services for point-to-point video meetings, which do not require any
of the services offered by the Company. The broad adoption of video
teleconferencing as a meeting tool has historically been constrained by
several factors, including limited access to video sites, expensive and
proprietary equipment, limited and costly bandwidth, incompatibility of
systems, and poor video quality. Video teleconferencing was also generally
limited to small or broadcast meetings at fixed locations, except as
implemented using expensive two-way satellite technology.
The adoption of International Telecommunications Union ("ITU") standard
H.320 in 1991 and ITU standard H.323 in 1996 has facilitated systems
compatibility. By 1995, technological advances (which brought down the cost of
equipment and required bandwidth) combined with increased processing speed
(which improved quality) to permit the development of desktop video.
Interactive multipoint video teleconferencing also became feasible in 1995
with the introduction of more cost-effective video MCU technology and low-
cost, PC-based video cameras and sound cards. The rapid deployment of
compatible hardware, reductions in cost, increases in available bandwidth, and
improvements in quality are all expected to accelerate the growth of the
market for multipoint video teleconferencing.
Data teleconferencing. Data teleconferencing, which enables multiple users
to collaborate using data and voice over a single, high bandwidth line, is the
most recent advance in teleconferencing. Industry sources estimate that total
data teleconferencing net revenues constituted less than $150 million in 1996.
Virtually all of these net revenues were related to proprietary software and
systems not offered by the Company. The adoption of ITU standard T.120 data
protocols and H.323 for multimedia conferencing and new Internet "groupware"
services and software are expected to facilitate greater adoption of data
teleconferencing. Industry sources estimate that total data teleconferencing
net revenues will approach $1 billion by the year 2000, virtually all of which
will continue to be derived from sales of proprietary software and systems.
Prior to the emergence of data teleconferencing, audio teleconference
participants were unable to share computer data during a conference call. New
standards allow data to travel over data networks on an interactive basis so
that multiple remote computers can manipulate the same program. For instance,
Intel's ProShare and Microsoft's NetMeeting allow remotely located personal
computers and/or work stations to share video and data interactively over the
Internet. These Internet data teleconferencing programs will likely be used in
conjunction
38
<PAGE>
with audio teleconferencing to allow simultaneous group discussions during
editing and display of documents. Over two million copies of NetMeeting have
been distributed by Microsoft since its introduction in early 1996. Also,
several manufacturers have announced plans to introduce specialized non-TCP/IP
application servers that will provide mixed media teleconferencing with high
quality.
SERVICE PROVIDERS
There are three categories of service providers in the North American
electronic group communications industry: (i) the IXCs, such as AT&T, MCI,
Sprint, Frontier and Cable & Wireless, (ii) the PCSBs, a group of over 20
companies, excluding the Founding Companies, and (iii) the independent LECs,
such as GTE and SNET. In addition, the RBOCs will be allowed to provide long
distance services, which the Company believes may lead to their entry into the
teleconferencing market, if they individually meet certain requirements under
the Telecommunications Act of 1996. See "Business--Regulation."
The IXCs are currently the largest providers of teleconferencing services,
constituting approximately 80% of the audio teleconferencing services market.
Management believes that the IXCs generate most of their business through
their position as the customer's long distance carrier. The IXCs generally do
not market teleconferencing services separately, but rather offer such
services as part of a "bundled" telecommunications offering. The IXCs have
generally not emphasized enhanced services or customized communications
solutions to meet individual customer needs. Rather, they have generally de-
emphasized operator-involved services (such as 411 and collect calls), and are
increasingly implementing automated systems and technology as a substitute for
traditional operator-intensive services.
The second category of providers of electronic group communications services
are the PCSBs, constituting approximately 15% of the audio teleconferencing
services market. There are approximately 20 PCSBs, excluding the Founding
Companies. PCSBs began entering the teleconferencing market in the mid-1980s
when businesses were beginning to find applications for teleconferencing due
to significant technological improvements in teleconferencing equipment. The
number of PCSBs increased in the late 1980s, taking advantage of a niche
opportunity to provide customized, high quality service and specialized
applications. As a result of their scale and limited access to capital, PCSBs
tended to develop as regional or industry-specific businesses. Due to
technological changes facing the teleconferencing industry, such as the
introduction of video and data service, the ability to secure necessary
capital has become more critical. Additionally, many PCSBs do not currently
have the marketing expertise or teleconferencing capacity to reach the
critical mass which will allow them to develop a national brand name and
compete for and service large, national accounts. There has been some
consolidation in the industry, as evidenced by the fact that five PCSBs have
been acquired over the last 18 months by large telecommunications providers.
The third category of providers of electronic group communications services
are the independent LECs, which constitute under five percent of the audio
teleconferencing services market. Similar to the IXCs, the LECs have generally
not focused on teleconferencing, enhanced services or customized
communications solutions.
A potential new category of providers is the RBOCs. As a result of the
Consent Decree entered into by AT&T and the United States Department of
Justice in 1982, the RBOCs could not offer long distance services, which
drastically limited their teleconferencing potential. Under the
Telecommunications Act of 1996, the RBOCs will be allowed to provide in-region
long distance services upon the satisfaction of certain conditions. Upon
entrance into the long distance market, management believes that the ability
of an RBOC to gain immediate and significant teleconferencing market share
will be enhanced by its status as the incumbent provider of local services to
its customers. While each RBOC will determine whether to create a separate
teleconferencing business unit or to outsource this service, management
believes that some of the new entrants will elect to outsource
teleconferencing services and instead focus on entering the long distance
market. To date, three RBOCs have either entered into contracts or have issued
RFPs to outsource teleconferencing.
39
<PAGE>
GROWTH STRATEGY
The Company's objective is to become a leading provider of value-added
electronic group communications services. Management plans to achieve this
goal by:
Creating a brand identity. The Company intends to establish its brand,
VIALOG, as synonymous with expertise in, and a focus on, electronic group
communications. The Company intends to distinguish its brand from those of the
IXCs and other competitors through the Company's responsive customer service,
focused service offerings and selling strategy. In conjunction with this
strategy, the Company anticipates that it will invest $6 to $8 million in
advertising and promotion during the 24 months following this Offering, with
significant expenditures for direct marketing and trade advertising.
Focusing on superior customer service. The Company expects to continue to
differentiate itself from competitors through its customer service philosophy,
which stresses operator training, personalized service and anticipation of
customer needs. The Company plans to combine the best aspects of each of the
Founding Companies' customer service practices into a uniform standard of
excellence in the industry. In addition, through the collaborative efforts of
its seasoned senior management team, the Company believes that it will be able
to develop innovative new practices to raise its service standards even
higher.
Offering a comprehensive range of value-added services. Management believes
that, after the Acquisitions, the Company will offer one of the most
comprehensive selections of audio teleconferencing services in its industry,
with features and pricing options to meet varying customer needs. The Company
intends to remain at the forefront of the electronic group communications
industry by continuing to augment its existing service offerings through the
development and introduction of additional enhanced services and customized
communications solutions. The Company is also committed to developing new
services, such as video and data teleconferencing. The Company believes that
its breadth of services, features and pricing options enable it to attract
customers initially seeking only a single service or pricing option and to
penetrate those customer relationships further through sales of other services
offered by the Company.
Establishing a national sales network. The Company will establish a national
sales network with a total staff of approximately 70 salespeople, including 40
field salespeople, 10 national accounts salespeople and 20 salespeople
dedicated to telemarketing. The field salespeople will form the core of the
Company's selling effort. This group will be deployed throughout the United
States and will focus on increasing usage at the local level under any
national contracts as well as focus on sales to regional accounts. The
national accounts salespeople will focus their efforts on obtaining national
contracts with the Company's top customers, which include many Fortune 500
companies. The telemarketing specialists will generate sales leads for its
field sales force by identifying customers who are using a competitor's
service. The Company also intends to market its services vertically within
select industries, such as pharmaceuticals, finance and technology, in order
to capitalize on its industry-specific knowledge. Management believes that its
national selling strategy, combined with its specialized services and
branding, will lead to greater penetration and retention of existing customers
as well as increased market share.
Capitalizing on opportunities to provide outsourced services. The Company
intends to expand its customer base for outsourced services to include
additional IXCs and independent LECs as well as RBOCs. Management believes the
broad trend among these companies to outsource services such as telemarketing
and billing is likely to extend to teleconferencing as these companies
continue to move away from labor intensive activities. Management believes
that, should the RBOCs become long distance providers, competition will
require that the RBOCs enter the market quickly with a complete package of
high quality telecommunications services, including teleconferencing.
Consequently, management believes that some RBOCs will choose to outsource
their electronic group communications requirements. The Company believes that
it is well-positioned to be competitive in obtaining outsourced
teleconferencing business, since it (i) is not a competitor with IXCs
40
<PAGE>
and LECs in the local or long distance markets, (ii) has the capacity and
resources to handle significant teleconferencing volume, and (iii) already has
experience in providing services on an outsourced basis.
Expanding through acquisitions. One element of the Company's strategy is to
continue consolidating the electronic group communications services industry
in order to increase market share, broaden geographic coverage and add new
service offerings. The Company will seek to acquire companies that provide
high quality service, have a significant customer base and utilize high
quality technology. Management believes its acquisition experience in
combining the Founding Companies and its knowledge of the industry will be
instrumental in identifying and successfully negotiating additional
acquisitions. The Company believes that it will be an attractive acquirer for
many closely-held PCSBs because of (i) the Company's increased access to
financial resources as a public company, (ii) the Company's decentralized
operating structure, and (iii) the ability of the owner of the business being
acquired to participate in the Company's on-going business, while at the same
time realizing liquidity.
Capitalizing on consolidation benefits. The Company expects to capitalize on
the benefits of its increased size, the combined experience of the Founding
Companies and its diverse customer base. The Company believes that its size
will result in stronger bargaining power in areas such as long distance
telecommunications, equipment, employee benefits, financing and marketing. The
Company also intends to improve allocation of personnel and equipment and to
streamline internal practices through coordination among the Founding
Companies. The Company believes its combined experience and diverse customer
base will allow it to develop and rapidly deploy innovative new services.
Management also intends to cross-market services developed by any one of the
Founding Companies to all of the Company's customers and to maximize capacity
utilization and pricing strategy.
THE COMPANY'S ELECTRONIC GROUP COMMUNICATIONS SERVICES
AUDIO TELECONFERENCING. The Company offers a broad range of audio
teleconferencing services and related services, primarily to businesses in the
financial, professional service and pharmaceutical industries as well as to
government agencies and trade associations. The Company generates revenues
from this service by charging on a per-line, per-minute basis similar to
standard telephone pricing practices. Audio teleconferencing services
accounted for approximately 90%, 90% and 85% of the Founding Companies'
combined net revenues in 1994, 1995 and 1996, respectively.
The Company's audio teleconference call services may be divided into three
major classifications: operator attended calls, unattended calls and enhanced
services. Within each major category there are several means of accessing the
conference call, as well as a number of operator assisted features and
services available upon the request of the customer.
Operator Attended Conference Calls. On operator attended conference calls,
the operator coordinates the call with the customer and provides support on
the call as required. Customers are given a choice of three different methods
to access an operator attended conference call. In the dial-out method, the
operator dials each participant and places each participant in the conference.
In the 800 Meet-Me method, the conference participants dial into the
conference using the same toll-free number. In the Meet-Me method, the
conference call is handled the same as 800 Meet-Me, but the participants dial
in via their own long distance service provider. Customers can also decide to
mix the access methods for participants. In an operator-attended conference
call, the operator greets each caller, conducts a roll call, and places each
caller on the conference call. The operator can offer a variety of features
and enhanced services. For example, the operator can gather information such
as agenda items or weekly sales figures from participants prior to joining a
call, arrange for translation services, conduct question and answer (Q&A)
sessions, conduct polling sessions, and relay all results back to the
customer. If a conference participant disconnects while a call is in session,
the operator can immediately call that participant to determine if the
disconnect was unintentional and, if necessary, re-establish the link. This
feature is generally not offered on unattended calls.
Unattended Conference Calls. Unattended conference calls refer to calls that
are not monitored by a Company operator. Each of the participants joins the
conference by dialing into a Company MCU and entering
41
<PAGE>
an assigned passcode. This passcode directs participants to the correct
conference and allows them to participate in the conference without operator
assistance. During certain unattended calls, customers are still able to
obtain operator assistance by pressing "0". Customers may use either 800 Meet-
Me or Meet-Me access modes to join unattended conference calls.
Enhanced Services. The Company offers a wide range of enhanced services
(some of which were noted above), which allow customers to add value to their
conference calls. Enhanced services provided to customers are generally
charged on a fee basis. Enhanced services accounted for approximately 10% of
the Founding Companies' combined net revenues in 1996. The following are
examples of enhanced services.
. Q&A is often utilized on conference calls with a large number of
participants where an orderly forum for accepting questions is required.
This feature is appropriate, for example, during a review of a
corporation's quarterly financial results with a number of financial
analysts.
. Polling is a type of electronic counting using Touch-tone and is often
provided for focus group sessions or educational applications.
. Digital recording and replay allows people who were unable to
participate in the call to dial in and listen to a recording of the
call. Many customers have the digital recording duplicated on tape or
audio CD for distribution to interested parties. In some cases, a CD ROM
is pressed by another vendor, augmented with interactive graphics, and
used by the customer as a marketing or training tool.
. Broadcast fax and fax on demand services provide distribution of
information to facsimile machines during or after a conference using the
Company's existing MCU facilities. Broadcast fax services are typically
used for the widespread distribution of press releases, earnings
reports, and other time-sensitive material.
. RSVP allows the Company to reserve places for participants on conference
calls and to gather information on such participants for its customers.
. Reminders can be sent to participants prior to a conference call via
direct call, fax or e-mail to ensure increased call attendance.
. Call transcripts of conference calls can be prepared and either printed or
downloaded onto a disk.
CUSTOMIZED COMMUNICATIONS SOLUTIONS. The Company provides specialized event
management, production services and conference support services. Companies
wishing to conduct new product announcements, investor relations calls
regarding quarterly results, analyst briefings, press conferences, customer
satisfaction polls or large sales events use the Company's customized
communications services extensively. Large events, which combine many
electronic group communications services such as data teleconferencing, audio
teleconferencing and digital replay, may require weeks of planning. Training
services are billed either on a project or a per diem basis. Customized
communications solutions accounted for approximately 5% of the Founding
Companies' combined net revenues in 1996. The following are examples of
customized communications solutions.
. The Company works with clients to design events which maximize
participant interaction, provides information retrieval and assists in
distributing pre-conference handouts.
. Coaching and event rehearsal services personnel assist customer
spokespersons to prepare for a teleconference, provide public speaking
lessons, and arrange for professional speakers to ensure the proper
presentation of information and image.
. During a conference call, private line service allows an advisor to
coach a spokesperson privately about points to include or proper
responses to questions, without conference call participants hearing
those comments.
. The Company provides customer training services such as introducing a
new customer to the effective use of a specific electronic group
communications service or to the detailed development of a teletraining
application.
42
<PAGE>
VIDEO TELECONFERENCING. In 1996, the Company began to offer video
teleconferencing services, which enable remote sites equipped with ITU
standards-compliant video equipment to conduct interactive multipoint sharing
of video images and audio among three or more participants. This service, like
audio teleconferencing, is charged on a per-line, per-minute basis, with
enhanced services charged on a fee basis. Video teleconferencing requires the
use of a video MCU and telecommunications facilities of greater bandwidth than
that required for a standard audio teleconference. The Company has one MCU
dedicated to video teleconferencing, with approximately 25 ports of capacity.
Video teleconferencing services accounted for approximately $13,000 of the
Founding Companies' combined net revenues in 1996.
The Company's video teleconferencing services enable participants at
multiple locations to see and hear each other in a video conference.
Generally, the current speaker is displayed on the video monitors of the other
participants in the conference while the speaker's screen displays the
previous speaker's image. The Company also offers another video conferencing
technique known as "continuous presence," in which up to four participant
locations appear simultaneously on the four quadrants of a monitor for the
duration of the conference.
The Company believes that the use of multipoint video teleconferencing
services will grow in relationship to the installed base of compatible video
equipment. Industry sources estimate that over 100,000 video teleconferencing
units had been sold by the end of 1996, and that approximately 20,000 units
per month are now being shipped by manufacturers for installation. The
following are examples of video teleconferencing applications.
. Telemedicine, in which doctors in different hospitals videoconference to
discuss research, treatments, and surgery.
. Distance learning, in which classes are held over video, enabling
students to benefit from multiple teachers and to interact with students
at other locations.
. Computer aided design (CAD), in which civil engineers and architects
present designs to clients and project teams over live video for review.
DATA TELECONFERENCING. In 1997, the Company began to offer data
teleconferencing services to its customers. Data teleconferences are
established between multiple computers through a server or data MCU and allow
the participants to review, discuss and modify spreadsheets or written text,
or design documents simultaneously on personal computers at different
locations. Data teleconferences are established through parallel data audio or
video links or on a single high bandwidth line which carries both data and
audio or video. When the Company simultaneously provides audio and data using
a data MCU for the data teleconferencing application, the charges for the data
and audio connections are on a per-line, per-minute basis. When the Company is
simply augmenting a data teleconference with the audio component, the per-
line, per-minute charges are for the audio portion only. The Company has one
beta site 48-port MCU, with 32 ports dedicated to data teleconferencing.
New Internet "groupware" services and software based on the ITU standards
T.120 and H.323 are expected to facilitate greater adoption of data
teleconferencing as an electronic group communications tool. For instance,
Intel's ProShare, and Microsoft's NetMeeting software services, allow
remotely-located personal computers and/or work stations to interactively
share video and data regardless of the location of each machine. Also, several
manufacturers have announced plans to introduce specialized non-TCP/IP
application servers that will provide high quality data teleconferencing. The
Company is a beta site for a specialized data MCU that will use new software
programs designed for non-Internet data sharing, which may provide greater
security, faster protocols, and more reliable access than the Internet.
SALES AND MARKETING
The Company's sales and marketing strategy will center on the establishment
of its brand, VIALOG, as synonymous with expertise in, and a focus on,
electronic group communications. The Company plans to launch
43
<PAGE>
a new corporate marketing program focused on customers who have the potential
for high usage. This marketing program will utilize targeted database
marketing techniques based on the combined customer data of the Founding
Companies, emerging trends, and other market segment information. Management
of the Company estimates that 70% of the sales efforts in the Founding
Companies have historically been performed by telephone, and 30% have been
personal (face-to-face) sales calls. The Company intends to reverse this
strategy to focus the majority of the Company's field sales efforts on face-
to-face selling augmented by dedicated telemarketing efforts.
The Company intends to establish a national sales network with a total staff
of approximately 70 salespeople, including 40 field salespeople, 10 national
accounts salespeople and 20 telemarketing specialists. As of December 31,
1996, the Company had a sales force of 50 people. The field salespeople will
form the core of the Company's selling effort. This group will be deployed
throughout the United States and will focus on selling services to smaller and
regional accounts and on increasing usage at the local level under any
national contracts as well as on sales to regional accounts. The national
accounts salespeople will focus their efforts on obtaining national contracts
with the Company's top customers, which include many Fortune 500 companies.
The telemarketing specialists will generate sales leads for the Company's
field salespeople by identifying customers who are using a competitor's
service. The Company also intends to market its services vertically within
select industries, such as the financial services and pharmaceutical
industries, in order to capitalize on its industry-specific knowledge.
Management believes that its national selling strategy, combined with its
specialized services and branding, will lead to greater penetration and
retention of existing customers as well as increased market share.
The Company intends to expand its customer base for outsourced services to
include additional IXCs and independent LECs as well as RBOCs. The Company
currently provides outsourced audio teleconferencing services for one IXC, one
LEC and several non-facilities-based long distance providers. An important
element of the Company's marketing strategy will be to initiate additional
outsourcing alliances, both domestically and overseas, and to expand net
revenues from its existing alliances. These alliances could include the
existing and future IXCs in the U.S. and overseas, the LECs, the RBOCs and
other non-facilities based providers of equipment and services. Management
believes the broad trend among telecommunications providers to outsource
services will extend to teleconferencing, as indicated by (i) existing
outsourcing of other services, such as billing and telemarketing, (ii) hiring
and downsizing trends in the IXCs, LECs and RBOCs as they move away from
labor-intensive activities, and (iii) increasing opportunities under the
Telecommunications Act of 1996 to provide telecommunications services in new
markets for the IXCs and RBOCs. To date, three RBOCs have either entered into
contracts or have issued RFPs to outsource teleconferencing.
The Company believes that it is well-positioned to be competitive in
obtaining outsourced teleconferencing business, since it (i) is not a
competitor with IXCs and LECs in the local or long distance markets, (ii) has
the capacity and resources to handle significant teleconferencing volume, and
(iii) already has experience in providing services on an outsourced basis. The
Company plans to establish a small specialized sales team to increase its
market share of this business.
CUSTOMER SERVICE
The Company believes that it has successfully obtained and retained
customers due, in large measure, to quality customer service provided by a
highly skilled staff. Reservationists and operators become the Company's
primary contacts with its customers after the initial sales effort, thereby
providing opportunities to support the sales effort with personalized service.
The Company uses a team approach, whereby a customer can work with the same
small group of customer service personnel. In some cases, customers have
become accustomed to working with a particular reservationist or operator and
insist upon continued assistance from these specific individuals.
Reservationists assist the Company's customers in scheduling their
conferences. Reservationists access the conferencing system to determine time
and ports available and confirm the teleconferences. Operators monitor calls
and provide the services requested in the reservation. Operators are also
trained to provide assistance to the
44
<PAGE>
moderator (usually the person initiating the conference) to ensure a
successful meeting. Supervisors are available to assist in the setup and
execution of a conference. The Company's staff is trained to facilitate
effective meetings through a combination of classroom, mentoring, teaming, and
on-the-job supervision.
CUSTOMERS
The Company has approximately 6,000 corporate customers with over 40,000
separate accounts. Customers range in size from major multinational
corporations and Fortune 500 companies to small businesses, professional
organizations, public institutions and consumers. A breakdown of the Company's
top 30 customers by industry is as follows: health and pharmaceutical (six),
finance (five), professional services (five), technology (five), retail
(four), educational (three) and industrial (two). No account, or related set
of accounts, represented more than 10% of the Company's net revenues in 1996.
The top 20 customers of the Company represented approximately 19% of the
Company's net revenues in 1996.
BILLING AND MANAGEMENT INFORMATION SYSTEMS
All operational aspects of the electronic group communications business are
presently performed in each of the Founding Companies, including marketing,
sales, purchasing, accounting, billing, reservations, personnel, and service
delivery functions. Management of the Company intends to retain a
decentralized organizational structure, permitting most customer-related
decisions to remain at the Founding Company level. The Company intends to
centralize some administrative support activities within the 12 months
following the closing of this Offering in order to standardize its services,
improve customer service and reduce Company expenses.
The Founding Companies presently complete the entire billing and collection
process for their respective customers. The data needed to develop an invoice
is captured by and stored on each MCU and entered into the billing system
automatically or by the staff. This data includes the account number, which
identifies the entity paying for the call and the moderator number, which
identifies the person who organized the call. The MCU software creates a call
detail record which is augmented by the operator to capture any additional,
enhanced services. Billing is on a one minute increment basis for the duration
of each connected line. A billing database is maintained by each of the
Founding Companies and used to customize billing formats to respond to
individual customer preferences. The frequency with which invoices are
delivered to the customer for payment can vary by Founding Company and by
customer. Generally, individual invoices are sent out within two business days
of the conference call.
Each of the Founding Companies validates its invoices against its telephone
bills to verify billing accuracy. Each Founding Company also generates account
reports which detail payments and adjustments, credit status, aging of
receivables, invoice analysis, commission summaries, and usage and rate
profiles. These detailed reports allow management to make business and
marketing decisions concerning extension of credit or additional sales
contacts as customer usage increases or decreases.
The Company intends to transition the Founding Companies' systems to a
uniform system on an individual basis over the 18 months following this
Offering. Each of the Founding Companies will continue to process its results
with the existing system until the new centralized system has been implemented
and management has verified that the centralized system is performing at
designed proficiency. See "Risk Factors--Absence of Combined Operating
History; Difficulty of Integrating the Founding Companies."
COMPETITION
The teleconferencing service industry is highly competitive and subject to
rapid change. The Company currently competes, or expects to compete in the
near future, with the following categories of companies: (i) IXCs, such as
AT&T, MCI, Sprint, Frontier and Cable & Wireless, and non-facilities based
long distance
45
<PAGE>
providers, such as Excel, (ii) independent LECs, such as GTE and SNET, and
(iii) other PCSBs. The IXCs currently serve approximately 80% of the audio
teleconferencing market. The IXCs generally do not market teleconferencing
services separately, but rather offer such services as part of a "bundled"
telecommunications offering. The IXCs have not emphasized enhanced services or
customized communications solutions to meet customer needs. However, there can
be no assurance that these competitors will not alter their current strategies
and begin to focus on services-specific selling, customized solutions and
operator-attended services, the occurrence of any of which could increase
competition. Under the Telecommunications Act of 1996, the RBOCs will also be
allowed to provide long distance services within the regions in which they
also provide local exchange services ("in-region long distance services") upon
the satisfaction of certain conditions, including the specific approval of the
FCC, the introduction of or a defined potential for facilities-based local
competition, the offering of local services for resale, and compliance with
access and interconnection requirements for facilities-based competitors. Upon
entrance into the long distance market, the ability of an RBOC to gain
immediate and significant teleconferencing market share will be enhanced by
its status as the incumbent primary provider of local services to its
customers.
If the Company is able to expand its video and data teleconferencing service
offerings, it will encounter additional competition. Management expects that
there will be competition from existing providers of audio teleconferencing
services, as well as new competitors dedicated to video and/or data
teleconferencing. The Company believes that the principal competitive factors
influencing the market for its services are brand identity, quality of
customer service, breadth of service offerings, price and vendor reputation.
There can be no assurance that the Company will be able to compete
successfully with respect to any of these factors. Competition may result in
significant price reductions, decreased gross margins, loss of market share
and reduced acceptance of the Company's services.
The Company currently derives approximately 10% of its net revenues from
IXCs and LECs which outsource teleconferencing services provided to their
respective customers. These telecommunications companies have the financial
capability and expertise to deliver these teleconferencing services
internally. There can be no assurance that the Company's current IXC and LEC
customers will not insource the teleconferencing services now being provided
by the Company and pursue such market actively and in direct competition with
the Company, which would have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, part of the
Company's growth is projected to occur as RBOCs enter the long distance market
and, as management believes, outsource their teleconferencing services. There
can be no assurance that any telecommunications company able to offer
teleconferencing services under the law, now or in the future, will choose to
do so or that those choosing to do so will outsource their teleconferencing
services or choose the Company as its provider in the case it does outsource
teleconferencing.
The Company also believes that many of its current and prospective customers
have sufficient resources to purchase the equipment and hire the personnel
necessary to establish and maintain teleconferencing capabilities sufficient
to meet their respective teleconferencing needs. If the manufacturers of PBXs
develop improved, cost-effective PBX capabilities for handling
teleconferencing calls with the quality of existing MCUs used in the
teleconferencing business, the Company's customers could choose to purchase
such equipment and hire the personnel necessary to service their
teleconferencing needs through internal telephone systems. The loss of such
customers could have a material adverse effect on the Company's business,
financial condition and results of operations. Additionally, if Internet
technology can be modified to accommodate multipoint voice transmission
comparable to existing MCUs used in the teleconferencing business, there could
be a material adverse effect on the Company's business, financial condition
and results of operations.
Many of the Company's current and potential competitors have substantially
greater financial, sales, marketing, managerial, operational and other
resources, as well as greater name recognition, than the Company and may be
able to respond more effectively than the Company to new or emerging
technologies and changes in customer requirements. In addition, such
competitors may be capable of initiating or withstanding significant price
decreases or devoting substantially greater resources than the Company to the
development, promotion and
46
<PAGE>
sale of new services. Because MCUs are not prohibitively expensive to purchase
or maintain, companies previously not involved in teleconferencing could
choose to enter the marketplace and compete with the Company. There can be no
assurance that new competitors will not enter the Company's markets or that
consolidations or alliances among current competitors will not create
significant new competition. In order to remain competitive, the Company will
be required to provide superior customer service and to respond effectively to
the introduction of new and improved services offered by its competitors. Any
failure of the Company to accomplish these tasks or otherwise to respond to
competitive threats may have a material adverse effect on the Company's
business, financial condition and results of operations.
SUPPLIERS
The Company's services require two material components which it purchases
from outside suppliers:
Telecommunications Services. A significant portion of the Company's direct
costs are attributable to the purchase of local and long distance telephone
services. The Founding Companies have purchased telecommunications services
from a number of vendors, including AT&T, Sprint, MCI, Cable & Wireless and
WorldCom, Inc. The Company believes that multiple suppliers will continue to
compete for the Company's telecommunications contracts. Since the minutes of
use generated by the Company will be substantially higher than the largest of
the Founding Companies, management believes that it will be able to negotiate
telecommunications contracts with lower prices and improved service
guarantees. The Company anticipates that new telecommunications contracts will
be phased in over time as the existing contracts at the Founding Companies
expire. However, there can be no assurance that competition in the long
distance services market will continue to increase, that any increased
competition will reduce the cost of long distance services or that the
Company's purchasing strategy will result in cost savings. If the costs of
long distance services increase over time, the Company's current purchasing
strategy, which calls for shorter-term contracts, may place it at a
competitive disadvantage with respect to competitors that have entered into
longer-term contracts for long distance services. There can be no assurance
that the Company's analysis of the future costs of long distance services will
be accurate, and the failure to predict future cost trends accurately could
have a material adverse effect on the Company's business, financial condition
and results of operations. Certain of the Company's existing contracts have
remaining terms in excess of one year and require the Company to pay premiums
over current market rates for long distance services. These contracts impose
substantial monetary penalties for early termination. Although the Company
intends to attempt to renegotiate these contracts to obtain more favorable
rates, there can be no assurance that the Company will be able to do so. The
failure of the Company to renegotiate these contracts will require the Company
to continue to pay premiums over current market rates for long distance
services.
Bridging Hardware and Software Support Systems. The Founding Companies use
MCU equipment produced by four different manufacturers. At present, such
equipment is not functionally identical, but it is compatible with
substantially all network standards. Nearly 50% of all audio MCU systems used
by the Founding Companies are manufactured by one vendor, MultiLink, Inc.
("MultiLink"), located in Andover, Massachusetts. However, a number of other
vendors offer similar MCU equipment. The Company intends to use its position
as a substantial purchaser of MCU equipment to attempt to negotiate a volume
purchase contract with each selected manufacturer.
FACILITIES
The Company's corporate headquarters are located in approximately 10,000
square feet of office space in Billerica, Massachusetts under a lease expiring
May 31, 1997. Management is currently identifying and reviewing other sites
located in the Boston metropolitan area for the Company's corporate
headquarters, and management believes that there are a number of sites
available which are adequate for its needs and competitively priced. The
Company operates eight network equipment centers in leased locations in the
United States. The Company believes all of such locations are fully utilized
except for its 25,141 square foot facility in Reston, Virginia which is
approximately 75% utilized, and its approximately 50,000 square foot facility
in
47
<PAGE>
Colorado Springs, Colorado which is approximately 50% utilized. The Colorado
Springs facility is occupied pursuant to a lease which expires in 2006. The
Company believes its properties are adequate for its needs. The Company's
facilities are located either within one mile of central telephone switching
locations or on the sonet fiberoptic loop in metropolitan locations. Each
facility has dual sources of power or back-up generating capabilities. While
the Company's telephone and power requirements may preclude locating in some
areas, the Company believes alternative locations are available for its
facilities at competitive prices.
EMPLOYEES
On December 31, 1996 the Company had approximately 661 employees, of whom 10
were employed full time at its corporate headquarters, 295 were employed full
time in various management, supervisory and administrative positions, and 288
were employed full time as operators and 68 part time as operators. None of
the Company's employees are represented by unions. The Company has experienced
no work stoppages and believes its relationships with its employees are good.
REGULATION
In general, the telecommunications industry is subject to extensive
regulation by federal, state and local governments. Although there is little
or no direct regulation in the United States of the core electronic group
communications services offered by the Company, various government agencies,
such as the FCC, have jurisdiction over some of the Company's current and
potential suppliers of telecommunications services, and government regulation
of those services has a direct impact on the cost of the Company's electronic
group communications services.
A central element of the Company's business strategy is to capitalize on
outsourcing opportunities. With the passage of the Telecommunications Act of
1996, the Company believes that the RBOCs will seek to enter the market for
long distance services and that competition in the markets for both local and
long distance telephone services will increase. In order to compete
successfully in those markets, the Company believes that the IXCs, LECs and
RBOCs will be required to devote more attention and resources to the provision
of such services and will therefore seek to outsource non-core services, such
as audio teleconferencing. Because the Company's outsourcing strategy depends
on the entrance of the RBOCs into the long distance market, any factor that
delays or prevents the entrance of the RBOCs into that market could impact the
Company's strategy. For example, the Telecommunications Act of 1996 imposes
strict pre-conditions to the provision of in-region long distance services by
the RBOCs, including the specific approval of the FCC, the introduction of
facilities-based local competition, the offering of local services for resale,
compliance with access and interconnection requirements for facilities-based
competitors, and the establishment of a separate operating subsidiary with
separate financing, management, employees, and books and records. To date,
only one RBOC has filed an application to obtain the approval of the FCC to
offer in-region long distance services, and that application was withdrawn in
February 1997. There can be no assurance that the RBOCs will be able to meet
all of the requirements of the Telecommunications Act of 1996 on a timely
basis, if at all. Even if one or more RBOCs meets these requirements, there
can be no assurance that the entrance of those RBOCs into the long distance
market will cause any IXCs, LECs or RBOCs to seek to outsource their audio
teleconferencing services or that significant IXCs, LECs or RBOCs will not
continue to provide audio teleconferencing services in direct competition with
the Company. Finally, there can be no assurance that any IXCs, LECs or RBOCs
seeking to outsource audio teleconferencing services will obtain such services
from the Company. The failure of IXCs, LECs and RBOCs to outsource audio
teleconferencing services to the Company would have a material adverse effect
on the Company's growth strategy and could have a material adverse affect on
the Company's business, financial condition and results of operations.
The Telecommunications Act of 1996 is being contested both administratively
and in the courts, and opinions vary widely as to the effects and timing of
various aspects of the law. There can be no assurances at this time that the
Telecommunications Act of 1996 will create any opportunities for the Company,
that local access services will be provided by the IXCs, or that the RBOCs
will be able to offer long distance services
48
<PAGE>
including teleconferencing. The Telecommunications Act of 1996 has effected
changes in the telecommunications industry and the Company is unable to
predict the extent to which such changes may ultimately affect its business.
There can be no assurance that the FCC or other government agencies will not
seek in the future to regulate the prices, conditions or other aspects of the
electronic group communications services offered by the Company, that the FCC
will not impose registration, certification or other requirements on the
provision of those services, or that the Company would be able to comply with
any such requirements. In addition, the Company is subject to laws and
regulations that affect its ability to provide certain of its enhanced
services, such as those relating to the recording of telephone calls. Changes
in the current federal, state or local legislation or regulation could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, government regulations in countries other
than the United States vary widely and may restrict the Company's ability to
offer its services in those countries.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its properties are subject. In connection with the
acquisition of Call Points, one of the Founding Companies, the Company has
agreed to assume all disclosed liabilities with the exception of any liability
relating to claims arising out of litigation involving the former president of
Call Points and any liabilities arising out of EEOC claims filed against Call
Points by certain former and current employees. Complainants in these cases
could seek to name the Company as a defendant in any such EEOC case and to
hold the Company liable for the EEOC claims as a successor in interest to Call
Points. Although the Company believes it has defenses to any such claim, there
can be no assurance that any such defense would be successful. The principal
stockholder of Call Points has agreed to indemnify the Company from any
liability relating to such claims and to place $500,000 in escrow with a third
party to secure such indemnification obligations.
A former employee of CSI, one of the Founding Companies, has orally claimed
that he may be entitled to five percent of the stock of CSI based on an
unsigned paper outlining possible employment terms. CSI's position is that the
only agreements with such employee were set forth in two successive executed
employment agreements, each of which had a specific provision that such
agreement was inclusive as to the terms of employment. No written claim has
been made by such employee. The Company and CSI believe that such oral claim
is without merit.
ORGANIZATION AND ACQUISITION OF THE FOUNDING COMPANIES
Simultaneously with the closing of this Offering, the Company will acquire
by merger all of the issued and outstanding stock of six Founding Companies
and by purchase the assets of one Founding Company, Call Points. The aggregate
consideration to be paid by the Company for the Acquisitions will be 3,548,954
shares of Common Stock and approximately $38.6 million in cash. The
stockholders of each of the Founding Companies (except Call Points) will
receive an aggregate of 3,548,954 shares of Common Stock and approximately
$31.1 million in cash. Approximately $7.5 million in cash will be paid to Call
Points and its principal stockholder. The consideration to be paid to the
stockholders of the Founding Companies and to Call Points was determined
through arm's length negotiations among the Company and the stockholders of
the Founding Companies. The valuation of each Founding Company was generally
based upon its current operating results, geographic market, type and
condition of its equipment and facilities, and potential cost savings
resulting from the Acquisitions. The following table sets forth the
consideration to be paid for each of the Founding Companies.
<TABLE>
<CAPTION>
CASH
NAME CONSIDERATION SHARES
- ---- ------------- ---------
<S> <C> <C>
American Teleconferencing Services, Ltd................. $18,000,005 1,565,217
Telephone Business Meetings, Inc........................ 3,431,008 888,608
Conference Source International, Inc.................... 5,306,011 692,086
Call Points, Inc........................................ 7,500,000 --
Kendall Square Teleconferencing, Inc.................... 2,000,001 173,913
American Conferencing Company, Inc...................... 1,260,001 133,913
Communication Development Corporation................... 1,095,005 95,217
----------- ---------
Total Acquisitions Consideration........................ $38,592,031 3,548,954
=========== =========
</TABLE>
49
<PAGE>
Certain Founding Companies will make S corporation distributions
approximating the Federal, state and local taxes payable by their stockholders
with respect to the Founding Company's earnings through the consummation of
the Acquisitions, an amount estimated to be $750,000. In addition, during the
course of operations, certain of the Founding Companies incurred indebtedness
or entered into capital leases which has been guaranteed by their principal
stockholders. At December 31, 1996, the aggregate amount of indebtedness and
capital leases of the Founding Companies that was subject to such personal
guarantees was approximately $3.5 million. The Company intends to repay
approximately $480,000 of such indebtedness following the closing of this
Offering, and the Company has agreed to use its best efforts to cause all such
guarantees to be released. If the Company cannot obtain such releases, it has
agreed to hold the guarantors harmless from liability under such guarantees.
See "Use of Proceeds."
The following is a discussion of the material information regarding the
Founding Companies and their principal stockholders:
VIALOG will (i) cause a subsidiary of VIALOG to merge with ATS, whereby ATS
will become a wholly owned subsidiary of the Company and (ii) deliver to the
stockholders of ATS 1,565,217 shares of Common Stock and approximately $18.0
million in cash in exchange for their shares of ATS. Robert A. Cowan, the
Chairman of the Board of ATS, will become Chairman of the Board of the Company
on the closing of this Offering and will receive 689,198 shares of Common
Stock and approximately $7.9 million in cash. Mr. Cowan will enter into a two-
year employment agreement with ATS which includes a covenant not to compete
expiring on the third anniversary of the merger. Mr. Louis I. Jaffe, a
principal stockholder of ATS, will become a five percent or greater
stockholder of the Company upon the closing of this Offering and will receive
590,741 shares of Common Stock and approximately $6.8 million in cash. Mr.
Jaffe will enter into a noncompetition agreement expiring on the second
anniversary of the merger. Roy F. Cammarano, a consultant to ATS, will receive
a bonus of $600,000 for past services out of the cash consideration to be paid
to the stockholders of ATS. Mr. Cammarano will continue to serve as a
consultant to ATS through June 30, 1997 and will receive $20,000 per month for
his services through such date.
VIALOG will (i) cause a subsidiary of VIALOG to merge with Access, whereby
Access will become a wholly owned subsidiary of the Company and (ii) deliver
to the stockholders of Access 888,608 shares of Common Stock and approximately
$3.4 million in cash in exchange for their shares of Access. Prior to the
merger, Access will distribute $245,000 to its stockholders, or if not done
prior to the merger the Company will pay such amount to the former
stockholders of Access as an S corporation tax distribution. C. Raymond Marvin
will remain as President of Access following the closing of this Offering and
will receive 861,950 shares of Common Stock and approximately $2.5 million in
cash upon the closing of this Offering in addition to his pro rata share of
the S corporation distribution. The Company has agreed either to repay
approximately $1.5 million of indebtedness of Access, of which Mr. Marvin is
the guarantor, or to negotiate a release of Mr. Marvin's guarantee. Such
indebtedness matures in 1999 and bears interest at rates ranging from prime
plus .75% to 9.5%. The Company's current plans are to attempt to renegotiate
such loans to substitute a VIALOG guarantee for Mr. Marvin's guarantee. Mr.
Marvin will enter into a two-year employment agreement with Access which
includes a covenant not to compete expiring no earlier than the third
anniversary of the merger or one year after termination of his employment,
whichever is the later to occur.
VIALOG will (i) cause a subsidiary of VIALOG to merge with CSI, whereby CSI
will become a wholly owned subsidiary of the Company and (ii) deliver to the
stockholders of CSI 692,086 shares of Common Stock and approximately $5.3
million in cash in exchange for their shares of CSI. Prior to the merger, CSI
will distribute, or if not done prior to the merger the Company will pay,
$420,000 to Judy B. Crawford as an S corporation tax distribution. Ms.
Crawford will remain as President of CSI following the closing of this
Offering and will receive 692,086 shares of Common Stock and approximately
$5.3 million in cash upon the closing of this Offering. The Company intends to
repay approximately $316,000 of indebtedness of CSI, of which Ms. Crawford is
the guarantor. Such indebtedness matures in 1999 and bears interest at rates
ranging from 10.25% to 10.5%. In addition, Ms. Crawford has guaranteed all of
CSI's capital leases, which have remaining lease payments of $1.3 million. The
Company has agreed to arrange for the release of such guarantees or to
50
<PAGE>
indemnify her for any obligations arising under such guarantees. Ms. Crawford
will enter into a three-year employment agreement with CSI which includes a
covenant not to compete expiring no earlier than the fourth anniversary of the
merger or one year after termination of her employment whichever is the later
to occur. Olen Crawford, the spouse of Ms. Crawford, will receive a consulting
fee of $10,000 per month through December 31, 1997 and will enter into a
noncompetition agreement expiring on the second anniversary of the merger.
VIALOG will (i) cause a subsidiary of VIALOG to acquire substantially all of
the assets of, and assume specified liabilities of, Call Points and (ii)
deliver to Call Points $7.5 million in cash in exchange for such assets.
VIALOG will (i) cause a subsidiary of VIALOG to merge with TCC, whereby TCC
will become a wholly owned subsidiary of the Company and (ii) deliver to the
stockholders of TCC 173,913 shares of Common Stock and approximately $2
million in cash in exchange for their shares of TCC. Prior to the merger, TCC
will distribute $85,000 to its stockholders, as an S corporation tax
distribution. Prior to entering into the merger agreement, TCC distributed
certain technology and hardware with a net book value of approximately $12,000
to the stockholders of TCC. Courtney P. Snyder will remain as President of TCC
following the closing of this Offering and will receive 42,418 shares of
Common Stock and approximately $488,000 in cash upon the closing of this
Offering. John J. Hassett, a director of the Company and a principal
stockholder of TCC, will receive 38,706 shares of Common Stock and
approximately $445,000 in cash. See "Principal Stockholders". The Company
intends to repay approximately $54,000 of indebtedness of TCC, of which Mr.
Snyder and Mr. Hassett are guarantors. Such indebtedness matures in 1999 and
bears interest at 11%. In addition, Mr. Snyder and Mr. Hassett have guaranteed
all of TCC's capital leases, which have remaining lease payments of $270,000.
The Company has agreed to arrange for the release of such guarantees or to
indemnify them for any obligations arising under such guarantees. Mr. Snyder
will enter into a three-year employment agreement with TCC which includes a
covenant not to compete expiring no earlier than the third anniversary of the
merger or one year after termination of his employment, whichever is the later
to occur. Mr. Hassett, on the closing of this Offering, will enter into a
three-year consulting contract with the Company, which includes a covenant not
to compete expiring one year after termination of his contract.
VIALOG will (i) cause a subsidiary of VIALOG to merge with Americo, whereby
Americo will become a wholly owned subsidiary of the Company and (ii) deliver
to David L. Lipsky, the sole stockholder of Americo, 133,913 shares of Common
Stock and approximately $1.3 million in cash in exchange for his shares of
Americo. Mr. Lipsky will remain as President of Americo following the closing
of this Offering. The Company intends to repay approximately $35,000 of
indebtedness of Americo, of which Mr. Lipsky is a guarantor. Such indebtedness
matures in 1997 and bears interest at prime plus 1.25%. Mr. Lipsky will enter
into a three-year employment agreement with Americo which includes a covenant
not to compete expiring no earlier than the third anniversary of the merger or
one year after termination of his employment, whichever is the later to occur.
VIALOG will (i) cause a subsidiary of VIALOG to merge with CDC, whereby CDC
will become a wholly owned subsidiary of the Company and (ii) deliver to the
stockholders of CDC 95,217 shares of Common Stock and approximately $1.1
million in cash in exchange for their shares of CDC. Patti R. Bisbano will
remain as President of CDC following the closing of this Offering and will
receive 47,609 shares of Common Stock and approximately $548,000 in cash upon
the closing of this Offering. The Company intends to repay indebtedness of
CDC, of which Ms. Bisbano is a guarantor, of approximately $75,000. Such
indebtedness matures in 1999 and bears interest at prime plus 1%. Ms. Bisbano
will enter into a three-year employment agreement with CDC which includes a
covenant not to compete expiring on the later of one year from the expiration
of her employment agreement or two years from the expiration of her severance
period under such agreement.
See "Management--Employment and Noncompetition Agreements" for a discussion
of certain employment agreements between the Company and certain of its
executive officers.
The Company has agreed with all of the Founding Companies, except Call
Points, that for the two-year period following the closing of this Offering
there will be no (i) change in the location of a Founding Company's
facilities, (ii) physical merging of any Founding Company's operations with
another operation, (iii) change in
51
<PAGE>
the position of certain persons receiving employment agreements authorized by
the Acquisition agreements, or (iv) reduction in work force or termination of
employment except as related to employee performance or the contemplated
reorganization of the combined sales/marketing staff or the accounting
function, without the approval of a majority in interest of the respective
Founding Company's former stockholders. In the case of Call Points, the period
is one year and does not include a change in the location of Call Points'
facilities.
Additionally, the Company has agreed to maintain the Founding Companies'
respective employee incentive compensation, fringe benefits and severance
programs, or their substantial equivalent, through December 31, 1997.
The closing of each of the Acquisitions is subject to certain conditions,
including the conditions that the representations, warranties, covenants and
agreements of each Founding Company and its principal stockholders in the
Acquisition agreements will be true and correct in all material respects and
that no event will have occurred which would result in an adverse change in
the condition of the Founding Company from its condition as set forth in its
audited financial statements. In addition, each of the Acquisitions may be
terminated prior to the closing of such Acquisition under certain
circumstances set forth in the agreement relating to such Acquisition. Each
Acquisition will close simultaneously with the other Acquisitions on the day
prior to the effective date of the registration statement of which this
Prospectus forms a part, subject only to the closing of the Offering and, in
the case of the Acquisitions of six Founding Companies, the filing of the
articles or certificates of merger with the respective state authorities.
52
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the Company's current
directors and executive officers and those persons who will become directors
and executive officers upon consummation of this Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
John J. Hassett(1)(2).......... 45 Chairman and Director
52 Chairman, Director and Chief Executive
Robert A. Cowan(3)............. Officer--ATS
44 Director, President and Chief Executive
Glenn D. Bolduc................ Officer
Robert J. Eckenrode(3)(4)...... 66 Director
Joanna M. Jacobson(2)(3)(4).... 37 Director
Richard J. Valentine(2)(3)(4).. 52 Director
C. Raymond Marvin.............. 58 President--Access
Judy B. Crawford............... 44 President--CSI
Courtney P. Snyder............. 47 President--TCC
David L. Lipsky................ 51 President--Americo
Patti R. Bisbano............... 52 President--CDC
Bruce T. Guzowski(5)........... 43 Chief Financial Officer, Senior Vice
President--Finance, Treasurer and
Director
</TABLE>
- --------
(1) Mr. Hassett will resign as Chairman effective upon the closing of this
Offering.
(2) Will become a member of the Audit Committee effective upon the closing of
this Offering.
(3) Appointment will become effective upon the closing of this Offering.
(4) Will become a member of the Compensation Committee effective upon the
closing of this Offering.
(5) Mr. Guzowski will resign as a Director effective upon the closing of this
Offering.
JOHN J. HASSETT founded the Company and has served as a Director of the
Company since its inception and as Chairman since October 1996. Mr. Hassett
also served as President of the Company from January 1996 to October 1996 and
as Treasurer from January 1996 to November 1996. Mr. Hassett will resign as
Chairman upon the closing of this Offering. Mr. Hassett is also the founder,
President, Chief Executive Officer and a Director of Currency Scientific,
Inc., a research and development stage company in the electronic currency
industry. From January 1990 to October 1995, Mr. Hassett was Chief Executive
Officer and a Director of AT/Comm, Inc., a designer and developer of
electronic toll collection systems. From March 1984 to December 1990, Mr.
Hassett was Executive Vice President of MultiLink, a manufacturer of MCUs
which he co-founded in 1984.
ROBERT A. COWAN will become Chairman and a Director of the Company upon the
closing of this Offering. Mr. Cowan has over twenty years of experience in the
electronic group communications industry and since October 1984, Mr. Cowan has
served as Chairman, Chief Executive Officer, President and as a Director of
ATS.
GLENN D. BOLDUC has served as President, Chief Executive Officer and as a
Director of the Company since October 1996. From July 1989 to September 1996,
Mr. Bolduc served as Chief Financial Officer, Treasurer and Vice President--
Finance of MultiLink.
ROBERT J. ECKENRODE served as a consultant to VIALOG prior to this Offering
and will become a Director of the Company upon the closing of this Offering.
From May 1989 until his retirement in June 1992, Mr. Eckenrode was Vice
Chairman and Chief Financial Officer of NYNEX Corporation ("NYNEX").
JOANNA M. JACOBSON served as a consultant to VIALOG prior to this Offering
and will become a Director of the Company upon the closing of this Offering.
Since April 1996 she has been President of Keds, a distributor
53
<PAGE>
of athletic footwear and a division of Stride-Rite Corporation. From February
1995 to March 1996, she was a partner in Core Strategy Group, a strategic
marketing consulting firm. From December 1991 to September 1994, she was a
Senior Vice President of Marketing and Product Development for Converse, Inc.,
a distributor of athletic footwear.
RICHARD J. VALENTINE served as a consultant to VIALOG prior to this Offering
and will become a Director of the Company upon the closing of this Offering.
Mr. Valentine has been the Chief Executive Officer and President of MBA Group,
a diversified holding company for more than the last five years. Mr. Valentine
is also the majority owner and Treasurer of LCF Associates, Inc., an
investigation firm concentrating on white collar crime. From January 1992 to
October 1993, Mr. Valentine was also the President and Chief Executive Officer
of Lube 495, Inc., an automobile oil change/lubrication company.
C. RAYMOND MARVIN founded Access in 1987 and has served as its President,
Chief Executive Officer and as a Director since its inception.
JUDY B. CRAWFORD founded CSI in February 1992 and has served as its
President, Chief Executive Officer and as a Director since its inception.
COURTNEY P. SNYDER founded TCC in 1987 and has served as its President,
Chief Executive Officer and as a Director since its inception.
DAVID L. LIPSKY founded Americo in August 1987 and has served as Director,
President and Chief Executive Officer since its inception. From 1983 until
1996, Mr. Lipsky also served as President and Chief Executive Officer of
Resource Objectives, Inc., a seller of communications equipment that merged
into Americo in 1996.
PATTI R. BISBANO co-founded CDC in April 1990 and has served as its
President, Treasurer and as a Director since its inception.
BRUCE T. GUZOWSKI has served as Chief Financial Officer, Senior Vice
President--Finance, Treasurer and as a Director of the Company since February
1997. He will resign as a Director upon the closing of this Offering. From May
1996 to January 1997, Mr. Guzowski served as Chief Financial Officer for Grand
Circle Corporation, a holding company for various direct marketing,
international travel, executive training and real estate firms. From January
1995 to April 1996, Mr. Guzowski was an independent consultant specializing in
the development of acquisition and disposition plans for clients in the real
estate, telecommunications and electric power industries. From August 1979 to
December 1994, Mr. Guzowski held various positions, including Chief Operating
Officer, Managing Director and Vice Chairman, of First Winthrop Corporation, a
real estate management company.
The Company's Board of Directors is divided into three classes, with one
class of directors elected each year at the annual meeting of stockholders for
a three-year term of office. All directors of one class hold their positions
until the annual meeting of stockholders at which the terms of the directors
in such class expire and until their respective successors are elected and
qualified. Messrs. Hassett, Bolduc and Guzowski presently serve as Directors
of the Company. Upon the closing of this Offering, Mr. Cowan and
will serve in the class whose terms expire in 1998, Mr. Eckenrode and Mr.
Bolduc will serve in the class whose terms expire in 1999 and Mr. Hassett, Mr.
Valentine and Ms. Jacobson will serve in the class whose terms expire in 2000.
Executive officers of the Company are elected annually by the Board of
Directors and serve at the discretion of the Board of Directors or until their
successors are duly elected and qualified. See "Management-- Executive
Compensation" and "Management--Employment and Noncompetition Agreements."
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee will review the scope and results of the annual
audit of the Company's consolidated financial statements conducted by the
Company's independent accountants, proposed changes in the Company's financial
54
<PAGE>
and accounting standards and principles, and the Company's policies and
procedures with respect to its internal accounting, auditing and financial
controls, and will make recommendations to the Board of Directors on the
engagement of the independent accountants, as well as other matters which may
come before it or as directed by the Board of Directors. The Compensation
Committee will administer the Company's compensation programs, including the
1996 Stock Plan, and will perform such other duties as may from time to time
be determined by the Board of Directors.
DIRECTOR COMPENSATION
Directors who are also employees of the Company or one of its subsidiaries
do not receive additional compensation for serving as directors. Each director
who is not an employee of the Company or one of its subsidiaries will receive
upon his or her election as a Director an option to purchase 6,000 shares of
Common Stock at its then fair market value, and will receive a fee of $500 for
attendance at each Board of Directors meeting and $250 for each committee
meeting (unless held on the same day as a Board of Directors meeting).
Directors are also reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof or otherwise incurred
in their capacity as Directors. Mr. Cowan will receive an annual fee of
$200,000 for services as Chairman of VIALOG. In connection with their services
as consultants to the Company, Mr. Eckenrode, Ms. Jacobson and Mr. Valentine
each received an option to purchase 6,000 shares of Common Stock at $.555 per
share. They will not be granted additional options when they are elected to
the Board of Directors upon completion of this Offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors has established a Compensation Committee,
which will consist of Mr. Eckenrode, Ms. Jacobson and Mr. Valentine upon the
closing of this Offering. In 1996, decisions as to executive compensation were
made by the Board of Directors, which consisted of Mr. Hassett, Mr. Bolduc and
Thomas M. Carroll. Mr. Cowan, Mr. Hassett and Mr. Bolduc have been parties to
certain transactions with the Company. See "Certain Transactions."
EXECUTIVE COMPENSATION
VIALOG has conducted limited operations and generated no revenue to date and
only paid its executive officers nominal compensation during 1996. The
following table sets forth the compensation earned by the two individuals who
each served as the Company's President for a portion of 1996 (the "Named
Executive Officers") for services rendered in all capacities to the Company
during 1996. No executive officer earned in excess of $100,000 during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------ ------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY ($) OPTIONS (#) ($)
- --------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
John J. Hassett, Chairman............... $16,000 -- --
Glenn D. Bolduc, President and CEO...... -- 80,000 $13,875(1)
</TABLE>
- --------
(1) On September 18, 1996, the Company issued Mr. Bolduc 25,000 shares of
Common Stock valued at such time at $.555 per share for services rendered.
Other than Mr. Hassett, no executive officer of the Company received cash
compensation for services rendered to the Company in 1996. Mr. Bolduc received
an option to purchase 80,000 shares of Common Stock at an exercise price of
$.555 per share and received 25,000 shares of Common Stock for services
rendered in 1996. Pursuant to an employment agreement executed by the Company
and Mr. Bolduc in 1996, Mr. Bolduc will be paid an annual salary of $220,000
effective upon the closing of this Offering. The Company has also agreed to
pay to Mr. Bolduc upon the closing of this Offering a one-time bonus equal to
1/365th of his salary multiplied by the number of days from the date of his
employment by VIALOG to the closing of this Offering.
55
<PAGE>
Mr. Bolduc's employment agreement also provides for a severance payment of one
year's then current salary and the continuation of all fringe benefits for one
year at the Company's expense after the termination of his employment.
The Company will enter into a consulting agreement with John J. Hassett, its
current Chairman, upon the closing of this Offering. Mr. Hassett will resign
as Chairman and will become a consultant to the Company. The agreement will
provide for a consulting fee of $95,000 per year for three years, an
automobile allowance of $500 per month and insurance benefits of $500 per
month, and will contain confidentiality and non-competition provisions.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
The following table sets forth a summary of the terms of the employment
agreements to be entered into with the chief executive officers of the
Founding Companies upon the closing of this Offering:
<TABLE>
<CAPTION>
NAME POSITION SALARY TERM
---- -------- ------ -------
<C> <C> <S> <C>
Robert A. Cowan..... CEO--ATS $250,000 base salary; 2 years
$200,000 annual fee for
services as Chairman of
VIALOG; and $10,000 per
year for a Noncompete
Agreement(1)
C. Raymond Marvin... President--Access $242,000 2 years
Judy B. Crawford.... President--CSI $255,000(2) 3 years
Courtney P. Snyder.. President--TCC $142,000(3) 3 years
David L. Lipsky..... President--Americo $225,000(4) 3 years
Patti R. Bisbano.... President--CDC $110,000(5) 3 years
</TABLE>
- --------
(1) Mr. Cowan has agreed, for the three-year period following the closing of
this Offering, not to (i) engage in any business in competition with the
Company's teleconferencing service business, (ii) solicit or accept
business from any clients of the Company, (iii) hire any of the Company's
employees or consultants, or (iv) damage the goodwill of the Company.
(2) CSI also maintains a life insurance policy on the life of Ms. Crawford in
the face amount of $1.0 million, the proceeds of which are payable to a
beneficiary to be designated by her. She is also entitled to a monthly
automobile allowance of $400.
(3) TCC also maintains a life insurance policy on the life of Mr. Snyder in
the face of $750,000, the proceeds of which are payable to a beneficiary
to be designated by him. He is also entitled to a monthly automobile
allowance of $400.
(4)Mr. Lipsky is entitled to a monthly automobile allowance of $750.
(5)Ms. Bisbano is entitled to a monthly automobile allowance of $400.
1996 STOCK PLAN
On February 14, 1996, the Board of Directors and the Company's stockholders
approved the Company's 1996 Stock Plan (the "Plan"). The purpose of the Plan
is to provide directors, officers, key employees, consultants and other
service providers with additional incentives by increasing their ownership
interests in the Company. Individual awards under the Plan may take the form
of one or more of (i) incentive stock options ("ISOs"), (ii) non-qualified
stock options ("NQSOs"), (iii) stock appreciation rights ("SARs"); and (iv)
restricted stock.
The Compensation Committee administers the Plan and generally selects the
individuals who will receive awards and the terms and conditions of those
awards. The maximum number of shares of Common Stock that may be issued or
issuable under the Plan, determined immediately after the grant of any award,
may not exceed 1,625,000 shares. Shares of Common Stock subject to awards
which have expired, terminated or been canceled or forfeited are available for
issuance or use in connection with future awards.
56
<PAGE>
The Plan will remain in effect until February 14, 2006 unless terminated
earlier by the Board of Directors. The Plan may be amended by the Board of
Directors without the consent of the stockholders of the Company, except that
any amendment, although effective when made, will be subject to stockholder
approval if required by any Federal or state law or regulation or by the rules
of any stock exchange or automated quotation system on which the Common Stock
may then be listed or quoted.
The Company has outstanding ISOs to purchase a total of 434,500 shares of
Common Stock granted between September 1996 and February 1997, at a weighted
average price of $1.69 per share. The Company also has outstanding NQSOs to
purchase a total of 73,066 shares of Common Stock granted between February
1996 and February 1997, at a weighted average price of $2.14 per share.
The following table sets forth all options granted to the Named Executive
Officers in 1996:
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES
NUMBER OF TOTAL OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM (1)
OPTIONS IN FISCAL PRICE ---------------------
NAME GRANTED(#)(2) YEAR ($/SHARE)(3) EXPIRATION DATE 5%($) 10%($)
---- ------------- ------------- ------------ ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John J. Hassett......... -- -- -- -- -- --
Glenn D. Bolduc......... 80,000 12.9% $.555 October 31, 2006 $27,923 $70,762
</TABLE>
- --------
(1) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming the specified compounded rates of appreciation of
the Company's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not represent the Company's estimate of future stock
price growth. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on timing of such exercise and future
performance of the Company's Common Stock. There can be no assurance that
the rates of appreciation assumed in this table can be achieved or that
the amounts reflected will be received by the Named Executive Officers.
This table does not take into account any appreciation in the price of the
Common Stock from the date of grant to current date. The values shown are
net of the option exercise price, but do not include deductions for taxes
or other expenses associated with the exercise.
(2) The option granted to Mr. Bolduc to purchase 80,000 shares of Common Stock
was exercisable for 6,685 shares of Common Stock on December 31, 1996; the
remaining 73,315 shares vest in equal quarterly installments, commencing
on March 31, 1997. However, pursuant to Mr. Bolduc's employment agreement
with the Company, all 80,000 shares shall vest immediately upon the
closing of this Offering or upon the closing of a change in control as
defined in Mr. Bolduc's employment agreement.
(3) All options were granted at fair market value as determined by the Board
of Directors of the Company on the date of grant. The Board of Directors
determined the market value of the Common Stock based on various factors,
including the illiquid nature of an investment in the Company's Common
Stock, the absence of any operating history and the Company's future
prospects.
57
<PAGE>
The following table sets forth the value of all unexercised options held by
the Named Executive Officers at the end of 1996:
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(#) AT FISCAL YEAR END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John J. Hassett............. -- -- -- --
Glenn D. Bolduc............. 6,685 73,315 $ $
</TABLE>
- --------
(1) There was no public trading market for the Common Stock on December 31,
1996. Accordingly, solely for purposes of this table, the values in this
column have been calculated on the basis of the initial public offering
price of $ (rather than a determination of the fair market value of
the Common Stock on December 31, 1996), less the aggregate exercise price
of the options.
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
In connection with the formation and initial financing of VIALOG, VIALOG
issued Common Stock at prices ranging from $.01 per share to $4.00 per share,
including 500,000 shares to John J. Hassett, the founder of VIALOG, 72,500
shares to Richard J. Valentine (including 7,500 shares issued to an entity of
which Mr. Valentine is a principal owner), and 25,000 shares to Glenn D.
Bolduc, President and Chief Executive Officer of the Company.
See "Organization and Acquisition of the Founding Companies" for a
discussion of certain information regarding the Acquisitions and the principal
stockholders of the Founding Companies.
OTHER TRANSACTIONS
The Company has agreed with ATS to the payment by ATS of approximately $1.2
million to consultants and optionholders of ATS, including approximately
$600,000 to Roy F. Cammarano, President of and a consultant of ATS. The amount
of such payment will reduce the cash portion of the payment to ATS
stockholders in the Acquisition of ATS. On or before the Acquisition closing
date, ATS and Mr. Cowan will enter into an employment agreement whereby Mr.
Cowan will be employed as President and Chief Executive Officer of ATS with
annual compensation of $250,000 plus an annual fee of $200,000, payable at the
end of each year during the term of his employment contract for his services
as Chairman of the Board of the Company.
In July 1996 Mr. Cowan loaned ATS $100,000, which amount was repaid in
December 1996. Between December 1, 1989 and September 30, 1996, ATS leased
certain assets from Executive Offices Services, a company of which Mr. Cowan
and his spouse are officers, directors and shareholders. The leases were
accounted for as operating leases. Amounts expensed under these leases during
the years ended December 31, 1994, 1995 and 1996 were $67,435, $66,163, and
$49,108, respectively. The leases were terminated in October 1996. Certain of
the equipment was acquired by ATS upon termination of the leases for cash
consideration of $12,500.
The Company has agreed with Access to the payment by Access of approximately
$860,000 to retire a note and consulting contract with a former stockholder of
Access. While the amount of such payment will reduce the cash portion of the
payment to Access stockholders in the acquisition of Access, there will be an
expense deduction to the income of Access of approximately $405,000 which will
impact the earnings of the Company.
58
<PAGE>
TCC provides teleconferencing services to customers of a company owned by
Susan C. Hassett, spouse of John J. Hassett, for which TCC received $80,000,
$86,000 and $175,000 in 1994, 1995 and 1996, respectively. Such company
received commissions of $24,000, $28,250 and $33,000 in 1994, 1995 and 1996,
respectively, with respect to such transactions.
Glenn D. Bolduc, President and Chief Executive Officer of the Company, owns
approximately five percent of the issued and outstanding common stock of
MultiLink, a principal supplier of MCUs to the Company. In 1994, 1995 and
1996, aggregate purchases of MCUs and ancillary services from MultiLink by the
Founding Companies were approximately $1.9 million, $1.4 million and $2.1
million, respectively. Any future purchases of MCUs and ancillary services by
the Company from MultiLink will be made in accordance with the policy set
forth below.
The Company has agreed with Judy B. Crawford, the President of CSI, that if
Ms. Crawford constructs a facility adequate for CSI's needs, the Company will
lease such facility from Ms. Crawford on commercially reasonable arms-length
terms.
For information regarding consulting and employment agreements with certain
directors and executive officers, see "Management--Executive Compensation" and
"Management--Employment and Noncompetition Agreement."
COMPANY POLICY
The Company has implemented a policy whereby, and it is a condition to the
Acquisition agreements that, neither the Company nor any subsidiary (which
includes the Founding Companies) will enter into contracts or business
arrangements with person or entities owned in whole or in part by officers or
directors of the Company or any subsidiary except on an arms-length basis and
with the approval of the Company's Board of Directors. The Company's Bylaws
require that any approval must be by a majority of the independent Directors
then in office who have no interest in such contract or transaction.
59
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of February 28, 1997, after
giving effect to the Acquisitions and as adjusted to reflect the sale of the
Common Stock offered hereby, by (i) each person known to the Company to
beneficially own more than five percent of the outstanding shares of Common
Stock, (ii) each of the Company's Directors and persons who have consented to
be named as Directors, (iii) each Named Executive Officer, and (iv) all
executive officers, Directors and named Directors as a group. All persons
listed have an address in care of the Company's principal executive office and
have sole voting and investment power with respect to their shares unless
otherwise indicated.
<TABLE>
<CAPTION>
PERCENT OF OUTSTANDING SHARES
------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED AFTER
NAME AFTER ACQUISITIONS BEFORE OFFERING OFFERING
---- ------------------ ------------------ --------------
<S> <C> <C> <C>
C. Raymond Marvin....... 861,950 17.4% 9.4%
Judy B. Crawford........ 692,086 14.0 7.6
Robert A. Cowan......... 689,198 13.9 7.5
Louis I. Jaffe.......... 590,741 11.9 6.5
John J. Hassett......... 532,206 10.8 5.8
Glenn D. Bolduc......... 105,000(1) 2.1 1.1
Richard J. Valentine.... 73,500(2) 1.5 *
Bruce T. Guzowski....... 11,666(3) * *
Robert J. Eckenrode..... 1,000(4) * *
Joanna M. Jacobson...... 1,000(4) * *
All executive officers,
directors and named di-
rectors as a group (13
persons)............... 3,782,287(5) 75.1% 41.0%
</TABLE>
- --------
(1) Includes 80,000 shares issuable upon exercise of an ISO.
(2) Includes 1,000 shares issuable upon exercise of all NQSOs vested as of
April 30, 1997 and 7,500 shares owned by an entity controlled by Mr.
Valentine.
(3) Includes 1,666 shares issuable upon exercise of all NQSOs vested as of
April 30, 1997.
(4)Represents shares issuable upon exercise of all NQSOs vested as of April 30,
1997.
(5)See Notes 1-4.
*Less than 1.0%.
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock as of February 28, 1997 consisted of
30,000,000 shares of Common Stock, $.01 par value, and 10,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock"). Based on shares
outstanding as of February 28, 1997, after giving effect to the Acquisitions
and the issuance of the shares of Common Stock offered hereby, the Company
will have outstanding 9,148,604 shares of Common Stock and no shares of
Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders of the Company.
Subject to the rights of any then outstanding shares of Preferred Stock,
holders of Common Stock are entitled to receive dividends when and as declared
in the discretion of the Board of Directors out of funds legally available
therefor. Holders of Common Stock are entitled to share ratably in the net
assets of the Company upon liquidation after payment or provision for all
liabilities of the Company and any preferential liquidation rights of any
Preferred Stock then outstanding. The holders of Common Stock have no
preemptive rights to purchase any securities of the Company. Shares of Common
Stock are not subject to any redemption provisions and are not convertible
into any other securities of the Company. All outstanding shares of Common
Stock are, and the shares of Common Stock to be issued in the Acquisitions and
pursuant to this Prospectus will, upon payment therefor, be fully paid and
non-assessable. The rights, preferences and privileges of holders of Common
Stock are subject to and may be adversely affected by, the rights of holders
of Preferred Stock which the Company may designate and issue in the future.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors in one or more classes or series. Subject to the provisions of the
Company's Articles of Organization and limitations prescribed by law, the
Board of Directors is expressly authorized to adopt resolutions to issue
shares of Preferred Stock, to fix or change the number of shares of Preferred
Stock to be included in any series and to provide for or change the voting
powers, designations, preferences and relative, participating, optional or
other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative),
dividend rates, terms of redemption (including sinking fund provisions),
redemption prices, conversation rights and liquidation preferences of the
shares constituting any series of the Preferred Stock, in each case without
any further action or vote by the stockholders. The Company has no current
plans to issue any shares of Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of the Company's
management. The issuance of shares of the Preferred Stock pursuant to the
Board of Directors' authority described above may adversely affect the rights
of the holders of Common Stock. For example, Preferred Stock issued by the
Company may rank prior to the Common Stock as to dividend rights, liquidation
preferences or both, may have full or limited voting rights and may be
convertible into shares of Common Stock. Accordingly, the issuance of shares
of Preferred Stock may discourage bids for the Common Stock or may otherwise
adversely affect the market price of the Common Stock.
WARRANTS
On February 24, 1997, the Company issued promissory notes in the aggregate
principal amount of $500,000 bearing interest at 8.0% per annum and payable
upon the earlier of ten days following the closing of the Offering or one year
from their date of issuance, together with warrants to purchase an aggregate
of 55,555 shares of Common Stock at an exercise price of $9.00 per share. The
warrants are not exercisable until November 1, 1997 and expire on February 28,
1999.
61
<PAGE>
PROVISIONS OF MASSACHUSETTS LAW AND THE COMPANY'S ARTICLES OF ORGANIZATION AND
BY-LAWS
CERTAIN ANTI-TAKEOVER PROVISIONS. After the closing of this offering, the
Company will be subject to the provisions of Chapter 110F of the Massachusetts
General Laws, an anti-takeover law. In general, this statute prohibits a
Massachusetts corporation with more than 200 stockholders of record from
engaging in a "business combination" with "interested stockholders" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless (i) prior to such date, the board of
directors approves either the business combination or the transaction which
results in the stockholder becoming an interested stockholder, (ii) the
interested stockholder acquires 90% of the outstanding voting stock of the
corporation (excluding shares held by certain affiliates of the corporation)
at the time the stockholder becomes an interested stockholder, or (iii) the
business combination is approved by both the board of directors and holders of
two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). A "business combination" includes
a merger, consolidation, certain stock or asset sales, and certain other
specified transactions involving the corporation or any direct or indirect
majority-owned subsidiary of the corporation resulting in a financial benefit
to the interested stockholder. Generally, an "interested stockholder" is (i) a
person who, alone or together with affiliates and associates, owns five
percent or more of the corporation's voting stock, (ii) an affiliate or
associate of the corporation who at any time within the three year period
preceding the date of the transaction owned five percent or more of the
corporation's voting stock, or (iii) the affiliates and associates of any such
affiliate or associate of the corporation. A person is not an "interested
stockholder" if its ownership of shares in excess of the five percent
limitation is the result of action taken solely by the Company, provided,
however, that such a person will become an "interested stockholder" if the
person thereafter acquires additional shares of voting stock, except as a
result of further corporate action not caused, directly or indirectly, by such
person. The Company may at any time elect not to be governed by Chapter 110F
by amending its Articles of Organization and By-Laws by a vote of a majority
of the stockholders entitled to vote, but such an amendment would not be
effective for 12 months and would not apply to a business combination with any
person who became an interested stockholder prior to the adoption of the
amendment.
In addition, Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions," provides, in general, that any stockholder of
a Massachusetts corporation with more than 200 stockholders of record who
acquires voting stock of such corporation in a "control share acquisition" may
not vote the shares so acquired (or shares acquired within 90 days before or
after the "control share acquisition") unless a majority of the other
stockholders of such corporation entitled to vote so authorize. In general, a
"control share acquisition" includes the acquisition by any person of
beneficial ownership of shares which, when added to all other shares of such
corporation beneficially owned by such person, would entitle such person to
vote (i) between 20% and 33 1/3%, (ii) between 33 1/3% and 50%, or (iii) more
than 50% of the outstanding voting stock of such corporation. A "control share
acquisition" generally does not include, among other transactions, the
acquisition of shares directly from the issuing corporation. The Company has
amended its By-Laws to opt out of the provisions of Chapter 110D.
Massachusetts General Laws Chapter 156B, Section 50A, requires that publicly
held Massachusetts corporations that have not "opted out" of Section 50A have
a classified board of directors consisting of three classes as nearly equal in
size as possible. Section 50A also provides that directors who are so
classified shall be subject to removal by the stockholders only for cause. The
Company's Articles of Organization reflect the requirements of Section 50A.
The Company's Articles of Organization authorize the issuance of 10,000,000
shares of undesignated Preferred Stock, the terms of which may be fixed from
time to time by the Board of Directors without further stockholder approval.
The Company's By-Laws provide that after the Company has a class of voting
stock registered under the Exchange Act, a special meeting of stockholders may
be called by the President, the Board of Directors or by the holders of 35% or
more of the outstanding voting stock of the Company. Certain other provisions
of the Company's By-Laws, its Articles of Organization and Massachusetts law
may also make more difficult or discourage a proxy contest or the acquisition
of control by a holder of a substantial block of the Company's
62
<PAGE>
Common Stock or the removal of the incumbent Board of Directors and could also
have the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its stockholders. In addition,
because such provisions also have the effect of discouraging accumulations of
large blocks of Common Stock by purchasers whose objective is to have such
Common Stock repurchased by the Company at a premium, such provisions could
tend to reduce the temporary fluctuations in the market price of the Company's
Common Stock that are caused by such accumulations. Accordingly, stockholders
could be deprived of certain opportunities to sell their Common Stock at a
temporarily higher market price.
Reference is made to the full text of the foregoing statutes, the Company's
Articles of Organization and its By-Laws for their entire terms. The partial
summary contained in this Prospectus is not intended to be complete. See "Risk
Factors--Effect of Certain Charter and By-Law Provisions and Anti-Takeover
Provisions; Possible Issuances of Preferred Stock."
ELIMINATION OF MONETARY LIABILITY FOR OFFICERS AND DIRECTORS. The Company's
Articles of Organization also incorporate certain provisions permitted under
the Massachusetts General Laws relating to the liability of directors. The
provisions eliminate to the maximum extent permitted by Chapter 156B of the
Massachusetts General Laws a director's personal liability to the Company for
monetary damages arising out of a breach of the director's fiduciary duty as a
director of the Company, except in circumstances involving certain wrongful
acts, such as the breach of a director's duty of loyalty or acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law or authorization of distributions in violation of the
Articles of Organization or in violation of Chapter 156B or of loans to
officers or directors of the Company or any transaction from which the
director derived an improper personal benefit. These provisions do not prevent
recourse against directors through equitable remedies such as injunctive
relief.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Company's By-Laws contain
provisions to indemnify each of the directors and officers of the Company (as
well as the former directors and officers) to the fullest extent permitted by
Massachusetts law against any and all claims and liabilities to which he or
she may be or become subject by reason of his or her being or having been an
officer or director of the Company, or by reason of his or her alleged acts or
omissions as an officer or director of the Company, except in relation to such
matters as to which such officer or director shall have been guilty of willful
malfeasance, bad faith, gross negligence or reckless disregard of his or her
duties in the conduct of his or her office. The By-Laws further provide that
the Company shall indemnify and reimburse each such officer and director
against and for any and all legal and other expenses reasonably incurred by
him or her in connection with any such claims and liabilities, actual or
threatened, whether or not, at or prior to the time when so indemnified, held
harmless and reimbursed, he or she had ceased being an officer or director of
the Company, except in relation to such matters as to which such officer or
director shall have been guilty of willful malfeasance, bad faith, gross
negligence or reckless disregard of his or her duties in the conduct of his or
her office; provided that the Company prior to such final adjudication may
compromise and settle any such claims and liabilities and pay such expenses,
if such settlement or payment or both appears, in the judgment of a majority
of the Board of Directors, to be for the best interest of the Company,
evidenced by a resolution to that effect after receipt by the Company of a
written opinion of counsel for the Company that such officer or director has
not been guilty of willful malfeasance, bad faith, gross negligence or
reckless disregard of his or her duties in the conduct of his office in
connection with the matters involved in such compromise, settlement and
payment.
REGISTRATION RIGHTS
In connection with each Acquisition, the Company has entered into a
registration rights agreement (the "Registration Rights Agreement") with the
principal stockholders of the Company (the "VIALOG Stockholders") and the
principal stockholders of each of the Founding Companies (the "Founding
Company Stockholders") granting demand and piggyback registration rights with
respect to their shares and providing for a market lockup of their shares
following the effective date of a registration statement of the Company filed
under the Securities Act.
63
<PAGE>
The VIALOG Stockholders and the Founding Company Stockholders may demand, on
two occasions only, that the Company register their shares of Common Stock
under the Securities Act by written request delivered at least one year after
the effective date of the Acquisitions. Any such demand must be made by the
holders of not less than 20% in interest of the persons having such
registration rights. The Company is obligated to keep such registration
effective for a period of four months. The Company may defer, not more than
once during any twelve-month period, the filing of such registration statement
for up to 180 days, if it is determined in good faith by the Company's Board
of Directors that such registration would be detrimental to the Company or its
stockholders. The Company may include in any such filing securities of the
Company for its own account, or other securities of the Company which are held
by officers or directors of the Company or held by other persons who, by
virtue of agreements with the Company, are entitled to include their
securities in any such registration.
If the Company determines to register any of its shares, other than under a
filing relating transactions such as mergers, consolidations,
reclassifications, asset sales or similar transactions described in Rule 145
promulgated under the Securities Act or on a form which does not permit
secondary sales or does not include substantially the same information as
would be required to be included in a registration statement, then the VIALOG
Stockholders and the Founding Company Stockholders may request that shares of
their Common Stock be included in such registration. If the registration is an
underwritten offering, the lead underwriter may limit the number of shares
requested to be registered pursuant to such piggyback rights to 25% of the
securities covered by such underwritten offering. Any shares offered by
officers and directors will be the first to be excluded from such offering.
The Company is obligated to use its best efforts to file all reports
necessary to qualify for registration of its securities on Form S-3 or a
comparable or successor form. After qualifying for such use, the Company is
obligated upon request to register the stock of any qualifying VIALOG
Stockholder on Form S-3, unless (i) the aggregate offering price is less than
$1 million or (ii) the Company has effected a registration on Form S-3 in the
last twelve months. Additionally, the Company may defer such registration for
a period of 120 days if the Company has plans to make within 90 days a
registered public offering or is engaged in any other activity which, if
determined in good faith by the Company's Board of Directors, would be
adversely affected by the requested registration.
The VIALOG Stockholders and the Founding Company Stockholders have agreed to
enter into a 180 day "market stand-off" following the effective date of a
Company registration statement if requested to do so by the Company or the
underwriter of said offering and provided that all other shareholders,
officers and directors of the Company enter into similar agreements. Such
agreement may prohibit the sale, transfer or disposition of the shares of
registerable Common Stock held by the VIALOG Stockholders or Founding Company
Stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is .
LISTING
The Company intends to make an application to have the Common Stock listed
on the New York Stock Exchange under the symbol " ".
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
As of February 28, 1997, the Company had outstanding 1,399,650 shares of
Common Stock. The 4,200,000 shares offered hereby will be freely tradable
without restriction unless acquired by affiliates of the Company. Neither the
remaining 1,399,650 outstanding shares of Common Stock nor the 3,548,954
shares to be issued in the Acquisitions have been registered under the
Securities Act, which means that they may be resold publicly only upon
registration under the Securities Act or in compliance with an exemption from
the registration requirements of the Securities Act, including the exemption
provided by Rule 144 thereunder.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of the acquisition of restricted shares of Common
Stock from either the Company or any affiliate of the Company, the acquirer or
subsequent holder thereof may sell, within any three-month period commencing
90 days after the date of this Prospectus, a number of shares that does not
exceed the greater of one percent of the then outstanding shares of the Common
Stock (approximately 91,500 shares immediately after this Offering), or the
average weekly trading volume of the Common Stock on the New York Stock
Exchange during the four calendar weeks preceding the date on which notice of
the proposed sale is filed with the Securities and Exchange Commission (the
"Commission"). Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the later of
the date of the acquisition of restricted shares of Common Stock from the
Company or any affiliate of the Company, a person who is not deemed to have
been an affiliate of the Company at any time for 90 days preceding a sale
would be entitled to sell such shares under Rule 144 without regard to the
volume limitations, manner of sale provisions or notice requirements. In
meeting the one-year and two-year holding periods described above, a holder of
restricted shares may in some circumstances include the holding period of a
prior owner. The one-year and two-year holding periods described above do not
begin until the full purchase price or other consideration is paid by the
person acquiring the restricted shares from the Company or an affiliate of the
Company.
The Company and its officers, directors and stockholders have agreed not to
sell or otherwise dispose of any shares of Common Stock for a period of 180
days from the closing of this Offering without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, except that the Company
may issue Common Stock in connection with the Acquisitions or in connection
with the Plan. The former stockholders of the Founding Companies and the
Company's officers, directors and certain stockholders have the right, in the
event the Company proposes to register under the Securities Act any Common
Stock for its own account or for the account of others, subject to certain
exceptions, to require the Company to include their shares in the
registration, subject to the right of any managing underwriter of any such
public offering to exclude some or all of the shares for marketing reasons. In
addition, such stockholders will have demand registration rights to require
the Company to register shares held by them by written request of the holders
of not less than 20% in interest of the persons having such registration
rights delivered more than one year after the closing of the Acquisitions.
Sales, or the availability for sale of, substantial amounts of the Common
Stock in the public market could adversely affect prevailing market prices and
the ability of the Company to raise equity capital in the future.
65
<PAGE>
UNDERWRITING
Subject to the terms and certain conditions contained in the Underwriting
Agreement, the underwriters named below (the "Underwriters"), for whom
Donaldson, Lufkin & Jenrette Securities Corporation and are acting as
representatives (collectively, the "Representatives"), have severally agreed
to purchase from the Company an aggregate of 4,200,000 shares of Common Stock.
The number of shares of Common Stock that each Underwriter has agreed to
purchase is set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation................
---------
Total............................................................ 4,200,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay
for all the shares of Common Stock offered hereby (other than the shares of
Common Stock covered by the over-allotment option described below) if any are
taken.
Prior to this Offering, there has been no established trading market for the
Common Stock. The initial price to the public for the Common Stock offered
hereby will be determined by negotiations between the Company and the
Representatives. The factors to be considered in determining the initial price
to the public are expected to include the history of and the prospects for the
industry in which the Company competes, the past and present operations of the
Company, the historical results of operations of the Company, the prospects
for future earnings of the Company, the recent market prices of securities of
generally comparable companies, and the general condition of the securities
markets at the time of this Offering.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and certain stockholders of the Founding Companies
against certain liabilities, including liabilities under the Securities Act.
The Underwriters have advised the Company that they propose to offer the
shares of Common Stock to the public initially at the price to the public set
forth on the cover page of this Prospectus and to certain dealers (who may
include the Underwriters) at such price less a concession not to exceed $ per
share. The Underwriters may allow, and such dealers may reallow, discounts not
in excess of $ per share to any other Underwriter and certain other dealers.
After this Offering, the prices and concessions and reallowances to dealers
may be changed by the Underwriters. The Common Stock is offered subject to
receipt and acceptance by the Underwriters and to certain other conditions,
including the right to reject orders in whole or in part.
The Company has agreed to pay the Representatives a fee of $600,000 for
financial advisory services rendered by the Representatives to the Company in
connection with the structuring of the Acquisitions and this Offering.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to an aggregate of 630,000
additional shares of Common Stock at the initial public offering price less
underwriting discounts and commissions, solely to cover over-allotments. To
the extent that the Underwriters exercise such option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite such Underwriter's name in the preceding table bears
to the total number of shares offered.
66
<PAGE>
Subject to certain exceptions, the Company and its directors, officers and
stockholders have agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible or
exchangeable into any shares of Common Stock prior to the expiration of 180
days from the date of this Prospectus, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. See "Shares Eligible for
Future Sale."
The Underwriters do not intend to confirm sales of shares of Common Stock to
accounts over which they exercise discretionary authority.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company by
Mirick, O'Connell, DeMallie & Lougee, llp, Worcester, Massachusetts. David L.
Lougee, a partner in Mirick, O'Connell, DeMallie & Lougee, llp, owns 25,500
shares of the Company's Common Stock. Certain legal matters related to this
Offering will be passed upon for the Underwriters by Foley, Hoag & Eliot llp,
Boston, Massachusetts.
EXPERTS
The historical financial statements as indicated in the index on pages F-1
and F-2 of this Prospectus have been included herein and in the registration
statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere in this Prospectus, and upon
the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments thereto, the "Registration Statement") under
the Securities Act with respect to the shares of Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement and
the exhibits and schedules filed therewith, certain portions of which have
been omitted as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract or any
other document are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is hereby made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by reference. For further information pertaining to
the Company and the shares of Common Stock offered hereby, reference is made
to such Registration Statement, including the exhibits, financial statements
and schedules filed therewith. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and its regional
offices located at 7 World Trade Center, Suite 1300, New York, New York, 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials, when filed, may also be obtained from
the Commission at Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C.
20549 upon payments of certain fees prescribed by the Commission. The
Commission maintains a web site on the Internet (http://www.sec.gov.) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
67
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Basis of Presentation.................................................... F-3
Pro Forma Combined Balance Sheet as of December 31, 1996 (Unaudited)..... F-4
Pro Forma Combined Statement of Earnings for the Year Ended December 31,
1996 (Unaudited)........................................................ F-5
Notes to Unaudited Pro Forma Combined Financial Statements............... F-6
HISTORICAL FINANCIAL STATEMENTS
VIALOG Corporation
Independent Auditors' Report............................................ F-9
Balance Sheet........................................................... F-10
Statement of Operations................................................. F-11
Statement of Stockholders' Equity....................................... F-12
Statement of Cash Flows ................................................ F-13
Notes to Financial Statements........................................... F-14
American Teleconferencing Services, Ltd.
Independent Auditors' Report............................................ F-18
Balance Sheets.......................................................... F-19
Statements of Operations................................................ F-20
Statements of Stockholders' Equity...................................... F-21
Statements of Cash Flows................................................ F-22
Notes to Financial Statements........................................... F-23
Telephone Business Meetings, Inc.
Independent Auditors' Report............................................ F-29
Balance Sheets.......................................................... F-30
Statements of Income.................................................... F-31
Statements of Stockholders' Equity...................................... F-32
Statements of Cash Flows................................................ F-33
Notes to Financial Statements........................................... F-34
Conference Source International, Inc.
Independent Auditors' Report............................................ F-39
Balance Sheets.......................................................... F-40
Statements of Income.................................................... F-41
Statements of Stockholders' Equity...................................... F-42
Statements of Cash Flows................................................ F-43
Notes to Financial Statements .......................................... F-44
Call Points, Inc.
Independent Auditors' Report............................................ F-48
Balance Sheets.......................................................... F-49
Statements of Operations................................................ F-50
Statements of Stockholders' Equity...................................... F-51
Statements of Cash Flows ............................................... F-52
Notes to Financial Statements........................................... F-53
Kendall Square Teleconferencing, Inc.
Independent Auditors' Report............................................ F-58
Balance Sheets.......................................................... F-59
Statements of Income.................................................... F-60
Statements of Stockholders' Equity...................................... F-61
Statements of Cash Flows................................................ F-62
Notes to Financial Statements........................................... F-63
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American Conferencing Company, Inc. and Resource Objectives, Inc.
Independent Auditors' Report.............................................. F-68
Combined Balance Sheets................................................... F-69
Combined Statements of Operations......................................... F-70
Combined Statements of Stockholders' Equity............................... F-71
Combined Statements of Cash Flows ........................................ F-72
Notes to Combined Financial Statements.................................... F-73
Communication Development Corporation
Independent Auditors' Report ............................................. F-77
Balance Sheets............................................................ F-78
Statements of Operations.................................................. F-79
Statements of Stockholders' Equity........................................ F-80
Statements of Cash Flows.................................................. F-81
Notes to Financial Statements............................................. F-82
</TABLE>
F-2
<PAGE>
VIALOG CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(UNAUDITED)
The following unaudited pro forma combined financial statements give effect
to the acquisitions by VIALOG Corporation ("VIALOG") of all of the stock of
(a) American Teleconferencing Services, Ltd. ("ATS"), (b) Telephone Business
Meetings, Inc. ("Access"), (c) Conference Source International, Inc. ("CSI"),
(d) Kendall Square Teleconferencing, Inc. ("TCC"), (e) American
Teleconferencing Company, Inc. ("Americo"), and (f) Communication Development
Corporation ("CDC"), and substantially all the net assets of Call Points, Inc.
("Call Points") (together, the "Founding Companies"). These acquisitions (the
"Acquisitions") will occur simultaneously with the closing of this Offering
and will be accounted for using the purchase method of accounting. ATS, one of
the Founding Companies, has been identified as the acquirer for financial
statement presentation purposes. The unaudited pro forma combined financial
statements also give effect to the issuance of Common Stock, which will be
issued by VIALOG to the stockholders of the Founding Companies upon the
effectiveness of the Offering. These statements are based on the historical
financial statements of the Founding Companies included elsewhere in this
Prospectus and the estimates and assumptions set forth below and in the notes
to the unaudited pro forma combined financial statements.
The unaudited pro forma combined balance sheet gives effect to these
transactions (the Acquisitions and the Offering) as if they had occurred on
December 31, 1996. The unaudited pro forma combined statement of earnings
gives effect to these transactions as if they had occurred on January 1, 1996.
The pro forma adjustments are based upon preliminary estimates, currently
available information and certain assumptions that management deems
appropriate. In management's opinion, the preliminary estimates regarding
allocation of the purchase price of the Founding Companies are not expected to
materially differ from the final adjustments, except that management
anticipates allocating some portion of the purchase price to in-process
research and development expenses. This allocation could result in a
significant charge to operations upon closing of the Acquisitions and would
result in a reduction in goodwill in the accompanying pro forma combined
balance sheet. These adjustments will be finalized after the Acquisitions. The
unaudited pro forma combined financial data presented herein are not
necessarily indicative of the results the Company would have obtained had such
events occurred on January 1, 1996, as assumed, or the future results of the
Company. The unaudited pro forma combined financial statements should be read
in conjunction with the other financial statements and notes thereto included
elsewhere in this Prospectus. See "Risk Factors" included elsewhere herein.
F-3
<PAGE>
VIALOG CORPORATION
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOUNDING COMPANIES--HISTORICAL
-------------------------------------------------------- (A) AND (B) (C) AND (D)
VIALOG CALL PRO FORMA POST MERGER AS
CORP. ATS ACCESS CSI POINTS TCC AMERICO CDC ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
------ -------- ------- ------- ------- ------- ------- ----- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents.... $ 337 $ 290 $ 804 $ 318 $ 31 $ 104 $ 39 $ 90 $ -- $ 2,013 $ -- $ --
Trade accounts
receivable,
net............ -- 2,977 1,103 801 1,080 471 213 186 -- 6,831 -- --
Other receiv-
ables.......... -- 67 -- -- 1 61 -- 1 -- 130 -- --
Prepaid ex-
penses......... 377 217 161 48 3 -- 5 9 -- 820 -- --
Other current
assets......... 13 515 -- -- -- 28 19 -- 35 610 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Total current
assets......... 727 4,066 2,068 1,167 1,115 664 276 286 35 10,404 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Property, plant &
equipment....... 8 10,627 3,641 2,111 5,087 914 295 480 -- 23,163 -- --
Less: Accumulated
depreciation.... 1 4,418 1,440 1,052 3,168 181 184 352 -- 10,796 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Property, plant
& equipment,
net............ 7 6,209 2,201 1,059 1,919 733 111 128 -- 12,367 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Goodwill......... -- -- -- -- -- -- -- -- 38,815 38,815 -- --
Other assets..... 529 16 336 67 2 10 17 1 437 1,415 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
$ 1,263 $ 10,291 $ 4,605 $ 2,293 $ 3,036 $ 1,407 $ 404 $ 415 $ 39,287 $ 63,001 $ -- $ --
======= ======== ======= ======= ======= ======= ===== ===== ======== ======== ===== =====
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current liabili-
ties
Notes payable,
bank........... $ -- $ -- $ -- $ -- $ -- $ -- $ 35 $ -- $ -- $ 35 $ -- $ --
Current maturi-
ties of long-
term debt...... -- 710 802 486 617 93 7 33 (116) 2,632 -- --
Trade accounts
payable........ 313 1,320 141 121 394 438 64 74 -- 2,865 -- --
Accrued ex-
penses......... 663 1,652 366 91 315 127 210 102 -- 3,526 -- --
Pro forma
consideration
due Founding
Companies...... -- -- -- -- -- -- -- -- 38,592 38,592 -- --
Other current
liabilities.... -- -- -- -- 169 56 18 7 362 612 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Total current
liabilities.... 976 3,682 1,309 698 1,495 714 334 216 38,838 48,262 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Long-term debt... -- 5,222 1,250 919 625 183 -- 42 (323) 7,918 -- --
Other noncurrent
liabilities..... -- 99 128 -- -- -- 14 19 25 285 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Total liabili-
ties........... 976 9,003 2,687 1,617 2,120 897 348 277 38,540 56,465 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Redeemable common
stock........... -- -- 148 -- -- -- -- -- -- 148 -- --
Stockholders' eq-
uity
Preferred
stock.......... -- -- -- -- -- -- -- -- -- -- -- --
Common stock.... 14 1 -- 1 2 62 1 2 (34) 49 -- --
Additional paid-
in capital..... 1,058 372 660 349 3,132 -- -- -- 18,653 24,224 -- --
Retained earn-
ings (defi-
cit)........... (785) 915 1,110 326 (2,218) 463 90 136 (17,922) (17,885) -- --
Treasury stock,
at cost........ -- -- -- -- -- (15) (35) -- 50 -- -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
Total stockhold-
ers' equity.... 287 1,288 1,770 676 916 510 56 138 747 6,388 -- --
------- -------- ------- ------- ------- ------- ----- ----- -------- -------- ----- -----
$ 1,263 $ 10,291 $ 4,605 $ 2,293 $ 3,036 $ 1,407 $ 404 $ 415 $ 39,287 $ 63,001 $ -- $ --
======= ======== ======= ======= ======= ======= ===== ===== ======== ======== ===== =====
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE>
VIALOG CORPORATION
PRO FORMA COMBINED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOUNDING COMPANIES--HISTORICAL
----------------------------------------------------------
VIALOG CALL PRO FORMA
CORP. ATS ACCESS CSI POINTS TCC AMERICO CDC ADJUSTMENTS PRO FORMA
------- ------- ------- ------- ------ ------ ------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $ -- $22,347 $9,073 $5,868 $7,509 $3,396 $1,679 $1,480 $ (743)(e) $ 50,609
Cost of revenue......... -- 14,447 4,071 2,208 5,898 1,813 854 886 (533)(e) 28,106
(1,538)(f)
------- ------- ------- ------- ------ ------ ------ ------ ------- ---------
Gross profit.......... -- 7,900 5,002 3,660 1,611 1,583 825 594 1,328 22,503
Selling, general and ad-
ministrative expenses.. 1,308 8,300 3,455 1,621 1,873 1,329 889 655 (182)(e) 17,255
(1,993)(g)
Goodwill amortization... -- -- -- -- -- -- -- -- 1,539 (h) 1,539
------- ------- ------- ------- ------ ------ ------ ------ ------- ---------
Operating income
(loss)............... (1,308) (400) 1,547 2,039 (262) 254 (64) (61) 1,964 3,709
Other income (expense)..
Interest income....... 1 8 19 15 -- 1 -- 1 -- 45
Interest expense...... -- (328) (193) (180) (49) (43) (9) (12) 29 (i) (785)
Other income (ex-
pense), net.......... -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------ ------ ------ ------ ------- ---------
Earnings (loss) before
income taxes......... (1,307) (720) 1,373 1,874 (311) 212 (73) (72) 1,993 2,969
Provision for income
taxes.................. (522) (315) -- -- -- -- (14) (28) 2,566 (j) 1,687
------- ------- ------- ------- ------ ------ ------ ------ ------- ---------
Net earnings (loss)... $ (785) $ (405) $ 1,373 $ 1,874 $ (311) $ 212 $ (59) $ (44) $ (573) $ 1,282
======= ======= ======= ======= ====== ====== ====== ====== ======= =========
Pro forma earnings per
share.................. $0.13
=========
Shares used in computing
pro forma net earnings
per share.............. (k) 9,604,611
=========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE>
VIALOG CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. VIALOG CORPORATION BACKGROUND
VIALOG Corporation ("VIALOG") was formed with the intention of becoming a
leading provider of value added electronic group communications. These
services include audio, video and data teleconferencing. VIALOG has conducted
no operations to date and will acquire the Founding Companies simultaneously
with the consummation of the Offering.
2. HISTORICAL FINANCIAL STATEMENTS
The historical financial statements represent the financial position and
results of operations of the Founding Companies and were derived from the
respective financial statements where indicated. All Founding Companies have a
December 31 year-end or have been converted to a December 31 year-end.
3. ACQUISITION OF FOUNDING COMPANIES
Concurrent with the closing of the Offering, VIALOG will acquire
substantially all of the stock, or in one case, the net assets of the Founding
Companies. The Acquisitions will be accounted for using the purchase method of
accounting, with ATS being treated as the acquirer.
The following table sets forth for each Founding Company the consideration
to be paid its common stockholders (i) in cash and (ii) in shares of Common
Stock.
<TABLE>
<CAPTION>
CASH SHARES OF
(000'S) COMMON STOCK
------- ------------
<S> <C> <C>
ATS..................................................... $18,000 1,565,217
Access.................................................. 3,431 888,608
CSI..................................................... 5,306 692,086
Call Points............................................. 7,500 --
TCC..................................................... 2,000 173,913
Americo................................................. 1,260 133,913
CDC..................................................... 1,095 95,217
------- ---------
Total Consideration..................................... $38,592 3,548,954
======= =========
</TABLE>
Excluding ATS (the accounting acquirer), the purchase price of the Founding
Companies is estimated to be $43.4, which amount will be adjusted to reflect
the sum of the cash consideration paid in the Acquisitions (excluding the
Acquisition of ATS) and a valuation of the shares issued in the Acquisitions
(excluding the Acquisition of ATS) equal to 80% of the high end of the
estimated initial public offering price range. Of the estimated purchase
price, $4.6 million has been allocated to the identifiable assets acquired and
liabilities assumed and the balance (currently estimated at $38.8 million) has
been allocated to goodwill. In management's opinion, the preliminary estimates
regarding allocation of the purchase price to the Founding Companies are not
expected to materially differ from the final adjustments, except that
management anticipates allocating some portion of the purchase price to in-
process research and development expenses. This allocation could result in a
significant charge to operations upon closing of the Acquisitions and would
result in a reduction in goodwill in the accompanying pro forma combined
balance sheet. These adjustments will be finalized after the Acquisitions.
F-6
<PAGE>
VIALOG CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(a) Records the purchase of VIALOG by ATS and records a capital distribution
to ATS shareholders.
(b) Records the purchase of the Founding Companies, including the cash
consideration due to the Founding Companies and Common Stock portions.
(c) Records the proceeds from the issuance of 4,200,000 shares of VIALOG
Common Stock, net of estimated offering costs of $ . Offering costs
primarily consist of underwriting discounts and commissions, accounting fees,
legal fees and printing expenses.
(d) Records the cash portion to be paid to the Founding Companies in
connection with the Acquisitions.
The following tables summarize unaudited pro forma combined balance sheet
adjustments:
<TABLE>
<CAPTION>
PRO FORMA
(A) (B) ADJUSTMENTS
-------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Other current assets..................... $ -- $ 35 $ 35
Goodwill................................. -- 38,815 38,815
Other assets............................. -- 437 437
Current maturities of long-term debt..... -- 116 116
Pro forma cash consideration due Founding
Companies............................... (18,000) (20,592) (38,592)
Other current liabilities................ -- (362) (362)
Long term debt, net of current maturi-
ties.................................... -- 323 323
Other noncurrent liabilities............. -- (25) (25)
Common stock............................. (14) 48 34
Additional paid-in capital............... (1) (18,652) (18,653)
Retained earnings (deficit).............. 18,015 (93) 17,922
Treasury stock........................... -- (50) (50)
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
POST MERGER
(C) (D) ADJUSTMENTS
------ ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents...................... $ $ $
Prepaid expenses...............................
Pro forma cash consideration due Founding Com-
panies........................................
Common stock...................................
Additional paid-in capital.....................
------ ------ ------
$ $ $
====== ====== ======
</TABLE>
5. UNAUDITED PRO FORMA COMBINED STATEMENTS OF EARNINGS ADJUSTMENTS
(e) Accounts for the effect of assets distributed to the owners of certain
Founding Companies.
(f) Accounts for the reduction in long distance charges as a result of
contracts recently negotiated by the Founding Companies.
(g) Adjusts compensation for the owners and certain key employees of and
consultants to the Founding Companies to specified amounts that the
individuals have agreed to accept subsequent to the Acquisitions.
(h) Records the pro forma goodwill amortization expense using a twenty-five
year estimated life.
F-7
<PAGE>
VIALOG CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(i) Records the change in interest expense for pro forma adjustments to
debt.
(j) Records the incremental provision for federal and state income taxes
relating to the compensation differential, S corporation income and other pro
forma adjustments.
(k) For purposes of the earnings per share calculation, the outstanding
number of shares assumed to be outstanding on completion of the Offering
include: 55,555 shares of Common Stock issuable upon exercise of warrants
exercisable between November 1997 and February 1999, an aggregate of 507,566
shares subject to options granted under the Company's 1996 Stock Plan less
107,114 shares assumed to be repurchased using the treasury stock method, and
52,000 shares issued upon exercise of stock options, in accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83.
<TABLE>
<S> <C>
Outstanding........................................................ 1,347,650
Issued in Initial Public Offering.................................. 4,200,000
Issued to acquire Founding Companies............................... 3,548,954
Shares related to stock options and warrants....................... 508,007
---------
Shares estimated to be outstanding................................. 9,604,611
=========
</TABLE>
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
VIALOG Corporation:
We have audited the accompanying balance sheet of VIALOG Corporation as of
December 31, 1996, and the related statement of operations, stockholders'
equity and cash flows for the period from January 1, 1996 (inception) to
December 31, 1996. 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 VIALOG Corporation as of
December 31, 1996 and the results of its operations and its cash flows for the
period from January 1, 1996 (inception) to December 31, 1996, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
January 14, 1997
Boston, Massachusetts
F-9
<PAGE>
VIALOG CORPORATION
BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash................................................................. $ 337
Deferred offering costs.............................................. 377
Other current assets................................................. 13
------
Total current assets............................................... 727
------
Office equipment....................................................... 7
Other assets........................................................... 7
Deferred income taxes (note 5)......................................... 522
------
Total assets....................................................... $1,263
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 313
Accrued expenses (note 4)............................................ 663
------
Total current liabilities.......................................... 976
------
Stockholders' equity (note 3):
Common stock, $.01 par value. Authorized 3,000,000 shares; issued and
outstanding 1,347,650 shares at December 31, 1996................... 14
Additional paid-in capital........................................... 1,058
Accumulated deficit.................................................. (785)
------
Total stockholders' equity......................................... 287
------
Commitments and contingencies (notes 2 and 6)
Total liabilities and stockholders' equity......................... $1,263
======
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
VIALOG CORPORATION
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1996 (INCEPTION) TO DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenues.............................................................. $ --
General and administrative expenses................................... 1,308
-------
Loss from operations................................................ (1,308)
Interest income....................................................... 1
-------
Loss before income tax benefit...................................... (1,307)
Income tax benefit (note 5)........................................... 522
-------
Net loss............................................................ $ (785)
=======
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
VIALOG CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1996 (INCEPTION) TO DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT EQUITY
--------- --------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Initial investment at
incorporation on Janu-
ary 1, 1996............ 666,400 $ 7 $ -- $ -- $ 7
Additional shares issued
in connection with
initial
capitalization......... 180,000 2 23 -- 25
Issuance of common
stock:
Contribution of common
stock to capital..... (125,000) (1) 1 -- --
Outsiders by private
offering dated May 8,
1996................. 189,000 2 103 -- 105
Outsiders by private
placement dated
October 22, 1996..... 190,000 2 758 -- 760
Employees in lieu of
payment for servic-
es................... 121,250 1 92 -- 93
Consultants in lieu of
payment for servic-
es................... 88,500 1 29 -- 30
Options exercised..... 37,500 -- 2 -- 2
Options granted to
consultants.......... -- -- 50 -- 50
Net loss.............. -- -- -- (785) (785)
--------- ---- ------ ----- -----
Balance at December 31,
1996................... 1,347,650 $ 14 $1,058 $(785) $ 287
========= ==== ====== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
VIALOG CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 (INCEPTION) TO DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.............................................................. $(785)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Deferred income taxes............................................... (522)
Compensation expense for issuance of common stock and options (note
3)................................................................. 173
Changes in operating assets and liabilities:
Other current assets.............................................. (13)
Other assets...................................................... (7)
Accounts payable.................................................. 313
Accrued expenses.................................................. 663
-----
Net cash used in operating activities........................... (178)
-----
Cash flows from investing activities:
Additions to property and equipment................................... (7)
-----
Cash flows from financing activities:
Proceeds from issuance of common stock................................ 899
Deferred offering costs............................................... (377)
-----
Net cash provided by financing activities....................... 522
-----
Net increase in cash.................................................... 337
Cash at beginning of period............................................. --
-----
Cash at end of period................................................... $ 337
=====
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1996 (INCEPTION) TO DECEMBER 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
VIALOG Corporation (the "Company") was incorporated in Massachusetts on
January 1, 1996 as Interplay Corporation. In January 1997, the Company changed
its name to VIALOG Corporation. The Company was formed to create a national
provider of integrated audio teleconferencing services (see note 2). The
Company intends to acquire teleconferencing service providers, complete an
initial public offering ("IPO") of its common stock, and subsequent to the
IPO, continue to acquire similar companies to expand their national
operations. (See note 2.)
At December 31, 1996, the Company's primary assets are cash, deferred
offering costs and deferred tax assets. The Company has not conducted any
operations, and all activities have related to the acquisitions and the IPO.
During 1996 the Company raised a total of $899,000 from issuances of common
stock, which will be expended on costs associated with the acquisitions and
the IPO. There can be no assurance that the IPO and the acquisitions described
in note 2 will be completed and that the Company will be able to generate
future operating revenues. The Company is dependent upon the proposed IPO to
fund the pending acquisitions and future operations.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates. Management assumes that recoverability of the
Company's primary assets at December 31, 1996, deferred offering costs and
deferred tax assets, will occur through the successful completion of the IPO
and the acquisitions described in note 2.
(c) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(d) Stock-based Compensation
The Financial Accounting Standards Board has issued SFAS No. 123, Accounting
for Stock-Based Compensation. The Company is required to adopt this standard
for the year ending December 31, 1996. SFAS No. 123 permits entities either to
recognize as expense, over the vesting period, the fair value of all stock-
based awards on the date of grant or continue to apply the provisions of
Accounting Principles Board ("APB") Opinion No. 25 and provide pro forma net
income and earnings per share disclosures for options granted in 1995 and
subsequent years, as if the provisions of SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB 25 and provide
the disclosures required by SFAS No. 123. This pronouncement had no impact on
the Company's reported financial position or results of operation for the year
ended December 31, 1996.
F-14
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) ACQUISITIONS AND PUBLIC OFFERING
VIALOG Corporation has agreements to acquire all of the issued and
outstanding stock of American Teleconferencing Services, Ltd., Telephone
Business Meetings, Inc., Conference Source International, Inc., Kendall Square
Teleconferencing, Inc., American Conferencing Company, Inc. and Communication
Development Corporation, and substantially all the net assets of Call Points
Inc. (together, the "Founding Companies"). These acquisitions will occur
contemporaneously with the closing of the Company's proposed IPO and will be
accounted for using the purchase method. The estimated total purchase price of
the Founding Companies consists of $38.6 million in cash to be paid to the
stockholders of the Founding Companies (the "Sellers") upon the consummation
of the Offering and $3,548,954 shares of common stock to be issued to the
Sellers.
(3) STOCKHOLDERS' EQUITY
(a) Sale of Common Stock
During 1996 the Company sold common stock through several private
placements. The proceeds of the sales have been used primarily for expenses
relating to the business acquisition agreements and the proposed public
offering of common stock (see note 2). A total of 379,000 shares of common
stock were sold for aggregate net proceeds of $865,012.
(b) Common Stock Grants
Between February and November 1996, the Company issued a total of 209,750
shares of common stock to consultants and employees as an inducement to them
to provide services to the Company. Compensation expense of $122,666, which
represents the estimated fair market value of the stock granted, has been
recorded in connection with these transactions.
(c) The 1996 Stock Plan
On February 14, 1996, the Board of Directors and the Company's stockholders
approved the Company's 1996 Stock Plan (the "Plan"). The purpose of the Plan
is to provide directors, officers, key employees, consultants and other
service providers with additional incentives by increasing their ownership
interests in the Company. Individual awards under the Plan may take the form
of one or more of: (i) incentive stock options ("ISOs"); (ii) non-qualified
stock options ("NQSOs"); (iii) stock appreciation rights ("SARs"); and
(iv) restricted stock.
The Compensation Committee administers the Plan and generally selects the
individuals who will receive awards and the terms and conditions of those
awards. The maximum number of shares of Common Stock that may be subject to
outstanding awards, determined immediately after the grant of any award, may
not exceed 1,500,000 shares. Shares of Common Stock attributable to awards
which have expired, terminated or been canceled or forfeited are available for
issuance or use in connection with future awards.
The Plan will remain in effect until February 14, 2006 unless terminated
earlier by the Board of Directors. The Plan may be amended by the Board of
Directors without the consent of the stockholders of the Company, except that
any amendment, although effective when made, will be subject to stockholder
approval if required by any Federal or state law or regulation or by the rules
of any stock exchange or automated quotation system on which the Common Stock
may then be listed or quoted.
The Company granted and has outstanding ISOs to purchase a total of 407,500
shares of common stock as follows: (i) 330,000 shares of Common Stock
exercisable at $.555 per share granted in September and October
F-15
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
of 1996 and (ii) 77,500 shares of Common Stock exercisable at $4.00 per share
granted in November, 1996. The options vest in equal quarterly instalments
over 3 years and have a 10 year term. The Company also granted NQSOs to
purchase a total of 147,566 shares of Common Stock as follows: (i) 111,066
shares of Common Stock exercisable at $.05 to $.06 per share granted in
February, March and April of 1996 and (ii) 36,500 shares of common stock
exercisable at $.555 per share granted in June through October of 1996. The
options vest in equal quarterly instalments over 3 years and have a 10 year
term. 37,500 NQSOs with a $.06 exercise price were exercised during 1996 so
that 110,066 NQSOs are outstanding at December 31, 1996. At December 31, 1996,
37,500 options were exercisable at $0.555 per share.
Through December 1996, the Company granted a total of 55,556 options to
consultants. Compensation expense of $50,250 has been recorded in connection
with these transactions.
At December 31, 1996, there were 982,434 additional shares available for
grant under the Plan. The per share weighted-average fair value of ISO and
NQSO stock options granted during 1996 were $.27 and $.04, respectively on the
date of grant using the minimum value option-pricing model with the following
weighted-average assumptions: 1996--no expected dividend yield, risk-free
interest rate of 6.5%, and an expected life of 4 years.
In February 1997, 27,000 ISOs and 15,000 NQSOs were granted with exercise
prices of $9.00, and 52,000 NQSOs were exercised at a weighted average
exercise price of $.05.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized in the financial
statements for stock options granted to employees. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net loss would have been increased
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996
--------------
(IN THOUSANDS)
<S> <C>
Net loss
As reported.............................................. $(785)
Pro forma................................................ (826)
</TABLE>
(4) ACCRUED EXPENSES
Accrued expenses principally consist of professional fees related to the
acquisitions of the Founding Companies and the Offering.
(5) INCOME TAXES
Income tax benefit consists of the following at December 31, 1996:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Federal............................................ $ -- 398 398
State.............................................. -- 124 124
----- --- ---
$ -- 522 522
===== === ===
</TABLE>
Income tax benefit differed from the amounts computed by applying the U.S.
statutory federal income tax rate of 34% as a result of the following (in
thousands):
<TABLE>
<S> <C>
Computed "expected" tax benefit..................................... $445
State and local income taxes, net of federal tax benefit............ 82
Nondeductible amounts and other differences......................... (5)
----
Tax benefit....................................................... $522
====
</TABLE>
F-16
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portion of deferred tax assets and liabilities at December 31, 1996 are
presented below (in thousands):
<TABLE>
<S> <C>
Deferred tax asset:
Organizational expenditures and start-up costs.................... $522
====
</TABLE>
The Company did not have net operating loss carryforwards at December 31,
1996.
In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Based on management's projections for future
taxable income over the periods in which the deferred tax assets are
deductible, the ultimate realization of deferred tax assets recognized appears
more likely than not.
(6) COMMITMENTS AND CONTINGENCIES
Operating Lease
The Company leases office space in Billerica, Massachusetts. The lease
expires in May 1997. Future minimum payments under this lease as of December
31, 1996 are approximately $55,000.
(7) SUBSEQUENT EVENTS (UNAUDITED)
On February 24, 1997, the Company issued promissory notes in the amount of
$500,000, bearing interest at 8.0% per annum and due on the earlier of ten
days following the closing of an initial public offering or one year from
their issue date. Warrants to purchase 55,555 common shares at an exercise
price of $9.00 were issued in conjunction with the promissory notes. The
warrants may be exercised between November 1997 and February 1999.
In February 1997, the Company increased the number of authorized common
shares from 3,000,000 to 30,000,000, increased the number of shares authorized
under the 1996 Stock Plan from 1,500,000 to 1,625,000, and authorized
10,000,000 shares of preferred stock with a $.01 par value of which no shares
have been issued.
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Teleconferencing Services, Ltd.:
We have audited the accompanying balance sheets of American Teleconferencing
Services, Ltd. as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Teleconferencing
Services, Ltd. as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
January 17, 1997
Boston, Massachusetts
F-18
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 353 $ 290
Trade accounts receivable, less allowance for doubtful
accounts of $93 in 1995 and $153 in 1996 (notes 3, 4 and
10).......................................................... 2,682 2,977
Due from stockholder (note 6)................................. 79 --
Due from employees............................................ 49 38
Income taxes receivable....................................... -- 29
Deferred income taxes (note 7)................................ 404 515
Prepaid expenses and other current assets..................... 110 217
------ -------
Total current assets........................................ 3,677 4,066
------ -------
Property and equipment, net (notes 2 and 4)..................... 4,288 6,209
Other assets.................................................... 11 16
------ -------
Total assets................................................ $7,976 $10,291
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 4)............... $ 952 $ 710
Accounts payable.............................................. 1,256 1,320
Accrued expenses (note 5)..................................... 1,582 1,652
Income taxes payable.......................................... 78 --
------ -------
Total current liabilities................................... 3,868 3,682
------ -------
Long-term debt, excluding current installments (note 4)......... 2,112 5,222
Deferred income taxes........................................... 303 99
------ -------
Total liabilities........................................... 6,283 9,003
------ -------
Stockholders' equity (notes 8 and 11):
Common stock, $.0125 par value. Authorized 100,000 shares;
issued and outstanding 76,308 shares at December 31, 1995 and
1996......................................................... 1 1
Additional paid-in capital.................................... 372 372
Retained earnings............................................. 1,320 915
------ -------
Total stockholders' equity.................................. 1,693 1,288
------ -------
Commitments and contingencies (notes 9 and 13)
Total liabilities and stockholders' equity.................. $7,976 $10,291
====== =======
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Net revenues (note 10)................................. $12,996 $17,012 $22,347
Cost of revenues....................................... 7,050 9,467 14,447
------- ------- -------
Gross profit......................................... 5,946 7,545 7,900
Selling, general, and administrative expenses.......... 5,371 6,646 8,300
------- ------- -------
Income (loss) from operations........................ 575 899 (400)
Interest expense, net.................................. 77 216 320
------- ------- -------
Income (loss) before income tax expense (benefit).... 498 683 (720)
Income tax expense (benefit) (note 7).................. 196 295 (315)
------- ------- -------
Net income (loss).................................... $ 302 $ 388 $ (405)
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
NUMBER PAR PAID-IN RETAINED STOCKHOLDERS'
OF SHARES VALUE CAPITAL EARNINGS EQUITY
--------- ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993........................ 74,400 $ 1 $ 186 $ 954 $ 1,141
Net income................. -- -- -- 302 302
Dividends.................. -- -- -- (141) (141)
------ ---- ----- ------ -------
Balance at December 31,
1994........................ 74,400 1 186 1,115 1,302
Issuance of common stock
(note 8).................. 1,908 -- 186 -- 186
Net income................. -- -- -- 388 388
Dividends.................. -- -- -- (183) (183)
------ ---- ----- ------ -------
Balance at December 31,
1995........................ 76,308 1 372 1,320 1,693
Net loss................... -- -- -- (405) (405)
------ ---- ----- ------ -------
Balance at December 31,
1996........................ 76,308 $ 1 $ 372 $ 915 $ 1,288
====== ==== ===== ====== =======
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ 302 $ 388 $ (405)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................... 572 1,047 1,467
Deferred income taxes........................... (19) (41) (315)
Compensation expense for issuance of common
stock (note 8)................................. -- 85 --
Changes in operating assets and liabilities:
Trade accounts receivable, net................ (708) (1,003) (295)
Due from stockholder.......................... 9 (59) 79
Due from employees............................ (19) (14) 11
Income taxes receivable....................... (5) 5 (29)
Prepaid expenses and other current assets..... (21) (26) (107)
Other assets.................................. -- -- (5)
Accounts payable.............................. 188 771 64
Accrued expenses.............................. 629 295 70
Income taxes payable.......................... (106) 77 (78)
------- ------- -------
Net cash provided by operating activities... 822 1,525 457
------- ------- -------
Cash flows from investing activities:
Additions to property and equipment............... (1,535) (2,765) (3,388)
------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt...................... 1,254 2,079 6,547
Principal repayment of long-term debt............. (358) (761) (3,679)
Dividends......................................... (141) (183) --
Proceeds from issuance of common stock............ -- 101 --
------- ------- -------
Net cash provided by financing activities... 755 1,236 2,868
------- ------- -------
Net increase (decrease) in cash and cash
equivalents........................................ 42 (4) (63)
Cash and cash equivalents at beginning of year...... 315 357 353
------- ------- -------
Cash and cash equivalents at end of year............ $ 357 $ 353 $ 290
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................ $ 92 $ 236 $ 309
======= ======= =======
Income taxes.................................... $ 327 $ 314 $ 107
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
American Teleconferencing Services, Ltd. (the "Company") is a provider of
teleconferencing services to a variety of customers primarily located in the
United States. The Company was incorporated in November, 1984 and has two
operations centers located in Overland Park, Kansas and Colorado Springs,
Colorado.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(c) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and money market deposits.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation of machinery and
equipment and furniture and fixtures is provided on the straight-line basis
over the estimated useful lives of the respective assets. The estimated useful
lives are as follows: five years for machinery and equipment; and five to
seven years for furniture and fixtures. Leasehold improvements are amortized
over the shorter of the lease term or the estimated useful lives which
approximate ten years.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(f) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
during 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
F-23
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(h) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise price.
During 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income disclosures
for employee stock option grants made in 1995 and future years as if the fair-
value-based method defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosure provisions of SFAS No. 123. There were no stock
option grants during 1995 and 1996, therefore there is no pro forma disclosure
for those years.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment.................................... $ 6,637 $ 9,401
Furniture and fixtures..................................... 560 989
Leasehold improvements..................................... 42 237
------- -------
7,239 10,627
Less accumulated depreciation and amortization............. (2,951) (4,418)
------- -------
Property and equipment, net.............................. $ 4,288 $ 6,209
======= =======
</TABLE>
(3) LINE OF CREDIT
The Company has line of credit agreements with a bank which, at December 31,
1996, permit the Company to borrow up to $2,250,000 at the bank's lending rate
(8.25% at December 31, 1996). There were no amounts outstanding under the
agreements at December 31, 1995 and 1996. Any borrowings under the line of
credit are secured by the Company's trade accounts receivable for amounts
borrowed under the lines of credit.
(4) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to a bank, interest payable monthly at the bank's
lending rate less .25% (8.00% at December 31, 1996). Principal
and interest due in monthly installments of $96,589 through
June 15, 2003 decreasing to $15,889 through December 9, 2003.
These notes are secured by all machinery and equipment,
furniture and fixtures, and accounts receivable............... $ -- $ 5,932
Notes payable to banks, interest payable monthly at fixed
interest rates of 7.5% and 9.75%, and at the bank's prime rate
and the bank's prime rate plus .25% (8.75% and 9.00%,
respectively, at December 31, 1995). Principal due monthly.
These notes were secured by certain machinery and equipment
and were repaid in full during 1996........................... 3,064 --
------- -------
Total long-term debt......................................... 3,064 5,932
Less: current installments................................... 952 710
------- -------
Long-term debt, excluding current installments............... $ 2,112 $ 5,222
======= =======
</TABLE>
F-24
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997.............................................................. $ 710
1998.............................................................. 769
1999.............................................................. 833
2000.............................................................. 902
2001.............................................................. 977
Later years through 2003.......................................... 1,741
------
Total........................................................... $5,932
======
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued payroll, bonuses and related taxes............... $ 1,516 $ 1,485
Accrued fees and other expenses.......................... 66 167
------- -------
$ 1,582 $ 1,652
======= =======
</TABLE>
(6) RELATED PARTY TRANSACTIONS
(a) Due From Stockholder
The Company loaned a stockholder $34,793 on June 1, 1989 which was payable
in monthly installments of $474 including interest at 7%. The amount due from
the stockholder under this loan was $7,656 at December 31, 1995. The
outstanding balance was paid in full during 1996.
In addition, the Company paid certain obligations of the stockholder which
totaled $71,040 at December 31, 1995 and was included in due from stockholder
at December 31, 1995. There were no amounts outstanding from the stockholder
at December 31, 1996.
(b) Due to Stockholder
In June 1996, the Company borrowed $100,000 from a stockholder in exchange
for a note payable, bearing interest at 8.25%. The loan was repaid in December
1996.
(c) Lease Transactions
The Company leased certain equipment and art work from a stockholder. The
leases were accounted for as operating leases. Amounts expensed under these
leases during the years ended December 31, 1994, 1995 and 1996 were $67,435,
$66,163, and $49,108, respectively. The leases were terminated in October
1996. Certain of the equipment was acquired upon termination of the leases for
cash consideration of $12,500.
F-25
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) INCOME TAXES
Income tax expense (benefit) consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
1994:
Federal......................................... $ 167 $ (15) $ 152
State........................................... 48 (4) 44
----- ----- -----
$ 215 $ (19) $ 196
===== ===== =====
1995:
Federal......................................... $ 260 $ (32) $ 228
State........................................... 76 (9) 67
----- ----- -----
$ 336 $ (41) $ 295
===== ===== =====
1996:
Federal......................................... $ -- $(243) $(243)
State........................................... -- (72) (72)
----- ----- -----
$ -- $(315) $(315)
===== ===== =====
</TABLE>
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. statutory federal income tax rate of 34% as a result of the
following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)............. $169 $232 $(245)
State and local income taxes, net of federal tax bene-
fit.................................................. 29 44 (48)
Nondeductible expenses and other differences.......... (2) 19 (22)
---- ---- -----
$196 $295 $(315)
==== ==== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, are presented
below:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts........................ $ 37 $ 69
Accruals............................................... 367 445
Net operating loss..................................... -- 436
------- -------
Total gross deferred tax assets...................... 404 950
------- -------
Deferred tax liabilities:
Property and equipment................................. 303 534
------- -------
Total gross deferred tax liability................... 303 534
------- -------
Net deferred tax assets.............................. $ 101 $ 416
======= =======
</TABLE>
In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Due to the fact that the Company has
sufficient taxable income in the carryback periods, and projections for future
taxable income over the periods in which the deferred tax assets are
deductible, the ultimate realization of deferred tax assets recognized appears
more likely than not.
F-26
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, the Company had net operating losses of approximately
$1,090,000. The net operating losses will expire in the year 2011. Upon a
change in ownership as defined in Section 382 of the Internal Revenue Code,
the ability to utilize these net operating losses may be limited (see note
13).
(8) STOCKHOLDERS' EQUITY
(a) Common Stock
On August 2, 1995, the Company issued 1,908 shares of non-voting common
stock to an employee at $53 per share. The Company recorded compensation
expense of $84,906 in connection with this transaction during the year ended
December 31, 1995 for the difference between the fair market value of the
stock and the issuance price.
(b) Stock Option Plan
The Company adopted a Stock Option Plan effective January 1, 1991, which
authorizes the grant of up to 20% of the shares of the Company's outstanding
common stock. The option price of all options granted to date represents the
fair market value of the Company's common stock on the date of grant. A total
of 1,200 options were granted from 1991 to 1993 at exercise prices between $87
and $140 per share. The options vest after seven years employment and may be
exercised ratably over four years upon vesting. At December 31, 1995 and 1996,
1,128 options were exercisable at a weighted average price of $106 per share.
(9) COMMITMENTS
The Company has entered into noncancelable operating leases covering its
office facilities and certain equipment. Rent expense amounted to $288,791,
$370,339 and $715,436 for the years ended December 31, 1994, 1995 and 1996,
respectively. Future minimum payments under the leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1997........................................................... $ 923
1998........................................................... 933
1999........................................................... 957
2000........................................................... 651
2001........................................................... 457
2002........................................................... 470
------
Total minimum lease payments................................. $4,391
======
</TABLE>
(10) SIGNIFICANT CUSTOMERS
For the years ended December 31, 1994, 1995 and 1996, one customer accounted
for approximately 10%, 20% and 21% of revenues, respectively. This customer
accounted for 20% and 21% of accounts receivable at December 31, 1995 and
1996, respectively.
(11) STOCKHOLDER AGREEMENT
An agreement with a stockholder who owns 42% of the outstanding shares of
the Company's stock provides that cash dividends are to be made in an amount
equal to one-third of after-tax earnings in any twelve month period ending
June 30, where the Company's pre-tax net earnings are in excess of $100,000,
unless stockholders holding two-thirds of all outstanding stock vote to retain
such funds for expansion, subject to applicable state laws. Dividends of
$141,360 and $183,024 were paid during 1994 and 1995. No dividends have been
accrued during 1996 due to the Company's net loss for the twelve months ended
June 30, 1996 and continued losses through December 31, 1996.
F-27
<PAGE>
AMERICAN TELECONFERENCING SERVICES, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(12) PROFIT SHARING PLAN
The Company has a Section 401(k) profit sharing plan covering substantially
all of its employees. Under this plan, eligible employees are allowed to
contribute a maximum of $9,500 per year. The Company matches 50% of employee
contributions up to 3% of compensation. In addition, the Company, at its
discretion, may contribute profit sharing funds in excess of the required
matching contribution. The matching and profit sharing contributions charged
to operations for the years ended December 31, 1994, 1995 and 1996 was
$194,455, $216,251 and $168,060, respectively.
(13) MERGER
In December 1996, the Company entered into a business combination agreement
with VIALOG Corporation whereby VIALOG Corporation will acquire the
outstanding stock of the Company upon completion of a proposed initial public
offering of common stock.
F-28
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Telephone Business Meetings, Inc.:
We have audited the accompanying balance sheets of Telephone Business
Meetings, Inc. as of December 31, 1995 and 1996, and the related statements of
income, stockholders' equity and cash flows for the year ended December 31,
1994, the period January 1, 1995 to April 9, 1995, the period April 10, 1995 to
December 31, 1995, and the year ended December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Telephone Business Meetings,
Inc. as of December 31, 1995 and 1996, and the results of its operations and
its cash flows for the year ended December 31, 1994, the period January 1, 1995
to April 9, 1995, the period April 10, 1995 to December 31, 1995, and the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in note 4 to the financial statements, effective April 10, 1995,
the Company repurchased all of the common stock of one of the Company's
founding stockholders, representing a 50% interest in the Company. As a result
of the change in control, the financial information for the periods after the
change in control is presented on a different cost basis than that for the
periods before the change in control and, therefore, is not comparable.
KPMG Peat Marwick LLP
January 24, 1997
Washington, D.C.
F-29
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
ASSETS (NOTE 3)
Current assets:
Cash and cash equivalents...................................... $ 390 $ 804
Trade accounts receivable, less allowance for doubtful accounts
of $33 in 1995 and $206 in 1996............................... 802 1,103
Prepaid expenses and other current assets...................... 108 161
------ ------
Total current assets......................................... 1,300 2,068
------ ------
Property and equipment, net (note 2)............................. 2,032 2,201
Restricted cash.................................................. 105 110
Excess of purchase price over the fair value of the interest in
net assets of the former stockholders, net of accumulated
amortization of $12 in 1995 and $28 in 1996 (note 4)............ 231 215
Other assets..................................................... 4 11
------ ------
Total assets................................................. $3,672 $4,605
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 3)................ $ 732 $ 654
Current installments of note payable to former stockholder
(note 4)...................................................... 109 116
Current installments of obligations under capital leases (note
7)............................................................ 28 32
Accounts payable............................................... 4 141
Accrued expenses (note 6)...................................... 276 366
Income taxes payable........................................... 10 --
------ ------
Total current liabilities.................................... 1,159 1,309
------ ------
Long-term debt, excluding current installments (note 3)........ 1,029 880
Note payable to former stockholder, excluding current install-
ments (note 4)................................................ 439 323
Obligations under capital leases, excluding current install-
ments (note 7)................................................ 79 47
Deferred rent.................................................. 94 128
------ ------
Total liabilities............................................ 2,800 2,687
------ ------
Common stock issued to employees with redemption option, 15.464
shares at liquidation value (note 5)............................ -- 148
Stockholders' equity (notes 4 and 5):
Common stock, $.01 par value. Authorized and issued 1,000
shares; 500 shares outstanding in 1995 and 1996............... -- --
Additional paid-in capital..................................... 660 660
Retained earnings.............................................. 212 1,110
------ ------
Total stockholders' equity................................... 872 1,770
------ ------
Commitments and contingencies (notes 7 and 8)
Total liabilities and stockholders' equity................... $3,672 $4,605
====== ======
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994, PERIOD JANUARY 1, 1995 TO APRIL 9, 1995, PERIOD
APRIL 10, 1995 TO DECEMBER 31, 1995, AND YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD PERIOD
YEAR ENDED JANUARY 1, 1995 APRIL 10, 1995 YEAR ENDED
DECEMBER 31, TO APRIL 9, TO DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
------------ --------------- --------------- ------------
<S> <C> <C> <C> <C>
Net revenues............ $5,114 $1,590 $4,918 $9,073
Cost of revenues........ 2,823 855 2,564 4,071
------ ------ ------ ------
Gross profit.......... 2,291 735 2,354 5,002
Selling, general and ad-
ministrative expenses.. 1,745 524 2,058 3,455
------ ------ ------ ------
Income from opera-
tions................ 546 211 296 1,547
Interest expense, net... 49 12 140 174
------ ------ ------ ------
Income before income
tax expense (bene-
fit)................. 497 199 156 1,373
Income tax expense (ben-
efit).................. 52 8 (56) --
------ ------ ------ ------
Net income............ $ 445 $ 191 $ 212 $1,373
====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
DECEMBER 31, 1994, APRIL 9, 1995, DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
NUMBER OF PAR PAID-IN RETAINED STOCKHOLDERS'
SHARES VALUE CAPITAL EARNINGS EQUITY
--------- ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993....................... 1,000 $-- $ 4 $ 715 $ 719
Dividends................. -- -- -- (39) (39)
Net income................ -- -- -- 445 445
----- ---- ---- ------ ------
Balance at December 31,
1994....................... 1,000 -- 4 1,121 1,125
Net income................ -- -- -- 191 191
----- ---- ---- ------ ------
Balance at April 9, 1995.... 1,000 -- 4 1,312 1,316
===== ==== ==== ====== ======
Balance subsequent to
repurchase of 50% interest
(note 4)................... 500 -- 660 -- 660
Net income................ -- -- -- 212 212
----- ---- ---- ------ ------
Balance at December 31,
1995....................... 500 -- 660 212 872
Dividends................. -- -- -- (475) (475)
Net income................ -- -- -- 1,373 1,373
----- ---- ---- ------ ------
Balance at December 31,
1996....................... 500 $-- $660 $1,110 $1,770
===== ==== ==== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994, PERIOD JANUARY 1, 1995 TO APRIL 9, 1995, PERIOD
APRIL 10, 1995 TO DECEMBER 31, 1995, AND YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD PERIOD
YEAR ENDED JANUARY 1, 1995 APRIL 10, 1995 YEAR ENDED
DECEMBER 31, TO APRIL 9, TO DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
------------ --------------- --------------- ------------
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ $ 445 $ 191 $ 212 $1,373
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization....... 269 121 375 630
Deferred income
taxes.............. 24 -- (62) --
Compensation expense
for issuance of
common stock....... -- -- -- 148
Changes in operating
assets and
liabilities:
Trade accounts
receivable, net.. (71) (170) (108) (301)
Prepaid expenses
and other current
assets........... (58) 62 (5) (53)
Accounts payable
and accrued
expenses......... (17) 90 22 227
Income taxes
payable.......... -- -- -- (10)
Deferred rent..... -- -- 93 34
----- ------ ------- ------
Net cash
provided by
operating
activities..... 592 294 527 2,048
----- ------ ------- ------
Cash flows from
investing activities:
Additions to property
and equipment........ (560) (123) (1,227) (783)
Increase in restricted
cash................. -- -- (105) (5)
(Increase) decrease in
other assets......... 3 (40) 63 (7)
----- ------ ------- ------
Net cash used in
investing
activities..... (557) (163) (1,269) (795)
----- ------ ------- ------
Cash flows from
financing activities:
Proceeds from long-
term debt............ 484 2,149 -- 587
Principal repayments
of long-term debt.... (338) (626) (389) (814)
Principal repayments
of notes payable to
stockholders......... (85) -- (51) (109)
Principal payments
under capital lease
obligations.......... -- -- (12) (28)
Cash portion of
consideration paid to
former stockholder... -- -- (300) --
Dividends............. (39) -- -- (475)
----- ------ ------- ------
Net cash
provided by
(used in)
financing
activities..... 22 1,523 (752) (839)
----- ------ ------- ------
Net increase (decrease)
in cash and cash
equivalents............ 57 1,654 (1,494) 414
Cash and cash
equivalents at
beginning of period.... 173 230 1,884 390
----- ------ ------- ------
Cash and cash
equivalents at end of
period................. $ 230 $1,884 $ 390 $ 804
===== ====== ======= ======
Supplemental disclosures
of cash flow
information:
Cash paid during the
period for:
Interest............ $ 49 $ 18 $ 169 $ 191
----- ------ ------- ------
Income taxes........ $ 22 $ -- $ -- $ 10
===== ====== ======= ======
Supplemental disclosure
of noncash investing
and financing
activities:
Capital lease
obligations........ $ -- $ -- $ 120 $ --
===== ====== ======= ======
Issuance of note
payable in partial
consideration to
former
stockholder........ $ -- $ -- $ 599 $ --
===== ====== ======= ======
</TABLE>
See accompanying notes to financial statements.
F-33
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Telephone Business Meetings, Inc. (the "Company"), which operates under the
names ACCESS Conference Call Service and ACCESS Teleconferencing
International, provides telephone and video conferencing services to a broad
spectrum of individuals and businesses throughout the United States. The
Company's operations center is located in Reston, Virginia.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(c) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and short-term investments
with original maturities of three months or less.
(d) Restricted Cash
Restricted cash consists of a certificate of deposit which is security for
the Company's commitment under its office lease and is classified as long-term
in the accompanying balance sheets.
(e) Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and
equipment is provided on the straight-line basis over the estimated useful
lives of the respective assets. The estimated useful lives are as follows:
five to seven years for office furniture and equipment; seven years for
conferencing equipment; and three to five years for computer equipment.
Capitalized lease equipment and leasehold improvements are amortized over the
lives of the leases, ranging from three to ten years.
(f) Intangible Assets
The Company monitors its excess of purchase price over the fair value of
interest in net assets of the former stockholders (goodwill) to determine
whether any impairment of goodwill has occurred. In making such determination
with respect to goodwill, the Company evaluates the performance, on an
undiscounted basis, of the underlying business which gave rise to such amount.
Amortization of goodwill is recorded on a straight-line basis over the
estimated useful life of 15 years.
(g) Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
income taxes on its taxable income. Instead, stockholders of the Company are
liable for individual federal income taxes for their respective shares of the
Company's taxable income. Notwithstanding the federal Subchapter S election,
franchise income taxes were payable through May of 1995 to the District of
Columbia, which does not recognize the Subchapter S election. As of June 1995,
the Company moved all of its property and office facilities to the State of
Virginia.
F-34
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(h) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
during 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------ -------
(IN THOUSANDS)
<S> <C> <C>
Office furniture and equipment........................... $ 66 $ 88
Conferencing equipment................................... 1,982 2,632
Computer equipment....................................... 456 567
Capitalized lease equipment.............................. 120 120
Leasehold improvements................................... 234 234
------ -------
2,858 3,641
Less: accumulated depreciation and amortization (826) (1,440)
------ -------
Property and equipment, net............................ $2,032 $ 2,201
====== =======
</TABLE>
(3) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Note payable to a bank, interest only at 9.33% payable monthly
through October 1995 and then monthly principal payments of
$38,095 plus interest until February 1999, with the balance
due in March 1999............................................. $ 1,486 $ 1,029
Note payable to a bank, interest at the prime rate plus 0.75%,
monthly principal payments of $7,000 plus interest, balance
due in March 1999............................................. -- 187
Note payable to a bank, interest at 9.5%, monthly principal
payments of $9,400 plus interest, balance due in October
1999.......................................................... -- 318
Note payable to a bank, interest at 9.33%, repaid in full in
September 1996................................................ 275 --
------- -------
Total long-term debt......................................... 1,761 1,534
Less current installments.................................... 732 654
------- -------
Long-term debt, excluding current installments............... $ 1,029 $ 880
======= =======
</TABLE>
All of the Company's assets are collateral for the bank notes. In addition,
the Company's majority stockholder is a guarantor of each of the bank notes.
The terms of each of the bank notes include certain financial and other
covenants. As of December 31, 1996, as a result of the stock awards discussed
in note 5, the Company was not in compliance with a covenant which limits the
amount of the annual increase in executive compensation. Subsequent to December
31, 1996, the Company obtained a waiver of the noncompliance from the lender.
F-35
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of all notes payable, including the note payable to
the former stockholder (see note 4), for each of the four years subsequent to
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 770
1998............................................................... 777
1999............................................................... 357
2000............................................................... 69
------
$1,973
======
</TABLE>
(4) RELATED PARTY TRANSACTIONS
On April 10, 1995, under a Share Purchase Agreement, as amended, all of the
common stock, 500 shares, of one of the Company's founding stockholders
(representing a 50 percent interest in the Company) was repurchased by the
Company for total consideration of $899,031. The consideration consisted of
$300,000 of cash paid at closing and a note payable of $599,031 due May 2000,
bearing interest at 6%, with equal quarterly principal and interest payments.
As of the date of the repurchase, the Company experienced a change of control
and, accordingly, the acquired 50% interest in the net assets of the Company
was recognized at fair market value, which approximated book value. The excess
consideration paid over the fair market value of the interest in the net
assets of the former stockholder was approximately $240,000.
Concurrent with the repurchase of the shares, the Company and the former
stockholder entered into an agreement for consulting services and an agreement
not to compete for a five-year period in exchange for total consideration of
$624,615 payable in equal quarterly payments by the Company of $31,231
commencing with the first quarter subsequent to the closing and continuing
through April 2000.
As of December 31, 1995 and 1996, $548,540 and $439,017, respectively, were
due under the note payable to the former stockholder, of which $109,521 and
$116,241, respectively, were current. During the period from April 10, 1995 to
December 31, 1995, and the year ended December 31, 1996, the Company paid the
former stockholder $62,462 and $124,923, respectively, under the agreements
for consulting services and not to compete.
(5) EMPLOYEE BENEFITS
Stock Awards
During 1996, the Company awarded 7.732 shares of common stock to each of two
executive officers of the Company. The shares are fully vested but are
restricted as to transfer by each of the executive officers. In the event of
termination of the executive officers' employment with the Company, the
Company has the right at its sole option to require the executives to sell
their shares back to the Company and the executives have the right to require
the Company to repurchase their shares, all at the then determined fair market
value. In the event of a public offering of the Company's shares or the sale
of the Company, all such restrictions, rights, and options terminate.
As a result of the executive officers' right to require the Company to
repurchase the shares upon termination of employment, the awards have been
accounted for using variable plan accounting, whereby compensation expense is
recognized each period for the increase, if any, in the estimated fair market
value of the Company's common stock. During the year ended December 31, 1996,
the Company recognized a total of $148,554 of compensation expense relating to
the stock awards. Further, the liquidation value of the shares has been
reflected between total liabilities and stockholders' equity in the
accompanying balance sheet as of December 31, 1996.
F-36
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Retirement Plan
The Company maintains a defined contribution retirement plan (the "Plan")
under Section 401(k) of the Internal Revenue Code which covers all eligible
employees. Employee contributions are voluntary and vest with the employee
immediately. The Plan provides for matching contributions by the Company of 50
percent of employee contributions, up to certain limits as defined in the
Plan. Company matching contributions vest over the employee's period of
service. Contributions by the Company to the Plan were approximately $27,000,
$7,000, $20,000, and $42,000 for the year ended December 31, 1994, the period
January 1, 1995 to April 9, 1995, the period April 10, 1995 to December 31,
1995, and the year ended December 31, 1996, respectively.
(6) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued salaries, wages and benefits..................... $ 86 $ 215
Accrued fees and other expenses.......................... 190 151
------- -------
$ 276 $ 366
======= =======
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
Operating Lease
The Company leases office space for its teleconferencing facility under a
noncancelable operating lease in Reston, Virginia. The lease is for a total of
ten years expiring May 31, 2005.
Future minimum payments under this lease as of December 31, 1996 are
approximately as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1997............................................................ $ 362
1998............................................................ 373
1999............................................................ 384
2000............................................................ 396
2001............................................................ 407
Thereafter.................................................... 1,485
------
$3,407
======
</TABLE>
Total rent expense was approximately $185,000, $51,000, $287,000 and
$396,000 for the year ended December 31, 1994, the period from January 1, 1995
to April 9, 1995, the period from April 10, 1995 to December 31, 1995, and the
year ended December 31, 1996, respectively.
As of December 31, 1996, the Company has an outstanding letter of credit in
the amount of $100,000 with a commercial bank which secures the Company's
obligations under the office lease.
Capital Leases
The Company has entered into noncancelable capital leases for various
computer equipment. The leases, which expire between June 1998 and June 2000,
consist of two 36 month leases and one 60 month lease. Interest rates range
from 9.07% to 10.31%.
F-37
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum payments under the leases are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31: AMOUNT
------------------------ --------------
(IN THOUSANDS)
<S> <C>
1997.................................................. $38
1998.................................................. 28
1999.................................................. 17
2000.................................................. 8
---
91
Less: imputed interest................................ 12
---
Net present value of future lease obligations......... 79
Less: current portion................................. 32
---
Obligations under capital leases, net of current por-
tion................................................. $47
===
</TABLE>
(8) MERGER
In December 1996, the Company entered into a business combination agreement
with VIALOG Corporation whereby VIALOG Corporation will acquire the
outstanding stock of the Company upon completion of a proposed initial public
offering of common stock.
F-38
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Conference Source International, Inc.
We have audited the accompanying balance sheets of Conference Source
International, Inc. as of December 31, 1995 and 1996, and the related
statements of income, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Conference Source
International, Inc. as of December 31, 1995 and 1996 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
January 17, 1997
Boston, Massachusetts
F-39
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
ASSETS (note 3)
Current assets:
Cash and cash equivalents...................................... $ 375 $ 318
Trade accounts receivable, less allowance for doubtful accounts
of $5 in 1995 and $10 in 1996 (note 6)........................ 692 801
Due from stockholder (note 4).................................. 72 --
Prepaid expenses and other current assets...................... -- 48
------ ------
Total current assets......................................... 1,139 1,167
Property and equipment, net (notes 2 and 5)...................... 866 1,059
Other assets..................................................... 32 67
------ ------
Total assets................................................. $2,037 $2,293
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 3)................ $1,089 $ 111
Current installments of obligations under capital leases (note
5)............................................................ 141 375
Accounts payable............................................... 201 121
Accrued expenses............................................... 30 91
------ ------
Total current liabilities.................................... 1,461 698
Long-term debt, excluding current installments (note 3).......... 43 219
Obligations under capital leases, excluding current installments
(note 5)........................................................ 173 700
------ ------
Total liabilities............................................ 1,677 1,617
------ ------
Stockholders' equity:
Common stock, $1.00 par value. Authorized 100,000 shares;
issued and outstanding 1,000 shares at December 31, 1995 and
1996 ......................................................... 1 1
Additional paid-in capital..................................... 349 349
Retained earnings.............................................. 10 326
------ ------
Total stockholders' equity................................... 360 676
------ ------
Commitments and contingencies (notes 5 and 7)
Total liabilities and stockholders' equity................... $2,037 $2,293
====== ======
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net revenues (note 6)..................................... $2,331 $3,808 $5,868
Cost of revenues.......................................... 1,115 1,426 2,208
------ ------ ------
Gross profit............................................ 1,216 2,382 3,660
Selling, general and administrative expenses.............. 1,083 1,388 1,621
------ ------ ------
Income from operations.................................. 133 994 2,039
Interest expense, net..................................... 124 160 165
------ ------ ------
Net income.............................................. $ 9 $ 834 $1,874
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
NUMBER OF PAR PAID-IN RETAINED STOCKHOLDERS'
SHARES VALUE CAPITAL EARNINGS EQUITY
--------- ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993........................ 1,000 $ 1 $349 $ (833) $ (483)
Net income................. -- -- -- 9 9
----- ---- ---- ------- -------
Balance at December 31,
1994........................ 1,000 1 349 (824) (474)
Net income................. -- -- -- 834 834
----- ---- ---- ------- -------
Balance at December 31,
1995........................ 1,000 1 349 10 360
Net income................. -- -- -- 1,874 1,874
Distributions to stockhold-
er........................ -- -- -- (1,558) (1,558)
----- ---- ---- ------- -------
Balance at December 31,
1996........................ 1,000 $ 1 $349 $ 326 $ 676
===== ==== ==== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-42
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 9 $ 834 $ 1,874
Adjustments to reconcile net income to net cash pro-
vided by operating activities:
Depreciation and amortization....................... 235 292 393
Changes in operating assets and liabilities:
Trade accounts receivable, net.................... (205) (312) (109)
Due from stockholder.............................. (6) (66) 72
Prepaid expenses and other assets................. (35) 4 (83)
Accounts payable.................................. 61 (38) (80)
Accrued expenses.................................. (6) 7 61
----- ----- -------
Net cash provided by operating activities....... 53 721 2,128
----- ----- -------
Cash flows from investing activities:
Additions to property and equipment................... (476) (225) (41)
----- ----- -------
Cash flows from financing activities:
Proceeds from borrowings on long-term debt............ 652 201 --
Principal repayment of long-term debt................. (100) (197) (438)
Proceeds from refinancing of capital lease obliga-
tions................................................ -- -- 142
Principal repayment of capital lease obligations...... (126) (148) (290)
Distributions to stockholder.......................... -- -- (1,558)
----- ----- -------
Net cash provided by (used in) financing activi-
ties........................................... 426 (144) (2,144)
----- ----- -------
Net increase (decrease) in cash and cash equivalents.... 3 352 (57)
Cash and cash equivalents at beginning of year.......... 20 23 375
----- ----- -------
Cash and cash equivalents at end of year................ $ 23 $ 375 $ 318
===== ===== =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................ $ 119 $ 162 $ 169
===== ===== =======
Noncash transaction:
Equipment purchased under capital lease obliga-
tions.............................................. $ 296 $ -- $ 545
===== ===== =======
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Conference Source International, Inc. ("the Company") is a provider of
teleconferencing services to a variety of customers located primarily in the
United States. The Company was incorporated in February, 1992, and is
headquartered in Atlanta, Georgia.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. At December 31,
1995 and 1996, certain cash deposits with financial institutions are in excess
of the $100,000 Federal Depository Insurance Corporation (FDIC) guarantee.
(d) Property and Equipment
Property and equipment is stated at cost. Equipment under capital leases is
stated at the present value of minimum lease payments. Depreciation is
calculated using accelerated methods over the estimated useful lives of the
respective assets. Estimated useful lives are as follows: five years for
vehicles; five to seven years for office equipment; five to seven years for
bridge equipment; and five years for computer software. Equipment under
capital leases is amortized using accelerated methods over the shorter of the
lease term or the estimated useful life of the asset, ranging from five to
seven years.
(e) Income Taxes
The Company has elected by consent of its stockholders to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under those
provisions, the Company does not pay corporate income taxes on its taxable
income. Instead, the stockholders are liable for individual income taxes on
the Company's taxable income. Accordingly, these financial statements do not
contain a provision for income taxes.
(f) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
during 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
F-44
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Vehicles................................................. $ 27 $ 27
Office equipment......................................... 123 148
Bridge equipment......................................... 1,313 1,874
Computer software........................................ 62 62
------- -------
1,525 2,111
Less: accumulated depreciation and amortization........ 659 1,052
------- -------
Property, and equipment, net......................... $ 866 $ 1,059
======= =======
</TABLE>
(3) LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Note payable to bank in monthly installments of $10,597,
including interest at 10.25%, matures August 1999;
collateralized by accounts receivable and cash surrender value
of life insurance and personal guarantee of owner............. $ 634 $ 286
Note payable to bank in monthly installments of $1,029,
including interest at 10.5%, matures October 1999;
collateralized by equipment, accounts receivable, and cash
surrender value of life insurance and personal guarantee of
owner......................................................... 39 30
Notes payable for bridge equipment purchases; balances were
converted to a capital lease obligation during 1996........... 437 --
Note payable to bank in monthly installments of $846, including
interest at 9.20%, matures May 1998; collateralized by
vehicles...................................................... 22 14
-------- ------
Total long-term debt......................................... 1,132 330
Less: current installments................................... 1,089 111
-------- ------
Long-term debt, excluding current installments............... $ 43 $ 219
======== ======
</TABLE>
The aggregate maturities of long-term debt for each of the three years
subsequent to December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................................. $111
1998................................................................. 127
1999................................................................. 92
----
$330
====
</TABLE>
(4) RELATED PARTY TRANSACTIONS
(a) Advance to Stockholder
The Company loaned the stockholder $71,987 during 1995. The note had no set
repayment schedule and was interest free. The amount was repaid in full during
1996.
F-45
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(b) Lease Transactions
The Company pays monthly lease payments to a former stockholder for use of
certain equipment. Total payments under these arrangements during the years
ended December 31, 1994, 1995 and 1996 were approximately $53,000 per year.
The leases expire during 1997, and the future minimum lease payments under
these leases have been included in note 5.
(5) COMMITMENTS AND CONTINGENCIES
(a) Leases
The Company is obligated under noncancelable operating leases covering its
office facilities and certain equipment. Rent expense amounted to $261,000,
$205,000 and $192,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. Future minimum lease payments under noncancelable operating
leases are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1997............................................................. $183
1998............................................................. 164
1999............................................................. 158
2000............................................................. 152
2001............................................................. 152
2002 and thereafter.............................................. 139
----
Total minimum operating lease payments......................... $948
====
</TABLE>
The Company is also obligated under various capital leases for equipment
that are guaranteed by the owner. At December 31, 1995 and 1996, the gross
amounts of equipment and related accumulated amortization recorded under
capital leases were as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Equipment............................................... $ 1,243 $ 1,788
Accumulated amortization................................ (521) (852)
------- -------
$ 722 $ 936
======= =======
</TABLE>
Future minimum payments under capital leases are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1997.......................................................... $ 482
1998.......................................................... 312
1999.......................................................... 287
2000.......................................................... 157
2001.......................................................... 69
------
Total minimum capital lease payments........................ 1,307
Less: amounts representing interest (at rates ranging from 10%
to 18%)...................................................... 232
------
Present value of minimum capital lease payments............. 1,075
Less: current installments of obligations under capital
leases....................................................... 375
------
Obligations under capital leases, excluding current
installments............................................... $ 700
======
</TABLE>
F-46
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(b) Purchase Agreements
The Company has entered into purchase agreements with several long distance
telephone service providers. The Company is committed to minimum purchases
under the agreements which amount to $48,000 in 1997 and 1998, and $23,000 in
1999.
(c) Consulting Agreement
The Company has entered into a consulting agreement with a former officer of
the Company. Total payments under the agreement amount to $120,000, payable in
equal monthly payments through December 1997.
(d) Dispute
A former employee of CSI has orally claimed that he may be entitled to 5% of
the stock of CSI based on an unsigned paper outlining possible employment
terms. The Company's position is that the only agreements with such employee
were set forth in two successive executed employment agreements, each of which
had a specific provision that such agreement was inclusive as to the terms of
employment. No written claim has been made by such employee. The Company
believes that such oral claim is without merit.
(6) SIGNIFICANT CUSTOMERS
Two customers accounted for the following percentages of revenues and
accounts receivable:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
TOTAL REVENUES TOTAL ACCOUNTS
FOR THE YEAR ENDED RECEIVABLE AT
DECEMBER 31: DECEMBER 31:
---------------------- ----------------
1994 1995 1996 1995 1996
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Customer A............................. 14% 30% 49% 47% 58%
Customer B............................. 14% 24% 21% 26% 26%
</TABLE>
(7) MERGER
In December, 1996, the Company entered into a business combination agreement
with VIALOG Corporation whereby VIALOG Corporation will acquire the outstanding
stock of the Company upon completion of a proposed initial public offering of
common stock.
F-47
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Call Points, Inc.:
We have audited the accompanying balance sheets of Call Points, Inc. as of
December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Call Points, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Call
Points, Inc. will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company's recurring losses and working capital
deficiency raise substantial doubt about the entity's ability to continue as a
going concern. Management's plans in regard to these matters are also
described in Note 10. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
January 17, 1997
Birmingham, Alabama
F-48
<PAGE>
CALL POINTS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 149 $ 31
Trade accounts receivable, less allowance for doubtful
accounts of $73 in 1995 and $85 in 1996 (note 4).......... 787 1,080
Due from related parties................................... 22 1
Prepaid expenses........................................... 4 3
------- -------
Total current assets..................................... 962 1,115
Property and equipment, net (notes 2, 3 and 4)............... 2,256 1,919
Other assets................................................. 4 2
------- -------
Total assets............................................. $ 3,222 $ 3,036
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of notes payable to related parties
(notes 4 and 7)........................................... $ 439 $ 574
Current installments of obligations under capital lease-re-
lated party (note 3)...................................... -- 43
Accounts payable........................................... 359 394
Accrued expenses (note 5).................................. 273 315
Due to related parties (note 7)............................ 140 169
------- -------
Total current liabilities................................ 1,211 1,495
Notes payable to related parties, excluding current install-
ments (notes 4 and 7)....................................... 784 625
------- -------
Total liabilities........................................ 1,995 2,120
------- -------
Stockholders' equity:
Common stock--Class A, $1 par value. Authorized 8,000
shares; issued and outstanding 1,000 shares at December
31, 1995 and 1996......................................... 1 1
Common stock--Class B, $1 par value. Authorized 12,000
shares; issued and outstanding 1,400 shares at December
31, 1995 and 1996......................................... 1 1
Additional paid-in capital................................. 3,132 3,132
Accumulated deficit........................................ (1,907) (2,218)
------- -------
Total stockholders' equity............................... 1,227 916
------- -------
Commitments and contingencies (notes 9, 10 and 11)
Total liabilities and stockholders' equity............... $ 3,222 $ 3,036
======= =======
</TABLE>
See accompanying notes to financial statements.
F-49
<PAGE>
CALL POINTS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net revenues (note 8).................................. $8,537 $6,852 $7,509
Cost of revenues....................................... 6,140 5,331 5,898
------ ------ ------
Gross profit......................................... 2,397 1,521 1,611
Selling, general and administrative expenses........... 2,035 1,820 1,873
------ ------ ------
Income (loss) from operations........................ 362 (299) (262)
Other income (expense):
Other income (expense), net.......................... 3 (7) --
Interest expense, net................................ (64) (65) (49)
------ ------ ------
Income (loss) before income tax expense.............. 301 (371) (311)
Income taxes (note 6).................................. -- -- --
------ ------ ------
Net income (loss).................................... $ 301 $ (371) $ (311)
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-50
<PAGE>
CALL POINTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
NUMBER PAR PAID-IN ACCUMULATED STOCKHOLDERS'
OF SHARES VALUE CAPITAL DEFICIT EQUITY
--------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993.................... 2,400 $ 2 $3,132 $(1,837) $1,297
Net income............. -- -- -- 301 301
----- ---- ------ ------- ------
Balance at December 31,
1994.................... 2,400 2 3,132 (1,536) 1,598
Net loss............... -- -- -- (371) (371)
----- ---- ------ ------- ------
Balance at December 31,
1995.................... 2,400 2 3,132 (1,907) 1,227
Net loss............... -- -- -- (311) (311)
----- ---- ------ ------- ------
Balance at December 31,
1996.................... 2,400 $ 2 $3,132 $(2,218) $ 916
===== ==== ====== ======= ======
</TABLE>
See accompanying notes to financial statements.
F-51
<PAGE>
CALL POINTS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ 301 $(371) $(311)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 841 845 696
Changes in operating assets and liabilities:
Trade accounts receivable, net....................... (199) 183 (293)
Due from related parties............................. 16 14 21
Prepaid expenses..................................... -- 1 1
Other assets......................................... 1 -- --
Accounts payable..................................... (146) 22 35
Accrued expenses..................................... 71 (130) 42
Due to related parties............................... (65) 277 29
----- ----- -----
Net cash provided by operating activities.......... 820 841 220
----- ----- -----
Cash flows from investing activities:
Additions to property and equipment.................... (148) (105) (50)
----- ----- -----
Cash flows from financing activities:
Principal payments on notes payable to related party... (651) (669) (249)
Principal payments under capital lease obligations--
related party......................................... -- -- (39)
Principal repayment of long-term debt.................. (44) (8) --
----- ----- -----
Net cash used in financing activities.............. (695) (677) (288)
----- ----- -----
Net increase (decrease) in cash and cash equivalents..... (23) 59 (118)
Cash and cash equivalents at beginning of year........... 113 90 149
----- ----- -----
Cash and cash equivalents at end of year................. $ 90 149 31
===== ===== =====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................. $ 263 $ 65 $ 48
===== ===== =====
</TABLE>
<TABLE>
<S> <C>
Supplemental schedule of noncash investing and financing activities:
During 1996, the Company issued notes payable to a related party to
refinance two existing notes payable and to acquire new equipment as
follows:
Notes payable--related party (refinanced)............................. $455
Acquisition of equipment.............................................. 225
----
Notes payable--related party........................................ $680
====
During 1995, the Company issued notes payable to a related party to fi-
nance the acquisition of new equipment and to finance operating ex-
penses due to the related party as follows:
Acquisition of equipment financed..................................... $250
Financing of amounts due to related parties........................... 409
----
Notes payable--related party........................................ $659
====
</TABLE>
During 1994, the Company offset a note payable--related party in the amount
of $135 against amounts due from a related party. Also during 1994, the
Company acquired equipment from a related party in exchange for notes payable
in the amount of $601.
See accompanying notes to financial statements.
F-52
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Call Points, Inc. (the Company) was incorporated in Delaware on December 29,
1988. The Company operated as a division of one of its stockholders prior to
incorporation and is located at the stockholder's principal place of business
in Montgomery, Alabama. The Company is a provider of international audio
teleconferencing services to a wide range of organizations.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(c) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and money market deposits.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation of machinery and
equipment and furniture and fixtures is provided on the straight-line basis
over the estimated useful lives of the respective assets. The estimated useful
lives are as follows: three to eight years for furniture and fixtures; five to
ten years for machinery and equipment.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(f) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
during 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
F-53
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(h) Reclassifications
Certain items in the 1994 and 1995 financial statements have been
reclassified to conform with classifications used in the 1996 financial
statements.
(2) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Furniture and fixtures.................................. $ 382 $ 419
Machinery and equipment................................. 4,348 4,668
------- -------
4,730 5,087
Less accumulated depreciation........................... (2,474) (3,168)
------- -------
Property and equipment, net........................... $ 2,256 $ 1,919
======= =======
</TABLE>
(3) OBLIGATIONS UNDER CAPITAL LEASE--RELATED PARTY
The Company is obligated to a related party under a capital lease that
expires during 1997. Leased equipment with a cost basis of $82,500 and
accumulated depreciation of $5,625 is included in property and equipment at
December 31, 1996. The present value of future minimum lease payments at
December 31, 1996, is $43,475 and is included in current liabilities.
(4) NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at December 31, 1995 and 1996 consists of
the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to stockholder; due in monthly installments of
$15,000, including interest at 8 percent through December 25,
2000......................................................... $ -- $ 659
Notes payable to affiliate; due in monthly installments of
$25,000, including interest at 8 percent through July 15,
1998......................................................... 666 540
Note payable to stockholder; due in monthly installments of
$9,678, including interest at 8 percent through July 15,
1998......................................................... 270 --
Note payable to stockholder; due in monthly installments of
$7,834, including interest at 8 percent through January 1,
1999......................................................... 250 --
Notes payable to stockholders; noninterest bearing and due in
monthly installments of $37,500 through January 1996; royalty
payments accounted for as interest were 10.4 percent of
average indebtedness in 1995; secured by certain equipment
and accounts receivable...................................... 37 --
------- -------
Total notes payable to related party........................ 1,223 1,199
Less current installments................................... 439 574
------- -------
Notes payable to related parties, excluding current
installments............................................... $ 784 $ 625
======= =======
</TABLE>
F-54
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of notes payable to related parties for each of the
four years subsequent to December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 574
1998............................................................... 304
1999............................................................... 160
2000............................................................... 161
------
$1,199
======
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued long distance fees............................... $ 208 $ 252
Accrued fees and other expenses.......................... 65 63
------- -------
$ 273 $ 315
======= =======
</TABLE>
(6) INCOME TAXES
The components of income tax expense for the years ended December 31, 1994,
1995 and 1996, were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Tax on income before carryforwards............... $ 240 $ -- $ --
Tax benefit of loss carryforwards................ (240) -- --
Deferred:
Deferred tax expense (exclusive of the effects of
other component listed below)................... 113 (133) (112)
Increase (decrease) in valuation allowance for
deferred tax assets............................. (113) 133 112
----- ----- -----
$ -- $ -- $ --
===== ===== =====
</TABLE>
The Company had no income tax expense or benefit for the years ended
December 31, 1994, 1995 and 1996, which differs from the expected income tax
(benefit) expense computed by applying the federal statutory rate of 34
percent to income (loss) before taxes as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate..... $ 102 $(126) $(106)
Meals and entertainment............................ 2 1 1
State income tax, net of federal benefit........... 9 (8) (7)
Change in valuation allowance for deferred taxes
allocated to income tax expense................... (113) 133 112
----- ----- -----
$ -- $ -- $ --
===== ===== =====
</TABLE>
F-55
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
----- -----
(IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to the allowance for
doubtful accounts............................................. $ 24 $ 34
Intangible assets, principally due to differences in amortiza-
tion.......................................................... 11 --
Equipment spare parts, principally due to differences in obso-
lescence reserves............................................. -- 4
Minimum tax credit carryforward................................ 12 12
Accrued expenses, principally due to vacation.................. 4 4
Net operating loss carryforward................................ 858 939
----- -----
Total gross deferred tax assets.............................. 909 993
Valuation allowance............................................ (736) (848)
----- -----
Net deferred tax assets...................................... 173 145
Deferred tax liabilities:
Equipment, principally due to differences in depreciation...... 171 143
Prepaid expenses............................................... 1 1
Other.......................................................... 1 1
----- -----
Total deferred tax liabilities............................... 173 145
----- -----
Net deferred tax asset....................................... $ -- $ --
===== =====
</TABLE>
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $2,473,859. These carryforwards begin to expire in 2004. Upon a
change in ownership as defined in Section 382 of the Internal Revenue Code,
the ability to utilize these net operating losses may be limited (see note
11). The Company also has alternative minimum tax credit carryforwards of
$11,877 which are available to reduce future regular income taxes, if any,
over an indefinite period.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. SFAS
109 requires that a valuation allowance be recorded against tax assets which
are not likely to be realized. Specifically, the Company's carryforwards
expire at specific future dates and utilization of certain carryforwards is
limited to specific amounts each year. However, due to the uncertain nature of
their ultimate realization based upon past performance and expiration dates,
the Company has established a full valuation allowance against these
carryforward benefits and is recognizing the benefits only as reassessment
demonstrates they are realizable.
(7) RELATED PARTY TRANSACTIONS
The Company negotiated a restructuring agreement among its stockholders on
March 14, 1991. The significant terms of the agreement included: the
acquisition of teleconferencing bridges from certain stockholders for
$2,250,000, in exchange for noninterest bearing notes payable due over a
period of five years; options for certain stockholders to purchase Class B
common stock of other stockholders for $900,000; monthly royalty payments
based on billed minutes through January 2006; forgiveness of certain notes
payable to stockholders totaling $522,440; a noncompete agreement; and a
license agreement. Royalty payments accounted for as interest expense were
$60,563, $27,221, and $0 for the years ended December 31, 1994, 1995 and 1996,
respectively. During 1995 and 1996, certain note payments were not made to
related parties. Although the principal amount of the notes were not changed,
the related parties waived $12,210 and $41,294 of interest payments during
1995 and 1996, respectively.
F-56
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company incurred expenses for services provided by its stockholders and
affiliates for the years ended December 31, 1994, 1995 and 1996 as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Automotive usage.......................................... $ 8 $ 4 $ 3
Computer rental........................................... 19 19 18
Long-distance usage....................................... 79 92 81
Management services....................................... 64 67 94
Office space rental....................................... 69 68 68
Miscellaneous............................................. -- 1 --
Teleconferencing bridge expense........................... 286 207 137
</TABLE>
Teleconferencing bridge expenses include charges for access, maintenance and
equipment rental.
The Company acquired equipment from its stockholders for which it issued
notes payable to them in the amount of $250,000 in 1995 and $225,000 in 1996.
(8) SIGNIFICANT CUSTOMERS
For the years ended December 31, 1995 and 1996, one customer accounted for
approximately 10 percent and 17 percent of sales, respectively.
(9) LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
(10) GOING CONCERN UNCERTAINTIES
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. During 1994, the Company did not retain a
significant portion of sales to one customer which represented approximately 15
percent of revenues. While management has been aggressively pursuing additional
customers, the Company was unable to replace the revenue volume it lost in 1994
and therefore realized net losses of $371,223 in 1995 and $311,144 in 1996. At
December 31, 1996, the Company's current liabilities exceeded current assets by
$379,301. The recurring losses and working capital deficiency create an
uncertainty about the Company's ability to continue as a going concern. The
Company has continued to aggressively market its services and has established a
Quality Assurance department in an effort to improve and maintain customer
satisfaction. Management believes these factors will continue to contribute
towards achieving and maintaining a consistent level of profitability.
(11) MERGER
In December, 1996, the Company entered into an agreement with VIALOG
Corporation whereby VIALOG Corporation will acquire the assets of the Company
upon completion of a proposed initial public offering of common stock during
1997.
F-57
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Kendall Square Teleconferencing, Inc.:
We have audited the accompanying balance sheets of Kendall Square
Teleconferencing, Inc. as of December 31, 1995 and 1996, and the related
statements of income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kendall Square
Teleconferencing, Inc. as of December 31, 1995 and 1996 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
January 18, 1997
Boston, Massachusetts
F-58
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
------ ------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 61 $ 104
Trade accounts receivable, less allowance for doubtful
accounts of $30 and $60 in 1995 and 1996, respectively...... 283 471
Due from related party....................................... 16 61
Note receivable, stockholder................................. 11 --
Other current assets......................................... -- 28
------ ------
Total current assets....................................... 371 664
------ ------
Property and equipment, net (notes 2, 3 and 4)................. 643 733
Other assets................................................... 5 10
Deferred income taxes (note 6)................................. 26 --
------ ------
Total assets............................................... $1,045 $1,407
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 3).............. $ 43 $ 28
Current installments of obligations under capital leases
(note 4).................................................... 33 65
Accounts payable (note 8).................................... 279 438
Accrued expenses (note 5).................................... 33 127
Income taxes payable (note 6)................................ 74 --
Dividends payable............................................ -- 45
Other current liabilities.................................... -- 11
------ ------
Total current liabilities.................................. 462 714
------ ------
Long-term debt, excluding current installments (note 3)........ 55 26
Obligations under capital leases, excluding current
installments (note 4)......................................... 105 157
Other liabilities.............................................. 21 --
Deferred income taxes (note 6)................................. 47 --
------ ------
Total liabilities.......................................... 690 897
====== ======
Stockholders' equity:
Common stock, no par value. Authorized 15,000 shares; issued
and outstanding 1,000 shares in 1995 and 1,740 shares in
1996........................................................ 62 68
Treasury stock, 428 common shares at cost in 1995 and 1996... (15) (15)
Note receivable, stockholder................................. -- (6)
Retained earnings............................................ 308 463
------ ------
Total stockholders' equity................................. 355 510
------ ------
Commitments and contingencies (notes 4, 8 and 10)
Total liabilities and stockholders' equity................. $1,045 $1,407
====== ======
</TABLE>
See accompanying notes to financial statements.
F-59
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net revenues (note 8 and 9)............................. $1,515 $2,329 $3,396
Cost of revenues........................................ 816 1,129 1,813
------ ------ ------
Gross profit........................................ 699 1,200 1,583
Selling, general and administrative expenses............ 510 889 1,329
------ ------ ------
Income from operations.............................. 189 311 254
Other income (expense):
Interest expense, net................................. (6) (23) (42)
Other income.......................................... 19 33 --
------ ------ ------
Income before income tax expense (benefit).......... 202 321 212
Income tax expense (benefit) (note 6)................... 82 129 --
------ ------ ------
Net income.......................................... $ 120 $ 192 $ 212
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-60
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK TOTAL
------------- ---------------- NOTE RECEIVABLE RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCKHOLDER EARNINGS EQUITY
------ ------ ------- ------- --------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 1,000 $ 35 -- $ -- $ -- $ 16 $ 51
Shares repurchased by
the Company.......... -- -- (428) (15) -- (20) (35)
Issuance of stock op-
tions................ -- 27 -- -- -- -- 27
Net income............ -- -- -- -- -- 120 120
----- ---- ------ ------- ----- ---- ----
Balance at December 31,
1994................... 1,000 62 (428) (15) -- 116 163
Net income............ -- -- -- -- -- 192 192
----- ---- ------ ------- ----- ---- ----
Balance at December 31,
1995................... 1,000 62 (428) (15) -- 308 355
Exercise of stock op-
tions................ 740 6 -- -- (6) -- --
Dividends:
Cash................ -- -- -- -- -- (45) (45)
Asset Distribution.. -- -- -- -- -- (12) (12)
Net income............ -- -- -- -- -- 212 212
----- ---- ------ ------- ----- ---- ----
Balance at December 31,
1996................... 1,740 $ 68 (428) $ (15) $ (6) $463 $510
===== ==== ====== ======= ===== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-61
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 120 $ 192 $ 212
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 16 67 133
Deferred income taxes................................. 34 32 (21)
Compensation expense arising from stock options grant-
ed................................................... 27 -- --
Gain on disposal of assets............................ (19) (33) --
Forgiveness of note receivable, stockholder........... -- -- 11
Changes in operating assets and liabilities:
Trade accounts receivable, net...................... (98) (133) (222)
Due from related party.............................. -- -- (45)
Other current assets................................ 15 -- (28)
Other assets........................................ (52) 46 (5)
Accounts payable.................................... (28) 41 114
Income taxes payable................................ 23 (27) (74)
Accrued expenses.................................... 24 5 94
Other current liabilities........................... -- -- 11
Other liabilities................................... -- 21 (21)
----- ----- -----
Net cash provided by operating activities......... 62 211 159
----- ----- -----
Cash flows from investing activities:
Additions to property and equipment..................... (39) (231) (156)
Proceeds from sale of equipment......................... 19 -- --
----- ----- -----
Net cash used in investing activities............. (20) (231) (156)
----- ----- -----
Cash flows from financing activities:
Proceeds from notes payable............................. 20 121 --
Principal payments on notes payable..................... (59) (53) (44)
Principal payments of capital lease obligations......... -- -- (51)
Proceeds from capital lease obligations................. -- -- 135
Repayment of stockholder loan........................... (10) -- --
Payments to acquire treasury stock...................... (35) -- --
----- ----- -----
Net cash provided by (used in) financing activi-
ties............................................. (84) 68 40
----- ----- -----
Net increase (decrease) in cash and cash equivalents...... (42) 48 43
Cash and cash equivalents at beginning of year............ 55 13 61
----- ----- -----
Cash and cash equivalents at end of year.................. $ 13 $ 61 $ 104
===== ===== =====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.............................................. $ 6 $ 19 $ 46
----- ----- -----
Taxes................................................. $ 38 $ 92 $ 18
----- ----- -----
Supplemental schedule of noncash investing and financing
activities:
Equipment acquired through capital lease obligation... $ -- $ 148 $ --
----- ----- -----
Equipment acquired through accounts payable to a
related party (note 8)............................... $ -- $ 216 $ 67
----- ----- -----
Distribution of assets to stockholders................ $ -- $ -- $ 12
===== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-62
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Kendall Square Teleconferencing, Inc. (the "Company") provides audio
teleconferencing services to a variety of customers, primarily located in the
United States. The Company was incorporated in 1987 and has its operations
center located in Cambridge, Massachusetts. Prior to November 29, 1996 the
Company operated under the name Teleconversant Ltd. Inc.
On December 2, 1996, certain assets of the Company related to a contract for
services provided by the Company were distributed to certain of the
stockholders of the Company. These assets were incidental to the basic
operations of the Company. The assets distributed consisted of property and
equipment, accounts receivable, accounts payable and a customer contract with
a net carrying value of $12,174 at December 31, 1996. Revenues associated with
the customer contract were $642,130, $727,209 and $706,619 for the years ended
December 31, 1994, 1995 and the period January 1 to December 2, 1996,
respectively.
(b) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(d) Property and Equipment
Property and equipment are stated at cost. Equipment under capital leases is
stated at the present value of minimum lease payments. Depreciation of
property and equipment is provided on the straight-line method over the
estimated useful lives of the respective assets. The estimated useful lives
are as follows: seven to ten years for furniture and fixtures; five to seven
years for office equipment; seven years for conferencing equipment; and three
years for purchased computer software. Equipment held under capital leases is
amortized straight line over the shorter of the lease life or the estimated
useful life of the assets, generally seven years.
(e) Income Taxes
Effective January 1, 1996, the Company elected by consent of its
stockholders to be taxed under the provisions of Subchapter S of the Internal
Revenue Code. Under those provisions, the Company does not pay corporate
income taxes on its taxable income. Instead, the stockholders are liable for
individual income taxes on the Company's taxable income. Prior to that
election, income taxes were accounted for under the asset and liability
method. Deferred tax assets and liabilities were recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities were measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates was recognized in income in the period that includes the
enactment date.
(f) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
F-63
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
during 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(h) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise price.
During 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and later years as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the provisions
of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS
No. 123. There were no stock option grants during 1995 and 1996, therefore, no
pro forma disclosures have been provided for these years.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
----- -----
(IN
THOUSANDS)
<S> <C> <C>
Furniture and fixtures....................................... $ 3 $ 16
Office equipment............................................. 37 64
Conferencing equipment....................................... 651 738
Purchased computer software.................................. -- 96
----- -----
691 914
Less: accumulated depreciation and amortization.............. 48 181
----- -----
Property and equipment, net................................ $ 643 $ 733
===== =====
</TABLE>
(3) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Note payable to bank, due in monthly installments of $1,389
plus interest at 10 percent through December, 1996; secured
by certain equipment. Balance was repaid during 1996........ $ 5 $ --
Note payable to bank; due in monthly installments of $2,740
including interest at 11 percent through January 1999; se-
cured by certain equipment and personal guarantees of cer-
tain stockholders. Additional principal repayments were made
without penalty during 1996................................. 82 54
Note payable to bank; due in monthly installments of $699,
including interest at 11 percent through May, 1997; secured
by certain equipment. Balance was repaid during 1996........ 11 --
------ --------
Total long-term debt....................................... 98 54
Less: current installments................................. 43 28
------ --------
Long-term debt, excluding current installments............. $ 55 $ 26
====== ========
</TABLE>
F-64
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of long-term debt for each of the two years
subsequent to December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997.................................................................. $28
1998.................................................................. 26
---
$54
===
</TABLE>
(4) LEASES
The Company is obligated for equipment under various capital leases that
expire at various dates during the next 4 years. At December 31, 1995 and 1996
the gross amount of equipment and related accumulated amortization recorded
under capital leases were as follows :
<TABLE>
<CAPTION>
1995 1996
----- -----
(IN
THOUSANDS)
<S> <C> <C>
Equipment................................................... $ 142 $ 357
Accumulated amortization.................................... (7) (68)
----- -----
$ 135 $ 289
===== =====
</TABLE>
Amortization of assets held under capital leases is included with
depreciation expense.
The Company also leases two facilities under operating leases expiring at
various dates through March, 2001. The Company's total rent expense was
$28,813, $47,011 and $107,996 for the years ended December 31, 1994, 1995 and
1996, respectively. Future minimum payments under operating and capital leases
(which are guaranteed by certain owners) are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31: LEASES LEASES
------------------------ --------- -------
(IN THOUSANDS)
<S> <C> <C>
1997............................................... $ 68 $ 89
1998............................................... 69 89
1999............................................... 72 78
2000............................................... 77 14
2001............................................... 19 --
---- ----
Total future minimum lease payments.............. $305 $270
====
Less: imputed interest............................. 48
----
Present value of minimum capital lease payments.. 222
Less: current installments of obligations under
capital leases.................................. 65
----
Obligations under capital leases excluding
current installments............................ $157
====
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued wages............................................ $ 3 $ 67
Accrued telephone charges................................ 30 60
------ -------
$ 33 $ 127
====== =======
</TABLE>
F-65
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
The components of income tax expense (benefit) consists of the following for
the years ended December 31:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current................................................... $ 48 $ 97
Deferred.................................................. 34 32
------ -------
$ 82 $ 129
====== =======
</TABLE>
There is no income tax expense recorded for the year ended December 31, 1996
as a result of the Company's election to be taxed under the provisions of
Subchapter S. Income tax expense (benefit) differed from the amounts computed
by applying the U.S. statutory federal income tax rate of 34% as a result of
the following:
<TABLE>
<CAPTION>
1994 1995
----- -----
(IN
THOUSANDS)
<S> <C> <C>
Income tax expense at statutory rate......................... $ 69 $ 109
State income tax, net of federal tax benefit................. 12 19
Nondeductible expenses and other differences................. 1 1
---- -----
$ 82 $ 129
==== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1995 are
presented below:
<TABLE>
<CAPTION>
1995
--------------
(IN THOUSANDS)
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts and accrued expenses.... $15
Stock compensation...................................... 11
---
Total gross deferred tax asset.......................... 26
---
Deferred tax liabilities:
Property and equipment.................................. 47
---
Total gross deferred tax liability...................... 47
---
Net deferred tax liability............................ $21
===
</TABLE>
(7) STOCK OPTIONS
In January 1994, the Board of Directors granted options to five individuals
to purchase an aggregate of 740 shares of common stock at an exercise price of
$8.77 per share. The options vested immediately and expire three years from the
date of grant. On January 2, 1996, all 740 options were exercised in exchange
for $6,490 in notes receivable from stockholders.
(8) RELATED PARTY TRANSACTIONS
The Company provides conferencing services to customers of Conferencing
Services International Inc. ("CSI"), a company owned by the spouse of a
stockholder. Total revenue from CSI was $79,890, $85,818 and $175,237 for the
years ended December 31, 1994, 1995 and 1996, respectively. Total accounts
receivable from CSI were $15,758 and $60,569 at December 31, 1995 and 1996,
respectively.
F-66
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company has certain accounts payable to a supplier. Several stockholders
are also stockholders of the supplier company. The amounts outstanding are
$209,417 and $88,617 at December 31, 1995 and 1996, respectively and are
included in accounts payable.
The Company pays consulting fees to several of its stockholders. Total
consulting fees were $37,000, $45,000 and $14,000 for the years ended December
31, 1994, 1995 and 1996, respectively.
(9) SIGNIFICANT CUSTOMERS
For the years ended December 31, 1994, 1995 and 1996, no customer accounted
for more than 10% of the Company's total sales. At December 31, 1996, one
customer, CSI, the related party discussed in note 9, accounted for 11% of the
total accounts receivable balance.
(10) MERGER
In December 1996, the Company entered into a business combination agreement
with VIALOG Corporation whereby VIALOG Corporation will acquire the
outstanding stock of the Company upon completion of a proposed initial public
offering of common stock. Several of the Company's stockholders also hold
stock and options in VIALOG Corporation.
F-67
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
American Conferencing Company, Inc.
and Resource Objectives, Inc.:
We have audited the accompanying combined balance sheets of American
Conferencing Company, Inc. and Resource Objectives, Inc. as of December 31,
1995 and 1996, and the related combined statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of American
Conferencing Company, Inc. and Resource Objectives, Inc. as of December 31,
1995 and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
January 20, 1997
Short Hills, New Jersey
F-68
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
ASSETS (note 3)
Current assets:
Cash............................................................. $ 17 $ 39
Trade accounts receivable, net (note 8).......................... 217 213
Inventory........................................................ 30 4
Deferred income taxes (note 6)................................... -- 15
Prepaid expenses and other current assets........................ 5 5
---- ----
Total current assets........................................... 269 276
Property and equipment, net (note 2)............................... 122 111
Other assets....................................................... 14 17
---- ----
Total assets................................................... $405 $404
==== ====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit agreement (note 3)................................ $ 35 $ 35
Current installments of obligations under capital leases (note
7).............................................................. 15 7
Accounts payable................................................. 100 64
Accrued expenses (notes 4 and 5)................................. 57 210
Income taxes payable............................................. 17 --
Due to stockholder (note 5)...................................... 14 18
---- ----
Total current liabilities...................................... 238 334
Obligations under capital leases, excluding current installments
(note 7).......................................................... 16 --
Other liabilities.................................................. 4 --
Deferred income taxes (note 6)..................................... 13 14
---- ----
Total liabilities.............................................. 271 348
---- ----
Stockholders' equity:
American Conferencing Company Inc.--common stock, at stated val-
ue.
Authorized 1,000 shares; issued and outstanding 50 shares in 1995
and 1996........................................................ 1 1
Resource Objectives, Inc.--common stock, at stated value.
Authorized 1,000 shares; issued and outstanding 100 shares in
1995 and 1996................................................... -- --
Resource Objectives, Inc.--treasury stock, 50 shares in 1995 and
1996............................................................ (35) (35)
Retained earnings................................................ 168 90
---- ----
Total stockholders' equity..................................... 134 56
---- ----
Commitments and contingencies (notes 7 and 10)
Total liabilities and stockholders' equity..................... $405 $404
==== ====
</TABLE>
See accompanying notes to combined financial statements.
F-69
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Net revenues (note 8)...................................... $772 $1,227 $1,679
Cost of revenues........................................... 335 625 854
---- ------ ------
Gross profit............................................. 437 602 825
Selling, general, and administrative expenses.............. 345 514 889
---- ------ ------
Income (loss) from operations............................ 92 88 (64)
Interest expense, net...................................... 6 6 9
---- ------ ------
Income (loss) before income tax expense (benefit)........ 86 82 (73)
Income tax expense (benefit) (note 6)...................... 16 22 (14)
---- ------ ------
Net income (loss)........................................ $ 70 $ 60 $ (59)
==== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-70
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
AMERICAN
CONFERENCING
COMPANY, INC. RESOURCE OBJECTIVES,
COMMON STOCK INC. COMMON STOCK
------------- ----------------------
NUMBER NUMBER TOTAL
OF STATED OF STATED TREASURY RETAINED STOCKHOLDERS'
SHARES VALUE SHARES VALUE STOCK EARNINGS EQUITY
------ ------ ------ ------ -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 50 $ 1 100 $-- $(35) $ 38 $ 4
Net income............ -- -- -- -- -- 70 70
--- ---- --- ---- ---- ---- ----
Balance at December 31,
1994................... 50 1 100 -- (35) 108 74
Net income............ -- -- -- -- -- 60 60
--- ---- --- ---- ---- ---- ----
Balance at December 31,
1995................... 50 1 100 -- (35) 168 134
Net loss.............. -- -- -- -- -- (59) (59)
Dividends............. -- -- -- -- -- (19) (19)
--- ---- --- ---- ---- ---- ----
Balance at December 31,
1996................... 50 $ 1 100 $-- $(35) $ 90 $ 56
=== ==== === ==== ==== ==== ====
</TABLE>
See accompanying notes to combined financial statements.
F-71
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................... $ 70 $ 60 $(59)
Adjustments to reconcile net income (loss) to net cash pro-
vided by operating activities:
Depreciation and amortization............................ 27 32 36
Deferred income taxes.................................... 9 -- (14)
Changes in operating assets and liabilities:
Trade accounts receivable, net......................... (80) (35) 4
Inventory.............................................. (11) (17) 26
Prepaid expenses and other current assets.............. 2 -- --
Other assets........................................... (6) (2) (3)
Accounts payable....................................... 18 (21) (36)
Accrued expenses....................................... (26) 38 153
Income taxes payable................................... -- 16 (17)
Due to stockholder..................................... 30 (48) 4
Other liabilities...................................... 10 (6) (4)
---- ---- ----
Net cash provided by operating activities............ 43 17 90
---- ---- ----
Cash flows from investing activities:
Additions to property and equipment........................ (47) (17) (25)
---- ---- ----
Cash flows from financing activities:
Proceeds from revolving line of credit..................... -- 35 --
Principal payments under capital lease obligations......... (1) (18) (24)
Dividends.................................................. -- -- (19)
---- ---- ----
Net cash provided by (used in) financing activities.. (1) 17 (43)
---- ---- ----
Net increase (decrease) in cash.............................. (5) 17 22
Cash at beginning of year.................................... 5 -- 17
---- ---- ----
Cash at end of year.......................................... $-- $ 17 $ 39
==== ==== ====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................. $ 6 $ 6 $ 9
==== ==== ====
Income taxes............................................. $ 17 $ 6 $ 17
==== ==== ====
</TABLE>
See accompanying notes to combined financial statements.
F-72
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
American Conferencing Company, Inc. ("Americo") is a provider of
teleconferencing services to a variety of customers primarily located in the
United States. Americo was incorporated in April 1987 and is headquartered in
Ridgewood, New Jersey.
Resource Objectives, Inc. ("ROI") is a reseller of teleconferencing
equipment and a provider of consulting services. ROI was incorporated in
September 1983 and is headquartered in Ridgewood, New Jersey.
(b) Principles of Combination
The financial statements of Americo and ROI are combined, as the 100%
stockholder of ROI owns 50% of the stock of Americo, and ROI owns the
remaining 50% of Americo stock. Affiliated company accounts and transactions
are eliminated in combination.
(c) Use of Estimates
Management of Americo and ROI have made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these combined
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is provided on the straight-line method over the estimated useful
lives of the respective assets. The estimated useful lives are as follows: ten
years for machinery and equipment; seven years for furniture and fixtures; and
five to seven years for office equipment. Capitalized lease equipment is
amortized over the lives of the leases, generally seven years.
(f) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(g) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service. Sales of
teleconferencing equipment are recognized upon shipment.
F-73
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(h) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Americo and ROI adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
in 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement did not have an impact on the combined
statements of financial position, results of operations, or liquidity.
(i) Treasury Stock
Treasury stock purchases are recorded at cost.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment................................. $ 125 $ 125
Furniture and fixtures.................................. 3 7
Office equipment........................................ 142 163
------- -------
270 295
Less: accumulated depreciation and amortization......... (148) (184)
------- -------
Property and equipment, net............................. $ 122 $ 111
======= =======
</TABLE>
(3) LINE OF CREDIT
Americo has a line of credit agreement with a commercial bank which permits
Americo to borrow up to $50,000. Amounts borrowed under the line were $35,000
at both December 31, 1995 and 1996. Amounts borrowed under the line bear
interest at the bank's base lending rate plus 1.25% (9.75% at December 31,
1996). Substantially all assets of Americo are pledged as security for amounts
borrowed under the line of credit agreement. In addition, the line of credit
is guaranteed by the sole stockholder.
(4) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued payroll, commissions and related taxes........... $ 15 $ 22
Accrued payroll-stockholder.............................. 15 65
Accrued fees and other expenses.......................... 27 15
Profit Sharing Plan accrual.............................. -- 52
Money Purchase Plan accrual.............................. -- 56
------ -------
$ 57 $210
====== =======
</TABLE>
(5) RELATED PARTY TRANSACTIONS
(a) Due to Stockholder
Amounts due to stockholder consist of short-term demand notes at December
31, 1995 and 1996. In addition, included in accrued expenses at December 31,
1995 and 1996 is accrued payroll of $14,750 and $65,000, respectively, due to
this stockholder.
F-74
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(b) Lease Transactions
ROI leases certain equipment to Americo. Total rent expense under these
leases for the years ended December 31, 1994, 1995 and 1996 was $39,948,
$104,513, and $104,513, respectively, which has been eliminated in the
accompanying combined statements of operations.
(6) INCOME TAXES
Income tax expense (benefit) attributable to income (loss) before income tax
expense consists of the following at December 31:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
1994:
Federal......................................... $ 5 $ 2 $ 7
State........................................... 2 7 9
----- ---- ----
$ 7 $ 9 $ 16
===== ==== ====
1995:
Federal......................................... $ 15 -- $ 15
State........................................... 7 -- 7
----- ---- ----
$ 22 -- $ 22
===== ==== ====
1996:
Federal......................................... $ -- (8) $ (8)
State........................................... -- (6) (6)
----- ---- ----
$ -- $(14) $(14)
===== ==== ====
</TABLE>
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. statutory federal income tax rate of 34% as a result of the
following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit).............. $ 29 $ 28 $(25)
State income taxes, net of federal tax benefit......... 4 5 (4)
Tax rate differential.................................. (16) (15) 14
Nondeductible expenses and other differences........... (1) 4 1
---- ---- ----
$ 16 $ 22 $(14)
==== ==== ====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31 are presented
below:
<TABLE>
<CAPTION>
1995 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued expenses...................................... $ -- $ 15
-------- ------
Total gross deferred tax asset...................... -- 15
-------- ------
Deferred tax liabilities:
Property and equipment................................ 13 14
-------- ------
Total gross deferred tax liability.................. 13 14
-------- ------
Net deferred tax liability (asset).................. $ 13 $ (1)
======== ======
</TABLE>
F-75
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Due to the fact that the Company has
sufficient taxable income in carryback periods, and projections for future
taxable income over the periods in which the deferred tax assets are
deductible, the ultimate realization of deferred tax assets recognized appears
more likely than not.
(7) COMMITMENTS
Americo has entered into a noncancelable operating lease covering certain
equipment. Rent expense amounted to $22,108, $67,359 and $75,541 for the years
ended December 31, 1994, 1995 and 1996, respectively. ROI leases certain
equipment under capital leases, which are included in property and equipment
in the accompanying combined balance sheets. Future minimum payments under
noncancelable lease agreements are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASE LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Year ending December 31:
1997................................................ $45 $ 11
1998................................................ 41 --
--- -----
Total minimum lease payments...................... $86 11
===
Less: interest...................................... (4)
Present value of net minimum capital lease pay-
ments............................................ 7
Less: current installments of obligations under cap-
ital leases........................................ 7
-----
Obligations under capital leases, less current
installments..................................... $ --
=====
</TABLE>
Included in property and equipment at December 31, 1995 and 1996 are assets
under capital leases of $82,400. Accumulated amortization of assets under
capital leases as of December 31, 1995 and 1996 is $29,456 and $41,228,
respectively.
(8) SIGNIFICANT CUSTOMERS
For the year ended December 31, 1996, one customer accounted for
approximately 17% of sales and 12% of accounts receivable at December 31,
1996.
(9) EMPLOYEE BENEFIT PLANS
During 1996, Americo adopted a Money Purchase Plan and a Profit Sharing
Plan. The plans cover substantially all employees who generally work 1,000
hours or more per year and have attained the age of 21. Americo will make a
contribution to the Money Purchase Plan for 10% of each eligible participant's
compensation. Contributions into the Profit Sharing Plan are discretionary.
Money Purchase Plan and Profit Sharing Plan contributions charged to
operations for the year ended December 31, 1996 were $47,507 and $70,761,
respectively.
(10) MERGER AGREEMENTS
On December 31, 1996, Americo entered into an agreement and plan of merger
with ROI, whereas, ROI merged with and into Americo with the surviving entity
being Americo. The merger became effective in January 1997.
In December 1996, Americo entered into a business combination agreement with
VIALOG Corporation whereby VIALOG Corporation will acquire the outstanding
stock of Americo upon completion of a proposed initial public offering of
common stock.
F-76
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Communication Development Corporation:
We have audited the accompanying balance sheets of Communication Development
Corporation as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Communication Development
Corporation as of December 31, 1995 and 1996 and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
January 17, 1997
Boston, Massachusetts
F-77
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1996
---- -----
<S> <C> <C>
ASSETS (note 3)
Current assets:
Cash and cash equivalents......................................... $ 18 $ 90
Trade accounts receivable, less allowance for doubtful accounts of
$2 in 1995 and 1996
(note 7)......................................................... 237 186
Income taxes receivable........................................... 6 1
Prepaid expenses and other current assets......................... 8 9
---- -----
Total current assets............................................ 269 286
---- -----
Property and equipment, net (note 2)................................ 212 128
Other assets........................................................ 1 1
---- -----
Total assets.................................................... $482 $ 415
==== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit (note 3).......................... $ 37 $ --
Current installments of long-term debt (note 3)................... 35 33
Accounts payable.................................................. 82 74
Accrued expenses (note 5)......................................... 9 102
Deferred income taxes (note 6).................................... 35 7
---- -----
Total current liabilities....................................... 198 216
---- -----
Long-term debt, excluding current installments (note 3)............. 72 42
Deferred income taxes (note 6)...................................... 30 19
---- -----
Total liabilities............................................... 300 277
---- -----
Stockholders' equity:
Common stock, no par value. Authorized, issued and outstanding
5,000 shares at December 31, 1995 and 1996....................... 2 2
Retained earnings................................................. 180 136
---- -----
Total stockholders' equity...................................... 182 138
---- -----
Commitments and contingencies (notes 4 and 8)
Total liabilities and stockholders' equity...................... $482 $ 415
==== =====
</TABLE>
See accompanying notes to financial statements.
F-78
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net revenues (note 7).................................... $1,121 $1,131 $1,480
Cost of revenues......................................... 709 765 886
------ ------ ------
Gross profit........................................... 412 366 594
Selling, general and administrative expenses............. 337 377 655
------ ------ ------
Income (loss) from operations.......................... 75 (11) (61)
Interest expense, net.................................... 7 17 11
------ ------ ------
Income (loss) before income tax expense (benefit)...... 68 (28) (72)
Income tax expense (benefit) (note 6).................... 29 (11) (28)
------ ------ ------
Net income (loss)...................................... $ 39 $ (17) $ (44)
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-79
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------
TOTAL
NUMBER RETAINED STOCKHOLDERS'
OF SHARES VALUE EARNINGS EQUITY
--------- ----- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993............. 5,000 $ 2 $158 $160
Net income............................. -- -- 39 39
----- ---- ---- ----
Balance at December 31, 1994............. 5,000 2 197 199
Net loss............................... -- -- (17) (17)
----- ---- ---- ----
Balance at December 31, 1995............. 5,000 2 180 182
Net loss............................... -- -- (44) (44)
----- ---- ---- ----
Balance at December 31, 1996............. 5,000 $ 2 $136 $138
===== ==== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-80
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
----- ---- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ 39 $(17) $ (44)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 77 95 86
Deferred income taxes.................................. 1 (11) (39)
Changes in operating assets and liabilities:
Trade accounts receivable, net....................... (27) (73) 51
Income taxes receivable.............................. -- -- 5
Prepaid expenses and other current assets............ (4) (1) (1)
Accounts payable..................................... 41 21 (8)
Accrued expenses..................................... 9 (3) 93
Income taxes payable................................. 23 (3) --
----- ---- -----
Net cash provided by operating activities.......... 159 8 143
----- ---- -----
Cash flows from investing activity:
Additions to property and equipment...................... (183) (4) (2)
----- ---- -----
Cash flows from financing activities:
Proceeds from borrowings under line of credit............ -- 37 --
Repayments of borrowings under line of credit............ (38) -- (37)
Proceeds from long-term debt............................. 100 -- --
Principal repayments of long-term debt................... (31) (36) (32)
----- ---- -----
Net cash provided by (used in) financing activi-
ties.............................................. 31 1 (69)
----- ---- -----
Net increase in cash and cash equivalents.................. 7 5 72
Cash and cash equivalents at beginning of year............. 6 13 18
----- ---- -----
Cash and cash equivalents at end of year................... $ 13 $ 18 $ 90
===== ==== =====
Supplemental cash flow information:
Cash paid during the year for:
Interest............................................... $ 7 $ 17 $ 11
===== ==== =====
Taxes.................................................. $ 9 $ 3 $ --
===== ==== =====
</TABLE>
See accompanying notes to financial statements.
F-81
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Communication Development Corporation (the "Company") provides audio
teleconferencing services to a variety of customers, primarily located in the
United States. The Company was incorporated in 1991 and has its operations
center in Danbury, Connecticut.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare the financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and money market deposits.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
provided on the straight-line basis over the estimated useful lives of the
respective assets, generally five years. Leasehold improvements are amortized
over the shorter of the lease term or three years.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(f) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of,
during 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
F-82
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Teleconferencing equipment.............................. $ 427 $427
Office equipment........................................ 41 43
Leasehold improvements.................................. 10 10
------- -------
478 480
Less: accumulated depreciation and amortization....... (266) (352)
------- -------
Property and equipment, net........................... $ 212 $ 128
======= =======
</TABLE>
(3) DEBT
(a) Line of Credit
The Company has a line of credit with a bank which provides for borrowings
of up to $125,000. Borrowings under this arrangement bear interest at 1% above
the bank's base lending rate (9.25% and 8.5% at December 31, 1996 and 1995,
respectively). The loan agreement is renewable annually in January, is
collateralized by accounts receivable, and is guaranteed by the stockholders.
Amounts borrowed under the line of credit were $37,000 and $0 at December 31,
1995 and 1996, respectively.
(b) Long-term Debt
Long-term debt at December 31, 1995 and 1996 consists of bank term notes
which are payable in equal monthly installments of principal plus interest at
1% above the bank's base lending rate through December 1999. The notes are
collateralized by substantially all the assets of the Company and are
guaranteed by the stockholders. Amounts outstanding at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Bank term notes........................................... $ 107 $ 75
Less: current installments................................ 35 33
------- ------
Long-term debt excluding current installments............. $ 72 $ 42
======= ======
</TABLE>
The aggregate maturities of long-term debt for each of the three years
subsequent to December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997.................................................................. $33
1998.................................................................. 20
1999.................................................................. 22
---
$75
===
</TABLE>
(4) COMMITMENTS
The Company rents its office facility under a noncancelable operating lease
expiring in February 1998. Rental expense under this lease for the years
ending December 31, 1994, 1995 and 1996 was $31,254, $57,181 and $65,427,
respectively. Future minimum lease payments under this lease are as follows
(in thousands):
<TABLE>
<S> <C>
1997................................................................. $72
1998................................................................. 12
---
Total minimum lease payments....................................... $84
===
</TABLE>
F-83
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) ACCRUED EXPENSES
Accrued expenses at December 31, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued officer bonus..................................... $ -- $ 90
Accrued payroll and related taxes......................... 8 6
Other accrued expenses.................................... 1 6
------- ------
$ 9 $102
======= ======
</TABLE>
(6) INCOME TAXES
Income tax expense (benefit) consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
1994:
Federal......................................... $ 21 $ 1 $ 22
State........................................... 7 -- 7
----- ---- ----
$ 28 $ 1 $ 29
===== ==== ====
1995:
Federal......................................... $ -- $ (8) $ (8)
State........................................... -- (3) (3)
----- ---- ----
$ -- $(11) $(11)
===== ==== ====
1996:
Federal......................................... $ 8 $(29) $(21)
State........................................... 3 (10) (7)
----- ---- ----
$ 11 $(39) $(28)
===== ==== ====
</TABLE>
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. statutory federal income tax rate of 34% as a result of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense........................ $23 $ (9) $(24)
State and local income taxes, net of federal tax bene-
fit................................................... 5 (2) (5)
Nondeductible items and other differences.............. 1 -- 1
--- ---- ----
$29 $(11) $(28)
=== ==== ====
</TABLE>
F-84
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31 are presented
below:
<TABLE>
<CAPTION>
1995 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss..................................... $ 29 $ --
------ --------
Total gross deferred tax assets..................... 29 --
------ --------
Deferred tax liabilities:
Property and equipment................................. 30 19
Accrued expenses....................................... 64 7
------ --------
Total gross deferred tax liabilities................ 94 26
------ --------
Net deferred tax liability............................. $ 65 $ 26
====== ========
</TABLE>
(7) SIGNIFICANT CUSTOMERS
Four customers accounted for the following percentages of revenues and
accounts receivable:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
TOTAL REVENUES TOTAL ACCOUNTS
FOR THE YEAR ENDED RECEIVABLE AT
DECEMBER 31, DECEMBER 31,
---------------------- ----------------
1994 1995 1996 1995 1996
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Customer A............................. 25% 63% 35% 33% 17%
Customer B............................. -- 11% -- 30% 25%
Customer C............................. 11% 10% 11% -- --
Customer D............................. -- -- -- -- 14%
</TABLE>
(8) MERGER
In December 1996, the Company entered into a business combination agreement
with VIALOG Corporation whereby VIALOG Corporation will acquire the outstanding
stock of the Company upon completion of a proposed initial public offering of
common stock.
F-85
<PAGE>
[INSIDE BACK COVER PAGE]
[PHOTO DESCRIPTION: SEVERAL PERSONS SEATED AROUND A TELEVISION]
[PHOTO DESCRIPTION: MAN IN COAT TALKING ON CELLULAR PHONE; CAR IN BACKGROUND]
[PHOTO DESCRIPTION: PERSON
SEATED BESIDE IGLOO]
HELPING YOU MEET ALL YOUR GLOBAL COMMUNICATIONS NEEDS.
[PHOTO DESCRIPTION: MAN TALKING ON CELLULAR PHONE; BUILDING IN BACKGROUND]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
The Company.............................................................. 15
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Selected Individual Company Financial Data............................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 37
Organization and Acquisition of the Founding Companies................... 49
Management............................................................... 53
Certain Transactions..................................................... 58
Principal Stockholders................................................... 60
Description of Capital Stock............................................. 61
Shares Eligible for Future Sale.......................................... 65
Underwriting............................................................. 66
Legal Matters............................................................ 67
Experts.................................................................. 67
Available Information.................................................... 67
Index to Financial Statements............................................ F-1
</TABLE>
-----------
UNTIL , 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,200,000 SHARES
[ICON] VIALOG CORPORATION
COMMON STOCK
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than the underwriting
compensation expected to be incurred) in connection with the offering
described in this Registration Statement. All of such amounts (except the SEC
Registration Fee, the NASD Filing Fee and the NYSE Listing Fee) are estimates.
<TABLE>
<S> <C>
SEC Registration Fee............................................... $ 20,491
NASD Filing Fee.................................................... $ 7,262
New York Stock Exchange Listing Fee................................ $ 89,654
Blue Sky Fees and Expenses......................................... $ 15,000
Printing and Engraving Costs.......................................
Legal Fees and Expenses............................................
Accounting and Tax Fees and Expenses............................... $650,000
Transfer Agent and Registrar Fees and Expenses.....................
Miscellaneous......................................................
--------
Total............................................................ $
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 67 of Chapter 156B of the Massachusetts General Laws, or the
Massachusetts Business Corporation Law (the "MBCL"), provides that
indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by
it to whatever extent shall be specified in or authorized by (i) the articles
of organization or (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote
on the election of directors. Except as the articles of organization or by-law
otherwise require, indemnification of any persons who are not directors of the
corporation may be provided by it to the extent authorized by the directors.
Such indemnification may include payment by the corporation of expenses
incurred in defending a civil or criminal action or proceeding in advance of
the final disposition of such action or proceeding, upon receipt of an
undertaking by the person indemnified to repay such payment if he shall be
adjudicated to be not entitled to indemnification, which undertaking may be
accepted without reference to the financial ability of such person to make
repaying. Any such indemnification may be provided although the person to be
indemnified is no longer an officer, director, employee or agent of the
corporation or of such other organization or no longer serves with respect to
any such employee benefit plan. Section 67 further provides that no
indemnification shall be provided for any person with respect to any matter as
to which he shall have been adjudicated in any proceeding not to have acted in
good faith in the reasonable belief that his action was in the best interest
of the corporation or to the extent that such matter relates to service with
respect to any employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan. Article VI of the
Company's Articles of Organization provides that the Company shall, to the
fullest extent permitted by the laws of the Commonwealth of Massachusetts,
indemnify each person who is, or shall have been, a director, officer,
employee of agent of the Company, or who is serving or shall have served, at
the request of the Company, as director or officer of another organization or
in any capacity with respect to any employee benefit plan of the Company,
against all liabilities and expenses (including judgments, fines, penalties,
amounts paid or to be paid in settlement and reasonable attorney's fees)
imposed upon or incurred by any such person in connection with, or arising out
of claims made, or any action, suit or proceeding threatened or brought
against him or in which he may be involved by reason of any action taken or
omitted by him as a director, officer, employee or agent, or as a result of
any service with respect to any such employee benefit plan.
II-1
<PAGE>
Section 13(b)(1 1/2) of Chapter 156B of the MBCL permits a corporation to
include in its articles of organization a provision eliminating or limiting
the personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, provided that
such provision shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 61
or 62 of the MBCL (relating to unlawful payment of dividends, unlawful stock
purchase and redemption and loans to insiders) or (iv) for any transaction
from which the director derived an improper personal benefit. Article VI of
the Company's Articles of Organization provides that the Company's directors
shall not be liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except in the circumstances that
are set forth in the MBCL.
The effect of these provisions is to permit indemnification by the Company
for, among other liabilities, liabilities arising out of the Securities Act.
The Underwriting Agreement (a form of which appears as Exhibit 1.1) provides
for indemnification of the Company's directors and officers in certain
circumstances.
Section 67 of the MBCL also affords a Massachusetts corporation the power to
obtain insurance on behalf of its directors and officers against liabilities
incurred by them in those capacities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Company issued or
sold within the past three years which were not registered under the
Securities Act of 1933. None of the sales of the securities issued by the
Company have involved the use of an underwriter, and no commissions were paid
in connection with the sale of any of the securities issued by the Company.
(i) On January 1, 1996, the Company issued an aggregate of 666,400 shares of
Common Stock, $.01 par value ("Common Stock") at $.01 per share to John J.
Hassett and J. Michael Powell in connection with the organization and initial
capitalization of the Company for an aggregate purchase price of $6,664.00.
John J. Hassett subsequently contributed to the capital of the Company 125,000
of the 625,000 shares originally issued to him.
(ii) On January 19, 1996, the Company issued 180,000 shares of Common Stock
at $.138 per share to Reynolds E. Moulton and J. Michael Powell in connection
with the organization and initial capitalization of the Company for an
aggregate purchase price of $24,840.
(iii) Between February 15, 1996 and April 15, 1996, the Company issued
123,250 shares of Common Stock valued at such time at $.01 per share to eleven
of its consultants for services rendered. The issuance of these shares may be
considered to be compensation to such individuals and will be expensed by the
Company.
(iv) On June 27, 1996 and July 31, 1996, the Company issued an aggregate of
189,000 shares of Common Stock to nine accredited investors at $0.555 per
share for an aggregate purchase price of $104,895.
(v) On June 27, 1996, October 18, 1996 and October 31, 1996, the Company
issued 64,000 shares of Common Stock valued at such time at $.555 per share to
ten of its consultants and employees for services rendered. The issuance of
these shares may be considered to be compensation to such individuals and will
be expensed by the Company.
(vi) On September 24, 1996, the Company issued 37,500 shares of Common Stock
at $.06 per share to one of its consultants upon the exercise of a NQSO for a
total purchase price of $2,250.
II-2
<PAGE>
(vii) On November 4, 1996, the Company issued 22,500 shares of Common Stock
valued at such time at $4.00 per share to four of its employees for services
rendered. The issuance of these shares may be considered to be compensation to
such individuals and will be expensed by the Company.
(viii) On November 29, 1996, the Company issued an aggregate of 190,000
shares of Common Stock to twenty accredited investors at $4.00 per share for
an aggregate purchase price of $760,000.
(ix) On February 12, 1997, the Company issued an aggregate of 52,000 shares
of Common Stock at $.05 per share to two of its consultants upon the exercise
of two NQSOs for an aggregate purchase price of $2,600.
(x) On February 24, 1997, the Company issued an aggregate of $500,000 in
principal amount of promissory notes due upon completion of the Offering and
warrants to purchase an aggregate of 55,555 shares of Common Stock at $9.00
per share to eight accredited investors.
(xi) On February 28, 1997, the Company entered into an Amended and Restated
Agreement and Plan of Reorganization with ATS Acquisition Corporation, its
wholly owned subsidiary, and American Teleconferencing Services, Ltd. and
Robert A. Cowan and Louis I. Jaffe pursuant to which the Company has agreed to
issue 1,565,217 shares of Common Stock as partial consideration for the merger
of American Teleconferencing Services, Ltd. with the Company's subsidiary all
as described in the Prospectus.
(xii) On February 28, 1997, the Company entered into an Amended and Restated
Agreement and Plan of Reorganization with TBMA Acquisition Corporation, its
wholly owned subsidiary, and Telephone Business Meetings, Inc. and C. Raymond
Marvin pursuant to which the Company has agreed to issue 888,608 shares of
Common Stock as partial consideration for the merger of Telephone Business
Meetings, Inc. with the Company's subsidiary all as described in the
Prospectus.
(xiii) On February 28, 1997, the Company entered into an Amended and
Restated Agreement and Plan of Reorganization with CSII Acquisition
Corporation, its wholly owned subsidiary, and Conference Source International,
Inc. and Judy B. Crawford and Olen E. Crawford pursuant to which the Company
has agreed to issue 692,086 shares of Common Stock as partial consideration
for the merger of Conference Source International, Inc. with the Company's
subsidiary all as described in the Prospectus.
(xiv) On February 28, 1997, the Company entered into an Amended and Restated
Agreement and Plan of Reorganization with KST Acquisition Corporation, its
wholly owned subsidiary, and Kendall Square Teleconferencing Inc. and Courtney
Snyder, Paul Ballantine, John Hassett and Dwight Grader pursuant to which the
Company has agreed to issue 173,913 shares of Common Stock as partial
consideration for the merger of Kendall Square Teleconferencing, Inc. with the
Company's subsidiary all as described in the Prospectus.
(xv) On February 28, 1997, the Company entered into an Agreement and Plan of
Reorganization with AMCS Acquisition Corporation, its wholly owned subsidiary,
and American Conferencing Company, Inc. and David Lipsky pursuant to which the
Company has agreed to issue 133,913 shares of Common Stock as partial
consideration for the merger of American Conferencing Company, Inc. with the
Company's subsidiary all as described in the Prospectus.
(xvi) On February 28, 1997, the Company entered into an Amended and Restated
Agreement and Plan of Reorganization with CDC Acquisition Corporation, its
wholly owned subsidiary, and Communication Development Corporation and Patti
R. Bisbano and Maurya Suda pursuant to which the Company has agreed to issue
95,217 shares of Common Stock as partial consideration for the merger of
Communication Development Corporation with the Company's subsidiary all as
described in the Prospectus.
Each of the transactions set forth in the preceding clauses were completed
without registration of the relevant security under the Securities Act in
reliance upon one or more of the following exemptions: (a) for the
transactions described in clauses (i) and (ii), Section 4(2) of the Securities
Act for transactions not involving a public offering; (b) for the transactions
described in clauses (iii), (v), (vi), (vii) and (ix), all of which were
consummated pursuant to the Company's 1996 Stock Plan, Rule 701 promulgated
under the Securities Act for transactions with directors, consultants, and
employees and Section 4(2) of the Securities Act; and (c) for the transactions
described in clauses (iv), (viii) and (x) through (xvi), Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated under the Securities
Act.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Amended and Restated Agreement and Plan of Reorganization dated as of
February 28, 1997 By and Among the Company and ATS Acquisition
Corporation and American Teleconferencing Services, Ltd. and Robert A.
Cowan and Louis I. Jaffe.
2.2 Amended and Restated Agreement and Plan of Reorganization dated as of
February 28, 1997 By and Among the Company and TBMA Acquisition
Corporation and Telephone Business Meetings, Inc. and C. Raymond
Marvin.
2.3 Restated Agreement and Plan of Reorganization dated as of February 28,
1997 By and Among the Company and CSII Acquisition Corporation and
Conference Source International, Inc. and Judy B. Crawford and Olen E.
Crawford.
2.4 Asset Purchase Agreement dated as of February 28, 1997 By and Among
the Company and Call Points Acquisition Corporation, Call Points, Inc.
and Ropir Industries, Inc.
2.5 Amended and Restated Agreement and Plan of Reorganization dated as of
February 28, 1997 By and Among the Company and KST Acquisition
Corporation and Kendall Square Teleconferencing, Inc. and Courtney
Snyder, Paul Ballantine, John Hassett and Dwight Grader.
2.6 Amended and Restated Agreement and Plan of Reorganization dated as of
February 28, 1997 By and Among the Company and AMCS Acquisition
Corporation and American Conferencing Company, Inc. and David Lipsky.
2.7 Amended and Restated Agreement and Plan of Reorganization dated as of
February 28, 1997 By and Among the Company and CDC Acquisition
Corporation and Communication Development Corporation and Patti R.
Bisbano and Maurya Suda.
3.1 Restated Articles of Organization of the Company.
3.2 Amended and Restated By-laws of the Company.
4.1 Form of certificate evidencing ownership of Common Stock of the
Company.*
5.1 Opinion of Mirick, O'Connell, DeMallie & Lougee, llp.*
8.1 Opinion of KPMG Peat Marwick llp re tax matters.*
10.1 1996 Stock Plan of the Company.
10.2 Equipment Lease between Conference Source International, Inc. and Ally
Capital Corporation dated April 1, 1996.
10.3 Equipment Lease between Conference Source International, Inc. and
Jacom Computer Services Inc. dated December 22, 1994.
10.4 Equipment Lease between Conference Source International, Inc. and The
CIT Group/Equipment Financing, Inc. dated November 11, 1996.
10.5 Equipment Lease between Conference Source International, Inc. and BSFS
Equipment Leasing dated April 8, 1996.
10.6 Equipment Lease between Teleconversant Ltd., now known as Kendall
Square Teleconferencing, Inc., and Wasco Funding Corp. dated May 21,
1996.
10.7 Equipment Lease between Teleconversant Ltd., now known as Kendall
Square Teleconferencing, Inc., and Wasco Funding Corp. dated July 20,
1995.
10.8 Lease between Aetna Life Insurance Company and Telephone Business
Meetings, Inc., as amended, dated December 6, 1994.
10.9 Master Lease Agreement between Market Financial Corporation and
American Conferencing Company, Inc. (f/k/a Resource Objectives, Inc.)
dated October 26, 1994.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.10 Lease Agreement between SPP Real Estate (Georgia II), Inc. and
Conference Source International, Inc. dated November 1, 1996.
10.11 Lease between Bijou Limited Liability Company and American
Teleconferencing Services, Ltd. dated May 23, 1996.
10.12 Lease between The Aetna Life Insurance Company and American
Teleconferencing Services, Ltd., as amended, dated November 25, 1987.
10.13 Employment Agreement between the Company and Glenn D. Bolduc dated as
of September 19, 1996.
10.14 Form of Employment Agreement to be entered into between American
Teleconferencing Services, Ltd. and Robert A. Cowan.
10.15 Form of Employment Agreement to be entered into between Telephone
Business Meetings, Inc. and C. Raymond Marvin.
10.16 Form of Employment Agreement to be entered into between Conference
Source International, Inc. and Judy B. Crawford.
10.17 Form of Employment Agreement to be entered into between Kendall Square
Teleconferencing, Inc. and Courtney Snyder.
10.18 Form of Employment Agreement to be entered into between American
Conferencing Company, Inc. and David Lipsky.
10.19 Form of Employment Agreement to be entered into between Communication
Development Corporation and Patti R. Bisbano.
10.20 Employment Agreement between the Company and Bruce T. Guzowski dated
as of
February 7, 1997.
10.21 Form of Consulting Agreement to be entered into between the Company
and John J. Hassett.
10.22 Form of Promissory Note and Warrant issued in connection with $500,000
financing.
10.23 Equipment Lease between Union Springs Telephone Company and Call
Points, Inc. dated
September 1, 1996.
10.24 Equipment Lease between Union Springs Telephone Company and Call
Points, Inc. dated June 1, 1996.
10.25 Registration Rights Agreement.
21 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Mirick, O'Connell, DeMallie & Lougee, LLP.*
23.3 Consent of Robert A. Cowan as nominee for directorship.
23.4 Consent of Robert Eckenrode as nominee for directorship.
23.5 Consent of Joanna M. Jacobson as nominee for directorship.
23.6 Consent of Richard J. Valentine as nominee for directorship.
24 Power of Attorney (included on the signature page of this Registration
Statement).
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are required to be included.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A and contained in a
form of prospectus filed by the 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 is declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, 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 the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOSTON, STATE OF
MASSACHUSETTS, ON FEBRUARY 28, 1997.
VIALOG CORPORATION
/s/ Glenn D. Bolduc
By: _________________________________
GLENN D. BOLDUC PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that VIALOG CORPORATION, a corporation
organized under the laws of the Commonwealth of Massachusetts (the
"Corporation"), and the undersigned officers and directors of the Corporation,
individually and in their respective capacities indicated below, hereby make,
constitute and appoint GLENN D. BOLDUC and JOHN J. HASSETT its and their true
and lawful attorneys, their separate or joint signatures sufficient to bind,
with power of substitution, to execute, deliver and file in its or their
behalf, and in each person's respective capacity or capacities as shown below,
with the Securities and Exchange Commission (or any other governmental
authority) a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, any amendments to and any and all documents in support of or
supplemental to said registration statement by the Corporation, and any
additional registration statements filed pursuant to Rule 462(b); and the
Corporation and each said person hereby grant to said attorneys full power and
authority to do and perform each and every act and thing whatsoever as any one
of said attorneys may deem necessary or advisable to carry out the full intent
of this Power of Attorney to the same extent and with the same effect as the
Corporation or the undersigned officers and directors of the Corporation might
or could do personally in its or their capacity or capacities as aforesaid;
and the Corporation of each of said persons hereby ratify, confirm and approve
all acts and things that any one of said attorneys may do or cause to be done
by virtue of this Power of Attorney and its signature or their signatures as
the same may be signed by any one of said attorneys to said registration
statement and any and all documents in support of or supplemental to said
Registration Statement and any and all amendments thereto.
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:
SIGNATURES TITLE DATE
/s/ Glenn D. Bolduc President, Chief February 28,
By: Executive Officer 1997
-------------------------------- and Director
GLENN D. BOLDUC
/s/ Bruce T. Guzowski Chief Financial February 28,
By: Officer, Treasurer 1997
-------------------------------- and Director
BRUCE T. GUZOWSKI
/s/ John J. Hassett Chairman of the February 28,
By: Board and Director 1997
--------------------------------
JOHN J. HASSETT
/s/ John J. Dion Principal Accounting February 28,
By: Officer 1997
--------------------------------
JOHN J. DION
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Amended and Restated Agreement and Plan of Reorganization dated as of
February 29, 1997 By and Among the Company and ATS Acquisition
Corporation and American Teleconferencing Services, Ltd. and Robert A.
Cowan and Louis A. Jaffe.
2.2 Amended and Restated Agreement and Plan of Reorganization dated as of
February 29, 1997 By and Among the Company and TBMA Acquisition
Corporation and Telephone Business Meetings, Inc. and C. Raymond
Marvin.
2.3 Restated Agreement and Plan of Reorganization dated as of February 29,
1997 By and Among the Company and CSII Aquisition Corporation and
Conference Source International, Inc. and Judy B. Crawford and Olen E.
Crawford.
2.4 Asset Purchase Agreement dated as of February 29, 1997 By and Among
the Company and Call Points Acquisition Corporation, Call Points, Inc.
and Ropir Industries, Inc.
2.5 Amended and Restated Agreement and Plan of Reorganization dated as of
February 29, 1997 By and Among the Company and KST Acquisition
Corporation and Kendall Square Teleconferencing, Inc. and Courtney
Snyder, Paul Balentine, John Hassett and Dwight Grader.
2.6 Amended and Restated Agreement and Plan of Reorganization dated as of
February 29, 1997 By and Among the Company and AMCS Acquisition
Corporation and American Conferencing Company, Inc. and David Lepsky.
2.7 Amended and Restated Agreement and Plan of Reorganization dated as of
February 29, 1997 By and Among the Company and CDC Acquisition
Corporation and Communication Development and Patti R. Bisbana and
Maurya Suda.
3.1 Restated Articles of Organization of the Company.
3.2 Amended and Restated By-laws of the Company.
4.1 Form of certificate evidencing ownership of Common Stock of the
Company.*
5.1 Opinion of Mirick, O'Connell, DeMallie & Lougee, llp.*
8.1 Opinion of KPMG Peat Marwick llp re tax matters.*
10.1 1996 Stock Plan of the Company.
10.2 Equipment Lease between Conference Source International, Inc. and Ally
Capital Corporation dated April 1, 1996.
10.3 Equipment Lease between Conference Source International, Inc. and
Jacom Computer Services Inc. dated December 22, 1994.
10.4 Equipment Lease between Conference Source International, Inc. and The
CIT Group/Equipment Financing, Inc. dated November 11, 1996.
10.5 Equipment Lease between Conference Source International, Inc. and BSFS
Equipment Leasing dated April 8, 1996.
10.6 Equipment Lease between TCC (f/k/a Teleconversant Ltd.) and Wasco
Funding Corp.
dated May 21, 1996.
10.7 Equipment Lease between TCC (f/k/a Teleconversant Ltd.) and Wasco
Funding Corp.
dated July 20, 1995.
10.8 Lease between Aetna Life Insurance Company and Access, as amended,
dated December 6, 1994.
10.9 Master Lease Agreement between Market Financial Corporation and
Americo (f/k/a Resource Objectives, Inc.) dated October 26, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.10 Lease Agreement between SPP Real Estate (Georgia II), Inc. and
Conference Source International, Inc. dated November 1, 1996.
10.11 Lease between Bijou Limited Liability Company and American
Teleconferencing Services, Ltd. dated May 23, 1996.
10.12 Lease between The Aetna Life Insurance Company and American
Teleconferencing Services, Ltd., as amended, dated November 25, 1987.
10.13 Employment Agreement between the Company and Glenn D. Bolduc dated as
of September 19, 1996.
10.14 Form of Employment Agreement to be entered into between American
Teleconferencing Services, Ltd. and Robert A. Cowan.
10.15 Form of Employment Agreement to be entered into between Telephone
Business Meetings, Inc. and C. Raymond Marvin.
10.16 Form of Employment Agreement to be entered into between Conference
Source International, Inc. and Judy B. Crawford.
10.17 Form of Employment Agreement to be entered into between Kendall Square
Teleconferencing, Inc. and Courtney Snyder.
10.18 Form of Employment Agreement to be entered into between American
Conferencing Company, Inc. and David Lipsky.
10.19 Form of Employment Agreement to be entered into between Communication
Development Corporation and Patti R. Bisbano.
10.20 Employment Agreement between the Company and Bruce T. Guzowski dated
as of February 7, 1997.
10.21 Form of Consulting Agreement to be entered into between the Company
and John J. Hassett.
10.22 Form of Promissory Note and Stock Purchase Warrant issued in
connection with $500,000 financing.
10.23 Equipment Lease between Union Springs Telephone Company and Call
Points, Inc. dated September 1, 1996.
10.24 Equipment Lease between Union Springs Telephone Company and Call
Points, Inc. dated June 1, 1996.
10.25 Registration Rights Agreement.
21 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Mirick, O'Connell, DeMallie & Lougee, LLP.*
23.3 Consent of Robert A. Cowan as nominee for directorship.
23.4 Consent of Robert Eckenrode as nominee for directorship.
23.5 Consent of Joanna M. Jacobson as nominee for directorship.
23.6 Consent of Richard J. Valentine as nominee for directorship.
24 Power of Attorney (included on the signature page of this Registration
Statement).
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
No financial statement schedules are required to be included.
<PAGE>
Exhibit 2.1
AMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
BY AND AMONG
VIALOG CORPORATION
ATS ACQUISITION CORPORATION
AND
AMERICAN TELECONFERENCING SERVICES, LTD.
AND
ROBERT A. COWAN
AND
LOUIS I. JAFFE
Dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 THE MERGER...........................................................2
SECTION 1.1 The Merger..................................................2
SECTION 1.2 Action by Stockholders......................................2
SECTION 1.3 Closing.....................................................3
SECTION 1.4 Effective Time..............................................3
SECTION 1.5 Effect of the Merger........................................4
SECTION 1.6 Certificate of Incorporation................................4
SECTION 1.7 By-laws.....................................................4
SECTION 1.8 Directors and Officers......................................4
ARTICLE 2 CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES................4
SECTION 2.1 Conversion of Securities....................................4
SECTION 2.2 Exchange of Certificates; Exchange Agent and
Exchange Procedures.........................................6
SECTION 2.3 Stock Transfer Books........................................8
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights..............................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................8
SECTION 3.1 Organization and Business; Power and Authority;
Effect of Transaction.......................................8
SECTION 3.2 Financial and Other Information............................10
SECTION 3.3 Changes in Condition.......................................12
SECTION 3.4 Liabilities................................................12
SECTION 3.5 Title to Properties; Leases................................12
SECTION 3.6 Compliance with Private Authorizations.....................14
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law.............................................14
SECTION 3.8 Intangible Assets..........................................15
SECTION 3.9 Related Transactions.......................................16
SECTION 3.10 Insurance..................................................16
SECTION 3.11 Tax Matters................................................16
SECTION 3.12 Employee Retirement Income Security Act of 1974............18
SECTION 3.13 Absence of Sensitive Payments..............................20
SECTION 3.14 Inapplicability of Specified Statutes......................20
SECTION 3.15 Authorized and Outstanding Capital Stock...................21
SECTION 3.16 Employment Arrangements....................................21
SECTION 3.17 Material Agreements........................................22
SECTION 3.18 Ordinary Course of Business................................23
SECTION 3.19 Bank Accounts, Etc.........................................25
i
<PAGE>
SECTION 3.20 Adverse Restrictions.......................................25
SECTION 3.21 Broker or Finder...........................................25
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc...25
SECTION 3.23 Environmental Matters......................................25
SECTION 3.24 Materiality................................................28
SECTION 3.25 Solvency...................................................28
SECTION 3.26 VIALOG Stock...............................................28
SECTION 3.27 Compliance with Regulations Relating to Securities Credit..28
SECTION 3.28 Certain State Statutes Inapplicable........................28
SECTION 3.29 Continuing Representations and Warranties..................28
SECTION 3.30 Registration Statement.....................................28
SECTION 3.31 Predecessor Status, etc....................................29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDER....................................................29
SECTION 4.1 Organization...............................................29
SECTION 4.2 Power and Authority........................................29
SECTION 4.3 Enforceability.............................................29
SECTION 4.4 Title to Shares............................................30
SECTION 4.5 No Conflict; Required Filings and Consents.................30
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VIALOG AND
VIALOG MERGER SUBSIDIARY.................................................30
SECTION 5.1 Organization and Qualification.............................30
SECTION 5.2 Power and Authority........................................31
SECTION 5.3 No Conflict; Required Filings and Consents.................31
SECTION 5.4 Financing..................................................32
SECTION 5.5 Broker or Finder...........................................32
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary....32
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary......32
SECTION 5.8 Registration Statement.....................................32
SECTION 5.9 Solvency...................................................33
SECTION 5.10 Firm Commitment............................................33
SECTION 5.11 Participating Agreements of Other Participating Companies..33
SECTION 5.12 Continuing Representations and Warranties..................33
ARTICLE 6 ADDITIONAL COVENANTS................................................34
SECTION 6.1 Access to Information; Confidentiality.....................34
SECTION 6.2 Agreement to Cooperate.....................................35
SECTION 6.3 Assignment of Contracts and Rights.........................36
SECTION 6.4 Compliance with the Securities Act.........................36
SECTION 6.5 Conduct of Business........................................37
ii
<PAGE>
SECTION 6.6 No Solicitation............................................38
SECTION 6.7 Directors' and Officers' Indemnification and Insurance.....38
SECTION 6.8 Notification of Certain Matters............................39
SECTION 6.9 Public Announcements.......................................39
SECTION 6.10 Conveyance Taxes...........................................40
SECTION 6.11 Obligations of VIALOG......................................40
SECTION 6.12 Employee Benefits; Severance Policy........................40
SECTION 6.13 Certain Actions Concerning Business Combinations...........40
SECTION 6.14 Termination of Option Securities and Convertible
Securities.................................................41
SECTION 6.15 Tax Returns................................................41
SECTION 6.16 Employment and Noncompetition..............................41
SECTION 6.17 Distributions, Liabilities, Etc............................42
SECTION 6.18 Release from Personal Guarantees...........................42
SECTION 6.19 No Significant Changes.....................................42
SECTION 6.20 Registration Statement.....................................43
SECTION 6.21 Tax Status.................................................43
SECTION 6.22 Self Dealing...............................................43
ARTICLE 7 CLOSING CONDITIONS..................................................43
SECTION 7.1 Conditions to Obligations of Each Party to Effect
the Merger.................................................43
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger
Subsidiary.................................................45
SECTION 7.3 Conditions to Obligations of the Company...................50
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER...................................53
SECTION 8.1 Termination................................................53
SECTION 8.2 Effect of Termination......................................55
SECTION 8.3 Amendment..................................................55
SECTION 8.4 Waiver.....................................................56
SECTION 8.5 Fees, Expenses and Other Payments..........................56
SECTION 8.6 Effect of Investigation....................................56
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER RESTRICTIONS
ON VIALOG STOCK..........................................................56
SECTION 9.1 Shares not Registered......................................56
SECTION 9.2 Economic Risk; Sophistication..............................57
SECTION 9.3 Restrictions on Resale; Legends............................57
ARTICLE 10 INDEMNIFICATION....................................................58
SECTION 10.1 Indemnification............................................58
SECTION 10.2 Procedures Concerning Claims by Third Parties;
iii
<PAGE>
Payment of Damages; etc....................................59
ARTICLE 11 GENERAL PROVISIONS 61
SECTION 11.1 Effectiveness of Representations; etc......................61
SECTION 11.2 Notices....................................................61
SECTION 11.3 Headings...................................................62
SECTION 11.4 Severability...............................................62
SECTION 11.5 Entire Agreement...........................................63
SECTION 11.6 Assignment.................................................63
SECTION 11.7 Parties in Interest........................................63
SECTION 11.8 Governing Law..............................................63
SECTION 11.9 Enforcement of the Agreement...............................63
SECTION 11.10 Counterparts...............................................63
SECTION 11.11 Disclosure Supplements.....................................63
ARTICLE 12 DEFINITIONS........................................................64
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of
February 28, 1997 among VIALOG CORPORATION, a Massachusetts corporation
("VIALOG"), ATS Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of VIALOG ("VIALOG Merger Subsidiary"), AMERICAN TELECONFERENCING
SERVICES, LTD., a Missouri corporation (the "Company"), and ROBERT A. COWAN and
LOUIS I. JAFFE (the "Principal Stockholder").
PREAMBLE
1. The Company and VIALOG Merger Subsidiary have agreed to carry out a
business combination transaction upon the terms and subject to the conditions of
this Agreement and in accordance with the Missouri Business Corporation Act (the
"BCA") and the General Corporation Law of the State of Delaware (the "DBCL"),
pursuant to which the VIALOG Merger Subsidiary will merge with and into the
Company (the "Merger") and the Stockholders and other Persons holding equity
interests in the Company will convert their holdings into cash and shares of
common stock, $.01 par value per share of VIALOG ("VIALOG Stock"), determined in
accordance with Section 2.1(a).
2. Each of the Other Participating Companies will enter into an
agreement and plan of reorganization or stock or asset purchase agreement with
VIALOG and a wholly-owned Subsidiary of VIALOG (each a "Participating
Agreement") whereby, contemporaneously with the Merger, each Other Participating
Company and a Subsidiary of VIALOG will carry out a business combination
transaction pursuant to which each such Subsidiary will merge with and into one
of the Other Participating Companies or VIALOG or such Subsidiary shall purchase
stock or assets of such Other Participating Companies and stockholders of and
other Persons holding equity interests in the Other Participating Companies will
convert their holdings into cash and shares of VIALOG Stock determined in
accordance with provisions substantially similar to those in Section 2.1(a).
3. Pursuant to the Underwriting Agreement, VIALOG will issue and sell
VIALOG Stock in a firm commitment public offering registered on Form S-1 in
accordance with the requirements of the Securities Act (the "Public Offering").
4. The Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement and the Merger as a
convenient means to accomplish a transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code") and a convenient means to
cause all of the Stockholders to transfer their capital stock of the Company to
VIALOG, has approved this Agreement, the Merger and the Transactions and
1
<PAGE>
has recommended approval and adoption of this Agreement, the Merger and the
Transactions by the Stockholders.
5. The Board of Directors of VIALOG has approved and adopted this
Agreement and has approved the Merger and the Transactions as the sole
stockholder of VIALOG Merger Subsidiary.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE
1
THE MERGER
1.1 The Merger.
----------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the BCA and the DBCL at the Effective Time the
VIALOG Merger Subsidiary will be merged with and into the Company. As a result
of the Merger, the separate existence of the VIALOG Merger Subsidiary will cease
and the Company will continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(b) The Company represents that, at a meeting duly called and held
at which a quorum was present and acting throughout, its Board of Directors has
unanimously (i) determined that this Agreement, the Merger and the Transactions
are fair to and in the best interest of Stockholders, (ii) approved this
Agreement, the Merger and the Transactions, which approval satisfies in full the
requirements of the BCA and Missouri law, and (iii) resolved to recommend
approval and adoption by the Stockholders of this Agreement, the Merger and the
Transactions to the extent required and in a manner permitted by Applicable Law.
1.2 Action by Stockholders.
----------------------
(a) The Company, acting through its Board of Directors, will, in
accordance with Applicable Law and its Organizational Documents: (i) as soon as
practicable, duly call, give notice of, convene and hold a special meeting of,
or to the extent permitted by Applicable Law submit for approval and adoption by
written consent by, the Stockholders for the purpose of adopting and approving
this Agreement, the Merger and the Transactions (the "Special Meeting"); (ii)
include in any proxy statement the conclusion and recommendation of the Board of
Directors to the effect that the Board of Directors, having determined that this
Agreement, the
2
<PAGE>
Merger and the Transactions are in the best interests of the Company and the
Stockholders, has approved this Agreement, the Merger and the Transactions and
recommends that the Stockholders vote in favor of the approval and adoption of
this Agreement, the Merger and the Transactions; and (iii) use its reasonable
best efforts to obtain the necessary approval and adoption of this Agreement,
the Merger and the Transactions by the Stockholders.
(b) VIALOG Merger Subsidiary, as soon as practicable, will submit to
VIALOG this Agreement, the Merger and the Transactions for approval and adoption
by written consent as the sole stockholder of VIALOG Merger Subsidiary, and
VIALOG will take all additional actions as such sole stockholder necessary to
adopt and approve this Agreement, the Merger and the Transactions.
(c) The approvals required by Sections 1.2(a) and (b) will occur
prior to the initial filing of the Registration Statement, which is expected to
occur on or before February 28, 1997.
1.3 Closing. Unless this Agreement is terminated pursuant to Section
-------
8.1 and the Merger and the Transactions have been abandoned, and subject to the
satisfaction or, if possible, waiver of conditions set forth in Article 7 other
than Section 7.1(d), the closing of the Merger (the "Merger Closing") will take
place, one day prior to the Effective Date, at the offices of Mirick, O'Connell,
DeMallie & Lougee, LLP, unless another date, time or place is agreed to in
writing by the Parties to this Agreement and each Participating Agreement.
Counsel for the Parties to this Agreement and each Participating Agreement will
hold a pre-closing two days prior to the Effective Date, at the offices of
Mirick, O'Connell, DeMallie & Lougee, LLP, for the purpose of finalizing all
documents to be signed at the Merger Closing. All certificates, legal opinions
and other instruments required to be delivered in order to satisfy the
conditions to the obligations of the Parties to effect the Merger set forth in
Article 7 below shall be delivered at the Merger Closing, and each such
certificate, legal opinion or other instrument shall, except to the extent
otherwise provided in Article 7, be dated as of the anticipated Public Offering
Closing Date, which is expected to occur five business days following the date
of Merger Closing. All such certificates, legal opinions and other instruments
shall be held in escrow by Mirick, O'Connell, DeMallie & Lougee, LLP between the
Merger Closing and the Effective Time and shall be released from escrow
concurrently with the Effective Time on the Public Offering Closing Date. In
the event that the Effective Time and Public Offering Closing Date occur on a
date other than the fifth business day following the Merger Closing, all such
certificates, legal opinions and instruments shall be re-dated as of the Public
Offering Closing Date. The Company, the Principal Stockholder, VIALOG and
VIALOG Merger Subsidiary shall use their respective best efforts to cause each
of the conditions set forth in Article 7 reasonably capable of being satisfied
prior to the Merger Closing, including, without limitation, the conditions set
forth in Sections 7.1(a), (c), (e), (f), (g) and (h), to be satisfied prior to
the Merger Closing.
1.4 Effective Time. On the Public Offering Closing Date, the Parties will
--------------
cause the Merger to be consummated by filing articles or certificates of merger,
as the case may be, with the Secretary of State of Missouri and with the
Secretary of State of Delaware, and by making any related filings required under
the BCA and the DBCL. The Merger will become effective at
3
<PAGE>
such time (but not prior to the Public Offering Closing Date) as such articles
or certificates, as the case may be, are duly filed with the Secretary of State
of Missouri and the Secretary of State of Delaware, respectively (the "Effective
Time)".
1.5 Effect of the Merger. From and after the Effective Time, the
--------------------
Surviving Corporation will possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and VIALOG Merger Subsidiary, and the Merger will otherwise have the
effects, all as provided under the BCA and the DBCL.
1.6 Certificate of Incorporation. From and after the Effective Time, the
----------------------------
Certificate of Incorporation of the Surviving Corporation will be substantially
in the form attached as Exhibit 1.6 until amended in accordance with Applicable
-----------
Law, and the name of the Surviving Corporation will be the name of the Company
or such other name as VIALOG may elect.
1.7 By-laws. From and after the Effective Time, the by-laws of the
-------
Surviving Corporation will be in the form attached as Exhibit 1.7, until
-----------
amended in accordance with Applicable Law.
1.8 Directors and Officers. From and after the Effective Time, until
----------------------
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law (a) the directors of
VIALOG Merger Subsidiary at the Effective Time will be the directors of the
Surviving Corporation and (b) the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation.
ARTICLE
2
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of VIALOG Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each share of common stock, $.00125 par value of the Company
(the "Company Stock") issued and outstanding or issuable upon the election to
exercise or convert outstanding Option Securities and Convertible Securities
immediately prior to the Effective Time (other than any shares of Company Stock
to be canceled pursuant to Section 2.1(b)) will be converted into the right to
receive shares of VIALOG Stock (the "Stock Merger Consideration") and cash (the
"Cash Merger Consideration") (together with the Stock Merger Consideration, the
"Merger Consideration") pursuant to the following formula:
Aggregate Merger Consideration = $36,000,000
Aggregate Stock Merger Consideration = 1,565,217 shares
4
<PAGE>
Aggregate Cash Merger Consideration = $18,000,005*
* The Aggregate Cash Merger Consideration shall be reduced by subtracting from
the Aggregate Cash Merger Consideration the sum of $1,174,730 representing the
bonuses listed on Schedule 6.17.
Merger Consideration = Aggregate Merger Consideration
------------------------------
Aggregate Equity
Stock Merger Consideration = Aggregate Stock Merger Consideration
------------------------------------
Aggregate Equity
Cash Merger Consideration = Aggregate Cash Merger Consideration
-----------------------------------
Aggregate Equity
At the Effective Time, all issued and outstanding shares of Company Stock (the
"Shares") will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and certificates previously evidencing any such
Shares (each a "Certificate") will thereafter represent the right to receive,
upon the surrender of such Certificate in accordance with the provisions of
Section 2.2, the number of Shares represented by such Certificate multiplied by
(i) the Stock Merger Consideration plus (ii) the Cash Merger Consideration. A
holder of more than one Certificate will have the right to receive the Stock
Merger Consideration and the Cash Merger Consideration multiplied by the number
of Shares represented by all such Certificates (the "Exchange Merger
Consideration"). The holders of all Certificates may allocate the Stock Merger
Consideration and Cash Merger Consideration disproportionately among all such
holders; provided, however, that (i) a Schedule 2.1 setting forth the allocation
of Stock Merger Consideration and Cash Merger Consideration among the holders of
all Certificates is completed and consented to in writing by all such holders
contemporaneously with the execution and delivery of this Agreement, all in such
form as required by VIALOG; (ii) for each Share, the total of (A) the allocated
Stock Merger Consideration multiplied by the Offering Price, plus (B) the
allocated Cash Merger Consideration, must equal the Merger Consideration, (iii)
the total allocation of the Stock Merger Consideration must equal the Aggregate
Stock Merger Consideration, and (iv) the total allocation of the Cash Merger
Consideration must equal the Aggregate Cash Merger Consideration. Any such
election to allocate the Stock Merger Consideration and Cash Merger
Consideration disproportionately may not thereafter be withdrawn or amended.
The holders of Certificates previously evidencing Shares outstanding immediately
prior to the Effective Time will cease to have any rights with respect to such
Shares except as otherwise provided in this Agreement or by Applicable Law.
(b) Each Share held in the treasury of the Company or by any direct
or indirect wholly-owned Subsidiary of the Company immediately prior to the
Effective Time will automatically be canceled and extinguished without
conversion, and no payment will be made with respect to such Share.
5
<PAGE>
(c) Each share of common stock of VIALOG Merger Subsidiary
outstanding immediately prior to the Effective Time will be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and will constitute the
only outstanding shares of capital stock of the Surviving Corporation.
(d) In lieu of issuing fractional shares, VIALOG may convert a
holder's right to receive shares of VIALOG Stock pursuant to Section 2.1(a) into
a right to receive the highest whole number of shares of VIALOG Stock
constituting the non-cash portion of the Exchange Merger Consideration plus cash
equal to the fraction of a share of VIALOG Stock to which the holder would
otherwise be entitled multiplied by the Offering Price, and the Exchange Merger
Consideration to which a holder is entitled will be deemed to be such number of
shares of VIALOG Stock plus such cash plus the cash portion of the Exchange
Merger Consideration.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Prior to the Merger Closing, VIALOG will deposit or cause to
be deposited with a bank, trust company or other Entity designated by VIALOG
(the "Exchange Agent"), for the benefit of the holders of Shares for exchange in
accordance with this Article, through the Exchange Agent, the stock portion of
the Merger Consideration multiplied by the number of all Shares issued and
outstanding immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 2.1(b)) (said number of Shares less Shares to be
canceled to be referred to as the "Net Shares"), and within one (1) business day
of the Public Offering Closing Date, a check or checks representing next day
funds from the Underwriter in (or, pursuant to instructions reasonably
satisfactory to the Exchange Agent, wire transfer of) an amount equal to the
Cash Merger Consideration multiplied by the number of Net Shares plus cash in an
amount sufficient to make payment for fractional shares, in exchange for all of
the outstanding Shares (collectively the "Exchange Fund"). The Exchange Agent
will, pursuant to irrevocable instructions from VIALOG, deliver the Exchange
Merger Consideration to be issued pursuant to Section 2.1(a) out of the Exchange
Fund to holders of Shares upon transmittal of Certificates for exchange as
provided therein and in Section 2.2(b). The Exchange Fund will not be used for
any other purposes. Any interest, dividends or other income earned by the
Exchange Fund will be for the account of VIALOG.
(b) As soon as reasonably practicable after the date as of which
the Stockholders act to approve and adopt this Agreement, the Merger and the
Transactions, the Company will notify VIALOG thereof and VIALOG will promptly
instruct the Exchange Agent to deliver to the Stockholders, for the purpose of
accepting Certificates for exchange on the terms provided in Section 2.1(a) at
the Effective Time, and subject to withdrawal of Certificates by their holders
prior thereto, (i) a letter of transmittal (which will specify that delivery
will be effected, and risk of loss and title to the Certificates will pass, only
upon proper delivery of the Certificates to the Exchange Agent and will be in
such form and have such other provisions as VIALOG may reasonably specify), and
(ii) instructions to effect the surrender of the Certificates in exchange for
the Exchange Merger Consideration. Subject to the occurrence of the Effective
Time, upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other
6
<PAGE>
agent or agents as may be appointed by VIALOG together with such letter of
transmittal, duly executed, and such other customary documents as may be
reasonably required pursuant to such instructions (collectively, the
"Transmittal Documents"), the holder of such Certificate will become entitled to
receive, as of the Effective Time, in exchange therefor the Exchange Merger
Consideration which such holder has the right to receive pursuant to Sections
2.1(a) and 2.1(d), and the Certificate so surrendered will be canceled. In the
event of a transfer of ownership of Shares which is not registered in the
transfer records of the Company, the Exchange Merger Consideration may be issued
and paid in accordance with this Article to a transferee if the Certificate
evidencing such Shares is presented to the Exchange Agent, accompanied by all
documents reasonably required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. The Exchange
Merger Consideration will be delivered by the Exchange Agent within two business
days (or such greater period not to exceed five business days as may be
customarily required by the Exchange Agent) following the later of (i) two
business days after the Public Offering Closing Date, or (ii) surrender of a
Certificate and the related Transmittal Documents, and cash payments for
fractional shares and the cash portion of the Exchange Merger Consideration may
be made by check (or, pursuant to instructions reasonably satisfactory to the
Exchange Agent, by wire transfer). No interest will be payable on the Exchange
Merger Consideration regardless of any delay in making payments. Until
surrendered as contemplated by this Section, each Certificate will be deemed at
any time after the Effective Time to evidence only the right to receive, upon
such surrender, the Exchange Merger Consideration, without interest.
(c) If any Certificate is lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and subject to such other conditions as VIALOG may
impose, the Surviving Corporation will issue in exchange for such lost, stolen
or destroyed Certificate the Exchange Merger Consideration deliverable in
respect thereof as determined in accordance with Sections 2.1(a) and 2.1(d).
VIALOG may, in its discretion and as a condition precedent to authorizing the
issuance thereof by the Surviving Corporation, require the owner of such lost,
stolen or destroyed Certificate to provide a bond or other surety to VIALOG and
the Surviving Corporation in such sum as VIALOG may reasonably direct as
indemnity against any claim that may be made against VIALOG, VIALOG Merger
Subsidiary or the Surviving Corporation (and their Affiliates) with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed
to the holders of the Company Stock for thirty (30) days after the Effective
Time will be delivered to VIALOG upon demand by VIALOG, and any holders of
Certificates who have not theretofore complied with this Article will thereafter
look only to VIALOG for the Exchange Merger Consideration to which they are
entitled pursuant to this Article.
(e) None of VIALOG, VIALOG Merger Subsidiary, the Company or the
Surviving Corporation will be liable to any holder of Shares for any shares of
VIALOG Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
7
<PAGE>
(f) Each of VIALOG, the Surviving Corporation and the Exchange
Agent will be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts as
VIALOG, the Surviving Corporation or the Exchange Agent is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by VIALOG, the Surviving Corporation or the Exchange Agent, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the holder of the Shares in respect of which such deduction and
withholding was made by VIALOG, the Surviving Corporation or the Exchange Agent.
2.3 Stock Transfer Books. At the Effective Time, the stock transfer
--------------------
books of the Company will be closed, and there will be no further registration
of transfers of Shares thereafter on the records of the Company other than to
VIALOG. On or after the Effective Time, any Certificate presented to the
Exchange Agent or the Surviving Corporation will be converted into the Exchange
Merger Consideration.
2.4 Option Securities and Convertible Securities; Payment Rights. At the
------------------------------------------------------------
Effective Time, (a) each outstanding Option Security and each outstanding
Convertible Security exercisable or convertible to purchase Shares as of
immediately prior to the Effective Time, will be canceled and the holder thereof
will be entitled to receive, and will receive, upon payment of the consideration
required to exercise or convert, or debit of such consideration against the
Merger Consideration otherwise due, and termination of such holder's rights to
exercise or convert, as the case may be, all other Option Securities or
Convertible Securities issued to such holder, Merger Consideration in the form
of shares of VIALOG Stock issuable and cash payable with respect to the number
of Shares issuable pursuant to such Option Security or Convertible Security so
exercised or converted, as the case may be, as provided in Section 2.1(a), plus
cash in lieu of receipt of a fractional share in an amount determined as
provided in Section 2.1(d), and (b) each Option Security outstanding not then
exercisable or exercised and the conversion rights of each Convertible Security
outstanding not then convertible or converted will be canceled.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to, and agrees with, VIALOG
and VIALOG Merger Subsidiary as follows:
3.1 Organization and Business; Power and Authority; Effect of
---------------------------------------------------------
Transaction.
-----------
(a) The Company:
8
<PAGE>
(i) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation as set forth in Section 3.1(a) of the
Disclosure Schedule,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties and to
conduct its business as now conducted and as presently
proposed to be conducted, and has in full force and
effect all Governmental Authorizations and Private
Authorizations and has made all Governmental Filings, to
the extent required for such ownership and lease of its
property and conduct of its business, and
(iii) has duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set
forth in Section 3.1(a) of the Disclosure Schedule) in
which the character of its property or the nature of its
business or operations requires such qualification or
authorization, except to the extent the failure so to
qualify or to maintain such authorizations would not
have an Adverse Effect.
(b) The Company has all requisite power and authority (corporate
and other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions. The execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the Stockholders). This
Agreement has been duly executed and delivered by the Company and constitutes,
and each Collateral Document executed or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions, when executed and
delivered by the Company or an Affiliate of the Company will constitute, legal,
valid and binding obligations of the Company or such Affiliate, enforceable in
accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity. The affirmative vote or action by
written consent of 66-2/3% of the votes the holders of the outstanding shares of
the Company are entitled to cast is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve this Agreement,
the Merger and the Transactions under Applicable Law and the Company's
Organizational Documents.
(c) Except as set forth in Section 3.1(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance
9
<PAGE>
with the terms, conditions and provisions hereof or thereof by the Company or
any of the other parties hereto or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation
of, or constitute a default under, any Applicable Law on
the part of the Company or any Subsidiary or will
conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration
of any obligation or liability in, or but for any
requirement of giving of notice or passage of time or
both would constitute such a conflict with, breach or
violation of, or default under, or permit any such
acceleration in, any Contractual Obligation of the
Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of
any Lien (except to the extent set forth in Section
3.1(c) of the Disclosure Schedule) upon any property now
owned or leased by the Company or any such other party,
or
(iii) will require any Governmental Authorization or
Governmental Filing or Private Authorization, except for
filing requirements under Applicable Law in connection
with the Merger and the Transactions and as the
Securities Act and applicable state securities laws may
apply to compliance by the Company with the provisions
of this Agreement relating to the Public Offering and
registration rights provided for hereunder and except
pursuant to the HSR Act. (if applicable).
(d) The Company does not have any Subsidiaries other than those
listed on Section 3.1(d) of the Disclosure Schedule. Each Subsidiary so listed
is wholly-owned, is a corporation which is duly organized, validly existing and
in good standing under the laws of the respective state of incorporation set
forth opposite its name on Section 3.1(d) of the Disclosure Schedule, and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown in Section 3.1(d) of the Disclosure Schedule) in which
the character of its property or the nature of its business or operations
requires such qualification or authorization, with full power and authority
(corporate and other) to carry on the business in which it is engaged. Each
Subsidiary has in full force and effect all Governmental Authorizations and
Private Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business. The Company owns all of the outstanding capital stock (as shown on
Section 3.1(d) of the Disclosure Schedule) of each Subsidiary, free and clear of
all Liens (except to the extent set forth in Section 3.1(d) of the Disclosure
Schedule), and all such stock has been duly authorized and validly issued and is
fully paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings with respect to any of
the foregoing, of any nature whatsoever relating to the authorized and unissued
or the outstanding capital stock of any Subsidiary.
10
<PAGE>
3.2 Financial and Other Information.
-------------------------------
(a) The Company has furnished to VIALOG copies of the financial
statements of the Company and its Subsidiaries listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements,
including in each case the notes thereto, have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, do not
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make any
statements contained therein not misleading, and fairly present the financial
condition and results of operations of the Company and its Subsidiaries, on the
bases therein stated, as of the respective dates thereof, and for the respective
periods covered thereby subject, in the case of unaudited financial statements
to normal nonmaterial year-end audit adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements,
this Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or any of the Stockholders pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Stockholders pursuant hereto or thereto or to consummate the
Merger and the Transactions, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated in such document by its terms or necessary in order to make the
statements contained herein or therein not misleading and all such Collateral
Documents are and will be true, correct and complete in all material respects;
provided that:
(i) with respect to projections contained or referred to in
the Disclosure Schedule, the Company represents and
warrants only that such projections were prepared in
good faith on the basis of the past business of the
Company and other information and assumptions which the
Company and the Principal Stockholder believe to be
reasonable,
(ii) each such Collateral Document will not be deemed
misleading by virtue of the absence of factual
recitations or references not germane thereto and
necessary to the purpose thereof, and
(iii) responses to due diligence requests will not be subject
to this Section 3.2(b) except to the extent that, to the
Company's knowledge, such response is materially
misleading.
(c) The Company does not own any capital stock or equity or
proprietary interest in any other Entity or enterprise, however organized and
however such interest may be denominated or evidenced, except as set forth in
Sections 3.1(d) or 3.2(c) of the Disclosure Schedule. None of the Entities, if
any, so set forth in Section 3.2(c) of the Disclosure Schedule is a Subsidiary
of the Company except as so set forth. The Company owns all of the outstanding
capital stock or equity or proprietary interests (as shown on Section 3.2(c) of
the Disclosure Schedule) of each such Entity or other enterprise, free and clear
of all Liens (except to the extent
11
<PAGE>
set forth in Section 3.2(c) of the Disclosure Schedule), and all of such stock
or equity or proprietary interests have been duly authorized and validly issued
and are fully paid and non-assessable. There are no outstanding Option
Securities or Convertible Securities, or agreements or understandings with
respect to any of the foregoing, of any nature whatsoever, except as described
in Section 3.2(c) of the Disclosure Schedule.
3.3 Changes in Condition. Since the date of the most recent financial
--------------------
statements forming part of the Financial Statements, except to the extent
specifically described in Section 3.3 of the Disclosure Schedule, there has been
no Adverse Change in the Company or the Company and its Subsidiaries taken as a
whole. There is no Event known to the Company which Adversely Affects, or in
the future might (so far as the Company or the Principal Stockholder can now
reasonably foresee) Adversely Affect, the Company or the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto except for changes in
general economic conditions and to the extent set forth in Section 3.3 of the
Disclosure Schedule.
3.4 Liabilities. At the date of the most recent balance sheet forming
-----------
part of the Financial Statements, neither the Company nor any Subsidiary had any
obligations or liabilities, past, present or deferred, accrued or unaccrued,
fixed, absolute, contingent or other, except as disclosed in such balance sheet,
or the notes thereto, and since such date neither the Company nor any Subsidiary
has incurred any such obligations or liabilities, other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, which do not and, to the Company's
knowledge, will not, in the aggregate, Adversely Affect the Company or the
Company and its Subsidiaries taken as a whole except to the extent set forth in
Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business or as disclosed in the most recent balance sheet, or the notes thereto,
forming part of the Financial Statements or in Section 3.4 of the Disclosure
Schedule.
3.5 Title to Properties; Leases.
---------------------------
(a) Each of the Company and its Subsidiaries has good legal and
insurable title, with respect to all real property owned or leased (in fee
simple if owned and leasehold if leased) and marketable title if owned (in fee
simple), if any, reflected as an asset on the most recent balance sheet forming
part of the Financial Statements, or held by the Company or any of its
Subsidiaries for use in its business if not so reflected, and good indefeasible
and merchantable title to all other assets, tangible and intangible (excluding
leased property), reflected on such balance sheet, or held by the Company or any
of its Subsidiaries for use in its business if not so reflected, or purported to
have been acquired by the Company or any of its Subsidiaries since such date,
except inventory sold or depleted, or property, plant and other equipment used
up or
12
<PAGE>
retired, since such date, in each case in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries, free and
clear of all Liens, except such as are reflected in the most recent balance
sheet, or the notes thereto, forming part of the Financial Statements or set
forth in Section 3.5(a) of the Disclosure Schedule. Except for financing
statements evidencing Liens referred to in the preceding sentence (a true,
correct and complete list and description of which is set forth in Section
3.5(a) of the Disclosure Schedule), to the Company's knowledge, no financing
statements under the Uniform Commercial Code and no other filing which names the
Company or any of its Subsidiaries as debtor or which covers or purports to
cover any of the property of the Company or any of its Subsidiaries is on file
in any state or other jurisdiction, and neither the Company nor any Subsidiary
has signed or agreed to sign any such financing statement or filing or any
agreement authorizing any secured party thereunder to file any such financing
statement or filing. Each Lease or other occupancy or other agreement under
which the Company or any of its Subsidiaries holds real or personal property has
been duly authorized, executed and delivered by the Company or Subsidiary, as
the case may be, and, to the Company's knowledge, by each of the parties
thereto. Each such Lease is a legal, valid and binding obligation of the Company
or a Subsidiary, as the case may be, and, to the Company's knowledge, of each
other party thereto, enforceable in accordance with its terms. Each of the
Company and its Subsidiaries has a valid leasehold interest in and enjoys
peaceful and undisturbed possession under all Leases pursuant to which it holds
any real property or tangible personal property, none of which contains any
provision which would impair the Company's ability to use such property as it is
currently used by the Company, except as described in Section 3.5(a) of the
Disclosure Schedule. All of such Leases are valid and subsisting and in full
force and effect. Neither the Company nor any of its Subsidiaries nor, to the
Company's knowledge, any other party thereto, is in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any such Lease.
(b) Section 3.5(b) of the Disclosure Schedule contains a true,
correct and complete description of all real estate owned or leased by the
Company or any of its Subsidiaries and all Leases and an identification of all
material items of fixed assets and machinery and equipment. None of the fixed
assets and machinery and equipment is subject to contracts of sale, and none is
held by the Company or any of its Subsidiaries as lessee or as conditional sales
venue under any Lease or conditional sales contract and none is subject to any
title retention agreement, except as set forth in Section 3.5(b) of the
Disclosure Schedule. The real property (other than land), fixtures, fixed assets
and machinery and equipment are in a state of good repair and maintenance and
are in good operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure
Schedule:
(i) all real property owned or leased by the Company or any
of its Subsidiaries conforms to and complies with all
applicable title covenants, conditions, restrictions and
reservations and all Environmental Laws and all
applicable zoning, wetlands, land use and other
Applicable Law, and
13
<PAGE>
(ii) neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any landlord, tenant or other
occupant or user of any such real property, has used
such real property for the storage or disposal of
Hazardous Materials or engaged in the business of
storing or disposing of Hazardous Materials, except for
use in the ordinary course of business of the type
conducted by the Company.
3.6 Compliance with Private Authorizations. Section 3.6 of the
--------------------------------------
Disclosure Schedule sets forth a true, correct and complete list and description
of each Private Authorization which individually is material to the Company or
the Company and its Subsidiaries taken as a whole, all of which are in full
force and effect. Each of the Company and each Subsidiary has obtained all
Private Authorizations which are necessary for the ownership by the Company or
each Subsidiary of its properties and the conduct of its business as now
conducted or as presently proposed to be conducted or which, if not obtained and
maintained, could, singly or in the aggregate, Adversely Affect the Company or
the Company and its Subsidiaries taken as a whole. Neither the Company nor any
Subsidiary is in breach or violation of, or is in default in the performance,
observance or fulfillment of, any Private Authorization, and no Event exists or
has occurred, which constitutes, or but for any requirement of giving of notice
or passage of time or both would constitute, such a breach, violation default,
under any Contractual Obligation or Private Authorization, except for such
defaults, breaches or violations, as do not and, to the Company's knowledge,
will not have in the aggregate any Adverse Effect on the Company or the Company
and its Subsidiaries taken as a whole or the ability of the Company to perform
any of the obligations set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto or to consummate
the Merger and the Transactions. No Private Authorization is the subject of any
pending or, to the Company's knowledge, threatened attack, revocation or
termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
--------------------------------------------------------------
(a) Section 3.7(a) of the Disclosure Schedule contains a
description of:
(i) all Legal Actions which are pending or, other than those
finally adjudicated or settled on or before December 31,
1995, in which the Company or any of its Subsidiaries,
or any of its officers or directors, is, or at any time
since its organization has been, engaged, or which
involves, or at any time during such period involved,
the business, operations or properties of the Company or
any of its Subsidiaries or, to the Company's knowledge,
which is threatened or contemplated against, or in any
other manner relating Adversely to, the Company or any
of its Subsidiaries or the business, operations or
properties, or the officers or directors, or any of them
in connection therewith; and
(ii) each Governmental Authorization to which the Company or
any Subsidiary is subject and which relates to the
business, operations,
14
<PAGE>
properties, prospects, condition (financial or other),
or results of operations of the Company or the Company
and its Subsidiaries taken as a whole, all of which are
in full force and effect.
(b) Each of the Company and each of its Subsidiaries has obtained
all Governmental Authorizations which are necessary for the ownership or uses of
its properties and the conduct of its business as now conducted or as presently
proposed to be conducted by the Company or which, if not obtained and
maintained, could singly or in the aggregate, have any Adverse Effect on the
Company or the Company and its Subsidiaries taken as a whole. No Governmental
Authorization is the subject of any pending or, to the Company's knowledge,
threatened attack, revocation or termination. Neither the Company nor any
Subsidiary nor any officer or director (in connection with the business,
operations and properties of the Company or any Subsidiary) is or at any time
since January 1, 1991 has been, or is or has during such time been charged with,
or to the knowledge of the Company, is threatened or under investigation with
respect to any material breach or violation of, or in default in the
performance, observance or fulfillment of, any Governmental Authorization or any
Applicable Law, and no Event exists or has occurred, which constitutes, or but
for any requirement of giving of notice or passage of time or both would
constitute, such a breach, violation or default, under
(i) any Governmental Authorization or any Applicable Law,
except for such breaches, violations or defaults as do
not and, to the Company's knowledge, will not have in
the aggregate any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or the
ability of the Company to perform any of the obligations
set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or
thereto, or to consummate the Merger and the
Transactions, or
(ii) any requirement of any insurance carrier, applicable to
its business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in
Sections 3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and
matters set forth in the Disclosure Schedule, individually and in the aggregate,
if adversely determined against the Company or any Subsidiary, will not
Adversely Affect the Company or the Company and its Subsidiaries taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions.
3.8 Intangible Assets.
-----------------
(a) Each of the Company and each Subsidiary owns or possesses or
otherwise has the right to use all Governmental Authorizations and other
Intangible Assets necessary for the present and planned future conduct of its
business, without any known conflict with the rights
15
<PAGE>
of others. The present and planned future conduct of business by the Company and
each Subsidiary is not dependent upon any one or more, or all, of such
Governmental Authorizations and other Intangible Assets or rights with respect
to any of the foregoing, except as set forth in Section 3.8(a) of the Disclosure
Schedule.
(b) Section 3.8(b) of the Disclosure Schedule sets forth a true,
correct and complete description of all of such Governmental Authorizations and
other Intangible Assets or rights with respect thereto, including without
limitation the nature of the Company's and each Subsidiary's interest in each
and the extent to which the same have been duly registered in the offices as
indicated therein.
3.9 Related Transactions. Section 3.9 of the Disclosure Schedule sets
--------------------
forth a true, correct and complete description of any Contractual Obligation or
transaction, not fully discharged or consummated, as the case may be, on or
before the beginning of the Company's current fiscal year, between the Company
or any of its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services as officers, directors and employees and reimbursement
for out-of-pocket expenses reasonably incurred in support of the Company's
business), now existing or which, at any time since its organization, existed or
occurred, including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any officer, director, stockholder or
employee, or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
3.10 Insurance.
---------
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance
policies maintained by the Company or any Subsidiary and includes insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention.
(b) Neither the Company nor any Subsidiary is in breach or
violation of or in default under any such policy, and all premiums due thereon
have been paid, and each such policy or a comparable replacement policy will
continue to be in force and effect up to and including the Public Offering
Closing Date. The insurance policies so listed and identified are of a nature
and scope and in amounts sufficient to prevent the Company or any Subsidiary
from becoming a coinsurer within the terms of such policies. Except as set forth
in Section 3.10(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has, within the past five (5) years, been refused insurance by any
insurance carrier to which it has applied for insurance.
16
<PAGE>
3.11 Tax Matters.
-----------
(a) Each of the Company and each Subsidiary has in accordance with
all Applicable Laws filed all Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Returns and all other governmental
charges and assessments received to date. The Tax Returns of the Company and
each Subsidiary have been prepared in accordance with all Applicable Laws and
generally accepted principles applicable to taxation consistently applied. All
Taxes which the Company and each Subsidiary are required by law to withhold and
collect have been duly withheld and collected and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. Neither
the Company nor any Subsidiary has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of the
Company or any Subsidiary for the fiscal year prior to and including the most
recent fiscal year. Adequate provision has been made on the most recent balance
sheet forming part of the Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other, and to the knowledge of the Company there are no transactions
or matters or any basis which might or could result in additional Taxes of any
nature to the Company or any Subsidiary for which an adequate reserve has not
been provided on such balance sheet. Each of the Company and each Subsidiary has
at all times been taxable as a Subchapter C corporation under the Code, except
as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. Neither
the Company nor any Subsidiary has ever been a member of any consolidated group
(other than exclusively with the Company and its Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes
which have become due pursuant to its Returns and has paid all installments (to
the extent required to avoid material underpayment penalties) of estimated Taxes
due and payable.
(c) From the end of its most recent fiscal year to the date hereof
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business with
respect to current operations or property presently owned.
(d) The information shown on the federal income Tax Returns of the
Company and its Subsidiaries (true, correct and complete copies of which have
been furnished by the Company to VIALOG) is true, correct and complete and
fairly and accurately reflects the information purported to be shown. Federal
and state income Tax Returns of the Company and its Subsidiaries have been
audited by the IRS or applicable state Authority for the taxable periods set
forth in Section 3.11(d) of the Disclosure Schedules, and neither the Company
nor any Subsidiary has been notified regarding any pending audit, except as
shown in Section 3.11(d) of the Disclosure Schedule.
17
<PAGE>
(e) Neither the Company nor any Subsidiary is a party to any tax
sharing agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
(f) Neither the Company nor any Subsidiary has ever (i) filed a
consent under Section 341(f) of the Code concerning collapsible corporations or
(ii) undergone an "ownership change" within the meaning of Section 382(g) of the
Code, except as set forth in Section 3.11(f) of the Disclosure Schedule.
3.12 Employee Retirement Income Security Act of 1974.
-----------------------------------------------
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list
of all Plans and Benefit Arrangements maintained by the Company and any of its
Subsidiaries (which for purposes of this Section 3.12 will include any ERISA
Affiliate with respect to any Plan subject to Title IV of ERISA). As to all such
Plans and Benefit Arrangements, and except as disclosed in such Section 3.12(a)
of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply currently, and
have complied in the past, in all material respects both
as to form and operation, with their terms and with all
Applicable Laws, and neither the Company nor any of its
Subsidiaries has received any outstanding notice from
any Authority questioning or challenging such
compliance,
(ii) all necessary governmental approvals for each Plan and
Benefit Arrangement have been obtained; the Internal
Revenue Service has issued a favorable determination as
to the tax qualified status of each Plan intended to
comply with section 401(a) of the Code and each
amendment thereto, and a recognition of exemption from
federal income taxation under Section 501(a) of the Code
of each Plan which constitutes a funded welfare plan as
defined in Section 3(1) of ERISA; and nothing has
occurred since the date of each such determination or
recognition that would adversely affect such
qualification.
(iii) no Plan which is subject to Part 3 of Subtitle B of
Title 1 of ERISA or Section 412 of the Code had an
accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA and Section 412 of the Code), whether
or not waived, as of the last day of the most recently
completed fiscal year of such Plan,
(iv) there are no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan for which the Company or any of its
Subsidiaries has any liability, nor are any of the
assets of any Plan invested in employer securities or
employer real property,
18
<PAGE>
(v) no Plan is subject to Title IV of ERISA, or if subject,
there have been no "reportable events" (as described in
Section 4043 of ERISA) as to which there is any material
risk of termination of such Plan,
(vi) no material liability to the PBGC has been or is
expected by the Company to be incurred by the Company or
any of its Subsidiaries with respect to any Plan, and
there has been no event or condition which presents a
material risk of termination of any Plan by the PBGC,
(vii) with respect to each Plan subject to Title IV of ERISA,
the amount for which Company or any of its Subsidiaries
would be liable pursuant to the provisions of Sections
4062, 4063 or 4064 of ERISA would be zero if such Plans
terminated on the date of this Agreement,
(viii) no notice of intent to terminate a Plan has been filed
with, nor has any Plan been terminated pursuant to the
provisions of Section 4041 of ERISA,
(ix) the PBGC has not instituted proceedings to terminate (or
appointed a trustee to administer) a Plan and no event
has occurred or condition exists which might constitute
grounds under the provisions of Section 4042 of ERISA
for the termination of (or the appointment of a trustee
to administer) any such Plan.
(x) no Plan or Benefit Arrangement covers any employee or
former employee of the Company or any of its
Subsidiaries that could give rise to the payment of any
amount that would not be deductible pursuant to the
terms of section 280G of the Code,
(xi) there are no Claims (other than routine claims for
benefits) pending or threatened involving any Plan or
Benefit Arrangement or any of the assets thereof,
(xii) except as set forth in Section 3.12(a) of the Disclosure
Schedule (which entry, if applicable, will indicate the
present value of accumulated plan liabilities calculated
in a manner consistent with FAS 106 and the actual
annual expense for such benefits for each of the last
two (2) years) and pursuant to the provisions of COBRA,
neither the Company nor any of its Subsidiaries
maintains any Plan that provides benefits described in
Section 3(1) of ERISA to any former employees or
retirees of the Company or any of its Subsidiaries,
19
<PAGE>
(xiii) all reports, returns and similar items required to be
filed with any Authority or distributed to employees
and/or Plan participants in connection with the
maintenance or operation of any Plan or Benefit
Arrangement have been duly and timely filed and
distributed, and there have been no acts or omissions by
the Company or any of its Subsidiaries, which have given
rise to or may reasonably be expected to give rise to
fines, penalties, taxes or related charges under
Sections 502(c), 502(i) or 4071 or ERISA or Chapter 43
or section 6039D of the Code for which the Company or
any of its Subsidiaries may be liable,
(xiv) neither the Company nor any of its Subsidiaries nor any
of its respective directors, officers or employees has
committed, nor to the best of the Company's knowledge
has any other fiduciary committed, any breach of the
fiduciary responsibility standards imposed by ERISA that
would subject the Company or any of its Subsidiaries or
any of its respective directors, officers or employees
to liability under ERISA,
(xv) to the extent that the most recent balance sheet forming
part of the Financial Statements does not include a pro
rata amount of the contributions which would otherwise
have been made in accordance with past practices for the
Plan years which include the Public Offering Closing
Date, such amounts are set forth in Section 3.12(a) of
the Disclosure Schedule,
(xvi) the Company has furnished to VIALOG a copy of the three
most recently filed annual reports (IRS Form 5500)
series and accountant's opinion, if applicable, for each
Plan (and the three most recent actuarial valuation
reports for each Plan, if any, that is subject to Title
IV of ERISA), and all information provided by the
Company to any actuary in connection with the
preparation of any such actuarial valuation report was
true, correct and complete in all material respects,
(b) Neither the Company nor any of its Subsidiaries is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the
basis of funding, and the current status of, any past service liability with
respect to each Employment Arrangement to which the same is applicable.
3.13 Absence of Sensitive Payments. The Company has not, nor has any
-----------------------------
Subsidiary, or, to the Company's knowledge, any of its or any Subsidiary's
officers, directors, employees or Representatives, (a) made any contributions,
payments or gifts to or for the private use of any governmental office, employee
or agent where either the payment or the purpose of such
20
<PAGE>
contribution, payment or gift is illegal under the laws of the United States or
the jurisdiction in which made, (b) established or maintained any unrecorded
fund or asset for any purpose or made any false or artificial entries on its
books, or (c) made any payments to any person with the intention or
understanding that any part of such payment was to be used for any purpose other
than that described in the documents supporting the payment.
3.14 Inapplicability of Specified Statutes. Neither the Company nor any
-------------------------------------
Subsidiary is a "holding company", or a "subsidiary company" or an "affiliate"
or a "holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, or an "investment company" or a company
"controlled" by or acting on behalf of an "investment company", as defined in
the Investment Company Act of 1940, as amended.
3.15 Authorized and Outstanding Capital Stock
----------------------------------------
(a) The authorized and outstanding capital stock of the Company is
as set forth in Section 3.15(a) of the Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is fully
paid and non-assessable and is not subject to any preemptive or similar rights.
Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) there is
neither outstanding nor has the Company or any Subsidiary agreed to grant or
issue any shares of its capital stock or any Option Security or Convertible
Security, and (ii) neither the Company nor any Subsidiary is a party to or is
bound by any agreement, put or commitment pursuant to which it is obligated to
purchase, redeem or otherwise acquire any shares of capital stock or any Option
Security or Convertible Security. Between the date of this Agreement and the
Merger Closing, the Company will not, and will not permit any Subsidiary to,
issue, sell or purchase or agree to issue, sell or purchase any capital stock or
any Option Security or Convertible Security of the Company or any Subsidiary. As
of the Effective Time, the rights of the holders of all Option Securities and
Convertible Securities issued by the Company to exercise or convert such
Securities will have been terminated pursuant to the terms thereof.
(b) All of the outstanding capital stock of the Company is owned by
the Stockholders as set forth in Section 3.15(b) of the Disclosure Schedule, and
is, to the Company's knowledge, free and clear of all Liens, except as set forth
in Section 3.15(b) of the Disclosure Schedule. To the Company's knowledge, no
Person, and no group of Persons acting in concert, owns as much as five percent
(5%) of the Company's outstanding Common Stock, and the Company is not
controlled by any other Person, except as set forth in Section 3.15(b) of the
Disclosure Schedule.
3.16 Employment Arrangements.
-----------------------
(a) Neither the Company nor any Subsidiary has any obligation or
liability, contingent or other, under any Employment Arrangement (whether or not
listed in Section 3.12(a) of the Disclosure Schedule), other than those listed
or described in Section 3.16(a) of the Disclosure Schedule. Neither the Company
nor any Subsidiary is now or during the past five (5) years has been subject to
or involved in or, to the Company's knowledge, threatened with any election for
the certification of a bargaining representative for any employees, petitions
therefor or other organizational activities, including but not limited to
voluntary requests for recognition
21
<PAGE>
as a bargaining representative, or organizational campaigns of any nature,
except as described in Section 3.16(a) of the Disclosure Schedule. None of the
employees of the Company or any Subsidiary are now, or during the past five (5)
years have been, represented by any labor union or other employee collective
bargaining organization. Neither the Company nor any Subsidiary are parties to
any labor or other collective bargaining agreement, and there are no pending
grievances, disputes or controversies with any union or any other employee
collective bargaining organization of such employees, or, to the Company's
knowledge, threats of strikes, work stoppages or slowdowns or any pending
demands for collective bargaining by any union or other such organization. The
Company and each Subsidiary have performed all obligations required to be
performed under all Employment Arrangements and are not in breach or violation
of or in default or arrears under any of the terms, provisions or conditions
thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, no employee will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employment Arrangement,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(c) The Company considers its and each Subsidiary's relationships
with employees to be good, and except as set forth in Section 3.16(c) of the
Disclosure Schedule, neither the Company nor any Subsidiary has experienced a
work slowdown or stoppage due to labor problems. Neither the Company nor any
Subsidiary has received notice of any claim that it has failed to comply with
any federal or state law, or is the subject of any investigation by any federal
or state agency to determine compliance with any federal or state law, relating
to the employment of labor, including any provisions relating to wages, hours,
collective bargaining, the payment of taxes, discrimination, equal employment
opportunity, employment discrimination, worker injury and/or occupational
safety, nor to the knowledge of the Company is there any basis for such a claim.
(d) Neither the Company nor any Subsidiary has conducted, and will
not conduct, a "plant closing" or "mass layoff" of employees of the Company or
any Subsidiary as defined by the Worker Adjustment and Retraining Notification
Act of 1988 ("the WARN Act"), 29 U.S.C. 2101-2109 as amended, or discharge,
layoff, or reduce the hours of work, of employees in a sufficient number or
manner to trigger any state or local law or regulation conditioning or
regulating in any manner the discharge, layoff, or reduction in hours of
employees or the closing of a facility, plant, workplace, division or
department, on the Merger Closing Date or during the twelve-month period
immediately prior thereto.
3.17 Material Agreements.
-------------------
(a) Listed on Section 3.17(a) of the Disclosure Schedule are all
Material Agreements relating to the ownership or operation of the business and
property of the Company or any Subsidiary presently held or used by the Company
or any Subsidiary or to which the Company or any Subsidiary is a party or to
which it or any or its property is subject or bound.
22
<PAGE>
True, complete and correct copies of each of the Material Agreements have been
furnished by the Company to VIALOG (or true, complete and correct descriptions
thereof have been set forth in Section 3.17(a) of the Disclosure Schedule, if
any such Material Agreements are oral). All of the Material Agreements are
valid, binding and legally enforceable obligations of the parties thereto
(except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference, fraudulent
conveyance and other similar laws relating to or affecting the rights of
creditors and except as the same may be subject to the effect of the general
principles of equity), and the Company or one of its Subsidiaries is validly and
lawfully operating its business and owning its property under each of the
Material Agreements. The Company and each Subsidiary have duly complied with all
of the terms and conditions of each Material Agreement and have not done or
performed, or failed to do or perform (and there is no pending or, to the
knowledge of the Company, threatened Claim that the Company or any Subsidiary
has not complied, done and performed or fail to do and perform) any act the
effect of which would be to invalidate or provide grounds for the other party
thereto to terminate (with or without notice, passage of time or both) such
Material Agreement or impair the rights or benefits, or increase the costs, of
the Company or any Subsidiary, under any of the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section 3.17(a)
of the Disclosure Schedule calling for the delivery of goods or merchandise or
the performance of services can be satisfied or performed by the Company or one
of its Subsidiaries at margins providing an operating profit, except as set
forth in Section 3.17(b) of the Disclosure Schedule.
3.18 Ordinary Course of Business.
---------------------------
(a) The Company and each Subsidiary, from the earlier of the date of
the most recent balance sheet forming part of the Financial Statements or
December 31, 1995 to the date of this Agreement, and until the Public Offering
Closing Date, except as may be described on Section 3.18(a) of the Disclosure
Schedule or as may be required or permitted expressly by the terms of this
Agreement or as may be approved in writing by VIALOG:
(i) has operated, and will continue to operate, its business
in the normal, usual and customary manner in the ordinary
and regular course of business, consistent with prior
practice,
(ii) has not sold or otherwise disposed of, or contracted to
sell or otherwise dispose of, and will not sell or
otherwise dispose of or contract to sell or otherwise
dispose of, any of its properties or assets, other than
in the ordinary course of business,
(iii) except in each case in the ordinary course of business or
as detailed as transactions not in the ordinary course in
the Company's business plan set forth as Section 3.18(a)
of the Disclosure Schedule, and except as expressly
otherwise contemplated hereby,
(A) has not incurred and will not incur any obligations
or liabilities (fixed, contingent or other),
23
<PAGE>
(B) has not entered and will not enter into any
commitments, and
(C) has not canceled and will not cancel any debts or
claims,
(iv) has not made or committed to make, and will not make or
commit to make, any additions to its property or any
purchases of machinery or equipment, except for normal
maintenance and replacements,
(v) has not discharged or satisfied, and will not discharge
or satisfy, any Lien and has not paid and will not pay
any obligation or liability (absolute or contingent)
other than current liabilities or obligations under
contracts then existing or thereafter entered into in the
ordinary course of business, and commitments under Leases
existing on that date or incurred since that date in the
ordinary course of business,
(vi) except in the ordinary course, has not increased and will
not increase the compensation payable or to become
payable to any of its directors, officers, employees,
advisers, consultants, salesmen or agents or otherwise
alter, modify or change the terms of their employment or
engagement,
(vii) has not suffered any material damage, destruction or loss
(whether or not covered by insurance) or any acquisition
or taking of property by any Authority,
(viii)has not waived, and will not waive, any rights of
material value without fair and adequate consideration,
(ix) has not experienced any work stoppage,
(x) has not entered into, amended or terminated and will not
enter into, amend or terminate any Lease, Governmental
Authorization, Private Authorization, Material Agreement,
Employment Arrangement, Contractual Obligation or
transaction with any Affiliate, except for terminations
in the ordinary course of business in accordance with the
terms thereof,
(xi) has not amended or terminated and will not amend or
terminate, and has kept and will keep in full force and
effect including without limitation renewing to the
extent the same would otherwise expire or terminate, all
insurance policies and coverage,
24
<PAGE>
(xii) has not entered into, and will not enter into, any other
transaction or series of related transactions which
individually or in the aggregate is material to the
Company or the Company and its Subsidiaries taken as a
whole, except in the ordinary course of business, and
(xiii) has not, nor has any affiliate (as defined in Section
517.021(1) of the Florida Statutes), transacted business
with the government of Cuba or with any person or
affiliate located in Cuba.
(b) From the end of its most recent fiscal year to the date of this
Agreement, except as described in Section 3.18(b) of the Disclosure Schedule,
neither the Company nor any Subsidiary has, or on or prior to the Public
Offering Closing Date will have, declared, made or paid, or agreed to declare,
make or pay, any Distribution.
3.19 Bank Accounts, Etc. A true and correct and complete list as of the
------------------
date of this Agreement of all banks, trust companies, savings and loan
associations and brokerage firms in which the Company or any Subsidiary has an
account or a safe deposit box and the names of all Persons authorized to draw
thereon, to have access thereto, or to authorize transactions therein, the names
of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof has been previously
delivered to VIALOG.
3.20 Adverse Restrictions. Neither the Company nor any Subsidiary is a
--------------------
party to or subject to, nor is any of its property subject to, any Applicable
Law, Governmental Authorization, Contractual Obligation, Employment Arrangement,
Material Agreement or Private Authorization, or any other obligation or
restriction of any kind or character, or any aggregation thereof, which impairs
the Company's or any Subsidiary's ability to conduct its business as it is
currently being conducted or which could have any Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, except as set forth in
Section 3.20 of the Disclosure Schedule.
3.21 Broker or Finder. No Person assisted in or brought about the
----------------
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or any Stockholder.
3.22 Personal Injury or Property Damage; Warranty Claims; Etc. Except as
--------------------------------------------------------
set forth in Section 3.22 of the Disclosure Schedule, neither the Company nor
any Subsidiary or any Person acting for or on behalf of the Company or any
Subsidiary, including without limitation any insurance carrier, has at any time
since December 31, 1995, paid, and there is not now pending or, to the knowledge
of the Company, threatened any Claim (or any basis for any such Claim) relating
to, any damages to any third party for injuries to Persons or damage to
property, or for breach of warranty, which, in the case of pending or threatened
Claims, if determined Adversely to the Company or any Subsidiary, individually
or in the aggregate (taking into account unasserted Claims of similar nature),
could have any Adverse Effect on the Company or the Company and its Subsidiaries
taken as a whole.
25
<PAGE>
3.23 Environmental Matters.
---------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Company and each Subsidiary:
(i) is in compliance in all material respects with all
Environmental Laws and has not been notified that it is
liable or potentially liable, has not received any
request for information or other correspondence
concerning any site or facility, and is not a
"responsible party" or "potentially responsible party"
under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the
Resource Conservation Recovery Act of 1976, as amended,
or any similar state law,
(ii) has not entered into or received any consent decree,
compliance order, or administrative order relating to
Environmental Requirements,
(iii) is not a party in interest or in default under any
judgment, order, writ, injunction or decree or any final
order relating to Environmental Requirements, and
(iv) has obtained all material Governmental Authorizations and
Private Authorizations (including without limitation all
Environmental Permits) and made all Governmental Filings
which are required to be filed by the Company and each
Subsidiary for the ownership of its property, facilities
and assets and the operation of its businesses under all
Environmental Laws, is and at all times since its
organization has been in material compliance with the
terms and conditions of all such required Governmental
and Private Authorizations and all Environmental
Requirements, and is not the subject of or, to the
Company's knowledge, threatened with any Legal Action
involving a demand for damages or any other potential
liability with respect to violations or breaches of any
Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure
Schedule:
(i) no spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water has
occurred on any property or facility owned, leased,
operated or occupied by the Company or any Subsidiary
during the period that such facilities and properties
were owned, leased, operated or occupied by it or, to the
knowledge of the Company, at any other time or at any
other facility or site to which Hazardous Materials from
or generated by
26
<PAGE>
the Company or any Subsidiary may have been taken at any
time in the past,
(ii) there has been no spill, disposal, release, burial or
placement of Hazardous Materials, in the soil, air or
water on any property which could reasonably be expected
to result or has resulted in contamination of or beneath
any properties or facilities owned, leased, operated or
occupied by the Company or any Subsidiary during the
period that such facilities and properties were owned,
leased, operated or occupied by it (or, to the knowledge
of the Company, at any other time), and
(iii) no notice has been received by the Company or any
Subsidiary and no Lien has arisen on its or any
Subsidiary's properties or facilities under Environmental
Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary has any above-ground or
underground tanks on property owned, leased, operated or occupied by it for the
storage of Hazardous Materials.
(d) There has not been, and on or prior to the Public Offering
Closing Date, there will not be, any past or present Events or plans of the
Company or any Subsidiary or any of its predecessors, which, individually or in
the aggregate, constitute a breach of any Environmental Requirements or which,
individually or in the aggregate, may interfere with or prevent continued
compliance with all Environmental Requirements, or which, individually or in the
aggregate, may give rise to any common law, statutory or other legal liability,
or otherwise form the basis of any Claim, assessment or remediation cost, fine,
penalty or assessment based on or related to the transportation, transmission,
gathering, processing, distribution, use, treatment, storage, disposal or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material with respect to the Company or any
Subsidiary or any of its predecessors or its or any of their business,
operations or property which could have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary has used any Hazardous
Materials in the conduct of its business. To the extent that any Hazardous
Materials are so set forth, Section 3.23(e) of the Disclosure Schedule also sets
forth (i) a description of Hazardous Materials used, (ii) the annual volume of
each of the Hazardous Materials used, (iii) the years during which each of the
Hazardous Materials used occurred, and (iv) the Persons to whom such Hazardous
Materials were transferred and/or transported after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a complete
and correct description of all Hazardous Materials generated by the Company or
any Subsidiary which are not set forth in Section 3.23(e), the approximate
annual volumes of each of the Hazardous Materials, and all Persons to whom such
Hazardous Materials have been transferred and/or transported.
27
<PAGE>
(g) No site assessment, audit, study, test or other investigation
has been conducted by or on behalf of the Company or any Subsidiary, nor has the
Company received any notice from any governmental agency, or financial
institution as to environmental matters at any property owned, leased, operated
or occupied by the Company or any Subsidiary, except as set forth in Section
3.23(g) of the Disclosure Schedule.
3.24 Materiality. The matters and items excluded from the representations
-----------
and warranties set forth in this Article by operation of the materiality
exceptions and materiality qualifications contained in such representations and
warranties, in the aggregate for all such excluded matters and items, are not
and could not reasonably be expected to be Adverse to the Company or the Company
and its Subsidiaries taken as a whole.
3.25 Solvency. As of the execution and delivery of this Agreement, the
--------
Company and the Company and its Subsidiaries taken as a whole are and, as of the
Public Offering Closing Date, will be solvent.
3.26 VIALOG Stock. The Stockholders will hold for investment the VIALOG
------------
Stock constituting the Stock Merger Consideration.
3.27 Compliance with Regulations Relating to Securities Credit. None of
---------------------------------------------------------
the borrowings, if any, of the Company were incurred or used for the purpose of
purchasing or carrying any security which at the date of its acquisitions was,
or any security which now is, margin stock or other margin security within the
meaning of Regulations T of the Margin Rules or a "security that is publicly
held," within the meaning of the Margin Rules, and the cash portion of the
proceeds from the consummation of the Transactions will not be used for the
purpose of purchasing or carrying any margin stock or other margin security, or
a "security that is publicly held", or any security issued by VIALOG, or in any
way which would involve the Company in any violation of the Margin Rules, and
neither the Company nor any Subsidiary owns any margin stock or other margin
security, or a "security that is publicly held", and neither the Company nor any
Subsidiary has any present intention of acquiring any margin stock or other
margin security, or any "security that is publicly held".
3.28 Certain State Statutes Inapplicable. The provisions of applicable
-----------------------------------
Missouri takeover laws, if any, will not apply to this Agreement, the Merger or
the Transactions.
3.29 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as of a specific date, all of the
representations and warranties of the Company set forth in this Article will be
true and correct in all material respects on the Public Offering Closing Date
with the same force and effect as though made on and as of that date and those,
if any, which speak as a specific date will be true and correct in all material
respects as of such date.
3.30 Registration Statement. All information furnished by or on behalf
----------------------
of the Company or any Stockholder in writing for use in the Registration
Statement and all information relating to the Company in the Prospectus (a copy
of which shall be provided by VIALOG to the Company and Principal Stockholder
for their review) is true, correct and complete and does not
28
<PAGE>
contain any untrue statement of material fact or omit to state any material fact
necessary to make such statements, in the light of the circumstances in which
they were made, not misleading. In the event any such information, through the
occurrence or nonoccurrence of any event or events between the date of this
Agreement and the Public Offering Closing Date, ceases to be true, correct and
complete or contains any untrue statement of material fact or omits to state any
material fact necessary to make such statements, in the light of the
circumstances in which they were made, not misleading, the Company, upon
discovery thereof will provide VIALOG, in writing, sufficient information to
correct such untrue statement or omission.
3.31 Predecessor Status; etc. Set forth in Section 3.31 of the Disclosure
------------------------
Schedule is a listing of all names of all predecessor companies of the Company
and the names of any Entities from which, since December 31, 1991, the Company
previously acquired material properties or assets. Except as disclosed in
Section 3.31 of the Disclosure Schedule, the Company has never been a Subsidiary
or division of another Entity, nor a part of an acquisition which was later
rescinded. None of the Company, the Principal Stockholder or any Subsidiary has
ever owned any capital stock of VIALOG nor, except as set forth in Section 3.31
of the Disclosure Schedule, has there been, since December 31, 1991, any sale or
spin-off of material assets by the Company or any Subsidiary other than in the
ordinary course of business.
ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL STOCKHOLDER
Robert A. Cowan and Louis I. Jaffe represent, warrant and covenant to, and
agree with, VIALOG and VIALOG Merger Subsidiary but only for himself and not for
the other, as follows:
4.1 Organization. The Principal Stockholder (if other than an individual)
------------
is an Entity duly organized, validly existing and in good standing under the
laws or its jurisdiction of organization.
4.2 Power and Authority. The Principal Stockholder (if other than an
-------------------
individual) has adequate power and authority (corporate, partnership, trust or
other) and all necessary Governmental Authorizations and Private Authorizations
in order to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each other Collateral Document executed or required to
be executed pursuant hereto or thereto. The execution, delivery and performance
of this Agreement and each other Collateral Document executed or required to be
executed pursuant hereto or thereto have, to the extent applicable, been duly
authorized by all requisite corporate, partnership, trust or other action,
including that, if required, of the Principal Stockholder's stockholders or
partners.
29
<PAGE>
4.3 Enforceability. This Agreement has been duly executed and delivered
--------------
by the Principal Stockholder and constitutes, and each Collateral Document
executed or required to be executed by the Principal Stockholder pursuant hereto
or thereto when executed and delivered by the Principal Stockholder will
constitute legal, valid and binding obligations of the Principal Stockholder,
enforceable in accordance with their respective terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
4.4 Title to Shares. Except as set forth in Section 4.4 of the
---------------
Disclosure Schedule (all of which exceptions will be removed, satisfied or
discharged no later than the Merger Closing), the Principal Stockholder owns and
has good and merchantable title to those Shares owned by the Principal
Stockholder and to be exchanged pursuant to this Agreement, free and clear or
all Liens.
4.5 No Conflict; Required Filings and Consents. Neither the execution and
------------------------------------------
delivery of this Agreement or any Collateral Document executed or required to be
executed pursuant hereto or thereto, nor the consummation of the Merger and the
Transactions, nor compliance with the terms, conditions and provisions hereof or
thereof by the Principal Stockholder:
(a) will materially conflict with, or result in a breach or
violation of, or constitute a default under, any Applicable Law on the part of
such Stockholder or will conflict with, or result in a material breach or
violation of, or constitute a material default in the performance, observance or
fulfillment of, or a material default under, or permit the acceleration of any
obligation or liability in, or, but for any requirements of notice or passage of
time or both, would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
the Principal Stockholder,
(b) will result in or permit the creation or imposition of any Lien
upon any property or asset of the Principal Stockholder used or now contemplated
to be used by the Company, or
(c) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in connection
with the Merger and the Transactions and as the Securities Act or applicable
state securities laws may apply to compliance by the Principal Stockholder with
the provisions of this Agreement relatin g to the Public Offering and
registration rights, pursuant to the HSR Act (if applicable) or as set forth in
Section 4.5 of the Disclosure Schedule.
30
<PAGE>
ARTICLE
5
REPRESENTATIONS AND WARRANTIES OF VIALOG
AND VIALOG MERGER SUBSIDIARY
VIALOG and VIALOG Merger Subsidiary, jointly and severally, represent,
warrant and covenant to, and agree with, the Company as follows:
5.1 Organization and Qualification. VIALOG is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of
Massachusetts. VIALOG Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware.
5.2 Power and Authority. Except for such consents of Authorities as may
-------------------
be necessary in connection with change-of-control transactions with respect to
Governmental Authorities listed in Section 3.1(c) of the Disclosure Schedule,
each of VIALOG and VIALOG Merger Subsidiary has all requisite power and
authority (corporate and other) and has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto and to consummate the Merger and the Transactions. The execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action. This Agreement has been duly
executed and delivered by each of VIALOG and VIALOG Merger Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto when executed and delivered by it will constitute,
legal, valid and binding obligations of VIALOG and VIALOG Merger Subsidiary,
respectively, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
5.3 No Conflict; Required Filings and Consents. Except for such
------------------------------------------
consents of Authorities as may be necessary in connection with change-of-control
transactions with respect to Governmental Authorities listed in Section 3.1(c)
of the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Collateral Document executed or required to be executed pursuant hereto
or thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of VIALOG and VIALOG
Merger Subsidiary:
(a) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of VIALOG or VIALOG
Merger Subsidiary or will conflict with, or result in a breach or violation of,
or constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of giving of notice or
31
<PAGE>
passage of time or both would constitute such a conflict with, breach or
violation of, or default under, or permit any such acceleration in, any
Contractual Obligation of VIALOG or VIALOG Merger Subsidiary, or
(b) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements under Applicable
Law in connection with the Merger and the Transactions and as the Securities Act
and applicable state securities laws may apply to compliance by VIALOG with the
provisions of this Agreement relating to the Public Offering and registration
rights and except pursuant to the HSR Act (if applicable).
5.4 Financing. VIALOG has or, upon consummation of the Public Offering,
---------
will have sufficient funds or available financing to enable the Surviving
Corporation to pay the Aggregate Merger Consideration for all Shares of the
Company Stock as provided in Sections 2.1(a) and 2.1(d), the consideration for
each Option Security and each Convertible Security as provided in Section 2.4,
and all fees and expenses related to the Merger and its obligations in
connection with the Public Offering.
5.5 Broker or Finder. Except for the Underwriter, the fees and expenses
----------------
of which (other than pursuant to the Underwriting Agreement) are solely the
responsibility of VIALOG, no Person assisted in or brought about the negotiation
of this Agreement or the subject matter of the Transactions in the capacity of
broker, agent or finder or in any similar capacity on behalf of VIALOG or VIALOG
Merger Subsidiary.
5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary. Neither of
-------------------------------------------------------
VIALOG or VIALOG Merger Subsidiary has incurred any liabilities or Contractual
Obligations, except those incurred in connection with its organization and
ordinary course business operations (including Employment Arrangements), the
negotiation of this Agreement and the performance of this Agreement and of the
Participating Agreements with the Other Participating Companies, the
registration of VIALOG Stock under the Securities Act, compliance with the
requirements of the HSR Act (if applicable) and the performance of all other
Governmental Filings, and the financing of the foregoing. Except as contemplated
by the foregoing, neither of VIALOG or VIALOG Merger Subsidiary has engaged in
any business activities of any type or kind whatsoever, nor entered into any
agreements or arrangements with any Person, nor is it subject to or bound by any
obligation or undertaking.
5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary. The
-----------------------------------------------------
authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary is as set forth in Section 5.7 of the Disclosure Schedule. All of
such outstanding capital stock has been duly authorized and validly issued, is
fully paid and non-assessable and is not subject to any preemptive or similar
rights. All shares of common stock of VIALOG Merger Subsidiary held by VIALOG
have been duly authorized and validly issued to VIALOG and are fully paid and
non-assessable and are not subject to any preemptive or similar rights. As of
the date of this Agreement, except for this Agreement, the Participating
Agreements, the Underwriting Agreement, and as set forth on Section 5.7 of the
Disclosure Schedule, there are not any outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments or any
32
<PAGE>
other agreements of any character obligating VIALOG or VIALOG Merger Subsidiary
to issue any shares of VIALOG Stock or other shares of capital stock of VIALOG
or of VIALOG Merger Subsidiary, or any other securities convertible into or
evidencing the right to subscribe for any such shares. When issued in connection
with the Merger, the VIALOG Stock will be duly authorized, validly issued, fully
paid and non-assessable and will not be subject to any preemptive or similar
rights.
5.8 Registration Statement. The Registration Statement and any
----------------------
amendments thereto will comply when the Registration Statement becomes effective
in all material respects with the provisions of the Securities Act and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Prospectus will not as of the issue date thereof contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations and
warranties contained in this Section 5.8 will not apply to statements or
omissions in the Registration Statement or the Prospectus based on information
relating to the Underwriter furnished to VIALOG in writing by the Underwriter,
or based on information relating to any of the Other Participating Companies or
its stockholders furnished to VIALOG in writing by such Participating Company or
any or its stockholders, or the Company or the Stockholders furnished to VIALOG
in writing by the Company or any of the Stockholders. VIALOG will furnish the
Company with a copy of the Registration Statement and of each amendment thereto
until the Merger Closing and thereafter will furnish the Principal Stockholder
with each amendment thereto and the final Prospectus.
5.9 Solvency. After the Effective Time, and upon the consummation of the
--------
Merger, the Participating Mergers and the Transactions, VIALOG and its
subsidiaries, individually and taken as a whole, will be solvent.
5.10 Firm Commitment. The contemplated Public Offering shall be a firm
---------------
commitment underwriting and not a best efforts underwriting and all VIALOG Stock
sold in the offering will be purchased by the Underwriter on the Effective Date
and paid for by the Underwriter on the Public Offering Closing Date.
5.11 Participating Agreements of Other Participating Companies. Except as
---------------------------------------------------------
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, each Participating Agreement
entered into among VIALOG, any Subsidiary of VIALOG, and any Other Participating
Company contains provisions substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement, including,
without limitation, the representations and warranties, covenants, termination
provisions and indemnification provisions contained in those Articles. Except as
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a
33
<PAGE>
condition to closing pursuant to Article 7 of a Participating Agreement, no
Participating Agreement contains any material provision which is not contained
in substantially identical form in this Agreement.
5.12 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as a specific date, all of the
representations and warranties of VIALOG and the VIALOG Merger Subsidiary set
forth in this Article will be true and correct in all material respects on the
Public Offering Closing Date with the same force and effect as though made on
and as of that date, and those, if any, which speak as of a specific date will
be true and correct in all material respects as of such date.
ARTICLE
6
ADDITIONAL COVENANTS
6.1 Access to Information; Confidentiality.
--------------------------------------
(a) The Company will afford to VIALOG and the Representatives of
VIALOG full access during normal business hours throughout the period prior to
the Effective Time to all of its (and its Subsidiaries') properties, books,
contracts, commitments and records (including without limitation Tax Returns)
and, during such period, will furnish promptly upon request (i) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of any Applicable Law (including without limitation federal or
state securities laws) or filed by any of them with any Authority in connection
with the Transactions or which may have a material effect on their respective
businesses, operations, properties, prospects, personnel, condition (financial
or other), or results of operations, (ii) to the extent not provided for
pursuant to the preceding clause, (A) all financial records, ledgers, workpapers
and other sources of financial information processed or controlled by the
Company or its accountants deemed by the Accountants necessary or useful for the
purpose of performing an audit of the Company and the Company and its
Subsidiaries taken as a whole and certifying financial statements and financial
information and (B) all other information relating to the Company, its
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Registration Statement, and
(iii) such other information concerning any of the foregoing as VIALOG will
reasonably request. Subject to the terms and conditions of the Confidentiality
Letter (as defined below), which are expressly incorporated in this Agreement by
reference for the benefit of the parties hereto, VIALOG will hold and will use
commercially reasonable efforts to cause the Representatives of VIALOG to hold,
and the Company will hold and will use commercially reasonable efforts to cause
the Representatives of the Company to hold, in strict confidence all non-public
documents and information furnished (whether prior or subsequent hereto) to
VIALOG or to the Company, as the case may be, in connection with the
Transactions.
34
<PAGE>
(b) Subject to the terms and conditions of the Confidentiality
Letter, VIALOG and the Company may disclose such information as may be necessary
in connection with seeking all Governmental and Private Authorizations or that
is required by Applicable Law to be disclosed. In the event that this Agreement
is terminated in accordance with its terms, VIALOG and the Company will each
promptly redeliver all non-public written material provided pursuant to this
Section or any other provision of this Agreement or otherwise in connection with
the Merger and the Transactions and will not retain any copies, extracts or
other reproductions in whole or in part of such written material other than one
copy thereof which will be delivered to independent counsel for such party.
(c) The Company and VIALOG acknowledge that the Company and
VIALOG executed one or more Confidential Disclosure Agreements, including a
Confidential Disclosure Agreement dated June 7, 1996, (collectively, the
"Confidentiality Letter"), which separately and as incorporated in this
Agreement will remain in full force and effect after and notwithstanding the
execution and delivery of this Agreement, and that information obtained from the
Company by VIALOG, or its Representatives or by the Company or its
Representatives from VIALOG pursuant to Section 6.1(a), the Confidentiality
Letter or otherwise will be subject to the provisions of the Confidentiality
Letter.
(d) No investigation pursuant to this Section 6.1 will affect any
representation or warranty in this Agreement of any party or any condition to
the obligations of the parties.
6.2 Agreement to Cooperate.
----------------------
(a) Each of the Parties will use commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate the
Merger and make effective the Transactions, including using commercially
reasonable efforts (i) to prepare and file with the applicable Authorities as
promptly as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information, data and
exhibits, necessary to request issuance of orders approving the Merger and the
Transactions by all such applicable Authorities, each of which must be obtained
or become final in order to satisfy the conditions applicable to it set forth in
Section 7; (ii) to obtain all necessary or appropriate waivers, consents and
approvals, (iii) to effect all necessary registration, filings and submissions
(including without limitation the Registration Statement, other filings under
the Securities Act or the HSR Act and any other submissions requested by the SEC
or the Federal Trade Commission or Department of Justice) and (iv) to lift any
injunction or other legal bar to the Merger and the Transactions (and, in such
case, to proceed with the Merger and the Transactions as expeditiously as
possible), subject, however, to the requisite votes of the Stockholders. Each of
the Parties recognizes that the consummation of the Merger and the Transactions
may be subject to the pre-merger notification requirements of the HSR Act. Each
agrees that, to the extent required by Applicable Law to consummate the Merger,
it will file with the Antitrust Division of the Department of Justice and the
Federal Trade Commission a Notification and Report Form in a manner so as to
constitute substantial compliance with the notification requirements of the HSR
Act. Each covenants and agrees to use commercially reasonable efforts to achieve
the
35
<PAGE>
prompt termination or expiration of any waiting period or any extensions thereof
under the HSR Act.
(b) Each of the Parties agrees to take such actions as may be
necessary to obtain any Governmental Authorizations legally required for the
consummation of the Merger and the Transactions, including the making of any
Governmental Filings, publications and requests for extensions and waivers.
(c) The Company will use commercially reasonable efforts on or
prior to the Public Offering Closing Date (i) to obtain the satisfaction of the
conditions specified in Sections 7.1 and 7.2; (ii) if requested by VIALOG, to
seek the consents (to the extent required) to the continued existence in
accordance with its then-stated terms of all long-term debt of each of the
Company and each of its Subsidiaries; and (iii) to attempt to cause those key
employees of the Company and its Subsidiaries designated by VIALOG that are not
Stockholders to execute and deliver non-competition agreements substantially
conforming in form and substance to the non-competition agreements currently
maintained by VIALOG with its key employees in the form attached as Exhibit
-------
6.2(c). Each of VIALOG and VIALOG Merger Subsidiary will use its best efforts on
- ------
or prior to the Public Offering Closing Date to obtain the satisfaction of the
conditions applicable to it specified in Sections 7.1 and 7.3. The Principal
Stockholder will use commercially reasonable efforts to obtain the satisfaction
of the conditions applicable to the Principal Stockholder in Section 7.2.
(d) The Company agrees that, except as set forth in Section 3.19
of the Disclosure Schedule, prior to the Public Offering Closing Date it will
not make or permit to be made any material change affecting any bank, trust
company, savings and loan association, brokerage firm or safe deposit box or in
the names of the Persons authorized to draw thereon, to have access thereto or
to authorize transactions therein or in such powers of attorney, or open any
additional accounts or boxes or grant any additional powers of attorney, without
in each case obtaining the prior written consent of VIALOG, which consent VIALOG
will not unreasonably withhold.
(e) The Company will take such steps as are necessary and
appropriate to obtain, and will promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.15(b) of the Disclosure Schedule.
6.3 Assignment of Contracts and Rights. Anything in this Agreement to
----------------------------------
the contrary notwithstanding, this Agreement will not constitute an agreement to
assign any Claim, Contractual Obligation, Governmental Authorization, Lease,
Private Authorization, commitment, sales, service or purchase order, or any
claim, right or benefit arising thereunder or resulting therefrom, if the Merger
or the Transactions would be deemed an attempted assignment thereof without the
required consent of a third party thereto and would constitute a breach thereof
or in any way affect the rights of VIALOG, VIALOG Merger Subsidiary or the
Company thereunder. If such consent is not obtained, or if consummation of the
Merger and the Transactions would affect the rights of the Company thereunder so
that the Surviving Corporation would not in fact receive all such rights, the
Company will cooperate with VIALOG in any arrangement designed
36
<PAGE>
to provide for the benefits thereof to the Surviving Corporation, including
subcontracting, sub-licensing or subleasing to the Surviving Corporation or
enforcement for the benefit of the Surviving Corporation of any and all rights
of the Company or its Subsidiaries against a third party thereto arising out of
the breach or cancellation by such third party or otherwise. Any assumption by
the Surviving Corporation of the Company's rights thereunder by operation of law
in connection with the Merger which will require the consent or approval of any
third party will be made subject to such consent or approval being obtained.
6.4 Compliance with the Securities Act. Each of VIALOG and the Company
----------------------------------
will use its commercially reasonable efforts to cause each executive officer,
each director and each other Person who is an "affiliate," as that term is
defined in paragraph (a) of Rule 144 under the Securities Act, of the Company,
or who will, upon consummation of the Merger and the Transactions become, an
"affiliate" of VIALOG, and each Stockholder of the Company, to deliver to VIALOG
on or prior to the Merger Closing a written agreement (the "Registration Rights
Agreement") to the effect that such Person will not offer to sell, sell or
otherwise dispose of any shares of VIALOG Stock issued pursuant to the
consummation of the Transactions, except, in each case, pursuant to an effective
registration statement or in compliance with Rule 144, or in a transaction
which, in the opinion of legal counsel for such "affiliates" (such legal counsel
to be satisfactory to legal counsel for VIALOG), as set forth in a written
opinion satisfactory in form, scope and substance to the legal counsel of
VIALOG, is exempt from registration under the Securities Act and applicable
state securities laws. The Registration Rights Agreement shall be substantially
in the form of Exhibit 6.4. Notwithstanding anything to the contrary in this
-----------
Agreement, VIALOG will have no obligation under the Registration Rights
Agreement or otherwise to register under the Securities Act or any applicable
state securities laws, or otherwise to facilitate the transfer of, shares of
VIALOG Stock received by any such Person who fails to execute the Registration
Rights Agreement as provided herein, and such Person will forfeit all "demand
registration" and other rights provided for in the Registration Rights Agreement
and all "piggyback" rights provided for in the Registration Rights Agreement.
6.5 Conduct of Business.
-------------------
(a) Prior to the Effective Time or the date, if any, on which
this Agreement is earlier terminated, the Company and its Subsidiaries will (i)
use their best efforts to preserve intact their respective business
organizations and good will, keep available the services of their respective
officers and employees as a group and maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
them, (ii) confer on a regular and frequent basis with one or more
representatives of VIALOG to report operational matters of Materiality and the
general status of ongoing operations, and (iii) notify VIALOG of any emergency
or other change in the normal course of their business and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) if such emergency, change, complaint, investigation or
hearing would be Material to the business, operations or financial condition of
the Company and its Subsidiaries, taken as a whole.
37
<PAGE>
(b) Except as set forth in Schedule 6.5(b) (or Section 6.5(b) of
the Disclosure Schedule, as the case may be) or with the written permission of
VIALOG, the Company agrees further that the Company (i) will not make, declare
or pay any dividends or other distributions on any Shares or the stock of the
Company's Subsidiaries or redeem or repurchase or otherwise acquire any Shares
(except cancellation of options and warrants as required in this Agreement),
(ii) will not enter into or terminate any Employment Arrangement with any
director or officer, (iii) will not incur any obligation or liability (absolute
or contingent), except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business (iv) will not
discharge or satisfy any Lien or Encumbrance or pay any obligation or liability
(absolute or contingent) other than current liabilities shown on its Financial
Statements, and current liabilities incurred since those dates in the ordinary
course of business, (v) will not mortgage, pledge, create a security interest
in, or subject to Lien or other Encumbrance any of its assets, tangible or
intangible, (vi) will not sell or transfer any of its tangible assets or cancel
any debts or claims except in each case in the ordinary course of business,
(vii) will not sell, assign, or transfer any trademark, trade name, patent, or
other Intangible Asset, (viii) will not waive any right of any substantial
value, (ix) will not make any material change in the tax procedures or practices
followed by the Company or any of its Subsidiaries, (x) will not make any change
in credit terms offered by the Company or any of its Subsidiaries, (xi) will not
make any capital expenditure or Material Commitment for any additions or
improvements to its or any of its Subsidiary's property, plant or equipment,
(xii) will not amend its capitalization, or issue any stocks, bonds or other
securities, except that the Company may issue shares pursuant to outstanding
Option Securities and Convertible Securities, (xiii) will not enter into, modify
or extend, or promise any bonus or incentive compensation program that was not
in place prior to June 1, 1996 and (xiv) will otherwise conduct its operation
and the operations of its Subsidiaries according to their ordinary and usual
course of business.
6.6 No Solicitation. The Company will not, nor will it permit any
---------------
Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquires or the making of any proposal with respect to an Other Transaction,
engage in any discussions or negotiations concerning, or provide to any other
person any information or data relating to it or any Subsidiary for the purposes
of, or otherwise cooperate in any way with or assist or participate in, or
facilitate any inquires or the making of any proposal which constitutes, or may
reasonably be expected to lead to, a proposal to seek or effect an Other
Transaction, or agree to or endorse any Other Transaction. Nothing contained in
this Section will prohibit the Company or its Board of Directors from making any
disclosure to Stockholders that, in the reasonable judgment of its Board of
Directors in accordance with, and based upon the written advice of outside
counsel, is required under Applicable Law. The Company will promptly advise
VIALOG of, and communicate the material terms of, any proposal it may receive,
or any inquires it receives which may reasonably be expected to lead to such a
proposal relating to an Other Transaction, and the identity of the Person making
it. The Company will further advise VIALOG of the status and changes in the
material terms of any such proposal or inquiry (or any amendment to any of
them). During the term of this Agreement, the Company will not enter into any
agreement oral or written, and whether or not legally binding, with any
38
<PAGE>
Person that provides for, or in any way facilitates, an Other Transaction, or
affects any other obligation of the Company under this Agreement.
6.7 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) From and after the Effective Time, the Surviving Corporation
will indemnify, defend and hold harmless the present and former officers and
directors of the Company against all Claims or amounts that are paid in
settlement of, with the approval of the Surviving Corporation, or otherwise in
connection with any Claim based in whole or in part on the fact that such Person
is or was a director or officer of the Company and arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the Merger and the Transactions), in each case to the fullest extent
permitted under the BCA (and will pay any expenses in advance of the final
disposition of any such action or proceeding to each such Person to the fullest
extent permitted under the BCA, upon receipt from the Person to whom expenses
are advanced of an undertaking to repay such advances to the extent required
under the BCA). The Surviving Corporation will observe and comply with the
Company's obligations pursuant to the indemnification agreements, if any, listed
in Section 3.9 of the Disclosure Schedule.
(b) This Section 6.7 is intended to be for the benefit of, and
will be enforceable by, the former officers and directors of the Company, their
heirs and personal representatives and will be binding on the Surviving
Corporation and its respective successors and assigns.
(c) VIALOG will apply for directors and officers insurance in the
amount of $2,000,000 for the benefit of the directors and officers of VIALOG and
the Surviving Corporations.
6.8 Notification of Certain Matters. The Company will give prompt
-------------------------------
notice to VIALOG, and VIALOG will give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any Event the occurrence or non-occurrence of
which would be likely to cause in any material respect (i) any representation or
warranty of the Company or VIALOG, as the case may be, contained in this
Agreement to be untrue or inaccurate, or (ii) in the case of the Company or the
Principal Stockholder, any change to be made in the Disclosure Schedule and (b)
any failure of the Company or VIALOG, as the case may be, to comply with or
satisfy, or be able to comply with or satisfy, any material covenant, condition
or agreement to be complied with or satisfied by it under this Agreement. The
delivery of any notice pursuant to this Section 6.8 will not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
6.9 Public Announcements. Until the Merger Closing, or in the event of
--------------------
termination of this Agreement, the closing of the Public Offering (or its
abandonment), the Company will consult with VIALOG before issuing any press
release or otherwise making any public statements with respect to this
Agreement, the Merger or any Transaction (including the Participating Mergers or
the termination of this Agreement in such event) and will not issue any such
press release or make any such public statement without the prior consent of
VIALOG and the written advice of legal counsel to VIALOG that such press release
or such public statement
39
<PAGE>
will not affect the registration of VIALOG Stock under the Securities Act or the
timing of the effectiveness thereof. The Company acknowledges and agrees that
VIALOG may, without the prior consent of the Company, issue such press release
or make such public statement as may be required by Applicable Law or any
listing agreement or arrangement to which VIALOG is a party with a national
securities exchange or the National Association of Securities Dealers, Inc.
Automated Quotation System, or as recommended by outside counsel. VIALOG will
exercise commercially reasonable efforts to furnish the Company a copy of any
press release relating to Other Participating Companies prior to its publication
and will furnish a copy of any such press release so issued as soon as
practicable after its publication, but any failure on VIALOG's part to do so
will not be deemed a breach of or default under this Agreement. VIALOG will
furnish the Company with a copy of any press release or public information of
VIALOG, at a reasonable time prior to its release for publication.
6.10 Conveyance Taxes. The Parties will cooperate with one another in
----------------
the preparation, execution and filing of all Returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees, and any similar Taxes which become
payable in connection with the Transactions that are required or permitted to be
filed on or before the Effective Time.
6.11 Obligations of VIALOG. VIALOG agrees to take all action necessary
---------------------
to cause VIALOG Merger Subsidiary and the Surviving Corporation to perform their
respective obligations under this Agreement and will use commercially reasonable
efforts to consummate, and cause VIALOG Merger Subsidiary to consummate, the
Merger on the terms and conditions set forth in this Agreement.
6.12 Employee Benefits; Severance Policy. VIALOG will cause the
-----------------------------------
Surviving Corporation to maintain through its fiscal year ending December 31,
1997:
(a) employee incentive compensation and fringe benefits that are
substantially equivalent to those provided to employees of the Company and its
Subsidiaries as in effect on the date of this Agreement, subject to the right of
VIALOG and the Surviving Corporation to amend or terminate such programs in
accordance with their terms, provided that after any such amendment or
termination the resulting programs continue to be substantially equivalent to
the existing programs, and
(b) employee severance pay and benefits that are substantially
equivalent to the applicable severance programs of the Company and its
Subsidiaries as in effect on the date hereof, subject to the right of VIALOG and
the Surviving Corporation to amend or terminate such programs in accordance with
their terms, provided that after any such amendment or termination, the
resulting programs continue to be substantially equivalent to the existing
programs.
Notwithstanding the foregoing, as soon as convenient after such period, the
Surviving Corporation may, in its sole discretion, substitute employee
compensation, benefit and severance
40
<PAGE>
programs for those of the Company as are consistent with the programs provided
to VIALOG's employees and the employees of VIALOG's Subsidiaries.
6.13 Certain Actions Concerning Business Combinations.
------------------------------------------------
(a) Neither the Principal Stockholder nor any Representative
thereof will, during the period commencing on the date of the filing of the
Registration Statement and ending with the earlier to occur of the Merger
Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly (i) solicit or initiate the submission of proposals or
offers from any Person or, (ii) participate in any discussions pertaining to, or
(iii) furnish any information to any Person other than VIALOG relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company or any Subsidiary (other than the Merger).
(b) The Company will not apply, and will not take any action
resulting in the application of, or otherwise elect to apply, the provisions of
applicable Missouri takeover laws, if any, with respect to or as a result of the
Merger or the Transactions.
6.14 Termination of Option Securities and Convertible Securities. The
-----------------------------------------------------------
Company will take all action necessary to terminate the exercise rights of all
outstanding Option Securities and the conversion rights of all Convertible
Securities issued by the Company as of the Effective Time to the extent such
option and conversion rights are not exercised prior to the Merger Closing, and
to provide timely notice to all holders of Option Securities and Convertible
Securities notifying them of such termination. Without the prior written consent
of VIALOG, except as set forth in Section 3.15(a) of the Disclosure Schedule,
(a) such termination or notice will not cause an acceleration of the exercise,
conversion or vesting schedule of any Option Security or of any Convertible
Security, and (b) the Company will not otherwise accelerate, or cause an
acceleration of, the exercise, conversion or vesting schedule of any Option
Security or Convertible Security. Prior to the Merger Closing, the Company will
issue Certificates to all holders of properly exercised Option Securities and
properly converted Convertible Securities. Such Certificates will accurately
represent the number of Shares to which such holder is entitled by virtue of
such exercise or conversion and the Company will amend Section 3.15(b) of the
Disclosure Schedule accordingly.
6.15 Tax Returns. The Principal Stockholder will cause all Tax Returns
-----------
of the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared in a manner consistent with past
practices and VIALOG will file such Tax Returns promptly upon receipt thereof
from the Principal Stockholder or the Company. At least thirty days before the
due date (including any extensions) for any such Tax Returns, the Principal
Stockholder or the Company will provide drafts of such Tax Returns to VIALOG for
its review and comment (which reasonable comments will be incorporated into the
final Tax Returns), and VIALOG will cooperate with the Principal Stockholder and
provide the Principal Stockholder with access to any books and records
reasonably necessary for their preparation of such draft Tax Returns. VIALOG
will file no amended Tax Returns with respect to the Company and the
41
<PAGE>
Subsidiaries for any taxable period ending on or before the Effective Time if
the Principal Stockholder reasonably objects thereto and furnishes VIALOG with
indemnification satisfactory in form and substance to it, including without
limitation, indemnification for all interest, penalties and Expenses resulting
from the failure to amend such Tax Returns and all proceedings in connection
therewith.
6.16 Employment and Noncompetition. On or before the Merger Closing, the
-----------------------------
Principal Stockholder will execute and deliver to VIALOG the employment
agreement contemplated by Section 7.2(s) to be effective as of the Public
Offering Closing Date. From and after the Public Offering Closing Date, the
Principal Stockholder will not compete with VIALOG or any of its Subsidiaries
except to the extent not prohibited by Exhibit 7.2(s).
---------------
6.17 Distributions, Liabilities, Etc.
--------------------------------
(a) The Company and VIALOG acknowledge and agree that the Company
contemplates that (i) prior to the Merger Closing it will make certain
Distributions to Stockholders, employees of and consultants to the Company, (ii)
no later than Merger Closing, it will cause certain Liens to be discharged in
their entirety (with financing statement terminations properly recorded), and
(iii) as of Merger Closing, it will indemnify VIALOG for certain liabilities
(except to the extent obligees with respect thereto release the Company and its
Affiliates therefrom), in each case as set forth in the Disclosure Schedule.
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be)
lists each such Distribution, Lien and liability;
(b) The Company agrees that Distributions not permitted pursuant
to Section 3.18 will be made by the Company (or VIALOG or the Surviving Company
if after the Effective Date) only to the extent provided in Schedule 6.17 (or
Section 6.17 of the Disclosure Schedule, as the case may be); and
(c) The Company further agrees that, notwithstanding anything to
the contrary in Section 10.1, it will indemnify VIALOG and VIALOG Merger
Subsidiary against all Claims and Expenses incurred by VIALOG and VIALOG Merger
Subsidiary (or either of them) by virtue of any failure on the Company's part to
secure the discharges from Liens contemplated by Schedule 6.17 (or Section 6.17
of the Disclosure Schedule, as the case may be) or any damage or harm
attributable to a liability to be indemnified against as contemplated by
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be).
6.18 Release from Personal Guarantees. On or prior to the Public
--------------------------------
Offering Closing Date, VIALOG will either obtain releases of the personal
guarantees of the Stockholders of Indebtedness or discharge or arrange for the
discharge of such Indebtedness. VIALOG will either obtain releases of the
personal guarantees of the Stockholders of Contractual Obligations which extend
beyond the Public Offering Closing Date or indemnify and hold the Stockholders
harmless from such personal guarantees.
6.19 No Significant Changes VIALOG agrees that there will be no
----------------------
"significant change" (as defined below) in the conduct of the business of the
Company for a period of two
42
<PAGE>
years after the Public Offering Closing Date without the approval of a majority
in interest of the Stockholders. "Significant change" means any change in the
location of the Company's facilities, a physical merging of the Company's
operations with another operation, any change in the position of those employees
who receive employment agreements pursuant to Section 7.2(s), or a reduction in
force or the termination of any employee except as related to employee
performance or the contemplated reorganization of the combined sales/marketing
staff or the accounting function.
6.20 Registration Statement.
----------------------
(a) The Company and the Principal Stockholder will furnish to
VIALOG all necessary information concerning the Company and the Principal
Stockholder for VIALOG to file the Registration Statement.
(b) The Company and the Principal Stockholder have reviewed or
have had reviewed on their behalf, and will be familiar with the information
concerning the Company and the Stockholders (or any of them) in the Prospectus,
which will be furnished to them by VIALOG for their review, and will have no
knowledge of any material fact, condition or information concerning the Company
and the Stockholders misstated or not disclosed in such Prospectus.
(c) VIALOG agrees to use its best efforts to prepare and file the
Registration Statement prior to February 28, 1997 and furnish to the Company and
the Principal Stockholder a copy of information concerning the Company and the
Stockholders included therein and each amendment thereto two business days prior
to such filing date.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder agree
----------
to use their best efforts to maintain the status of the Merger and the
Participating Mergers as a tax free incorporation, provided VIALOG's Accountants
so advise and provided the relative ownership rights of all parties remain the
same.
6.22 Self Dealing. VIALOG agrees that it will not and will not allow any
------------
Subsidiary to enter into contracts and business arrangements with Persons and
Entities owned in whole or in part by officers and directors of VIALOG or any
Subsidiary except on an arms length basis and with the approval of the VIALOG
Board of Directors.
ARTICLE
7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each Party to effect the Merger will be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
43
<PAGE>
(a) This Agreement, the Merger and the Transactions shall have
been approved and adopted in accordance with the BCA by the affirmative
vote, or to the extent permitted by Applicable Law, by written consent, of
the Stockholders holding at least the minimum number of shares of the
Company Stock then issued and outstanding as are required by Applicable Law
and the Company's Organizational Documents for such approval and adoption,
(b) No proceeding before any Authority or Claim by any Person
shall be pending, challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
consummation of the Merger or the Public Offering, or seeking material
damages or imposing any Adverse conditions in connection therewith,
(c) Other than the filing of merger documents in accordance with
the BCA and the DBCL, all authorizations, consents, waivers, orders or
approvals required to be obtained, and all filings, submissions,
registrations, notices or declarations required to be made, by VIALOG or
VIALOG Merger Subsidiary and the Company prior to the consummation of the
Merger and the Transactions shall have been obtained from, and made with,
all required Authorities, except for such authorizations, consents,
waivers, orders, approvals, filings, registrations, notices or declarations
the failure to obtain or make would not, assuming consummation of the
Merger, have an Adverse Effect on the Company and the Company and its
Subsidiaries taken as a whole,
(d) (i) The Registration Statement shall have become effective
and shall contain no untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the shares of VIALOG Stock offered
in the Public Offering shall have been sold and purchased subject only to
consummation of the Merger, the Participating Mergers and the Transactions,
(iii) every condition to closing the Public Offering (except as provided in
clause (iv) immediately succeeding) shall have been satisfied or properly
waived and (iv) release of the closing documents relating to the Public
Offering and distribution of the proceeds of the sale of all shares of
VIALOG Stock sold and purchased in the Public Offering shall have been
unconditionally authorized by the Underwriter upon consummation of the
Merger and the Participating Mergers,
(e) The minimum number of Participating Mergers required to
prevent termination pursuant to Section 8.1(b)(ii) of this Agreement shall
have been authorized and approved in accordance with Applicable Law and the
Organizational Documents of the Other Participating Companies, in the case
of the Participating Mergers,
(f) Subject to such material amendments, if any, as shall be
proposed prior to Merger Closing by VIALOG to be effective immediately
after Merger Closing, and to the extent reasonably satisfactory to the
Company and the Other Participating Companies, the VIALOG stock option plan
described in the Registration Statement shall have been approved and
adopted by all action (corporate and other) required for implementation
thereof,
(g) Each of the Persons named on Exhibit 7.1(g), including one
Person proposed by a majority of the chief executive officers of the
Company and the Other Participating Companies acting as a group, shall have
been elected a director of VIALOG, effective immediately after the Public
Offering Closing Date, and all together shall constitute the
44
<PAGE>
entire Board of Directors of VIALOG, each to serve until the election of
the successor to, or the earlier resignation or termination of, such
director. Additionally, Robert A. Cowan shall have been elected Chairman of
the Board of Directors effective as of the Public Offering Closing Date,
and
(h) VIALOG shall have delivered to the Exchange Agent that
number of shares of VIALOG Stock as determined pursuant to Section 2.1 of
this Agreement and of the Participating Agreements issued in the name of
the Stockholders and the stockholders and other Persons holding equity
interests in the Participating Companies, and
(i) The Company shall have been designated at the acquiring
company for financial statement purposes in the Registration Statement.
7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary.
----------------------------------------------------------------
The obligations of VIALOG and VIALOG Merger Subsidiary to effect the Merger
will be subject to the satisfaction at or prior to the Effective Time of
the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by Applicable Law:
(a) The Company shall have complied in all material respects with
its agreements contained in this Agreement, the certificates to be
furnished to VIALOG pursuant to this Section shall be true, correct and
complete, all Collateral Documents shall be reasonably satisfactory in
form, scope and substance to VIALOG and its counsel, and VIALOG and its
counsel shall have received all information and copies of all documents,
including records of corporate proceedings, which they may reasonably
request in connection therewith, such documents where appropriate to be
certified by proper corporate officers,
(b) The Company shall have furnished VIALOG and the Underwriters
with the favorable opinion, dated the Public Offering Closing Date of
Niewald, Waldeck & Brown which may contain limitations and qualifications
as to scope and law and rely on certifications as to facts of officers of
the Company and public officials as are reasonable and customary to
opinions delivered in the type of business transactions covered by this
Agreement, addressing the following:
(i) Due organization, valid existence and good standing
of the Company together with an opinion as to foreign
qualifications,
(ii) Requisite corporate power and authority and, to such
counsel's knowledge, all necessary material
Governmental Authorizations for the Company to own,
lease and operate its properties and to carry on its
business as it is now being conducted,
(iii) In respect of the Company, the number of shares of
capital stock or other voting securities authorized,
issued, reserved for issuance or outstanding as of
the date of this Agreement and the Effective Time and
number of Option Securities outstanding as of such
dates,
45
<PAGE>
(iv) Due authorization, valid issuance, full payment and non-
assessability of outstanding shares of capital stock of the
Company and (upon issuance on the terms and conditions specified
in the Option Securities pursuant to which they are issuable)
all shares of such capital stock subject to issuance and waiver
of preemptive rights with respect thereto,
(v) To the knowledge of counsel, (A) there are not Contractual
Obligations to repurchase, redeem or otherwise acquire any
shares of Company Stock, or any Option Securities and, (B) the
Merger will not cause an acceleration of the exercise or vesting
schedule of any Option Securities,
(vi) Corporate power and authority of the Company to execute and
deliver the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to consummate the
Merger, to perform its obligations thereunder and to consummate
the Merger,
(vii) Due and valid authorization by the Company and the Principal
Stockholder by all necessary corporate (and other) action of the
execution, delivery and performance of the Agreement and all
Collateral Documents executed or required to be executed
pursuant thereto or to consummate the Merger and the
consummation by the Company of the Merger,
(viii) Due authorization and valid execution and delivery by, and
enforceability against, the Company and the Principal
Stockholder of the Agreement and all Collateral Documents
executed or required to be executed pursuant hereto or thereto
or to consummate the Merger and the Transactions except (A) as
such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference,
fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and as the same may be subject
to the effect of general principles of equity and (B) that no
opinion need be expressed as to the enforceability of
indemnification and noncompetition provisions included herein;
(ix) The execution and delivery of the Agreement and all Collateral
Documents executed or required to be executed pursuant thereto
or to consummate the Merger by the Company do not, and the
performance of the Agreement and all Collateral Documents
executed or required to be executed pursuant thereto or to
consummate the Merger and the consummation of the Transactions
46
<PAGE>
by the Company will not, (i) conflict with or violate the
Organizational Documents of the Company, (ii) conflict with or
violate any Applicable Law, or (iii) to counsel's knowledge,
constitute a breach or default under, or give to others any
right of termination, amendment, acceleration, increased
payments or cancellation of, or result in the creation of a Lien
on any property or asset of the Company pursuant to, any
Material Agreement to which the Company or any Subsidiary is a
party or by which the Company or any property or asset of the
Company is bound or affected,
(x) No consents from or filings with any Governmental Authority
(other than filings under the HSR Act, if applicable, and
filings of certificates of merger) are required for the
execution and delivery of the Agreement by the Company and the
performance of the Agreement and all Collateral Documents
executed or required to be executed pursuant thereto or to
consummate the Merger and the consummation of the Merger by the
Company,
(xi) Required filings with the Secretary of State of Missouri have
been made,
(xii) To the knowledge of counsel, absence of pending or threatened
material Legal Action,
(xiii) Nonapplicability of Missouri takeover laws, and
(xiv) such other customary matters concerning the Stockholders in
connection with the Public Offering as may reasonably be
requested by the Underwriter or its counsel,
(c) No Legal Action or other Claim shall be pending or threatened at any
time prior to or on the Public Offering Closing Date before or by any Authority
or by any other Person seeking to restrain or prohibit, or damages or other
relief in connection with, the execution and delivery of this Agreement or the
consummation of the Merger and the Transactions or which might in the reasonable
judgment of VIALOG have any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole or, assuming consummation of the Merger and the
Participating Mergers, VIALOG and its Subsidiaries taken as a whole,
(d) Each Principal Stockholder (other than a Principal Stockholder
executing and delivering the agreement contemplated by Section 7.2(s)) and other
Persons listed on Schedule 7.2(d) (or Section 7.2(d) of the Disclosure Schedule,
as the case may be) shall have executed and delivered to VIALOG a noncompetition
agreement, substantially in the form of Exhibit 7.2(d),
--------------
47
<PAGE>
(e) The representations, warranties, covenants and agreements
of the Company contained in this Agreement or otherwise made in writing by it or
on its behalf pursuant to this Agreement or otherwise made in connection with
the Merger and the Transactions shall be true and correct in all material
respects at and as of the Public Offering Closing Date with the same force and
effect as though made on and as of such date except those which speak as of a
certain date which shall continue to be true and correct in all material
respects as of such date and the Public Offering Closing Date, each and all of
the agreements and conditions to be performed or satisfied by the Company under
this Agreement at or prior to the Public Offering Closing Date shall have been
duly performed or satisfied in all material respects, and the Company shall have
furnished VIALOG with such certificates and other documents evidencing the truth
of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as VIALOG shall have reasonably
requested,
(f) VIALOG shall have received from its Accountants, a
certificate or letter, dated the Public Offering Closing Date, to the effect
that, on the basis of a limited review in accordance with the standards for such
reviews promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No. 1, they
have no reason to believe that the unaudited financial statements set forth in
the Registration Statement were not prepared in accordance with GAAP and
practices consistent with those followed in the preparation of the audited
financial statements audited by the Accountants as contemplated by Section
6.1(a), or that any material modifications of such unaudited financial
statements are required for a fair presentation of the financial position or
results of operations or changes in financial position of the Company or that
during the period from the last day covered by the most recent financial
statements set forth in the Registration Statement prepared by the Accountants
as contemplated by Section 6.1(a) to a date not more than five (5) days prior to
the Public Offering Closing Date, there has been any Adverse Change in the
financial position or results of the operations of the Company or the Company
and its Subsidiaries taken as a whole which is not described in the Registration
Statement,
(g) All actions taken by the Stockholders to approve and adopt
this Agreement, the Merger and the Transactions shall comply in all respects
with and shall be legal, valid, binding, enforceable and effective under the Law
of the jurisdiction of incorporation of the Company, its Organizational
Documents and all Material Agreements to which it is a party or by which it or
any of them or any of its or any of their property or assets is bound,
(h) The Company shall have obtained consents to the assignment
and continuation of all Material Agreements which, in the reasonable judgment of
VIALOG or its counsel, require such consents, including appropriate binders or
consents as to policies of insurance to be assigned to VIALOG or the Surviving
Corporation under this Agreement. The Company shall have obtained satisfaction
and discharge of all Liens set forth in Section 3.15(b) of the Disclosure
Schedule, and shall have obtained, on terms and conditions reasonably
satisfactory to VIALOG, all Governmental Authorizations and Private
Authorizations, and all modifications of Contractual Obligations relating to
Indebtedness, which VIALOG deems, reasonably necessary or desirable in order to
own and operate and conduct the business of the
48
<PAGE>
Surviving Corporation, substantially on the basis heretofore owned, operated and
conducted by the Company and proposed to be owned, operated and conducted by
VIALOG,
(i) Between the date of this Agreement and the Public Offering
Closing Date, there shall not have occurred and be continuing any Adverse Change
affecting the Company or the Company and its Subsidiaries taken as a whole from
the condition thereof (financial and other) reflected in the Financial
Statements or in the audited financial statements prepared by the Accountants as
contemplated by Section 6.1(a) or in the most recent financial statements set
forth in the Registration Statement,
(j) The filing and waiting period requirements (if applicable)
under the HSR Act relating to the consummation of the Merger and the
Participating Mergers shall have been complied with,
(k) No Law shall have been enacted or made by or on behalf of
any Authority nor shall any legislation have been introduced and favorably
reported for passage to either House of Congress by any committee, nor shall any
Legal Action by any Authority been commenced or threatened, nor shall any
decision, order or other action of any Authority have been rendered or taken,
which in VIALOG's reasonable judgment, could have any Adverse Effect on the
Company or the Company and its Subsidiaries taken as a whole, or could restrain,
prevent or change the Merger or the Transactions or Adversely Affect the ability
of the Principal Stockholder to perform its obligations under this Agreement, or
the ability of VIALOG to continue to own, operate and conduct the business of
the Surviving Corporation, substantially on the basis heretofore owned, operated
and conducted by the Company and as proposed to be owned, operated and conducted
by the Surviving Corporation,
(l) VIALOG shall have received copies of any environmental
audits the Company has received in respect of all real property owned or leased
by the Company or any of its Subsidiaries. VIALOG, in its sole discretion and at
its sole expense, may engage an independent environmental engineer to perform
such audits and the results thereof shall not be materially inconsistent with
the representations and warranties set forth in Section 3.23,
(m) Each of the directors of the Company and each of its
Subsidiaries and each trustee under each Plan shall have submitted his or her
unqualified written resignation, dated as of the Public Offering Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG
an agreement, substantially in the form of Exhibit 7.2(n), dated the Public
---------------
Offering Closing Date, releasing the Company and its Subsidiaries from any and
all Claims against them (other than Claims arising from such Principal
Stockholder having acted as a director or officer of the Company or such
Subsidiary as contemplated by Section 6.7),
(o) The Registration Rights Agreement shall have been executed
and delivered by the Stockholders and the Executive Officers and principal
Stockholders of VIALOG.
49
<PAGE>
(p) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, nor shall it have
experienced any material work stoppage,
(q) Except for such leases and other Contractual Obligations
as are set forth on Schedule 7.2(q) (or Section 7.2(q) of the Disclosure
Schedule, as the case may be) and are executed, delivered and effective as of
the Effective Time, all Contractual Obligations set forth in Section 3.9 of the
Disclosure Schedule shall have been satisfied and discharged as of the Public
Offering Closing Date,
(r) The representations, warranties, covenants and agreements
of the Principal Stockholder contained in this Agreement or otherwise made in
writing by or on behalf of the Principal Stockholder pursuant to this Agreement
or otherwise made in connection with the Merger and the Transactions shall be
true and correct in all material respects at and as of the Public Offering
Closing Date with the same force and effect as though made on and as of such
date except those which speak as of a certain date which shall continue to be
true and correct in all material respects as of such date and on the Public
Offering Closing Date. Each and all of the agreements and conditions to be
performed or satisfied by the Principal Stockholder under this Agreement at or
prior to the Public Offering Closing Date, including without limitation the
provisions set forth in Section 6.20, shall have been duly performed or
satisfied in all material respects, and the Principal Stockholder shall have
furnished VIALOG with such certificates and other documents evidencing the truth
of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as VIALOG or its counsel shall have
reasonably requested,
(s) The Principal Stockholder shall have executed and delivered
to VIALOG an employment and noncompetition agreement, substantially in the form
of Exhibit 7.2(s),
- -----------------
(t) The individuals listed on Schedule 7.2(t) (or Section
7.2 (t) of the Disclosure Schedule, as the case may be) shall have executed and
delivered to VIALOG an Employment Arrangement substantially in the form of
Exhibit 7.2(t) and reasonably satisfactory to VIALOG and its counsel, and
(u) VIALOG shall have received a letter from its Accountants
to the effect that the Merger and the Transactions, the Participating Mergers
and the transactions contemplated thereby, and the acquisition of stock of any
Other Participating Company by VIALOG and the transactions contemplated thereby
together qualify as a transaction to which Section 351 of the Code applies and
will not result in any taxable income or gain or deductible loss to the Company,
VIALOG or VIALOG Merger Subsidiary.
7.3 Conditions to Obligations of the Company. The obligations of
----------------------------------------
the Company to effect the Merger will be subject to the satisfaction at or prior
to the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part to the extent permitted by Applicable Law:
50
<PAGE>
(a) VIALOG shall have furnished the Company and the Principal
Stockholder with the favorable opinions dated the Public Offering Closing Date
of Mirick, O'Connell, DeMallie & Lougee, llp, counsel to VIALOG and VIALOG
Merger Subsidiary, which may contain limitations and qualifications as to scope
and law and rely on certifications as to facts of officers of VIALOG and VIALOG
Merger Subsidiary and public officials as are reasonable and customary to
opinions delivered in the type of business transactions covered by this
Agreement, and addressing the following:
(i) Due organization, valid existence and good standing
of VIALOG and VIALOG Merger Subsidiary,
(ii) Due authorization and valid execution and delivery
by, and enforceability against, VIALOG and VIALOG
Merger Subsidiary of the Agreement except (A) as such
enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other
similar laws relating to or affecting the rights of
creditors and as the same may be subject to the
effect of general principles of equity and (B) that
no opinion need be expressed as to the enforceability
of indemnification provisions,
(iii) Due authorization, valid issuance, full payment and
non-assessability of and absence of preemptive rights
with respect to the shares of VIALOG Stock to be
received by the Stockholders,
(iv) The Registration Statement has become effective under
the Securities Act, and to such counsel's knowledge,
no stop order suspending its effectiveness has been
issued and no proceedings for that purpose have been
instituted or threatened by the SEC,
(v) The execution and delivery of the Agreement by VIALOG
and VIALOG Merger Subsidiary and all Collateral
Documents executed or required to be executed
pursuant thereto or to consummate the Merger by them
do not, and the performance of the Agreement and all
Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Merger
and the consummation of the Merger by them will not,
(A) conflict with or violate the Organizational
Documents of VIALOG or VIALOG Merger Subsidiary, (B)
conflict with or violate any Applicable Law, or (C)
to counsel's knowledge, constitute a default under,
or give to others any right of termination,
amendment, acceleration, increased payments or
cancellation of, or result in the creation of a Lien
on any property or assets of VIALOG or VIALOG Merger
Subsidiary pursuant to, any Material
51
<PAGE>
Agreement to which either is a party or by which
either or any property or asset of either is bound or
affected,
(vi) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger)
are required for the execution and delivery of the
Agreement by VIALOG and VIALOG Merger Subsidiary and
the performance of the Agreement and all Collateral
Documents executed or required to be executed
pursuant thereto or to consummate the Merger and the
consummation of the Merger by them, and
(vii) The required filings with the Delaware Secretary of
State and the Missouri Secretary of State shall have
been made, and a Certificate of Merger shall have
been issued by the Missouri Secretary of State for
the Merger.
(b) Each of VIALOG and VIALOG Merger Subsidiary shall have
complied in all material respects with its agreements contained in this
Agreement, and the certificates to be furnished to the Company pursuant to this
Section shall be true, correct and complete. All Collateral Documents shall be
reasonably satisfactory in form, scope and substance to the Company and its
counsel, and the Company and its counsel shall have received all information and
copies of all documents, including records of corporate proceedings, which they
may reasonably request in connection therewith, such documents where appropriate
to be certified by proper corporate officers,
(c) The representations, warranties, covenants and agreements
of each of VIALOG and VIALOG Merger Subsidiary contained in this Agreement or
otherwise made in writing by it or on its behalf pursuant to this Agreement or
otherwise made in connection with the Merger and the Transactions shall be true
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date; each and all of the agreements and conditions to be performed or
satisfied by each of VIALOG and VIALOG Merger Subsidiary under this Agreement at
or prior to the Public Offering Closing Date shall have been duly performed or
satisfied in all material respects; and each of VIALOG and VIALOG Merger
Subsidiary shall have furnished the Company with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as the
Company shall have reasonably requested,
(d) If executed and delivered to VIALOG by the Merger Closing,
the employment agreements contemplated by Section 7.2(s) and for those persons
listed on Schedule 7.2(t) (or Section 7.2(t) of the Disclosure Schedule, as the
case may be) shall have been executed by the Surviving Corporation and delivered
by VIALOG to the indicated person,
52
<PAGE>
(e) The filing and waiting period requirements (if applicable)
under the HSR Act relating to the consummation of the Merger and the
Participating Mergers shall have been complied with,
(f) VIALOG shall have obtained the insurance set forth in
Section 6.7(c),
(g) No Legal Action or other Claim shall be pending or
threatened at any time prior to or on the Public Offering Closing Date before or
by any Authority or by any other Person seeking to restrain or prohibit, or
damages or other relief in connection with, the execution and delivery of this
Agreement or the consummation of the Merger and the Transactions or which might
in the reasonable judgment of the Company have any Adverse Effect on VIALOG and
its Subsidiaries or the Company and its Subsidiaries taken as a whole or,
assuming consummation of the Merger and the Participating Agreements, VIALOG and
its Subsidiaries taken as a whole,
(h) The Company shall have received a letter from the
Accountants to the effect that the Merger and the Transactions qualify as a
transaction to which Section 351 of the Code applies for federal income tax
purposes and the exchange of the Shares for the Stock Merger Consideration, as
contemplated hereby, will not result in any taxable income or gain or deductible
loss to the common stockholders of the Company in their capacities as such
common stockholders to the extent of the Stock Merger Consideration, and
(i) The by-laws of VIALOG shall have been amended to remove the
right of first refusal contained therein and the Company shall have received
certification to its reasonable satisfaction that the VIALOG Stock to be issued
in the Merger will not be subject to any transfer restrictions or purchase
options under VIALOG's Certificate of Incorporation or by-laws.
ARTICLE
8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time, whether before or after approval of this Agreement, the
Merger and the Transactions as follows:
(a) by mutual consent of the Company and VIALOG.
(b) by either VIALOG or the Company,
(i) if any permanent injunction, decree or judgment by
any Authority preventing the consummation of the
Merger or the Public Offering shall have become final
and nonappealable, or if the terminating party
determines in its reasonable discretion that the
Merger has become inadvisable or impracticable by
reason of the institution by any Authority or other
Person of material Legal Action, or
53
<PAGE>
(ii) if the Merger Closing shall not occur on or before
the Termination Date.
(c) by the Company:
(i) in the event of a breach of this Agreement by VIALOG
or VIALOG Merger Subsidiary that has not been cured,
or if any representation or warranty of VIALOG or
VIALOG Merger Subsidiary shall have become untrue in
any material respect, in either case such that such
breach or untruth is incapable of being cured by the
Effective Date or will prevent or delay consummation
of the Merger by or beyond the Termination Date, or
(ii) in the event the Public Offering is not a firm
commitment in the manner and upon the terms described
in Section 5.10.
(d) by VIALOG:
(i) if the Merger and the Transactions fail to receive
the approval required by Applicable Law, by vote (or
to the extent permitted by Applicable Law, by
consent) of the Stockholders, or if any Stockholder
entitled to vote (or entitled to appraisal rights)
with respect to the Merger dissents from the Merger
and the Transactions,
(ii) if it shall determine in its sole reasonable
discretion that the Merger or the Transactions has or
have become inadvisable or impracticable by reason of
the threat by any Authority, or any other Person of
material Legal Action or proceedings against either
or both of the Company and VIALOG (or VIALOG Merger
Subsidiary, or a Subsidiary of any of them), it being
understood and agreed that a written request by
governmental authorities for information with respect
to the Transactions, which information could be used
in connection with such Legal Action or proceedings,
may be deemed by VIALOG to be a threat of material
Legal Action or proceedings,
(iii) if arrangements reasonably satisfactory to VIALOG
cannot be made for (A) the assumption by the
Surviving Corporation substantially on the terms and
conditions in effect as of the date of this
Agreement, or for the prepayment without premium, of
all outstanding Indebtedness of the Company for
borrowed money, or (B) the Public Offering,
(iv) if the business, assets, prospects, management,
condition (financial or other) or results of
operation of the Company or the Company
54
<PAGE>
and its Subsidiaries taken as a whole shall have been
Adversely Affected, whether by reason of changes or
developments in the economy or industry generally or
operations in the ordinary course of business or
otherwise,
(v) if the Company shall not have received, without the
imposition of any burdensome condition or material
cost, all Governmental Authorizations and Private
Authorizations, or if any Authority or other Person
shall withdraw any such Governmental Authorizations
or Private Authorizations,
(vi) if the terms of this Agreement shall not have been
approved by the Underwriter,
(vii) if the Company shall have suffered any material
damage, destruction or loss (whether or not covered
by insurance) or any material acquisition or taking
of property by any Authority, or if it or any of its
Subsidiaries shall have suffered a material work
stoppage, or
(viii) in the event of a material breach of this Agreement
by the Company or the Principal Stockholder that has
not been cured, or if any representation or warranty
of the Company or the Principal Stockholder shall
have become untrue in any material respect, so that
such breach or untruth is incapable of being
substantially cured by the Effective Date or will
prevent or delay consummation of the Merger by or
beyond the Termination Date, or if any condition to
VIALOG's obligation to close under this Agreement
shall not have been satisfied.
(e) by VIALOG if (i) the Board of Directors of the Company
shall withdraw, modify or change its recommendation so that it is not in favor
of this Agreement, the Merger or the Transactions, or shall have resolved to do
any of the foregoing (it being agreed and understood that nothing in this clause
(i) obliges the Company to effect the Merger if the conditions set forth in
Section 7.1 and Section 7.3 are not satisfied or limits the rights of the
Company to consent to terminate this Agreement pursuant to Section 8.1(a) or to
terminate the Agreement pursuant to Section 8.1(b) or Section 8.1(c)), (ii) the
Board of Directors of the Company shall have recommended or resolved to
recommend to the Stockholders an Other Transaction, (iii) the Company, the Board
of Directors of the Company or the Principal Stockholder shall have taken any
action in contravention of Sections 6.6 or 6.13 or (iv) the Principal
Stockholder shall fail to vote to approve and adopt this Agreement, the Merger
and the Transactions.
8.2 Effect of Termination. Except as provided in Sections 2.2(a),
---------------------
2.2(d), 6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void,
there shall be no liability on the part of any Party, or
55
<PAGE>
any of their respective officers or directors, to the other and all rights and
obligations of any Party shall cease; provided, however, that such termination
will not relieve any Party from liability for the willful breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
8.3 Amendment. This Agreement may be amended by the Parties by
---------
action taken by or on behalf of their respective Boards of Directors and by the
Principal Stockholder at any time prior to the Effective Time; provided,
however, that, after approval of this Agreement and the Merger by the
Stockholders, no amendment, which under Applicable Law may not be made without
the approval of the Stockholders, may be made without such approval. This
Agreement may not be amended to impose any additional material obligation on a
Party or to burden or limit a material right of such Party except by an
agreement in writing signed by the Party so affected.
8.4 Waiver. At any time prior to the Effective Time, except to the
------
extent Applicable Law does not permit, either VIALOG or VIALOG Merger Subsidiary
and the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other, subject, however, to the terms and
conditions of Section 8.1, (b) waive any inaccuracies in the representations and
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement and (c) waive compliance by the other with any of the
agreements, covenants or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an agreement in writing
signed by the Party or Parties to be bound thereby.
8.5 Fees, Expenses and Other Payments. If this Agreement is
---------------------------------
terminated, then all costs and expenses incurred by the Parties in connection
with this Agreement, the Merger and the Transactions and in connection with
compliance with Applicable Law and Contractual Obligations as a consequence
hereof and thereof, including fees and disbursements of counsel, financial
advisors and accountants, will be borne solely and entirely by the Party which
has incurred such costs and expenses (with respect to such Party, its
"Expenses"). VIALOG acknowledges and agrees that the Company has disclosed that
it is obligated and will become further obligated for Expenses (including fees
and expenses of its counsel, its independent accountants) incurred by it in
connection with this Agreement, the Merger and the Transactions. It is
understood and agreed that certain of such Expenses may be paid by the Company
prior to the execution of this Agreement, and VIALOG agrees to refrain from
taking any action which would prevent or delay the payment of reasonable
Expenses by the Company. Any Expenses incurred and not paid will constitute
liabilities of the Company. VIALOG agrees to take all action necessary to cause
the Surviving Corporation to pay promptly any of the foregoing reasonable
Expenses incurred, but not paid, by the Company prior to the Effective Time.
8.6 Effect of Investigation. The right of any Party to terminate
-----------------------
this Agreement pursuant to Section 8.1 will remain operative and in full force
and effect regardless of any investigation made by or on behalf of any Party,
any Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
56
<PAGE>
ARTICLE
9
FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON VIALOG STOCK
9.1 Shares not Registered. The Principal Stockholder acknowledges
---------------------
that the shares of VIALOG Stock to be delivered to Stockholders pursuant to this
Agreement have not and will not be registered under the Securities Act (except
pursuant to the Registration Rights Agreement) and may not be resold except
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from registration. The Principal Stockholder represents
and warrants that the VIALOG Stock to be acquired by the Stockholders pursuant
to this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
9.2 Economic Risk; Sophistication. The Principal Stockholder
-----------------------------
represents and warrants that the Principal Stockholder and the other
Stockholders are able to bear the economic risk of an investment in the VIALOG
Stock acquired pursuant to this Agreement and can afford to sustain a total loss
on such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of the
proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the VIALOG Stock. The Principal
Stockholder acknowledges that prior to the Merger Closing VIALOG will have
furnished a copy of the Prospectus to the Stockholders and at the Merger Closing
the Stockholders will be required to confirm that VIALOG has responded to due
diligence and information requests made on behalf of the Company similar in
extent and scope to the due diligence requests made to the Company by VIALOG.
The Principal Stockholder will at that time confirm that the Principal
Stockholder has had an adequate opportunity to ask questions and receive answers
from the officers of VIALOG (and, in the case of the other Stockholders, to ask
questions and receive answers from the Principal Stockholder) concerning any and
all matters relating to this Agreement, the Merger, the Transactions, or Other
Participating Companies, the Participating Agreements and the Registration
Statement, and have read and understood the matters described in the copies of
the Registration Statement provided to them including, without limitation, the
background and experience of the officers and directors of VIALOG, the plans for
the operations of the business of VIALOG, the potential dilutive effects of the
Public Offering and future acquisitions and projected uses of the proceeds of
the Public Offering. The Principal Stockholder will confirm at the Merger
Closing that the Principal Stockholder has asked any and all questions in the
nature described in the preceding sentence or otherwise of interest in
connection with the exchange of VIALOG Stock for Shares as provided in this
Agreement, and all questions have been answered to the Principal Stockholder's
satisfaction.
9.3 Restrictions on Resale; Legends. The Principal Stockholder
-------------------------------
agrees, and the Company will use commercially reasonable efforts to cause each
other Stockholder to agree, not to offer, sell, assign, exchange, transfer,
encumber, pledge, distribute or otherwise dispose of the VIALOG Stock to be
acquired by them pursuant to this Agreement except after full compliance
57
<PAGE>
with all of the applicable provisions of the Securities Act and applicable state
securities Laws, and any attempt by a Stockholder to do so will be treated as
ineffective for all purposes. The certificates of VIALOG Stock issued pursuant
to Section 2.1(a) of this Agreement will bear the following legend substantially
as set forth:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE
STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED OR
OTHERWISE DISPOSED OF WITHOUT (1) REGISTRATION UNDER THE ACT AND
ANY APPLICABLE STATE LAW, OR (2) AN OPINION (SATISFACTORY TO
VIALOG) OF COUNSEL (SATISFACTORY TO VIALOG) THAT REGISTRATION IS
NOT REQUIRED.
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification.
---------------
(a) Except as provided in Section 11.1, the Principal
Stockholder agrees to make whole, indemnify and hold VIALOG, VIALOG Merger
Subsidiary, the Surviving Corporation, the Underwriters and their respective
Affiliates, agents, successors and assigns (collectively, the "VIALOG
Indemnified Parties") harmless as a result of, from or against:
(i) any and all Claims of the VIALOG Indemnified Parties
or other Persons based upon, attributable to or
resulting from any material inaccuracy in or material
breach of any representation or warranty on the part
of any one or more of the Company or the Stockholders
under this Agreement or any Collateral Document;
(ii) any and all Claims of the VIALOG Indemnified Parties
or other Persons based upon, attributable to or
resulting from the material breach of any covenant or
other agreement on the part of any one or more of the
Company or the Stockholders under this Agreement or
any Collateral Document;
(iii) any and all other material Claims of the VIALOG
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(b) Except as provided in Section 11.1, VIALOG agrees to make
whole, indemnify and hold the Principal Stockholder (and each Stockholder that
delivers the agreements
58
<PAGE>
contemplated by Section 6.4) and their respective Affiliates, agents, heirs,
successors and assigns (collectively, the "Company Indemnified Parties")
harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified Parties
or other Persons based upon, attributable to or
resulting from any material inaccuracy in or material
breach of any representation or warranty on the part
of VIALOG or VIALOG Merger Subsidiary under this
Agreement or any Collateral Document;
(ii) any and all Claims of the Company Indemnified Parties
or other Persons based upon, attributable to or
resulting from the material breach of any covenant or
other agreement on the part of VIALOG or VIALOG
Merger Subsidiary; and
(iii) any and all other material Claims of the Company
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(c) No Principal Stockholder will be required to pay to the
VIALOG Indemnified Parties an aggregate amount in excess of an amount equal to
the cash received by such Stockholder as the cash portion of the Exchange Merger
Consideration pursuant to Sections 2.1(a) and 2.4, cash received by such
Stockholder pursuant to Section 2.1(d) plus, with respect to shares of VIALOG
Stock issued to such Stockholder as the stock portion of the Exchange Merger
Consideration pursuant to Section 2.1(a) and Section 2.4, the Indemnity Value
thereof. VIALOG will not be required to pay any Company Indemnified Party an
aggregate amount in excess of the Indemnity Value of the shares of VIALOG Stock
issued to such Company Indemnified Party plus the amount of cash delivered to
such Company Indemnified Party pursuant to Section 2.1(a), Section 2.1(d) and
Section 2.4. No Claim for indemnification may be commenced beyond the period
applicable to such Claim set forth in Section 11.1.
(d) Notwithstanding the foregoing, no Principal Stockholder
will be required to pay any amount for indemnification to the VIALOG Indemnified
Parties except to the extent the aggregate amount of Claims under this Section
10.1 asserted collectively against the Principal Stockholder exceeds the greater
of $100,000 or one quarter of one percent (.0025%) of the sum of (i) the product
of (x) the aggregate number or shares of VIALOG Stock into which the Shares of
the Stockholders will be converted as set forth in Sections 2.1(a) and 2.4 and
(y) the Offering Price, plus (ii) the total amount of cash paid to all
Stockholders pursuant to Sections 2.1(a), 2.1(d) and 2.4.
(e) Notwithstanding the foregoing for claims in excess of the
sum determined pursuant to Section 10.1(d) above for any material inaccuracy in,
material breach of any representation, warranty or covenant of the Company, the
responsibility therefore for Robert A. Cowan shall be 50% thereof and for Louis
I. Jaffe shall be the other 50% thereof.
59
<PAGE>
10.2 Procedures Concerning Claims by Third Parties;
----------------------------------------------
Payment of Damages; etc.
-----------------------
(a) If any Legal Action is instituted or asserted by any
person other than such indemnified party in respect of which payment may be
sought hereunder, the indemnified party will reasonably and promptly cause
written notice of the assertion of any Legal Action of which it has knowledge
which is covered by the indemnities under Section 10.1 to be forwarded to the
indemnifying party. In such event, the indemnifying party will have the right,
at its sole option and expense, to be represented by counsel of its choice,
which must be reasonably satisfactory to the indemnified party, and to defend
against, negotiate, settle or otherwise deal with any Legal Action which related
to any Claims instituted or asserted by any Person other than such indemnified
party and indemnified against hereunder; provided, however, that no settlement
thereof will be made without the prior written consent of the indemnified party,
which consent will not be unreasonably withheld, conditioned or delayed. If the
indemnifying party elects to defend against, negotiate, settle or otherwise deal
with any Legal Action which related to any such Claims, it will within thirty
(30) days of receipt of said notice (or sooner, if the nature of the Legal
Action so requires) notify in writing the indemnified party of its intent to do
so. If the indemnifying party elects not to defend against, negotiate, settle or
otherwise deal with any Legal Action which relates to any such Claims, fails to
notify the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Claims under this
Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Legal Action. If the indemnified party defends any
Legal Action, then the indemnifying party will reimburse the indemnified party
for reasonable Claims incurred in defending such Legal Action upon a final
determination that the indemnified party was entitled to indemnity hereunder.
Neither the indemnifying party nor the indemnified party may settle any Legal
Action without the prior written consent of the other party, which consent will
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
will assume the defense of any Legal Action instituted or asserted by any Person
other than an indemnified party, the indemnified party may participate, at such
party's own expense, in the defense of such Legal Action.
(b) After any final judgment or award will have been rendered
by a court, arbitration board (which may be engaged upon the consent of each of
the indemnifying party and the indemnified parties) or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement will have been consummated, or the indemnified party
and the indemnifying party will have arrived at a mutually binding agreement
with respect to a Legal Action hereunder, the indemnifying party will pay all of
the sums due and owing to the indemnified party by wire transfer of immediately
available funds, or by delivery of shares of VIALOG Stock, as permitted pursuant
to the definition of Indemnity Value in Article 12, within five business days
after the date of notice of such judgment or award conditioned, however, on the
indemnifying party having been finally determined by the parties' agreement or
by final court or arbitration that the indemnifying party is obligated hereunder
to make said payment and subject to the provisions of this Article 10.
(c) The failure of the indemnified party to give reasonably
prompt notice of any Legal Action instituted or asserted by any Person other
than such indemnified party and
60
<PAGE>
indemnified against hereunder will not release, waive or otherwise affect the
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual loss or material prejudice as a
result of such failure.
(d) No legal action to enforce a Claim for indemnity will be
stayed or dismissed for failure to join one or more indemnifying parties or to
permit an indemnifying party to cross-claim against another indemnifying party,
nor will the failure to join as indemnifying party be deemed grounds for
preventing a separate or subsequent Legal Action to enforce a Claim for
indemnification against such party, each such Legal Action being deemed a
separate and independent Claim for indemnification. A Legal Action to enforce a
Claim for indemnity may be instituted in the Commonwealth of Massachusetts, or
the jurisdiction to which each Party consents, or any other state having
jurisdiction with respect thereto.
ARTICLE
11
GENERAL PROVISIONS
11.1 Effectiveness of Representations; etc.
-------------------------------------
(a) Regardless of any investigation made by or on behalf of
any other party hereto, any Person controlling such party or any of their
respective Representatives whether prior to or after the execution and
consummation of this Agreement, the representations, warranties, covenants and
agreements contained in Article 3, Article 4 and Article 5 will survive the
Merger and remain operative and in full force and effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until
sixty (60) days after the applicable statute of
limitations, as the same may be extended from time to
time, has terminated;
(ii) Section 3.23, until the sixth anniversary date of
this Agreement; and
(iii) all other Sections, until VIALOG (or its successor)
files an annual report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended,
as prescribed thereunder on Form 10-K covering at
least two full fiscal years of operations by VIALOG,
but in no event more than thirty months after the
Public Offering Closing Date (the "Second Annual
Filing Date").
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements contained in Article 3,
Article 4 and Article 5, the representations, warranties, covenants and
agreements of each Party will survive and remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any
61
<PAGE>
other Party, any Person controlling any such Party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement.
11.2 Notices. All notices and other communications given or made
-------
pursuant to this Agreement will be in writing and will be deemed to have been
duly given or made as of the date delivered or transmitted, and will be
effective upon receipt, if delivered personally, mailed by certified mail
(postage prepaid, return receipt requested) to the Parties at the following
addresses or sent by electronic transmission to the fax number specified below:
(a) If to VIALOG or VIALOG Merger Subsidiary:
VIALOG Corporation
Attention: Glenn Bolduc, President
46 Manning Road
Billerica, MA 01821
Fax: (508) 667-1944
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, LLP
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
(b) If to the Company:
Robert A. Cowan, Chairman of the Board
American Teleconferencing Services, Ltd.
2221 East Bijou, Suite 100
Colorado Springs, Colardo 80903
with a copy to:
Michael E. Waldeck, Esq.
Niewald, Waldeck & Brown, P.C.
1200 Main Street
Kansas City, Missouri 64105
Any address for notice as herein above provided may be changed by the
party or person for whom the change is made by giving notice of said change in
the manner provided in this Section.
11.3 Headings. The headings contained in this Agreement are for
--------
reference purposes only and will not affect in any way the meaning and
interpretation of this Agreement.
62
<PAGE>
11.4 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner Adverse to any Party. Upon such
determination that any term or other provisions is invalid, illegal or incapable
of being enforced, the Parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement (together with the Disclosure
----------------
Schedule, the Confidentiality Agreement and the other Collateral Documents
delivered in connection herewith), constitutes the entire agreement of the
Parties and supersedes all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof, including without limitation
that certain Business Combination Agreement, dated October 25, 1996, between the
Company and VIALOG.
11.6 Assignment. This Agreement may not be assigned by operation of law
----------
or otherwise and any purported assignment will be null and void, provided that
VIALOG may cause a wholly owned Subsidiary of VIALOG or Holding Company to be
substituted for VIALOG or VIALOG Merger Subsidiary as the party to the Merger
and may, in addition, assign the other rights, but not its obligations,
including, without limitation, its obligation for payment of the Aggregate
Merger Consideration, under this Agreement to such Subsidiary or Holding
Company.
11.7 Parties in Interest. This Agreement will be binding upon and inure
-------------------
solely to the benefit of each Party, and nothing in this Agreement, express or
implied (other than the provisions of Section 6.7, which provisions are intended
to benefit and may be enforced by the beneficiaries thereof), is intended to or
will confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
11.8 Governing Law. Except to the extent that Delaware Law may be
-------------
applicable to the Merger, this Agreement will be governed by, and construed in
accordance with, the substantive laws of the Commonwealth of Massachusetts
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
11.9 Enforcement of the Agreement. Each Party recognizes and agrees
----------------------------
that each other Party's remedy at law for any breach of the provisions of this
Agreement would be inadequate and agrees that for breach of such provisions,
such Party will, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance to the
extent permitted by Applicable Law. Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
Nothing herein contained will be construed as
63
<PAGE>
prohibiting a Party from pursuing any other remedies available to such Party for
any breach or threatened breach hereof or failure to take or refrain from any
action as required hereunder to consummate the Merger and carry out the
Transactions.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
11.11 Disclosure Supplements. From time to time prior to the Public
----------------------
Offering Closing Date, the Company will promptly supplement or amend the
Disclosure Schedule delivered in connection with this Agreement, with respect to
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby; provided, however, that no
supplement or amendment to the Disclosure Schedule that constitutes or reflects
a Material Adverse Change to the Company may be made without the prior written
consent of VIALOG.
ARTICLE
12
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural, and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meanings when used in the Disclosure Schedule and each Collateral
Document, notice, certificate, communication, opinion, or other document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
Accountants means KPMG Peat Marwick, LLP.
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") means, with
respect to the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, any Event which could reasonably be expected to
(a) adversely affect the validity or enforceability of this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, or (b) adversely affect the business, operations, management,
properties or the condition, (financial or other), or results of operation of
the Company or the Company and its Subsidiaries taken as a whole, VIALOG or
VIALOG Merger Subsidiary, as the case may be, or (c) impair the
64
<PAGE>
Company's, VIALOG's or VIALOG Merger Subsidiary's ability to fulfill its
obligations under the terms of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, or (d) adversely
affect the aggregate rights and remedies of VIALOG or the Company under this
Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, in all cases, unless otherwise specifically set
forth, in a material respect or manner or to a material degree.
Affiliate or Affiliated means, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, will include any member of such
individual's immediate family or a family trust.
Aggregate Equity means such number of shares of Company Stock as shall
equal the aggregate of (a) the Shares, and (b) all shares of Company Stock
otherwise issuable based upon the affirmative election to exercise or convert
outstanding Option Securities and/or Convertible Securities pursuant to Section
2.4.
Aggregate Merger Consideration will have the meaning given to it in Section
2.1(a).
Aggregate Cash Merger Consideration will have the meaning given to it in
Section 2.1(a).
Aggregate Stock Merger Consideration will have the meaning given to it in
Section 2.1(a).
Agreement means this Agreement as originally in effect, including unless
the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits to this Agreement, and as the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
Applicable Law means any Law of any Authority, whether domestic or foreign,
including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or to any of its business or
operations is subject or any of its property or assets is bound.
Authority means any governmental or quasi-governmental authority, whether
administrative, executive, judicial, legislative or other, or any combination
thereof, including without limitation any federal, state, territorial, county,
municipal or other government or governmental or quasi-governmental agency,
arbitrator, authority, board, body, branch, bureau, central bank or comparable
agency or Entity, commission, corporation, court, department,
65
<PAGE>
instrumentality, master, mediator, panel, referee, system or other political
unit or subdivision or other Entity of any of the foregoing, whether domestic or
foreign.
BCA will have the meaning given to it in the Preamble.
Benefit Arrangement means any material benefit arrangement that is not a
Plan, including (a) any employment or consulting agreement, (b) any arrangement
providing for insurance coverage or workers' compensation benefits, (c) any
incentive bonus or deferred bonus arrangement, (d) any arrangement providing
termination allowance, severance or similar benefits, (e) any equity
compensation plan, (f) any deferred compensation plan, and (g) any compensation
policy and practice.
Cash Merger Consideration will have the meaning given to it in Section
2.1(a).
Certificate will have the meaning given to it in Section 2.1(a).
Claims means any and all debts, liabilities, obligations, losses, damages,
deficiencies, assessments and penalties, together with all Legal Actions,
pending or threatened, claims and judgments of whatever kind and nature relating
thereto, and all reasonable fees, costs, expenses and disbursements (including
without limitation attorneys' fees, costs and expenses) relating to any of the
foregoing.
COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
Code will have the meaning given to it in the Preamble.
Collateral Document means any agreement, instrument, certificate, opinion,
memorandum, schedule or other document delivered by a Party or a Stockholder
pursuant to this Agreement or in connection with the Merger and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Principal Stockholder, on the one hand, or
VIALOG and VIALOG Merger Subsidiary on the other, under this Agreement and with
respect to opinions to be delivered pursuant to this Agreement, except to the
extent of a Party's actual knowledge, the Company and the Principal Stockholder
or VIALOG and VIALOG Merger Subsidiary, as the case may be, assume no
responsibility for the authority of or genuineness of signatures relating to the
others as counterparts or their representations, warranties, covenants and
agreements.
Company will have the meaning given to it in the Preamble.
Company Indemnified Parties will have the meaning given to it in Section
10.1(b).
The Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or the Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after
66
<PAGE>
reasonable investigation, will have reason to believe and will believe that the
subject representation or warranty is true and accurate as stated.
Company Stock will have the meaning given to it in Section 2.1(a).
Confidentiality Letter will have the meaning given to it in Section 6.1(c).
Contract or Contractual Obligation means any term, condition, provision,
representation, warranty, agreement, covenant, undertaking, commitment,
indemnity or other obligation set forth in the Organizational Documents of the
obligee or which is outstanding or existing under any instrument, contract,
lease or other contractual undertaking (including without limitation any
instrument relating to or evidencing any Indebtedness) to which the obligee is a
party or by which it or any of its business is subject or property or assets is
bound.
Control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
Convertible Securities means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or existence or non-
existence of some other Event, or both.
DBCL will have the meaning given to it in the Preamble.
Disclosure Schedule means the disclosure schedules dated as of the date of
this Agreement delivered by the Company to VIALOG and VIALOG to the Company.
Distribution means, with respect to the Company or any of its Subsidiaries:
(a) the declaration or payment of any dividend (except dividends payable in
common stock of the Company) on or in respect of any shares of any class of
capital stock of the Company or any shares of capital stock of any Subsidiary
owned by a Person other than the Company or a Subsidiary, (b) the purchase,
redemption or other retirement of any shares of any class of capital stock of
the Company or any shares of capital stock of any Subsidiary owned by a Person
other than the Company or a Subsidiary, and (c) any other distribution on or in
respect of any shares of any class of capital stock of the Company or any shares
of capital stock of any Subsidiary owned by a Person other than the Company or a
Subsidiary.
Effective Date means the effective date of the Registration Statement and
commencement of the Public Offering as authorized by the SEC.
67
<PAGE>
Effective Time will have the meaning given to it in Section 1.4.
Employment Arrangement means, with respect to any Person, any employment,
consulting, retainer, severance or similar contract, agreement, plan,
arrangement or policy (exclusive of any which is terminable within thirty (30)
days without liability, penalty or payment of any kind by such Person or any
Affiliate), or providing for severance, termination payments, insurance coverage
(including any self-insured arrangements), workers compensation, disability
benefits, life, health, medical dental or hospitalization benefits, supplemental
unemployment benefits, vacation or sick leave benefits, pension or retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock purchase or appreciation rights or other forms of incentive compensation
or post-retirement insurance, compensation or benefits, or any collective
bargaining or other labor agreement, whether or not any of the foregoing is
subject to the provisions of ERISA.
Encumber means to suffer, accept, agree to or permit the imposition of a
Lien.
Entity means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
Environmental Laws means any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, mining or reclamation or mined land, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes. Environmental
Laws include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), the Hazardous Material
-- ---
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
-- ---
and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42
-- ---
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
Section 2601 et seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C.
-- ---
Section 651 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
-- ---
U.S.C. Section 136 et seq.), and the Surface Mining Control and Reclamation Act
-- ---
of 1977 (30 U.S.C. Section 1201 et seq.), and any analogous future federal, or
-- ---
present or future state, local or foreign, Laws, and the rules and regulations
promulgated thereunder all as from time to time in effect, and any reference to
any statutory or regulatory provision will be deemed to be a reference to any
successor statutory or regulatory provision.
68
<PAGE>
Environmental Permit means any Governmental Authorization required by or
pursuant to any Environmental Law.
Environmental Requirements means all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
(a) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of, or the remediation, emission,
discharge or release into the air, surface water, groundwater or land
of, Hazardous Materials;
(b) the protection of the health and safety of employees or the public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA means the Employee Retirement Security Act of 1974, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision will be deemed to be a reference to any successor statutory or
regulatory provision.
ERISA Affiliate means any Person that is treated as a single employer with
the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or (o) of
the Code or Section 4001(b)(1) of ERISA.
Event means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Exchange Agent will have the meaning given to it in Section 2.2(a).
Exchange Fund will have the meaning given to it in Section 2.2(a).
Exchange Merger Consideration will have the meaning given to it in Section
2.1(a).
Expenses will have the meaning set forth in Section 8.5.
Final Determination (a) means with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse
69
<PAGE>
determinations; and (b) will include the payment of Tax by the Company or
whichever Party is responsible for payment of such Tax under Applicable Law,
with respect to any item disallowed or adjusted by a Taxing Authority, provided
that the other party is notified of such payment and the party that is
responsible for such Tax under this Agreement determines that no action should
be taken to recoup such payment from such Taxing Authority.
Financial Statements will have the meaning given to it in Section 3.2(a).
GAAP means generally accepted accounting principles as in effect from time
to time in the United States of America.
Governmental Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
each applicable Authority.
Governmental Filings means all filings, including franchise and similar Tax
filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with each applicable Authority.
Guaranty or Guaranteed means any agreement, undertaking or arrangement by
which the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, guarantees, endorses or otherwise becomes or is
liable, directly or indirectly, upon any Indebtedness of any other Person
including without limitation the payment of amounts drawn down by beneficiaries
of letters of credit (other than by endorsements of negotiable instruments for
deposit or collection in the ordinary course of business). The amount of the
obligor's obligation under any Guaranty will be deemed to be the outstanding
amount (or maximum permitted amount, if larger) of the Indebtedness directly or
indirectly guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials means any substance (in whatever state or matter): (a)
the presence of which requires investigation or remediation under any
Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated by
any Authority; (d) that contains or consists of petroleum or petroleum products,
or (e) that contains or consists of PCBs, asbestos, or urea formaldehyde foam
insulation.
Holding Company means a corporation established by or on behalf of VIALOG
into which VIALOG merges or assigns its rights and obligations hereunder if the
Accountants so advise for purpose of a tax free incorporation of all parties
provided the relative ownership rights of all parties remain the same.
HSR Act means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision.
70
<PAGE>
Indebtedness means, with respect to the Company or any of its Subsidiaries
or VIALOG or VIALOG Merger Subsidiary, as the case may be, (a) all items, except
items of capital stock or of surplus or of general contingency or deferred tax
reserves or any minority interest in any Subsidiary to the extent such interest
is treated as a liability with indeterminate term on the consolidated balance
sheet of the Company or VIALOG, which in accordance with GAAP would be included
in determining total liabilities as shown on the liability side of a balance
sheet of the Company or such Subsidiary or VIALOG or VIALOG Merger Subsidiary,
(b) all obligations secured by any Lien to which any property or asset owned or
held by the Company or any Subsidiary or VIALOG or any VIALOG Merger Subsidiary
is subject, whether or not the obligation secured thereby will have been
assumed, and (c) to the extent not otherwise included, all Contractual
Obligations of the Company or any Subsidiary or VIALOG or any VIALOG Merger
Subsidiary constituting capitalized leases and all obligations of the Company or
any Subsidiary or VIALOG or any VIALOG Merger Subsidiary with respect to Leases
constituting part of a sale and leaseback arrangement.
Indemnity Value means with respect to each share of VIALOG Stock issued to
a Stockholder pursuant to the Merger, the Offering Price. In satisfaction of a
Claim under this Agreement for which a stockholder is liable to VIALOG, until
the Second Annual Filing Date, and in lieu of all cash, such Stockholder may
tender shares of VIALOG Stock valued at the Offering Price and cash in a ratio
not exceeding fifty-one (51) to forty-nine (49), for all payments by such
Stockholder, and after the Second Annual Filing Date, cash and shares of VIALOG
Stock in such proportion as such Stockholder determines.
Intangible Assets means all assets and property lacking physical properties
the evidence of ownership of which must customarily be maintained by independent
registration, documentation, certification, recordation or other means.
Law means any (a) administrative, judicial, legislative or other action,
code, consent decree, constitution, decree, directive, enactment, finding,
guideline, law, injunction, interpretation, judgment, order, ordinance, policy
statement, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic of foreign; (b) the common law, or other legal or quasi-
legal precedent; or (c) arbitrator's, mediator's or referee's award, decision,
finding or recommendation; including, in each such case or instance, any
interpretation, directive, guideline or request, whether or not having the force
of law including, in all cases, without limitation any particular section, part
or provision thereof.
Lease means any lease of property, whether real, personal or mixed, and all
amendments thereto.
Legal Action means any litigation or legal or other actions, arbitrations,
counterclaims, investigations, proceedings, requests for material information by
or pursuant to the order of any Authority, or suits, at law or in arbitration,
equity or admiralty commenced by any Person,
71
<PAGE>
whether or not purported to be brought on behalf of a party hereto affecting
such party or any of such party's business, property or assets.
Lien means any of the following: mortgage, lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building to use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
Margin Rules means Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
Material or Materiality for the purposes of this Agreement, will, unless
specifically stated to the contrary, be determined without regard to the fact
that various provisions of this Agreement set forth specific dollar amounts.
Material Agreement or Material Commitment means, with respect to the
Company or any of its Subsidiaries, or VIALOG or VIALOG Merger Subsidiary any
Contractual Obligation which (a) was not entered into in the ordinary course of
business, (b) was entered into in the ordinary course of business which (i)
involves the purchase, sale or lease of goods or materials or performance of
services aggregating more than Twenty-Five Thousand Dollars ($25,000), (ii)
extends for more than three (3) months, or (iii) is not terminable on thirty
(30) days or less notice without penalty or other payment, (c) involves
Indebtedness for money borrowed in excess of One Hundred Thousand Dollars
($100,000), (d) is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement, or (e) would
account for more than five percent (5%) of purchases or sales made by the
Company and its Subsidiaries for the year ended December 31, 1996.
Merger will have the meaning given to it in the Preamble.
Merger Closing will have the meaning given to it in Section 1.3.
Merger Consideration will have the meaning given to it in Section 2.1(a).
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
Net Shares will have the meaning given to it in Section 2.2(a).
72
<PAGE>
Offering Price means $11.50 per share of VIALOG Stock.
Option Securities means all rights, options and warrants, all calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
Organizational Documents means, with respect to a Person which is a
corporation, its charter, its by-laws, and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock, and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreement among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
Other Participating Companies mean those companies or entities engaged in
the teleconferencing business who execute agreements and plans of
reorganization, stock purchase agreements or asset purchase agreements with
VIALOG which agreements close contemporaneously with this Agreement.
Other Transaction means a transaction or series of related transactions
(other than the Merger) resulting in (a) any change in control of the Company,
(b) any merger or consolidation of the Company or any of its Subsidiaries,
regardless of whether the Company or such Subsidiary is the surviving Entity,
(c) any tender offer or exchange offer for, or any acquisition of, any
securities of the Company, or (d) any sale or other disposition of assets of the
Company of any Subsidiary not otherwise permitted under Section 3.18.
Participating Agreement will have the meaning given to it in the Preamble.
Participating Companies will mean the Company and the Other Participating
Companies.
Participating Mergers means the mergers of each of the Other Participating
Companies with a Subsidiary of VIALOG pursuant to a Participating Agreement.
Participating Stockholders means the Persons receiving VIALOG Stock
pursuant to the Participating Mergers.
Party means any natural individual or any Entity that has executed this
Agreement.
PBGC means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Person means any natural individual or any Entity.
73
<PAGE>
Plan means any "employee benefit plan" as defined in Section 3(3) of ERISA
(whether or not terminated) which is (or was in the case of a frozen or
terminated plan) maintained by the Company or any Subsidiary or VIALOG or VIALOG
Merger Subsidiary, and with respect to which the Company, such Subsidiary or
VIALOG or VIALOG Merger Subsidiary or, in the case of any such plan subject to
Title IV of ERISA, an ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, other than a Multiemployer Plan.
Principal Stockholder will have the meaning given to it in the Preamble.
Private Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than each Authority) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
Prospectus means the form of prospectus first filed by VIALOG in the
Registration Statement, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the Public
Offering.
Public Offering will have the meaning given to it in the Preamble.
Public Offering Closing Date means the date on which the Public Offering is
closed.
Registration Rights Agreement will have the meaning given to it in Section
6.4.
Registration Statement means the registration statement (including the
Prospectus, exhibits, financial statements and schedules included therein), and
all amendments thereof (including post-effective amendments and any registration
statement filed under Rule 462(b) with respect to the Public Offering), filed
under the Securities Act registering the shares of VIALOG Stock to be sold in
the Public Offering in accordance with the terms and conditions of the
Underwriting Agreement.
Representatives of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
SEC means the Securities and Exchange Commission of the United States or
any successor Authority.
Second Annual Filing Date will have the meaning given to it in Section
11.1(a)(iii).
Securities Act means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations.
74
<PAGE>
Shares will have the meaning given to it in Section 2.1(a).
Special Meeting will have the meaning given to it in Section 1.2(a).
Stock Merger Consideration will have the meaning given to it in Section
2.1(a).
Stockholders means the Principal Stockholder and all other Persons entitled
to Merger Consideration (or who would be entitled thereto but for their dissent
from the Merger) pursuant to Sections 2.1(a) or (to the extent Persons holding
Option Securities or Convertible Securities exercise their rights to acquire
Shares prior to the Effective Time, from and after the time they acquire such
Shares) Section 2.4.
Subsidiary means, with respect to a Person, any Entity a majority of the
capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Surviving Corporation will have the meaning given to it in Section 1.1.
Tax (and "Taxable", which means subject to Tax), means with respect to the
Company or any of its Subsidiaries or VIALOG or any VIALOG Merger Subsidiary,
(a) all taxes (domestic or foreign), including without limitation any income
(net, gross or other including recapture of any tax items such as investment tax
credits), alternative or add-on minimum tax, gross income, gross receipts,
gains, sales, use, leasing, lease, user, ad valorem, transfer, recording,
franchise, profits, property (real or personal, tangible or intangible), fuel,
license, withholding on amounts paid to or by the Company or any of its
Subsidiaries, or VIALOG or any VIALOG Merger Subsidiary, payroll, employment,
unemployment, social security, excise severance, stamp, occupation, premium,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, levies, assessments, charges, penalties, addition to tax or additional
amount imposed by any Taxing Authority, (b) any joint or several liability of
the Company or any of its Subsidiaries or VIALOG or any VIALOG Merger Subsidiary
with any other Person for the payment of any amounts of the type described in
(a), and (c) any liability of the Company or any of its Subsidiaries or VIALOG
or any VIALOG Merger Subsidiary for the payment of any amounts of the type
described in (a) as a result of any express or implied obligation to indemnify
any other Person.
Tax Claim means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
Tax Return or Returns means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority means any Authority responsible for the imposition of any
Tax.
75
<PAGE>
Termination Date means (a) March 15, 1997 unless on or prior to that date
the Registration Statement is filed, in which case such date will automatically
be extended to June 30, 1997, or (b) such date after March 15, 1997 as to which
the parties agree.
Transactions means the other transactions contemplated by this Agreement or
the Merger or by any Collateral Document executed or required to be executed in
connection herewith or therewith, but will not include the Participating
Mergers, the registration of sale of VIALOG Stock pursuant to the Registration
Statement or any credit facilities between VIALOG and any bank described in the
Registration Statement.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any two of Smith Barney Inc., Salomon Brothers Inc,
Donaldson, Lufkin & Jenrette Securities Corporation or comparable firm as lead
underwriters and any other Person who executes the Underwriting Agreement as an
underwriter of VIALOG Stock in the Public Offering.
Underwriting Agreement means the firm commitment underwriting agreement
between VIALOG and the Underwriter to be filed as an exhibit to the Registration
Statement and to be executed on or about the Effective Date.
VIALOG will have the meaning given to it in the Preamble.
VIALOG Indemnified Parties will have the meaning given to it in Section
10.1(a).
VIALOG Merger Subsidiary will have the meaning given to it in the Preamble.
VIALOG Stock will have the meaning given to it in the Preamble.
[This space is intentionally left blank.]
76
<PAGE>
IN WITNESS WHEREOF, VIALOG, VIALOG Merger Subsidiary, the Company and the
Principal Stockholder have caused this Agreement to be executed as of the date
first written above by their respective officers thereunto duly authorized.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
-----------------------------------
Name: Glenn D. Bolduc
Title: President
ATS ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
-----------------------------------
Name: Glenn D. Bolduc
Title: President
AMERICAN TELECONFERENCING SERVICES, LTD.
By: /s/ Robert A. Cowan
-----------------------------------
Name: Robert A. Cowan
Title: President and Chairman
PRINCIPAL STOCKHOLDER:
/s/ Louis I. Jaffe
--------------------------------------
Name: Louis I. Jaffe
/s/ Robert A. Cowan, President and Chair
--------------------------------------
Name: Robert A. Cowan
Spousal Consent
---------------
The spouse of the Principal Stockholder has executed this Agreement below
as of the date first above written (a) to indicate her understanding of and
agreement with all of the terms and provisions of this Agreement and (b) to bind
the community property interest, if any, of the spouse in the Shares of the
Principal Stockholder.
/s/ Jenny Cowan
--------------------------------------
Name: Jenny Cowan
77
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. THE REGISTRANT AGREES
TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE
TO THE COMMISSION UPON REQUEST.
------------------------------
Section 3.1(a)
. Jurisdiction of Incorporation of the Company.
. Jurisdictions where qualified to do business.
Section 3.1(c)
. Exceptions to No Breach or Default, Etc., upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Lien created or imposed upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Governmental Authorization or Governmental Filing Required
upon execution and delivery of the Agreement or any Collateral Document.
Section 3.1(d)
. Subsidiaries of the Company, and Jurisdictions of incorporation and where
qualified to do business.
. Capital Stock of any Subsidiary.
. Exceptions to Company's ownership of all Stock of any Subsidiary.
Section 3.2(a)
. Financial Statements of the Company and any Subsidiary, prepared in
accordance with GAAP.
Section 3.2(c)
. The Company's ownership of other Entities.
Section 3.3
. Changes and condition of the Company and any Subsidiary, since the date of
the most recent financial statements.
Section 3.4
. Exceptions to liabilities of the Company or any Subsidiary.
<PAGE>
. Any obligations or liabilities, past, present or deferred, or accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in the
balance sheet of the Financial Statements, or notes thereto, and any
obligations or liabilities, other than obligations and liabilities incurred
in the ordinary course of business consistent with past practice of the
Company and any Subsidiary, which will adversely affect the Company or any of
the Company's Subsidiaries.
. Guarantees or Primary or Secondary Liabilities of the Company or any
Subsidiary (except as disclosed in Financial Statements).
Section 3.5(a)
. Exceptions to No Liens with respect to all real property owned or leased, and
to all other assets, tangible and intangible.
. Financing Statements evidencing any Liens.
. Impairments to valid leasehold interests.
Section 3.5(b)
. Real estate owned or leased, and property leased by the Company and any
Subsidiary.
. Material Fixed Assets.
. Title Retention Agreements.
Section 3.5(c)
. Exceptions to compliance with title covenants and conditions and
environmental laws.
. Hazardous Materials used or stored by the Company or any Subsidiary.
Section 3.6
. Private Authorizations material to the Company or any Subsidiary.
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before December
31, 1995.
Section 3.7(b)
. Breaches, violations or defaults under Governmental Authorizations or any
Applicable Law or under any requirement of any insurance carrier.
2
<PAGE>
Section 3.8(a)
. Governmental Authorizations and Intangible Assets upon which the conduct of
business by the Company or any Subsidiary is dependent.
Section 3.8(b)
. Description of Intangible Assets and Governmental Authorizations.
Section 3.9
. Contractual obligations or transactions between the Company or any of its
Subsidiaries and any of its officers, directors, employees, stockholders, or
any Affiliate of any thereof (other than reasonable compensation for services
or out-of-pocket expenses reasonably incurred in support of the Company's
business).
Section 3.10(a)
. Insurance Policies maintained by the Company or any Subsidiary.
. Insurance Carriers which have refused the Company or any Subsidiary insurance
within the past five years.
Section 3.11(a)
. Exceptions to taxation as a Subchapter C corporation.
. Membership in a consolidated group for tax purposes.
Section 3.11(d)
. Tax audits of the Company or any Subsidiary by the IRS or any notifications
thereof.
Section 3.11(e)
. Tax Sharing Agreement or Arrangement of the Company or any Subsidiary.
Section 3.11(f)
. Consents concerning collapsible corporations under Section 341(f) of the
Code.
. Ownership changes within the meaning of Section 382(g) of the Code.
Section 3.12(a)
. ERISA plans, including, inter alia, exceptions to compliance to applicable
----- ----
laws, notices from any authority questioning compliance, deficiencies,
"prohibited transactions", any amounts of
3
<PAGE>
liability, termination proceedings, annual reports, or any membership in or
contributions to multi-employer plans.
Section 3.12(c)
. Basis of funding and current status of any past service liability with
respect to each Employment Arrangement.
Section 3.15(a)
. Authorized and outstanding Capital Stock of the Company.
. Agreements by the Company or any Subsidiary to grant or issue any shares of
its Capital Stock or any Option Security or Convertible Security.
. Any agreement, put or commitment pursuant to which the Company or any
Subsidiary is obligated to purchase, redeem or otherwise acquire any shares
of Capital Stock or any Option Security or Convertible Security.
Section 3.15(b)
. Stockholders.
. Stock not held free and clear of all Liens.
. Persons or groups of persons owning as much as 5% of the Company's
outstanding Common Stock.
Section 3.16(a)
. Employment Arrangements of the Company or any Subsidiary.
. Collective bargaining agreements or pending grievances or labor disputes.
Section 3.16(b)
. Accelerated payments or benefits, including parachute payments, that will be
received as a result of the transactions contemplated by this Agreement.
Section 3.16(c)
. Any unfavorable relationships with employees of the Company or any
Subsidiary.
Section 3.17(a)
. Material Agreements relating to the ownership or operation of the business
and property of the Company or any Subsidiary presently held or used by the
Company or any Subsidiary, or to
4
<PAGE>
which the Company or any Subsidiary is a party, or to which it or any of its
property is subject or bound.
Section 3.17(b)
. Exceptions to satisfaction or performance of Material Agreements by the
Company or any Subsidiary.
Section 3.18(a)
. Exceptions to operation of business in the ordinary course.
Section 3.18(b)
. Distributions from end of most recent fiscal year to the date of this
Agreement.
Section 3.19
. Banks, trust companies, savings and loan associations and brokerage firms in
which the Company or any Subsidiary has an account or safe deposit box, and
the names of all persons with access thereto.
Section 3.20
. Adverse restrictions which impairs the Company or any Subsidiary's ability to
conduct its business or which could have any adverse effect on the Company or
any Subsidiary.
Section 3.22
. Personal injury, warranty claims, etc., pending or threatened.
Section 3.23(a)
. Environmental matters - compliance and Governmental Authorizations and
Private Authorizations.
Section 3.23(b)
. Any actual or expected spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water on any property or facility
owned, leased, operated or occupied by the Company or any Subsidiary.
. Notices or Liens arising under Environmental Law.
Section 3.23(c)
. Above or underground tanks for the storage of Hazardous Materials.
5
<PAGE>
Section 3.23(e)
. Hazardous Materials used in the conduct of business of the Company or any
Subsidiary.
. Description and annual volume of Hazardous Materials used.
. Years during which use occurred.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(f)
. Hazardous Materials generated.
. Annual volume.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(g)
. Environmental site assessments.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
Section 4.4
. Exceptions to good and merchantable title to Shares to be exchanged pursuant
to this Agreement.
Section 4.5(a)
. Conflicts with, breaches of, or defaults under any Contractual Obligation of
Principal Stockholder resulting from the execution and delivery of this
Agreement or any Collateral Document.
Section 4.5(b)
. Liens created or imposed upon any property or asset of Principal Stockholder
as a result of the execution and delivery of this Agreement or any Collateral
Document.
Section 4.5(c)
. Governmental Authorizations, Governmental Filing or Private Authorizations
required as a result of the execution and delivery of this Agreement or any
Collateral Document.
6
<PAGE>
Section 5.7
. Authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary.
. Options, warrant, calls, rights, commitments or any other agreements of any
character obligating VIALOG or VIALOG Merger Subsidiary to issue any shares
of VIALOG Stock or other shares of Capital Stock of VIALOG or VIALOG Merger
Subsidiary, or any other securities convertible into or evidencing the right
to subscribe for any such shares.
Section 5.11
. Provisions in other Participating Agreements of other Participating Companies
not substantially identical in form and substance to the provisions contained
in Articles 3 through 12 of this Agreement.
Section 6.5(b)
. Business (other than business in the ordinary course) the Company will
conduct without the written permission of VIALOG Corporation.
Section 6.17
. Distributions to Stockholders, employees and consultants contemplated to be
made prior to the Merger Closing.
. Liens to be discharged prior to the Merger Closing.
. Certain liabilities for which the Company will indemnify VIALOG as of the
Merger Closing.
Section 7.1(f)
. Awards under Stock Option Plan.
Section 7.2(d)
. Persons executing Non-Competition Agreements.
Section 7.2(n)
. Form of Agreement releasing the Company and any Subsidiary from claims
against them.
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of the
Public Offering Closing Date.
7
<PAGE>
Section 7.2(s)
. Employment Agreement between Principal Stockholder and VIALOG Corporation.
Section 7.2(t)
. Individuals executing and delivering Employment Arrangements for VIALOG
Corporation.
8
<PAGE>
Exhibit 2.2
AMENDED AND RESTATED AGREEMENT AND PLAN OF
REORGANIZATION
BY AND AMONG
VIALOG CORPORATION
TBMA ACQUISITION CORPORATION
AND
TELEPHONE BUSINESS MEETINGS, INC.
AND
C. RAYMOND MARVIN
Dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 THE MERGER..........................................................2
SECTION 1.1 The Merger...................................................2
SECTION 1.2 Action by Stockholders.......................................2
SECTION 1.3 Closing......................................................3
SECTION 1.4 Effective Time...............................................3
SECTION 1.5 Effect of the Merger.........................................4
SECTION 1.6 Certificate of Incorporation.................................4
SECTION 1.7 By-laws......................................................4
SECTION 1.8 Directors and Officers.......................................4
ARTICLE 2 CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES...............4
SECTION 2.1 Conversion of Securities.....................................4
SECTION 2.2 Exchange of Certificates; Exchange Agent and
Exchange Procedures..........................................6
SECTION 2.3 Stock Transfer Books.........................................8
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights...............................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................8
SECTION 3.1 Organization and Business; Power and Authority;
Effect of Transaction........................................9
SECTION 3.2 Financial and Other Information.............................11
SECTION 3.3 Changes in Condition........................................12
SECTION 3.4 Liabilities.................................................12
SECTION 3.5 Title to Properties; Leases.................................12
SECTION 3.6 Compliance with Private Authorizations......................14
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law..............................................14
SECTION 3.8 Intangible Assets...........................................16
SECTION 3.9 Related Transactions........................................16
SECTION 3.10 Insurance...................................................16
SECTION 3.11 Tax Matters.................................................17
SECTION 3.12 Employee Retirement Income Security Act of 1974.............18
SECTION 3.13 Absence of Sensitive Payments...............................21
SECTION 3.14 Inapplicability of Specified Statutes.......................21
SECTION 3.15 Authorized and Outstanding Capital Stock....................21
SECTION 3.16 Employment Arrangements.....................................21
SECTION 3.17 Material Agreements.........................................23
SECTION 3.18 Ordinary Course of Business.................................23
SECTION 3.19 Bank Accounts, Etc..........................................25
i
<PAGE>
SECTION 3.20 Adverse Restrictions........................................25
SECTION 3.21 Broker or Finder............................................25
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc....25
SECTION 3.23 Environmental Matters.......................................26
SECTION 3.24 Materiality.................................................28
SECTION 3.25 Solvency....................................................28
SECTION 3.26 VIALOG Stock................................................28
SECTION 3.27 Compliance with Regulations Relating to Securities Credit...28
SECTION 3.28 Certain State Statutes Inapplicable.........................28
SECTION 3.29 Continuing Representations and Warranties...................28
SECTION 3.30 Registration Statement......................................29
SECTION 3.31 Predecessor Status, etc.....................................29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDER.....................................................29
SECTION 4.1 Organization................................................29
SECTION 4.2 Power and Authority.........................................29
SECTION 4.3 Enforceability..............................................30
SECTION 4.4 Title to Shares.............................................30
SECTION 4.5 No Conflict; Required Filings and Consents..................30
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VIALOG AND
VIALOG MERGER SUBSIDIARY..................................................31
SECTION 5.1 Organization and Qualification..............................31
SECTION 5.2 Power and Authority.........................................31
SECTION 5.3 No Conflict; Required Filings and Consents..................31
SECTION 5.4 Financing...................................................32
SECTION 5.5 Broker or Finder............................................32
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary.....32
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary.......32
SECTION 5.8 Registration Statement......................................33
SECTION 5.9 Solvency....................................................33
SECTION 5.10 Firm Commitment.............................................33
SECTION 5.11 Participating Agreements of Other Participating Companies...33
SECTION 5.12 Continuing Representations and Warranties...................34
ARTICLE 6 ADDITIONAL COVENANTS...............................................34
SECTION 6.1 Access to Information; Confidentiality......................34
SECTION 6.2 Agreement to Cooperate......................................35
SECTION 6.3 Assignment of Contracts and Rights..........................36
SECTION 6.4 Compliance with the Securities Act..........................37
SECTION 6.5 Conduct of Business.........................................37
ii
<PAGE>
SECTION 6.6 No Solicitation..............................................38
SECTION 6.7 Directors' and Officers' Indemnification and Insurance.......39
SECTION 6.8 Notification of Certain Matters..............................39
SECTION 6.9 Public Announcements.........................................39
SECTION 6.10 Conveyance Taxes.............................................40
SECTION 6.11 Obligations of VIALOG........................................40
SECTION 6.12 Employee Benefits; Severance Policy..........................40
SECTION 6.13 Certain Actions Concerning Business Combinations.............41
SECTION 6.14 Termination of Option Securities and Convertible Securities..41
SECTION 6.15 Tax Returns..................................................41
SECTION 6.16 Employment and Noncompetition................................42
SECTION 6.17 Distributions, Liabilities, Etc..............................42
SECTION 6.18 Release from Personal Guarantees.............................42
SECTION 6.19 No Significant Changes.......................................42
SECTION 6.20 Registration Statement.......................................43
SECTION 6.21 Tax Status...................................................43
SECTION 6.22 Self Dealing.................................................43
ARTICLE 7 CLOSING CONDITIONS..................................................43
SECTION 7.1 Conditions to Obligations of Each Party to Effect
the Merger...................................................43
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger
Subsidiary...................................................45
SECTION 7.3 Conditions to Obligations of the Company.....................50
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER...................................52
SECTION 8.1 Termination..................................................52
SECTION 8.2 Effect of Termination........................................55
SECTION 8.3 Amendment....................................................55
SECTION 8.4 Waiver.......................................................55
SECTION 8.5 Fees, Expenses and Other Payments............................55
SECTION 8.6 Effect of Investigation......................................56
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER RESTRICTIONS
ON VIALOG STOCK............................................................56
SECTION 9.1 Shares not Registered........................................56
SECTION 9.2 Economic Risk; Sophistication................................56
SECTION 9.3 Restrictions on Resale; Legends..............................57
ARTICLE 10 INDEMNIFICATION....................................................57
SECTION 10.1 Indemnification..............................................57
iii
<PAGE>
SECTION 10.2 Procedures Concerning Claims by Third Parties;
Payment of Damages; etc......................................59
ARTICLE 11 GENERAL PROVISIONS.................................................60
SECTION 11.1 Effectiveness of Representations; etc........................60
SECTION 11.2 Notices......................................................61
SECTION 11.3 Headings.....................................................62
SECTION 11.4 Severability.................................................62
SECTION 11.5 Entire Agreement.............................................62
SECTION 11.6 Assignment...................................................62
SECTION 11.7 Parties in Interest..........................................62
SECTION 11.8 Governing Law................................................63
SECTION 11.9 Enforcement of the Agreement.................................63
SECTION 11.10 Counterparts.................................................63
SECTION 11.11 Disclosure Supplements.......................................63
ARTICLE 12 DEFINITIONS........................................................63
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION dated as of
February 28, 1997 among VIALOG CORPORATION, a Massachusetts corporation
("VIALOG"), TBMA Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of VIALOG ("VIALOG Merger Subsidiary"), TELEPHONE BUSINESS
MEETINGS, INC. D/B/A ACCESS CONFERENCE CALL SERVICE, a Delaware corporation (the
"Company"), and C. RAYMOND MARVIN (the "Principal Stockholder").
PREAMBLE
1. The Company and VIALOG Merger Subsidiary have agreed to carry out a
business combination transaction upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DBCL"), pursuant to which the VIALOG Merger Subsidiary will
merge with and into the Company (the "Merger") and the Stockholders and other
Persons holding equity interests in the Company will convert their holdings into
cash and shares of common stock, $.01 par value per share of VIALOG ("VIALOG
Stock"), determined in accordance with Section 2.1(a).
2. Each of the Other Participating Companies will enter into an agreement
and plan of reorganization or stock or asset purchase agreement with VIALOG and
a wholly-owned Subsidiary of VIALOG (each a "Participating Agreement") whereby,
contemporaneously with the Merger, each Other Participating Company and a
Subsidiary of VIALOG will carry out a business combination transaction pursuant
to which each such Subsidiary will merge with and into one of the Other
Participating Companies or VIALOG or such Subsidiary shall purchase stock or
assets of such Other Participating Companies and stockholders of and other
Persons holding equity interests in the Other Participating Companies will
convert their holdings into cash and shares of VIALOG Stock determined in
accordance with provisions substantially similar to those in Section 2.1(a).
3. Pursuant to the Underwriting Agreement, VIALOG will issue and sell
VIALOG Stock in a firm commitment public offering registered on Form S-1 in
accordance with the requirements of the Securities Act (the "Public Offering").
4. The Board of Directors of the Company has unanimously determined that
the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement and the Merger as a
convenient means to accomplish a transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code") and a convenient means to
cause all of the Stockholders to transfer their capital stock of the Company to
VIALOG, has approved this Agreement, the Merger and the Transactions and has
recommended approval and adoption of this Agreement, the Merger and the
Transactions by the Stockholders.
1
<PAGE>
5. The Board of Directors of VIALOG has approved and adopted this
Agreement and has approved the Merger and the Transactions as the sole
stockholder of VIALOG Merger Subsidiary.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE
1
THE MERGER
1.1 The Merger.
----------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DBCL at the Effective Time the VIALOG
Merger Subsidiary will be merged with and into the Company. As a result of the
Merger, the separate existence of the VIALOG Merger Subsidiary will cease and
the Company will continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(b) The Company represents that, at a meeting duly called and held at
which a quorum was present and acting throughout, its Board of Directors has
unanimously (i) determined that this Agreement, the Merger and the Transactions
are fair to and in the best interest of Stockholders, (ii) approved this
Agreement, the Merger and the Transactions, which approval satisfies in full the
requirements of Delaware law, and (iii) resolved to recommend approval and
adoption by the Stockholders of this Agreement, the Merger and the Transactions
to the extent required and in a manner permitted by Applicable Law.
1.2 Action by Stockholders.
----------------------
(a) The Company, acting through its Board of Directors, will, in
accordance with Applicable Law and its Organizational Documents: (i) as soon as
practicable, duly call, give notice of, convene and hold a special meeting of,
or to the extent permitted by Applicable Law submit for approval and adoption by
written consent by, the Stockholders for the purpose of adopting and approving
this Agreement, the Merger and the Transactions (the "Special Meeting"); (ii)
include in any proxy statement the conclusion and recommendation of the Board of
Directors to the effect that the Board of Directors, having determined that this
Agreement, the Merger and the Transactions are in the best interests of the
Company and the Stockholders, has approved this Agreement, the Merger and the
Transactions and recommends that the
2
<PAGE>
Stockholders vote in favor of the approval and adoption of this Agreement, the
Merger and the Transactions; and (iii) use its reasonable best efforts to obtain
the necessary approval and adoption of this Agreement, the Merger and the
Transactions by the Stockholders.
(b) VIALOG Merger Subsidiary, as soon as practicable, will submit to
VIALOG this Agreement, the Merger and the Transactions for approval and adoption
by written consent as the sole stockholder of VIALOG Merger Subsidiary, and
VIALOG will take all additional actions as such sole stockholder necessary to
adopt and approve this Agreement, the Merger and the Transactions.
(c) The approvals required by Sections 1.2(a) and (b) will occur
prior to the initial filing of the Registration Statement, which is expected to
occur on or before February 28, 1997.
1.3 Closing. Unless this Agreement is terminated pursuant to Section 8.1
-------
and the Merger and the Transactions have been abandoned, and subject to the
satisfaction or, if possible, waiver of conditions set forth in Article 7 other
than Section 7.1(d), the closing of the Merger (the "Merger Closing") will take
place, one day prior to the Effective Date, at the offices of Mirick, O'Connell,
DeMallie & Lougee, LLP, unless another date, time or place is agreed to in
writing by the Parties to this Agreement and each Participating Agreement.
Counsel for the Parties to this Agreement and each Participating Agreement will
hold a pre-closing two days prior to the Effective Date, at the offices of
Mirick, O'Connell, DeMallie & Lougee, LLP, for the purpose of finalizing all
documents to be signed at the Merger Closing. All certificates, legal opinions
and other instruments required to be delivered in order to satisfy the
conditions to the obligations of the Parties to effect the Merger set forth in
Article 7 below shall be delivered at the Merger Closing, and each such
certificate, legal opinion or other instrument shall, except to the extent
otherwise provided in Article 7, be dated as of the anticipated Public Offering
Closing Date, which is expected to occur five business days following the date
of Merger Closing. All such certificates, legal opinions and other instruments
shall be held in escrow by Mirick, O'Connell, DeMallie & Lougee, LLP between the
Merger Closing and the Effective Time and shall be released from escrow
concurrently with the Effective Time on the Public Offering Closing Date. In the
event that the Effective Time and Public Offering Closing Date occur on a date
other than the fifth business day following the Merger Closing, all such
certificates, legal opinions and instruments shall be re-dated as of the Public
Offering Closing Date. The Company, the Principal Stockholder, VIALOG and VIALOG
Merger Subsidiary shall use their respective best efforts to cause each of the
conditions set forth in Article 7 reasonably capable of being satisfied prior to
the Merger Closing, including, without limitation, the conditions set forth in
Sections 7.1(a), (c), (e), (f), (g) and (h), to be satisfied prior to the Merger
Closing.
1.4 Effective Time. On the Public Offering Closing Date, the Parties will
--------------
cause the Merger to be consummated by filing articles or certificates of merger,
as the case may be, with the Secretary of State of Delaware, and by making any
related filings required under the DBCL. The Merger will become effective at
such time (but not prior to the Public Offering Closing Date) as such articles
or certificates, as the case may be, are duly filed with the Secretary of State
of Delaware, respectively (the "Effective Time)".
3
<PAGE>
1.5 Effect of the Merger. From and after the Effective Time, the Surviving
--------------------
Corporation will possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of the Company
and VIALOG Merger Subsidiary, and the Merger will otherwise have the effects,
all as provided under the DBCL.
1.6 Certificate of Incorporation. From and after the Effective Time, the
----------------------------
Certificate of Incorporation of the Surviving Corporation will be substantially
in the form attached as Exhibit 1.6 until amended in accordance with Applicable
-----------
Law, and the name of the Surviving Corporation will be the name of the Company
or such other name as VIALOG may elect.
1.7 By-laws. From and after the Effective Time, the by-laws of the
-------
Surviving Corporation will be in the form attached as Exhibit 1.7, until amended
-----------
in accordance with Applicable Law.
1.8 Directors and Officers. From and after the Effective Time, until
----------------------
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law (a) the directors of
VIALOG Merger Subsidiary at the Effective Time will be the directors of the
Surviving Corporation and (b) the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation.
ARTICLE
2
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of VIALOG Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each share of common stock, $.01 par value of the Company (the
"Company Stock") issued and outstanding or issuable upon the election to
exercise or convert outstanding Option Securities and Convertible Securities
immediately prior to the Effective Time (other than any shares of Company Stock
to be canceled pursuant to Section 2.1(b)) will be converted into the right to
receive shares of VIALOG Stock (the "Stock Merger Consideration") and cash (the
"Cash Merger Consideration") (together with the Stock Merger Consideration, the
"Merger Consideration") pursuant to the following formula:
Aggregate Merger Consideration = $13,650,000
Aggregate Stock Merger Consideration = 888,608 shares*
Aggregate Cash Merger Consideration = $2,534,859*
*The Aggregate Cash Merger Consideration and the Aggregate Stock Merger
Consideration have been based on the assumption that the Aggregate Merger
Consideration shall be reduced from
4
<PAGE>
13,650,000 to 12,773,753 as a result of payments due and owing to Danny
Robertson in the aggregate amount of $876,247 in connection with the Share
Purchase Agreement among Telephone Business Meetings, Inc., C. Raymond Marvin
and Danny E. Robertson dated November 4, 1994 and (ii) the Consulting and Non-
Competition Agreement between Telephone Business Meetings Inc. and Danny
Robertson dated April 10, 1995 (collectively, the "Robertson Agreements"). To
the extent that the aggregate amounts due and owing Mr. Robertson under the
Robertson Agreements is different from the amount stated above, the Aggregate
Cash Merger Consideration, but not the Aggregate Stock Merger Consideration,
will be increased or decreased to reflect the actual amount due at Effective
Time.
Merger Consideration = Aggregate Merger Consideration
------------------------------
Aggregate Equity
Stock Merger Consideration = Aggregate Stock Merger Consideration
------------------------------------
Aggregate Equity
Cash Merger Consideration = Aggregate Cash Merger Consideration
------------------------------------
Aggregate Equity
At the Effective Time, all issued and outstanding shares of Company Stock (the
"Shares") will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and certificates previously evidencing any such
Shares (each a "Certificate") will thereafter represent the right to receive,
upon the surrender of such Certificate in accordance with the provisions of
Section 2.2, the number of Shares represented by such Certificate multiplied by
(i) the Stock Merger Consideration plus (ii) the Cash Merger Consideration. A
holder of more than one Certificate will have the right to receive the Stock
Merger Consideration and the Cash Merger Consideration multiplied by the number
of Shares represented by all such Certificates (the "Exchange Merger
Consideration"). The holders of all Certificates may allocate the Stock Merger
Consideration and Cash Merger Consideration disproportionately among all such
holders; provided, however, that (i) a Schedule 2.1 setting forth the allocation
of Stock Merger Consideration and Cash Merger Consideration among the holders of
all Certificates is completed and consented to in writing by all such holders
contemporaneously with the execution and delivery of this Agreement, all in such
form as required by VIALOG; (ii) for each Share, the total of (A) the allocated
Stock Merger Consideration multiplied by the Offering Price, plus (B) the
allocated Cash Merger Consideration, must equal the Merger Consideration,
(iii) the total allocation of the Stock Merger Consideration must equal the
Aggregate Stock Merger Consideration, and (iv) the total allocation of the Cash
Merger Consideration must equal the Aggregate Cash Merger Consideration. Any
such election to allocate the Stock Merger Consideration and Cash Merger
Consideration disproportionately may not thereafter be withdrawn or amended. The
holders of Certificates previously evidencing Shares outstanding immediately
prior to the Effective Time will cease to have any rights with respect to such
Shares except as otherwise provided in this Agreement or by Applicable Law.
<PAGE>
(b) Each Share held in the treasury of the Company or by any direct
or indirect wholly-owned Subsidiary of the Company immediately prior to the
Effective Time will automatically be canceled and extinguished without
conversion, and no payment will be made with respect to such Share.
(c) Each share of common stock of VIALOG Merger Subsidiary
outstanding immediately prior to the Effective Time will be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and will constitute the
only outstanding shares of capital stock of the Surviving Corporation.
(d) In lieu of issuing fractional shares, VIALOG may convert a
holder's right to receive shares of VIALOG Stock pursuant to Section 2.1(a) into
a right to receive the highest whole number of shares of VIALOG Stock
constituting the non-cash portion of the Exchange Merger Consideration plus cash
equal to the fraction of a share of VIALOG Stock to which the holder would
otherwise be entitled multiplied by the Offering Price, and the Exchange Merger
Consideration to which a holder is entitled will be deemed to be such number of
shares of VIALOG Stock plus such cash plus the cash portion of the Exchange
Merger Consideration.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Prior to the Merger Closing, VIALOG will deposit or cause to be
deposited with a bank, trust company or other Entity designated by VIALOG (the
"Exchange Agent"), for the benefit of the holders of Shares for exchange in
accordance with this Article, through the Exchange Agent, the stock portion of
the Merger Consideration multiplied by the number of all Shares issued and
outstanding immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 2.1(b)) (said number of Shares less Shares to be
canceled to be referred to as the "Net Shares"), and within one (1) business day
of the Public Offering Closing Date, a check or checks representing next day
funds from the Underwriter in (or, pursuant to instructions reasonably
satisfactory to the Exchange Agent, wire transfer of) an amount equal to the
Cash Merger Consideration multiplied by the number of Net Shares plus cash in an
amount sufficient to make payment for fractional shares, in exchange for all of
the outstanding Shares (collectively the "Exchange Fund"). The Exchange Agent
will, pursuant to irrevocable instructions from VIALOG, deliver the Exchange
Merger Consideration to be issued pursuant to Section 2.1(a) out of the Exchange
Fund to holders of Shares upon transmittal of Certificates for exchange as
provided therein and in Section 2.2(b). The Exchange Fund will not be used for
any other purposes. Any interest, dividends or other income earned by the
Exchange Fund will be for the account of VIALOG.
(b) As soon as reasonably practicable after the date as of which the
Stockholders act to approve and adopt this Agreement, the Merger and the
Transactions, the Company will notify VIALOG thereof and VIALOG will promptly
instruct the Exchange Agent to deliver to the Stockholders, for the purpose of
accepting Certificates for exchange on the terms provided in Section 2.1(a) at
the Effective Time, and subject to withdrawal of Certificates by their holders
prior thereto, (i) a letter of transmittal (which will specify that delivery
will be
6
<PAGE>
effected, and risk of loss and title to the Certificates will pass, only upon
proper delivery of the Certificates to the Exchange Agent and will be in such
form and have such other provisions as VIALOG may reasonably specify), and (ii)
instructions to effect the surrender of the Certificates in exchange for the
Exchange Merger Consideration. Subject to the occurrence of the Effective Time,
upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by VIALOG together with such
letter of transmittal, duly executed, and such other customary documents as may
be reasonably required pursuant to such instructions (collectively, the
"Transmittal Documents"), the holder of such Certificate will become entitled to
receive, as of the Effective Time, in exchange therefor the Exchange Merger
Consideration which such holder has the right to receive pursuant to Sections
2.1(a) and 2.1(d), and the Certificate so surrendered will be canceled. In the
event of a transfer of ownership of Shares which is not registered in the
transfer records of the Company, the Exchange Merger Consideration may be issued
and paid in accordance with this Article to a transferee if the Certificate
evidencing such Shares is presented to the Exchange Agent, accompanied by all
documents reasonably required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. The Exchange
Merger Consideration will be delivered by the Exchange Agent within two business
days (or such greater period not to exceed five business days as may be
customarily required by the Exchange Agent) following the later of (i) two
business days after the Public Offering Closing Date, or (ii) surrender of a
Certificate and the related Transmittal Documents, and cash payments for
fractional shares and the cash portion of the Exchange Merger Consideration may
be made by check (or, pursuant to instructions reasonably satisfactory to the
Exchange Agent, by wire transfer). No interest will be payable on the Exchange
Merger Consideration regardless of any delay in making payments. Until
surrendered as contemplated by this Section, each Certificate will be deemed at
any time after the Effective Time to evidence only the right to receive, upon
such surrender, the Exchange Merger Consideration, without interest.
(c) If any Certificate is lost, stolen or destroyed, upon the making
of an affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and subject to such other conditions as VIALOG may impose,
the Surviving Corporation will issue in exchange for such lost, stolen or
destroyed Certificate the Exchange Merger Consideration deliverable in respect
thereof as determined in accordance with Sections 2.1(a) and 2.1(d). VIALOG may,
in its discretion and as a condition precedent to authorizing the issuance
thereof by the Surviving Corporation, require the owner of such lost, stolen or
destroyed Certificate to provide a bond or other surety to VIALOG and the
Surviving Corporation in such sum as VIALOG may reasonably direct as indemnity
against any claim that may be made against VIALOG, VIALOG Merger Subsidiary or
the Surviving Corporation (and their Affiliates) with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed to
the holders of the Company Stock for thirty (30) days after the Effective Time
will be delivered to VIALOG upon demand by VIALOG, and any holders of
Certificates who have not theretofore complied with this Article will thereafter
look only to VIALOG for the Exchange Merger Consideration to which they are
entitled pursuant to this Article.
7
<PAGE>
(e) None of VIALOG, VIALOG Merger Subsidiary, the Company or the
Surviving Corporation will be liable to any holder of Shares for any shares of
VIALOG Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Each of VIALOG, the Surviving Corporation and the Exchange Agent
will be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares such amounts as VIALOG, the
Surviving Corporation or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
VIALOG, the Surviving Corporation or the Exchange Agent, such withheld amounts
will be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by VIALOG, the Surviving Corporation or the Exchange Agent.
2.3 Stock Transfer Books. At the Effective Time, the stock transfer books
--------------------
of the Company will be closed, and there will be no further registration of
transfers of Shares thereafter on the records of the Company other than to
VIALOG. On or after the Effective Time, any Certificate presented to the
Exchange Agent or the Surviving Corporation will be converted into the Exchange
Merger Consideration.
2.4 Option Securities and Convertible Securities; Payment Rights. At the
------------------------------------------------------------
Effective Time, (a) each outstanding Option Security and each outstanding
Convertible Security exercisable or convertible to purchase Shares as of
immediately prior to the Effective Time, will be canceled and the holder thereof
will be entitled to receive, and will receive, upon payment of the consideration
required to exercise or convert, or debit of such consideration against the
Merger Consideration otherwise due, and termination of such holder's rights to
exercise or convert, as the case may be, all other Option Securities or
Convertible Securities issued to such holder, Merger Consideration in the form
of shares of VIALOG Stock issuable and cash payable with respect to the number
of Shares issuable pursuant to such Option Security or Convertible Security so
exercised or converted, as the case may be, as provided in Section 2.1(a), plus
cash in lieu of receipt of a fractional share in an amount determined as
provided in Section 2.1(d), and (b) each Option Security outstanding not then
exercisable or exercised and the conversion rights of each Convertible Security
outstanding not then convertible or converted will be canceled.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to, and agrees with, VIALOG
and VIALOG Merger Subsidiary as follows:
8
<PAGE>
3.1 Organization and Business; Power and Authority; Effect of
---------------------------------------------------------
Transaction.
-----------
(a) The Company:
(i) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation as set forth in Section 3.1(a) of the
Disclosure Schedule,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties and to
conduct its business as now conducted and as presently
proposed to be conducted, and has in full force and
effect all Governmental Authorizations and Private
Authorizations and has made all Governmental Filings, to
the extent required for such ownership and lease of its
property and conduct of its business, and
(iii) has duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set
forth in Section 3.1(a) of the Disclosure Schedule) in
which the character of its property or the nature of its
business or operations requires such qualification or
authorization, except to the extent the failure so to
qualify or to maintain such authorizations would not have
an Adverse Effect.
(b) The Company has all requisite power and authority (corporate and
other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions. The execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the Stockholders). This
Agreement has been duly executed and delivered by the Company and constitutes,
and each Collateral Document executed or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions, when executed and
delivered by the Company or an Affiliate of the Company will constitute, legal,
valid and binding obligations of the Company or such Affiliate, enforceable in
accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity. The affirmative vote or action by
written consent of 51% of the votes the holders of the outstanding shares of the
Company are entitled to cast is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve this Agreement,
the Merger and the Transactions under Applicable Law and the Company's
Organizational Documents.
9
<PAGE>
(c) Except as set forth in Section 3.1(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation
of, or constitute a default under, any Applicable Law on
the part of the Company or any Subsidiary or will
conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of
any obligation or liability in, or but for any
requirement of giving of notice or passage of time or
both would constitute such a conflict with, breach or
violation of, or default under, or permit any such
acceleration in, any Contractual Obligation of the
Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of
any Lien (except to the extent set forth in Section
3.1(c) of the Disclosure Schedule) upon any property now
owned or leased by the Company or any such other party,
or
(iii) will require any Governmental Authorization or
Governmental Filing or Private Authorization, except for
filing requirements under Applicable Law in connection
with the Merger and the Transactions and as the
Securities Act and applicable state securities laws may
apply to compliance by the Company with the provisions of
this Agreement relating to the Public Offering and
registration rights provided for hereunder and except
pursuant to the HSR Act. (if applicable).
(d) The Company does not have any Subsidiaries other than those
listed on Section 3.1(d) of the Disclosure Schedule. Each Subsidiary so listed
is wholly-owned, is a corporation which is duly organized, validly existing and
in good standing under the laws of the respective state of incorporation set
forth opposite its name on Section 3.1(d) of the Disclosure Schedule, and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown in Section 3.1(d) of the Disclosure Schedule) in which
the character of its property or the nature of its business or operations
requires such qualification or authorization, with full power and authority
(corporate and other) to carry on the business in which it is engaged. Each
Subsidiary has in full force and effect all Governmental Authorizations and
Private Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business. The Company owns all of the outstanding capital stock (as shown on
Section 3.1(d) of the Disclosure Schedule) of each Subsidiary, free and clear of
all Liens (except to the extent set forth in Section 3.1(d) of the Disclosure
Schedule), and all such stock has been duly authorized and validly issued and is
fully paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities,
10
<PAGE>
or agreements or understandings with respect to any of the foregoing, of any
nature whatsoever relating to the authorized and unissued or the outstanding
capital stock of any Subsidiary.
3.2 Financial and Other Information.
-------------------------------
(a) The Company has furnished to VIALOG copies of the financial
statements of the Company and its Subsidiaries listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements,
including in each case the notes thereto, have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, do not
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make any
statements contained therein not misleading, and fairly present the financial
condition and results of operations of the Company and its Subsidiaries, on the
bases therein stated, as of the respective dates thereof, and for the respective
periods covered thereby subject, in the case of unaudited financial statements
to normal nonmaterial year-end audit adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements, this
Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or any of the Stockholders pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Stockholders pursuant hereto or thereto or to consummate the
Merger and the Transactions, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated in such document by its terms or necessary in order to make the
statements contained herein or therein not misleading and all such Collateral
Documents are and will be true, correct and complete in all material respects;
provided that:
(i) with respect to projections contained or referred to in
the Disclosure Schedule, the Company represents and
warrants only that such projections were prepared in good
faith on the basis of the past business of the Company
and other information and assumptions which the Company
and the Principal Stockholder believe to be reasonable,
(ii) each such Collateral Document will not be deemed
misleading by virtue of the absence of factual
recitations or references not germane thereto and
necessary to the purpose thereof, and
(iii) responses to due diligence requests will not be subject
to this Section 3.2(b) except to the extent that, to the
Company's knowledge, such response is materially
misleading.
(c) The Company does not own any capital stock or equity or
proprietary interest in any other Entity or enterprise, however organized and
however such interest may be denominated or evidenced, except as set forth in
Sections 3.1(d) or 3.2(c) of the Disclosure Schedule. None of the Entities, if
any, so set forth in Section 3.2(c) of the Disclosure Schedule is
11
<PAGE>
a Subsidiary of the Company except as so set forth. The Company owns all of the
outstanding capital stock or equity or proprietary interests (as shown on
Section 3.2(c) of the Disclosure Schedule) of each such Entity or other
enterprise, free and clear of all Liens (except to the extent set forth in
Section 3.2(c) of the Disclosure Schedule), and all of such stock or equity or
proprietary interests have been duly authorized and validly issued and are fully
paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings with respect to any of
the foregoing, of any nature whatsoever, except as described in Section 3.2(c)
of the Disclosure Schedule.
3.3 Changes in Condition. Since the date of the most recent financial
--------------------
statements forming part of the Financial Statements, except to the extent
specifically described in Section 3.3 of the Disclosure Schedule, there has been
no Adverse Change in the Company or the Company and its Subsidiaries taken as a
whole. There is no Event known to the Company which Adversely Affects, or in the
future might (so far as the Company or the Principal Stockholder can now
reasonably foresee) Adversely Affect, the Company or the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto except for changes in
general economic conditions and to the extent set forth in Section 3.3 of the
Disclosure Schedule.
3.4 Liabilities. At the date of the most recent balance sheet forming
-----------
part of the Financial Statements, neither the Company nor any Subsidiary had any
obligations or liabilities, past, present or deferred, accrued or unaccrued,
fixed, absolute, contingent or other, except as disclosed in such balance sheet,
or the notes thereto, and since such date neither the Company nor any Subsidiary
has incurred any such obligations or liabilities, other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, which do not and, to the Company's
knowledge, will not, in the aggregate, Adversely Affect the Company or the
Company and its Subsidiaries taken as a whole except to the extent set forth in
Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business or as disclosed in the most recent balance sheet, or the notes thereto,
forming part of the Financial Statements or in Section 3.4 of the Disclosure
Schedule.
3.5 Title to Properties; Leases.
---------------------------
(a) Each of the Company and its Subsidiaries has good legal and
insurable title, with respect to all real property owned or leased (in fee
simple if owned and leasehold if leased) and marketable title if owned (in fee
simple), if any, reflected as an asset on the most recent balance sheet forming
part of the Financial Statements, or held by the Company or any of its
Subsidiaries for use in its business if not so reflected, and good indefeasible
and merchantable title to all other assets, tangible and intangible (excluding
leased property), reflected on such
12
<PAGE>
balance sheet, or held by the Company or any of its Subsidiaries for use in its
business if not so reflected, or purported to have been acquired by the Company
or any of its Subsidiaries since such date, except inventory sold or depleted,
or property, plant and other equipment used up or retired, since such date, in
each case in the ordinary course of business consistent with past practice of
the Company and its Subsidiaries, free and clear of all Liens, except such as
are reflected in the most recent balance sheet, or the notes thereto, forming
part of the Financial Statements or set forth in Section 3.5(a) of the
Disclosure Schedule. Except for financing statements evidencing Liens referred
to in the preceding sentence (a true, correct and complete list and description
of which is set forth in Section 3.5(a) of the Disclosure Schedule), to the
Company's knowledge, no financing statements under the Uniform Commercial Code
and no other filing which names the Company or any of its Subsidiaries as debtor
or which covers or purports to cover any of the property of the Company or any
of its Subsidiaries is on file in any state or other jurisdiction, and neither
the Company nor any Subsidiary has signed or agreed to sign any such financing
statement or filing or any agreement authorizing any secured party thereunder to
file any such financing statement or filing. Each Lease or other occupancy or
other agreement under which the Company or any of its Subsidiaries holds real or
personal property has been duly authorized, executed and delivered by the
Company or Subsidiary, as the case may be, and, to the Company's knowledge, by
each of the parties thereto. Each such Lease is a legal, valid and binding
obligation of the Company or a Subsidiary, as the case may be, and, to the
Company's knowledge, of each other party thereto, enforceable in accordance with
its terms. Each of the Company and its Subsidiaries has a valid leasehold
interest in and enjoys peaceful and undisturbed possession under all Leases
pursuant to which it holds any real property or tangible personal property, none
of which contains any provision which would impair the Company's ability to use
such property as it is currently used by the Company, except as described in
Section 3.5(a) of the Disclosure Schedule. All of such Leases are valid and
subsisting and in full force and effect. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any other party thereto, is in
default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in any such Lease.
(b) Section 3.5(b) of the Disclosure Schedule contains a true,
correct and complete description of all real estate owned or leased by the
Company or any of its Subsidiaries and all Leases and an identification of all
material items of fixed assets and machinery and equipment. None of the fixed
assets and machinery and equipment is subject to contracts of sale, and none is
held by the Company or any of its Subsidiaries as lessee or as conditional sales
venue under any Lease or conditional sales contract and none is subject to any
title retention agreement, except as set forth in Section 3.5(b) of the
Disclosure Schedule. The real property (other than land), fixtures, fixed assets
and machinery and equipment are in a state of good repair and maintenance and
are in good operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure
Schedule:
(i) all real property owned or leased by the Company or any
of its Subsidiaries conforms to and complies with all
applicable title covenants, conditions, restrictions and
reservations and all
13
<PAGE>
Environmental Laws and all applicable zoning, wetlands, land
use and other Applicable Law, and
(ii) neither the Company nor any Subsidiary, nor, to the knowledge
of the Company, any landlord, tenant or other occupant or user
of any such real property, has used such real property for the
storage or disposal of Hazardous Materials or engaged in the
business of storing or disposing of Hazardous Materials,
except for use in the ordinary course of business of the type
conducted by the Company.
3.6 Compliance with Private Authorizations. Section 3.6 of the Disclosure
--------------------------------------
Schedule sets forth a true, correct and complete list and description of each
Private Authorization which individually is material to the Company or the
Company and its Subsidiaries taken as a whole, all of which are in full force
and effect. Each of the Company and each Subsidiary has obtained all Private
Authorizations which are necessary for the ownership by the Company or each
Subsidiary of its properties and the conduct of its business as now conducted or
as presently proposed to be conducted or which, if not obtained and maintained,
could, singly or in the aggregate, Adversely Affect the Company or the Company
and its Subsidiaries taken as a whole. Neither the Company nor any Subsidiary is
in breach or violation of, or is in default in the performance, observance or
fulfillment of, any Private Authorization, and no Event exists or has occurred,
which constitutes, or but for any requirement of giving of notice or passage of
time or both would constitute, such a breach, violation default, under any
Contractual Obligation or Private Authorization, except for such defaults,
breaches or violations, as do not and, to the Company's knowledge, will not have
in the aggregate any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto or to consummate the
Merger and the Transactions. No Private Authorization is the subject of any
pending or, to the Company's knowledge, threatened attack, revocation or
termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
--------------------------------------------------------------
(a) Section 3.7(a) of the Disclosure Schedule contains a description
of:
(i) all Legal Actions which are pending or, other than those
finally adjudicated or settled on or before December 31,
1995, in which the Company or any of its Subsidiaries, or
any of its officers or directors, is, or at any time since
its organization has been, engaged, or which involves, or
at any time during such period involved, the business,
operations or properties of the Company or any of its
Subsidiaries or, to the Company's knowledge, which is
threatened or contemplated against, or in any other manner
relating Adversely to, the Company or any of its
Subsidiaries or the business, operations or properties, or
the officers or directors, or any of them in connection
therewith; and
14
<PAGE>
(ii) each Governmental Authorization to which the Company or
any Subsidiary is subject and which relates to the
business, operations, properties, prospects, condition
(financial or other), or results of operations of the
Company or the Company and its Subsidiaries taken as a
whole, all of which are in full force and effect.
(b) Each of the Company and each of its Subsidiaries has obtained
all Governmental Authorizations which are necessary for the ownership or uses
its properties and the conduct of its business as now conducted or as presently
proposed to be conducted by the Company or which, if not obtained and
maintained, could singly or in the aggregate, have any Adverse Effect on the
Company or the Company and its Subsidiaries taken as a whole. No Governmental
Authorization is the subject of any pending or, to the Company's knowledge,
threatened attack, revocation or termination. Neither the Company nor any
Subsidiary nor any officer or director (in connection with the business,
operations and properties of the Company or any Subsidiary) is or at any time
since January 1, 1991 has been, or is or has during such time been charged with,
or to the knowledge of the Company, is threatened or under investigation with
respect to any material breach or violation of, or in default in the
performance, observance or fulfillment of, any Governmental Authorization or any
Applicable Law, and no Event exists or has occurred, which constitutes, or but
for any requirement of giving of notice or passage of time or both would
constitute, such a breach, violation or default, under
(i) any Governmental Authorization or any Applicable Law,
except for such breaches, violations or defaults as do
not and, to the Company's knowledge, will not have in the
aggregate any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or the
ability of the Company to perform any of the obligations
set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or
thereto, or to consummate the Merger and the
Transactions, or
(ii) any requirement of any insurance carrier, applicable to
its business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in
Sections 3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and
matters set forth in the Disclosure Schedule, individually and in the aggregate,
if adversely determined against the Company or any Subsidiary, will not
Adversely Affect the Company or the Company and its Subsidiaries taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions.
15
<PAGE>
3.8 Intangible Assets.
-----------------
(a) Each of the Company and each Subsidiary owns or possesses or
otherwise has the right to use all Governmental Authorizations and other
Intangible Assets necessary for the present and planned future conduct of its
business, without any known conflict with the rights of others. The present and
planned future conduct of business by the Company and each Subsidiary is not
dependent upon any one or more, or all, of such Governmental Authorizations and
other Intangible Assets or rights with respect to any of the foregoing, except
as set forth in Section 3.8(a) of the Disclosure Schedule.
(b) Section 3.8(b) of the Disclosure Schedule sets forth a true,
correct and complete description of all of such Governmental Authorizations and
other Intangible Assets or rights with respect thereto, including without
limitation the nature of the Company's and each Subsidiary's interest in each
and the extent to which the same have been duly registered in the offices as
indicated therein.
3.9 Related Transactions. Section 3.9 of the Disclosure Schedule sets
--------------------
forth a true, correct and complete description of any Contractual Obligation or
transaction, not fully discharged or consummated, as the case may be, on or
before the beginning of the Company's current fiscal year, between the Company
or any of its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services as officers, directors and employees and reimbursement
for out-of-pocket expenses reasonably incurred in support of the Company's
business), now existing or which, at any time since its organization, existed or
occurred, including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any officer, director, stockholder or
employee, or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
3.10 Insurance.
---------
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance
policies maintained by the Company or any Subsidiary and includes insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention.
(b) Neither the Company nor any Subsidiary is in breach or violation
of or in default under any such policy, and all premiums due thereon have been
paid, and each such policy or a comparable replacement policy will continue to
be in force and effect up to and including the Public Offering Closing Date. The
insurance policies so listed and identified are of a nature and scope and in
amounts sufficient to prevent the Company or any Subsidiary from
16
<PAGE>
becoming a coinsurer within the terms of such policies. Except as set forth in
Section 3.10(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has, within the past five (5) years, been refused insurance by any
insurance carrier to which it has applied for insurance.
3.11 Tax Matters.
-----------
(a) Each of the Company and each Subsidiary has in accordance with
all Applicable Laws filed all Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Returns and all other governmental
charges and assessments received to date. The Tax Returns of the Company and
each Subsidiary have been prepared in accordance with all Applicable Laws and
generally accepted principles applicable to taxation consistently applied. All
Taxes which the Company and each Subsidiary are required by law to withhold and
collect have been duly withheld and collected and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. Neither
the Company nor any Subsidiary has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of the
Company or any Subsidiary for the fiscal year prior to and including the most
recent fiscal year. Adequate provision has been made on the most recent balance
sheet forming part of the Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other, and to the knowledge of the Company there are no transactions
or matters or any basis which might or could result in additional Taxes of any
nature to the Company or any Subsidiary for which an adequate reserve has not
been provided on such balance sheet. Each of the Company and each Subsidiary has
at all times been taxable as a Subchapter C corporation under the Code, except
as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. Neither
the Company nor any Subsidiary has ever been a member of any consolidated group
(other than exclusively with the Company and its Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes which
have become due pursuant to its Returns and has paid all installments (to the
extent required to avoid material underpayment penalties) of estimated Taxes due
and payable.
(c) From the end of its most recent fiscal year to the date hereof
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business with
respect to current operations or property presently owned.
(d) The information shown on the federal income Tax Returns of the
Company and its Subsidiaries (true, correct and complete copies of which have
been furnished by the Company to VIALOG) is true, correct and complete and
fairly and accurately reflects the information purported to be shown. Federal
and state income Tax Returns of the Company and its Subsidiaries have been
audited by the IRS or applicable state Authority for the taxable periods set
forth in Section 3.11(d) of the Disclosure Schedules, and neither the Company
nor any
17
<PAGE>
Subsidiary has been notified regarding any pending audit, except as shown in
Section 3.11(d) of the Disclosure Schedule.
(e) Neither the Company nor any Subsidiary is a party to any tax
sharing agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
(f) Neither the Company nor any Subsidiary has ever (i) filed a
consent under Section 341(f) of the Code concerning collapsible corporations or
(ii) undergone an "ownership change" within the meaning of Section 382(g) of the
Code, except as set forth in Section 3.11(f) of the Disclosure Schedule.
3.12 Employee Retirement Income Security Act of 1974.
-----------------------------------------------
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list of
all Plans and Benefit Arrangements maintained by the Company and any of its
Subsidiaries (which for purposes of this Section 3.12 will include any ERISA
Affiliate with respect to any Plan subject to Title IV of ERISA). As to all such
Plans and Benefit Arrangements, and except as disclosed in such Section 3.12(a)
of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply currently, and
have complied in the past, in all material respects both
as to form and operation, with their terms and with all
Applicable Laws, and neither the Company nor any of its
Subsidiaries has received any outstanding notice from any
Authority questioning or challenging such compliance,
(ii) all necessary governmental approvals for each Plan and
Benefit Arrangement have been obtained; the Internal
Revenue Service has issued a favorable determination as
to the tax qualified status of each Plan intended to
comply with section 401(a) of the Code and each amendment
thereto, and a recognition of exemption from federal
income taxation under Section 501(a) of the Code of each
Plan which constitutes a funded welfare plan as defined
in Section 3(1) of ERISA; and nothing has occurred since
the date of each such determination or recognition that
would adversely affect such qualification.
(iii) no Plan which is subject to Part 3 of Subtitle B of Title
1 of ERISA or Section 412 of the Code had an accumulated
funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recently completed
fiscal year of such Plan,
(iv) there are no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan for which the Company or any of its
Subsidiaries has any liability,
18
<PAGE>
nor are any of the assets of any Plan invested in
employer securities or employer real property,
(v) no Plan is subject to Title IV of ERISA, or if subject,
there have been no "reportable events" (as described in
Section 4043 of ERISA) as to which there is any material
risk of termination of such Plan,
(vi) no material liability to the PBGC has been or is expected
by the Company to be incurred by the Company or any of
its Subsidiaries with respect to any Plan, and there has
been no event or condition which presents a material risk
of termination of any Plan by the PBGC,
(vii) with respect to each Plan subject to Title IV of ERISA,
the amount for which Company or any of its Subsidiaries
would be liable pursuant to the provisions of Sections
4062, 4063 or 4064 of ERISA would be zero if such Plans
terminated on the date of this Agreement,
(viii) no notice of intent to terminate a Plan has been filed
with, nor has any Plan been terminated pursuant to the
provisions of Section 4041 of ERISA,
(ix) the PBGC has not instituted proceedings to terminate (or
appointed a trustee to administer) a Plan and no event
has occurred or condition exists which might constitute
grounds under the provisions of Section 4042 of ERISA for
the termination of (or the appointment of a trustee to
administer) any such Plan.
(x) no Plan or Benefit Arrangement covers any employee or
former employee of the Company or any of its Subsidiaries
that could give rise to the payment of any amount that
would not be deductible pursuant to the terms of section
280G of the Code,
(xi) there are no Claims (other than routine claims for
benefits) pending or threatened involving any Plan or
Benefit Arrangement or any of the assets thereof,
(xii) except as set forth in Section 3.12(a) of the Disclosure
Schedule (which entry, if applicable, will indicate the
present value of accumulated plan liabilities calculated
in a manner consistent with FAS 106 and the actual annual
expense for such benefits for each of the last two (2)
years) and pursuant to the provisions of COBRA, neither
the Company nor any of its Subsidiaries maintains any
Plan that provides benefits described in Section 3(1)
19
<PAGE>
of ERISA to any former employees or retirees of the
Company or any of its Subsidiaries,
(xiii) all reports, returns and similar items required to be
filed with any Authority or distributed to employees
and/or Plan participants in connection with the
maintenance or operation of any Plan or Benefit
Arrangement have been duly and timely filed and
distributed, and there have been no acts or omissions by
the Company or any of its Subsidiaries, which have given
rise to or may reasonably be expected to give rise to
fines, penalties, taxes or related charges under Sections
502(c), 502(i) or 4071 or ERISA or Chapter 43 or section
6039D of the Code for which the Company or any of its
Subsidiaries may be liable,
(xiv) neither the Company nor any of its Subsidiaries nor any
of its respective directors, officers or employees has
committed, nor to the best of the Company's knowledge has
any other fiduciary committed, any breach of the
fiduciary responsibility standards imposed by ERISA that
would subject the Company or any of its Subsidiaries or
any of its respective directors, officers or employees to
liability under ERISA,
(xv) to the extent that the most recent balance sheet forming
part of the Financial Statements does not include a pro
rata amount of the contributions which would otherwise
have been made in accordance with past practices for the
Plan years which include the Public Offering Closing
Date, such amounts are set forth in Section 3.12(a) of
the Disclosure Schedule,
(xvi) the Company has furnished to VIALOG a copy of the three
most recently filed annual reports (IRS Form 5500) series
and accountant's opinion, if applicable, for each Plan
(and the three most recent actuarial valuation reports
for each Plan, if any, that is subject to Title IV of
ERISA), and all information provided by the Company to
any actuary in connection with the preparation of any
such actuarial valuation report was true, correct and
complete in all material respects,
(b) Neither the Company nor any of its Subsidiaries is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the basis
of funding, and the current status of, any past service liability with respect
to each Employment Arrangement to which the same is applicable.
20
<PAGE>
3.13 Absence of Sensitive Payments. The Company has not, nor has any
-----------------------------
Subsidiary, or, to the Company's knowledge, any of its or any Subsidiary's
officers, directors, employees or Representatives, (a) made any contributions,
payments or gifts to or for the private use of any governmental office, employee
or agent where either the payment or the purpose of such contribution, payment
or gift is illegal under the laws of the United States or the jurisdiction in
which made, (b) established or maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on its books, or (c) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
3.14 Inapplicability of Specified Statutes. Neither the Company nor
-------------------------------------
any Subsidiary is a "holding company", or a "subsidiary company" or an
"affiliate" or a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended, or an "investment company" or a
company "controlled" by or acting on behalf of an "investment company", as
defined in the Investment Company Act of 1940, as amended.
3.15 Authorized and Outstanding Capital Stock
----------------------------------------
(a) The authorized and outstanding capital stock of the Company
is as set forth in Section 3.15(a) of the Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is fully
paid and non-assessable and is not subject to any preemptive or similar rights.
Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) there is
neither outstanding nor has the Company or any Subsidiary agreed to grant or
issue any shares of its capital stock or any Option Security or Convertible
Security, and (ii) neither the Company nor any Subsidiary is a party to or is
bound by any agreement, put or commitment pursuant to which it is obligated to
purchase, redeem or otherwise acquire any shares of capital stock or any Option
Security or Convertible Security. Between the date of this Agreement and the
Merger Closing, the Company will not, and will not permit any Subsidiary to,
issue, sell or purchase or agree to issue, sell or purchase any capital stock or
any Option Security or Convertible Security of the Company or any Subsidiary. As
of the Effective Time, the rights of the holders of all Option Securities and
Convertible Securities issued by the Company to exercise or convert such
Securities will have been terminated pursuant to the terms thereof.
(b) All of the outstanding capital stock of the Company is
owned by the Stockholders as set forth in Section 3.15(b) of the Disclosure
Schedule, and is, to the Company's knowledge, free and clear of all Liens,
except as set forth in Section 3.15(b) of the Disclosure Schedule. To the
Company's knowledge, no Person, and no group of Persons acting in concert, owns
as much as five percent (5%) of the Company's outstanding Common Stock, and the
Company is not controlled by any other Person, except as set forth in Section
3.15(b) of the Disclosure Schedule.
3.16 Employment Arrangements.
-----------------------
(a) Neither the Company nor any Subsidiary has any obligation
or liability, contingent or other, under any Employment Arrangement (whether or
not listed in Section 3.12(a) of the Disclosure Schedule), other than those
listed or described in Section 3.16(a) of the
21
<PAGE>
Disclosure Schedule. Neither the Company nor any Subsidiary is now or during the
past five (5) years has been subject to or involved in or, to the Company's
knowledge, threatened with any election for the certification of a bargaining
representative for any employees, petitions therefor or other organizational
activities, including but not limited to voluntary requests for recognition as a
bargaining representative, or organizational campaigns of any nature, except as
described in Section 3.16(a) of the Disclosure Schedule. None of the employees
of the Company or any Subsidiary are now, or during the past five (5) years have
been, represented by any labor union or other employee collective bargaining
organization. Neither the Company nor any Subsidiary are parties to any labor or
other collective bargaining agreement, and there are no pending grievances,
disputes or controversies with any union or any other employee collective
bargaining organization of such employees, or, to the Company's knowledge,
threats of strikes, work stoppages or slowdowns or any pending demands for
collective bargaining by any union or other such organization. The Company and
each Subsidiary have performed all obligations required to be performed under
all Employment Arrangements and are not in breach or violation of or in default
or arrears under any of the terms, provisions or conditions thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, no employee will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employment Arrangement,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(c) The Company considers its and each Subsidiary's
relationships with employees to be good, and except as set forth in Section
3.16(c) of the Disclosure Schedule, neither the Company nor any Subsidiary has
experienced a work slowdown or stoppage due to labor problems. Neither the
Company nor any Subsidiary has received notice of any claim that it has failed
to comply with any federal or state law, or is the subject of any investigation
by any federal or state agency to determine compliance with any federal or state
law, relating to the employment of labor, including any provisions relating to
wages, hours, collective bargaining, the payment of taxes, discrimination, equal
employment opportunity, employment discrimination, worker injury and/or
occupational safety, nor to the knowledge of the Company is there any basis for
such a claim.
(d) Neither the Company nor any Subsidiary has conducted, and
on or prior to the Public Offering Closing Date will not conduct, a "plant
closing" or "mass layoff" of employees of the Company or any Subsidiary as
defined by the Worker Adjustment and Retraining Notification Act of 1988 ("the
WARN Act"), 29 U.S.C. 2101-2109 as amended, or discharge, layoff, or reduce the
hours of work, of employees in a sufficient number or manner to trigger any
state or local law or regulation conditioning or regulating in any manner the
discharge, layoff, or reduction in hours of employees or the closing of a
facility, plant, workplace, division or department, from the date hereof or
through the Public Offering Closing Date or during the twelve-month period
immediately prior thereto.
22
<PAGE>
3.17 Material Agreements.
-------------------
(a) Listed on Section 3.17(a) of the Disclosure Schedule are
all Material Agreements relating to the ownership or operation of the business
and property of the Company or any Subsidiary presently held or used by the
Company or any Subsidiary or to which the Company or any Subsidiary is a party
or to which it or any or its property is subject or bound. True, complete and
correct copies of each of the Material Agreements have been furnished by the
Company to VIALOG (or true, complete and correct descriptions thereof have been
set forth in Section 3.17(a) of the Disclosure Schedule, if any such Material
Agreements are oral). All of the Material Agreements are valid, binding and
legally enforceable obligations of the parties thereto (except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of the general principles of equity),
and the Company or one of its Subsidiaries is validly and lawfully operating its
business and owning its property under each of the Material Agreements. The
Company and each Subsidiary have duly complied with all of the terms and
conditions of each Material Agreement and have not done or performed, or failed
to do or perform (and there is no pending or, to the knowledge of the Company,
threatened Claim that the Company or any Subsidiary has not complied, done and
performed or fail to do and perform) any act the effect of which would be to
invalidate or provide grounds for the other party thereto to terminate (with or
without notice, passage of time or both) such Material Agreement or impair the
rights or benefits, or increase the costs, of the Company or any Subsidiary,
under any of the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section
3.17(a) of the Disclosure Schedule calling for the delivery of goods or
merchandise or the performance of services can be satisfied or performed by the
Company or one of its Subsidiaries at margins providing an operating profit,
except as set forth in Section 3.17(b) of the Disclosure Schedule.
3.18 Ordinary Course of Business.
---------------------------
(a) The Company and each Subsidiary, from the earlier of the
date of the most recent balance sheet forming part of the Financial Statements
or December 31, 1995 to the date of this Agreement, and until the Public
Offering Closing Date, except as may be described on Section 3.18(a) of the
Disclosure Schedule or as may be required or permitted expressly by the terms of
this Agreement or as may be approved in writing by VIALOG:
(i) has operated, and will continue to operate, its
business in the normal, usual and customary manner
in the ordinary and regular course of business,
consistent with prior practice,
(ii) has not sold or otherwise disposed of, or
contracted to sell or otherwise dispose of, and
will not sell or otherwise dispose of or contract
to sell or otherwise dispose of, any of its
properties or assets, other than in the ordinary
course of business,
23
<PAGE>
(iii) except in each case in the ordinary course of
business or as detailed as transactions not in the
ordinary course in the Company's business plan set
forth as Section 3.18(a) of the Disclosure
Schedule, and except as expressly otherwise
contemplated hereby,
(A) has not incurred and will not incur any
obligations or liabilities (fixed, contingent
or other),
(B) has not entered and will not enter into any
commitments, and
(C) has not canceled and will not cancel any
debts or claims,
(iv) has not made or committed to make, and will not
make or commit to make, any additions to its
property or any purchases of machinery or
equipment, except for normal maintenance and
replacements,
(v) has not discharged or satisfied, and will not
discharge or satisfy, any Lien and has not paid
and will not pay any obligation or liability
(absolute or contingent) other than current
liabilities or obligations under contracts then
existing or thereafter entered into in the
ordinary course of business, and commitments under
Leases existing on that date or incurred since
that date in the ordinary course of business,
(vi) except in the ordinary course, has not increased
and will not increase the compensation payable or
to become payable to any of its directors,
officers, employees, advisers, consultants,
salesmen or agents or otherwise alter, modify or
change the terms of their employment or
engagement,
(vii) has not suffered any material damage, destruction
or loss (whether or not covered by insurance) or
any acquisition or taking of property by any
Authority,
(viii) has not waived, and will not waive, any rights of
material value without fair and adequate
consideration,
(ix) has not experienced any work stoppage,
(x) has not entered into, amended or terminated and
will not enter into, amend or terminate any Lease,
Governmental Authorization, Private Authorization,
Material Agreement, Employment Arrangement,
Contractual Obligation or transaction with any
24
<PAGE>
Affiliate, except for terminations in the ordinary
course of business in accordance with the terms
thereof,
(xi) has not amended or terminated and will not amend
or terminate, and has kept and will keep in full
force and effect including without limitation
renewing to the extent the same would otherwise
expire or terminate, all insurance policies and
coverage,
(xii) has not entered into, and will not enter into, any
other transaction or series of related
transactions which individually or in the
aggregate is material to the Company or the
Company and its Subsidiaries taken as a whole,
except in the ordinary course of business, and
(xiii) has not, nor has any affiliate (as defined in
Section 517.021(1) of the Florida Statutes),
transacted business with the government of Cuba or
with any person or affiliate located in Cuba.
(b) From the end of its most recent fiscal year to the date of
this Agreement, except as described in Section 3.18(b) of the Disclosure
Schedule, neither the Company nor any Subsidiary has, or on or prior to the
Public Offering Closing Date will have, declared, made or paid, or agreed to
declare, make or pay, any Distribution.
3.19 Bank Accounts, Etc. A true and correct and complete list as of
------------------
the date of this Agreement of all banks, trust companies, savings and loan
associations and brokerage firms in which the Company or any Subsidiary has an
account or a safe deposit box and the names of all Persons authorized to draw
thereon, to have access thereto, or to authorize transactions therein, the names
of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof has been previously
delivered to VIALOG.
3.20 Adverse Restrictions. Neither the Company nor any Subsidiary is
--------------------
a party to or subject to, nor is any of its property subject to, any Applicable
Law, Governmental Authorization, Contractual Obligation, Employment Arrangement,
Material Agreement or Private Authorization, or any other obligation or
restriction of any kind or character, or any aggregation thereof, which impairs
the Company's or any Subsidiary's ability to conduct its business as it is
currently being conducted or which could have any Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, except as set forth in
Section 3.20 of the Disclosure Schedule.
3.21 Broker or Finder. No Person assisted in or brought about the
----------------
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or any Stockholder.
3.22 Personal Injury or Property Damage; Warranty Claims; Etc. Except
--------------------------------------------------------
as set forth in Section 3.22 of the Disclosure Schedule, neither the Company nor
any Subsidiary or any Person acting for or on behalf of the Company or any
Subsidiary, including without limitation any
25
<PAGE>
insurance carrier, has at any time since December 31, 1995, paid, and there is
not now pending or, to the knowledge of the Company, threatened any Claim (or
any basis for any such Claim) relating to, any damages to any third party for
injuries to Persons or damage to property, or for breach of warranty, which, in
the case of pending or threatened Claims, if determined Adversely to the Company
or any Subsidiary, individually or in the aggregate (taking into account
unasserted Claims of similar nature), could have any Adverse Effect on the
Company or the Company and its Subsidiaries taken as a whole.
3.23 Environmental Matters.
---------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Company and each Subsidiary:
(i) is in compliance in all material respects with all
Environmental Laws and has not been notified that
it is liable or potentially liable, has not
received any request for information or other
correspondence concerning any site or facility,
and is not a "responsible party" or "potentially
responsible party" under the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980, as amended, the Resource Conservation
Recovery Act of 1976, as amended, or any similar
state law,
(ii) has not entered into or received any consent
decree, compliance order, or administrative order
relating to Environmental Requirements,
(iii) is not a party in interest or in default under any
judgment, order, writ, injunction or decree or any
final order relating to Environmental
Requirements, and
(iv) has obtained all material Governmental
Authorizations and Private Authorizations
(including without limitation all Environmental
Permits) and made all Governmental Filings which
are required to be filed by the Company and each
Subsidiary for the ownership of its property,
facilities and assets and the operation of its
businesses under all Environmental Laws, is and at
all times since its organization has been in
material compliance with the terms and conditions
of all such required Governmental and Private
Authorizations and all Environmental Requirements,
and is not the subject of or, to the Company's
knowledge, threatened with any Legal Action
involving a demand for damages or any other
potential liability with respect to violations or
breaches of any Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure
Schedule:
26
<PAGE>
(i) no spill, disposal, release, burial or placement
of Hazardous Materials in the soil, air or water
has occurred on any property or facility owned,
leased, operated or occupied by the Company or any
Subsidiary during the period that such facilities
and properties were owned, leased, operated or
occupied by it or, to the knowledge of the
Company, at any other time or at any other
facility or site to which Hazardous Materials from
or generated by the Company or any Subsidiary may
have been taken at any time in the past,
(ii) there has been no spill, disposal, release, burial
or placement of Hazardous Materials, in the soil,
air or water on any property which could
reasonably be expected to result or has resulted
in contamination of or beneath any properties or
facilities owned, leased, operated or occupied by
the Company or any Subsidiary during the period
that such facilities and properties were owned,
leased, operated or occupied by it (or, to the
knowledge of the Company, at any other time), and
(iii) no notice has been received by the Company or any
Subsidiary and no Lien has arisen on its or any
Subsidiary's properties or facilities under
Environmental Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary has any above-ground or
underground tanks on property owned, leased, operated or occupied by it for the
storage of Hazardous Materials.
(d) There has not been, and on or prior to the Public Offering
Closing Date, there will not be, any past or present Events or plans of the
Company or any Subsidiary or any of its predecessors, which, individually or in
the aggregate, constitute a breach of any Environmental Requirements or which,
individually or in the aggregate, may interfere with or prevent continued
compliance with all Environmental Requirements, or which, individually or in the
aggregate, may give rise to any common law, statutory or other legal liability,
or otherwise form the basis of any Claim, assessment or remediation cost, fine,
penalty or assessment based on or related to the transportation, transmission,
gathering, processing, distribution, use, treatment, storage, disposal or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material with respect to the Company or any
Subsidiary or any of its predecessors or its or any of their business,
operations or property which could have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary has used any Hazardous
Materials in the conduct of its business. To the extent that any Hazardous
Materials are so set forth, Section 3.23(e) of the Disclosure Schedule also sets
forth (i) a description of Hazardous Materials used, (ii) the annual volume of
each of the Hazardous Materials used, (iii) the years during which each of the
Hazardous
27
<PAGE>
Materials used occurred, and (iv) the Persons to whom such Hazardous Materials
were transferred and/or transported after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a
complete and correct description of all Hazardous Materials generated by the
Company or any Subsidiary which are not set forth in Section 3.23(e), the
approximate annual volumes of each of the Hazardous Materials, and all Persons
to whom such Hazardous Materials have been transferred and/or transported.
(g) No site assessment, audit, study, test or other
investigation has been conducted by or on behalf of the Company or any
Subsidiary, nor has the Company received any notice from any governmental
agency, or financial institution as to environmental matters at any property
owned, leased, operated or occupied by the Company or any Subsidiary, except as
set forth in Section 3.23(g) of the Disclosure Schedule.
3.24 Materiality. The matters and items excluded from the
-----------
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to be Adverse to the
Company or the Company and its Subsidiaries taken as a whole.
3.25 Solvency. As of the execution and delivery of this Agreement,
--------
the Company and the Company and its Subsidiaries taken as a whole are and, as of
the Public Offering Closing Date, will be solvent.
3.26 VIALOG Stock. The Stockholders will hold for investment the
------------
VIALOG Stock constituting the Stock Merger Consideration.
3.27 Compliance with Regulations Relating to Securities Credit. None
---------------------------------------------------------
of the borrowings, if any, of the Company were incurred or used for the purpose
of purchasing or carrying any security which at the date of its acquisitions
was, or any security which now is, margin stock or other margin security within
the meaning of Regulations T of the Margin Rules or a "security that is publicly
held," within the meaning of the Margin Rules, and the cash portion of the
proceeds from the consummation of the Transactions will not be used for the
purpose of purchasing or carrying any margin stock or other margin security, or
a "security that is publicly held", or any security issued by VIALOG, or in any
way which would involve the Company in any violation of the Margin Rules, and
neither the Company nor any Subsidiary owns any margin stock or other margin
security, or a "security that is publicly held", and neither the Company nor any
Subsidiary has any present intention of acquiring any margin stock or other
margin security, or any "security that is publicly held".
3.28 Certain State Statutes Inapplicable. The provisions of
-----------------------------------
applicable Delaware takeover laws, if any, will not apply to this Agreement, the
Merger or the Transactions.
3.29 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as of a specific date, all of the
representations and warranties of the
28
<PAGE>
Company set forth in this Article will be true and correct in all material
respects on the Public Offering Closing Date with the same force and effect as
though made on and as of that date and those, if any, which speak as a specific
date will be true and correct in all material respects as of such date.
3.30 Registration Statement. All information furnished by or on
----------------------
behalf of the Company or any Stockholder in writing for use in the Registration
Statement and all information relating to the Company in the Prospectus (a copy
of which shall be provided by VIALOG to the Company and Principal Stockholder
for their review) is true, correct and complete and does not contain any untrue
statement of material fact or omit to state any material fact necessary to make
such statements, in the light of the circumstances in which they were made, not
misleading. In the event any such information, through the occurrence or
nonoccurrence of any event or events between the date of this Agreement and the
Public Offering Closing Date, ceases to be true, correct and complete or
contains any untrue statement of material fact or omits to state any material
fact necessary to make such statements, in the light of the circumstances in
which they were made, not misleading, the Company, upon discovery thereof will
provide VIALOG, in writing, sufficient information to correct such untrue
statement or omission.
3.31 Predecessor Status; etc. Set forth in Section 3.31 of the
-----------------------
Disclosure Schedule is a listing of all names of all predecessor companies of
the Company and the names of any Entities from which, since December 31, 1991,
the Company previously acquired material properties or assets. Except as
disclosed in Section 3.31 of the Disclosure Schedule, the Company has never been
a Subsidiary or division of another Entity, nor a part of an acquisition which
was later rescinded. None of the Company, the Principal Stockholder or any
Subsidiary has ever owned any capital stock of VIALOG nor, except as set forth
in Section 3.31 of the Disclosure Schedule, has there been, since December 31,
1991, any sale or spin-off of material assets by the Company or any Subsidiary
other than in the ordinary course of business.
ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL STOCKHOLDER
The Principal Stockholder represents, warrants and covenants to, and
agrees with, VIALOG and VIALOG Merger Subsidiary as follows:
4.1 Organization. The Principal Stockholder (if other than an
------------
individual) is an Entity duly organized, validly existing and in good standing
under the laws or its jurisdiction of organization.
4.2 Power and Authority. The Principal Stockholder (if other than an
-------------------
individual) has adequate power and authority (corporate, partnership, trust or
other) and all necessary
29
<PAGE>
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each other Collateral Document executed or required to be executed pursuant
hereto or thereto. The execution, delivery and performance of this Agreement and
each other Collateral Document executed or required to be executed pursuant
hereto or thereto have, to the extent applicable, been duly authorized by all
requisite corporate, partnership, trust or other action, including that, if
required, of the Principal Stockholder's stockholders or partners.
4.3 Enforceability. This Agreement has been duly executed and
--------------
delivered by the Principal Stockholder and constitutes, and each Collateral
Document executed or required to be executed by the Principal Stockholder
pursuant hereto or thereto when executed and delivered by the Principal
Stockholder will constitute legal, valid and binding obligations of the
Principal Stockholder, enforceable in accordance with their respective terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference, fraudulent
conveyance and other similar laws relating to or affecting the rights of
creditors and except as the same may be subject to the effect of general
principles of equity.
4.4 Title to Shares. Except as set forth in Section 4.4 of the
---------------
Disclosure Schedule (all of which exceptions will be removed, satisfied or
discharged no later than the Merger Closing), the Principal Stockholder owns and
has good and merchantable title to those Shares owned by the Principal
Stockholder and to be exchanged pursuant to this Agreement, free and clear or
all Liens.
4.5 No Conflict; Required Filings and Consents. Neither the
------------------------------------------
execution and delivery of this Agreement or any Collateral Document executed or
required to be executed pursuant hereto or thereto, nor the consummation of the
Merger and the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Principal Stockholder:
(a) will materially conflict with, or result in a breach or
violation of, or constitute a default under, any Applicable Law on the part of
such Stockholder or will conflict with, or result in a material breach or
violation of, or constitute a material default in the performance, observance or
fulfillment of, or a material default under, or permit the acceleration of any
obligation or liability in, or, but for any requirements of notice or passage of
time or both, would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
the Principal Stockholder,
(b) will result in or permit the creation or imposition of any
Lien upon any property or asset of the Principal Stockholder used or now
contemplated to be used by the Company, or
(c) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in connection
with the Merger and the Transactions and as the Securities Act or applicable
state securities laws may apply to compliance by the Principal Stockholder with
the provisions of this Agreement relating to the Public Offering and
registration rights, pursuant to the HSR Act (if applicable) or as set forth in
Section 4.5 of the Disclosure Schedule.
30
<PAGE>
ARTICLE
5
REPRESENTATIONS AND WARRANTIES OF VIALOG
AND VIALOG MERGER SUBSIDIARY
VIALOG and VIALOG Merger Subsidiary, jointly and severally, represent,
warrant and covenant to, and agree with, the Company as follows:
5.1 Organization and Qualification. VIALOG is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of
Massachusetts. VIALOG Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware.
5.2 Power and Authority. Except for such consents of Authorities as
-------------------
may be necessary in connection with change-of-control transactions with respect
to Governmental Authorities listed in Section 3.1(c) of the Disclosure Schedule,
each of VIALOG and VIALOG Merger Subsidiary has all requisite power and
authority (corporate and other) and has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto and to consummate the Merger and the Transactions. The execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action. This Agreement has been duly
executed and delivered by each of VIALOG and VIALOG Merger Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto when executed and delivered by it will constitute,
legal, valid and binding obligations of VIALOG and VIALOG Merger Subsidiary,
respectively, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
5.3 No Conflict; Required Filings and Consents. Except for such
------------------------------------------
consents of Authorities as may be necessary in connection with change-of-control
transactions with respect to Governmental Authorities listed in Section 3.1(c)
of the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Collateral Document executed or required to be executed pursuant hereto
or thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of VIALOG and VIALOG
Merger Subsidiary:
(a) will conflict with, or result in a breach or violation of,
or constitute a default under, any Applicable Law on the part of VIALOG or
VIALOG Merger Subsidiary or will conflict with, or result in a breach or
violation of, or constitute a default under, or permit the
31
<PAGE>
acceleration of any obligation or liability in, or but for any requirement of
giving of notice or passage of time or both would constitute such a conflict
with, breach or violation of, or default under, or permit any such acceleration
in, any Contractual Obligation of VIALOG or VIALOG Merger Subsidiary, or
(b) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements under Applicable
Law in connection with the Merger and the Transactions and as the Securities Act
and applicable state securities laws may apply to compliance by VIALOG with the
provisions of this Agreement relating to the Public Offering and registration
rights and except pursuant to the HSR Act (if applicable).
5.4 Financing. VIALOG has or, upon consummation of the Public
---------
Offering, will have sufficient funds or available financing to enable the
Surviving Corporation to pay the Aggregate Merger Consideration for all Shares
of the Company Stock as provided in Sections 2.1(a) and 2.1(d), the
consideration for each Option Security and each Convertible Security as provided
in Section 2.4, and all fees and expenses related to the Merger and its
obligations in connection with the Public Offering.
5.5 Broker or Finder. Except for the Underwriter, the fees and
----------------
expenses of which (other than pursuant to the Underwriting Agreement) are solely
the responsibility of VIALOG, no Person assisted in or brought about the
negotiation of this Agreement or the subject matter of the Transactions in the
capacity of broker, agent or finder or in any similar capacity on behalf of
VIALOG or VIALOG Merger Subsidiary.
5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary. Neither
-------------------------------------------------------
of VIALOG or VIALOG Merger Subsidiary has incurred any liabilities or
Contractual Obligations, except those incurred in connection with its
organization and ordinary course business operations (including Employment
Arrangements), the negotiation of this Agreement and the performance of this
Agreement and of the Participating Agreements with the Other Participating
Companies, the registration of VIALOG Stock under the Securities Act, compliance
with the requirements of the HSR Act (if applicable) and the performance of all
other Governmental Filings, and the financing of the foregoing. Except as
contemplated by the foregoing, neither of VIALOG or VIALOG Merger Subsidiary has
engaged in any business activities of any type or kind whatsoever, nor entered
into any agreements or arrangements with any Person, nor is it subject to or
bound by any obligation or undertaking.
5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary. The
-----------------------------------------------------
authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary is as set forth in Section 5.7 of the Disclosure Schedule. All of
such outstanding capital stock has been duly authorized and validly issued, is
fully paid and non-assessable and is not subject to any preemptive or similar
rights. All shares of common stock of VIALOG Merger Subsidiary held by VIALOG
have been duly authorized and validly issued to VIALOG and are fully paid and
non-assessable and are not subject to any preemptive or similar rights. As of
the date of this Agreement, except for this Agreement, the Participating
Agreements, the Underwriting Agreement, and as set forth on Section 5.7 of the
Disclosure Schedule, there are not any
32
<PAGE>
outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or any other agreements of any character obligating VIALOG or VIALOG
Merger Subsidiary to issue any shares of VIALOG Stock or other shares of capital
stock of VIALOG or of VIALOG Merger Subsidiary, or any other securities
convertible into or evidencing the right to subscribe for any such shares. When
issued in connection with the Merger, the VIALOG Stock will be duly authorized,
validly issued, fully paid and non-assessable and will not be subject to any
preemptive or similar rights.
5.8 Registration Statement. The Registration Statement and any
----------------------
amendments thereto will comply when the Registration Statement becomes effective
in all material respects with the provisions of the Securities Act and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Prospectus will not as of the issue date thereof contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations and
warranties contained in this Section 5.8 will not apply to statements or
omissions in the Registration Statement or the Prospectus based on information
relating to the Underwriter furnished to VIALOG in writing by the Underwriter,
or based on information relating to any of the Other Participating Companies or
its stockholders furnished to VIALOG in writing by such Participating Company or
any or its stockholders, or the Company or the Stockholders furnished to VIALOG
in writing by the Company or any of the Stockholders. VIALOG will furnish the
Company with a copy of the Registration Statement and of each amendment thereto
until the Merger Closing and thereafter will furnish the Principal Stockholder
with each amendment thereto and the final Prospectus.
5.9 Solvency. After the Effective Time, and upon the consummation
--------
of the Merger, the Participating Mergers and the Transactions, VIALOG and its
subsidiaries, individually and taken as a whole, will be solvent.
5.10 Firm Commitment. The contemplated Public Offering shall be a
---------------
firm commitment underwriting and not a best efforts underwriting and all VIALOG
Stock sold in the offering will be purchased by the Underwriter on the Effective
Date and paid for by the Underwriter on the Public Offering Closing Date.
5.11 Participating Agreements of Other Participating Companies.
---------------------------------------------------------
Except as set forth in Section 5.11 of the Disclosure Schedule or as dictated by
the structuring of any transaction with a Participating Company as a sale of
assets or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, each Participating Agreement
entered into among VIALOG, any Subsidiary of VIALOG, and any Other Participating
Company contains provisions substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement, including,
without limitation, the representations and warranties, covenants, termination
provisions and indemnification provisions contained in those Articles. Except as
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or
33
<PAGE>
as set forth in any employment or noncompetition agreement required to be
executed as a condition to closing pursuant to Article 7 of a Participating
Agreement, no Participating Agreement contains any material provision which is
not contained in substantially identical form in this Agreement.
5.12 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as a specific date, all of the
representations and warranties of VIALOG and the VIALOG Merger Subsidiary set
forth in this Article will be true and correct in all material respects on the
Public Offering Closing Date with the same force and effect as though made on
and as of that date, and those, if any, which speak as of a specific date will
be true and correct in all material respects as of such date.
ARTICLE
6
ADDITIONAL COVENANTS
6.1 Access to Information; Confidentiality.
--------------------------------------
(a) The Company will afford to VIALOG and the Representatives
of VIALOG full access during normal business hours throughout the period prior
to the Effective Time to all of its (and its Subsidiaries') properties, books,
contracts, commitments and records (including without limitation Tax Returns)
and, during such period, will furnish promptly upon request (i) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of any Applicable Law (including without limitation federal or
state securities laws) or filed by any of them with any Authority in connection
with the Transactions or which may have a material effect on their respective
businesses, operations, properties, prospects, personnel, condition (financial
or other), or results of operations, (ii) to the extent not provided for
pursuant to the preceding clause, (A) all financial records, ledgers, workpapers
and other sources of financial information processed or controlled by the
Company or its accountants deemed by the Accountants necessary or useful for the
purpose of performing an audit of the Company and the Company and its
Subsidiaries taken as a whole and certifying financial statements and financial
information and (B) all other information relating to the Company, its
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Registration Statement, and
(iii) such other information concerning any of the foregoing as VIALOG will
reasonably request. Subject to the terms and conditions of the Confidentiality
Letter (as defined below), which are expressly incorporated in this Agreement by
reference for the benefit of the parties hereto, VIALOG will hold and will use
commercially reasonable efforts to cause the Representatives of VIALOG to hold,
and the Company will hold and will use commercially reasonable efforts to cause
the Representatives of the Company to hold, in strict confidence all non-public
documents and information furnished (whether prior or subsequent hereto) to
VIALOG or to the Company, as the case may be, in connection with the
Transactions.
34
<PAGE>
(b) Subject to the terms and conditions of the Confidentiality
Letter, VIALOG and the Company may disclose such information as may be necessary
in connection with seeking all Governmental and Private Authorizations or that
is required by Applicable Law to be disclosed. In the event that this Agreement
is terminated in accordance with its terms, VIALOG and the Company will each
promptly redeliver all non-public written material provided pursuant to this
Section or any other provision of this Agreement or otherwise in connection with
the Merger and the Transactions and will not retain any copies, extracts or
other reproductions in whole or in part of such written material other than one
copy thereof which will be delivered to independent counsel for such party.
(c) The Company and VIALOG acknowledge that the Company and VIALOG
executed a Confidential Disclosure Agreement dated May 7, 1996 and a Second
Confidential Disclosure Agreement dated June 3, 1996 (collectively, the
"Confidentiality Letter"), which separately and as incorporated in this
Agreement will remain in full force and effect after and notwithstanding the
execution and delivery of this Agreement, and that information obtained from the
Company by VIALOG, or its Representatives or by the Company or its
Representatives from VIALOG pursuant to Section 6.1(a), the Confidentiality
Letter or otherwise will be subject to the provisions of the Confidentiality
Letter.
(d) No investigation pursuant to this Section 6.1 will affect any
representation or warranty in this Agreement of any party or any condition to
the obligations of the parties.
6.2 Agreement to Cooperate.
----------------------
(a) Each of the Parties will use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate the
Merger and make effective the Transactions, including using commercially
reasonable efforts (i) to prepare and file with the applicable Authorities as
promptly as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information, data and
exhibits, necessary to request issuance of orders approving the Merger and the
Transactions by all such applicable Authorities, each of which must be obtained
or become final in order to satisfy the conditions applicable to it set forth in
Section 7; (ii) to obtain all necessary or appropriate waivers, consents and
approvals, (iii) to effect all necessary registration, filings and submissions
(including without limitation the Registration Statement, other filings under
the Securities Act or the HSR Act and any other submissions requested by the SEC
or the Federal Trade Commission or Department of Justice) and (iv) to lift any
injunction or other legal bar to the Merger and the Transactions (and, in such
case, to proceed with the Merger and the Transactions as expeditiously as
possible), subject, however, to the requisite votes of the Stockholders. Each of
the Parties recognizes that the consummation of the Merger and the Transactions
may be subject to the pre-merger notification requirements of the HSR Act. Each
agrees that, to the extent required by Applicable Law to consummate the Merger,
it will file with the Antitrust Division of the Department of Justice and the
Federal Trade Commission a Notification and Report Form in a manner so as to
constitute substantial compliance with the notification requirements of the HSR
Act. Each covenants and agrees to use commercially reasonable efforts to achieve
the
35
<PAGE>
prompt termination or expiration of any waiting period or any extensions
thereof under the HSR Act.
(b) Each of the Parties agrees to take such actions as may be
necessary to obtain any Governmental Authorizations legally required for the
consummation of the Merger and the Transactions, including the making of any
Governmental Filings, publications and requests for extensions and waivers.
(c) The Company will use commercially reasonable efforts on or
prior to the Public Offering Closing Date (i) to obtain the satisfaction of the
conditions specified in Sections 7.1 and 7.2; (ii) if requested by VIALOG, to
seek the consents (to the extent required) to the continued existence in
accordance with its then-stated terms of all long-term debt of each of the
Company and each of its Subsidiaries; and (iii) to attempt to cause those key
employees of the Company and its Subsidiaries designated by VIALOG that are not
Stockholders to execute and deliver non-competition agreements substantially
conforming in form and substance to the non-competition agreements currently
maintained by VIALOG with its key employees in the form attached as Exhibit
-------
6.2(c). Each of VIALOG and VIALOG Merger Subsidiary will use its best efforts on
- ------
or prior to the Public Offering Closing Date to obtain the satisfaction of the
conditions applicable to it specified in Sections 7.1 and 7.3. The Principal
Stockholder will use commercially reasonable efforts to obtain the satisfaction
of the conditions applicable to the Principal Stockholder in Section 7.2.
(d) The Company agrees that, except as set forth in Section 3.19 of
the Disclosure Schedule, prior to the Public Offering Closing Date it will not
make or permit to be made any material change affecting any bank, trust company,
savings and loan association, brokerage firm or safe deposit box or in the names
of the Persons authorized to draw thereon, to have access thereto or to
authorize transactions therein or in such powers of attorney, or open any
additional accounts or boxes or grant any additional powers of attorney, without
in each case obtaining the prior written consent of VIALOG, which consent VIALOG
will not unreasonably withhold.
(e) The Company will take such steps as are necessary and
appropriate to obtain, and will promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.15(b) of the Disclosure Schedule.
6.3 Assignment of Contracts and Rights. Anything in this Agreement to the
----------------------------------
contrary notwithstanding, this Agreement will not constitute an agreement to
assign any Claim, Contractual Obligation, Governmental Authorization, Lease,
Private Authorization, commitment, sales, service or purchase order, or any
claim, right or benefit arising thereunder or resulting therefrom, if the Merger
or the Transactions would be deemed an attempted assignment thereof without the
required consent of a third party thereto and would constitute a breach thereof
or in any way affect the rights of VIALOG, VIALOG Merger Subsidiary or the
Company thereunder. If such consent is not obtained, or if consummation of the
Merger and the Transactions would affect the rights of the Company thereunder so
that the Surviving Corporation would not in fact receive all such rights, the
Company will cooperate with VIALOG in any arrangement designed
36
<PAGE>
to provide for the benefits thereof to the Surviving Corporation, including
subcontracting, sub-licensing or subleasing to the Surviving Corporation or
enforcement for the benefit of the Surviving Corporation of any and all rights
of the Company or its Subsidiaries against a third party thereto arising out of
the breach or cancellation by such third party or otherwise. Any assumption by
the Surviving Corporation of the Company's rights thereunder by operation of law
in connection with the Merger which will require the consent or approval of any
third party will be made subject to such consent or approval being obtained.
6.4 Compliance with the Securities Act. Each of VIALOG and the Company
----------------------------------
will use its commercially reasonable efforts to cause each executive officer,
each director and each other Person who is an "affiliate," as that term is
defined in paragraph (a) of Rule 144 under the Securities Act, of the Company,
or who will, upon consummation of the Merger and the Transactions become, an
"affiliate" of VIALOG, and each Stockholder of the Company, to deliver to VIALOG
on or prior to the Merger Closing a written agreement (the "Registration Rights
Agreement") to the effect that such Person will not offer to sell, sell or
otherwise dispose of any shares of VIALOG Stock issued pursuant to the
consummation of the Transactions, except, in each case, pursuant to an effective
registration statement or in compliance with Rule 144, or in a transaction
which, in the opinion of legal counsel for such "affiliates" (such legal counsel
to be satisfactory to legal counsel for VIALOG), as set forth in a written
opinion satisfactory in form, scope and substance to the legal counsel of
VIALOG, is exempt from registration under the Securities Act and applicable
state securities laws. The Registration Rights Agreement shall be substantially
in the form of Exhibit 6.4. Notwithstanding anything to the contrary in this
-----------
Agreement, VIALOG will have no obligation under the Registration Rights
Agreement or otherwise to register under the Securities Act or any applicable
state securities laws, or otherwise to facilitate the transfer of, shares of
VIALOG Stock received by any such Person who fails to execute the Registration
Rights Agreement as provided herein, and such Person will forfeit all "demand
registration" and other rights provided for in the Registration Rights Agreement
and all "piggyback" rights provided for in the Registration Rights Agreement.
6.5 Conduct of Business.
-------------------
(a) Prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated, the Company and its Subsidiaries will (i) use
their best efforts to preserve intact their respective business organizations
and good will, keep available the services of their respective officers and
employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them, (ii)
confer on a regular and frequent basis with one or more representatives of
VIALOG to report operational matters of Materiality and the general status of
ongoing operations, and (iii) notify VIALOG of any emergency or other change in
the normal course of their business and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be Material to the business, operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
37
<PAGE>
(b) Except as set forth in Schedule 6.5(b) (or Section 6.5(b) of the
Disclosure Schedule, as the case may be) or with the written permission of
VIALOG, the Company agrees further that the Company (i) will not make, declare
or pay any dividends or other distributions on any Shares or the stock of the
Company's Subsidiaries or redeem or repurchase or otherwise acquire any Shares
(except cancellation of options and warrants as required in this Agreement),
(ii) will not enter into or terminate any Employment Arrangement with any
director or officer, (iii) will not incur any obligation or liability (absolute
or contingent), except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business (iv) will not
discharge or satisfy any Lien or Encumbrance or pay any obligation or liability
(absolute or contingent) other than current liabilities shown on its Financial
Statements, and current liabilities incurred since those dates in the ordinary
course of business, (v) will not mortgage, pledge, create a security interest
in, or subject to Lien or other Encumbrance any of its assets, tangible or
intangible, (vi) will not sell or transfer any of its tangible assets or cancel
any debts or claims except in each case in the ordinary course of business,
(vii) will not sell, assign, or transfer any trademark, trade name, patent, or
other Intangible Asset, (viii) will not waive any right of any substantial
value, (ix) will not make any material change in the tax procedures or practices
followed by the Company or any of its Subsidiaries, (x) will not make any change
in credit terms offered by the Company or any of its Subsidiaries, (xi) will not
make any capital expenditure or Material Commitment for any additions or
improvements to its or any of its Subsidiary's property, plant or equipment,
(xii) will not amend its capitalization, or issue any stocks, bonds or other
securities, except that the Company may issue shares pursuant to outstanding
Option Securities and Convertible Securities, (xiii) will not enter into, modify
or extend, or promise any bonus or incentive compensation program that was not
in place prior to June 1, 1996 and (xiv) will otherwise conduct its operation
and the operations of its Subsidiaries according to their ordinary and usual
course of business.
6.6 No Solicitation. The Company will not, nor will it permit any
---------------
Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquires or the making of any proposal with respect to an Other Transaction,
engage in any discussions or negotiations concerning, or provide to any other
person any information or data relating to it or any Subsidiary for the purposes
of, or otherwise cooperate in any way with or assist or participate in, or
facilitate any inquires or the making of any proposal which constitutes, or may
reasonably be expected to lead to, a proposal to seek or effect an Other
Transaction, or agree to or endorse any Other Transaction. Nothing contained in
this Section will prohibit the Company or its Board of Directors from making any
disclosure to Stockholders that, in the reasonable judgment of its Board of
Directors in accordance with, and based upon the written advice of outside
counsel, is required under Applicable Law. The Company will promptly advise
VIALOG of, and communicate the material terms of, any proposal it may receive,
or any inquires it receives which may reasonably be expected to lead to such a
proposal relating to an Other Transaction, and the identity of the Person making
it. The Company will further advise VIALOG of the status and changes in the
material terms of any such proposal or inquiry (or any amendment to any of
them). During the term of this Agreement, the Company will not enter into any
agreement oral or written, and whether or not legally binding, with any
38
<PAGE>
Person that provides for, or in any way facilitates, an Other Transaction, or
affects any other obligation of the Company under this Agreement.
6.7 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) From and after the Effective Time, the Surviving Corporation
will indemnify, defend and hold harmless the present and former officers and
directors of the Company against all Claims or amounts that are paid in
settlement of, with the approval of the Surviving Corporation, or otherwise in
connection with any Claim based in whole or in part on the fact that such Person
is or was a director or officer of the Company and arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the Merger and the Transactions), in each case to the fullest extent
permitted under the DBCL (and will pay any expenses in advance of the final
disposition of any such action or proceeding to each such Person to the fullest
extent permitted under the DBCL, upon receipt from the Person to whom expenses
are advanced of an undertaking to repay such advances to the extent required
under the DBCL). The Surviving Corporation will observe and comply with the
Company's obligations pursuant to the indemnification agreements, if any, listed
in Section 3.9 of the Disclosure Schedule.
(b) This Section 6.7 is intended to be for the benefit of, and will
be enforceable by, the former officers and directors of the Company, their heirs
and personal representatives and will be binding on the Surviving Corporation
and its respective successors and assigns.
(c) VIALOG will apply for directors and officers insurance in the
amount of $2,000,000 for the benefit of the directors and officers of VIALOG and
the Surviving Corporations.
6.8 Notification of Certain Matters. The Company will give prompt notice
-------------------------------
to VIALOG, and VIALOG will give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any Event the occurrence or non-occurrence of
which would be likely to cause in any material respect (i) any representation or
warranty of the Company or VIALOG, as the case may be, contained in this
Agreement to be untrue or inaccurate, or (ii) in the case of the Company or the
Principal Stockholder, any change to be made in the Disclosure Schedule and (b)
any failure of the Company or VIALOG, as the case may be, to comply with or
satisfy, or be able to comply with or satisfy, any material covenant, condition
or agreement to be complied with or satisfied by it under this Agreement. The
delivery of any notice pursuant to this Section 6.8 will not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
6.9 Public Announcements. Until the Merger Closing, or in the event of
--------------------
termination of this Agreement, the closing of the Public Offering (or its
abandonment), the Company will consult with VIALOG before issuing any press
release or otherwise making any public statements with respect to this
Agreement, the Merger or any Transaction (including the Participating Mergers or
the termination of this Agreement in such event) and will not issue any such
press release or make any such public statement without the prior consent of
VIALOG and the written advice of legal counsel to VIALOG that such press release
or such public statement
39
<PAGE>
will not affect the registration of VIALOG Stock under the Securities Act or the
timing of the effectiveness thereof. The Company acknowledges and agrees that
VIALOG may, without the prior consent of the Company, issue such press release
or make such public statement as may be required by Applicable Law or any
listing agreement or arrangement to which VIALOG is a party with a national
securities exchange or the National Association of Securities Dealers, Inc.
Automated Quotation System, or as recommended by outside counsel. VIALOG will
exercise commercially reasonable efforts to furnish the Company a copy of any
press release relating to Other Participating Companies prior to its publication
and will furnish a copy of any such press release so issued as soon as
practicable after its publication, but any failure on VIALOG's part to do so
will not be deemed a breach of or default under this Agreement. VIALOG will
furnish the Company with a copy of any press release or public information of
VIALOG, at a reasonable time prior to its release for publication.
6.10 Conveyance Taxes. The Parties will cooperate with one another in the
----------------
preparation, execution and filing of all Returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.
6.11 Obligations of VIALOG. VIALOG agrees to take all action necessary to
---------------------
cause VIALOG Merger Subsidiary and the Surviving Corporation to perform their
respective obligations under this Agreement and will use commercially reasonable
efforts to consummate, and cause VIALOG Merger Subsidiary to consummate, the
Merger on the terms and conditions set forth in this Agreement.
6.12 Employee Benefits; Severance Policy. VIALOG will cause the Surviving
-----------------------------------
Corporation to maintain through its fiscal year ending December 31, 1997:
(a) employee incentive compensation and fringe benefits that are
substantially equivalent to those provided to employees of the Company and its
Subsidiaries as in effect on the date of this Agreement, subject to the right of
VIALOG and the Surviving Corporation to amend or terminate such programs in
accordance with their terms, provided that after any such amendment or
termination the resulting programs continue to be substantially equivalent to
the existing programs, and
(b) employee severance pay and benefits that are substantially
equivalent to the applicable severance programs of the Company and its
Subsidiaries as in effect on the date hereof, subject to the right of VIALOG and
the Surviving Corporation to amend or terminate such programs in accordance with
their terms, provided that after any such amendment or termination, the
resulting programs continue to be substantially equivalent to the existing
programs.
Notwithstanding the foregoing, as soon as convenient after such period, the
Surviving Corporation may, in its sole discretion, substitute employee
compensation, benefit and severance
40
<PAGE>
programs for those of the Company as are consistent with the programs provided
to VIALOG's employees and the employees of VIALOG's Subsidiaries.
6.13 Certain Actions Concerning Business Combinations.
------------------------------------------------
(a) Neither the Principal Stockholder nor any Representative thereof
will, during the period commencing on the date of the filing of the Registration
Statement and ending with the earlier to occur of the Merger Closing or the
termination of this Agreement in accordance with its terms, directly or
indirectly (i) solicit or initiate the submission of proposals or offers from
any Person or, (ii) participate in any discussions pertaining to, or (iii)
furnish any information to any Person other than VIALOG relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company or any Subsidiary (other than the Merger).
(b) The Company will not apply, and will not take any action
resulting in the application of, or otherwise elect to apply, the provisions of
applicable Delaware takeover laws, if any, with respect to or as a result of the
Merger or the Transactions.
6.14 Termination of Option Securities and Convertible Securities. The
-----------------------------------------------------------
Company will take all action necessary to terminate the exercise rights of all
outstanding Option Securities and the conversion rights of all Convertible
Securities issued by the Company as of the Effective Time to the extent such
option and conversion rights are not exercised prior to the Merger Closing, and
to provide timely notice to all holders of Option Securities and Convertible
Securities notifying them of such termination. Without the prior written consent
of VIALOG, except as set forth in Section 3.15(a) of the Disclosure Schedule,
(a) such termination or notice will not cause an acceleration of the exercise,
conversion or vesting schedule of any Option Security or of any Convertible
Security, and (b) the Company will not otherwise accelerate, or cause an
acceleration of, the exercise, conversion or vesting schedule of any Option
Security or Convertible Security. Prior to the Merger Closing, the Company will
issue Certificates to all holders of properly exercised Option Securities and
properly converted Convertible Securities. Such Certificates will accurately
represent the number of Shares to which such holder is entitled by virtue of
such exercise or conversion and the Company will amend Section 3.15(b) of the
Disclosure Schedule accordingly.
6.15 Tax Returns. The Principal Stockholder will cause all Tax Returns of
-----------
the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared in a manner consistent with past
practices and VIALOG will file such Tax Returns promptly upon receipt thereof
from the Principal Stockholder or the Company. At least thirty days before the
due date (including any extensions) for any such Tax Returns, the Principal
Stockholder or the Company will provide drafts of such Tax Returns to VIALOG for
its review and comment (which reasonable comments will be incorporated into the
final Tax Returns), and VIALOG will cooperate with the Principal Stockholder and
provide the Principal Stockholder with access to any books and records
reasonably necessary for their preparation of such draft Tax Returns. VIALOG
will file no amended Tax Returns with respect to the Company and the
41
<PAGE>
Subsidiaries for any taxable period ending on or before the Effective Time if
the Principal Stockholder reasonably objects thereto and furnishes VIALOG with
indemnification satisfactory in form and substance to it, including without
limitation, indemnification for all interest, penalties and Expenses resulting
from the failure to amend such Tax Returns and all proceedings in connection
therewith.
6.16 Employment and Noncompetition. On or before the Merger Closing, the
-----------------------------
Principal Stockholder will execute and deliver to VIALOG the employment
agreement contemplated by Section 7.2(s) to be effective as of the Public
Offering Closing Date. From and after the Public Offering Closing Date, the
Principal Stockholder will not compete with VIALOG or any of its Subsidiaries
except to the extent not prohibited by Exhibit 7.2(s).
--------------
6.17 Distributions, Liabilities, Etc.
-------------------------------
(a) The Company and VIALOG acknowledge and agree that the Company
contemplates that (i) prior to the Merger Closing it will make certain
Distributions to Stockholders, employees of and consultants to the Company, (ii)
no later than Merger Closing, it will cause certain Liens to be discharged in
their entirety (with financing statement terminations properly recorded), and
(iii) as of Merger Closing, it will indemnify VIALOG for certain liabilities
(except to the extent obligees with respect thereto release the Company and its
Affiliates therefrom), in each case as set forth in the Disclosure Schedule.
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be)
lists each such Distribution, Lien and liability;
(b) The Company agrees that Distributions not permitted pursuant to
Section 3.18 will be made by the Company (or VIALOG or the Surviving Company if
after the Effective Date) only to the extent provided in Schedule 6.17 (or
Section 6.17 of the Disclosure Schedule, as the case may be); and
(c) The Company further agrees that, notwithstanding anything to the
contrary in Section 10.1, it will indemnify VIALOG and VIALOG Merger Subsidiary
against all Claims and Expenses incurred by VIALOG and VIALOG Merger Subsidiary
(or either of them) by virtue of any failure on the Company's part to secure the
discharges from Liens contemplated by Schedule 6.17 (or Section 6.17 of the
Disclosure Schedule, as the case may be) or any damage or harm attributable to a
liability to be indemnified against as contemplated by Schedule 6.17 (or Section
6.17 of the Disclosure Schedule, as the case may be).
6.18 Release from Personal Guarantees. On or prior to the Public
--------------------------------
Offering Closing Date, VIALOG will either obtain releases of the personal
guarantees of the Stockholders of Indebtedness or discharge or arrange for the
discharge of such Indebtedness. VIALOG will either obtain releases of the
personal guarantees of the Stockholders of Contractual Obligations which extend
beyond the Public Offering Closing Date or indemnify and hold the Stockholders
harmless from such personal guarantees.
6.19 No Significant Changes. VIALOG agrees that there will be no
----------------------
"significant change" (as defined below) in the conduct of the business of the
Company for a period of two
42
<PAGE>
years after the Public Offering Closing Date without the approval of a majority
in interest of the Stockholders. "Significant change" means any change in the
location of the Company's facilities, a physical merging of the Company's
operations with another operation, any change in the position of those employees
who receive employment agreements pursuant to Section 7.2(s), or a reduction in
force or the termination of any employee except as related to employee
performance or the contemplated reorganization of the combined sales/marketing
staff or the accounting function.
6.20 Registration Statement.
----------------------
(a) The Company and the Principal Stockholder will furnish to VIALOG
all necessary information concerning the Company and the Principal Stockholder
for VIALOG to file the Registration Statement.
(b) The Company and the Principal Stockholder have reviewed or have
had reviewed on their behalf, and will be familiar with the information
concerning the Company and the Stockholders (or any of them) in the Prospectus,
which will be furnished to them by VIALOG for their review, and will have no
knowledge of any material fact, condition or information concerning the Company
and the Stockholders misstated or not disclosed in such Prospectus.
(c) VIALOG agrees to use its best efforts to prepare and file the
Registration Statement prior to February 28, 1997 and furnish to the Company and
the Principal Stockholder a copy of information concerning the Company and the
Stockholders included therein and each amendment thereto two business days prior
to such filing date.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder agree
----------
to use their best efforts to maintain the status of the Merger and the
Participating Mergers as a tax free incorporation, provided VIALOG's Accountants
so advise and provided the relative ownership rights of all parties remain the
same.
6.22 Self Dealing. VIALOG agrees that it will not and will not allow any
------------
Subsidiary to enter into contracts and business arrangements with Persons and
Entities owned in whole or in part by officers and directors of VIALOG or any
Subsidiary except on an arms length basis and with the approval of the VIALOG
Board of Directors.
ARTICLE
7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each Party to effect the Merger will be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
43
<PAGE>
(a) This Agreement, the Merger and the Transactions shall have been
approved and adopted in accordance with the DBCL by the affirmative vote, or to
the extent permitted by Applicable Law, by written consent, of the Stockholders
holding at least the minimum number of shares of the Company Stock then issued
and outstanding as are required by Applicable Law and the Company's
Organizational Documents for such approval and adoption,
(b) No proceeding before any Authority or Claim by any Person shall
be pending, challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation of the
Merger or the Public Offering, or seeking material damages or imposing any
Adverse conditions in connection therewith,
(c) Other than the filing of merger documents in accordance with the
DBCL and the DBCL, all authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, submissions, registrations, notices or
declarations required to be made, by VIALOG or VIALOG Merger Subsidiary and the
Company prior to the consummation of the Merger and the Transactions shall have
been obtained from, and made with, all required Authorities, except for such
authorizations, consents, waivers, orders, approvals, filings, registrations,
notices or declarations the failure to obtain or make would not, assuming
consummation of the Merger, have an Adverse Effect on the Company and the
Company and its Subsidiaries taken as a whole,
(d) (i) The Registration Statement shall have become effective and
shall contain no untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the shares of VIALOG Stock offered in the Public
Offering shall have been sold and purchased subject only to consummation of the
Merger, the Participating Mergers and the Transactions, (iii) every condition to
closing the Public Offering (except as provided in clause (iv) immediately
succeeding) shall have been satisfied or properly waived and (iv) release of the
closing documents relating to the Public Offering and distribution of the
proceeds of the sale of all shares of VIALOG Stock sold and purchased in the
Public Offering shall have been unconditionally authorized by the Underwriter
upon consummation of the Merger and the Participating Mergers,
(e) The minimum number of Participating Mergers required to prevent
termination pursuant to Section 8.1(b)(ii) of this Agreement shall have been
authorized and approved in accordance with Applicable Law and the Organizational
Documents of the Other Participating Companies, in the case of the Participating
Mergers,
(f) Subject to such material amendments, if any, as shall be
proposed prior to Merger Closing by VIALOG to be effective immediately after
Merger Closing, and to the extent reasonably satisfactory to the Company and the
Other Participating Companies, the VIALOG stock option plan described in the
Registration Statement shall have been approved and adopted by all action
(corporate and other) required for implementation thereof,
(g) Each of the Persons named on Exhibit 7.1(g), including one
--------------
Person proposed by a majority of the chief executive officers of the Company and
the Other Participating Companies acting as a group, shall have been elected a
director of VIALOG,
44
<PAGE>
effective immediately after the Public Offering Closing Date, and all together
shall constitute the entire Board of Directors of VIALOG, each to serve until
the election of the successor to, or the earlier resignation or termination of,
such director, and
(h) VIALOG shall have delivered to the Exchange Agent that number of
shares of VIALOG Stock as determined pursuant to Section 2.1 of this Agreement
and of the Participating Agreements issued in the name of the Stockholders and
the stockholders and other Persons holding equity interests in the Participating
Companies.
7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary.
----------------------------------------------------------------
The obligations of VIALOG and VIALOG Merger Subsidiary to effect the Merger will
be subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived, in whole or in part, to
the extent permitted by Applicable Law:
(a) The Company shall have complied in all material respects with
its agreements contained in this Agreement, the certificates to be furnished to
VIALOG pursuant to this Section shall be true, correct and complete, all
Collateral Documents shall be reasonably satisfactory in form, scope and
substance to VIALOG and its counsel, and VIALOG and its counsel shall have
received all information and copies of all documents, including records of
corporate proceedings, which they may reasonably request in connection
therewith, such documents where appropriate to be certified by proper corporate
officers,
(b) The Company shall have furnished VIALOG and the Underwriters
with the favorable opinion, dated the Public Offering Closing Date of Jones,
Day, Reavis & Pogue, which may contain limitations and qualifications as to
scope and law and rely on certifications as to facts of officers of the Company,
the Principal Stockholder, and public officials as are reasonable and customary
to opinions delivered in the type of business transactions covered by this
Agreement, addressing the following:
(i) Valid existence and good standing of the Company and each
Subsidiary, together with an opinion as to foreign
qualifications,
(ii) In respect of the Company, the number of shares of
capital stock or other voting securities authorized,
issued, reserved for issuance or outstanding as of the
Effective Time and number of Option Securities and amount
of Convertible Securities outstanding as of the Effective
Time,
(iii) Due authorization, valid issuance, full payment and non-
assessability of outstanding shares of capital stock of
the Company and absence of preemptive rights with respect
thereto,
(iv) To the knowledge of counsel, there are not Contractual
Obligations to repurchase, redeem or otherwise acquire
any shares of Company Stock or any stock of any
Subsidiary, or any Option Securities and Convertible
Securities,
45
<PAGE>
(v) Corporate power and authority of the Company to execute
and deliver the Agreement and all Collateral Documents
and to perform its obligations thereunder and to
consummate the Merger,
(vi) Due and valid authorization by the Company by all
necessary corporate action of the execution, delivery and
performance of the Agreement and all Collateral Documents
and the consummation by the Company of the Merger,
(vii) Due authorization, valid execution and delivery by, the
Company and the Principal Stockholder of the Agreement
and all Collateral Documents,
(viii) The execution and delivery of the Agreement and all
Collateral Documents by the Company do not, and the
performance by the Company of the Agreement and all
Collateral Documents and the consummation of the Merger
by the Company will not, (i) conflict with or violate the
Organizational Documents of the Company generally
applicable to transactions of this type, (ii) conflict
with or violate any Applicable Law, or (iii) to counsel's
knowledge, in the absence of any consents obtained prior
to the Effective Time constitute a breach or default
under, or give to others any right of termination,
acceleration, increased payments or cancellation, or
result in the creation of a Lien on any property or asset
of the Company pursuant to those Material Agreements to
which the Company is a party set forth on Schedule 3.17
of the Disclosure Schedule,
(ix) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution, delivery and performance of
the Agreement and all Collateral Documents by the Company
and the consummation of the Merger by the Company,
(x) To the knowledge of counsel, absence of pending or
threatened material Legal Action, and
(xi) Such other customary matters concerning the Stockholders
in connection with the Public Offering as may reasonably
be requested by the Underwriter or its counsel,
(c) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of VIALOG have any Adverse Effect on the Company or the
46
<PAGE>
Company and its Subsidiaries taken as a whole or, assuming consummation of the
Merger and the Participating Mergers, VIALOG and its Subsidiaries taken as a
whole,
(d) Each Principal Stockholder (other than a Principal Stockholder
executing and delivering the agreement contemplated by Section 7.2(s)) and other
Persons listed on Schedule 7.2(d) (or Section 7.2(d) of the Disclosure Schedule,
as the case may be) shall have executed and delivered to VIALOG a noncompetition
agreement, substantially in the form of Exhibit 7.2(d),
--------------
(e) The representations, warranties, covenants and agreements of the
Company contained in this Agreement or otherwise made in writing by it or on its
behalf pursuant to this Agreement or otherwise made in connection with the
Merger and the Transactions shall be true and correct in all material respects
at and as of the Public Offering Closing Date with the same force and effect as
though made on and as of such date except those which speak as of a certain date
which shall continue to be true and correct in all material respects as of such
date and the Public Offering Closing Date, each and all of the agreements and
conditions to be performed or satisfied by the Company under this Agreement at
or prior to the Public Offering Closing Date shall have been duly performed or
satisfied in all material respects, and the Company shall have furnished VIALOG
with such certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance of
such agreements or conditions as VIALOG shall have reasonably requested,
(f) VIALOG shall have received from its Accountants, a certificate
or letter, dated the Public Offering Closing Date, to the effect that, on the
basis of a limited review in accordance with the standards for such reviews
promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No. 1, they
have no reason to believe that the unaudited financial statements set forth in
the Registration Statement were not prepared in accordance with GAAP and
practices consistent with those followed in the preparation of the audited
financial statements audited by the Accountants as contemplated by Section
6.1(a), or that any material modifications of such unaudited financial
statements are required for a fair presentation of the financial position or
results of operations or changes in financial position of the Company or that
during the period from the last day covered by the most recent financial
statements set forth in the Registration Statement prepared by the Accountants
as contemplated by Section 6.1(a) to a date not more than five (5) days prior to
the Public Offering Closing Date, there has been any Adverse Change in the
financial position or results of the operations of the Company or the Company
and its Subsidiaries taken as a whole which is not described in the Registration
Statement,
(g) All actions taken by the Stockholders to approve and adopt this
Agreement, the Merger and the Transactions shall comply in all respects with and
shall be legal, valid, binding, enforceable and effective under the Law of the
jurisdiction of incorporation of the Company, its Organizational Documents and
all Material Agreements to which it or any of its Subsidiaries is a party or by
which it or any of them or any of its or any of their property or assets is
bound,
47
<PAGE>
(h) The Company shall have obtained consents to the assignment and
continuation of all Material Agreements which, in the reasonable judgment of
VIALOG or its counsel, require such consents, including appropriate binders or
consents as to policies of insurance to be assigned to VIALOG or the Surviving
Corporation under this Agreement. The Company shall have obtained satisfaction
and discharge of all Liens set forth in Section 3.15(b) of the Disclosure
Schedule, and shall have obtained, on terms and conditions reasonably
satisfactory to VIALOG, all Governmental Authorizations and Private
Authorizations, and all modifications of Contractual Obligations relating to
Indebtedness, which VIALOG deems, reasonably necessary or desirable in order to
own and operate and conduct the business of the Surviving Corporation,
substantially on the basis heretofore owned, operated and conducted by the
Company and proposed to be owned, operated and conducted by VIALOG,
(i) Between the date of this Agreement and the Public Offering
Closing Date, there shall not have occurred and be continuing any Adverse Change
affecting the Company or the Company and its Subsidiaries taken as a whole from
the condition thereof (financial and other) reflected in the Financial
Statements or in the audited financial statements prepared by the Accountants as
contemplated by Section 6.1(a) or in the most recent financial statements set
forth in the Registration Statement,
(j) The filing and waiting period requirements (if applicable) under
the HSR Act relating to the consummation of the Merger and the Participating
Mergers shall have been complied with,
(k) No Law shall have been enacted or made by or on behalf of any
Authority nor shall any legislation have been introduced and favorably reported
for passage to either House of Congress by any committee, nor shall any Legal
Action by any Authority been commenced or threatened, nor shall any decision,
order or other action of any Authority have been rendered or taken, which in
VIALOG's reasonable judgment, could have any Adverse Effect on the Company or
the Company and its Subsidiaries taken as a whole, or could restrain, prevent or
change the Merger or the Transactions or Adversely Affect the ability of the
Principal Stockholder to perform its obligations under this Agreement, or the
ability of VIALOG to continue to own, operate and conduct the business of the
Surviving Corporation, substantially on the basis heretofore owned, operated and
conducted by the Company and as proposed to be owned, operated and conducted by
the Surviving Corporation,
(l) VIALOG shall have received copies of any environmental audits the
Company has received in respect of all real property owned or leased by the
Company or any of its Subsidiaries. VIALOG, in its sole discretion and at its
sole expense, may engage an independent environmental engineer to perform such
audits and the results thereof shall not be materially inconsistent with the
representations and warranties set forth in Section 3.23,
(m) Each of the directors of the Company and each of its Subsidiaries
and each trustee under each Plan shall have submitted his or her unqualified
written resignation, dated as of the Public Offering Closing Date,
48
<PAGE>
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Public
--------------
Offering Closing Date, releasing the Company and its Subsidiaries from any and
all Claims against them (other than Claims arising from such Principal
Stockholder having acted as a director or officer of the Company or such
Subsidiary as contemplated by Section 6.7),
(o) The Registration Rights Agreement shall have been executed and
delivered by the Stockholders and the Executive Officers and principal
Stockholders of VIALOG.
(p) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, nor shall it have
experienced any material work stoppage,
(q) Except for such leases and other Contractual Obligations as are
set forth on Schedule 7.2(q) (or Section 7.2(q) of the Disclosure Schedule, as
the case may be) and are executed, delivered and effective as of the Effective
Time, all Contractual Obligations set forth in Section 3.9 of the Disclosure
Schedule shall have been satisfied and discharged as of the Public Offering
Closing Date,
(r) The representations, warranties, covenants and agreements of the
Principal Stockholder contained in this Agreement or otherwise made in writing
by or on behalf of the Principal Stockholder pursuant to this Agreement or
otherwise made in connection with the Merger and the Transactions shall be true
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date. Each and all of the agreements and conditions to be performed or
satisfied by the Principal Stockholder under this Agreement at or prior to the
Public Offering Closing Date, including without limitation the provisions set
forth in Section 6.20, shall have been duly performed or satisfied in all
material respects, and the Principal Stockholder shall have furnished VIALOG
with such certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance of
such agreements or conditions as VIALOG or its counsel shall have reasonably
requested,
(s) The Principal Stockholder shall have executed and delivered to
VIALOG an employment and noncompetition agreement, substantially in the form of
Exhibit 7.2(s),
- --------------
(t) The individuals listed on Schedule 7.2(t) (or Section 7.2(t) of
the Disclosure Schedule, as the case may be) shall have executed and delivered
to VIALOG an Employment Arrangement substantially in the form of Exhibit 7.2(t)
and reasonably satisfactory to VIALOG and its counsel, and
(u) VIALOG shall have received a letter from its Accountants to the
effect that the Merger and the Transactions, the Participating Mergers and the
transactions contemplated thereby, and the acquisition of stock of any Other
Participating Company by VIALOG and the transactions contemplated thereby
together qualify as a transaction to which Section 351 of the
49
<PAGE>
Code applies and will not result in any taxable income or gain or deductible
loss to the Company, VIALOG or VIALOG Merger Subsidiary.
7.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to effect the Merger will be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part to the extent permitted by Applicable Law:
(a) VIALOG shall have furnished the Company and the Principal
Stockholder with the favorable opinion dated the Public Offering Closing Date of
Mirick, O'Connell, DeMallie & Lougee, LLP, counsel to VIALOG and VIALOG Merger
Subsidiary, which may contain limitations and qualifications as to scope and law
and rely on certifications as to facts of officers of VIALOG and VIALOG Merger
Subsidiary and public officials as are reasonable and customary to opinions
delivered in the type of business transactions covered by this Agreement,
addressing the following:
(i) Due organization, valid existence and good standing of
VIALOG and VIALOG Merger Subsidiary,
(ii) Due authorization and valid execution and delivery by, and
enforceability against, VIALOG and VIALOG Merger Subsidiary
of the Agreement except (A) as such enforceability may be
subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference,
fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and as the same may be
subject to the effect of general principles of equity and
(B) that no opinion need be expressed as to the
enforceability of indemnification provisions,
(iii) Due authorization, valid issuance, full payment and non-
assessability of and absence of preemptive rights with
respect to the shares of VIALOG Stock to be received by the
Stockholders,
(iv) The Registration Statement has become effective under the
Securities Act, and to such counsel's knowledge, no stop
order suspending its effectiveness has been issued and no
proceedings for that purpose have been instituted or
threatened by the SEC,
(v) The execution and delivery of the Agreement by VIALOG and
VIALOG Merger Subsidiary and all Collateral Documents
executed or required to be executed pursuant thereto or to
consummate the Merger by them do not, and the performance
of the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to consummate
the Merger and the consummation of the Merger by them will
not, (A) conflict with or violate the Organizational
Documents of VIALOG or
50
<PAGE>
VIALOG Merger Subsidiary, (B) conflict with or violate any
Applicable Law, or (C) to counsel's knowledge, constitute a
default under, or give to others any right of termination,
amendment, acceleration, increased payments or cancellation
of, or result in the creation of a Lien on any property or
assets of VIALOG or VIALOG Merger Subsidiary pursuant to,
any Material Agreement to which either is a party or by
which either or any property or asset of either is bound or
affected,
(vi) No consents from or filings with any Governmental Authority
(other than filings under the HSR Act, if applicable, and
filings of certificates of merger) are required for the
execution and delivery of the Agreement by VIALOG and
VIALOG Merger Subsidiary and the performance of the
Agreement and all Collateral Documents executed or required
to be executed pursuant thereto or to consummate the Merger
and the consummation of the Merger by them, and
(vii) The required filings with the Delaware Secretary of State
shall have been made, and a Certificate of Merger shall
have been issued by the Delaware Secretary of State for the
Merger.
(b) Each of VIALOG and VIALOG Merger Subsidiary shall have complied
in all material respects with its agreements contained in this Agreement, and
the certificates to be furnished to the Company pursuant to this Section shall
be true, correct and complete. All Collateral Documents shall be reasonably
satisfactory in form, scope and substance to the Company and its counsel, and
the Company and its counsel shall have received all information and copies of
all documents, including records of corporate proceedings, which they may
reasonably request in connection therewith, such documents where appropriate to
be certified by proper corporate officers,
(c) The representations, warranties, covenants and agreements of each
of VIALOG and VIALOG Merger Subsidiary contained in this Agreement or otherwise
made in writing by it or on its behalf pursuant to this Agreement or otherwise
made in connection with the Merger and the Transactions shall be true and
correct in all material respects at and as of the Public Offering Closing Date
with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date; each and all of the agreements and conditions to be performed or
satisfied by each of VIALOG and VIALOG Merger Subsidiary under this Agreement at
or prior to the Public Offering Closing Date shall have been duly performed or
satisfied in all material respects; and each of VIALOG and VIALOG Merger
Subsidiary shall have furnished the Company with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as the
Company shall have reasonably requested,
51
<PAGE>
(d) If executed and delivered to VIALOG by the Merger Closing, the
employment agreements contemplated by Section 7.2(s) and for those persons
listed on Schedule 7.2(t) (or Section 7.2(t) of the Disclosure Schedule, as the
case may be) shall have been executed by the Surviving Corporation and delivered
by VIALOG to the indicated person,
(e) The filing and waiting period requirements (if applicable) under
the HSR Act relating to the consummation of the Merger and the Participating
Mergers shall have been complied with,
(f) VIALOG shall have obtained the insurance set forth in Section
6.7(c),
(g) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of the Company have any Adverse Effect on VIALOG and its
Subsidiaries or the Company and its Subsidiaries taken as a whole or, assuming
consummation of the Merger and the Participating Agreements, VIALOG and its
Subsidiaries taken as a whole,
(h) The Company shall have received a letter from the Accountants to
the effect that the Merger and the Transactions qualify as a transaction to
which Section 351 of the Code applies for federal income tax purposes and the
exchange of the Shares for the Stock Merger Consideration, as contemplated
hereby, will not result in any taxable income or gain or deductible loss to the
common stockholders of the Company in their capacities as such common
stockholders to the extent of the Stock Merger Consideration, and
(i) The by-laws of VIALOG shall have been amended to remove the right
of first refusal contained therein and the Company shall have received
certification to its reasonable satisfaction that the VIALOG Stock to be issued
in the Merger will not be subject to any transfer restrictions or purchase
options under VIALOG's Certificate of Incorporation or by-laws.
ARTICLE
8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time, whether before or after approval of this Agreement, the Merger
and the Transactions as follows:
(a) by mutual consent of the Company and VIALOG.
(b) by either VIALOG or the Company,
52
<PAGE>
(i) if any permanent injunction, decree or judgment by any
Authority preventing the consummation of the Merger or the
Public Offering shall have become final and nonappealable,
or if the terminating party determines in its reasonable
discretion that the Merger has become inadvisable or
impracticable by reason of the institution by any Authority
or other Person of material Legal Action, or
(ii) if the Merger Closing shall not occur on or before the
Termination Date.
(c) by the Company:
(i) in the event of a breach of this Agreement by VIALOG or
VIALOG Merger Subsidiary that has not been cured, or if any
representation or warranty of VIALOG or VIALOG Merger
Subsidiary shall have become untrue in any material
respect, in either case such that such breach or untruth is
incapable of being cured by the Effective Date or will
prevent or delay consummation of the Merger by or beyond
the Termination Date, or
(ii) in the event the Public Offering is not a firm commitment
in the manner and upon the terms described in Section 5.10.
(d) by VIALOG:
(i) if the Merger and the Transactions fail to receive the
approval required by Applicable Law, by vote (or to the
extent permitted by Applicable Law, by consent) of the
Stockholders, or if any Stockholder entitled to vote (or
entitled to appraisal rights) with respect to the Merger
dissents from the Merger and the Transactions,
(ii) if it shall determine in its reasonable discretion that the
Merger or the Transactions has or have become inadvisable
or impracticable by reason of the threat by any Authority,
or any other Person of material Legal Action or proceedings
against either or both of the Company and VIALOG (or VIALOG
Merger Subsidiary, or a Subsidiary of any of them), it
being understood and agreed that a written request by
governmental authorities for information with respect to
the Transactions, which information could be used in
connection with such Legal Action or proceedings, may be
deemed by VIALOG to be a threat of material Legal Action or
proceedings,
(iii) if arrangements reasonably satisfactory to VIALOG cannot be
made for (A) the assumption by the Surviving Corporation
substantially on the terms and conditions in effect as of
the date of
53
<PAGE>
this Agreement, or for the prepayment without premium, of
all outstanding Indebtedness of the Company for borrowed
money, or (B) the Public Offering,
(iv) if the business, assets, prospects, management, condition
(financial or other) or results of operation of the
Company or the Company and its Subsidiaries taken as a
whole shall have been Adversely Affected, whether by
reason of changes or developments in the economy or
industry generally or operations in the ordinary course of
business or otherwise,
(v) if the Company shall not have received, without the
imposition of any burdensome condition or material cost,
all Governmental Authorizations and Private
Authorizations, or if any Authority or other Person shall
withdraw any such Governmental Authorizations or Private
Authorizations,
(vi) if the terms of this Agreement shall not have been
approved by the Underwriter,
(vii) if the Company shall have suffered any material damage,
destruction or loss (whether or not covered by insurance)
or any material acquisition or taking of property by any
Authority, or if it or any of its Subsidiaries shall have
suffered a material work stoppage, or
(viii) in the event of a material breach of this Agreement by the
Company or the Principal Stockholder that has not been
cured, or if any representation or warranty of the Company
or the Principal Stockholder shall have become untrue in
any material respect, so that such breach or untruth is
incapable of being substantially cured by the Effective
Date or will prevent or delay consummation of the Merger
by or beyond the Termination Date, or if any condition to
VIALOG's obligation to close under this Agreement shall
not have been satisfied.
(e) by VIALOG if (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions, or shall have resolved to do any of
the foregoing (it being agreed and understood that nothing in this clause (i)
obliges the Company to effect the Merger if the conditions set forth in Section
7.1 and Section 7.3 are not satisfied or limits the rights of the Company to
consent to terminate this Agreement pursuant to Section 8.1(a) or to terminate
the Agreement pursuant to Section 8.1(b) or Section 8.1(c)), (ii) the Board of
Directors of the Company shall have recommended or resolved to recommend to the
Stockholders an Other Transaction, (iii) the Company, the Board of Directors of
the Company or the Principal Stockholder shall have taken any action in
contravention of Sections 6.6 or 6.13 or (iv) the
54
<PAGE>
Principal Stockholder shall fail to vote to approve and adopt this Agreement,
the Merger and the Transactions.
8.2 Effect of Termination. Except as provided in Sections 2.2(a), 2.2(d),
---------------------
6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void, there shall
be no liability on the part of any Party, or any of their respective officers or
directors, to the other and all rights and obligations of any Party shall cease;
provided, however, that such termination will not relieve any Party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
8.3 Amendment. This Agreement may be amended by the Parties by action
---------
taken by or on behalf of their respective Boards of Directors and by the
Principal Stockholder at any time prior to the Effective Time; provided,
however, that, after approval of this Agreement and the Merger by the
Stockholders, no amendment, which under Applicable Law may not be made without
the approval of the Stockholders, may be made without such approval. This
Agreement may not be amended to impose any additional material obligation on a
Party or to burden or limit a material right of such Party except by an
agreement in writing signed by the Party so affected.
8.4 Waiver. At any time prior to the Effective Time, except to the extent
------
Applicable Law does not permit, either VIALOG or VIALOG Merger Subsidiary and
the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other, subject, however, to the terms and
conditions of Section 8.1, (b) waive any inaccuracies in the representations and
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement and (c) waive compliance by the other with any of the
agreements, covenants or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an agreement in writing
signed by the Party or Parties to be bound thereby.
8.5 Fees, Expenses and Other Payments. If this Agreement is terminated,
---------------------------------
then all costs and expenses incurred by the Parties in connection with this
Agreement, the Merger and the Transactions and in connection with compliance
with Applicable Law and Contractual Obligations as a consequence hereof and
thereof, including fees and disbursements of counsel, financial advisors and
accountants, will be borne solely and entirely by the Party which has incurred
such costs and expenses (with respect to such Party, its "Expenses"). VIALOG
acknowledges and agrees that the Company has disclosed that it is obligated and
will become further obligated for Expenses (including fees and expenses of its
counsel, its independent accountants, and its financial advisor) incurred by it
in connection with this Agreement, the Merger and the Transactions. It is
understood and agreed that certain of such Expenses may be paid by the Company
prior to the execution of this Agreement, and VIALOG agrees to refrain from
taking any action which would prevent or delay the payment of reasonable
Expenses by the Company. Any Expenses incurred and not paid will constitute
liabilities of the Company. VIALOG agrees to take all action necessary to cause
the Surviving Corporation to pay promptly any of the foregoing reasonable
Expenses incurred, but not paid, by the Company prior to the Effective Time.
55
<PAGE>
8.6 Effect of Investigation. The right of any Party to terminate this
-----------------------
Agreement pursuant to Section 8.1 will remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Party, any
Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
ARTICLE
9
FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON VIALOG STOCK
9.1 Shares not Registered. The Principal Stockholder acknowledges that the
---------------------
shares of VIALOG Stock to be delivered to Stockholders pursuant to this
Agreement have not and will not be registered under the Securities Act (except
pursuant to the Registration Rights Agreement) and may not be resold except
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from registration. The Principal Stockholder represents
and warrants that the VIALOG Stock to be acquired by the Stockholders pursuant
to this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
9.2 Economic Risk; Sophistication. The Principal Stockholder represents
-----------------------------
and warrants that the Principal Stockholder and the other Stockholders are able
to bear the economic risk of an investment in the VIALOG Stock acquired pursuant
to this Agreement and can afford to sustain a total loss on such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the VIALOG Stock. The Principal Stockholder acknowledges that
prior to the Merger Closing VIALOG will have furnished a copy of the Prospectus
to the Stockholders and at the Merger Closing the Stockholders will be required
to confirm that VIALOG has responded to due diligence and information requests
made on behalf of the Company similar in extent and scope to the due diligence
requests made to the Company by VIALOG. The Principal Stockholder will at that
time confirm that the Principal Stockholder has had an adequate opportunity to
ask questions and receive answers from the officers of VIALOG (and, in the case
of the other Stockholders, to ask questions and receive answers from the
Principal Stockholder) concerning any and all matters relating to this
Agreement, the Merger, the Transactions, or Other Participating Companies, the
Participating Agreements and the Registration Statement, and have read and
understood the matters described in the copies of the Registration Statement
provided to them including, without limitation, the background and experience of
the officers and directors of VIALOG, the plans for the operations of the
business of VIALOG, the potential dilutive effects of the Public Offering and
future acquisitions and projected uses of the proceeds of the Public Offering.
The Principal Stockholder will confirm at the Merger Closing that the Principal
Stockholder has asked any and all questions in the nature described in the
preceding sentence or otherwise of interest in connection with the exchange of
VIALOG Stock for Shares as provided
56
<PAGE>
in this Agreement, and all questions have been answered to the Principal
Stockholder's satisfaction.
9.3 Restrictions on Resale; Legends. The Principal Stockholder agrees, and
-------------------------------
the Company will use commercially reasonable efforts to cause each other
Stockholder to agree, not to offer, sell, assign, exchange, transfer, encumber,
pledge, distribute or otherwise dispose of the VIALOG Stock to be acquired by
them pursuant to this Agreement except after full compliance with all of the
applicable provisions of the Securities Act and applicable state securities
Laws, and any attempt by a Stockholder to do so will be treated as ineffective
for all purposes. The certificates of VIALOG Stock issued pursuant to Section
2.1(a) of this Agreement will bear the following legend substantially as set
forth:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE
LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED OR OTHERWISE DISPOSED OF
WITHOUT (1) REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE LAW,
OR (2) AN OPINION (SATISFACTORY TO VIALOG) OF COUNSEL (SATISFACTORY TO
VIALOG) THAT REGISTRATION IS NOT REQUIRED.
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification.
---------------
(a) Except as provided in Section 11.1, the Principal Stockholder
agrees to make whole, indemnify and hold VIALOG, VIALOG Merger Subsidiary, the
Surviving Corporation, the Underwriters and their respective Affiliates, agents,
successors and assigns (collectively, the "VIALOG Indemnified Parties") harmless
as a result of, from or against:
(i) any and all Claims of the VIALOG Indemnified Parties or
other Persons based upon, attributable to or resulting from
any material inaccuracy in or material breach of any
representation or warranty on the part of any one or more of
the Company or the Stockholders under this Agreement or any
Collateral Document;
(ii) any and all Claims of the VIALOG Indemnified Parties or
other Persons based upon, attributable to or resulting from
the material breach of any covenant or other agreement on
the part of any one
57
<PAGE>
or more of the Company or the Stockholders under this
Agreement or any Collateral Document;
(iii) any and all Claims and/or Taxes incurred by the VIALOG
Indemnified Parties or other Persons with respect to each
tax year in which the Company is not treated as an S
corporation because distributions made by the Company
caused it to violate the single class of stock rule of IRC
Section 1361(b)(1)(D) and Treasury Regulation 1.1361-1(l);
(iv) any and all other material Claims of the VIALOG Indemnified
Parties or other Persons incident to the foregoing or to
the enforcement of this Section.
(b) Except as provided in Section 11.1, VIALOG agrees to make whole,
indemnify and hold the Principal Stockholder (and each Stockholder that delivers
the agreements contemplated by Section 6.4) and their respective Affiliates,
agents, heirs, successors and assigns (collectively, the "Company Indemnified
Parties") harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified Parties or
other Persons based upon, attributable to or resulting from
any material inaccuracy in or material breach of any
representation or warranty on the part of VIALOG or VIALOG
Merger Subsidiary under this Agreement or any Collateral
Document;
(ii) any and all Claims of the Company Indemnified Parties or
other Persons based upon, attributable to or resulting from
the material breach of any covenant or other agreement on
the part of VIALOG or VIALOG Merger Subsidiary; and
(iii) any and all other material Claims of the Company
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(c) Except in connection with Claims pursuant to Section
10.1(a)(iii), no Principal Stockholder will be required to pay to the VIALOG
Indemnified Parties an aggregate amount in excess of an amount equal to the cash
received by such Stockholder as the cash portion of the Exchange Merger
Consideration pursuant to Sections 2.1(a) and 2.4, cash received by such
Stockholder pursuant to Section 2.1(d) plus, with respect to shares of VIALOG
Stock issued to such Stockholder as the stock portion of the Exchange Merger
Consideration pursuant to Section 2.1(a) and Section 2.4, the Indemnity Value
thereof. VIALOG will not be required to pay any Company Indemnified Party an
aggregate amount in excess of the Indemnity Value of the shares of VIALOG Stock
issued to such Company Indemnified Party plus the amount of cash delivered to
such Company Indemnified Party pursuant to Section 2.1(a), Section 2.1(d) and
Section 2.4. No Claim for indemnification may be commenced beyond the period
applicable to such Claim set forth in Section 11.1.
58
<PAGE>
(d) Notwithstanding the foregoing, no Principal Stockholder will be
required to pay any amount for indemnification to the VIALOG Indemnified Parties
except to the extent that (i) the Claim is in connection with the matters set
forth in Section 10.1(a)(iii); or (ii) the aggregate amount of Claims under this
Section 10.1 asserted collectively against the Principal Stockholder exceeds the
greater of $100,000 or one quarter of one percent (.0025%) of the sum of (A) the
product of (x) the aggregate number or shares of VIALOG Stock into which the
Shares of the Stockholders will be converted as set forth in Sections 2.1(a) and
2.4 and (y) the Offering Price, plus (B) the total amount of cash paid to all
Stockholders pursuant to Sections 2.1(a), 2.1(d) and 2.4.
10.2 Procedures Concerning Claims by Third Parties; Payment of Damages;
------------------------------------------------------------------
etc.
- ---
(a) If any Legal Action is instituted or asserted by any person other
than such indemnified party in respect of which payment may be sought hereunder,
the indemnified party will reasonably and promptly cause written notice of the
assertion of any Legal Action of which it has knowledge which is covered by the
indemnities under Section 10.1 to be forwarded to the indemnifying party. In
such event, the indemnifying party will have the right, at its sole option and
expense, to be represented by counsel of its choice, which must be reasonably
satisfactory to the indemnified party, and to defend against, negotiate, settle
or otherwise deal with any Legal Action which related to any Claims instituted
or asserted by any Person other than such indemnified party and indemnified
against hereunder; provided, however, that no settlement thereof will be made
without the prior written consent of the indemnified party, which consent will
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
elects to defend against, negotiate, settle or otherwise deal with any Legal
Action which related to any such Claims, it will within thirty (30) days of
receipt of said notice (or sooner, if the nature of the Legal Action so
requires) notify in writing the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Legal Action which relates to any such Claims, fails to notify the
indemnified party of its election as herein provided or contests its obligation
to indemnify the indemnified party for such Claims under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Legal Action. If the indemnified party defends any Legal Action, then the
indemnifying party will reimburse the indemnified party for reasonable Claims
incurred in defending such Legal Action upon a final determination that the
indemnified party was entitled to indemnity hereunder. Neither the indemnifying
party nor the indemnified party may settle any Legal Action without the prior
written consent of the other party, which consent will not be unreasonably
withheld, conditioned or delayed. If the indemnifying party will assume the
defense of any Legal Action instituted or asserted by any Person other than an
indemnified party, the indemnified party may participate, at such party's own
expense, in the defense of such Legal Action.
(b) After any final judgment or award will have been rendered by a
court, arbitration board (which may be engaged upon the consent of each of the
indemnifying party and the indemnified parties) or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement will have been consummated, or the indemnified party
and the indemnifying party will have arrived at a mutually binding agreement
59
<PAGE>
with respect to a Legal Action hereunder, the indemnifying party will pay all of
the sums due and owing to the indemnified party by wire transfer of immediately
available funds, or by delivery of shares of VIALOG Stock, as permitted pursuant
to the definition of Indemnity Value in Article 12, within five business days
after the date of notice of such judgment or award conditioned, however, on the
indemnifying party having been finally determined by the parties' agreement or
by final court or arbitration that the indemnifying party is obligated hereunder
to make said payment and subject to the provisions of this Article 10.
(c) The failure of the indemnified party to give reasonably prompt
notice of any Legal Action instituted or asserted by any Person other than such
indemnified party and indemnified against hereunder will not release, waive or
otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss or
material prejudice as a result of such failure.
(d) No legal action to enforce a Claim for indemnity will be stayed
or dismissed for failure to join one or more indemnifying parties or to permit
an indemnifying party to cross-claim against another indemnifying party, nor
will the failure to join as indemnifying party be deemed grounds for preventing
a separate or subsequent Legal Action to enforce a Claim for indemnification
against such party, each such Legal Action being deemed a separate and
independent Claim for indemnification. A Legal Action to enforce a Claim for
indemnity may be instituted in the Commonwealth of Massachusetts, or the
jurisdiction to which each Party consents, or any other state having
jurisdiction with respect thereto.
ARTICLE
11
GENERAL PROVISIONS
11.1 Effectiveness of Representations; etc.
-------------------------------------
(a) Regardless of any investigation made by or on behalf of any other
party hereto, any Person controlling such party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement, the representations, warranties, covenants and agreements contained
in Article 3, Article 4 and Article 5 will survive the Merger and remain
operative and in full force and effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until sixty
(60) days after the applicable statute of limitations, as
the same may be extended from time to time, has terminated;
(ii) Section 3.23, until the sixth anniversary date of this
Agreement; and
(iii) all other Sections, until VIALOG (or its successor) files
an annual report pursuant to the requirements of the
Securities Exchange Act
60
<PAGE>
of 1934, as amended, as prescribed thereunder on Form 10-K
covering at least two full fiscal years of operations by
VIALOG, but in no event more than thirty months after the
Public Offering Closing Date (the "Second Annual Filing
Date").
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements contained in Article 3,
Article 4 and Article 5, the representations, warranties, covenants and
agreements of each Party will survive and remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other Party,
any Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution and consummation of this Agreement.
11.2 Notices. All notices and other communications given or made pursuant
-------
to this Agreement will be in writing and will be deemed to have been duly given
or made as of the date delivered or transmitted, and will be effective upon
receipt, if delivered personally, mailed by certified mail (postage prepaid,
return receipt requested) to the Parties at the following addresses or sent by
electronic transmission to the fax number specified below:
(a) If to VIALOG or VIALOG Merger Subsidiary:
VIALOG Corporation
Attention: Glenn Bolduc, President
46 Manning Road
Billerica, MA 01821
Fax: (508) 667-1944
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, LLP
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
(b) If to the Company:
C. Raymond Marvin, President
Telephone Business Meetings, Inc.
1861 Wiehle Avenue
Reston, VA 22090
61
<PAGE>
with a copy to:
Sean M. McAvoy, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Any address for notice as herein above provided may be changed by the
party or person for whom the change is made by giving notice of said change in
the manner provided in this Section.
11.3 Headings. The headings contained in this Agreement are for
--------
reference purposes only and will not affect in any way the meaning and
interpretation of this Agreement.
11.4 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner Adverse to any Party. Upon such
determination that any term or other provisions is invalid, illegal or incapable
of being enforced, the Parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement (together with the Disclosure
----------------
Schedule, the Confidentiality Agreement and the other Collateral Documents
delivered in connection herewith), constitutes the entire agreement of the
Parties and supersedes all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof.
11.6 Assignment. This Agreement may not be assigned by operation of
----------
law or otherwise and any purported assignment will be null and void, provided
that VIALOG may cause a wholly owned Subsidiary of VIALOG or Holding Company to
be substituted for VIALOG or VIALOG Merger Subsidiary as the party to the Merger
and may, in addition, assign the other rights, but not its obligations,
including, without limitation, its obligation for payment of the Aggregate
Merger Consideration, under this Agreement to such Subsidiary or Holding
Company.
11.7 Parties in Interest. This Agreement will be binding upon and
-------------------
inure solely to the benefit of each Party, and nothing in this Agreement,
express or implied (other than the provisions of Section 6.7, which provisions
are intended to benefit and may be enforced by the beneficiaries thereof), is
intended to or will confer upon any Person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
62
<PAGE>
11.8 Governing Law. Except to the extent that Delaware Law may be
-------------
applicable to the Merger, this Agreement will be governed by, and construed in
accordance with, the substantive laws of the Commonwealth of Massachusetts
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
11.9 Enforcement of the Agreement. Each Party recognizes and agrees
----------------------------
that each other Party's remedy at law for any breach of the provisions of this
Agreement would be inadequate and agrees that for breach of such provisions,
such Party will, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance to the
extent permitted by Applicable Law. Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
Nothing herein contained will be construed as prohibiting a Party from pursuing
any other remedies available to such Party for any breach or threatened breach
hereof or failure to take or refrain from any action as required hereunder to
consummate the Merger and carry out the Transactions.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
11.11 Disclosure Supplements. From time to time prior to the Public
----------------------
Offering Closing Date, the Company will promptly supplement or amend the
Disclosure Schedule delivered in connection with this Agreement, with respect to
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby; provided, however, that no
supplement or amendment to the Disclosure Schedule that constitutes or reflects
a Material Adverse Change to the Company may be made without the prior written
consent of VIALOG.
ARTICLE
12
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural, and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meanings when used in the Disclosure
63
<PAGE>
Schedule and each Collateral Document, notice, certificate, communication,
opinion, or other document executed or required to be executed pursuant hereto
or thereto or otherwise delivered, from time to time, pursuant hereto or
thereto.
Accountants means KPMG Peat Marwick, LLP.
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") means, with
respect to the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, any Event which could reasonably be expected to
(a) adversely affect the validity or enforceability of this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, or (b) adversely affect the business, operations, management,
properties or the condition, (financial or other), or results of operation of
the Company or the Company and its Subsidiaries taken as a whole, VIALOG or
VIALOG Merger Subsidiary, as the case may be, or (c) impair the Company's,
VIALOG's or VIALOG Merger Subsidiary's ability to fulfill its obligations under
the terms of this Agreement or any Collateral Document executed or required to
be executed pursuant hereto or thereto, or (d) adversely affect the aggregate
rights and remedies of VIALOG or the Company under this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, in all cases, unless otherwise specifically set forth, in a material
respect or manner or to a material degree.
Affiliate or Affiliated means, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, will include any member of such
individual's immediate family or a family trust.
Aggregate Equity means such number of shares of Company Stock as shall
equal the aggregate of (a) the Shares, and (b) all shares of Company Stock
otherwise issuable based upon the affirmative election to exercise or convert
outstanding Option Securities and/or Convertible Securities pursuant to Section
2.4.
Aggregate Merger Consideration will have the meaning given to it in
Section 2.1(a).
Aggregate Cash Merger Consideration will have the meaning given to it in
Section 2.1(a).
Aggregate Stock Merger Consideration will have the meaning given to it
in Section 2.1(a).
64
<PAGE>
Agreement means this Agreement as originally in effect, including unless
the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits to this Agreement, and as the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
Applicable Law means any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or to any of its business or
operations is subject or any of its property or assets is bound.
Authority means any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau, central
bank or comparable agency or Entity, commission, corporation, court, department,
instrumentality, master, mediator, panel, referee, system or other political
unit or subdivision or other Entity of any of the foregoing, whether domestic or
foreign.
Benefit Arrangement means any material benefit arrangement that is not a
Plan, including (a) any employment or consulting agreement, (b) any arrangement
providing for insurance coverage or workers' compensation benefits, (c) any
incentive bonus or deferred bonus arrangement, (d) any arrangement providing
termination allowance, severance or similar benefits, (e) any equity
compensation plan, (f) any deferred compensation plan, and (g) any compensation
policy and practice.
Cash Merger Consideration will have the meaning given to it in Section
2.1(a).
Certificate will have the meaning given to it in Section 2.1(a).
Claims means any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all reasonable fees, costs, expenses and disbursements
(including without limitation attorneys' fees, costs and expenses) relating to
any of the foregoing.
COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
Code will have the meaning given to it in the Preamble.
Collateral Document means any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Principal Stockholder, on the one hand, or
VIALOG and VIALOG Merger Subsidiary on the other, under this Agreement and with
respect to opinions to be delivered pursuant to this Agreement, except
65
<PAGE>
to the extent of a Party's actual knowledge, the Company and the Principal
Stockholder or VIALOG and VIALOG Merger Subsidiary, as the case may be, assume
no responsibility for the authority of or genuineness of signatures relating to
the others as counterparts or their representations, warranties, covenants and
agreements.
Company will have the meaning given to it in the Preamble.
Company Indemnified Parties will have the meaning given to it in Section
10.1(b).
The Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or the Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after reasonable investigation, will
have reason to believe and will believe that the subject representation or
warranty is true and accurate as stated.
Company Stock will have the meaning given to it in Section 2.1(a).
Confidentiality Letter will have the meaning given to it in Section
6.1(c).
Contract or Contractual Obligation means any term, condition, provision,
representation, warranty, agreement, covenant, undertaking, commitment,
indemnity or other obligation set forth in the Organizational Documents of the
obligee or which is outstanding or existing under any instrument, contract,
lease or other contractual undertaking (including without limitation any
instrument relating to or evidencing any Indebtedness) to which the obligee is a
party or by which it or any of its business is subject or property or assets is
bound.
Control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
Convertible Securities means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or existence or non-
existence of some other Event, or both.
DBCL will have the meaning given to it in the Preamble.
Disclosure Schedule means the disclosure schedules dated as of the date
of this Agreement delivered by the Company to VIALOG and VIALOG to the Company.
66
<PAGE>
Distribution means, with respect to the Company or any of its
Subsidiaries: (a) the declaration or payment of any dividend (except dividends
payable in common stock of the Company) on or in respect of any shares of any
class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary, (b) the
purchase, redemption or other retirement of any shares of any class of capital
stock of the Company or any shares of capital stock of any Subsidiary owned by a
Person other than the Company or a Subsidiary, and (c) any other distribution on
or in respect of any shares of any class of capital stock of the Company or any
shares of capital stock of any Subsidiary owned by a Person other than the
Company or a Subsidiary.
Effective Date means the effective date of the Registration Statement
and commencement of the Public Offering as authorized by the SEC.
Effective Time will have the meaning given to it in Section 1.4.
Employment Arrangement means, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock purchase or appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA.
Encumber means to suffer, accept, agree to or permit the imposition of a
Lien.
Entity means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
Environmental Laws means any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, mining or reclamation or mined land, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes. Environmental
Laws include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et
--
67
<PAGE>
seq.), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et
- --- --
seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section
- ---
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251
-- ---
et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
- -- --- -- ---
Substances Control Act (15 U.S.C. Section 2601 et seq.), the Occupational Safety
-- ---
and Health Act of 1970 (29 U.S.C. Section 651 et seq.), the Federal Insecticide,
-- ---
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), and the Surface
-- ---
Mining Control and Reclamation Act of 1977 (30 U.S.C. Section 1201 et seq.), and
-- ---
any analogous future federal, or present or future state, local or foreign,
Laws, and the rules and regulations promulgated thereunder all as from time to
time in effect, and any reference to any statutory or regulatory provision will
be deemed to be a reference to any successor statutory or regulatory provision.
Environmental Permit means any Governmental Authorization required by or
pursuant to any Environmental Law.
Environmental Requirements means all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
(a) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of, or the remediation, emission,
discharge or release into the air, surface water, groundwater or
land of, Hazardous Materials;
(b) the protection of the health and safety of employees or the public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA means the Employee Retirement Security Act of 1974, and the rules
and regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision will be deemed to be a reference to any successor statutory or
regulatory provision.
ERISA Affiliate means any Person that is treated as a single employer
with the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
Event means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Exchange Agent will have the meaning given to it in Section 2.2(a).
68
<PAGE>
Exchange Fund will have the meaning given to it in Section 2.2(a).
Exchange Merger Consideration will have the meaning given to it in
Section 2.1(a).
Expenses will have the meaning set forth in Section 8.5.
Final Determination (a) means with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations; and (b) will include the payment of Tax by
the Company or whichever Party is responsible for payment of such Tax under
Applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the other party is notified of such payment and the
party that is responsible for such Tax under this Agreement determines that no
action should be taken to recoup such payment from such Taxing Authority.
Financial Statements will have the meaning given to it in Section
3.2(a).
GAAP means generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
each applicable Authority.
Governmental Filings means all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with each applicable Authority.
Guaranty or Guaranteed means any agreement, undertaking or arrangement
by which the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, guarantees, endorses or otherwise becomes or is
liable, directly or indirectly, upon any Indebtedness of any other Person
including without limitation the payment of amounts drawn down by beneficiaries
of letters of credit (other than by endorsements of negotiable instruments for
deposit or collection in the ordinary course of business). The amount of the
obligor's obligation under any Guaranty will be deemed to be the outstanding
amount (or maximum permitted amount, if larger) of the Indebtedness directly or
indirectly guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials means any substance (in whatever state or matter):
(a) the presence of which requires investigation or remediation under any
Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated by
any Authority;
69
<PAGE>
(d) that contains or consists of petroleum or petroleum products, or (e) that
contains or consists of PCBs, asbestos, or urea formaldehyde foam insulation.
Holding Company means a corporation established by or on behalf of
VIALOG into which VIALOG merges or assigns its rights and obligations hereunder
if the Accountants so advise for purpose of a tax free incorporation of all
parties provided the relative ownership rights of all parties remain the same.
HSR Act means the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
and the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision.
Indebtedness means, with respect to the Company or any of its
Subsidiaries or VIALOG or VIALOG Merger Subsidiary, as the case may be, (a) all
items, except items of capital stock or of surplus or of general contingency or
deferred tax reserves or any minority interest in any Subsidiary to the extent
such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of the Company or VIALOG, which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of the Company or such Subsidiary or VIALOG or
VIALOG Merger Subsidiary, (b) all obligations secured by any Lien to which any
property or asset owned or held by the Company or any Subsidiary or VIALOG or
any VIALOG Merger Subsidiary is subject, whether or not the obligation secured
thereby will have been assumed, and (c) to the extent not otherwise included,
all Contractual Obligations of the Company or any Subsidiary or VIALOG or any
VIALOG Merger Subsidiary constituting capitalized leases and all obligations of
the Company or any Subsidiary or VIALOG or any VIALOG Merger Subsidiary with
respect to Leases constituting part of a sale and leaseback arrangement.
Indemnity Value means with respect to each share of VIALOG Stock issued
to a Stockholder pursuant to the Merger, the Offering Price. In satisfaction of
a Claim under this Agreement for which a stockholder is liable to VIALOG, until
the Second Annual Filing Date, and in lieu of all cash, such Stockholder may
tender shares of VIALOG Stock valued at the Offering Price and cash in a ratio
not exceeding fifty-one (51) to forty-nine (49), for all payments by such
Stockholder, and after the Second Annual Filing Date, cash and shares of VIALOG
Stock in such proportion as such Stockholder determines.
Intangible Assets means all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
Law means any (a) administrative, judicial, legislative or other action,
code, consent decree, constitution, decree, directive, enactment, finding,
guideline, law, injunction, interpretation, judgment, order, ordinance, policy
statement, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic of foreign; (b) the common law, or other legal or quasi-
legal
70
<PAGE>
precedent; or (c) arbitrator's, mediator's or referee's award, decision, finding
or recommendation; including, in each such case or instance, any interpretation,
directive, guideline or request, whether or not having the force of law
including, in all cases, without limitation any particular section, part or
provision thereof.
Lease means any lease of property, whether real, personal or mixed, and
all amendments thereto.
Legal Action means any litigation or legal or other actions,
arbitrations, counterclaims, investigations, proceedings, requests for material
information by or pursuant to the order of any Authority, or suits, at law or in
arbitration, equity or admiralty commenced by any Person, whether or not
purported to be brought on behalf of a party hereto affecting such party or any
of such party's business, property or assets.
Lien means any of the following: mortgage, lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building to use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
Margin Rules means Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
Material or Materiality for the purposes of this Agreement, will, unless
specifically stated to the contrary, be determined without regard to the fact
that various provisions of this Agreement set forth specific dollar amounts.
Material Agreement or Material Commitment means, with respect to the
Company or any of its Subsidiaries, or VIALOG or VIALOG Merger Subsidiary any
Contractual Obligation which (a) was not entered into in the ordinary course of
business, (b) was entered into in the ordinary course of business which
(i) involves the purchase, sale or lease of goods or materials or performance of
services aggregating more than Twenty-Five Thousand Dollars ($25,000),
(ii) extends for more than three (3) months, or (iii) is not terminable on
thirty (30) days or less notice without penalty or other payment, (c) involves
Indebtedness for money borrowed in excess of One Hundred Thousand Dollars
($100,000), (d) is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement, or (e) would
account for more than five percent (5%) of purchases or sales made by the
Company and its Subsidiaries for the year ended December 31, 1996.
71
<PAGE>
Merger will have the meaning given to it in the Preamble.
Merger Closing will have the meaning given to it in Section 1.3.
Merger Consideration will have the meaning given to it in Section
2.1(a).
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
Net Shares will have the meaning given to it in Section 2.2(a).
Offering Price means $11.50 per share of VIALOG Stock.
Option Securities means all rights, options and warrants, all calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
Organizational Documents means, with respect to a Person which is a
corporation, its charter, its by-laws, and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock, and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreement among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
Other Participating Companies mean those companies or entities engaged
in the teleconferencing business who execute agreements and plans of
reorganization, stock purchase agreements or asset purchase agreements with
VIALOG which agreements close contemporaneously with this Agreement.
Other Transaction means a transaction or series of related transactions
(other than the Merger) resulting in (a) any change in control of the Company,
(b) any merger or consolidation of the Company or any of its Subsidiaries,
regardless of whether the Company or such Subsidiary is the surviving Entity,
(c) any tender offer or exchange offer for, or any acquisition of, any
securities of the Company, or (d) any sale or other disposition of assets of the
Company of any Subsidiary not otherwise permitted under Section 3.18.
Participating Agreement will have the meaning given to it in the
Preamble.
Participating Companies will mean the Company and the Other
Participating Companies.
Participating Mergers means the mergers of each of the Other
Participating Companies with a Subsidiary of VIALOG pursuant to a Participating
Agreement.
72
<PAGE>
Participating Stockholders means the Persons receiving VIALOG Stock
pursuant to the Participating Mergers.
Party means any natural individual or any Entity that has executed this
Agreement.
PBGC means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Person means any natural individual or any Entity.
Plan means any "employee benefit plan" as defined in Section 3(3) of
ERISA (whether or not terminated) which is (or was in the case of a frozen or
terminated plan) maintained by the Company or any Subsidiary or VIALOG or VIALOG
Merger Subsidiary, and with respect to which the Company, such Subsidiary or
VIALOG or VIALOG Merger Subsidiary or, in the case of any such plan subject to
Title IV of ERISA, an ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, other than a Multiemployer Plan.
Principal Stockholder will have the meaning given to it in the Preamble.
Private Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than each Authority) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
Prospectus means the form of prospectus first filed by VIALOG in the
Registration Statement, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the Public
Offering.
Public Offering will have the meaning given to it in the Preamble.
Public Offering Closing Date means the date on which the Public Offering
is closed.
Registration Rights Agreement will have the meaning given to it in
Section 6.4.
Registration Statement means the registration statement (including the
Prospectus, exhibits, financial statements and schedules included therein), and
all amendments thereof (including post-effective amendments and any registration
statement filed under Rule 462(b) with respect to the Public Offering), filed
under the Securities Act registering the shares of VIALOG Stock to be sold in
the Public Offering in accordance with the terms and conditions of the
Underwriting Agreement.
Representatives of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
73
<PAGE>
SEC means the Securities and Exchange Commission of the United States or
any successor Authority.
Second Annual Filing Date will have the meaning given to it in Section
11.1(a)(iii).
Securities Act means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations.
Shares will have the meaning given to it in Section 2.1(a).
Special Meeting will have the meaning given to it in Section 1.2(a).
Stock Merger Consideration will have the meaning given to it in Section
2.1(a).
Stockholders means the Principal Stockholder and all other Persons
entitled to Merger Consideration (or who would be entitled thereto but for their
dissent from the Merger) pursuant to Sections 2.1(a) or (to the extent Persons
holding Option Securities or Convertible Securities exercise their rights to
acquire Shares prior to the Effective Time, from and after the time they acquire
such Shares) Section 2.4.
Subsidiary means, with respect to a Person, any Entity a majority of the
capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Surviving Corporation will have the meaning given to it in Section 1.1.
Tax (and "Taxable", which means subject to Tax), means with respect to
the Company or any of its Subsidiaries or VIALOG or any VIALOG Merger
Subsidiary, (a) all taxes (domestic or foreign), including without limitation
any income (net, gross or other including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, gains, sales, use, leasing, lease, user, ad valorem, transfer,
recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by the Company or
any of its Subsidiaries, or VIALOG or any VIALOG Merger Subsidiary, payroll,
employment, unemployment, social security, excise severance, stamp, occupation,
premium, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, levies, assessments, charges, penalties, addition to
tax or additional amount imposed by any Taxing Authority, (b) any joint or
several liability of the Company or any of its Subsidiaries or VIALOG or any
VIALOG Merger Subsidiary with any other Person for the payment of any amounts of
the type described in (a), and (c) any liability of the Company or any of its
Subsidiaries or VIALOG or any VIALOG Merger Subsidiary for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
74
<PAGE>
Tax Claim means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
Tax Return or Returns means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority means any Authority responsible for the imposition of any
Tax.
Termination Date means (a) March 15, 1997 unless on or prior to that date
the Registration Statement is filed, in which case such date will automatically
be extended to June 30, 1997, or (b) such date after March 15, 1997 as to which
the parties agree.
Transactions means the other transactions contemplated by this Agreement
or the Merger or by any Collateral Document executed or required to be executed
in connection herewith or therewith, but will not include the Participating
Mergers, the registration of sale of VIALOG Stock pursuant to the Registration
Statement or any credit facilities between VIALOG and any bank described in the
Registration Statement.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any two of Smith Barney Inc., Salomon Brothers Inc,
Donaldson, Lufkin & Jenrette Securities Corporation or comparable firm as lead
underwriters and any other Person who executes the Underwriting Agreement as an
underwriter of VIALOG Stock in the Public Offering.
Underwriting Agreement means the firm commitment underwriting agreement
between VIALOG and the Underwriter to be filed as an exhibit to the Registration
Statement and to be executed on or about the Effective Date.
VIALOG will have the meaning given to it in the Preamble.
VIALOG Indemnified Parties will have the meaning given to it in
Section 10.1(a).
VIALOG Merger Subsidiary will have the meaning given to it in the Preamble.
VIALOG Stock will have the meaning given to it in the Preamble.
[This space is intentionally left blank.]
75
<PAGE>
IN WITNESS WHEREOF, VIALOG, VIALOG Merger Subsidiary, the Company and the
Principal Stockholder have caused this Agreement to be executed as of the date
first written above by their respective officers thereunto duly authorized.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
----------------------------------------
Name: Glenn D. Bolduc
Title: President
TBMA ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
----------------------------------------
Name: Glenn D. Bolduc
Title: President
TELEPHONE BUSINESS MEETINGS, INC.
By: /s/ C. Raymond Marvin, President
----------------------------------------
Name: C. Raymond Marvin
Title: President
PRINCIPAL STOCKHOLDER:
/s/ C. Raymond Marvin
----------------------------------------
Name: C. Raymond Marvin
76
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. THE REGISTRANT AGREES
TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE
TO THE COMMISSION UPON REQUEST.
------------------------------
Section 3.1(a)
. Jurisdiction of Incorporation of the Company.
. Jurisdictions where qualified to do business.
Section 3.1(c)
. Exceptions to No Breach or Default, Etc., upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Lien created or imposed upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Governmental Authorization or Governmental Filing Required
upon execution and delivery of the Agreement or any Collateral Document.
Section 3.1(d)
. Subsidiaries of the Company, and Jurisdictions of incorporation and where
qualified to do business.
. Capital Stock of any Subsidiary.
. Exceptions to Company's ownership of all Stock of any Subsidiary.
Section 3.2(a)
. Financial Statements of the Company and any Subsidiary, prepared in
accordance with GAAP.
Section 3.2(c)
. The Company's ownership of other Entities.
Section 3.3
. Changes and condition of the Company and any Subsidiary, since the date of
the most recent financial statements.
Section 3.4
. Exceptions to liabilities of the Company or any Subsidiary.
<PAGE>
. Any obligations or liabilities, past, present or deferred, or accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in the
balance sheet of the Financial Statements, or notes thereto, and any
obligations or liabilities, other than obligations and liabilities incurred
in the ordinary course of business consistent with past practice of the
Company and any Subsidiary, which will adversely affect the Company or any
of the Company's Subsidiaries.
. Guarantees or Primary or Secondary Liabilities of the Company or any
Subsidiary (except as disclosed in Financial Statements).
Section 3.5(a)
. Exceptions to No Liens with respect to all real property owned or leased,
and to all other assets, tangible and intangible.
. Financing Statements evidencing any Liens.
. Impairments to valid leasehold interests.
Section 3.5(b)
. Real estate owned or leased, and property leased by the Company and any
Subsidiary.
. Material Fixed Assets.
. Title Retention Agreements.
Section 3.5(c)
. Exceptions to compliance with title covenants and conditions and
environmental laws.
. Hazardous Materials used or stored by the Company or any Subsidiary.
Section 3.6
. Private Authorizations material to the Company or any Subsidiary.
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before
December 31, 1995.
Section 3.7(b)
. Breaches, violations or defaults under Governmental Authorizations or any
Applicable Law or under any requirement of any insurance carrier.
2
<PAGE>
Section 3.8(a)
. Governmental Authorizations and Intangible Assets upon which the conduct of
business by the Company or any Subsidiary is dependent.
Section 3.8(b)
. Description of Intangible Assets and Governmental Authorizations.
Section 3.9
. Contractual obligations or transactions between the Company or any of its
Subsidiaries and any of its officers, directors, employees, stockholders,
or any Affiliate of any thereof (other than reasonable compensation for
services or out-of-pocket expenses reasonably incurred in support of the
Company's business).
Section 3.10(a)
. Insurance Policies maintained by the Company or any Subsidiary.
. Insurance Carriers which have refused the Company or any Subsidiary insurance
within the past five years.
Section 3.11(a)
. Exceptions to taxation as a Subchapter C corporation.
. Membership in a consolidated group for tax purposes.
Section 3.11(d)
. Tax audits of the Company or any Subsidiary by the IRS or any notifications
thereof.
Section 3.11(e)
. Tax Sharing Agreement or Arrangement of the Company or any Subsidiary.
Section 3.11(f)
. Consents concerning collapsible corporations under Section 341(f) of the
Code.
. Ownership changes within the meaning of Section 382(g) of the Code.
Section 3.12(a)
. ERISA plans, including, inter alia, exceptions to compliance to applicable
----- ----
laws, notices from any authority questioning compliance, deficiencies,
"prohibited transactions", any amounts of
3
<PAGE>
liability, termination proceedings, annual reports, or any membership in or
contributions to multi-employer plans.
Section 3.12(c)
. Basis of funding and current status of any past service liability with
respect to each Employment Arrangement.
Section 3.15(a)
. Authorized and outstanding Capital Stock of the Company.
. Agreements by the Company or any Subsidiary to grant or issue any shares of
its Capital Stock or any Option Security or Convertible Security.
. Any agreement, put or commitment pursuant to which the Company or any
Subsidiary is obligated to purchase, redeem or otherwise acquire any shares
of Capital Stock or any Option Security or Convertible Security.
Section 3.15(b)
. Stockholders.
. Stock not held free and clear of all Liens.
. Persons or groups of persons owning as much as 5% of the Company's
outstanding Common Stock.
Section 3.16(a)
. Employment Arrangements of the Company or any Subsidiary.
. Collective bargaining agreements or pending grievances or labor disputes.
Section 3.16(b)
. Accelerated payments or benefits, including parachute payments, that will be
received as a result of the transactions contemplated by this Agreement.
Section 3.16(c)
. Any unfavorable relationships with employees of the Company or any
Subsidiary.
Section 3.17(a)
. Material Agreements relating to the ownership or operation of the business
and property of the Company or any Subsidiary presently held or used by the
Company or any Subsidiary, or to
4
<PAGE>
which the Company or any Subsidiary is a party, or to which it or any of its
property is subject or bound.
Section 3.17(b)
. Exceptions to satisfaction or performance of Material Agreements by the
Company or any Subsidiary.
Section 3.18(a)
. Exceptions to operation of business in the ordinary course.
Section 3.18(b)
. Distributions from end of most recent fiscal year to the date of this
Agreement.
Section 3.19
. Banks, trust companies, savings and loan associations and brokerage firms in
which the Company or any Subsidiary has an account or safe deposit box, and
the names of all persons with access thereto.
Section 3.20
. Adverse restrictions which impairs the Company or any Subsidiary's ability to
conduct its business or which could have any adverse effect on the Company or
any Subsidiary.
Section 3.22
. Personal injury, warranty claims, etc., pending or threatened.
Section 3.23(a)
. Environmental matters - compliance and Governmental Authorizations and
Private Authorizations.
Section 3.23(b)
. Any actual or expected spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water on any property or facility
owned, leased, operated or occupied by the Company or any Subsidiary.
. Notices or Liens arising under Environmental Law.
Section 3.23(c)
. Above or underground tanks for the storage of Hazardous Materials.
5
<PAGE>
Section 3.23(e)
. Hazardous Materials used in the conduct of business of the Company or any
Subsidiary.
. Description and annual volume of Hazardous Materials used.
. Years during which use occurred.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(f)
. Hazardous Materials generated.
. Annual volume.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(g)
. Environmental site assessments.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
Section 4.4
. Exceptions to good and merchantable title to Shares to be exchanged pursuant
to this Agreement.
Section 4.5(a)
. Conflicts with, breaches of, or defaults under any Contractual Obligation of
Principal Stockholder resulting from the execution and delivery of this
Agreement or any Collateral Document.
Section 4.5(b)
. Liens created or imposed upon any property or asset of Principal Stockholder
as a result of the execution and delivery of this Agreement or any Collateral
Document.
Section 4.5(c)
. Governmental Authorizations, Governmental Filing or Private Authorizations
required as a result of the execution and delivery of this Agreement or any
Collateral Document.
6
<PAGE>
Section 5.7
. Authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary.
. Options, warrant, calls, rights, commitments or any other agreements of any
character obligating VIALOG or VIALOG Merger Subsidiary to issue any shares
of VIALOG Stock or other shares of Capital Stock of VIALOG or VIALOG Merger
Subsidiary, or any other securities convertible into or evidencing the right
to subscribe for any such shares.
Section 5.11
. Provisions in other Participating Agreements of other Participating Companies
not substantially identical in form and substance to the provisions contained
in Articles 3 through 12 of this Agreement.
Section 6.5(b)
. Business (other than business in the ordinary course) the Company will
conduct without the written permission of VIALOG Corporation.
Section 6.17
. Distributions to Stockholders, employees and consultants contemplated to be
made prior to the Merger Closing.
. Liens to be discharged prior to the Merger Closing.
. Certain liabilities for which the Company will indemnify VIALOG as of the
Merger Closing.
Section 7.1(f)
. Awards under Stock Option Plan.
Section 7.2(d)
. Persons executing Non-Competition Agreements.
Section 7.2(n)
. Form of Agreement releasing the Company and any Subsidiary from claims
against them.
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of the
Public Offering Closing Date.
7
<PAGE>
Section 7.2(s)
. Employment Agreement between Principal Stockholder and VIALOG Corporation.
Section 7.2(t)
. Individuals executing and delivering Employment Arrangements for VIALOG
Corporation.
8
<PAGE>
Exhibit 2.3
AMENDED AND RESTATED AGREEMENT AND PLAN OF
REORGANIZATION
BY AND AMONG
VIALOG CORPORATION
CSII ACQUISITION CORPORATION
AND
CONFERENCE SOURCE INTERNATIONAL, INC.
AND
JUDY B. CRAWFORD
AND
OLEN E. CRAWFORD
Dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 THE MERGER.......................................................... 2
SECTION 1.1 The Merger.................................................. 2
SECTION 1.2 Action by Stockholders...................................... 2
SECTION 1.3 Closing..................................................... 3
SECTION 1.4 Effective Time.............................................. 3
SECTION 1.5 Effect of the Merger........................................ 4
SECTION 1.6 Certificate of Incorporation................................ 4
SECTION 1.7 By-laws..................................................... 4
SECTION 1.8 Directors and Officers...................................... 4
ARTICLE 2 CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES............... 4
SECTION 2.1 Conversion of Securities.................................... 4
SECTION 2.2 Exchange of Certificates; Exchange Agent and
Exchange Procedures......................................... 6
SECTION 2.3 Stock Transfer Books........................................ 8
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights.............................................. 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 8
SECTION 3.1 Organization and Business; Power and Authority;
Effect of Transaction....................................... 8
SECTION 3.2 Financial and Other Information............................ 10
SECTION 3.3 Changes in Condition....................................... 12
SECTION 3.4 Liabilities................................................ 12
SECTION 3.5 Title to Properties; Leases................................ 12
SECTION 3.6 Compliance with Private Authorizations..................... 14
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law............................................. 14
SECTION 3.8 Intangible Assets.......................................... 15
SECTION 3.9 Related Transactions....................................... 16
SECTION 3.10 Insurance.................................................. 16
SECTION 3.11 Tax Matters................................................ 16
SECTION 3.12 Employee Retirement Income Security Act of 1974............ 18
SECTION 3.13 Absence of Sensitive Payments.............................. 20
SECTION 3.14 Inapplicability of Specified Statutes...................... 20
SECTION 3.15 Authorized and Outstanding Capital Stock................... 21
SECTION 3.16 Employment Arrangements.................................... 21
SECTION 3.17 Material Agreements........................................ 22
SECTION 3.18 Ordinary Course of Business................................ 23
SECTION 3.19 Bank Accounts, Etc......................................... 25
i
<PAGE>
SECTION 3.20 Adverse Restrictions....................................... 25
SECTION 3.21 Broker or Finder........................................... 25
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc... 25
SECTION 3.23 Environmental Matters...................................... 25
SECTION 3.24 Materiality................................................ 28
SECTION 3.25 Solvency................................................... 28
SECTION 3.26 VIALOG Stock............................................... 28
SECTION 3.27 Compliance with Regulations Relating to Securities Credit.. 28
SECTION 3.28 Certain State Statutes Inapplicable........................ 28
SECTION 3.29 Continuing Representations and Warranties.................. 28
SECTION 3.30 Registration Statement..................................... 28
SECTION 3.31 Predecessor Status, etc.................................... 29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDER................................................... 29
SECTION 4.1 Organization............................................... 29
SECTION 4.2 Power and Authority........................................ 29
SECTION 4.3 Enforceability............................................. 29
SECTION 4.4 Title to Shares............................................ 30
SECTION 4.5 No Conflict; Required Filings and Consents................. 30
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VIALOG AND
VIALOG MERGER SUBSIDIARY................................................ 30
SECTION 5.1 Organization and Qualification............................. 30
SECTION 5.2 Power and Authority........................................ 31
SECTION 5.3 No Conflict; Required Filings and Consents................. 31
SECTION 5.4 Financing.................................................. 32
SECTION 5.5 Broker or Finder........................................... 32
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary.... 32
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary...... 32
SECTION 5.8 Registration Statement..................................... 32
SECTION 5.9 Solvency................................................... 33
SECTION 5.10 Firm Commitment............................................ 33
SECTION 5.11 Participating Agreements of Other Participating Companies.. 33
SECTION 5.12 Continuing Representations and Warranties.................. 33
ARTICLE 6 ADDITIONAL COVENANTS............................................... 34
SECTION 6.1 Access to Information; Confidentiality..................... 34
SECTION 6.2 Agreement to Cooperate..................................... 35
SECTION 6.3 Assignment of Contracts and Rights......................... 36
SECTION 6.4 Compliance with the Securities Act......................... 36
SECTION 6.5 Conduct of Business........................................ 37
ii
<PAGE>
SECTION 6.6 No Solicitation............................................ 38
SECTION 6.7 Directors' and Officers' Indemnification and Insurance..... 38
SECTION 6.8 Notification of Certain Matters............................ 39
SECTION 6.9 Public Announcements....................................... 39
SECTION 6.10 Conveyance Taxes........................................... 40
SECTION 6.11 Obligations of VIALOG...................................... 40
SECTION 6.12 Employee Benefits; Severance Policy........................ 40
SECTION 6.13 Certain Actions Concerning Business Combinations........... 40
SECTION 6.14 Termination of Option Securities and Convertible
Securities................................................. 41
SECTION 6.15 Tax Returns................................................ 41
SECTION 6.16 Employment and Noncompetition.............................. 41
SECTION 6.17 Distributions, Liabilities, Etc............................ 42
SECTION 6.18 Release from Personal Guarantees........................... 42
SECTION 6.19 No Significant Changes..................................... 42
SECTION 6.20 Registration Statement..................................... 43
SECTION 6.21 Tax Status................................................. 43
SECTION 6.22 Self Dealing............................................... 43
ARTICLE 7 CLOSING CONDITIONS................................................. 43
SECTION 7.1 Conditions to Obligations of Each Party to Effect.......... 43
the Merger
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG
Merger Subsidiary.......................................... 45
SECTION 7.3 Conditions to Obligations of the Company................... 50
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.................................. 53
SECTION 8.1 Termination................................................ 53
SECTION 8.2 Effect of Termination...................................... 55
SECTION 8.3 Amendment.................................................. 56
SECTION 8.4 Waiver..................................................... 56
SECTION 8.5 Fees, Expenses and Other Payments.......................... 56
SECTION 8.6 Effect of Investigation.................................... 56
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER RESTRICTIONS
ON VIALOG STOCK......................................................... 57
SECTION 9.1 Shares not Registered...................................... 57
SECTION 9.2 Economic Risk; Sophistication.............................. 57
SECTION 9.3 Restrictions on Resale; Legends............................ 57
ARTICLE 10 INDEMNIFICATION................................................... 58
SECTION 10.1 Indemnification............................................ 58
SECTION 10.2 Procedures Concerning Claims by Third Parties;
iii
<PAGE>
Payment of Damages; etc.................................... 60
ARTICLE 11 GENERAL PROVISIONS................................................ 61
SECTION 11.1 Effectiveness of Representations; etc..................... 61
SECTION 11.2 Notices................................................... 62
SECTION 11.3 Headings.................................................. 63
SECTION 11.4 Severability.............................................. 63
SECTION 11.5 Entire Agreement.......................................... 63
SECTION 11.6 Assignment................................................ 63
SECTION 11.7 Parties in Interest....................................... 63
SECTION 11.8 Governing Law............................................. 63
SECTION 11.9 Enforcement of the Agreement.............................. 63
SECTION 11.10 Counterparts.............................................. 64
SECTION 11.11 Disclosure Supplements.................................... 64
ARTICLE 12 DEFINITIONS....................................................... 64
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION dated as of
February 28, 1997 among VIALOG CORPORATION, a Massachusetts corporation
("VIALOG"), CSII Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of VIALOG ("VIALOG Merger Subsidiary"), CONFERENCE SOURCE
INTERNATIONAL, INC., a Georgia corporation (the "Company"), and JUDY B. CRAWFORD
and OLEN E. CRAWFORD (the "Principal Stockholder").
PREAMBLE
1. The Company and VIALOG Merger Subsidiary have agreed to carry out a
business combination transaction upon the terms and subject to the conditions of
this Agreement and in accordance with the Georgia Business Corporation Act (the
"BCA") and the General Corporation Law of the State of Delaware (the "DBCL"),
pursuant to which the VIALOG Merger Subsidiary will merge with and into the
Company (the "Merger") and the Stockholders and other Persons holding equity
interests in the Company will convert their holdings into cash and shares of
common stock, $.01 par value per share of VIALOG ("VIALOG Stock"), determined in
accordance with Section 2.1(a).
2. Each of the Other Participating Companies will enter into an
agreement and plan of reorganization or stock or asset purchase agreement with
VIALOG and a wholly-owned Subsidiary of VIALOG (each a "Participating
Agreement") whereby, contemporaneously with the Merger, each Other Participating
Company and a Subsidiary of VIALOG will carry out a business combination
transaction pursuant to which each such Subsidiary will merge with and into one
of the Other Participating Companies or VIALOG or such Subsidiary shall purchase
stock or assets of such Other Participating Companies and stockholders of and
other Persons holding equity interests in the Other Participating Companies will
convert their holdings into cash and shares of VIALOG Stock determined in
accordance with provisions substantially similar to those in Section 2.1(a).
3. Pursuant to the Underwriting Agreement, VIALOG will issue and sell
VIALOG Stock in a firm commitment public offering registered on Form S-1 in
accordance with the requirements of the Securities Act (the "Public Offering").
4. The Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement and the Merger as a
convenient means to accomplish a transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code") and a convenient means to
cause all of the Stockholders to transfer their capital stock of the Company to
VIALOG, has approved this Agreement, the Merger and the Transactions and
1
<PAGE>
has recommended approval and adoption of this Agreement, the Merger and the
Transactions by the Stockholders.
5. The Board of Directors of VIALOG has approved and adopted this
Agreement and has approved the Merger and the Transactions as the sole
stockholder of VIALOG Merger Subsidiary.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE
1
THE MERGER
1.1 The Merger.
----------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the BCA and the DBCL at the Effective Time the
VIALOG Merger Subsidiary will be merged with and into the Company. As a result
of the Merger, the separate existence of the VIALOG Merger Subsidiary will cease
and the Company will continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(b) The Company represents that, at a meeting duly called and held
at which a quorum was present and acting throughout, its Board of Directors has
unanimously (i) determined that this Agreement, the Merger and the Transactions
are fair to and in the best interest of Stockholders, (ii) approved this
Agreement, the Merger and the Transactions, which approval satisfies in full the
requirements of the BCA and Georgia law, and (iii) resolved to recommend
approval and adoption by the Stockholders of this Agreement, the Merger and the
Transactions to the extent required and in a manner permitted by Applicable Law.
1.2 Action by Stockholders.
----------------------
(a) The Company, acting through its Board of Directors, will, in
accordance with Applicable Law and its Organizational Documents: (i) as soon as
practicable, duly call, give notice of, convene and hold a special meeting of,
or to the extent permitted by Applicable Law submit for approval and adoption by
written consent by, the Stockholders for the purpose of adopting and approving
this Agreement, the Merger and the Transactions (the "Special Meeting"); (ii)
include in any proxy statement the conclusion and recommendation of the Board of
Directors to the effect that the Board of Directors, having determined that this
Agreement, the
2
<PAGE>
Merger and the Transactions are in the best interests of the Company and the
Stockholders, has approved this Agreement, the Merger and the Transactions and
recommends that the Stockholders vote in favor of the approval and adoption of
this Agreement, the Merger and the Transactions; and (iii) use its reasonable
best efforts to obtain the necessary approval and adoption of this Agreement,
the Merger and the Transactions by the Stockholders.
(b) VIALOG Merger Subsidiary, as soon as practicable, will submit
to VIALOG this Agreement, the Merger and the Transactions for approval and
adoption by written consent as the sole stockholder of VIALOG Merger Subsidiary,
and VIALOG will take all additional actions as such sole stockholder necessary
to adopt and approve this Agreement, the Merger and the Transactions.
(c) The approvals required by Sections 1.2(a) and (b) will occur
prior to the initial filing of the Registration Statement, which is expected to
occur on or before February 28, 1997.
1.3 Closing. Unless this Agreement is terminated pursuant to Section
-------
8.1 and the Merger and the Transactions have been abandoned, and subject to the
satisfaction or, if possible, waiver of conditions set forth in Article 7 other
than Section 7.1(d), the closing of the Merger (the "Merger Closing") will take
place, one day prior to the Effective Date, at the offices of Mirick, O'Connell,
DeMallie & Lougee, LLP, unless another date, time or place is agreed to in
writing by the Parties to this Agreement and each Participating Agreement.
Counsel for the Parties to this Agreement and each Participating Agreement will
hold a pre-closing two days prior to the Effective Date, at the offices of
Mirick, O'Connell, DeMallie & Lougee, LLP, for the purpose of finalizing all
documents to be signed at the Merger Closing. All certificates, legal opinions
and other instruments required to be delivered in order to satisfy the
conditions to the obligations of the Parties to effect the Merger set forth in
Article 7 below shall be delivered at the Merger Closing, and each such
certificate, legal opinion or other instrument shall, except to the extent
otherwise provided in Article 7, be dated as of the anticipated Public Offering
Closing Date, which is expected to occur five business days following the date
of Merger Closing. All such certificates, legal opinions and other instruments
shall be held in escrow by Mirick, O'Connell, DeMallie & Lougee, LLP between the
Merger Closing and the Effective Time and shall be released from escrow
concurrently with the Effective Time on the Public Offering Closing Date. In
the event that the Effective Time and Public Offering Closing Date occur on a
date other than the fifth business day following the Merger Closing, all such
certificates, legal opinions and instruments shall be re-dated as of the Public
Offering Closing Date. The Company, the Principal Stockholder, VIALOG and
VIALOG Merger Subsidiary shall use their respective best efforts to cause each
of the conditions set forth in Article 7 reasonably capable of being satisfied
prior to the Merger Closing, including, without limitation, the conditions set
forth in Sections 7.1(a), (c), (e), (f), (g) and (h), to be satisfied prior to
the Merger Closing.
1.4 Effective Time. On the Public Offering Closing Date, the Parties
--------------
will cause the Merger to be consummated by filing articles or certificates of
merger, as the case may be, with the Secretary of State of Georgia and with the
Secretary of State of Delaware, and by making any related filings required under
the BCA and the DBCL. The Merger will become effective at
3
<PAGE>
such time (but not prior to the Public Offering Closing Date) as such articles
or certificates, as the case may be, are duly filed with the Secretary of State
of Georgia and the Secretary of State of Delaware, respectively (the "Effective
Time)".
1.5 Effect of the Merger. From and after the Effective Time, the
--------------------
Surviving Corporation will possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and VIALOG Merger Subsidiary, and the Merger will otherwise have the
effects, all as provided under the BCA and the DBCL.
1.6 Certificate of Incorporation. From and after the Effective Time,
----------------------------
the Certificate of Incorporation of the Surviving Corporation will be
substantially in the form attached as Exhibit 1.6 until amended in accordance
-----------
with Applicable Law, and the name of the Surviving Corporation will be the name
of the Company or such other name as VIALOG may elect.
1.7 By-laws. From and after the Effective Time, the by-laws of the
-------
Surviving Corporation will be in the form attached as Exhibit 1.7, until amended
-----------
in accordance with Applicable Law.
1.8 Directors and Officers. From and after the Effective Time, until
----------------------
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law (a) the directors of
VIALOG Merger Subsidiary at the Effective Time will be the directors of the
Surviving Corporation and (b) the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation.
ARTICLE
2
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of VIALOG Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each share of common stock, $1.00 par value of the Company
(the "Company Stock") issued and outstanding or issuable upon the election to
exercise or convert outstanding Option Securities and Convertible Securities
immediately prior to the Effective Time (other than any shares of Company Stock
to be canceled pursuant to Section 2.1(b)) will be converted into the right to
receive shares of VIALOG Stock (the "Stock Merger Consideration") and cash (the
"Cash Merger Consideration") (together with the Stock Merger Consideration, the
"Merger Consideration") pursuant to the following formula:
Aggregate Merger Consideration = $13,265,000
Aggregate Stock Merger Consideration = 692,086 shares
4
<PAGE>
Aggregate Cash Merger Consideration = $5,306,011
Merger Consideration = Aggregate Merger Consideration
------------------------------
Aggregate Equity
Stock Merger Consideration = Aggregate Stock Merger Consideration
------------------------------------
Aggregate Equity
Cash Merger Consideration = Aggregate Cash Merger Consideration
-----------------------------------
Aggregate Equity
At the Effective Time, all issued and outstanding shares of Company Stock (the
"Shares") will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and certificates previously evidencing any such
Shares (each a "Certificate") will thereafter represent the right to receive,
upon the surrender of such Certificate in accordance with the provisions of
Section 2.2, the number of Shares represented by such Certificate multiplied by
(i) the Stock Merger Consideration plus (ii) the Cash Merger Consideration. A
holder of more than one Certificate will have the right to receive the Stock
Merger Consideration and the Cash Merger Consideration multiplied by the number
of Shares represented by all such Certificates (the "Exchange Merger
Consideration"). The holders of all Certificates may allocate the Stock Merger
Consideration and Cash Merger Consideration disproportionately among all such
holders; provided, however, that (i) a Schedule 2.1 setting forth the allocation
of Stock Merger Consideration and Cash Merger Consideration among the holders of
all Certificates is completed and consented to in writing by all such holders
contemporaneously with the execution and delivery of this Agreement, all in such
form as required by VIALOG; (ii) for each Share, the total of (A) the allocated
Stock Merger Consideration multiplied by the Offering Price, plus (B) the
allocated Cash Merger Consideration, must equal the Merger Consideration, (iii)
the total allocation of the Stock Merger Consideration must equal the Aggregate
Stock Merger Consideration, and (iv) the total allocation of the Cash Merger
Consideration must equal the Aggregate Cash Merger Consideration. Any such
election to allocate the Stock Merger Consideration and Cash Merger
Consideration disproportionately may not thereafter be withdrawn or amended.
The holders of Certificates previously evidencing Shares outstanding immediately
prior to the Effective Time will cease to have any rights with respect to such
Shares except as otherwise provided in this Agreement or by Applicable Law.
(b) Each Share held in the treasury of the Company or by any
direct or indirect wholly-owned Subsidiary of the Company immediately prior to
the Effective Time will automatically be canceled and extinguished without
conversion, and no payment will be made with respect to such Share.
(c) Each share of common stock of VIALOG Merger Subsidiary
outstanding immediately prior to the Effective Time will be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so
5
<PAGE>
converted and will constitute the only outstanding shares of capital stock of
the Surviving Corporation.
(d) In lieu of issuing fractional shares, VIALOG may convert a
holder's right to receive shares of VIALOG Stock pursuant to Section 2.1(a) into
a right to receive the highest whole number of shares of VIALOG Stock
constituting the non-cash portion of the Exchange Merger Consideration plus cash
equal to the fraction of a share of VIALOG Stock to which the holder would
otherwise be entitled multiplied by the Offering Price, and the Exchange Merger
Consideration to which a holder is entitled will be deemed to be such number of
shares of VIALOG Stock plus such cash plus the cash portion of the Exchange
Merger Consideration.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Prior to the Merger Closing, VIALOG will deposit or cause to
be deposited with a bank, trust company or other Entity designated by VIALOG
(the "Exchange Agent"), for the benefit of the holders of Shares for exchange in
accordance with this Article, through the Exchange Agent, the stock portion of
the Merger Consideration multiplied by the number of all Shares issued and
outstanding immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 2.1(b)) (said number of Shares less Shares to be
canceled to be referred to as the "Net Shares"), and within one (1) business day
of the Public Offering Closing Date, a check or checks representing next day
funds from the Underwriter in (or, pursuant to instructions reasonably
satisfactory to the Exchange Agent, wire transfer of) an amount equal to the
Cash Merger Consideration multiplied by the number of Net Shares plus cash in an
amount sufficient to make payment for fractional shares, in exchange for all of
the outstanding Shares (collectively the "Exchange Fund"). The Exchange Agent
will, pursuant to irrevocable instructions from VIALOG, deliver the Exchange
Merger Consideration to be issued pursuant to Section 2.1(a) out of the Exchange
Fund to holders of Shares upon transmittal of Certificates for exchange as
provided therein and in Section 2.2(b). The Exchange Fund will not be used for
any other purposes. Any interest, dividends or other income earned by the
Exchange Fund will be for the account of VIALOG.
(b) As soon as reasonably practicable after the date as of which
the Stockholders act to approve and adopt this Agreement, the Merger and the
Transactions, the Company will notify VIALOG thereof and VIALOG will promptly
instruct the Exchange Agent to deliver to the Stockholders, for the purpose of
accepting Certificates for exchange on the terms provided in Section 2.1(a) at
the Effective Time, and subject to withdrawal of Certificates by their holders
prior thereto, (i) a letter of transmittal (which will specify that delivery
will be effected, and risk of loss and title to the Certificates will pass, only
upon proper delivery of the Certificates to the Exchange Agent and will be in
such form and have such other provisions as VIALOG may reasonably specify), and
(ii) instructions to effect the surrender of the Certificates in exchange for
the Exchange Merger Consideration. Subject to the occurrence of the Effective
Time, upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by VIALOG together with such
letter of transmittal, duly executed, and such other customary documents as may
be reasonably required pursuant to such instructions (collectively, the
"Transmittal Documents"), the holder of such Certificate will
6
<PAGE>
become entitled to receive, as of the Effective Time, in exchange therefor the
Exchange Merger Consideration which such holder has the right to receive
pursuant to Sections 2.1(a) and 2.1(d), and the Certificate so surrendered will
be canceled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, the Exchange Merger
Consideration may be issued and paid in accordance with this Article to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents reasonably required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. The Exchange Merger Consideration will be delivered by the
Exchange Agent within two business days (or such greater period not to exceed
five business days as may be customarily required by the Exchange Agent)
following the later of (i) two business days after the Public Offering Closing
Date, or (ii) surrender of a Certificate and the related Transmittal Documents,
and cash payments for fractional shares and the cash portion of the Exchange
Merger Consideration may be made by check (or, pursuant to instructions
reasonably satisfactory to the Exchange Agent, by wire transfer). No interest
will be payable on the Exchange Merger Consideration regardless of any delay in
making payments. Until surrendered as contemplated by this Section, each
Certificate will be deemed at any time after the Effective Time to evidence only
the right to receive, upon such surrender, the Exchange Merger Consideration,
without interest.
(c) If any Certificate is lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and subject to such other conditions as VIALOG may
impose, the Surviving Corporation will issue in exchange for such lost, stolen
or destroyed Certificate the Exchange Merger Consideration deliverable in
respect thereof as determined in accordance with Sections 2.1(a) and 2.1(d).
VIALOG may, in its discretion and as a condition precedent to authorizing the
issuance thereof by the Surviving Corporation, require the owner of such lost,
stolen or destroyed Certificate to provide a bond or other surety to VIALOG and
the Surviving Corporation in such sum as VIALOG may reasonably direct as
indemnity against any claim that may be made against VIALOG, VIALOG Merger
Subsidiary or the Surviving Corporation (and their Affiliates) with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed
to the holders of the Company Stock for thirty (30) days after the Effective
Time will be delivered to VIALOG upon demand by VIALOG, and any holders of
Certificates who have not theretofore complied with this Article will thereafter
look only to VIALOG for the Exchange Merger Consideration to which they are
entitled pursuant to this Article.
(e) None of VIALOG, VIALOG Merger Subsidiary, the Company or the
Surviving Corporation will be liable to any holder of Shares for any shares of
VIALOG Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Each of VIALOG, the Surviving Corporation and the Exchange
Agent will be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts as
VIALOG, the Surviving Corporation or the
7
<PAGE>
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by VIALOG, the Surviving
Corporation or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by VIALOG, the
Surviving Corporation or the Exchange Agent.
2.3 Stock Transfer Books. At the Effective Time, the stock transfer
--------------------
books of the Company will be closed, and there will be no further registration
of transfers of Shares thereafter on the records of the Company other than to
VIALOG. On or after the Effective Time, any Certificate presented to the
Exchange Agent or the Surviving Corporation will be converted into the Exchange
Merger Consideration.
2.4 Option Securities and Convertible Securities; Payment Rights. At
------------------------------------------------------------
the Effective Time, (a) each outstanding Option Security and each outstanding
Convertible Security exercisable or convertible to purchase Shares as of
immediately prior to the Effective Time, will be canceled and the holder thereof
will be entitled to receive, and will receive, upon payment of the consideration
required to exercise or convert, or debit of such consideration against the
Merger Consideration otherwise due, and termination of such holder's rights to
exercise or convert, as the case may be, all other Option Securities or
Convertible Securities issued to such holder, Merger Consideration in the form
of shares of VIALOG Stock issuable and cash payable with respect to the number
of Shares issuable pursuant to such Option Security or Convertible Security so
exercised or converted, as the case may be, as provided in Section 2.1(a), plus
cash in lieu of receipt of a fractional share in an amount determined as
provided in Section 2.1(d), and (b) each Option Security outstanding not then
exercisable or exercised and the conversion rights of each Convertible Security
outstanding not then convertible or converted will be canceled.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to, and agrees with, VIALOG
and VIALOG Merger Subsidiary as follows:
3.1 Organization and Business; Power and Authority; Effect of
---------------------------------------------------------
Transaction.
-----------
(a) The Company:
(i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation as set forth in Section 3.1(a) of the
Disclosure Schedule,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties and
to conduct its business as
8
<PAGE>
now conducted and as presently proposed to be
conducted, and has in full force and effect all
Governmental Authorizations and Private Authorizations
and has made all Governmental Filings, to the extent
required for such ownership and lease of its property
and conduct of its business, and
(iii) has duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set
forth in Section 3.1(a) of the Disclosure Schedule) in
which the character of its property or the nature of
its business or operations requires such qualification
or authorization, except to the extent the failure so
to qualify or to maintain such authorizations would not
have an Adverse Effect.
(b) The Company has all requisite power and authority (corporate
and other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions. The execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the Stockholders). This
Agreement has been duly executed and delivered by the Company and constitutes,
and each Collateral Document executed or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions, when executed and
delivered by the Company or an Affiliate of the Company will constitute, legal,
valid and binding obligations of the Company or such Affiliate, enforceable in
accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity. The affirmative vote or action by
written consent of 51% of the votes the holders of the outstanding shares of the
Company are entitled to cast is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve this Agreement,
the Merger and the Transactions under Applicable Law and the Company's
Organizational Documents.
(c) Except as set forth in Section 3.1(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation
of, or constitute a default under, any Applicable Law
on the part of the Company or any Subsidiary or will
conflict with, or result in a breach or violation of,
or constitute a default under, or permit the
9
<PAGE>
acceleration of any obligation or liability in, or but
for any requirement of giving of notice or passage of
time or both would constitute such a conflict with,
breach or violation of, or default under, or permit any
such acceleration in, any Contractual Obligation of the
Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of
any Lien (except to the extent set forth in Section
3.1(c) of the Disclosure Schedule) upon any property
now owned or leased by the Company or any such other
party, or
(iii) will require any Governmental Authorization or
Governmental Filing or Private Authorization, except
for filing requirements under Applicable Law in
connection with the Merger and the Transactions and as
the Securities Act and applicable state securities laws
may apply to compliance by the Company with the
provisions of this Agreement relating to the Public
Offering and registration rights provided for hereunder
and except pursuant to the HSR Act. (if applicable).
(d) The Company does not have any Subsidiaries other than those
listed on Section 3.1(d) of the Disclosure Schedule. Each Subsidiary so listed
is wholly-owned, is a corporation which is duly organized, validly existing and
in good standing under the laws of the respective state of incorporation set
forth opposite its name on Section 3.1(d) of the Disclosure Schedule, and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown in Section 3.1(d) of the Disclosure Schedule) in which
the character of its property or the nature of its business or operations
requires such qualification or authorization, with full power and authority
(corporate and other) to carry on the business in which it is engaged. Each
Subsidiary has in full force and effect all Governmental Authorizations and
Private Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business. The Company owns all of the outstanding capital stock (as shown on
Section 3.1(d) of the Disclosure Schedule) of each Subsidiary, free and clear of
all Liens (except to the extent set forth in Section 3.1(d) of the Disclosure
Schedule), and all such stock has been duly authorized and validly issued and is
fully paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings with respect to any of
the foregoing, of any nature whatsoever relating to the authorized and unissued
or the outstanding capital stock of any Subsidiary.
3.2 Financial and Other Information.
-------------------------------
(a) The Company has furnished to VIALOG copies of the financial
statements of the Company and its Subsidiaries listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements,
including in each case the notes thereto, have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, do not
10
<PAGE>
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make any
statements contained therein not misleading, and fairly present the financial
condition and results of operations of the Company and its Subsidiaries, on the
bases therein stated, as of the respective dates thereof, and for the respective
periods covered thereby subject, in the case of unaudited financial statements
to normal nonmaterial year-end audit adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements,
this Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or any of the Stockholders pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Stockholders pursuant hereto or thereto or to consummate the
Merger and the Transactions, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated in such document by its terms or necessary in order to make the
statements contained herein or therein not misleading and all such Collateral
Documents are and will be true, correct and complete in all material respects;
provided that:
(i) with respect to projections contained or referred to in
the Disclosure Schedule, the Company represents and
warrants only that such projections were prepared in
good faith on the basis of the past business of the
Company and other information and assumptions which the
Company and the Principal Stockholder believe to be
reasonable,
(ii) each such Collateral Document will not be deemed
misleading by virtue of the absence of factual
recitations or references not germane thereto and
necessary to the purpose thereof, and
(iii) responses to due diligence requests will not be subject
to this Section 3.2(b) except to the extent that, to
the Company's knowledge, such response is materially
misleading.
(c) The Company does not own any capital stock or equity or
proprietary interest in any other Entity or enterprise, however organized and
however such interest may be denominated or evidenced, except as set forth in
Sections 3.1(d) or 3.2(c) of the Disclosure Schedule. None of the Entities, if
any, so set forth in Section 3.2(c) of the Disclosure Schedule is a Subsidiary
of the Company except as so set forth. The Company owns all of the outstanding
capital stock or equity or proprietary interests (as shown on Section 3.2(c) of
the Disclosure Schedule) of each such Entity or other enterprise, free and clear
of all Liens (except to the extent set forth in Section 3.2(c) of the Disclosure
Schedule), and all of such stock or equity or proprietary interests have been
duly authorized and validly issued and are fully paid and non-assessable. There
are no outstanding Option Securities or Convertible Securities, or agreements or
understandings with respect to any of the foregoing, of any nature whatsoever,
except as described in Section 3.2(c) of the Disclosure Schedule.
11
<PAGE>
3.3 Changes in Condition. Since the date of the most recent financial
--------------------
statements forming part of the Financial Statements, except to the extent
specifically described in Section 3.3 of the Disclosure Schedule, there has been
no Adverse Change in the Company or the Company and its Subsidiaries taken as a
whole. There is no Event known to the Company which Adversely Affects, or in
the future might (so far as the Company or the Principal Stockholder can now
reasonably foresee) Adversely Affect, the Company or the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto except for changes in
general economic conditions and to the extent set forth in Section 3.3 of the
Disclosure Schedule.
3.4 Liabilities. At the date of the most recent balance sheet forming
-----------
part of the Financial Statements, neither the Company nor any Subsidiary had any
obligations or liabilities, past, present or deferred, accrued or unaccrued,
fixed, absolute, contingent or other, except as disclosed in such balance sheet,
or the notes thereto, and since such date neither the Company nor any Subsidiary
has incurred any such obligations or liabilities, other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, which do not and, to the Company's
knowledge, will not, in the aggregate, Adversely Affect the Company or the
Company and its Subsidiaries taken as a whole except to the extent set forth in
Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business or as disclosed in the most recent balance sheet, or the notes thereto,
forming part of the Financial Statements or in Section 3.4 of the Disclosure
Schedule.
3.5 Title to Properties; Leases.
---------------------------
(a) Each of the Company and its Subsidiaries has good legal and
insurable title, with respect to all real property owned or leased (in fee
simple if owned and leasehold if leased) and marketable title if owned (in fee
simple), if any, reflected as an asset on the most recent balance sheet forming
part of the Financial Statements, or held by the Company or any of its
Subsidiaries for use in its business if not so reflected, and good indefeasible
and merchantable title to all other assets, tangible and intangible (excluding
leased property), reflected on such balance sheet, or held by the Company or any
of its Subsidiaries for use in its business if not so reflected, or purported to
have been acquired by the Company or any of its Subsidiaries since such date,
except inventory sold or depleted, or property, plant and other equipment used
up or retired, since such date, in each case in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries, free and
clear of all Liens, except such as are reflected in the most recent balance
sheet, or the notes thereto, forming part of the Financial Statements or set
forth in Section 3.5(a) of the Disclosure Schedule. Except for financing
statements evidencing Liens referred to in the preceding sentence (a true,
correct and complete list and description of which is set forth in Section
3.5(a) of the Disclosure Schedule), to the
12
<PAGE>
statements under the Uniform Commercial Code and no other filing which names the
Company or any of its Subsidiaries as debtor or which covers or purports to
cover any of the property of the Company or any of its Subsidiaries is on file
in any state or other jurisdiction, and neither the Company nor any Subsidiary
has signed or agreed to sign any such financing statement or filing or any
agreement authorizing any secured party thereunder to file any such financing
statement or filing. Each Lease or other occupancy or other agreement under
which the Company or any of its Subsidiaries holds real or personal property has
been duly authorized, executed and delivered by the Company or Subsidiary, as
the case may be, and, to the Company's knowledge, by each of the parties
thereto. Each such Lease is a legal, valid and binding obligation of the Company
or a Subsidiary, as the case may be, and, to the Company's knowledge, of each
other party thereto, enforceable in accordance with its terms. Each of the
Company and its Subsidiaries has a valid leasehold interest in and enjoys
peaceful and undisturbed possession under all Leases pursuant to which it holds
any real property or tangible personal property, none of which contains any
provision which would impair the Company's ability to use such property as it is
currently used by the Company, except as described in Section 3.5(a) of the
Disclosure Schedule. All of such Leases are valid and subsisting and in full
force and effect. Neither the Company nor any of its Subsidiaries nor, to the
Company's knowledge, any other party thereto, is in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any such Lease.
(b) Section 3.5(b) of the Disclosure Schedule contains a true,
correct and complete description of all real estate owned or leased by the
Company or any of its Subsidiaries and all Leases and an identification of all
material items of fixed assets and machinery and equipment. None of the fixed
assets and machinery and equipment is subject to contracts of sale, and none is
held by the Company or any of its Subsidiaries as lessee or as conditional sales
venue under any Lease or conditional sales contract and none is subject to any
title retention agreement, except as set forth in Section 3.5(b) of the
Disclosure Schedule. The real property (other than land), fixtures, fixed assets
and machinery and equipment are in a state of good repair and maintenance and
are in good operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure
Schedule:
(i) all real property owned or leased by the Company or any
of its Subsidiaries conforms to and complies with all
applicable title covenants, conditions, restrictions
and reservations and all Environmental Laws and all
applicable zoning, wetlands, land use and other
Applicable Law, and
(ii) neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any landlord, tenant or other
occupant or user of any such real property, has used
such real property for the storage or disposal of
Hazardous Materials or engaged in the business of
storing or disposing of Hazardous Materials, except for
use in the ordinary course of business of the type
conducted by the Company.
13
<PAGE>
3.6 Compliance with Private Authorizations. Section 3.6 of the
--------------------------------------
Disclosure Schedule sets forth a true, correct and complete list and description
of each Private Authorization which individually is material to the Company or
the Company and its Subsidiaries taken as a whole, all of which are in full
force and effect. Each of the Company and each Subsidiary has obtained all
Private Authorizations which are necessary for the ownership by the Company or
each Subsidiary of its properties and the conduct of its business as now
conducted or as presently proposed to be conducted or which, if not obtained and
maintained, could, singly or in the aggregate, Adversely Affect the Company or
the Company and its Subsidiaries taken as a whole. Neither the Company nor any
Subsidiary is in breach or violation of, or is in default in the performance,
observance or fulfillment of, any Private Authorization, and no Event exists or
has occurred, which constitutes, or but for any requirement of giving of notice
or passage of time or both would constitute, such a breach, violation default,
under any Contractual Obligation or Private Authorization, except for such
defaults, breaches or violations, as do not and, to the Company's knowledge,
will not have in the aggregate any Adverse Effect on the Company or the Company
and its Subsidiaries taken as a whole or the ability of the Company to perform
any of the obligations set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto or to consummate
the Merger and the Transactions. No Private Authorization is the subject of any
pending or, to the Company's knowledge, threatened attack, revocation or
termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
--------------------------------------------------------------
(a) Section 3.7(a) of the Disclosure Schedule contains a
description of:
(i) all Legal Actions which are pending or, other than
those finally adjudicated or settled on or before
December 31, 1995, in which the Company or any of its
Subsidiaries, or any of its officers or directors, is,
or at any time since its organization has been,
engaged, or which involves, or at any time during such
period involved, the business, operations or properties
of the Company or any of its Subsidiaries or, to the
Company's knowledge, which is threatened or
contemplated against, or in any other manner relating
Adversely to, the Company or any of its Subsidiaries or
the business, operations or properties, or the officers
or directors, or any of them in connection therewith;
and
(ii) each Governmental Authorization to which the Company or
any Subsidiary is subject and which relates to the
business, operations, properties, prospects, condition
(financial or other), or results of operations of the
Company or the Company and its Subsidiaries taken as a
whole, all of which are in full force and effect.
(b) Each of the Company and each of its Subsidiaries has
obtained all Governmental Authorizations which are necessary for the ownership
or uses of its properties and the conduct of its business as now conducted or as
presently proposed to be conducted by the
14
<PAGE>
Company or which, if not obtained and maintained, could singly or in the
aggregate, have any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole. No Governmental Authorization is the subject of
any pending or, to the Company's knowledge, threatened attack, revocation or
termination. Neither the Company nor any Subsidiary nor any officer or director
(in connection with the business, operations and properties of the Company or
any Subsidiary) is or at any time since January 1, 1991 has been, or is or has
during such time been charged with, or to the knowledge of the Company, is
threatened or under investigation with respect to any material breach or
violation of, or in default in the performance, observance or fulfillment of,
any Governmental Authorization or any Applicable Law, and no Event exists or has
occurred, which constitutes, or but for any requirement of giving of notice or
passage of time or both would constitute, such a breach, violation or default,
under
(i) any Governmental Authorization or any Applicable Law,
except for such breaches, violations or defaults as do
not and, to the Company's knowledge, will not have in the
aggregate any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or the
ability of the Company to perform any of the obligations
set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or
thereto, or to consummate the Merger and the
Transactions, or
(ii) any requirement of any insurance carrier, applicable to
its business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in
Sections 3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and
matters set forth in the Disclosure Schedule, individually and in the aggregate,
if adversely determined against the Company or any Subsidiary, will not
Adversely Affect the Company or the Company and its Subsidiaries taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions.
3.8 Intangible Assets.
-----------------
(a) Each of the Company and each Subsidiary owns or possesses or
otherwise has the right to use all Governmental Authorizations and other
Intangible Assets necessary for the present and planned future conduct of its
business, without any known conflict with the rights of others. The present and
planned future conduct of business by the Company and each Subsidiary is not
dependent upon any one or more, or all, of such Governmental Authorizations and
other Intangible Assets or rights with respect to any of the foregoing, except
as set forth in Section 3.8(a) of the Disclosure Schedule.
(b) Section 3.8(b) of the Disclosure Schedule sets forth a true,
correct and complete description of all of such Governmental Authorizations and
other Intangible Assets or
15
<PAGE>
rights with respect thereto, including without limitation the nature of the
Company's and each Subsidiary's interest in each and the extent to which the
same have been duly registered in the offices as indicated therein.
3.9 Related Transactions. Section 3.9 of the Disclosure Schedule sets
--------------------
forth a true, correct and complete description of any Contractual Obligation or
transaction, not fully discharged or consummated, as the case may be, on or
before the beginning of the Company's current fiscal year, between the Company
or any of its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services as officers, directors and employees and reimbursement
for out-of-pocket expenses reasonably incurred in support of the Company's
business), now existing or which, at any time since its organization, existed or
occurred, including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any officer, director, stockholder or
employee, or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
3.10 Insurance.
---------
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance
policies maintained by the Company or any Subsidiary and includes insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention.
(b) Neither the Company nor any Subsidiary is in breach or
violation of or in default under any such policy, and all premiums due thereon
have been paid, and each such policy or a comparable replacement policy will
continue to be in force and effect up to and including the Public Offering
Closing Date. The insurance policies so listed and identified are of a nature
and scope and in amounts sufficient to prevent the Company or any Subsidiary
from becoming a coinsurer within the terms of such policies. Except as set forth
in Section 3.10(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has, within the past five (5) years, been refused insurance by any
insurance carrier to which it has applied for insurance.
3.11 Tax Matters.
-----------
(a) Each of the Company and each Subsidiary has in accordance with
all Applicable Laws filed all Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Returns and all other governmental
charges and assessments received to date. The Tax Returns of the Company and
each Subsidiary have been prepared in accordance with all Applicable Laws and
generally accepted principles applicable to taxation consistently applied.
16
<PAGE>
All Taxes which the Company and each Subsidiary are required by law to withhold
and collect have been duly withheld and collected and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. Neither
the Company nor any Subsidiary has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of the
Company or any Subsidiary for the fiscal year prior to and including the most
recent fiscal year. Adequate provision has been made on the most recent balance
sheet forming part of the Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other, and to the knowledge of the Company there are no transactions
or matters or any basis which might or could result in additional Taxes of any
nature to the Company or any Subsidiary for which an adequate reserve has not
been provided on such balance sheet. Each of the Company and each Subsidiary has
at all times been taxable as a Subchapter C corporation under the Code, except
as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. Neither
the Company nor any Subsidiary has ever been a member of any consolidated group
(other than exclusively with the Company and its Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes which
have become due pursuant to its Returns and has paid all installments (to the
extent required to avoid material underpayment penalties) of estimated Taxes due
and payable.
(c) From the end of its most recent fiscal year to the date hereof
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business with
respect to current operations or property presently owned.
(d) The information shown on the federal income Tax Returns of the
Company and its Subsidiaries (true, correct and complete copies of which have
been furnished by the Company to VIALOG) is true, correct and complete and
fairly and accurately reflects the information purported to be shown. Federal
and state income Tax Returns of the Company and its Subsidiaries have been
audited by the IRS or applicable state Authority for the taxable periods set
forth in Section 3.11(d) of the Disclosure Schedules, and neither the Company
nor any Subsidiary has been notified regarding any pending audit, except as
shown in Section 3.11(d) of the Disclosure Schedule.
(e) Neither the Company nor any Subsidiary is a party to any tax
sharing agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
(f) Neither the Company nor any Subsidiary has ever (i) filed a
consent under Section 341(f) of the Code concerning collapsible corporations or
(ii) undergone an "ownership change" within the meaning of Section 382(g) of the
Code, except as set forth in Section 3.11(f) of the Disclosure Schedule.
<PAGE>
3.12 Employee Retirement Income Security Act of 1974.
-----------------------------------------------
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list of
all Plans and Benefit Arrangements maintained by the Company and any of its
Subsidiaries (which for purposes of this Section 3.12 will include any ERISA
Affiliate with respect to any Plan subject to Title IV of ERISA). As to all such
Plans and Benefit Arrangements, and except as disclosed in such Section 3.12(a)
of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply currently, and
have complied in the past, in all material respects both
as to form and operation, with their terms and with all
Applicable Laws, and neither the Company nor any of its
Subsidiaries has received any outstanding notice from any
Authority questioning or challenging such compliance,
(ii) all necessary governmental approvals for each Plan and
Benefit Arrangement have been obtained; the Internal
Revenue Service has issued a favorable determination as
to the tax qualified status of each Plan intended to
comply with section 401(a) of the Code and each amendment
thereto, and a recognition of exemption from federal
income taxation under Section 501(a) of the Code of each
Plan which constitutes a funded welfare plan as defined
in Section 3(1) of ERISA; and nothing has occurred since
the date of each such determination or recognition that
would adversely affect such qualification.
(iii) no Plan which is subject to Part 3 of Subtitle B of Title
1 of ERISA or Section 412 of the Code had an accumulated
funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recently completed
fiscal year of such Plan,
(iv) there are no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan for which the Company or any of its
Subsidiaries has any liability, nor are any of the assets
of any Plan invested in employer securities or employer
real property,
(v) no Plan is subject to Title IV of ERISA, or if subject,
there have been no "reportable events" (as described in
Section 4043 of ERISA) as to which there is any material
risk of termination of such Plan,
(vi) no material liability to the PBGC has been or is expected
by the Company to be incurred by the Company or any of
its Subsidiaries with respect to any Plan, and there has
been no event or condition
18
<PAGE>
which presents a material risk of termination of any Plan
by the PBGC,
(vii) with respect to each Plan subject to Title IV of ERISA,
the amount for which Company or any of its Subsidiaries
would be liable pursuant to the provisions of Sections
4062, 4063 or 4064 of ERISA would be zero if such Plans
terminated on the date of this Agreement,
(viii) no notice of intent to terminate a Plan has been filed
with, nor has any Plan been terminated pursuant to the
provisions of Section 4041 of ERISA,
(ix) the PBGC has not instituted proceedings to terminate (or
appointed a trustee to administer) a Plan and no event
has occurred or condition exists which might constitute
grounds under the provisions of Section 4042 of ERISA for
the termination of (or the appointment of a trustee to
administer) any such Plan.
(x) no Plan or Benefit Arrangement covers any employee or
former employee of the Company or any of its Subsidiaries
that could give rise to the payment of any amount that
would not be deductible pursuant to the terms of section
280G of the Code,
(xi) there are no Claims (other than routine claims for
benefits) pending or threatened involving any Plan or
Benefit Arrangement or any of the assets thereof,
(xii) except as set forth in Section 3.12(a) of the Disclosure
Schedule (which entry, if applicable, will indicate the
present value of accumulated plan liabilities calculated
in a manner consistent with FAS 106 and the actual annual
expense for such benefits for each of the last two (2)
years) and pursuant to the provisions of COBRA, neither
the Company nor any of its Subsidiaries maintains any
Plan that provides benefits described in Section 3(1) of
ERISA to any former employees or retirees of the Company
or any of its Subsidiaries,
(xiii) all reports, returns and similar items required to be
filed with any Authority or distributed to employees
and/or Plan participants in connection with the
maintenance or operation of any Plan or Benefit
Arrangement have been duly and timely filed and
distributed, and there have been no acts or omissions by
the Company or any of its Subsidiaries, which have given
rise to or may reasonably be expected to give rise to
fines, penalties, taxes or related charges under Sections
502(c), 502(i) or 4071 or ERISA or
19
<PAGE>
Chapter 43 or section 6039D of the Code for which the
Company or any of its Subsidiaries may be liable,
(xiv) neither the Company nor any of its Subsidiaries nor any
of its respective directors, officers or employees has
committed, nor to the best of the Company's knowledge has
any other fiduciary committed, any breach of the
fiduciary responsibility standards imposed by ERISA that
would subject the Company or any of its Subsidiaries or
any of its respective directors, officers or employees to
liability under ERISA,
(xv) to the extent that the most recent balance sheet forming
part of the Financial Statements does not include a pro
rata amount of the contributions which would otherwise
have been made in accordance with past practices for the
Plan years which include the Public Offering Closing
Date, such amounts are set forth in Section 3.12(a) of
the Disclosure Schedule,
(xvi) the Company has furnished to VIALOG a copy of the three
most recently filed annual reports (IRS Form 5500) series
and accountant's opinion, if applicable, for each Plan
(and the three most recent actuarial valuation reports
for each Plan, if any, that is subject to Title IV of
ERISA), and all information provided by the Company to
any actuary in connection with the preparation of any
such actuarial valuation report was true, correct and
complete in all material respects,
(b) Neither the Company nor any of its Subsidiaries is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the basis
of funding, and the current status of, any past service liability with respect
to each Employment Arrangement to which the same is applicable.
3.13 Absence of Sensitive Payments. The Company has not, nor has any
-----------------------------
Subsidiary, or, to the Company's knowledge, any of its or any Subsidiary's
officers, directors, employees or Representatives, (a) made any contributions,
payments or gifts to or for the private use of any governmental office, employee
or agent where either the payment or the purpose of such contribution, payment
or gift is illegal under the laws of the United States or the jurisdiction in
which made, (b) established or maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on its books, or (c) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
3.14 Inapplicability of Specified Statutes. Neither the Company nor
-------------------------------------
any Subsidiary is a "holding company", or a "subsidiary company" or an
"affiliate" or a "holding company", as
20
<PAGE>
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or an "investment company" or a company "controlled" by or acting on
behalf of an "investment company", as defined in the Investment Company Act of
1940, as amended.
3.15 Authorized and Outstanding Capital Stock
----------------------------------------
(a) The authorized and outstanding capital stock of the Company
is as set forth in Section 3.15(a) of the Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is fully
paid and non-assessable and is not subject to any preemptive or similar rights.
Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) there is
neither outstanding nor has the Company or any Subsidiary agreed to grant or
issue any shares of its capital stock or any Option Security or Convertible
Security, and (ii) neither the Company nor any Subsidiary is a party to or is
bound by any agreement, put or commitment pursuant to which it is obligated to
purchase, redeem or otherwise acquire any shares of capital stock or any Option
Security or Convertible Security. Between the date of this Agreement and the
Merger Closing, the Company will not, and will not permit any Subsidiary to,
issue, sell or purchase or agree to issue, sell or purchase any capital stock or
any Option Security or Convertible Security of the Company or any Subsidiary. As
of the Effective Time, the rights of the holders of all Option Securities and
Convertible Securities issued by the Company to exercise or convert such
Securities will have been terminated pursuant to the terms thereof.
(b) All of the outstanding capital stock of the Company is owned by
the Stockholders as set forth in Section 3.15(b) of the Disclosure Schedule, and
is, to the Company's knowledge, free and clear of all Liens, except as set forth
in Section 3.15(b) of the Disclosure Schedule. To the Company's knowledge, no
Person, and no group of Persons acting in concert, owns as much as five percent
(5%) of the Company's outstanding Common Stock, and the Company is not
controlled by any other Person, except as set forth in Section 3.15(b) of the
Disclosure Schedule.
3.16 Employment Arrangements.
-----------------------
(a) Neither the Company nor any Subsidiary has any obligation or
liability, contingent or other, under any Employment Arrangement (whether or not
listed in Section 3.12(a) of the Disclosure Schedule), other than those listed
or described in Section 3.16(a) of the Disclosure Schedule. Neither the Company
nor any Subsidiary is now or during the past five (5) years has been subject to
or involved in or, to the Company's knowledge, threatened with any election for
the certification of a bargaining representative for any employees, petitions
therefor or other organizational activities, including but not limited to
voluntary requests for recognition as a bargaining representative, or
organizational campaigns of any nature, except as described in Section 3.16(a)
of the Disclosure Schedule. None of the employees of the Company or any
Subsidiary are now, or during the past five (5) years have been, represented by
any labor union or other employee collective bargaining organization. Neither
the Company nor any Subsidiary are parties to any labor or other collective
bargaining agreement, and there are no pending grievances, disputes or
controversies with any union or any other employee collective bargaining
organization of such employees, or, to the Company's knowledge, threats of
strikes, work
21
<PAGE>
stoppages or slowdowns or any pending demands for collective bargaining by any
union or other such organization. The Company and each Subsidiary have performed
all obligations required to be performed under all Employment Arrangements and
are not in breach or violation of or in default or arrears under any of the
terms, provisions or conditions thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, no employee will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employment Arrangement,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(c) The Company considers its and each Subsidiary's relationships
with employees to be good, and except as set forth in Section 3.16(c) of the
Disclosure Schedule, neither the Company nor any Subsidiary has experienced a
work slowdown or stoppage due to labor problems. Neither the Company nor any
Subsidiary has received notice of any claim that it has failed to comply with
any federal or state law, or is the subject of any investigation by any federal
or state agency to determine compliance with any federal or state law, relating
to the employment of labor, including any provisions relating to wages, hours,
collective bargaining, the payment of taxes, discrimination, equal employment
opportunity, employment discrimination, worker injury and/or occupational
safety, nor to the knowledge of the Company is there any basis for such a claim.
(d) Neither the Company nor any Subsidiary has conducted, and on or
prior to the Public Offering Closing Date will not conduct, a "plant closing" or
"mass layoff" of employees of the Company or any Subsidiary as defined by the
Worker Adjustment and Retraining Notification Act of 1988 ("the WARN Act"), 29
U.S.C. 2101-2109 as amended, or discharge, layoff, or reduce the hours of work,
of employees in a sufficient number or manner to trigger any state or local law
or regulation conditioning or regulating in any manner the discharge, layoff, or
reduction in hours of employees or the closing of a facility, plant, workplace,
division or department, from the date hereof or through the Public Offering
Closing Date or during the twelve-month period immediately prior thereto.
3.17 Material Agreements.
-------------------
(a) Listed on Section 3.17(a) of the Disclosure Schedule are all
Material Agreements relating to the ownership or operation of the business and
property of the Company or any Subsidiary presently held or used by the Company
or any Subsidiary or to which the Company or any Subsidiary is a party or to
which it or any or its property is subject or bound. True, complete and correct
copies of each of the Material Agreements have been furnished by the Company to
VIALOG (or true, complete and correct descriptions thereof have been set forth
in Section 3.17(a) of the Disclosure Schedule, if any such Material Agreements
are oral). All of the Material Agreements are valid, binding and legally
enforceable obligations of the parties thereto (except as such enforceability
may be subject to bankruptcy, moratorium, insolvency, reorganization,
arrangement, voidable preference, fraudulent conveyance and other similar laws
22
<PAGE>
relating to or affecting the rights of creditors and except as the same may be
subject to the effect of the general principles of equity), and the Company or
one of its Subsidiaries is validly and lawfully operating its business and
owning its property under each of the Material Agreements. The Company and each
Subsidiary have duly complied with all of the terms and conditions of each
Material Agreement and have not done or performed, or failed to do or perform
(and there is no pending or, to the knowledge of the Company, threatened Claim
that the Company or any Subsidiary has not complied, done and performed or fail
to do and perform) any act the effect of which would be to invalidate or provide
grounds for the other party thereto to terminate (with or without notice,
passage of time or both) such Material Agreement or impair the rights or
benefits, or increase the costs, of the Company or any Subsidiary, under any of
the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section 3.17(a) of
the Disclosure Schedule calling for the delivery of goods or merchandise or the
performance of services can be satisfied or performed by the Company or one of
its Subsidiaries at margins providing an operating profit, except as set forth
in Section 3.17(b) of the Disclosure Schedule.
3.18 Ordinary Course of Business.
---------------------------
(a) The Company and each Subsidiary, from the earlier of the date of
the most recent balance sheet forming part of the Financial Statements or
December 31, 1995 to the date of this Agreement, and until the Public Offering
Closing Date, except as may be described on Section 3.18(a) of the Disclosure
Schedule or as may be required or permitted expressly by the terms of this
Agreement or as may be approved in writing by VIALOG:
(i) has operated, and will continue to operate, its business
in the normal, usual and customary manner in the ordinary
and regular course of business, consistent with prior
practice,
(ii) has not sold or otherwise disposed of, or contracted to
sell or otherwise dispose of, and will not sell or
otherwise dispose of or contract to sell or otherwise
dispose of, any of its properties or assets, other than
in the ordinary course of business,
(iii) except in each case in the ordinary course of business or
as detailed as transactions not in the ordinary course in
the Company's business plan set forth as Section 3.18(a)
of the Disclosure Schedule, and except as expressly
otherwise contemplated hereby,
(A) has not incurred and will not incur any obligations
or liabilities (fixed, contingent or other),
(B) has not entered and will not enter into any
commitments, and
(C) has not canceled and will not cancel any debts or
claims,
23
<PAGE>
(iv) has not made or committed to make, and will not make or
commit to make, any additions to its property or any
purchases of machinery or equipment, except for normal
maintenance and replacements,
(v) has not discharged or satisfied, and will not discharge
or satisfy, any Lien and has not paid and will not pay
any obligation or liability (absolute or contingent)
other than current liabilities or obligations under
contracts then existing or thereafter entered into in the
ordinary course of business, and commitments under Leases
existing on that date or incurred since that date in the
ordinary course of business,
(vi) except in the ordinary course, has not increased and will
not increase the compensation payable or to become
payable to any of its directors, officers, employees,
advisers, consultants, salesmen or agents or otherwise
alter, modify or change the terms of their employment or
engagement,
(vii) has not suffered any material damage, destruction or loss
(whether or not covered by insurance) or any acquisition
or taking of property by any Authority,
(viii) has not waived, and will not waive, any rights of
material value without fair and adequate consideration,
(ix) has not experienced any work stoppage,
(x) has not entered into, amended or terminated and will not
enter into, amend or terminate any Lease, Governmental
Authorization, Private Authorization, Material Agreement,
Employment Arrangement, Contractual Obligation or
transaction with any Affiliate, except for terminations
in the ordinary course of business in accordance with the
terms thereof,
(xi) has not amended or terminated and will not amend or
terminate, and has kept and will keep in full force and
effect including without limitation renewing to the
extent the same would otherwise expire or terminate, all
insurance policies and coverage,
(xii) has not entered into, and will not enter into, any other
transaction or series of related transactions which
individually or in the aggregate is material to the
Company or the Company and its Subsidiaries taken as a
whole, except in the ordinary course of business, and
24
<PAGE>
(xiii) has not, nor has any affiliate (as defined in Section
517.021(1) of the Florida Statutes), transacted business
with the government of Cuba or with any person or
affiliate located in Cuba.
(b) From the end of its most recent fiscal year to the date of this
Agreement, except as described in Section 3.18(b) of the Disclosure Schedule,
neither the Company nor any Subsidiary has, or on or prior to the Public
Offering Closing Date will have, declared, made or paid, or agreed to declare,
make or pay, any Distribution.
3.19 Bank Accounts, Etc. A true and correct and complete list as of the
------------------
date of this Agreement of all banks, trust companies, savings and loan
associations and brokerage firms in which the Company or any Subsidiary has an
account or a safe deposit box and the names of all Persons authorized to draw
thereon, to have access thereto, or to authorize transactions therein, the names
of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof has been previously
delivered to VIALOG.
3.20 Adverse Restrictions. Neither the Company nor any Subsidiary is a
--------------------
party to or subject to, nor is any of its property subject to, any Applicable
Law, Governmental Authorization, Contractual Obligation, Employment Arrangement,
Material Agreement or Private Authorization, or any other obligation or
restriction of any kind or character, or any aggregation thereof, which impairs
the Company's or any Subsidiary's ability to conduct its business as it is
currently being conducted or which could have any Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, except as set forth in
Section 3.20 of the Disclosure Schedule.
3.21 Broker or Finder. No Person assisted in or brought about the
----------------
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or any Stockholder.
3.22 Personal Injury or Property Damage; Warranty Claims; Etc. Except as
--------------------------------------------------------
set forth in Section 3.22 of the Disclosure Schedule, neither the Company nor
any Subsidiary or any Person acting for or on behalf of the Company or any
Subsidiary, including without limitation any insurance carrier, has at any time
since December 31, 1995, paid, and there is not now pending or, to the knowledge
of the Company, threatened any Claim (or any basis for any such Claim) relating
to, any damages to any third party for injuries to Persons or damage to
property, or for breach of warranty, which, in the case of pending or threatened
Claims, if determined Adversely to the Company or any Subsidiary, individually
or in the aggregate (taking into account unasserted Claims of similar nature),
could have any Adverse Effect on the Company or the Company and its Subsidiaries
taken as a whole.
3.23 Environmental Matters.
---------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Company and each Subsidiary:
25
<PAGE>
(i) is in compliance in all material respects with all
Environmental Laws and has not been notified that it is
liable or potentially liable, has not received any
request for information or other correspondence
concerning any site or facility, and is not a
"responsible party" or "potentially responsible party"
under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the
Resource Conservation Recovery Act of 1976, as amended,
or any similar state law,
(ii) has not entered into or received any consent decree,
compliance order, or administrative order relating to
Environmental Requirements,
(iii) is not a party in interest or in default under any
judgment, order, writ, injunction or decree or any final
order relating to Environmental Requirements, and
(iv) has obtained all material Governmental Authorizations and
Private Authorizations (including without limitation all
Environmental Permits) and made all Governmental Filings
which are required to be filed by the Company and each
Subsidiary for the ownership of its property, facilities
and assets and the operation of its businesses under all
Environmental Laws, is and at all times since its
organization has been in material compliance with the
terms and conditions of all such required Governmental
and Private Authorizations and all Environmental
Requirements, and is not the subject of or, to the
Company's knowledge, threatened with any Legal Action
involving a demand for damages or any other potential
liability with respect to violations or breaches of any
Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure
Schedule:
(i) no spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water has
occurred on any property or facility owned, leased,
operated or occupied by the Company or any Subsidiary
during the period that such facilities and properties
were owned, leased, operated or occupied by it or, to the
knowledge of the Company, at any other time or at any
other facility or site to which Hazardous Materials from
or generated by the Company or any Subsidiary may have
been taken at any time in the past,
(ii) there has been no spill, disposal, release, burial or
placement of Hazardous Materials, in the soil, air or
water on any property which could reasonably be expected
to result or has resulted in
26
<PAGE>
contamination of or beneath any properties or facilities
owned, leased, operated or occupied by the Company or any
Subsidiary during the period that such facilities and
properties were owned, leased, operated or occupied by it
(or, to the knowledge of the Company, at any other time),
and
(iii) no notice has been received by the Company or any
Subsidiary and no Lien has arisen on its or any
Subsidiary's properties or facilities under Environmental
Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary has any above-ground or
underground tanks on property owned, leased, operated or occupied by it for the
storage of Hazardous Materials.
(d) There has not been, and on or prior to the Public Offering
Closing Date, there will not be, any past or present Events or plans of the
Company or any Subsidiary or any of its predecessors, which, individually or in
the aggregate, constitute a breach of any Environmental Requirements or which,
individually or in the aggregate, may interfere with or prevent continued
compliance with all Environmental Requirements, or which, individually or in the
aggregate, may give rise to any common law, statutory or other legal liability,
or otherwise form the basis of any Claim, assessment or remediation cost, fine,
penalty or assessment based on or related to the transportation, transmission,
gathering, processing, distribution, use, treatment, storage, disposal or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material with respect to the Company or any
Subsidiary or any of its predecessors or its or any of their business,
operations or property which could have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary has used any Hazardous
Materials in the conduct of its business. To the extent that any Hazardous
Materials are so set forth, Section 3.23(e) of the Disclosure Schedule also sets
forth (i) a description of Hazardous Materials used, (ii) the annual volume of
each of the Hazardous Materials used, (iii) the years during which each of the
Hazardous Materials used occurred, and (iv) the Persons to whom such Hazardous
Materials were transferred and/or transported after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a complete
and correct description of all Hazardous Materials generated by the Company or
any Subsidiary which are not set forth in Section 3.23(e), the approximate
annual volumes of each of the Hazardous Materials, and all Persons to whom such
Hazardous Materials have been transferred and/or transported.
(g) No site assessment, audit, study, test or other investigation
has been conducted by or on behalf of the Company or any Subsidiary, nor has the
Company received any notice from any governmental agency, or financial
institution as to environmental matters at any property owned, leased, operated
or occupied by the Company or any Subsidiary, except as set forth in Section
3.23(g) of the Disclosure Schedule.
27
<PAGE>
3.24 Materiality. The matters and items excluded from the
-----------
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to be Adverse to the
Company or the Company and its Subsidiaries taken as a whole.
3.25 Solvency. As of the execution and delivery of this Agreement,
--------
the Company and the Company and its Subsidiaries taken as a whole are and, as of
the Public Offering Closing Date, will be solvent.
3.26 VIALOG Stock. The Stockholders will hold for investment the
------------
VIALOG Stock constituting the Stock Merger Consideration.
3.27 Compliance with Regulations Relating to Securities Credit. None
---------------------------------------------------------
of the borrowings, if any, of the Company were incurred or used for the purpose
of purchasing or carrying any security which at the date of its acquisitions
was, or any security which now is, margin stock or other margin security within
the meaning of Regulations T of the Margin Rules or a "security that is publicly
held," within the meaning of the Margin Rules, and the cash portion of the
proceeds from the consummation of the Transactions will not be used for the
purpose of purchasing or carrying any margin stock or other margin security, or
a "security that is publicly held", or any security issued by VIALOG, or in any
way which would involve the Company in any violation of the Margin Rules, and
neither the Company nor any Subsidiary owns any margin stock or other margin
security, or a "security that is publicly held", and neither the Company nor any
Subsidiary has any present intention of acquiring any margin stock or other
margin security, or any "security that is publicly held".
3.28 Certain State Statutes Inapplicable. The provisions of
-----------------------------------
applicable Georgia takeover laws, if any, will not apply to this Agreement, the
Merger or the Transactions.
3.29 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as of a specific date, all of the
representations and warranties of the Company set forth in this Article will be
true and correct in all material respects on the Public Offering Closing Date
with the same force and effect as though made on and as of that date and those,
if any, which speak as a specific date will be true and correct in all material
respects as of such date.
3.30 Registration Statement. All information furnished by or on
----------------------
behalf of the Company or any Stockholder in writing for use in the Registration
Statement and all information relating to the Company in the Prospectus (a copy
of which shall be provided by VIALOG to the Company and Principal Stockholder
for their review) is true, correct and complete and does not contain any untrue
statement of material fact or omit to state any material fact necessary to make
such statements, in the light of the circumstances in which they were made, not
misleading. In the event any such information, through the occurrence or
nonoccurrence of any event or events between the date of this Agreement and the
Public Offering Closing Date, ceases to be true, correct and complete or
contains any untrue statement of material fact or omits to state any material
fact necessary to make such statements, in the light of the circumstances in
which they
28
<PAGE>
were made, not misleading, the Company, upon discovery thereof will provide
VIALOG, in writing, sufficient information to correct such untrue statement or
omission.
3.31 Predecessor Status; etc. Set forth in Section 3.31 of the
-----------------------
Disclosure Schedule is a listing of all names of all predecessor companies of
the Company and the names of any Entities from which, since December 31, 1991,
the Company previously acquired material properties or assets. Except as
disclosed in Section 3.31 of the Disclosure Schedule, the Company has never been
a Subsidiary or division of another Entity, nor a part of an acquisition which
was later rescinded. None of the Company, the Principal Stockholder or any
Subsidiary has ever owned any capital stock of VIALOG nor, except as set forth
in Section 3.31 of the Disclosure Schedule, has there been, since December 31,
1991, any sale or spin-off of material assets by the Company or any Subsidiary
other than in the ordinary course of business.
ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL STOCKHOLDER
The Principal Stockholder represents, warrants and covenants to, and
agrees with, VIALOG and VIALOG Merger Subsidiary as follows:
4.1 Organization. The Principal Stockholder (if other than an
------------
individual) is an Entity duly organized, validly existing and in good standing
under the laws or its jurisdiction of organization.
4.2 Power and Authority. The Principal Stockholder (if other than an
-------------------
individual) has adequate power and authority (corporate, partnership, trust or
other) and all necessary Governmental Authorizations and Private Authorizations
in order to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each other Collateral Document executed or required to
be executed pursuant hereto or thereto. The execution, delivery and performance
of this Agreement and each other Collateral Document executed or required to be
executed pursuant hereto or thereto have, to the extent applicable, been duly
authorized by all requisite corporate, partnership, trust or other action,
including that, if required, of the Principal Stockholder's stockholders or
partners.
4.3 Enforceability. This Agreement has been duly executed and
--------------
delivered by the Principal Stockholder and constitutes, and each Collateral
Document executed or required to be executed by the Principal Stockholder
pursuant hereto or thereto when executed and delivered by the Principal
Stockholder will constitute legal, valid and binding obligations of the
Principal Stockholder, enforceable in accordance with their respective terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable
29
<PAGE>
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity.
4.4 Title to Shares. Except as set forth in Section 4.4 of the
---------------
Disclosure Schedule (all of which exceptions will be removed, satisfied or
discharged no later than the Merger Closing), the Principal Stockholder owns and
has good and merchantable title to those Shares owned by the Principal
Stockholder and to be exchanged pursuant to this Agreement, free and clear or
all Liens.
4.5 No Conflict; Required Filings and Consents. Neither the
------------------------------------------
execution and delivery of this Agreement or any Collateral Document executed or
required to be executed pursuant hereto or thereto, nor the consummation of the
Merger and the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Principal Stockholder:
(a) will materially conflict with, or result in a breach or
violation of, or constitute a default under, any Applicable Law on the part of
such Stockholder or will conflict with, or result in a material breach or
violation of, or constitute a material default in the performance, observance or
fulfillment of, or a material default under, or permit the acceleration of any
obligation or liability in, or, but for any requirements of notice or passage of
time or both, would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
the Principal Stockholder,
(b) will result in or permit the creation or imposition of any
Lien upon any property or asset of the Principal Stockholder used or now
contemplated to be used by the Company, or
(c) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in connection
with the Merger and the Transactions and as the Securities Act or applicable
state securities laws may apply to compliance by the Principal Stockholder with
the provisions of this Agreement relating to the Public Offering and
registration rights, pursuant to the HSR Act (if applicable) or as set forth in
Section 4.5 of the Disclosure Schedule.
ARTICLE
5
REPRESENTATIONS AND WARRANTIES OF VIALOG
AND VIALOG MERGER SUBSIDIARY
VIALOG and VIALOG Merger Subsidiary, jointly and severally, represent,
warrant and covenant to, and agree with, the Company as follows:
5.1 Organization and Qualification. VIALOG is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of
Massachusetts. VIALOG Merger
30
<PAGE>
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware.
5.2 Power and Authority. Except for such consents of Authorities as
-------------------
may be necessary in connection with change-of-control transactions with respect
to Governmental Authorities listed in Section 3.1(c) of the Disclosure Schedule,
each of VIALOG and VIALOG Merger Subsidiary has all requisite power and
authority (corporate and other) and has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto and to consummate the Merger and the Transactions. The execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action. This Agreement has been duly
executed and delivered by each of VIALOG and VIALOG Merger Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto when executed and delivered by it will constitute,
legal, valid and binding obligations of VIALOG and VIALOG Merger Subsidiary,
respectively, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
5.3 No Conflict; Required Filings and Consents. Except for such
------------------------------------------
consents of Authorities as may be necessary in connection with change-of-control
transactions with respect to Governmental Authorities listed in Section 3.1(c)
of the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Collateral Document executed or required to be executed pursuant hereto
or thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of VIALOG and VIALOG
Merger Subsidiary:
(a) will conflict with, or result in a breach or violation of,
or constitute a default under, any Applicable Law on the part of VIALOG or
VIALOG Merger Subsidiary or will conflict with, or result in a breach or
violation of, or constitute a default under, or permit the acceleration of any
obligation or liability in, or but for any requirement of giving of notice or
passage of time or both would constitute such a conflict with, breach or
violation of, or default under, or permit any such acceleration in, any
Contractual Obligation of VIALOG or VIALOG Merger Subsidiary, or
(b) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements under Applicable
Law in connection with the Merger and the Transactions and as the Securities Act
and applicable state securities laws may apply to compliance by VIALOG with the
provisions of this Agreement relating to the Public Offering and registration
rights and except pursuant to the HSR Act (if applicable).
31
<PAGE>
5.4 Financing. VIALOG has or, upon consummation of the Public
---------
Offering, will have sufficient funds or available financing to enable the
Surviving Corporation to pay the Aggregate Merger Consideration for all Shares
of the Company Stock as provided in Sections 2.1(a) and 2.1(d), the
consideration for each Option Security and each Convertible Security as provided
in Section 2.4, and all fees and expenses related to the Merger and its
obligations in connection with the Public Offering.
5.5 Broker or Finder. Except for the Underwriter, the fees and
----------------
expenses of which (other than pursuant to the Underwriting Agreement) are solely
the responsibility of VIALOG, no Person assisted in or brought about the
negotiation of this Agreement or the subject matter of the Transactions in the
capacity of broker, agent or finder or in any similar capacity on behalf of
VIALOG or VIALOG Merger Subsidiary.
5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary.
-------------------------------------------------------
Neither of VIALOG or VIALOG Merger Subsidiary has incurred any liabilities or
Contractual Obligations, except those incurred in connection with its
organization and ordinary course business operations (including Employment
Arrangements), the negotiation of this Agreement and the performance of this
Agreement and of the Participating Agreements with the Other Participating
Companies, the registration of VIALOG Stock under the Securities Act, compliance
with the requirements of the HSR Act (if applicable) and the performance of all
other Governmental Filings, and the financing of the foregoing. Except as
contemplated by the foregoing, neither of VIALOG or VIALOG Merger Subsidiary has
engaged in any business activities of any type or kind whatsoever, nor entered
into any agreements or arrangements with any Person, nor is it subject to or
bound by any obligation or undertaking.
5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary. The
-----------------------------------------------------
authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary is as set forth in Section 5.7 of the Disclosure Schedule. All of
such outstanding capital stock has been duly authorized and validly issued, is
fully paid and non-assessable and is not subject to any preemptive or similar
rights. All shares of common stock of VIALOG Merger Subsidiary held by VIALOG
have been duly authorized and validly issued to VIALOG and are fully paid and
non-assessable and are not subject to any preemptive or similar rights. As of
the date of this Agreement, except for this Agreement, the Participating
Agreements, the Underwriting Agreement, and as set forth on Section 5.7 of the
Disclosure Schedule, there are not any outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments or any other agreements of any
character obligating VIALOG or VIALOG Merger Subsidiary to issue any shares of
VIALOG Stock or other shares of capital stock of VIALOG or of VIALOG Merger
Subsidiary, or any other securities convertible into or evidencing the right to
subscribe for any such shares. When issued in connection with the Merger, the
VIALOG Stock will be duly authorized, validly issued, fully paid and non-
assessable and will not be subject to any preemptive or similar rights.
5.8 Registration Statement. The Registration Statement and any
----------------------
amendments thereto will comply when the Registration Statement becomes effective
in all material respects with the provisions of the Securities Act and will not
contain any untrue statement of a material fact or
32
<PAGE>
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus will not as of the
issue date thereof contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this Section 5.8
will not apply to statements or omissions in the Registration Statement or the
Prospectus based on information relating to the Underwriter furnished to VIALOG
in writing by the Underwriter, or based on information relating to any of the
Other Participating Companies or its stockholders furnished to VIALOG in writing
by such Participating Company or any or its stockholders, or the Company or the
Stockholders furnished to VIALOG in writing by the Company or any of the
Stockholders. VIALOG will furnish the Company with a copy of the Registration
Statement and of each amendment thereto until the Merger Closing and thereafter
will furnish the Principal Stockholder with each amendment thereto and the final
Prospectus.
5.9 Solvency. After the Effective Time, and upon the consummation
--------
of the Merger, the Participating Mergers and the Transactions, VIALOG and its
subsidiaries, individually and taken as a whole, will be solvent.
5.10 Firm Commitment. The contemplated Public Offering shall be a
---------------
firm commitment underwriting and not a best efforts underwriting and all VIALOG
Stock sold in the offering will be purchased by the Underwriter on the Effective
Date and paid for by the Underwriter on the Public Offering Closing Date.
5.11 Participating Agreements of Other Participating Companies.
---------------------------------------------------------
Except as set forth in Section 5.11 of the Disclosure Schedule or as dictated by
the structuring of any transaction with a Participating Company as a sale of
assets or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, each Participating Agreement
entered into among VIALOG, any Subsidiary of VIALOG, and any Other Participating
Company contains provisions substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement, including,
without limitation, the representations and warranties, covenants, termination
provisions and indemnification provisions contained in those Articles. Except as
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, no Participating Agreement
contains any material provision which is not contained in substantially
identical form in this Agreement.
5.12 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as a specific date, all of the
representations and warranties of VIALOG and the VIALOG Merger Subsidiary set
forth in this Article will be true and correct in all material respects on the
Public Offering Closing Date with the same force and effect as though made on
and as of that date, and those, if any, which speak as of a specific date will
be true and correct in all material respects as of such date.
33
<PAGE>
ARTICLE
6
ADDITIONAL COVENANTS
6.1 Access to Information; Confidentiality.
--------------------------------------
(a) The Company will afford to VIALOG and the Representatives
of VIALOG full access during normal business hours throughout the period prior
to the Effective Time to all of its (and its Subsidiaries') properties, books,
contracts, commitments and records (including without limitation Tax Returns)
and, during such period, will furnish promptly upon request (i) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of any Applicable Law (including without limitation federal or
state securities laws) or filed by any of them with any Authority in connection
with the Transactions or which may have a material effect on their respective
businesses, operations, properties, prospects, personnel, condition (financial
or other), or results of operations, (ii) to the extent not provided for
pursuant to the preceding clause, (A) all financial records, ledgers, workpapers
and other sources of financial information processed or controlled by the
Company or its accountants deemed by the Accountants necessary or useful for the
purpose of performing an audit of the Company and the Company and its
Subsidiaries taken as a whole and certifying financial statements and financial
information and (B) all other information relating to the Company, its
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Registration Statement, and
(iii) such other information concerning any of the foregoing as VIALOG will
reasonably request. Subject to the terms and conditions of the Confidentiality
Letter (as defined below), which are expressly incorporated in this Agreement by
reference for the benefit of the parties hereto, VIALOG will hold and will use
commercially reasonable efforts to cause the Representatives of VIALOG to hold,
and the Company will hold and will use commercially reasonable efforts to cause
the Representatives of the Company to hold, in strict confidence all non-public
documents and information furnished (whether prior or subsequent hereto) to
VIALOG or to the Company, as the case may be, in connection with the
Transactions.
(b) Subject to the terms and conditions of the Confidentiality
Letter, VIALOG and the Company may disclose such information as may be necessary
in connection with seeking all Governmental and Private Authorizations or that
is required by Applicable Law to be disclosed. In the event that this Agreement
is terminated in accordance with its terms, VIALOG and the Company will each
promptly redeliver all non-public written material provided pursuant to this
Section or any other provision of this Agreement or otherwise in connection with
the Merger and the Transactions and will not retain any copies, extracts or
other reproductions in whole or in part of such written material other than one
copy thereof which will be delivered to independent counsel for such party.
(c) The Company and VIALOG acknowledge that the Company and
VIALOG executed one or more Confidential Disclosure Agreements (collectively,
the "Confidentiality
34
<PAGE>
Letter"), which separately and as incorporated in this Agreement will remain in
full force and effect after and notwithstanding the execution and delivery of
this Agreement, and that information obtained from the Company by VIALOG, or its
Representatives or by the Company or its Representatives from VIALOG pursuant to
Section 6.1(a), the Confidentiality Letter or otherwise will be subject to the
provisions of the Confidentiality Letter.
(d) No investigation pursuant to this Section 6.1 will affect
any representation or warranty in this Agreement of any party or any condition
to the obligations of the parties.
6.2 Agreement to Cooperate.
----------------------
(a) Each of the Parties will use commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under Applicable Law to
consummate the Merger and make effective the Transactions, including using
commercially reasonable efforts (i) to prepare and file with the applicable
Authorities as promptly as practicable after the execution of this Agreement all
requisite applications and amendments thereto, together with related
information, data and exhibits, necessary to request issuance of orders
approving the Merger and the Transactions by all such applicable Authorities,
each of which must be obtained or become final in order to satisfy the
conditions applicable to it set forth in Section 7; (ii) to obtain all necessary
or appropriate waivers, consents and approvals, (iii) to effect all necessary
registration, filings and submissions (including without limitation the
Registration Statement, other filings under the Securities Act or the HSR Act
and any other submissions requested by the SEC or the Federal Trade Commission
or Department of Justice) and (iv) to lift any injunction or other legal bar to
the Merger and the Transactions (and, in such case, to proceed with the Merger
and the Transactions as expeditiously as possible), subject, however, to the
requisite votes of the Stockholders. Each of the Parties recognizes that the
consummation of the Merger and the Transactions may be subject to the pre-merger
notification requirements of the HSR Act. Each agrees that, to the extent
required by Applicable Law to consummate the Merger, it will file with the
Antitrust Division of the Department of Justice and the Federal Trade Commission
a Notification and Report Form in a manner so as to constitute substantial
compliance with the notification requirements of the HSR Act. Each covenants and
agrees to use commercially reasonable efforts to achieve the prompt termination
or expiration of any waiting period or any extensions thereof under the HSR Act.
(b) Each of the Parties agrees to take such actions as may be
necessary to obtain any Governmental Authorizations legally required for the
consummation of the Merger and the Transactions, including the making of any
Governmental Filings, publications and requests for extensions and waivers.
(c) The Company will use commercially reasonable efforts on or
prior to the Public Offering Closing Date (i) to obtain the satisfaction of the
conditions specified in Sections 7.1 and 7.2; (ii) if requested by VIALOG, to
seek the consents (to the extent required) to the continued existence in
accordance with its then-stated terms of all long-term debt of each of the
Company and each of its Subsidiaries; and (iii) to attempt to cause those key
employees of
35
<PAGE>
the Company and its Subsidiaries designated by VIALOG that are not Stockholders
to execute and deliver non-competition agreements substantially conforming in
form and substance to the non-competition agreements currently maintained by
VIALOG with its key employees in the form attached as Exhibit 6.2(c). Each of
--------------
VIALOG and VIALOG Merger Subsidiary will use its best efforts on or prior to the
Public Offering Closing Date to obtain the satisfaction of the conditions
applicable to it specified in Sections 7.1 and 7.3. The Principal Stockholder
will use commercially reasonable efforts to obtain the satisfaction of the
conditions applicable to the Principal Stockholder in Section 7.2.
(d) The Company agrees that, except as set forth in Section
3.19 of the Disclosure Schedule, prior to the Public Offering Closing Date it
will not make or permit to be made any material change affecting any bank, trust
company, savings and loan association, brokerage firm or safe deposit box or in
the names of the Persons authorized to draw thereon, to have access thereto or
to authorize transactions therein or in such powers of attorney, or open any
additional accounts or boxes or grant any additional powers of attorney, without
in each case obtaining the prior written consent of VIALOG, which consent VIALOG
will not unreasonably withhold.
(e) The Company will take such steps as are necessary and
appropriate to obtain, and will promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.15(b) of the Disclosure Schedule.
6.3 Assignment of Contracts and Rights. Anything in this Agreement
----------------------------------
to the contrary notwithstanding, this Agreement will not constitute an agreement
to assign any Claim, Contractual Obligation, Governmental Authorization, Lease,
Private Authorization, commitment, sales, service or purchase order, or any
claim, right or benefit arising thereunder or resulting therefrom, if the Merger
or the Transactions would be deemed an attempted assignment thereof without the
required consent of a third party thereto and would constitute a breach thereof
or in any way affect the rights of VIALOG, VIALOG Merger Subsidiary or the
Company thereunder. If such consent is not obtained, or if consummation of the
Merger and the Transactions would affect the rights of the Company thereunder so
that the Surviving Corporation would not in fact receive all such rights, the
Company will cooperate with VIALOG in any arrangement designed to provide for
the benefits thereof to the Surviving Corporation, including subcontracting,
sublicensing or subleasing to the Surviving Corporation or enforcement for the
benefit of the Surviving Corporation of any and all rights of the Company or its
Subsidiaries against a third party thereto arising out of the breach or
cancellation by such third party or otherwise. Any assumption by the Surviving
Corporation of the Company's rights thereunder by operation of law in connection
with the Merger which will require the consent or approval of any third party
will be made subject to such consent or approval being obtained.
6.4 Compliance with the Securities Act. Each of VIALOG and the
----------------------------------
Company will use its commercially reasonable efforts to cause each executive
officer, each director and each other Person who is an "affiliate," as that term
is defined in paragraph (a) of Rule 144 under the Securities Act, of the
Company, or who will, upon consummation of the Merger and the Transactions
become, an "affiliate" of VIALOG, and each Stockholder of the Company, to
36
<PAGE>
deliver to VIALOG on or prior to the Merger Closing a written agreement (the
"Registration Rights Agreement") to the effect that such Person will not offer
to sell, sell or otherwise dispose of any shares of VIALOG Stock issued pursuant
to the consummation of the Transactions, except, in each case, pursuant to an
effective registration statement or in compliance with Rule 144, or in a
transaction which, in the opinion of legal counsel for such "affiliates" (such
legal counsel to be satisfactory to legal counsel for VIALOG), as set forth in a
written opinion satisfactory in form, scope and substance to the legal counsel
of VIALOG, is exempt from registration under the Securities Act and applicable
state securities laws. The Registration Rights Agreement shall be substantially
in the form of Exhibit 6.4. Notwithstanding anything to the contrary in this
-----------
Agreement, VIALOG will have no obligation under the Registration Rights
Agreement or otherwise to register under the Securities Act or any applicable
state securities laws, or otherwise to facilitate the transfer of, shares of
VIALOG Stock received by any such Person who fails to execute the Registration
Rights Agreement as provided herein, and such Person will forfeit all "demand
registration" and other rights provided for in the Registration Rights Agreement
and all "piggyback" rights provided for in the Registration Rights Agreement.
6.5 Conduct of Business.
-------------------
(a) Prior to the Effective Time or the date, if any, on which
this Agreement is earlier terminated, the Company and its Subsidiaries will
(i) use their best efforts to preserve intact their respective business
organizations and good will, keep available the services of their respective
officers and employees as a group and maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
them, (ii) confer on a regular and frequent basis with one or more
representatives of VIALOG to report operational matters of Materiality and the
general status of ongoing operations, and (iii) notify VIALOG of any emergency
or other change in the normal course of their business and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) if such emergency, change, complaint, investigation or
hearing would be Material to the business, operations or financial condition of
the Company and its Subsidiaries, taken as a whole.
(b) Except as set forth in Schedule 6.5(b) (or Section 6.5(b)
of the Disclosure Schedule, as the case may be) or with the written permission
of VIALOG, the Company agrees further that the Company (i) will not make,
declare or pay any dividends or other distributions on any Shares or the stock
of the Company's Subsidiaries or redeem or repurchase or otherwise acquire any
Shares (except cancellation of options and warrants as required in this
Agreement), (ii) will not enter into or terminate any Employment Arrangement
with any director or officer, (iii) will not incur any obligation or liability
(absolute or contingent), except current liabilities incurred, and obligations
under contracts entered into, in the ordinary course of business (iv) will not
discharge or satisfy any Lien or Encumbrance or pay any obligation or liability
(absolute or contingent) other than current liabilities shown on its Financial
Statements, and current liabilities incurred since those dates in the ordinary
course of business, (v) will not mortgage, pledge, create a security interest
in, or subject to Lien or other Encumbrance any of its assets, tangible or
intangible, (vi) will not sell or transfer any of its tangible assets or cancel
any debts or claims except in each case in the ordinary course of business,
(vii) will not sell, assign, or transfer any
37
<PAGE>
trademark, trade name, patent, or other Intangible Asset, (viii) will not waive
any right of any substantial value, (ix) will not make any material change in
the tax procedures or practices followed by the Company or any of its
Subsidiaries, (x) will not make any change in credit terms offered by the
Company or any of its Subsidiaries, (xi) will not make any capital expenditure
or Material Commitment for any additions or improvements to its or any of its
Subsidiary's property, plant or equipment, (xii) will not amend its
capitalization, or issue any stocks, bonds or other securities, except that the
Company may issue shares pursuant to outstanding Option Securities and
Convertible Securities, (xiii) will not enter into, modify or extend, or promise
any bonus or incentive compensation program that was not in place prior to June
1, 1996 and (xiv) will otherwise conduct its operation and the operations of its
Subsidiaries according to their ordinary and usual course of business.
6.6 No Solicitation. The Company will not, nor will it permit any
---------------
Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquires or the making of any proposal with respect to an Other Transaction,
engage in any discussions or negotiations concerning, or provide to any other
person any information or data relating to it or any Subsidiary for the purposes
of, or otherwise cooperate in any way with or assist or participate in, or
facilitate any inquires or the making of any proposal which constitutes, or may
reasonably be expected to lead to, a proposal to seek or effect an Other
Transaction, or agree to or endorse any Other Transaction. Nothing contained in
this Section will prohibit the Company or its Board of Directors from making any
disclosure to Stockholders that, in the reasonable judgment of its Board of
Directors in accordance with, and based upon the written advice of outside
counsel, is required under Applicable Law. The Company will promptly advise
VIALOG of, and communicate the material terms of, any proposal it may receive,
or any inquires it receives which may reasonably be expected to lead to such a
proposal relating to an Other Transaction, and the identity of the Person making
it. The Company will further advise VIALOG of the status and changes in the
material terms of any such proposal or inquiry (or any amendment to any of
them). During the term of this Agreement, the Company will not enter into any
agreement oral or written, and whether or not legally binding, with any Person
that provides for, or in any way facilitates, an Other Transaction, or affects
any other obligation of the Company under this Agreement.
6.7 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) From and after the Effective Time, the Surviving
Corporation will indemnify, defend and hold harmless the present and former
officers and directors of the Company against all Claims or amounts that are
paid in settlement of, with the approval of the Surviving Corporation, or
otherwise in connection with any Claim based in whole or in part on the fact
that such Person is or was a director or officer of the Company and arising out
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the Merger and the Transactions), in each case to the
fullest extent permitted under the BCA (and will pay any expenses in advance of
the final disposition of any such action or proceeding to each such Person to
the fullest extent permitted under the BCA, upon receipt from the Person to whom
expenses are advanced of an undertaking to repay such advances to the extent
required
38
<PAGE>
under the BCA). The Surviving Corporation will observe and comply with the
Company's obligations pursuant to the indemnification agreements, if any, listed
in Section 3.9 of the Disclosure Schedule.
(b) This Section 6.7 is intended to be for the benefit of, and
will be enforceable by, the former officers and directors of the Company, their
heirs and personal representatives and will be binding on the Surviving
Corporation and its respective successors and assigns.
(c) VIALOG will apply for directors and officers insurance in
the amount of $2,000,000 for the benefit of the directors and officers of VIALOG
and the Surviving Corporations.
6.8 Notification of Certain Matters. The Company will give prompt
-------------------------------
notice to VIALOG, and VIALOG will give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any Event the occurrence or non-occurrence of
which would be likely to cause in any material respect (i) any representation or
warranty of the Company or VIALOG, as the case may be, contained in this
Agreement to be untrue or inaccurate, or (ii) in the case of the Company or the
Principal Stockholder, any change to be made in the Disclosure Schedule and (b)
any failure of the Company or VIALOG, as the case may be, to comply with or
satisfy, or be able to comply with or satisfy, any material covenant, condition
or agreement to be complied with or satisfied by it under this Agreement. The
delivery of any notice pursuant to this Section 6.8 will not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
6.9 Public Announcements. Until the Merger Closing, or in the event
--------------------
of termination of this Agreement, the closing of the Public Offering (or its
abandonment), the Company will consult with VIALOG before issuing any press
release or otherwise making any public statements with respect to this
Agreement, the Merger or any Transaction (including the Participating Mergers or
the termination of this Agreement in such event) and will not issue any such
press release or make any such public statement without the prior consent of
VIALOG and the written advice of legal counsel to VIALOG that such press release
or such public statement will not affect the registration of VIALOG Stock under
the Securities Act or the timing of the effectiveness thereof. The Company
acknowledges and agrees that VIALOG may, without the prior consent of the
Company, issue such press release or make such public statement as may be
required by Applicable Law or any listing agreement or arrangement to which
VIALOG is a party with a national securities exchange or the National
Association of Securities Dealers, Inc. Automated Quotation System, or as
recommended by outside counsel. VIALOG will exercise commercially reasonable
efforts to furnish the Company a copy of any press release relating to Other
Participating Companies prior to its publication and will furnish a copy of any
such press release so issued as soon as practicable after its publication, but
any failure on VIALOG's part to do so will not be deemed a breach of or default
under this Agreement. VIALOG will furnish the Company with a copy of any press
release or public information of VIALOG, at a reasonable time prior to its
release for publication.
39
<PAGE>
6.10 Conveyance Taxes. The Parties will cooperate with one another in the
----------------
preparation, execution and filing of all Returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.
6.11 Obligations of VIALOG. VIALOG agrees to take all action necessary to
---------------------
cause VIALOG Merger Subsidiary and the Surviving Corporation to perform their
respective obligations under this Agreement and will use commercially reasonable
efforts to consummate, and cause VIALOG Merger Subsidiary to consummate, the
Merger on the terms and conditions set forth in this Agreement.
6.12 Employee Benefits; Severance Policy. VIALOG will cause the Surviving
-----------------------------------
Corporation to maintain through its fiscal year ending December 31, 1997:
(a) employee incentive compensation and fringe benefits that are
substantially equivalent to those provided to employees of the Company and its
Subsidiaries as in effect on the date of this Agreement, subject to the right of
VIALOG and the Surviving Corporation to amend or terminate such programs in
accordance with their terms, provided that after any such amendment or
termination the resulting programs continue to be substantially equivalent to
the existing programs, and
(b) employee severance pay and benefits that are substantially
equivalent to the applicable severance programs of the Company and its
Subsidiaries as in effect on the date hereof, subject to the right of VIALOG and
the Surviving Corporation to amend or terminate such programs in accordance with
their terms, provided that after any such amendment or termination, the
resulting programs continue to be substantially equivalent to the existing
programs.
Notwithstanding the foregoing, as soon as convenient after such period, the
Surviving Corporation may, in its sole discretion, substitute employee
compensation, benefit and severance programs for those of the Company as are
consistent with the programs provided to VIALOG's employees and the employees of
VIALOG's Subsidiaries.
6.13 Certain Actions Concerning Business Combinations.
------------------------------------------------
(a) Neither the Principal Stockholder nor any Representative
thereof will, during the period commencing on the date of the filing of the
Registration Statement and ending with the earlier to occur of the Merger
Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly (i) solicit or initiate the submission of proposals or
offers from any Person or, (ii) participate in any discussions pertaining to, or
(iii) furnish any information to any Person other than VIALOG relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company or any Subsidiary (other than the Merger).
40
<PAGE>
(b) The Company will not apply, and will not take any action
resulting in the application of, or otherwise elect to apply, the provisions of
applicable Georgia takeover laws, if any, with respect to or as a result of the
Merger or the Transactions.
6.14 Termination of Option Securities and Convertible Securities. The
-----------------------------------------------------------
Company will take all action necessary to terminate the exercise rights of all
outstanding Option Securities and the conversion rights of all Convertible
Securities issued by the Company as of the Effective Time to the extent such
option and conversion rights are not exercised prior to the Merger Closing, and
to provide timely notice to all holders of Option Securities and Convertible
Securities notifying them of such termination. Without the prior written consent
of VIALOG, except as set forth in Section 3.15(a) of the Disclosure Schedule,
(a) such termination or notice will not cause an acceleration of the exercise,
conversion or vesting schedule of any Option Security or of any Convertible
Security, and (b) the Company will not otherwise accelerate, or cause an
acceleration of, the exercise, conversion or vesting schedule of any Option
Security or Convertible Security. Prior to the Merger Closing, the Company will
issue Certificates to all holders of properly exercised Option Securities and
properly converted Convertible Securities. Such Certificates will accurately
represent the number of Shares to which such holder is entitled by virtue of
such exercise or conversion and the Company will amend Section 3.15(b) of the
Disclosure Schedule accordingly.
6.15 Tax Returns. The Principal Stockholder will cause all Tax Returns of
-----------
the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared in a manner consistent with past
practices and VIALOG will file such Tax Returns promptly upon receipt thereof
from the Principal Stockholder or the Company. At least thirty days before the
due date (including any extensions) for any such Tax Returns, the Principal
Stockholder or the Company will provide drafts of such Tax Returns to VIALOG for
its review and comment (which reasonable comments will be incorporated into the
final Tax Returns), and VIALOG will cooperate with the Principal Stockholder and
provide the Principal Stockholder with access to any books and records
reasonably necessary for their preparation of such draft Tax Returns. VIALOG
will file no amended Tax Returns with respect to the Company and the
Subsidiaries for any taxable period ending on or before the Effective Time if
the Principal Stockholder reasonably objects thereto and furnishes VIALOG with
indemnification satisfactory in form and substance to it, including without
limitation, indemnification for all interest, penalties and Expenses resulting
from the failure to amend such Tax Returns and all proceedings in connection
therewith.
6.16 Employment and Noncompetition. On or before the Merger Closing, the
-----------------------------
Principal Stockholder will execute and deliver to VIALOG the employment
agreement contemplated by Section 7.2(s) to be effective as of the Public
Offering Closing Date. From and after the Public Offering Closing Date, the
Principal Stockholder will not compete with VIALOG or any of its Subsidiaries
except to the extent not prohibited by Exhibit 7.2(s).
------------
41
<PAGE>
6.17 Distributions, Liabilities, Etc.
-------------------------------
(a) The Company and VIALOG acknowledge and agree that the Company
contemplates that (i) prior to the Merger Closing it will make certain
Distributions to Stockholders, employees of and consultants to the Company, (ii)
no later than Merger Closing, it will cause certain Liens to be discharged in
their entirety (with financing statement terminations properly recorded), and
(iii) as of Merger Closing, it will indemnify VIALOG for certain liabilities
(except to the extent obligees with respect thereto release the Company and its
Affiliates therefrom), in each case as set forth in the Disclosure Schedule.
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be)
lists each such Distribution, Lien and liability;
(b) The Company agrees that Distributions not permitted pursuant to
Section 3.18 will be made by the Company (or VIALOG or the Surviving Company if
after the Effective Date) only to the extent provided in Schedule 6.17 (or
Section 6.17 of the Disclosure Schedule, as the case may be); and
(c) The Company further agrees that, notwithstanding anything to the
contrary in Section 10.1, it will indemnify VIALOG and VIALOG Merger Subsidiary
against all Claims and Expenses incurred by VIALOG and VIALOG Merger Subsidiary
(or either of them) by virtue of any failure on the Company's part to secure the
discharges from Liens contemplated by Schedule 6.17 (or Section 6.17 of the
Disclosure Schedule, as the case may be) or any damage or harm attributable to a
liability to be indemnified against as contemplated by Schedule 6.17 (or Section
6.17 of the Disclosure Schedule, as the case may be).
6.18 Release from Personal Guarantees. On or prior to the Public
--------------------------------
Offering Closing Date, VIALOG will either obtain releases of the personal
guarantees of the Stockholders of Indebtedness or discharge or arrange for the
discharge of such Indebtedness. VIALOG will either obtain releases of the
personal guarantees of the Stockholders of Contractual Obligations which extend
beyond the Public Offering Closing Date or indemnify and hold the Stockholders
harmless from such personal guarantees.
6.19 No Significant Changes VIALOG agrees that there will be no
----------------------
"significant change" (as defined below) in the conduct of the business of the
Company for a period of two years after the Public Offering Closing Date without
the approval of a majority in interest of the Stockholders. "Significant change"
means any change in the location of the Company's facilities, a physical merging
of the Company's operations with another operation, any change in the position
of those employees who receive employment agreements pursuant to Section 7.2(s),
or a reduction in force or the termination of any employee except as related to
employee performance or the contemplated reorganization of the combined
sales/marketing staff or the accounting function.
42
<PAGE>
6.20 Registration Statement.
----------------------
(a) The Company and the Principal Stockholder will furnish to
VIALOG all necessary information concerning the Company and the Principal
Stockholder for VIALOG to file the Registration Statement.
(b) The Company and the Principal Stockholder have reviewed or have
had reviewed on their behalf, and will be familiar with the information
concerning the Company and the Stockholders (or any of them) in the Prospectus,
which will be furnished to them by VIALOG for their review, and will have no
knowledge of any material fact, condition or information concerning the Company
and the Stockholders misstated or not disclosed in such Prospectus.
(c) VIALOG agrees to use its best efforts to prepare and file the
Registration Statement prior to February 28, 1997 and furnish to the Company and
the Principal Stockholder a copy of information concerning the Company and the
Stockholders included therein and each amendment thereto two business days prior
to such filing date.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder
----------
agree to use their best efforts to maintain the status of the Merger and the
Participating Mergers as a tax free incorporation, provided VIALOG's Accountants
so advise and provided the relative ownership rights of all parties remain the
same.
6.22 Self Dealing. VIALOG agrees that it will not and will not allow any
------------
Subsidiary to enter into contracts and business arrangements with Persons and
Entities owned in whole or in part by officers and directors of VIALOG or any
Subsidiary except on an arms length basis and with the approval of the VIALOG
Board of Directors.
ARTICLE
7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each Party to effect the Merger will be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) This Agreement, the Merger and the Transactions shall have been
approved and adopted in accordance with the BCA by the affirmative vote, or to
the extent permitted by Applicable Law, by written consent, of the Stockholders
holding at least the minimum number of shares of the Company Stock then issued
and outstanding as are required by Applicable Law and the Company's
Organizational Documents for such approval and adoption,
43
<PAGE>
(b) No proceeding before any Authority or Claim by any Person shall
be pending, challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation of the
Merger or the Public Offering, or seeking material damages or imposing any
Adverse conditions in connection therewith,
(c) Other than the filing of merger documents in accordance with
the BCA and the DBCL, all authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, submissions, registrations, notices or
declarations required to be made, by VIALOG or VIALOG Merger Subsidiary and the
Company prior to the consummation of the Merger and the Transactions shall have
been obtained from, and made with, all required Authorities, except for such
authorizations, consents, waivers, orders, approvals, filings, registrations,
notices or declarations the failure to obtain or make would not, assuming
consummation of the Merger, have an Adverse Effect on the Company and the
Company and its Subsidiaries taken as a whole,
(d) (i) The Registration Statement shall have become effective and
shall contain no untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the shares of VIALOG Stock offered in the Public
Offering shall have been sold and purchased subject only to consummation of the
Merger, the Participating Mergers and the Transactions, (iii) every condition to
closing the Public Offering (except as provided in clause (iv) immediately
succeeding) shall have been satisfied or properly waived and (iv) release of the
closing documents relating to the Public Offering and distribution of the
proceeds of the sale of all shares of VIALOG Stock sold and purchased in the
Public Offering shall have been unconditionally authorized by the Underwriter
upon consummation of the Merger and the Participating Mergers,
(e) The minimum number of Participating Mergers required to prevent
termination pursuant to Section 8.1(b)(ii) of this Agreement shall have been
authorized and approved in accordance with Applicable Law and the Organizational
Documents of the Other Participating Companies, in the case of the Participating
Mergers,
(f) Subject to such material amendments, if any, as shall be
proposed prior to Merger Closing by VIALOG to be effective immediately after
Merger Closing, and to the extent reasonably satisfactory to the Company and the
Other Participating Companies, the VIALOG stock option plan described in the
Registration Statement shall have been approved and adopted by all action
(corporate and other) required for implementation thereof,
(g) Each of the Persons named on Exhibit 7.1(g), including one
Person proposed by a majority of the chief executive officers of the Company and
the Other Participating Companies acting as a group, shall have been elected a
director of VIALOG, effective immediately after the Public Offering Closing
Date, and all together shall constitute the entire Board of Directors of VIALOG,
each to serve until the election of the successor to, or the earlier resignation
or termination of, such director, and
(h) VIALOG shall have delivered to the Exchange Agent that number
of shares of VIALOG Stock as determined pursuant to Section 2.1 of this
Agreement and of the
44
<PAGE>
Participating Agreements issued in the name of the Stockholders and the
stockholders and other Persons holding equity interests in the Participating
Companies.
7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary. The
----------------------------------------------------------------
obligations of VIALOG and VIALOG Merger Subsidiary to effect the Merger will be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) The Company shall have complied in all material respects with
its agreements contained in this Agreement, the certificates to be furnished to
VIALOG pursuant to this Section shall be true, correct and complete, all
Collateral Documents shall be reasonably satisfactory in form, scope and
substance to VIALOG and its counsel, and VIALOG and its counsel shall have
received all information and copies of all documents, including records of
corporate proceedings, which they may reasonably request in connection
therewith, such documents where appropriate to be certified by proper corporate
officers,
(b) The Company shall have furnished VIALOG and the Underwriters
with the favorable opinion, dated the Public Offering Closing Date of Gandy,
Rice & Sundberg, P.C. , which may contain limitations and qualifications as to
scope and law and rely on certifications as to facts of officers of the Company
and public officials as are reasonable and customary to opinions delivered in
the type of business transactions covered by this Agreement, addressing the
following:
(i) Due organization, valid existence and good standing of
the Company and each Subsidiary, together with an opinion
as to foreign qualifications,
(ii) Requisite corporate power and authority and all, to such
counsel's knowledge, necessary Governmental
Authorizations for the Company and each Subsidiary to
own, lease and operate its properties and to carry on its
business as it is now being conducted,
(iii) In respect of the Company and each Subsidiary, the number
of shares of capital stock or other voting securities
authorized, issued, reserved for issuance or outstanding
as of the date of this Agreement and the Effective Time
and number of Option Securities and amount of Convertible
Securities outstanding as of such dates,
(iv) Due authorization, valid issuance, full payment and non-
assessability of outstanding shares of capital stock of
the Company and each Subsidiary and (upon issuance on the
terms and conditions specified in the Option Securities
and Convertible Securities pursuant to which they are
issuable) all shares of such capital stock subject to
issuance and absence of preemptive rights with respect
thereto,
45
<PAGE>
(v) To the knowledge of counsel, (A) there are not
Contractual Obligations to repurchase, redeem or
otherwise acquire any shares of Company Stock or any
stock of any Subsidiary, or any Option Securities and
Convertible Securities, (B) the Merger will not cause an
acceleration of the exercise or vesting schedule of any
Option Securities and Convertible Securities and (C) all
outstanding shares of stock of each Subsidiary are owned
by the Company or by another Subsidiary, free and clear
of any Lien (except as set forth in Section 3.1(d) of the
Disclosure Schedule),
(vi) Corporate power and authority of the Company to execute
and deliver the Agreement and all Collateral Documents
executed or required to be executed pursuant thereto or
to consummate the Merger, to perform its obligations
thereunder and to consummate the Merger,
(vii) Due and valid authorization by the Company and the
Principal Stockholder by all necessary corporate (and
other) action of the execution, delivery and performance
of the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to consummate
the Merger and the consummation by the Company of the
Merger,
(viii) Due authorization and valid execution and delivery by,
and enforceability against, the Company and the Principal
Stockholder of the Agreement and all Collateral Documents
executed or required to be executed pursuant hereto or
thereto or to consummate the Merger and the Transactions
except (A) as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization,
arrangement, voidable preference, fraudulent conveyance
and other similar laws relating to or affecting the
rights of creditors and as the same may be subject to the
effect of general principles of equity and (B) that no
opinion need be expressed as to the enforceability of
indemnification and noncompetition provisions included
herein;
(ix) The execution and delivery of the Agreement and all
Collateral Documents executed or required to be executed
pursuant thereto or to consummate the Merger by the
Company do not, and the performance of the Agreement and
all Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Merger and
the consummation of the Transactions by the Company will
not, (i) conflict with or violate the Organizational
Documents of the Company or any Subsidiary, (ii) conflict
with or violate any Applicable Law, or (iii) to
46
<PAGE>
counsel's knowledge, constitute a breach or default
under, or give to others any right of termination,
amendment, acceleration, increased payments or
cancellation of, or result in the creation of a Lien on
any property or asset of the Company or any Subsidiary
pursuant to, any Material Agreement to which the Company
or any Subsidiary is a party or by which the Company or
any Subsidiary or any property or asset of the Company or
any Subsidiary is bound or affected,
(x) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution and delivery of the Agreement
by the Company and the performance of the Agreement and
all Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Merger and
the consummation of the Merger by the Company,
(xi) Required filings with the Secretary of State of Georgia
have been made,
(xii) To the knowledge of counsel, absence of pending or
threatened material Legal Action,
(xiii) Nonapplicability of Georgia takeover laws, and
(xiv) such other customary matters concerning the Stockholders
in connection with the Public Offering as may reasonably
be requested by the Underwriter or its counsel,
(c) No Legal Action or other Claim shall be pending or threatened
at any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of VIALOG have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or, assuming consummation of the
Merger and the Participating Mergers, VIALOG and its Subsidiaries taken as a
whole,
(d) Each Principal Stockholder (other than a Principal Stockholder
executing and delivering the agreement contemplated by Section 7.2(s)) and other
Persons listed on Schedule 7.2(d) (or Section 7.2(d) of the Disclosure Schedule,
as the case may be) shall have executed and delivered to VIALOG a noncompetition
agreement, substantially in the form of Exhibit 7.2(d),
-------------
(e) The representations, warranties, covenants and agreements of
the Company contained in this Agreement or otherwise made in writing by it or on
its behalf pursuant to this Agreement or otherwise made in connection with the
Merger and the Transactions shall be true
47
<PAGE>
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and the Public Offering Closing
Date, each and all of the agreements and conditions to be performed or satisfied
by the Company under this Agreement at or prior to the Public Offering Closing
Date shall have been duly performed or satisfied in all material respects, and
the Company shall have furnished VIALOG with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as VIALOG
shall have reasonably requested,
(f) VIALOG shall have received from its Accountants, a certificate
or letter, dated the Public Offering Closing Date, to the effect that, on the
basis of a limited review in accordance with the standards for such reviews
promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No. 1, they
have no reason to believe that the unaudited financial statements set forth in
the Registration Statement were not prepared in accordance with GAAP and
practices consistent with those followed in the preparation of the audited
financial statements audited by the Accountants as contemplated by Section
6.1(a), or that any material modifications of such unaudited financial
statements are required for a fair presentation of the financial position or
results of operations or changes in financial position of the Company or that
during the period from the last day covered by the most recent financial
statements set forth in the Registration Statement prepared by the Accountants
as contemplated by Section 6.1(a) to a date not more than five (5) days prior to
the Public Offering Closing Date, there has been any Adverse Change in the
financial position or results of the operations of the Company or the Company
and its Subsidiaries taken as a whole which is not described in the Registration
Statement,
(g) All actions taken by the Stockholders to approve and adopt this
Agreement, the Merger and the Transactions shall comply in all respects with and
shall be legal, valid, binding, enforceable and effective under the Law of the
jurisdiction of incorporation of the Company, its Organizational Documents and
all Material Agreements to which it or any of its Subsidiaries is a party or by
which it or any of them or any of its or any of their property or assets is
bound,
(h) The Company shall have obtained consents to the assignment and
continuation of all Material Agreements which, in the reasonable judgment of
VIALOG or its counsel, require such consents, including appropriate binders or
consents as to policies of insurance to be assigned to VIALOG or the Surviving
Corporation under this Agreement. The Company shall have obtained satisfaction
and discharge of all Liens set forth in Section 3.15(b) of the Disclosure
Schedule, and shall have obtained, on terms and conditions reasonably
satisfactory to VIALOG, all Governmental Authorizations and Private
Authorizations, and all modifications of Contractual Obligations relating to
Indebtedness, which VIALOG deems, reasonably necessary or desirable in order to
own and operate and conduct the business of the Surviving Corporation,
substantially on the basis heretofore owned, operated and conducted by the
Company and proposed to be owned, operated and conducted by VIALOG,
48
<PAGE>
(i) Between the date of this Agreement and the Public Offering
Closing Date, there shall not have occurred and be continuing any Adverse Change
affecting the Company or the Company and its Subsidiaries taken as a whole from
the condition thereof (financial and other) reflected in the Financial
Statements or in the audited financial statements prepared by the Accountants as
contemplated by Section 6.1(a) or in the most recent financial statements set
forth in the Registration Statement,
(j) The filing and waiting period requirements (if applicable)
under the HSR Act relating to the consummation of the Merger and the
Participating Mergers shall have been complied with,
(k) No Law shall have been enacted or made by or on behalf of any
Authority nor shall any legislation have been introduced and favorably reported
for passage to either House of Congress by any committee, nor shall any Legal
Action by any Authority been commenced or threatened, nor shall any decision,
order or other action of any Authority have been rendered or taken, which in
VIALOG's reasonable judgment, could have any Adverse Effect on the Company or
the Company and its Subsidiaries taken as a whole, or could restrain, prevent or
change the Merger or the Transactions or Adversely Affect the ability of the
Principal Stockholder to perform its obligations under this Agreement, or the
ability of VIALOG to continue to own, operate and conduct the business of the
Surviving Corporation, substantially on the basis heretofore owned, operated and
conducted by the Company and as proposed to be owned, operated and conducted by
the Surviving Corporation,
(l) VIALOG shall have received copies of any environmental audits
the Company has received in respect of all real property owned or leased by the
Company or any of its Subsidiaries. VIALOG, in its sole discretion and at its
sole expense, may engage an independent environmental engineer to perform such
audits and the results thereof shall not be materially inconsistent with the
representations and warranties set forth in Section 3.23,
(m) Each of the directors of the Company and each of its
Subsidiaries and each trustee under each Plan shall have submitted his or her
unqualified written resignation, dated as of the Public Offering Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Public
--------------
Offering Closing Date, releasing the Company and its Subsidiaries from any and
all Claims against them (other than Claims arising from such Principal
Stockholder having acted as a director or officer of the Company or such
Subsidiary as contemplated by Section 6.7),
(o) The Registration Rights Agreement shall have been executed and
delivered by the Stockholders and the Executive Officers and principal
Stockholders of VIALOG.
(p) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, nor shall it have
experienced any material work stoppage,
49
<PAGE>
(q) Except for such leases and other Contractual Obligations as are
set forth on Schedule 7.2(q) (or Section 7.2(q) of the Disclosure Schedule, as
the case may be) and are executed, delivered and effective as of the Effective
Time, all Contractual Obligations set forth in Section 3.9 of the Disclosure
Schedule shall have been satisfied and discharged as of the Public Offering
Closing Date,
(r) The representations, warranties, covenants and agreements of
the Principal Stockholder contained in this Agreement or otherwise made in
writing by or on behalf of the Principal Stockholder pursuant to this Agreement
or otherwise made in connection with the Merger and the Transactions shall be
true and correct in all material respects at and as of the Public Offering
Closing Date with the same force and effect as though made on and as of such
date except those which speak as of a certain date which shall continue to be
true and correct in all material respects as of such date and on the Public
Offering Closing Date. Each and all of the agreements and conditions to be
performed or satisfied by the Principal Stockholder under this Agreement at or
prior to the Public Offering Closing Date, including without limitation the
provisions set forth in Section 6.20, shall have been duly performed or
satisfied in all material respects, and the Principal Stockholder shall have
furnished VIALOG with such certificates and other documents evidencing the truth
of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as VIALOG or its counsel shall have
reasonably requested,
(s) Judy B. Crawford shall have executed and delivered to VIALOG an
employment and noncompetition agreement, substantially in the form of Exhibit
-------
7.2(s),
- ------
(t) The individuals listed on Schedule 7.2(t) (or Section 7.2(t) of
the Disclosure Schedule, as the case may be) shall have executed and delivered
to VIALOG an Employment Arrangement substantially in the form of Exhibit 7.2(t)
and reasonably satisfactory to VIALOG and its counsel, and
(u) VIALOG shall have received a letter from its Accountants to the
effect that the Merger and the Transactions, the Participating Mergers and the
transactions contemplated thereby, and the acquisition of stock of any Other
Participating Company by VIALOG and the transactions contemplated thereby
together qualify as a transaction to which Section 351 of the Code applies and
will not result in any taxable income or gain or deductible loss to the Company,
VIALOG or VIALOG Merger Subsidiary.
7.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to effect the Merger will be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part to the extent permitted by Applicable Law:
(a) VIALOG shall have furnished the Company and the Principal
Stockholder with the favorable opinion dated the Public Offering Closing Date of
Mirick, O'Connell, DeMallie & Lougee, llp, counsel to VIALOG and VIALOG Merger
Subsidiary, which may contain limitations and qualifications as to scope and law
and rely on certifications as to facts of officers of VIALOG and VIALOG Merger
Subsidiary and public officials as are reasonable and
50
<PAGE>
customary to opinions delivered in the type of business transactions covered by
this Agreement, addressing the following:
(i) Due organization, valid existence and good standing of
VIALOG and VIALOG Merger Subsidiary,
(ii) Due authorization and valid execution and delivery by,
and enforceability against, VIALOG and VIALOG Merger
Subsidiary of the Agreement except (A) as such
enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other similar laws
relating to or affecting the rights of creditors and as
the same may be subject to the effect of general
principles of equity and (B) that no opinion need be
expressed as to the enforceability of indemnification
provisions,
(iii) Due authorization, valid issuance, full payment and non-
assessability of and absence of preemptive rights with
respect to the shares of VIALOG Stock to be received by
the Stockholders,
(iv) The Registration Statement has become effective under the
Securities Act, and to such counsel's knowledge, no stop
order suspending its effectiveness has been issued and no
proceedings for that purpose have been instituted or
threatened by the SEC,
(v) The execution and delivery of the Agreement by VIALOG and
VIALOG Merger Subsidiary and all Collateral Documents
executed or required to be executed pursuant thereto or
to consummate the Merger by them do not, and the
performance of the Agreement and all Collateral Documents
executed or required to be executed pursuant thereto or
to consummate the Merger and the consummation of the
Merger by them will not, (A) conflict with or violate the
Organizational Documents of VIALOG or VIALOG Merger
Subsidiary, (B) conflict with or violate any Applicable
Law, or (C) to counsel's knowledge, constitute a default
under, or give to others any right of termination,
amendment, acceleration, increased payments or
cancellation of, or result in the creation of a Lien on
any property or assets of VIALOG or VIALOG Merger
Subsidiary pursuant to, any Material Agreement to which
either is a party or by which either or any property or
asset of either is bound or affected,
(vi) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution and delivery of the Agreement
by VIALOG and VIALOG Merger Subsidiary
51
<PAGE>
and the performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the consummation
of the Merger by them, and
(vii) The required filings with the Delaware Secretary of State
and the Georgia Secretary of State shall have been made,
and a Certificate of Merger shall have been issued by the
Georgia Secretary of State for the Merger.
(b) Each of VIALOG and VIALOG Merger Subsidiary shall have complied
in all material respects with its agreements contained in this Agreement, and
the certificates to be furnished to the Company pursuant to this Section shall
be true, correct and complete. All Collateral Documents shall be reasonably
satisfactory in form, scope and substance to the Company and its counsel, and
the Company and its counsel shall have received all information and copies of
all documents, including records of corporate proceedings, which they may
reasonably request in connection therewith, such documents where appropriate to
be certified by proper corporate officers,
(c) The representations, warranties, covenants and agreements of
each of VIALOG and VIALOG Merger Subsidiary contained in this Agreement or
otherwise made in writing by it or on its behalf pursuant to this Agreement or
otherwise made in connection with the Merger and the Transactions shall be true
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date; each and all of the agreements and conditions to be performed or
satisfied by each of VIALOG and VIALOG Merger Subsidiary under this Agreement at
or prior to the Public Offering Closing Date shall have been duly performed or
satisfied in all material respects; and each of VIALOG and VIALOG Merger
Subsidiary shall have furnished the Company with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as the
Company shall have reasonably requested,
(d) If executed and delivered to VIALOG by the Merger Closing, the
employment agreements contemplated by Section 7.2(s) and for those persons
listed on Schedule 7.2(t) (or Section 7.2(t) of the Disclosure Schedule, as the
case may be) shall have been executed by the Surviving Corporation and delivered
by VIALOG to the indicated person,
(e) The filing and waiting period requirements (if applicable) under
the HSR Act relating to the consummation of the Merger and the Participating
Mergers shall have been complied with,
(f) VIALOG shall have obtained the insurance set forth in Section
6.7(c),
52
<PAGE>
(g) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of the Company have any Adverse Effect on VIALOG and its
Subsidiaries or the Company and its Subsidiaries taken as a whole or, assuming
consummation of the Merger and the Participating Agreements, VIALOG and its
Subsidiaries taken as a whole,
(h) The Company shall have received a letter from the Accountants to
the effect that the Merger and the Transactions qualify as a transaction to
which Section 351 of the Code applies for federal income tax purposes and the
exchange of the Shares for the Stock Merger Consideration, as contemplated
hereby, will not result in any taxable income or gain or deductible loss to the
common stockholders of the Company in their capacities as such common
stockholders to the extent of the Stock Merger Consideration, and
(i) The by-laws of VIALOG shall have been amended to remove the right
of first refusal contained therein and the Company shall have received
certification to its reasonable satisfaction that the VIALOG Stock to be issued
in the Merger will not be subject to any transfer restrictions or purchase
options under VIALOG's Certificate of Incorporation or by-laws.
ARTICLE
8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time, whether before or after approval of this Agreement, the Merger
and the Transactions as follows:
(a) by mutual consent of the Company and VIALOG.
(b) by either VIALOG or the Company,
(i) if any permanent injunction, decree or judgment by any
Authority preventing the consummation of the Merger or the
Public Offering shall have become final and nonappealable,
or if the terminating party determines in its reasonable
discretion that the Merger has become inadvisable or
impracticable by reason of the institution by any Authority
or other Person of material Legal Action, or
(ii) if the Merger Closing shall not occur on or before the
Termination Date.
(c) by the Company:
53
<PAGE>
(i) in the event of a breach of this Agreement by VIALOG or
VIALOG Merger Subsidiary that has not been cured, or if any
representation or warranty of VIALOG or VIALOG Merger
Subsidiary shall have become untrue in any material
respect, in either case such that such breach or untruth is
incapable of being cured by the Effective Date or will
prevent or delay consummation of the Merger by or beyond
the Termination Date, or
(ii) in the event the Public Offering is not a firm commitment
in the manner and upon the terms described in Section 5.10.
(d) by VIALOG:
(i) if the Merger and the Transactions fail to receive the
approval required by Applicable Law, by vote (or to the
extent permitted by Applicable Law, by consent) of the
Stockholders, or if any Stockholder entitled to vote (or
entitled to appraisal rights) with respect to the Merger
dissents from the Merger and the Transactions,
(ii) if it shall determine in its reasonable discretion that the
Merger or the Transactions has or have become inadvisable
or impracticable by reason of the threat by any Authority,
or any other Person of material Legal Action or proceedings
against either or both of the Company and VIALOG (or VIALOG
Merger Subsidiary, or a Subsidiary of any of them), it
being understood and agreed that a written request by
governmental authorities for information with respect to
the Transactions, which information could be used in
connection with such Legal Action or proceedings, may be
deemed by VIALOG to be a threat of material Legal Action or
proceedings,
(iii) if arrangements reasonably satisfactory to VIALOG cannot be
made for (A) the assumption by the Surviving Corporation
substantially on the terms and conditions in effect as of
the date of this Agreement, or for the prepayment without
premium, of all outstanding Indebtedness of the Company for
borrowed money, or (B) the Public Offering,
(iv) if the business, assets, prospects, management, condition
(financial or other) or results of operation of the Company
or the Company and its Subsidiaries taken as a whole shall
have been Adversely Affected, whether by reason of changes
or developments in the economy or industry generally or
operations in the ordinary course of business or otherwise,
54
<PAGE>
(v) if the Company shall not have received, without the
imposition of any burdensome condition or material cost,
all Governmental Authorizations and Private
Authorizations, or if any Authority or other Person shall
withdraw any such Governmental Authorizations or Private
Authorizations,
(vi) if the terms of this Agreement shall not have been
approved by the Underwriter,
(vii) if the Company shall have suffered any material damage,
destruction or loss (whether or not covered by insurance)
or any material acquisition or taking of property by any
Authority, or if it or any of its Subsidiaries shall have
suffered a material work stoppage, or
(viii) in the event of a material breach of this Agreement by the
Company or the Principal Stockholder that has not been
cured, or if any representation or warranty of the Company
or the Principal Stockholder shall have become untrue in
any material respect, so that such breach or untruth is
incapable of being substantially cured by the Effective
Date or will prevent or delay consummation of the Merger
by or beyond the Termination Date, or if any condition to
VIALOG's obligation to close under this Agreement shall
not have been satisfied.
(e) by VIALOG if (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions, or shall have resolved to do any of
the foregoing (it being agreed and understood that nothing in this clause (i)
obliges the Company to effect the Merger if the conditions set forth in Section
7.1 and Section 7.3 are not satisfied or limits the rights of the Company to
consent to terminate this Agreement pursuant to Section 8.1(a) or to terminate
the Agreement pursuant to Section 8.1(b) or Section 8.1(c)), (ii) the Board of
Directors of the Company shall have recommended or resolved to recommend to the
Stockholders an Other Transaction, (iii) the Company, the Board of Directors of
the Company or the Principal Stockholder shall have taken any action in
contravention of Sections 6.6 or 6.13 or (iv) the Principal Stockholder shall
fail to vote to approve and adopt this Agreement, the Merger and the
Transactions.
8.2 Effect of Termination. Except as provided in Sections 2.2(a), 2.2(d),
---------------------
6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void, there shall
be no liability on the part of any Party, or any of their respective officers or
directors, to the other and all rights and obligations of any Party shall cease;
provided, however, that such termination will not relieve any Party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
55
<PAGE>
8.3 Amendment. This Agreement may be amended by the Parties by action
---------
taken by or on behalf of their respective Boards of Directors and by the
Principal Stockholder at any time prior to the Effective Time; provided,
however, that, after approval of this Agreement and the Merger by the
Stockholders, no amendment, which under Applicable Law may not be made without
the approval of the Stockholders, may be made without such approval. This
Agreement may not be amended to impose any additional material obligation on a
Party or to burden or limit a material right of such Party except by an
agreement in writing signed by the Party so affected.
8.4 Waiver. At any time prior to the Effective Time, except to the extent
------
Applicable Law does not permit, either VIALOG or VIALOG Merger Subsidiary and
the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other, subject, however, to the terms and
conditions of Section 8.1, (b) waive any inaccuracies in the representations and
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement and (c) waive compliance by the other with any of the
agreements, covenants or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an agreement in writing
signed by the Party or Parties to be bound thereby.
8.5 Fees, Expenses and Other Payments. If this Agreement is terminated,
---------------------------------
then all costs and expenses incurred by the Parties in connection with this
Agreement, the Merger and the Transactions and in connection with compliance
with Applicable Law and Contractual Obligations as a consequence hereof and
thereof, including fees and disbursements of counsel, financial advisors and
accountants, will be borne solely and entirely by the Party which has incurred
such costs and expenses (with respect to such Party, its "Expenses"). VIALOG
acknowledges and agrees that the Company has disclosed that it is obligated and
will become further obligated for Expenses (including fees and expenses of its
counsel, its independent accountants, and its financial advisor) incurred by it
in connection with this Agreement, the Merger and the Transactions. It is
understood and agreed that certain of such Expenses may be paid by the Company
prior to the execution of this Agreement, and VIALOG agrees to refrain from
taking any action which would prevent or delay the payment of reasonable
Expenses by the Company. Any Expenses incurred and not paid will constitute
liabilities of the Company. VIALOG agrees to take all action necessary to cause
the Surviving Corporation to pay promptly any of the foregoing reasonable
Expenses incurred, but not paid, by the Company prior to the Effective Time.
8.6 Effect of Investigation. The right of any Party to terminate this
-----------------------
Agreement pursuant to Section 8.1 will remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Party, any
Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
56
<PAGE>
ARTICLE
9
FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON VIALOG STOCK
9.1 Shares not Registered. The Principal Stockholder acknowledges that the
---------------------
shares of VIALOG Stock to be delivered to Stockholders pursuant to this
Agreement have not and will not be registered under the Securities Act (except
pursuant to the Registration Rights Agreement) and may not be resold except
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from registration. The Principal Stockholder represents
and warrants that the VIALOG Stock to be acquired by the Stockholders pursuant
to this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
9.2 Economic Risk; Sophistication. The Principal Stockholder represents
-----------------------------
and warrants that the Principal Stockholder and the other Stockholders are able
to bear the economic risk of an investment in the VIALOG Stock acquired pursuant
to this Agreement and can afford to sustain a total loss on such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the VIALOG Stock. The Principal Stockholder acknowledges that
prior to the Merger Closing VIALOG will have furnished a copy of the Prospectus
to the Stockholders and at the Merger Closing the Stockholders will be required
to confirm that VIALOG has responded to due diligence and information requests
made on behalf of the Company similar in extent and scope to the due diligence
requests made to the Company by VIALOG. The Principal Stockholder will at that
time confirm that the Principal Stockholder has had an adequate opportunity to
ask questions and receive answers from the officers of VIALOG (and, in the case
of the other Stockholders, to ask questions and receive answers from the
Principal Stockholder) concerning any and all matters relating to this
Agreement, the Merger, the Transactions, or Other Participating Companies, the
Participating Agreements and the Registration Statement, and have read and
understood the matters described in the copies of the Registration Statement
provided to them including, without limitation, the background and experience of
the officers and directors of VIALOG, the plans for the operations of the
business of VIALOG, the potential dilutive effects of the Public Offering and
future acquisitions and projected uses of the proceeds of the Public Offering.
The Principal Stockholder will confirm at the Merger Closing that the Principal
Stockholder has asked any and all questions in the nature described in the
preceding sentence or otherwise of interest in connection with the exchange of
VIALOG Stock for Shares as provided in this Agreement, and all questions have
been answered to the Principal Stockholder's satisfaction.
9.3 Restrictions on Resale; Legends. The Principal Stockholder agrees, and
-------------------------------
the Company will use commercially reasonable efforts to cause each other
Stockholder to agree, not to offer, sell, assign, exchange, transfer, encumber,
pledge, distribute or otherwise dispose of the VIALOG Stock to be acquired by
them pursuant to this Agreement except after full compliance
57
<PAGE>
with all of the applicable provisions of the Securities Act and applicable state
securities Laws, and any attempt by a Stockholder to do so will be treated as
ineffective for all purposes. The certificates of VIALOG Stock issued pursuant
to Section 2.1(a) of this Agreement will bear the following legend substantially
as set forth:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE
LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED OR OTHERWISE DISPOSED OF
WITHOUT (1) REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE LAW,
OR (2) AN OPINION (SATISFACTORY TO VIALOG) OF COUNSEL (SATISFACTORY TO
VIALOG) THAT REGISTRATION IS NOT REQUIRED.
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification.
---------------
(a) Except as provided in Section 11.1, the Principal Stockholder
agrees to make whole, indemnify and hold VIALOG, VIALOG Merger Subsidiary, the
Surviving Corporation, the Underwriters and their respective Affiliates, agents,
successors and assigns (collectively, the "VIALOG Indemnified Parties") harmless
as a result of, from or against:
(i) any and all Claims of the VIALOG Indemnified Parties or
other Persons based upon, attributable to or resulting from
any material inaccuracy in or material breach of any
representation or warranty on the part of any one or more
of the Company or the Stockholders under this Agreement or
any Collateral Document;
(ii) any and all Claims of the VIALOG Indemnified Parties or
other Persons based upon, attributable to or resulting from
the material breach of any covenant or other agreement on
the part of any one or more of the Company or the
Stockholders under this Agreement or any Collateral
Document;
(iii) any and all Claims of the VIALOG Indemnified Parties or
other Persons based upon, attributable to or resulting from
any Claims made by Dwayne Dobler in connection with his
prior affiliation with the Company as an employee, officer,
and stockholder and his subsequent termination of
employment;
58
<PAGE>
(iv) any and all Claims and/or taxes incurred VIALOG Indemnified
Parties or other Persons with respect to each tax year in
which the Company is not treated as an S corporation because
distributions made by the Company caused it to violate the
single class of stock rule of IRC Section 1361(b)(1)(D) and
Treasury Regulation 1.1361-1(1); and
(v) any and all other material Claims of the VIALOG Indemnified
Parties or other Persons incident to the foregoing or to the
enforcement of this Section.
(b) Except as provided in Section 11.1, VIALOG agrees to make whole,
indemnify and hold the Principal Stockholder (and each Stockholder that delivers
the agreements contemplated by Section 6.4) and their respective Affiliates,
agents, heirs, successors and assigns (collectively, the "Company Indemnified
Parties") harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified Parties or
other Persons based upon, attributable to or resulting from
any material inaccuracy in or material breach of any
representation or warranty on the part of VIALOG or VIALOG
Merger Subsidiary under this Agreement or any Collateral
Document;
(ii) any and all Claims of the Company Indemnified Parties or
other Persons based upon, attributable to or resulting from
the material breach of any covenant or other agreement on
the part of VIALOG or VIALOG Merger Subsidiary; and
(iii) any and all other material Claims of the Company
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(c) Except in connection with Claims pursuant to Sections
10.1(a)(iii) and (iv), no Principal Stockholder will be required to pay to the
VIALOG Indemnified Parties an aggregate amount in excess of an amount equal to
the cash received by such Stockholder as the cash portion of the Exchange Merger
Consideration pursuant to Sections 2.1(a) and 2.4, cash received by such
Stockholder pursuant to Section 2.1(d) plus, with respect to shares of VIALOG
Stock issued to such Stockholder as the stock portion of the Exchange Merger
Consideration pursuant to Section 2.1(a) and Section 2.4, the Indemnity Value
thereof. VIALOG will not be required to pay any Company Indemnified Party an
aggregate amount in excess of the Indemnity Value of the shares of VIALOG Stock
issued to such Company Indemnified Party plus the amount of cash delivered to
such Company Indemnified Party pursuant to Section 2.1(a), Section 2.1(d) and
Section 2.4. No Claim for indemnification may be commenced beyond the period
applicable to such Claim set forth in Section 11.1.
(d) Notwithstanding the foregoing, no Principal Stockholder will be
required to pay any amount for indemnification to the VIALOG Indemnified Parties
except to the extent that
59
<PAGE>
(i) the claim is in connection with any of the maters set forth in Sections
10.1(a)(iii) or (iv); or (ii) the aggregate amount of Claims under this Section
10.1 asserted collectively against the Principal Stockholder exceeds the greater
of $100,000 or one quarter of one percent (.0025%) of the sum of (i) the product
of (x) the aggregate number or shares of VIALOG Stock into which the Shares of
the Stockholders will be converted as set forth in Sections 2.1(a) and 2.4 and
(y) the Offering Price, plus (ii) the total amount of cash paid to all
Stockholders pursuant to Sections 2.1(a), 2.1(d) and 2.4.
10.2 Procedures Concerning Claims by Third Parties; Payment of Damages;
------------------------------------------------------------------
etc.
- ---
(a) If any Legal Action is instituted or asserted by any person other
than such indemnified party in respect of which payment may be sought hereunder,
the indemnified party will reasonably and promptly cause written notice of the
assertion of any Legal Action of which it has knowledge which is covered by the
indemnities under Section 10.1 to be forwarded to the indemnifying party. In
such event, the indemnifying party will have the right, at its sole option and
expense, to be represented by counsel of its choice, which must be reasonably
satisfactory to the indemnified party, and to defend against, negotiate, settle
or otherwise deal with any Legal Action which related to any Claims instituted
or asserted by any Person other than such indemnified party and indemnified
against hereunder; provided, however, that no settlement thereof will be made
without the prior written consent of the indemnified party, which consent will
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
elects to defend against, negotiate, settle or otherwise deal with any Legal
Action which related to any such Claims, it will within thirty (30) days of
receipt of said notice (or sooner, if the nature of the Legal Action so
requires) notify in writing the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Legal Action which relates to any such Claims, fails to notify the
indemnified party of its election as herein provided or contests its obligation
to indemnify the indemnified party for such Claims under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Legal Action. If the indemnified party defends any Legal Action, then the
indemnifying party will reimburse the indemnified party for reasonable Claims
incurred in defending such Legal Action upon a final determination that the
indemnified party was entitled to indemnity hereunder. Neither the indemnifying
party nor the indemnified party may settle any Legal Action without the prior
written consent of the other party, which consent will not be unreasonably
withheld, conditioned or delayed. If the indemnifying party will assume the
defense of any Legal Action instituted or asserted by any Person other than an
indemnified party, the indemnified party may participate, at such party's own
expense, in the defense of such Legal Action.
(b) After any final judgment or award will have been rendered by a
court, arbitration board (which may be engaged upon the consent of each of the
indemnifying party and the indemnified parties) or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement will have been consummated, or the indemnified party
and the indemnifying party will have arrived at a mutually binding agreement
with respect to a Legal Action hereunder, the indemnifying party will pay all of
the sums due and owing to the indemnified party by wire transfer of immediately
available funds, or by delivery of
60
<PAGE>
shares of VIALOG Stock, as permitted pursuant to the definition of Indemnity
Value in Article 12, within five business days after the date of notice of such
judgment or award conditioned, however, on the indemnifying party having been
finally determined by the parties' agreement or by final court or arbitration
that the indemnifying party is obligated hereunder to make said payment and
subject to the provisions of this Article 10.
(c) The failure of the indemnified party to give reasonably prompt
notice of any Legal Action instituted or asserted by any Person other than such
indemnified party and indemnified against hereunder will not release, waive or
otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss or
material prejudice as a result of such failure.
(d) No legal action to enforce a Claim for indemnity will be stayed
or dismissed for failure to join one or more indemnifying parties or to permit
an indemnifying party to cross-claim against another indemnifying party, nor
will the failure to join as indemnifying party be deemed grounds for preventing
a separate or subsequent Legal Action to enforce a Claim for indemnification
against such party, each such Legal Action being deemed a separate and
independent Claim for indemnification. A Legal Action to enforce a Claim for
indemnity may be instituted in the Commonwealth of Massachusetts, or the
jurisdiction to which each Party consents, or any other state having
jurisdiction with respect thereto.
ARTICLE
11
GENERAL PROVISIONS
11.1 Effectiveness of Representations; etc.
-------------------------------------
(a) Regardless of any investigation made by or on behalf of any other
party hereto, any Person controlling such party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement, the representations, warranties, covenants and agreements contained
in Article 3, Article 4 and Article 5 will survive the Merger and remain
operative and in full force and effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until sixty
(60) days after the applicable statute of limitations, as
the same may be extended from time to time, has terminated;
(ii) Section 3.23, until the sixth anniversary date of this
Agreement; and
(iii) all other Sections, until VIALOG (or its successor) files
an annual report pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, as prescribed
thereunder on Form 10-K covering at least two full fiscal
years of operations by VIALOG,
61
<PAGE>
but in no event more than thirty months after the Public
Offering Closing Date (the "Second Annual Filing Date").
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements contained in Article 3,
Article 4 and Article 5, the representations, warranties, covenants and
agreements of each Party will survive and remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other Party,
any Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution and consummation of this Agreement.
11.2 Notices. All notices and other communications given or made pursuant
-------
to this Agreement will be in writing and will be deemed to have been duly given
or made as of the date delivered or transmitted, and will be effective upon
receipt, if delivered personally, mailed by certified mail (postage prepaid,
return receipt requested) to the Parties at the following addresses or sent by
electronic transmission to the fax number specified below:
(a) If to VIALOG or VIALOG Merger Subsidiary:
VIALOG Corporation
Attention: Glenn Bolduc, President
46 Manning Road
Billerica, MA 01821
Fax: (508) 667-1944
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, LLP
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
(b) If to the Company:
Conference Source International, Inc.
Attention: Judy B. Crawford, President
100 Hartsfield Parkway, Suite 300
Atlanta, GA 30354
Fax: 800-343-9332
with a copy to:
Robert C. Sundberg, II, Esq.
Gandy, Rice & Sundberg, P.C.
3775 Peachtree Dunwoody Road, Suite 380-C
62
<PAGE>
Atlanta, GA 30342
Fax: 404-205-1985
Any address for notice as herein above provided may be changed by the party
or person for whom the change is made by giving notice of said change in the
manner provided in this Section.
11.3 Headings. The headings contained in this Agreement are for reference
--------
purposes only and will not affect in any way the meaning and interpretation of
this Agreement.
11.4 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner Adverse to any Party. Upon such
determination that any term or other provisions is invalid, illegal or incapable
of being enforced, the Parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement (together with the Disclosure
----------------
Schedule, the Confidentiality Agreement and the other Collateral Documents
delivered in connection herewith), constitutes the entire agreement of the
Parties and supersedes all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof.
11.6 Assignment. This Agreement may not be assigned by operation of law or
----------
otherwise and any purported assignment will be null and void, provided that
VIALOG may cause a wholly owned Subsidiary of VIALOG or Holding Company to be
substituted for VIALOG or VIALOG Merger Subsidiary as the party to the Merger
and may, in addition, assign the other rights, but not its obligations,
including, without limitation, its obligation for payment of the Aggregate
Merger Consideration, under this Agreement to such Subsidiary or Holding
Company.
11.7 Parties in Interest. This Agreement will be binding upon and inure
-------------------
solely to the benefit of each Party, and nothing in this Agreement, express or
implied (other than the provisions of Section 6.7, which provisions are intended
to benefit and may be enforced by the beneficiaries thereof), is intended to or
will confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
11.8 Governing Law. Except to the extent that Delaware Law may be
-------------
applicable to the Merger, this Agreement will be governed by, and construed in
accordance with, the substantive laws of the Commonwealth of Massachusetts
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
63
<PAGE>
11.9 Enforcement of the Agreement. Each Party recognizes and agrees that
----------------------------
each other Party's remedy at law for any breach of the provisions of this
Agreement would be inadequate and agrees that for breach of such provisions,
such Party will, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance to the
extent permitted by Applicable Law. Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
Nothing herein contained will be construed as prohibiting a Party from pursuing
any other remedies available to such Party for any breach or threatened breach
hereof or failure to take or refrain from any action as required hereunder to
consummate the Merger and carry out the Transactions.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
11.11 Disclosure Supplements. From time to time prior to the Public
----------------------
Offering Closing Date, the Company will promptly supplement or amend the
Disclosure Schedule delivered in connection with this Agreement, with respect to
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby; provided, however, that no
supplement or amendment to the Disclosure Schedule that constitutes or reflects
a Material Adverse Change to the Company may be made without the prior written
consent of VIALOG.
ARTICLE
12
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural, and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meanings when used in the Disclosure Schedule and each Collateral
Document, notice, certificate, communication, opinion, or other document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
Accountants means KPMG Peat Marwick, LLP.
64
<PAGE>
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") means, with
respect to the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, any Event which could reasonably be expected to
(a) adversely affect the validity or enforceability of this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, or (b) adversely affect the business, operations, management,
properties or the condition, (financial or other), or results of operation of
the Company or the Company and its Subsidiaries taken as a whole, VIALOG or
VIALOG Merger Subsidiary, as the case may be, or (c) impair the Company's,
VIALOG's or VIALOG Merger Subsidiary's ability to fulfill its obligations under
the terms of this Agreement or any Collateral Document executed or required to
be executed pursuant hereto or thereto, or (d) adversely affect the aggregate
rights and remedies of VIALOG or the Company under this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, in all cases, unless otherwise specifically set forth, in a material
respect or manner or to a material degree.
Affiliate or Affiliated means, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, will include any member of such
individual's immediate family or a family trust.
Aggregate Equity means such number of shares of Company Stock as shall
equal the aggregate of (a) the Shares, and (b) all shares of Company Stock
otherwise issuable based upon the affirmative election to exercise or convert
outstanding Option Securities and/or Convertible Securities pursuant to Section
2.4.
Aggregate Merger Consideration will have the meaning given to it in Section
2.1(a).
Aggregate Cash Merger Consideration will have the meaning given to it in
Section 2.1(a) .
Aggregate Stock Merger Consideration will have the meaning given to it in
Section 2.1(a).
Agreement means this Agreement as originally in effect, including unless
the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits to this Agreement, and as the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
65
<PAGE>
Applicable Law means any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or to any of its business or
operations is subject or any of its property or assets is bound.
Authority means any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau, central
bank or comparable agency or Entity, commission, corporation, court, department,
instrumentality, master, mediator, panel, referee, system or other political
unit or subdivision or other Entity of any of the foregoing, whether domestic or
foreign.
BCA will have the meaning given to it in the Preamble.
Benefit Arrangement means any material benefit arrangement that is not a
Plan, including (a) any employment or consulting agreement, (b) any arrangement
providing for insurance coverage or workers' compensation benefits, (c) any
incentive bonus or deferred bonus arrangement, (d) any arrangement providing
termination allowance, severance or similar benefits, (e) any equity
compensation plan, (f) any deferred compensation plan, and (g) any compensation
policy and practice.
Cash Merger Consideration will have the meaning given to it in Section
2.1(a).
Certificate will have the meaning given to it in Section 2.1(a).
Claims means any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all reasonable fees, costs, expenses and disbursements
(including without limitation attorneys' fees, costs and expenses) relating to
any of the foregoing.
COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
Code will have the meaning given to it in the Preamble.
Collateral Document means any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Principal Stockholder, on the one hand, or
VIALOG and VIALOG Merger Subsidiary on the other, under this Agreement and with
respect to opinions to be delivered pursuant to this Agreement, except to the
extent of a Party's actual knowledge, the Company and the Principal Stockholder
or VIALOG and VIALOG Merger Subsidiary, as the case may be, assume no
responsibility for the
66
<PAGE>
authority of or genuineness of signatures relating to the others as counterparts
or their representations, warranties, covenants and agreements.
Company will have the meaning given to it in the Preamble.
Company Indemnified Parties will have the meaning given to it in Section
10.1(b).
The Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or the Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after reasonable investigation, will
have reason to believe and will believe that the subject representation or
warranty is true and accurate as stated.
Company Stock will have the meaning given to it in Section 2.1(a).
Confidentiality Letter will have the meaning given to it in Section
6.1(c).
Contract or Contractual Obligation means any term, condition, provision,
representation, warranty, agreement, covenant, undertaking, commitment,
indemnity or other obligation set forth in the Organizational Documents of the
obligee or which is outstanding or existing under any instrument, contract,
lease or other contractual undertaking (including without limitation any
instrument relating to or evidencing any Indebtedness) to which the obligee is a
party or by which it or any of its business is subject or property or assets is
bound.
Control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
Convertible Securities means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or existence or non-
existence of some other Event, or both.
DBCL will have the meaning given to it in the Preamble.
Disclosure Schedule means the disclosure schedules dated as of the date
of this Agreement delivered by the Company to VIALOG and VIALOG to the Company.
Distribution means, with respect to the Company or any of its
Subsidiaries: (a) the declaration or payment of any dividend (except dividends
payable in common stock of the Company) on or in respect of any shares of any
class of capital stock of the Company or any
67
<PAGE>
shares of capital stock of any Subsidiary owned by a Person other than the
Company or a Subsidiary, (b) the purchase, redemption or other retirement of any
shares of any class of capital stock of the Company or any shares of capital
stock of any Subsidiary owned by a Person other than the Company or a
Subsidiary, and (c) any other distribution on or in respect of any shares of any
class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary.
Effective Date means the effective date of the Registration Statement
and commencement of the Public Offering as authorized by the SEC.
Effective Time will have the meaning given to it in Section 1.4.
Employment Arrangement means, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock purchase or appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA.
Encumber means to suffer, accept, agree to or permit the imposition of a
Lien.
Entity means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
Environmental Laws means any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, mining or reclamation or mined land, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes. Environmental
Laws include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), the Hazardous Material
-- ---
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
-- ---
and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42
-- ---
U.S.C.
68
<PAGE>
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
Section 2601 et seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C.
-- ---
Section 651 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
-- ---
U.S.C. Section 136 et seq.), and the Surface Mining Control and Reclamation Act
-- ---
of 1977 (30 U.S.C. Section 1201 et seq.), and any analogous future federal, or
-- ---
present or future state, local or foreign, Laws, and the rules and regulations
promulgated thereunder all as from time to time in effect, and any reference to
any statutory or regulatory provision will be deemed to be a reference to any
successor statutory or regulatory provision.
Environmental Permit means any Governmental Authorization required by or
pursuant to any Environmental Law.
Environmental Requirements means all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
(a) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of, or the remediation, emission,
discharge or release into the air, surface water, groundwater or
land of, Hazardous Materials;
(b) the protection of the health and safety of employees or the public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA means the Employee Retirement Security Act of 1974, and the rules
and regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision will be deemed to be a reference to any successor statutory or
regulatory provision.
ERISA Affiliate means any Person that is treated as a single employer
with the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
Event means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Exchange Agent will have the meaning given to it in Section 2.2(a).
Exchange Fund will have the meaning given to it in Section 2.2(a).
Exchange Merger Consideration will have the meaning given to it in
Section 2.1(a).
69
<PAGE>
Expenses will have the meaning set forth in Section 8.5.
Final Determination (a) means with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations; and (b) will include the payment of Tax by
the Company or whichever Party is responsible for payment of such Tax under
Applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the other party is notified of such payment and the
party that is responsible for such Tax under this Agreement determines that no
action should be taken to recoup such payment from such Taxing Authority.
Financial Statements will have the meaning given to it in Section
3.2(a).
GAAP means generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
each applicable Authority.
Governmental Filings means all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with each applicable Authority.
Guaranty or Guaranteed means any agreement, undertaking or arrangement
by which the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, guarantees, endorses or otherwise becomes or is
liable, directly or indirectly, upon any Indebtedness of any other Person
including without limitation the payment of amounts drawn down by beneficiaries
of letters of credit (other than by endorsements of negotiable instruments for
deposit or collection in the ordinary course of business). The amount of the
obligor's obligation under any Guaranty will be deemed to be the outstanding
amount (or maximum permitted amount, if larger) of the Indebtedness directly or
indirectly guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials means any substance (in whatever state or matter):
(a) the presence of which requires investigation or remediation under any
Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated by
any Authority; (d) that contains or consists of petroleum or petroleum products,
or (e) that contains or consists of PCBs, asbestos, or urea formaldehyde foam
insulation.
70
<PAGE>
Holding Company means a corporation established by or on behalf of
VIALOG into which VIALOG merges or assigns its rights and obligations hereunder
if the Accountants so advise for purpose of a tax free incorporation of all
parties provided the relative ownership rights of all parties remain the same.
HSR Act means the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
and the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision.
Indebtedness means, with respect to the Company or any of its
Subsidiaries or VIALOG or VIALOG Merger Subsidiary, as the case may be, (a) all
items, except items of capital stock or of surplus or of general contingency or
deferred tax reserves or any minority interest in any Subsidiary to the extent
such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of the Company or VIALOG, which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of the Company or such Subsidiary or VIALOG or
VIALOG Merger Subsidiary, (b) all obligations secured by any Lien to which any
property or asset owned or held by the Company or any Subsidiary or VIALOG or
any VIALOG Merger Subsidiary is subject, whether or not the obligation secured
thereby will have been assumed, and (c) to the extent not otherwise included,
all Contractual Obligations of the Company or any Subsidiary or VIALOG or any
VIALOG Merger Subsidiary constituting capitalized leases and all obligations of
the Company or any Subsidiary or VIALOG or any VIALOG Merger Subsidiary with
respect to Leases constituting part of a sale and leaseback arrangement.
Indemnity Value means with respect to each share of VIALOG Stock issued
to a Stockholder pursuant to the Merger, the Offering Price. In satisfaction of
a Claim under this Agreement for which a stockholder is liable to VIALOG, until
the Second Annual Filing Date, and in lieu of all cash, such Stockholder may
tender shares of VIALOG Stock valued at the Offering Price and cash in a ratio
not exceeding fifty-one (51) to forty-nine (49), for all payments by such
Stockholder, and after the Second Annual Filing Date, cash and shares of VIALOG
Stock in such proportion as such Stockholder determines.
Intangible Assets means all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
Law means any (a) administrative, judicial, legislative or other action,
code, consent decree, constitution, decree, directive, enactment, finding,
guideline, law, injunction, interpretation, judgment, order, ordinance, policy
statement, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic of foreign; (b) the common law, or other legal or quasi-
legal precedent; or (c) arbitrator's, mediator's or referee's award, decision,
finding or recommendation; including, in each such case or instance, any
interpretation, directive, guideline
71
<PAGE>
or request, whether or not having the force of law including, in all cases,
without limitation any particular section, part or provision thereof.
Lease means any lease of property, whether real, personal or mixed, and
all amendments thereto.
Legal Action means any litigation or legal or other actions,
arbitrations, counterclaims, investigations, proceedings, requests for material
information by or pursuant to the order of any Authority, or suits, at law or in
arbitration, equity or admiralty commenced by any Person, whether or not
purported to be brought on behalf of a party hereto affecting such party or any
of such party's business, property or assets.
Lien means any of the following: mortgage, lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building to use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
Margin Rules means Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
Material or Materiality for the purposes of this Agreement, will, unless
specifically stated to the contrary, be determined without regard to the fact
that various provisions of this Agreement set forth specific dollar amounts.
Material Agreement or Material Commitment means, with respect to the
Company or any of its Subsidiaries, or VIALOG or VIALOG Merger Subsidiary any
Contractual Obligation which (a) was not entered into in the ordinary course of
business, (b) was entered into in the ordinary course of business which (i)
involves the purchase, sale or lease of goods or materials or performance of
services aggregating more than Twenty-Five Thousand Dollars ($25,000), (ii)
extends for more than three (3) months, or (iii) is not terminable on thirty
(30) days or less notice without penalty or other payment, (c) involves
Indebtedness for money borrowed in excess of One Hundred Thousand Dollars
($100,000), (d) is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement, or (e) would
account for more than five percent (5%) of purchases or sales made by the
Company and its Subsidiaries for the year ended December 31, 1996.
Merger will have the meaning given to it in the Preamble.
72
<PAGE>
Merger Closing will have the meaning given to it in Section 1.3.
Merger Consideration will have the meaning given to it in Section
2.1(a).
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
Net Shares will have the meaning given to it in Section 2.2(a).
Offering Price means $11.50 per share of VIALOG Stock.
Option Securities means all rights, options and warrants, all calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
Organizational Documents means, with respect to a Person which is a
corporation, its charter, its by-laws, and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock, and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreement among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
Other Participating Companies mean those companies or entities engaged
in the teleconferencing business who execute agreements and plans of
reorganization, stock purchase agreements or asset purchase agreements with
VIALOG which agreements close contemporaneously with this Agreement.
Other Transaction means a transaction or series of related transactions
(other than the Merger) resulting in (a) any change in control of the Company,
(b) any merger or consolidation of the Company or any of its Subsidiaries,
regardless of whether the Company or such Subsidiary is the surviving Entity,
(c) any tender offer or exchange offer for, or any acquisition of, any
securities of the Company, or (d) any sale or other disposition of assets of the
Company of any Subsidiary not otherwise permitted under Section 3.18.
Participating Agreement will have the meaning given to it in the
Preamble.
Participating Companies will mean the Company and the Other
Participating Companies.
Participating Mergers means the mergers of each of the Other
Participating Companies with a Subsidiary of VIALOG pursuant to a Participating
Agreement.
Participating Stockholders means the Persons receiving VIALOG Stock
pursuant to the Participating Mergers.
73
<PAGE>
Party means any natural individual or any Entity that has executed this
Agreement.
PBGC means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Person means any natural individual or any Entity.
Plan means any "employee benefit plan" as defined in Section 3(3) of
ERISA (whether or not terminated) which is (or was in the case of a frozen or
terminated plan) maintained by the Company or any Subsidiary or VIALOG or VIALOG
Merger Subsidiary, and with respect to which the Company, such Subsidiary or
VIALOG or VIALOG Merger Subsidiary or, in the case of any such plan subject to
Title IV of ERISA, an ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, other than a Multiemployer Plan.
Principal Stockholder will have the meaning given to it in the Preamble.
Private Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than each Authority) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
Prospectus means the form of prospectus first filed by VIALOG in the
Registration Statement, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the Public
Offering.
Public Offering will have the meaning given to it in the Preamble.
Public Offering Closing Date means the date on which the Public Offering
is closed.
Registration Rights Agreement will have the meaning given to it in
Section 6.4.
Registration Statement means the registration statement (including the
Prospectus, exhibits, financial statements and schedules included therein), and
all amendments thereof (including post-effective amendments and any registration
statement filed under Rule 462(b) with respect to the Public Offering), filed
under the Securities Act registering the shares of VIALOG Stock to be sold in
the Public Offering in accordance with the terms and conditions of the
Underwriting Agreement.
Representatives of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
74
<PAGE>
SEC means the Securities and Exchange Commission of the United States or
any successor Authority.
Second Annual Filing Date will have the meaning given to it in Section
11.1(a)(iii).
Securities Act means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations.
Shares will have the meaning given to it in Section 2.1(a).
Special Meeting will have the meaning given to it in Section 1.2(a).
Stock Merger Consideration will have the meaning given to it in Section
2.1(a).
Stockholders means the Principal Stockholder and all other Persons
entitled to Merger Consideration (or who would be entitled thereto but for their
dissent from the Merger) pursuant to Sections 2.1(a) or (to the extent Persons
holding Option Securities or Convertible Securities exercise their rights to
acquire Shares prior to the Effective Time, from and after the time they acquire
such Shares) Section 2.4.
Subsidiary means, with respect to a Person, any Entity a majority of the
capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Surviving Corporation will have the meaning given to it in Section 1.1.
Tax (and "Taxable", which means subject to Tax), means with respect to
the Company or any of its Subsidiaries or VIALOG or any VIALOG Merger
Subsidiary, (a) all taxes (domestic or foreign), including without limitation
any income (net, gross or other including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, gains, sales, use, leasing, lease, user, ad valorem, transfer,
recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by the Company or
any of its Subsidiaries, or VIALOG or any VIALOG Merger Subsidiary, payroll,
employment, unemployment, social security, excise severance, stamp, occupation,
premium, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, levies, assessments, charges, penalties, addition to
tax or additional amount imposed by any Taxing Authority, (b) any joint or
several liability of the Company or any of its Subsidiaries or VIALOG or any
VIALOG Merger Subsidiary with any other Person for the payment of any amounts of
the type described in (a), and (c) any liability of the Company or any of its
Subsidiaries or VIALOG or any VIALOG Merger Subsidiary for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
75
<PAGE>
Tax Claim means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
Tax Return or Returns means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority means any Authority responsible for the imposition of
any Tax.
Termination Date means (a) March 15, 1997 unless on or prior to that
date the Registration Statement is filed, in which case such date will
automatically be extended to June 30, 1997, or (b) such date after March 15,
1997 as to which the parties agree.
Transactions means the other transactions contemplated by this Agreement
or the Merger or by any Collateral Document executed or required to be executed
in connection herewith or therewith, but will not include the Participating
Mergers, the registration of sale of VIALOG Stock pursuant to the Registration
Statement or any credit facilities between VIALOG and any bank described in the
Registration Statement.
Transmittal Documents will have the meaning given to it in Section
2.2(b).
Underwriter means any two of Smith Barney Inc., Salomon Brothers Inc,
Donaldson, Lufkin & Jenrette Securities Corporation or comparable firm as lead
underwriters and any other Person who executes the Underwriting Agreement as an
underwriter of VIALOG Stock in the Public Offering.
Underwriting Agreement means the firm commitment underwriting agreement
between VIALOG and the Underwriter to be filed as an exhibit to the Registration
Statement and to be executed on or about the Effective Date.
VIALOG will have the meaning given to it in the Preamble.
VIALOG Indemnified Parties will have the meaning given to it in Section
10.1(a).
VIALOG Merger Subsidiary will have the meaning given to it in the
Preamble.
VIALOG Stock will have the meaning given to it in the Preamble.
[This space is intentionally left blank.]
76
<PAGE>
IN WITNESS WHEREOF, InterPlay, InterPlay Merger Subsidiary, the Company
and the Principal Stockholder have caused this Agreement to be executed as of
the date first written above by their respective officers thereunto duly
authorized.
INTERPLAY CORPORATION
By: /s/ Glenn D. Bolduc
--------------------------------
Name: Glenn D. Bolduc
Title: President
CSII ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
--------------------------------
Name: Glenn D. Bolduc
Title: President
CONFERENCE SOURCE
INTERNATIONAL, INC.
By: /s/ Judy B. Crawford
--------------------------------
Name: Judy B. Crawford
Title: President
PRINCIPAL STOCKHOLDER:
/s/ Judy B. Crawford
-----------------------------------
Name: Judy B. Crawford
/s/ Olen E. Crawford
-----------------------------------
Name: Olen E. Crawford
77
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. THE REGISTRANT AGRESS
TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE
TO THE COMMISSION UPON REQUEST.
------------------------------
Section 3.1(a)
. Jurisdiction of Incorporation of the Company.
. Jurisdictions where qualified to do business.
Section 3.1(c)
. Exceptions to No Breach or Default, Etc., upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Lien created or imposed upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Governmental Authorization or Governmental Filing Required
upon execution and delivery of the Agreement or any Collateral Document.
Section 3.1(d)
. Subsidiaries of the Company, and Jurisdictions of incorporation and where
qualified to do business.
. Capital Stock of any Subsidiary.
. Exceptions to Company's ownership of all Stock of any Subsidiary.
Section 3.2(a)
. Financial Statements of the Company and any Subsidiary, prepared in accordance
with GAAP.
Section 3.2(c)
. The Company's ownership of other Entities.
Section 3.3
. Changes and condition of the Company and any Subsidiary, since the date of the
most recent financial statements.
Section 3.4
. Exceptions to liabilities of the Company or any Subsidiary.
<PAGE>
. Any obligations or liabilities, past, present or deferred, or accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in the
balance sheet of the Financial Statements, or notes thereto, and any
obligations or liabilities, other than obligations and liabilities incurred in
the ordinary course of business consistent with past practice of the Company
and any Subsidiary, which will adversely affect the Company or any of the
Company's Subsidiaries.
. Guarantees or Primary or Secondary Liabilities of the Company or any
Subsidiary (except as disclosed in Financial Statements).
Section 3.5(a)
. Exceptions to No Liens with respect to all real property owned or leased, and
to all other assets, tangible and intangible.
. Financing Statements evidencing any Liens.
. Impairments to valid leasehold interests.
Section 3.5(b)
. Real estate owned or leased, and property leased by the Company and any
Subsidiary.
. Material Fixed Assets.
. Title Retention Agreements.
Section 3.5(c)
. Exceptions to compliance with title covenants and conditions and environmental
laws.
. Hazardous Materials used or stored by the Company or any Subsidiary.
Section 3.6
. Private Authorizations material to the Company or any Subsidiary.
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before December
31, 1995.
Section 3.7(b)
. Breaches, violations or defaults under Governmental Authorizations or any
Applicable Law or under any requirement of any insurance carrier.
2
<PAGE>
Section 3.8(a)
. Governmental Authorizations and Intangible Assets upon which the conduct of
business by the Company or any Subsidiary is dependent.
Section 3.8(b)
. Description of Intangible Assets and Governmental Authorizations.
Section 3.9
. Contractual obligations or transactions between the Company or any of its
Subsidiaries and any of its officers, directors, employees, stockholders, or
any Affiliate of any thereof (other than reasonable compensation for services
or out-of-pocket expenses reasonably incurred in support of the Company's
business).
Section 3.10(a)
. Insurance Policies maintained by the Company or any Subsidiary.
. Insurance Carriers which have refused the Company or any Subsidiary insurance
within the past five years.
Section 3.11(a)
. Exceptions to taxation as a Subchapter C corporation.
. Membership in a consolidated group for tax purposes.
Section 3.11(d)
. Tax audits of the Company or any Subsidiary by the IRS or any notifications
thereof.
Section 3.11(e)
. Tax Sharing Agreement or Arrangement of the Company or any Subsidiary.
Section 3.11(f)
. Consents concerning collapsible corporations under Section 341(f) of the Code.
Ownership changes within the meaning of Section 382(g) of the Code.
Section 3.12(a)
. ERISA plans, including, inter alia, exceptions to compliance to applicable
----- ----
laws, notices from any authority questioning compliance, deficiencies,
"prohibited transactions", any amounts of
3
<PAGE>
liability, termination proceedings, annual reports, or any membership in or
contributions to multi-employer plans.
Section 3.12(c)
. Basis of funding and current status of any past service liability with respect
to each Employment Arrangement.
Section 3.15(a)
. Authorized and outstanding Capital Stock of the Company.
. Agreements by the Company or any Subsidiary to grant or issue any shares of
its Capital Stock or any Option Security or Convertible Security.
. Any agreement, put or commitment pursuant to which the Company or any
Subsidiary is obligated to purchase, redeem or otherwise acquire any shares of
Capital Stock or any Option Security or Convertible Security.
Section 3.15(b)
. Stockholders.
. Stock not held free and clear of all Liens.
. Persons or groups of persons owning as much as 5% of the Company's outstanding
Common Stock.
Section 3.16(a)
. Employment Arrangements of the Company or any Subsidiary.
. Collective bargaining agreements or pending grievances or labor disputes.
Section 3.16(b)
. Accelerated payments or benefits, including parachute payments, that will be
received as a result of the transactions contemplated by this Agreement.
Section 3.16(c)
. Any unfavorable relationships with employees of the Company or any Subsidiary.
Section 3.17(a)
. Material Agreements relating to the ownership or operation of the business and
property of the Company or any Subsidiary presently held or used by the
Company or any Subsidiary, or to which the Company or any Subsidiary is a
party, or to which it or any of its property is subject or bound.
4
<PAGE>
which the Company or any Subsidiary is a party, or to which it or any of its
property is subject or bound.
Section 3.17(b)
. Exceptions to satisfaction or performance of Material Agreements by the
Company or any Subsidiary.
Section 3.18(a)
. Exceptions to operation of business in the ordinary course.
Section 3.18(b)
. Distributions from end of most recent fiscal year to the date of this
Agreement.
Section 3.19
. Banks, trust companies, savings and loan associations and brokerage firms in
which the Company or any Subsidiary has an account or safe deposit box, and
the names of all persons with access thereto.
Section 3.20
. Adverse restrictions which impairs the Company or any Subsidiary's ability to
conduct its business or which could have any adverse effect on the Company or
any Subsidiary.
Section 3.22
. Personal injury, warranty claims, etc., pending or threatened.
Section 3.23(a)
. Environmental matters - compliance and Governmental Authorizations and Private
Authorizations.
Section 3.23(b)
. Any actual or expected spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water on any property or facility
owned, leased, operated or occupied by the Company or any Subsidiary.
. Notices or Liens arising under Environmental Law.
Section 3.23(c)
. Above or underground tanks for the storage of Hazardous Materials.
5
<PAGE>
Section 3.23(e)
. Hazardous Materials used in the conduct of business of the Company or any
Subsidiary.
. Description and annual volume of Hazardous Materials used.
. Years during which use occurred.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(f)
. Hazardous Materials generated.
. Annual volume.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(g)
. Environmental site assessments.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
Section 4.4
. Exceptions to good and merchantable title to Shares to be exchanged pursuant
to this Agreement.
Section 4.5(a)
. Conflicts with, breaches of, or defaults under any Contractual Obligation of
Principal Stockholder resulting from the execution and delivery of this
Agreement or any Collateral Document.
Section 4.5(b)
. Liens created or imposed upon any property or asset of Principal Stockholder
as a result of the execution and delivery of this Agreement or any Collateral
Document.
Section 4.5(c)
. Governmental Authorizations, Governmental Filing or Private Authorizations
required as a result of the execution and delivery of this Agreement or any
Collateral Document.
6
<PAGE>
Section 5.7
. Authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary.
. Options, warrant, calls, rights, commitments or any other agreements of any
character obligating VIALOG or VIALOG Merger Subsidiary to issue any shares of
VIALOG Stock or other shares of Capital Stock of VIALOG or VIALOG Merger
Subsidiary, or any other securities convertible into or evidencing the right
to subscribe for any such shares.
Section 5.11
. Provisions in other Participating Agreements of other Participating Companies
not substantially identical in form and substance to the provisions contained
in Articles 3 through 12 of this Agreement.
Section 6.5(b)
. Business (other than business in the ordinary course) the Company will conduct
without the written permission of VIALOG Corporation.
Section 6.17
. Distributions to Stockholders, employees and consultants contemplated to be
made prior to the Merger Closing.
. Liens to be discharged prior to the Merger Closing.
. Certain liabilities for which the Company will indemnify VIALOG as of the
Merger Closing.
Section 7.1(f)
. Awards under Stock Option Plan.
Section 7.2(d)
. Persons executing Non-Competition Agreements.
Section 7.2(n)
. Form of Agreement releasing the Company and any Subsidiary from claims against
them.
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of the
Public Offering Closing Date.
7
<PAGE>
Section 7.2(s)
. Employment Agreement between Principal Stockholder and VIALOG Corporation.
Section 7.2(t)
. Individuals executing and delivering Employment Arrangements for VIALOG
Corporation.
8
<PAGE>
Exhibit 2.4
ASSET PURCHASE AGREEMENT
BY AND AMONG
VIALOG CORPORATION
CALL POINTS ACQUISITION CORPORATION
CALL POINTS, INC.
AND
ROPIR INDUSTRIES, INC.
Dated as of February 28, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 PURCHASE AND SALE OF ASSETS...................................................2
SECTION 1.1 Purchase and Sale of Assets..........................................2
SECTION 1.2 Closing..............................................................2
SECTION 1.3 Liabilities Assumed..................................................3
SECTION 1.4 Transactions at the Asset Purchase Closing...........................3
SECTION 1.5 Action by the Principal Stockholders.................................4
SECTION 1.6 Effective Time.......................................................4
SECTION 1.7 Certificate of Incorporation.........................................4
SECTION 1.8 By-laws..............................................................4
SECTION 1.9 Directors and Officers...............................................4
SECTION 1.10 Further Assurances...................................................4
ARTICLE 2 CONSIDERATION.................................................................4
SECTION 2.1 Consideration........................................................4
SECTION 2.2 Allocation of Purchase Price.........................................5
SECTION 2.3 Payment of Purchase Price............................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................5
SECTION 3.1 Organization and Business; Power and Authority;
Effect of Transaction................................................5
SECTION 3.2 Financial and Other Information......................................7
SECTION 3.3 Changes in Condition.................................................8
SECTION 3.4 Liabilities..........................................................9
SECTION 3.5 Title to Properties and Assets; Leases...............................9
SECTION 3.6 Compliance with Private Authorizations...............................10
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law.......................................................11
SECTION 3.8 Intangible Assets....................................................12
SECTION 3.9 Related Transactions.................................................13
SECTION 3.10 Insurance............................................................13
SECTION 3.11 Tax Matters..........................................................13
SECTION 3.12 Employee Retirement Income Security Act of 1974......................14
SECTION 3.13 Absence of Sensitive Payments........................................17
SECTION 3.14 Inapplicability of Specified Statutes................................17
SECTION 3.15 Authorized and Outstanding Capital Stock.............................18
SECTION 3.16 Employment Arrangements..............................................18
SECTION 3.17 Material Agreements..................................................20
SECTION 3.18 Ordinary Course of Business..........................................20
SECTION 3.19 Bank Accounts, Etc...................................................22
SECTION 3.20 Adverse Restrictions.................................................22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.21 Broker or Finder.....................................................22
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc.............22
SECTION 3.23 Environmental Matters................................................23
SECTION 3.24 Materiality..........................................................25
SECTION 3.25 Solvency.............................................................25
SECTION 3.26 Acquisition of the Entire Business...................................25
SECTION 3.27 Compliance with Regulations Relating to Securities Credit............25
SECTION 3.28 Certain State Statutes Inapplicable..................................25
SECTION 3.29 Continuing Representations and Warranties............................26
SECTION 3.30 Registration Statement...............................................26
SECTION 3.31 Predecessor Status, etc..............................................26
ARTICLE 4 ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDER.........................................................26
SECTION 4.1 Organization.........................................................26
SECTION 4.2 Power and Authority..................................................26
SECTION 4.3 Enforceability.......................................................27
SECTION 4.4 Equity Ownership.....................................................27
SECTION 4.5 No Conflict; Required Filings and Consents...........................27
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VIALOG
AND BUYER............................................................................28
SECTION 5.1 Organization and Qualification.......................................28
SECTION 5.2 Power and Authority..................................................28
SECTION 5.3 No Conflict; Required Filings and Consents...........................28
SECTION 5.4 Financing............................................................29
SECTION 5.5 Broker and Finder....................................................29
SECTION 5.6 Prior Activities of VIALOG or Buyer..................................29
SECTION 5.7 Capitalization of VIALOG and Buyer...................................29
SECTION 5.8 Registration Statement...............................................29
SECTION 5.9 Solvency.............................................................30
SECTION 5.10 Firm Commitment......................................................30
SECTION 5.11 Participating Agreements of Other Participating Companies............30
SECTION 5.12 Continuing Representations and Warranties............................30
ARTICLE 6 ADDITIONAL COVENANTS..........................................................31
SECTION 6.1 Access to Information; Confidentiality...............................31
SECTION 6.2 Agreement to Cooperate...............................................32
SECTION 6.3 Assignment of Contracts and Rights...................................33
SECTION 6.4 Maintenance of Corporate Existence...................................33
SECTION 6.5 Conduct of Business..................................................34
SECTION 6.6 No Solicitation......................................................34
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.7 Directors' and Officers' Indemnification and Insurance...............35
SECTION 6.8 Notification of Certain Matters......................................35
SECTION 6.9 Public Announcements.................................................35
SECTION 6.10 Conveyance Taxes.....................................................36
SECTION 6.11 Obligations of VIALOG................................................36
SECTION 6.12 Employee Benefits; Severance Policy..................................36
SECTION 6.13 Certain Actions Concerning Business Combinations.....................37
SECTION 6.14 Intentionally Left Blank.............................................37
SECTION 6.15 Tax Returns..........................................................37
SECTION 6.16 Noncompetition.......................................................37
SECTION 6.17 Distributions, Liabilities, Etc......................................38
SECTION 6.18 Release from Guarantees..............................................38
SECTION 6.19 No Significant Changes...............................................38
SECTION 6.20 Registration Statement...............................................39
SECTION 6.21 Self Dealing.........................................................39
ARTICLE 7 CLOSING CONDITIONS............................................................39
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Asset
Purchase.............................................................39
SECTION 7.2 Conditions to Obligations of VIALOG and Buyer........................41
SECTION 7.3 Conditions to Obligations of the Company.............................47
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.............................................49
SECTION 8.1 Termination..........................................................49
SECTION 8.2 Effect of Termination................................................51
SECTION 8.3 Amendment............................................................51
SECTION 8.4 Waiver...............................................................52
SECTION 8.5 Fees, Expenses and Other Payments....................................52
SECTION 8.6 Effect of Investigation..............................................52
ARTICLE 9 INTENTIONALLY LEFT BLANK.....................................................52
ARTICLE 10 INDEMNIFICATION..............................................................53
SECTION 10.1 Indemnification......................................................53
SECTION 10.2 Procedures Concerning Claims by Third Parties;
Payment of Damages; etc..............................................54
ARTICLE 11 GENERAL PROVISIONS...........................................................55
SECTION 11.1 Effectiveness of Representations; etc................................55
SECTION 11.2 Notices..............................................................56
SECTION 11.3 Headings.............................................................57
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 11.4 Severability...................................................... 58
SECTION 11.5 Entire Agreement.................................................. 58
SECTION 11.6 Assignment........................................................ 58
SECTION 11.7 Parties in Interest............................................... 58
SECTION 11.8 Governing Law..................................................... 58
SECTION 11.9 Enforcement of the Agreement...................................... 58
SECTION 11.10 Counterparts...................................................... 59
SECTION 11.11 Disclosure Supplements............................................ 59
ARTICLE 12 DEFINITIONS............................................................... 59
</TABLE>
iv
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of February 28, 1997 among VIALOG
CORPORATION, a Massachusetts corporation ("VIALOG"), Call Points Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of VIALOG
("Buyer"), Call Points, Inc., a Delaware corporation (the "Company"), and Ropir
Industries, Inc. (the "Principal Stockholder").
PREAMBLE
1. The Company and Buyer agree that it is in their best interest to
combine their business upon the terms and subject to the conditions of this
Agreement and in accordance with the Alabama Business Corporation Act (the
"BCA") and the General Corporation Law of the State of Delaware (the "DBCL"),
pursuant to which the Buyer will acquire substantially all of the assets and
assume certain liabilities of the Company (the "Asset Purchase").
2. Each of the Other Participating Companies will enter into an agreement
and plan of reorganization or stock or asset purchase agreement with VIALOG and
a wholly-owned Subsidiary of VIALOG (each a "Participating Agreement") whereby,
contemporaneously with the Asset Purchase contemplated hereby, each Other
Participating Company and a Subsidiary of VIALOG will carry out a business
combination transaction pursuant to which each such Subsidiary will merge with
and into one of the Other Participating Companies or VIALOG or such Subsidiary
shall purchase stock or assets of such Other Participating Companies and
stockholders of and other Persons holding equity interests in the Other
Participating Companies will convert their holdings into cash and shares of
common stock, $.01 par value per share of VIALOG ("VIALOG Stock") determined in
accordance with the respective Participating Agreements.
3. Pursuant to the Underwriting Agreement, VIALOG will issue and sell
VIALOG Stock in a firm commitment public offering registered on Form S-1 in
accordance with the requirements of the Securities Act (the "Public Offering").
4. The Board of Directors of the Company has unanimously determined that
the Asset Purchase is fair to, and in the best interest of the Company and has
approved and adopted this Agreement and the Principal Stockholder has approved
and adopted this Agreement.
5. The Board of Directors of Buyer has approved and adopted this
Agreement and VIALOG has approved this Agreement as the sole stockholder of
Buyer.
1
<PAGE>
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE
1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets.
---------------------------
(a) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the BCA and the DBCL at the Effective
Time, the Buyer shall purchase and the Company shall sell, convey, transfer,
assign and deliver to Buyer the Business, including without limitation the
Assets. The Company's sale, conveyance, transfer, assignment and delivery of the
Assets shall be free and clear of all liens, encumbrances, liabilities and
obligations, except for those expressly assumed by Buyer pursuant to Section
1.3. Upon completion of the Asset Purchase, the Buyer will succeed to the
Business and thereafter do business under the name "Call Points, Inc.".
(b) The Company represents that, at a meeting duly called and
held at which a quorum was present and acting throughout, its Board of Directors
has unanimously (i) determined that this Agreement, the Asset Purchase and the
Transactions are fair to and in the best interest of the Company, (ii) approved
this Agreement, the Asset Purchase and the Transactions, which approval
satisfies in full the requirements of Applicable Law, and (iii) resolved to
recommend approval and adoption by the Stockholders of this Agreement, the Asset
Purchase and the Transactions to the extent required and in a manner permitted
by Applicable Law.
1.2 Closing. Unless this Agreement is terminated pursuant to Section 8.1
-------
and the Asset Purchase and the Transactions have been abandoned, and subject to
the satisfaction or, if possible, waiver of the conditions set forth in Article
7 other than Section 7.1(d), the closing of the Asset Purchase (the "Asset
Purchase Closing") will take place in escrow, one day prior to the Effective
Date, at the offices of Mirick, O'Connell, DeMallie & Lougee, LLP, unless
another date, time or place is agreed to in writing by the Parties to this
Agreement. Counsel for the Parties to this Agreement will hold a pre-closing two
days prior to the Effective Date at the offices of Mirick, O'Connell, DeMallie &
Lougee, LLP, for the purpose of finalizing all documents to be signed at the
Asset Purchase Closing. All certificates, legal opinions and other instruments
required to be delivered in order to satisfy the conditions to the obligations
of the Parties to effect the Asset Purchase set forth in Article 7 below shall
be delivered at the Asset Purchase Closing, and each such certificate, legal
opinion or other instrument shall, except to the extent otherwise provided in
Article 7, be dated as of the anticipated Public Offering Closing Date, which is
expected to occur five business days following the date of the Asset Purchase
Closing. All such certificates, legal opinions and other instruments shall be
held in escrow by
2
<PAGE>
Mirick, O'Connell, DeMallie & Lougee, LLP between the Asset Purchase Closing and
the Effective Time and shall be released from escrow concurrently with the
Effective Time on the Public Offering Closing Date. In the event that the
Effective Time and Public Offering Closing Date occur on a date other than the
fifth business day following the Asset Purchase Closing, all such certificates,
legal opinions and instruments shall be re-dated as of the Public Offering
Closing Date. The Company, the Principal Stockholder, VIALOG and Buyer shall use
their respective best efforts to cause each of the conditions set forth in
Article 7 reasonably capable of being satisfied prior to the Asset Purchase
Closing, including, without limitation, the conditions set forth in Sections
7.1(a), (c), (e), (f), (g) and (h) to be satisfied prior to the Asset Purchase
Closing.
1.3 Liabilities Assumed. At the Asset Purchase Closing, Buyer shall
-------------------
deliver to the Company an Assumption Agreement in the form of Exhibit 1.3
-----------
whereby Buyer assumes and agrees to pay and perform when due (subject
to the provisions of this Agreement) the Assumed Liabilities and agrees to
indemnify the Company for all amounts incurred by the Company as a result of the
Buyer's failure to pay the Assumed Liabilities when due. The Company shall
retain and the Buyer shall not assume or be obligated for the Retained
Liabilities, and the Company and the Principal Stockholder hereby jointly and
severally indemnify the Buyer against and holds it harmless from any loss, cost,
liability or expense incurred by the Buyer with respect to the Retained
Liabilities.
1.4 Transactions at the Asset Purchase Closing. At the Asset Purchase
------------------------------------------
Closing and subject to compliance or waiver of each of the conditions set
forth in Article 7:
(a) The Company shall deliver to the Buyer possession of the
Assets and the Business, free of all liens and in connection therewith duly
execute and deliver to Buyer such deeds, conveyances, bills of sale,
certificates of title, assignments, assurances and other instruments and
documents as Buyer may reasonably request in order to effect the sale,
conveyance and transfer of the Assets. Such instruments and documents shall be
sufficient to convey to Buyer, the Business and good and merchantable title to
all of the Assets.
(b) The Buyer shall execute and deliver the Assumption
Agreement.
(c) The Buyer shall pay the Purchase Price in accordance with
Section 2.3.
(d) The Buyer, the Company and the Principal Stockholder shall
have executed and delivered the Escrow Agreement.
(e) The Company shall deliver to Buyer an amendment to its
Certificate of Incorporation changing the name of the Company to a name
acceptable to Buyer and dissimilar to "Call Points, Inc." which amendment
shall be in form for filing with the Delaware Secretary of State.
(f) The Buyer shall pay the Principal Stockholder the
Noncompetition Payment.
3
<PAGE>
Each of the documents, instruments and agreements delivered at the Asset
Purchase Closing shall be held in escrow by. Mirick, O'Connell, DeMallie &
Lougee, LLP until the Effective Time. At the Effective Time, the Buyer shall pay
the Purchase Price and the Noncompetition Payment and all of said documents,
instruments and agreements shall be delivered to the appropriate parties.
1.5 Action by the Stockholders. The Company represents and warrants
--------------------------
that the Stockholders have approved this Agreement, the Asset Purchase and
the Transactions by written consent adopted in accordance with Applicable
Law and its Organizational Documents.
1.6 Effective Time. On the Public Offering Closing Date, the Parties
--------------
hereto will cause the Asset Purchase to be released from escrow at which time
the Asset Purchase shall become effective (the "Effective Time)".
1.7 Certificate of Incorporation. From and after the Effective Time,
----------------------------
the Certificate of Incorporation of the Buyer will be in the form attached as
Exhibit 1.7 until amended in accordance with Applicable Law, and the name of the
- -----------
Buyer will be Call Points, Inc. or such other name as VIALOG may elect.
1.8 By-laws. From and after the Effective Time, the by-laws of the
-------
Buyer will be in the form attached as Exhibit 1.8, until amended in accordance
-----------
with Applicable Law.
1.9 Directors and Officers. From and after the Effective Time, until
----------------------
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law the directors and
officers of the Buyer will be as determined by VIALOG acting in its capacity as
the sole stockholder of the Buyer.
1.10 Further Assurances. The Company and the Principal Stockholder,
------------------
from time to time after the Asset Purchase Closing and at Buyer's request, will
execute and deliver any such other instruments of conveyance and transfer and
take such other action as the Buyer reasonably may require more effectively to
vest title in the Buyer and to put Buyer in possession of the Business and the
Assets.
ARTICLE
2
CONSIDERATION
2.1 Consideration. Upon the terms and conditions of this Agreement,
-------------
and in reliance upon the representations, warranties, covenants and agreements
of the Company and Principal Stockholder contained herein, and in consideration
of the sale, assignment, transfer and delivery of the Assets, Buyer will:
(a) pay to the Company the purchase price of Six Million Five
Hundred Thousand Dollars ($6,500,000) (the "Purchase Price"),
4
<PAGE>
(b) assume the Assumed Liabilities, and
(c) pay to the Principal Stockholder an aggregate of One
Million Dollars ($1,000,000) (the "Noncompetition Payment") to be paid in
accordance with the terms of the noncompetition agreement to be executed by
Principal Stockholder as contemplated by Section 7.2(d).
2.2 Allocation of the Purchase Price.
--------------------------------
The Purchase Price shall be allocated among the Assets as set
forth on Exhibit 2.2. The Company and Buyer shall be bound by such allocation
-----------
for all purposes and shall account for and report the purchase and sale
contemplated hereby for all financial accounting and tax purposes in accordance
with such allocation.
2.3 Payment of Purchase Price. The Purchase Price shall be paid by
-------------------------
Buyer to the Company as follows:
(a) Six Million Dollars ($6,000,000) by wire transfer,
certified or bank check payable to the Company and delivered at the Asset
Purchase Closing, and
(b) Five Hundred Thousand Dollars ($500,000) (the "Escrowed
Funds") by wire transfer, certified or bank check payable to Messrs. Mirick,
O'Connell, DeMallie & Lougee, LLP ("Escrow Agent") for disposition in accordance
with the Escrow Agreement substantially in the form of Exhibit 2.3(b).
--------------
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Principal Stockholder jointly and severally
represent, warrant and covenant to, and agree with, VIALOG and Buyer as follows:
3.1 Organization and Business; Power and Authority; Effect of
---------------------------------------------------------
Transaction.
- -----------
(a) The Company:
(i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation as set forth in Section 3.1(a) of the
Disclosure Schedule,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties
(including the Assets) and to conduct its business as
now conducted and as presently proposed to be
conducted, and has in full force and effect all
Governmental
5
<PAGE>
Authorizations and Private Authorizations and has made
all Governmental Filings, to the extent required for
such ownership and lease of its property and conduct of
its business, and
(iii) has duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set
forth in Section 3.1(a) of the Disclosure Schedule) in
which the character of its property or the nature of
its business or operations requires such qualification
or authorization, except to the extent the failure so
to qualify or to maintain such authorizations would not
have an Adverse Effect.
(b) The Company has all requisite power and authority (corporate and
other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Asset Purchase and the Transactions. The execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action. This Agreement has been duly executed and
delivered by the Company and constitutes, and each Collateral Document executed
or required to be executed pursuant hereto or thereto or to consummate the Asset
Purchase and the Transactions, when executed and delivered by the Company or an
Affiliate of the Company will constitute, legal, valid and binding obligations
of the Company or such Affiliate, enforceable in accordance with their
respective terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement, voidable preference,
fraudulent conveyance and other similar laws relating to or affecting the rights
of creditors and except as the same may be subject to the effect of general
principles of equity. The affirmative vote or action by written consent of fifty
(50%) of the votes the holders of the outstanding shares of the Company are
entitled to cast is the only vote of the holders of any class or series of the
capital stock of the Company necessary to approve this Agreement, the Asset
Purchase and the Transactions under Applicable Law and the Company's
Organizational Documents.
(c) Except as set forth in Section 3.1(c) of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation
of, or constitute a default under, any Applicable Law
on the part of the Company or any Subsidiary or will
conflict with, or result in a breach or violation of,
or constitute a default under, or permit the
acceleration of any obligation or liability in, or but
for any requirement of giving of notice or passage of
time or both would constitute such a conflict
6
<PAGE>
with, breach or violation of, or default under, or
permit any such acceleration in, any Contractual
Obligation of the Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of
any Lien (except to the extent set forth in Section
3.1(c) of the Disclosure Schedule) upon any property
now owned or leased by the Company or any such other
party, or
(iii) will require any Governmental Authorization or
Governmental Filing or Private Authorization, except
for filing requirements under Applicable Law in
connection with the Asset Purchase and the Transactions
and as the Securities Act and applicable state
securities laws may apply to compliance by the Company
with the provisions of this Agreement relating to the
Public Offering and except pursuant to the HSR Act (if
applicable).
(d) The Company does not have any Subsidiaries other than those
listed on Section 3.1(d) of the Disclosure Schedule. Each Subsidiary so listed
is wholly-owned, is a corporation which is duly organized, validly existing and
in good standing under the laws of the respective state of incorporation set
forth opposite its name on Section 3.1(d) of the Disclosure Schedule, and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown in Section 3.1(d) of the Disclosure Schedule) in which
the character of its property or the nature of its business or operations
requires such qualification or authorization, with full power and authority
(corporate and other) to carry on the business in which it is engaged. Each
Subsidiary has in full force and effect all Governmental Authorizations and
Private Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business. The Company owns all of the outstanding capital stock (as shown on
Section 3.1(d) of the Disclosure Schedule) of each Subsidiary, free and clear of
all Liens (except to the extent set forth in Section 3.1(d) of the Disclosure
Schedule), and all such stock has been duly authorized and validly issued and is
fully paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings with respect to any of
the foregoing, of any nature whatsoever relating to the authorized and unissued
or the outstanding capital stock of any Subsidiary.
3.2 Financial and Other Information.
-------------------------------
(a) The Company has furnished to VIALOG copies of the financial
statements of the Company and its Subsidiaries listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements,
including in each case the notes thereto, have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, do not
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make any
statements contained therein not misleading, and fairly present the financial
condition and results of operations of the Company
7
<PAGE>
and its Subsidiaries, on the bases therein stated, as of the respective dates
thereof, and for the respective periods covered thereby subject, in the case of
unaudited financial statements to normal nonmaterial year-end audit adjustments
and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements, this
Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or the Principal Stockholder pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Principal Stockholder pursuant hereto or thereto or to
consummate the Asset Purchase and the Transactions, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to be stated in such document by its terms or necessary in order
to make the statements contained herein or therein not misleading and all such
Collateral Documents are and will be true, correct and complete in all material
respects; provided that:
(i) with respect to projections contained or referred to in
the Disclosure Schedule, the Company represents and
warrants only that such projections were prepared in
good faith on the basis of the past business of the
Company and other information and assumptions which the
Company and the Principal Stockholder believe to be
reasonable,
(ii) each such Collateral Document will not be deemed
misleading by virtue of the absence of factual
recitations or references not germane thereto and
necessary to the purpose thereof, and
(iii) responses to due diligence requests will not be subject
to this Section 3.2(b) except to the extent that, to
the Company's knowledge, such response is materially
misleading.
(c) The Company does not own any capital stock or equity or
proprietary interest in any other Entity or enterprise, however organized and
however such interest may be denominated or evidenced, except as set forth in
Sections 3.1(d) or 3.2(c) of the Disclosure Schedule. None of the Entities, if
any, so set forth in Section 3.2(c) of the Disclosure Schedule is a Subsidiary
of the Company except as so set forth. The Company owns all of the outstanding
capital stock or equity or proprietary interests (as shown on Section 3.2(c) of
the Disclosure Schedule) of each such Entity or other enterprise, free and clear
of all Liens (except to the extent set forth in Section 3.2(c) of the Disclosure
Schedule), and all of such stock or equity or proprietary interests have been
duly authorized and validly issued and are fully paid and non-assessable. There
are no outstanding Option Securities or Convertible Securities, or agreements or
understandings with respect to any of the foregoing, of any nature whatsoever,
except as described in Section 3.2(c) of the Disclosure Schedule.
3.3 Changes in Condition. Since the date of the most recent financial
--------------------
statements forming part of the Financial Statements, except to the extent
specifically described in Section 3.3 of the Disclosure Schedule, there has been
no Adverse Change in the Company or the
8
<PAGE>
Company and its Subsidiaries taken as a whole. There is no Event known to the
Company which Adversely Affects, or in the future might (so far as the Company
or the Principal Stockholder can now reasonably foresee) Adversely Affect, the
Company or the Company and its Subsidiaries taken as a whole, or the ability of
the Company to perform any of the obligations set forth in this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto except for changes in general economic conditions and to the extent set
forth in Section 3.3 of the Disclosure Schedule.
3.4 Liabilities. At the date of the most recent balance sheet forming
-----------
part of the Financial Statements, neither the Company nor any Subsidiary had any
obligations or liabilities, past, present or deferred, accrued or unaccrued,
fixed, absolute, contingent or other, except as disclosed in such balance sheet,
or the notes thereto, and since such date neither the Company nor any Subsidiary
has incurred any such obligations or liabilities, other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, which do not and, to the Company's
knowledge, will not, in the aggregate, Adversely Affect the Company or the
Company and its Subsidiaries taken as a whole except to the extent set forth in
Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business or as disclosed in the most recent balance sheet, or the notes thereto,
forming part of the Financial Statements or in Section 3.4 of the Disclosure
Schedule.
3.5 Title to Properties and Assets; Leases.
--------------------------------------
(a) Each of the Company and its Subsidiaries has good legal and
insurable title, with respect to all real property owned or leased (in fee
simple if owned and leasehold if leased) and marketable title if owned (in fee
simple), if any, reflected as an asset on the most recent balance sheet forming
part of the Financial Statements, or held by the Company or any of its
Subsidiaries for use in its business if not so reflected, and good indefeasible
and merchantable title to all other Assets, tangible and intangible (excluding
leased property), reflected on such balance sheet, or held by the Company or any
of its Subsidiaries for use in its business if not so reflected, or purported to
have been acquired by the Company or any of its Subsidiaries since such date,
except inventory sold or depleted, or property, plant and other equipment used
up or retired, since such date, in each case in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries, free and
clear of all Liens, except such as are reflected in the most recent balance
sheet, or the notes thereto, forming part of the Financial Statements or set
forth in Section 3.5(a) of the Disclosure Schedule. Except for financing
statements evidencing Liens referred to in the preceding sentence (a true,
correct and complete list and description of which is set forth in Section
3.5(a) of the Disclosure Schedule), to the Company's knowledge, no financing
statements under the Uniform Commercial Code and no other filing which names the
Company or any of its Subsidiaries as debtor or which covers or purports to
cover any of the Assets or property of the Company or any of its Subsidiaries is
on
9
<PAGE>
file in any state or other jurisdiction, and neither the Company nor any
Subsidiary has signed or agreed to sign any such financing statement or filing
or any agreement authorizing any secured party thereunder to file any such
financing statement or filing. Each Lease or other occupancy or other agreement
under which the Company or any of its Subsidiaries holds real or personal
property has been duly authorized, executed and delivered by the Company or
Subsidiary, as the case may be, and, to the Company's knowledge, by each of the
parties thereto. Each such Lease is a legal, valid and binding obligation of the
Company or a Subsidiary, as the case may be, and, to the Company's knowledge, of
each other party thereto, enforceable in accordance with its terms. Each of the
Company and its Subsidiaries has a valid leasehold interest in and enjoys
peaceful and undisturbed possession under all Leases pursuant to which it holds
any real property or tangible personal property, none of which contains any
provision which would impair the Company's ability to use such property as it is
currently used by the Company, except as described in Section 3.5(a) of the
Disclosure Schedule. All of such Leases are valid and subsisting and in full
force and effect. Neither the Company nor any of its Subsidiaries nor, to the
Company's or Principal Stockholder's knowledge, any other party thereto, is in
default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in any such Lease.
(b) Section 3.5(b) of the Disclosure Schedule contains a true,
correct and complete description of all real estate owned or leased by the
Company or any of its Subsidiaries and all Leases and an identification of all
material items of fixed assets and machinery and equipment. None of the fixed
assets and machinery and equipment is subject to contracts of sale, and none is
held by the Company or any of its Subsidiaries as lessee or as conditional sales
venue under any Lease or conditional sales contract and none is subject to any
title retention agreement, except as set forth in Section 3.5(b) of the
Disclosure Schedule. The real property (other than land), fixtures, fixed assets
and machinery and equipment are in a state of good repair and maintenance and
are in good operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure
Schedule:
(i) all real property owned or leased by the Company or any
of its Subsidiaries conforms to and complies with all
applicable title covenants, conditions, restrictions
and reservations and all Environmental Laws and all
applicable zoning, wetlands, land use and other
Applicable Law, and
(ii) neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any landlord, tenant or other
occupant or user of any such real property, has used
such real property for the storage or disposal of
Hazardous Materials or engaged in the business of
storing or disposing of Hazardous Materials, except for
use in the ordinary course of business of the type
conducted by the Company.
3.6 Compliance with Private Authorizations. Section 3.6 of the
--------------------------------------
Disclosure Schedule sets forth a true, correct and complete list and description
of each Private Authorization which
10
<PAGE>
individually is material to the Company or the Company and its Subsidiaries
taken as a whole, all of which are in full force and effect. Each of the Company
and each Subsidiary has obtained all Private Authorizations which are necessary
for the ownership by the Company or each Subsidiary of its properties and the
conduct of its business as now conducted or as presently proposed to be
conducted or which, if not obtained and maintained, could, singly or in the
aggregate, Adversely Affect the Company or the Company and its Subsidiaries
taken as a whole. Neither the Company nor any Subsidiary is in breach or
violation of, or is in default in the performance, observance or fulfillment of,
any Private Authorization, and no Event exists or has occurred, which
constitutes, or but for any requirement of giving of notice or passage of time
or both would constitute, such a breach, violation default, under any
Contractual Obligation or Private Authorization, except for such defaults,
breaches or violations, as do not and, to the Company's knowledge, will not have
in the aggregate any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto or to consummate the Asset
Purchase and the Transactions. No Private Authorization is the subject of any
pending or, to the Company's or Principal Stockholder's knowledge, threatened
attack, revocation or termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
--------------------------------------------------------------
(a) Section 3.7(a) of the Disclosure Schedule contains a description
of:
(i) all Legal Actions which are pending or, other than
those finally adjudicated or settled on or before
December 31, 1995, in which the Company or any of its
Subsidiaries, or any of its officers or directors, is,
or at any time since its organization has been,
engaged, or which involves, or at any time during such
period involved, the business, operations or properties
of the Company or any of its Subsidiaries or, to the
Company's knowledge, which is threatened or
contemplated against, or in any other manner relating
Adversely to, the Company or any of its Subsidiaries or
the business, operations or properties, or the officers
or directors, or any of them in connection therewith
(the "Identified Legal Actions"); and
(ii) each Governmental Authorization to which the Company or
any Subsidiary is subject and which relates to the
business, operations, properties, prospects, condition
(financial or other), or results of operations of the
Company or the Company and its Subsidiaries taken as a
whole, all of which are in full force and effect.
(b) Each of the Company and each of its Subsidiaries has obtained
all Governmental Authorizations which are necessary for the ownership or uses of
its properties and the conduct of its business as now conducted or as presently
proposed to be conducted by the Company or which, if not obtained and
maintained, could singly or in the aggregate, have any Adverse Effect on the
Company or the Company and its Subsidiaries taken as a whole. No
11
<PAGE>
Governmental Authorization is the subject of any pending or, to the Company's
knowledge, threatened attack, revocation or termination. Neither the Company nor
any Subsidiary nor any officer or director (in connection with the business,
operations and properties of the Company or any Subsidiary) is or at any time
since January 1, 1991 has been, or is or has during such time been charged with,
or to the knowledge of the Company, is threatened or under investigation with
respect to any material breach or violation of, or in default in the
performance, observance or fulfillment of, any Governmental Authorization or any
Applicable Law, and no Event exists or has occurred, which constitutes, or but
for any requirement of giving of notice or passage of time or both would
constitute, such a breach, violation or default, under
(i) any Governmental Authorization or any Applicable Law,
except for such breaches, violations or defaults as do
not and, to the Company's knowledge, will not have in
the aggregate any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or the
ability of the Company to perform any of the
obligations set forth in this Agreement or any
Collateral Document executed or required to be executed
pursuant hereto or thereto, or to consummate the Asset
Purchase and the Transactions, or
(ii) any requirement of any insurance carrier, applicable to
its business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in
Sections 3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and
matters set forth in the Disclosure Schedule, individually and in the aggregate,
if adversely determined against the Company or any Subsidiary, will not
Adversely Affect the Company or the Company and its Subsidiaries taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents or required to be executed pursuant hereto
or thereto or to consummate the Asset Purchase and the Transactions.
3.8 Intangible Assets.
-----------------
(a) Each of the Company and each Subsidiary owns or possesses or
otherwise has the right to use all Governmental Authorizations and other
Intangible Assets necessary for the present and planned future conduct of its
business, without any known conflict with the rights of others. The present and
planned future conduct of business by the Company and each Subsidiary is not
dependent upon any one or more, or all, of such Governmental Authorizations and
other Intangible Assets or rights with respect to any of the foregoing, except
as set forth in Section 3.8(a) of the Disclosure Schedule.
(b) Section 3.8(b) of the Disclosure Schedule sets forth a true,
correct and complete description of all of such Governmental Authorizations and
other Intangible Assets or rights with respect thereto, including without
limitation the nature of the Company's and each
12
<PAGE>
Subsidiary's interest in each and the extent to which the same have been duly
registered in the offices as indicated therein.
3.9 Related Transactions. Section 3.9 of the Disclosure Schedule sets
--------------------
forth a true, correct and complete description of any Contractual Obligation or
transaction, not fully discharged or consummated, as the case may be, on or
before the beginning of the Company's current fiscal year, between the Company
or any of its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services as officers, directors and employees and reimbursement
for out-of-pocket expenses reasonably incurred in support of the Company's
business), now existing or which, at any time since its organization, existed or
occurred, including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any officer, director, stockholder or
employee, or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
3.10 Insurance.
---------
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance
policies maintained by the Company or any Subsidiary and includes insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention.
(b) Neither the Company nor any Subsidiary is in breach or violation
of or in default under any such policy, and all premiums due thereon have been
paid, and each such policy or a comparable replacement policy will continue to
be in force and effect up to and including the Public Offering Closing Date. The
insurance policies so listed and identified are of a nature and scope and in
amounts sufficient to prevent the Company or any Subsidiary from becoming a
coinsurer within the terms of such policies. Except as set forth in Section
3.10(a) of the Disclosure Schedule, neither the Company nor any Subsidiary has,
within the past five (5) years, been refused insurance by any insurance carrier
to which it has applied for insurance.
3.11 Tax Matters.
-----------
(a) Each of the Company and each Subsidiary has in accordance with
all Applicable Laws filed all Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Returns and all other governmental
charges and assessments received to date. The Tax Returns of the Company and
each Subsidiary have been prepared in accordance with all Applicable Laws and
generally accepted principles applicable to taxation consistently applied.
13
<PAGE>
All Taxes which the Company and each Subsidiary are required by law to withhold
and collect have been duly withheld and collected and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. Neither
the Company nor any Subsidiary has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of the
Company or any Subsidiary for the fiscal year prior to and including the most
recent fiscal year. Adequate provision has been made on the most recent balance
sheet forming part of the Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other, and to the knowledge of the Company there are no transactions
or matters or any basis which might or could result in additional Taxes of any
nature to the Company or any Subsidiary for which an adequate reserve has not
been provided on such balance sheet. Each of the Company and each Subsidiary has
at all times been taxable as a Subchapter C corporation under the Code, except
as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. Neither
the Company nor any Subsidiary has ever been a member of any consolidated group
(other than exclusively with the Company and its Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes which
have become due pursuant to its Returns and has paid all installments (to the
extent required to avoid material underpayment penalties) of estimated Taxes due
and payable.
(c) From the end of its most recent fiscal year to the date hereof
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business with
respect to current operations or property presently owned.
(d) The information shown on the federal income Tax Returns of the
Company and its Subsidiaries (true, correct and complete copies of which have
been furnished by the Company to VIALOG) is true, correct and complete and
fairly and accurately reflects the information purported to be shown. Federal
and state income Tax Returns of the Company and its Subsidiaries have been
audited by the IRS or applicable state Authority for the taxable periods set
forth in Section 3.11(d) of the Disclosure Schedules, and neither the Company
nor any Subsidiary has been notified regarding any pending audit, except as
shown in Section 3.11(d) of the Disclosure Schedule.
(e) Neither the Company nor any Subsidiary is a party to any tax
sharing agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
3.12 Employee Retirement Income Security Act of 1974.
-----------------------------------------------
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list of
all Plans and Benefit Arrangements maintained by the Company and any of its
Subsidiaries (which for purposes of this Section 3.12 will include any ERISA
Affiliate with respect to any Plan subject to
14
<PAGE>
Title IV of ERISA). As to all such Plans and Benefit Arrangements, and except as
disclosed in such Section 3.12(a) of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply currently,
and have complied in the past, in all material respects
both as to form and operation, with their terms and
with all Applicable Laws, and neither the Company nor
any of its Subsidiaries has received any outstanding
notice from any Authority questioning or challenging
such compliance,
(ii) all necessary governmental approvals for each Plan and
Benefit Arrangement have been obtained; the Internal
Revenue Service has issued a favorable determination as
to the tax qualified status of each Plan intended to
comply with section 401(a) of the Code and each
amendment thereto, and a recognition of exemption from
federal income taxation under Section 501(a) of the
Code of each Plan which constitutes a funded welfare
plan as defined in Section 3(1) of ERISA; and nothing
has occurred since the date of each such determination
or recognition that would adversely affect such
qualification.
(iii) no Plan which is subject to Part 3 of Subtitle B of
Title 1 of ERISA or Section 412 of the Code had an
accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most
recently completed fiscal year of such Plan,
(iv) there are no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan for which the Company or any of its
Subsidiaries has any liability, nor are any of the
assets of any Plan invested in employer securities or
employer real property,
(v) no Plan is subject to Title IV of ERISA, or if subject,
there have been no "reportable events" (as described in
Section 4043 of ERISA) as to which there is any
material risk of termination of such Plan,
(vi) no material liability to the PBGC has been or is
expected by the Company to be incurred by the Company
or any of its Subsidiaries with respect to any Plan,
and there has been no event or condition which presents
a material risk of termination of any Plan by the PBGC,
15
<PAGE>
(vii) with respect to each Plan subject to Title IV of
ERISA, the amount for which Company or any of its
Subsidiaries would be liable pursuant to the
provisions of Sections 4062, 4063 or 4064 of ERISA
would be zero if such Plans terminated on the date of
this Agreement,
(viii) no notice of intent to terminate a Plan has been filed
with, nor has any Plan been terminated pursuant to the
provisions of Section 4041 of ERISA,
(ix) the PBGC has not instituted proceedings to terminate
(or appointed a trustee to administer) a Plan and no
event has occurred or condition exists which might
constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any such Plan.
(x) no Plan or Benefit Arrangement covers any employee or
former employee of the Company or any of its
Subsidiaries that could give rise to the payment of
any amount that would not be deductible pursuant to
the terms of section 280G of the Code,
(xi) there are no Claims (other than routine claims for
benefits) pending or threatened involving any Plan or
Benefit Arrangement or any of the assets thereof,
(xii) except as set forth in Section 3.12(a) of the
Disclosure Schedule (which entry, if applicable, will
indicate the present value of accumulated plan
liabilities calculated in a manner consistent with FAS
106 and the actual annual expense for such benefits
for each of the last two (2) years) and pursuant to
the provisions of COBRA, neither the Company nor any
of its Subsidiaries maintains any Plan that provides
benefits described in Section 3(1) of ERISA to any
former employees or retirees of the Company or any of
its Subsidiaries,
(xiii) all reports, returns and similar items required to be
filed with any Authority or distributed to employees
and/or Plan participants in connection with the
maintenance or operation of any Plan or Benefit
Arrangement have been duly and timely filed and
distributed, and there have been no acts or omissions
by the Company or any of its Subsidiaries, which have
given rise to or may reasonably be expected to give
rise to fines, penalties, taxes or related charges
under Sections 502(c), 502(i) or 4071 or ERISA or
Chapter 43 or section 6039D of the Code for which the
Company or any of its Subsidiaries may be liable,
16
<PAGE>
(xiv) neither the Company nor any of its Subsidiaries nor
any of its respective directors, officers or employees
has committed, nor to the best of the Company's
knowledge has any other fiduciary committed, any
breach of the fiduciary responsibility standards
imposed by ERISA that would subject the Company or any
of its Subsidiaries or any of its respective
directors, officers or employees to liability under
ERISA,
(xv) to the extent that the most recent balance sheet
forming part of the Financial Statements does not
include a pro rata amount of the contributions which
would otherwise have been made in accordance with past
practices for the Plan years which include the Public
Offering Closing Date, such amounts are set forth in
Section 3.12(a) of the Disclosure Schedule,
(xvi) the Company has furnished to VIALOG a copy of the
three most recently filed annual reports (IRS Form
5500) series and accountant's opinion, if applicable,
for each Plan (and the three most recent actuarial
valuation reports for each Plan, if any, that is
subject to Title IV of ERISA), and all information
provided by the Company to any actuary in connection
with the preparation of any such actuarial valuation
report was true, correct and complete in all material
respects,
(b) Neither the Company nor any of its Subsidiaries is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the basis
of funding, and the current status of, any past service liability with respect
to each Employment Arrangement to which the same is applicable.
3.13 Absence of Sensitive Payments. The Company has not, nor has any
-----------------------------
Subsidiary, or, to the Company's or Principal Stockholder's knowledge, any of
its or any Subsidiary's officers, directors, employees or Representatives, (i)
made any contributions, payments or gifts to or for the private use of any
governmental office, employee or agent where either the payment or the purpose
of such contribution, payment or gift is illegal under the laws of the United
States or the jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial entries
on its books, or (iii) made any payments to any person with the intention or
understanding that any part of such payment was to be used for any purpose other
than that described in the documents supporting the payment.
3.14 Inapplicability of Specified Statutes. Neither the Company nor
-------------------------------------
any Subsidiary is a "holding company", or a "subsidiary company" or an
"affiliate" or a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended, or an
17
<PAGE>
"investment company" or a company "controlled" by or acting on behalf of an
"investment company", as defined in the Investment Company Act of 1940, as
amended.
3.15 Authorized and Outstanding Capital Stock.
----------------------------------------
(a) The authorized and outstanding capital stock of the Company is
as set forth in Section 3.15(a) of the Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is fully
paid and non-assessable and is not subject to any preemptive or similar rights.
Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) there is
neither outstanding nor has the Company or any Subsidiary agreed to grant or
issue any shares of its capital stock or any Option Security or Convertible
Security, and (ii) neither the Company nor any Subsidiary is a party to or is
bound by any agreement, put or commitment pursuant to which it is obligated to
purchase, redeem or otherwise acquire any shares of capital stock or any Option
Security or Convertible Security. Between the date of this Agreement and the
Asset Purchase Closing, the Company will not, and will not permit any Subsidiary
to, issue, sell or purchase or agree to issue, sell or purchase any capital
stock or any Option Security or Convertible Security of the Company or any
Subsidiary. As of the Effective Time, the rights of the holders of all Option
Securities and Convertible Securities issued by the Company to exercise or
convert such Securities will have been terminated pursuant to the terms thereof.
(b) All of the outstanding capital stock of the Company is owned by
the Stockholders as set forth in Section 3.15(b) of the Disclosure Schedule, and
is, to the Company's knowledge, free and clear of all Liens, except as set forth
in Section 3.15(b) of the Disclosure Schedule. To the Company's and the
Principal Stockholder's knowledge, no Person, and no group of Persons acting in
concert, owns as much as five percent (5%) of the Company's outstanding Common
Stock, and the Company is not controlled by any other Person, except as set
forth in Section 3.15(b) of the Disclosure Schedule.
3.16 Employment Arrangements.
-----------------------
(a) Neither the Company nor any Subsidiary has any obligation or
liability, contingent or other, under any Employment Arrangement (whether or not
listed in Section 3.12(a) of the Disclosure Schedule), other than those listed
or described in Section 3.16(a) of the Disclosure Schedule. Neither the Company
nor any Subsidiary is now or during the past five (5) years has been subject to
or involved in or, to the Company's knowledge, threatened with any election for
the certification of a bargaining representative for any employees, petitions
therefor or other organizational activities, including but not limited to
voluntary requests for recognition as a bargaining representative, or
organizational campaigns of any nature, except as described in Section 3.16(a)
of the Disclosure Schedule. None of the employees of the Company or any
Subsidiary are now, or during the past five (5) years have been, represented by
any labor union or other employee collective bargaining organization. Neither
the Company nor any Subsidiary are parties to any labor or other collective
bargaining agreement, and there are no pending grievances, disputes or
controversies with any union or any other employee collective bargaining
organization of such employees, or, to the Company's knowledge, threats of
strikes, work stoppages or slowdowns or any pending demands for collective
bargaining by any union or other
18
<PAGE>
such organization. The Company and each Subsidiary have performed all
obligations required to be performed under all Employment Arrangements and are
not in breach or violation of or in default or arrears under any of the terms,
provisions or conditions thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, no employee will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employment Arrangement,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(c) The Company considers its and each Subsidiary's relationships
with employees to be good, and except as set forth in Section 3.16(c) of the
Disclosure Schedule, neither the Company nor any Subsidiary has experienced a
work slowdown or stoppage due to labor problems. Neither the Company nor any
Subsidiary has received notice of any claim that it has failed to comply with
any federal or state law, or is the subject of any investigation by any federal
or state agency to determine compliance with any federal or state law, relating
to the employment of labor, including any provisions relating to wages, hours,
collective bargaining, the payment of taxes, discrimination, equal employment
opportunity, employment discrimination, worker injury and/or occupational
safety, nor to the knowledge of the Company is there any basis for such a claim.
(d) Neither the Company nor any Subsidiary has conducted, and on or
prior to the Public Offering Closing Date will not conduct, a "plant closing" or
"mass layoff" of employees of the Company or any Subsidiary as defined by the
Worker Adjustment and Retraining Notification Act of 1988 ("the WARN Act"), 29
U.S.C. 2101-2109 as amended, or discharge, layoff, or reduce the hours of work,
of employees in a sufficient number or manner to trigger any state or local law
or regulation conditioning or regulating in any manner the discharge, layoff, or
reduction in hours of employees or the closing of a facility, plant, workplace,
division or department, from the date hereof or through the Public Offering
Closing Date or during the twelve-month period immediately prior thereto. The
Company's obligation to terminate all Employment Arrangements on the day of the
Asset Purchase Closing (to be effective at the Effective Time) will not
constitute a "plant closing" or "mass layoff" pursuant to the WARN Act or
otherwise trigger compliance with any state or local law or regulation.
(e) Except as set forth in Section 3.16(e) of the Disclosure
Schedule, there is no accrued vacation, sick days, personal days or other
accruals owing any employee of the Company, all of which has been accrued in the
ordinary course of the Business and consistent with the past practices of the
Company (the "Employee Accruals"). Listed on Section 3.16(e) of the Disclosure
Schedule are the Employee Accruals with regard to each Employment Arrangement
along with the aggregate of all Employee Accruals payable by the Company.
Section 3.16(e) of the Disclosure Schedule also sets forth the Company's policy
as to earning and the subsequent use or forfeiture of Employee Accruals.
19
<PAGE>
3.17 Material Agreements.
-------------------
(a) Listed on Section 3.17(a) of the Disclosure Schedule are
all Material Agreements relating to the ownership or operation of the business
and property of the Company or any Subsidiary presently held or used by the
Company or any Subsidiary or to which the Company or any Subsidiary is a party
or to which it or any or its property is subject or bound. True, complete and
correct copies of each of the Material Agreements have been furnished by the
Company to VIALOG (or true, complete and correct descriptions thereof have been
set forth in Section 3.17(a) of the Disclosure Schedule, if any such Material
Agreements are oral). All of the Material Agreements are valid, binding and
legally enforceable obligations of the parties thereto (except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of the general principles of equity),
and the Company or one of its Subsidiaries is validly and lawfully operating its
business and owning its property under each of the Material Agreements. The
Company and each Subsidiary have duly complied with all of the terms and
conditions of each Material Agreement and have not done or performed, or failed
to do or perform (and there is no pending or, to the knowledge of the Company,
threatened Claim that the Company or any Subsidiary has not complied, done and
performed or fail to do and perform) any act the effect of which would be to
invalidate or provide grounds for the other party thereto to terminate (with or
without notice, passage of time or both) such Material Agreement or impair the
rights or benefits, or increase the costs, of the Company or any Subsidiary,
under any of the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section
3.17(a) of the Disclosure Schedule calling for the delivery of goods or
merchandise or the performance of services can be satisfied or performed by the
Company or one of its Subsidiaries at margins providing an operating profit,
except as set forth in Section 3.17(b) of the Disclosure Schedule.
3.18 Ordinary Course of Business.
---------------------------
(a) The Company and each Subsidiary, from the earlier of the
date of the most recent balance sheet forming part of the Financial Statements
or December 31, 1995 to the date of this Agreement, and until the Public
Offering Closing Date, except as may be described on Section 3.18(a) of the
Disclosure Schedule or as may be required or permitted expressly by the terms of
this Agreement or as may be approved in writing by VIALOG:
(i) has operated, and will continue to operate, its
business in the normal, usual and customary manner
in the ordinary and regular course of business,
consistent with prior practice,
(ii) has not sold or otherwise disposed of, or
contracted to sell or otherwise dispose of, and
will not sell or otherwise dispose of or contract
to sell or otherwise dispose of, any of its
properties or assets, other than in the ordinary
course of business,
20
<PAGE>
(iii) except in each case in the ordinary course of
business or as detailed as transactions not in the
ordinary course in the Company's business plan set
forth as Section 3.18(a) of the Disclosure
Schedule, and except as expressly otherwise
contemplated hereby,
(A) has not incurred and will not incur any
obligations or liabilities (fixed, contingent
or other),
(B) has not entered and will not enter into any
commitments, and
(C) has not canceled and will not cancel any
debts or claims,
(iv) has not made or committed to make, and will not
make or commit to make, any additions to its
property or any purchases of machinery or
equipment, except for normal maintenance and
replacements,
(v) has not discharged or satisfied, and will not
discharge or satisfy, any Lien and has not paid
and will not pay any obligation or liability
(absolute or contingent) other than current
liabilities or obligations under contracts then
existing or thereafter entered into in the
ordinary course of business, and commitments under
Leases existing on that date or incurred since
that date in the ordinary course of business,
(vi) except in the ordinary course, has not increased
and will not increase the compensation payable or
to become payable to any of its directors,
officers, employees, advisers, consultants,
salesmen or agents or otherwise alter, modify or
change the terms of their employment or
engagement,
(vii) has not suffered any material damage, destruction
or loss (whether or not covered by insurance) or
any acquisition or taking of property by any
Authority,
(viii) has not waived, and will not waive, any rights of
material value without fair and adequate
consideration,
(ix) has not experienced any work stoppage,
(x) has not entered into, amended or terminated and
will not enter into, amend or terminate any Lease,
Governmental Authorization, Private Authorization,
Material Agreement, Employment Arrangement,
Contractual Obligation or transaction with any
Affiliate, except for terminations in the ordinary
course of business in accordance with the terms
thereof,
21
<PAGE>
(xi) has not amended or terminated and will not amend
or terminate, and has kept and will keep in full
force and effect including without limitation
renewing to the extent the same would otherwise
expire or terminate, all insurance policies and
coverage,
(xii) has not entered into, and will not enter into, any
other transaction or series of related
transactions which individually or in the
aggregate is material to the Company or the
Company and its Subsidiaries taken as a whole,
except in the ordinary course of business, and
(xiii) has not, nor has any affiliate (as defined in
Section 517.021(1) of the Florida Statutes),
transacted business with the government of Cuba or
with any person or affiliate located in Cuba.
(b) From the end of its most recent fiscal year to the date of
this Agreement, except as described in Section 3.18(b) of the Disclosure
Schedule, neither the Company nor any Subsidiary has, or on or prior to the
Public Offering Closing Date will have, declared, made or paid, or agreed to
declare, make or pay, any Distribution.
3.19 Bank Accounts, Etc. A true and correct and complete list as of
------------------
the date of this Agreement of all banks, trust companies, savings and loan
associations and brokerage firms in which the Company or any Subsidiary has an
account or a safe deposit box and the names of all Persons authorized to draw
thereon, to have access thereto, or to authorize transactions therein, the names
of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof has been previously
delivered to VIALOG.
3.20 Adverse Restrictions. Neither the Company nor any Subsidiary is a
--------------------
party to or subject to, nor is any of its property subject to, any Applicable
Law, Governmental Authorization, Contractual Obligation, Employment Arrangement,
Material Agreement or Private Authorization, or any other obligation or
restriction of any kind or character, or any aggregation thereof, which impairs
the Company's or any Subsidiary's ability to conduct its business as it is
currently being conducted or which could have any Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, except as set forth in
Section 3.20 of the Disclosure Schedule.
3.21 Broker or Finder. No Person assisted in or brought about the
----------------
negotiation of this Agreement, the Asset Purchase or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or the Principal Stockholder.
3.22 Personal Injury or Property Damage; Warranty Claims; Etc. Except
--------------------------------------------------------
as set forth in Section 3.22 of the Disclosure Schedule, neither the Company nor
any Subsidiary or any Person acting for or on behalf of the Company or any
Subsidiary including without limitation any insurance carrier, has at any time
since December 31, 1995, paid, and there is not now pending
22
<PAGE>
or, to the knowledge of the Company, threatened any Claim (or any basis for any
such Claim) relating to, any damages to any third party for injuries to Persons
or damage to property, or for breach of warranty, which, in the case of pending
or threatened Claims, if determined Adversely to the Company or any Subsidiary,
individually or in the aggregate (taking into account unasserted Claims of
similar nature), could have any Adverse Effect on the Company or the Company and
its Subsidiaries taken as a whole.
3.23 Environmental Matters.
---------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Company and each Subsidiary:
(i) is in compliance in all material respects with all
Environmental Laws and has not been notified that
it is liable or potentially liable, has not
received any request for information or other
correspondence concerning any site or facility,
and is not a "responsible party" or "potentially
responsible party" under the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980, as amended, the Resource Conservation
Recovery Act of 1976, as amended, or any similar
state law,
(ii) has not entered into or received any consent
decree, compliance order, or administrative order
relating to Environmental Requirements,
(iii) is not a party in interest or in default under any
judgment, order, writ, injunction or decree or any
final order relating to Environmental
Requirements, and
(iv) has obtained all material Governmental
Authorizations and Private Authorizations
(including without limitation all Environmental
Permits) and made all Governmental Filings which
are required to be filed by the Company and each
Subsidiary for the ownership of its property,
facilities and assets and the operation of its
businesses under all Environmental Laws, is and at
all times since its organization has been in
material compliance with the terms and conditions
of all such required Governmental and Private
Authorizations and all Environmental Requirements,
and is not the subject of or, to the Company's
knowledge, threatened with any Legal Action
involving a demand for damages or any other
potential liability with respect to violations or
breaches of any Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure
Schedule:
23
<PAGE>
(i) no spill, disposal, release, burial or placement
of Hazardous Materials in the soil, air or water
has occurred on any property or facility owned,
leased, operated or occupied by the Company or any
Subsidiary during the period that such facilities
and properties were owned, leased, operated or
occupied by it or, to the knowledge of the
Company, at any other time or at any other
facility or site to which Hazardous Materials from
or generated by the Company or any Subsidiary may
have been taken at any time in the past,
(ii) there has been no spill, disposal, release, burial
or placement of Hazardous Materials, in the soil,
air or water on any property which could
reasonably be expected to result or has resulted
in contamination of or beneath any properties or
facilities owned, leased, operated or occupied by
the Company or any Subsidiary during the period
that such facilities and properties were owned,
leased, operated or occupied by it (or, to the
knowledge of the Company, at any other time), and
(iii) no notice has been received by the Company or any
Subsidiary and no Lien has arisen on its or any
Subsidiary's properties or facilities under
Environmental Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary has any above-ground or
underground tanks on property owned, leased, operated or occupied by it for the
storage of Hazardous Materials.
(d) There has not been, and on or prior to the Public Offering
Closing Date, there will not be, any past or present Events or plans of the
Company or any Subsidiary or any of its predecessors, which, individually or in
the aggregate, constitute a breach of any Environmental Requirements or which,
individually or in the aggregate, may interfere with or prevent continued
compliance with all Environmental Requirements, or which, individually or in the
aggregate, may give rise to any common law, statutory or other legal liability,
or otherwise form the basis of any Claim, assessment or remediation cost, fine,
penalty or assessment based on or related to the transportation, transmission,
gathering, processing, distribution, use, treatment, storage, disposal or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material with respect to the Company or any
Subsidiary or any of its predecessors or its or any of their business,
operations or property which could have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary has used any Hazardous
Materials in the conduct of its business. To the extent that any Hazardous
Materials are so set forth, Section 3.23(e) of the Disclosure Schedule also sets
forth (i) a description of Hazardous Materials used, (ii) the annual volume of
each of the Hazardous Materials used, (iii) the years during which each of the
Hazardous
24
<PAGE>
Materials used occurred, and (iv) the Persons to whom such Hazardous Materials
were transferred and/or transported after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a
complete and correct description of all Hazardous Materials generated by the
Company or any Subsidiary which are not set forth in Section 3.23(e), the
approximate annual volumes of each of the Hazardous Materials, and all Persons
to whom such Hazardous Materials have been transferred and/or transported.
(g) No site assessment, audit, study, test or other
investigation has been conducted by or on behalf of the Company or any
Subsidiary, nor has the Company received any notice from any governmental
agency, or financial institution as to environmental matters at any property
owned, leased, operated or occupied by the Company or any Subsidiary, except as
set forth in Section 3.23(g) of the Disclosure Schedule.
3.24 Materiality. The matters and items excluded from the
-----------
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to be Adverse to the
Company or the Company and its Subsidiaries taken as a whole.
3.25 Solvency. As of the execution and delivery of this Agreement,
--------
the Company and the Company and its Subsidiaries taken as a whole are and, as of
the Public Offering Closing Date, will be solvent.
3.26 Acquisition of the Entire Business. The Assets to be transferred
----------------------------------
to Buyer under this Agreement comprise all the assets necessary for Buyer to
conduct the Business as presently conducted by the Company.
3.27 Compliance with Regulations Relating to Securities Credit. None
---------------------------------------------------------
of the borrowings, if any, of the Company were incurred or used for the purpose
of purchasing or carrying any security which at the date of its acquisitions
was, or any security which now is, margin stock or other margin security within
the meaning of Regulations T of the Margin Rules or a "security that is publicly
held," within the meaning of the Margin Rules, and the cash portion of the
proceeds from the consummation of the Transactions will not be used for the
purpose of purchasing or carrying any margin stock or other margin security, or
a "security that is publicly held", or any security issued by VIALOG, or in any
way which would involve the Company in any violation of the Margin Rules, and
neither the Company nor any Subsidiary owns any margin stock or other margin
security, or a "security that is publicly held", and neither the Company nor any
Subsidiary has any present intention of acquiring any margin stock or other
margin security, or any "security that is publicly held".
3.28 Certain State Statutes Inapplicable. The provisions of
-----------------------------------
applicable Alabama takeover laws, if any, will not apply to this Agreement, the
Asset Purchase or the Transactions.
25
<PAGE>
3.29 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as of a specific date, all of the
representations and warranties of the Company set forth in this Article will be
true and correct in all material respects on the Public Offering Closing Date
with the same force and effect as though made on and as of that date and those,
if any, which speak as a specific date will be true and correct in all material
respects as of such date.
3.30 Registration Statement. All information furnished by or on
----------------------
behalf of the Company or the Principal Stockholder in writing for use in the
Registration Statement and all information relating to the Company in the
Prospectus (a copy of which shall be provided by VIALOG to the Company and
Principal Stockholder for their review) is true, correct and complete and does
not contain any untrue statement of material fact or omit to state any material
fact necessary to make such statements, in the light of the circumstances in
which they were made, not misleading. In the event any such information, through
the occurrence or nonoccurrence of any event or events between the date of this
Agreement and the Public Offering Closing Date, ceases to be true, correct and
complete or contains any untrue statement of material fact or omits to state any
material fact necessary to make such statements, in the light of the
circumstances in which they were made, not misleading, the Company, and the
Principal Stockholder upon discovery thereof will provide VIALOG, in writing,
sufficient information to correct such untrue statement or omission.
3.31 Predecessor Status; etc. Set forth in Section 3.31 of the
-----------------------
Disclosure Schedule is a listing of all names of all predecessor companies of
the Company and the names of any Entities from which, since December 31, 1991,
the Company previously acquired material properties or assets. Except as
disclosed in Section 3.31 of the Disclosure Schedule, the Company has never been
a Subsidiary or division of another Entity, nor a part of an acquisition which
was later rescinded. None of the Company, the Principal Stockholder or any
Subsidiary has ever owned any capital stock of VIALOG nor, except as set forth
in Section 3.31 of the Disclosure Schedule, has there been, since December 31,
1991, any sale or spin-off of material assets by the Company or any Subsidiary
other than in the ordinary course of business.
ARTICLE
4
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL STOCKHOLDER
The Principal Stockholder represents, warrants and covenants to, and
agrees with, VIALOG as follows:
4.1 Organization. The Principal Stockholder is an Entity duly
------------
organized, validly existing and in good standing under the laws or its
jurisdiction of organization.
4.2 Power and Authority. The Principal Stockholder has adequate
-------------------
power and authority (corporate, partnership, trust or other) and all necessary
Governmental Authorizations and
26
<PAGE>
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each other Collateral Document
executed or required to be executed pursuant hereto or thereto. The execution,
delivery and performance of this Agreement and each other Collateral Document
executed or required to be executed pursuant hereto or thereto have, to the
extent applicable, been duly authorized by all requisite corporate, partnership,
trust or other action, including that, if required, of the Principal
Stockholder's stockholders.
4.3 Enforceability. This Agreement has been duly executed and
--------------
delivered by the Principal Stockholder and constitutes, and each Collateral
Document executed or required to be executed by the Principal Stockholder
pursuant hereto or thereto when executed and delivered by the Principal
Stockholder will constitute legal, valid and binding obligations of the
Principal Stockholder, enforceable in accordance with their respective terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference, fraudulent
conveyance and other similar laws relating to or affecting the rights of
creditors and except as the same may be subject to the effect of general
principles of equity.
4.4 Equity Ownership. The Principal Stockholder owns and has good
----------------
and merchantable title to more than 90% of the issued and outstanding common
stock of the Company and has the unencumbered right to vote said stock without
restriction. The Principal Stockholder owns 100% of the issued and outstanding
capital stock of the other Stockholder.
4.5 No Conflict; Required Filings and Consents. Neither the
------------------------------------------
execution and delivery of this Agreement or any Collateral Document executed or
required to be executed pursuant hereto or thereto, nor the consummation of the
Asset Purchase and the Transactions, nor compliance with the terms, conditions
and provisions hereof or thereof by the Principal Stockholder:
(a) will materially conflict with, or result in a breach or
violation of, or constitute a default under, any Applicable Law on the part of
the Principal Stockholder or will conflict with, or result in a material breach
or violation of, or constitute a material default in the performance, observance
or fulfillment of, or a material default under, or permit the acceleration of
any obligation or liability in, or but for any requirements of notice or passage
of time or both would constitute such a conflict with, breach or violation of,
or default under, or permit any such acceleration in, any Contractual Obligation
of the Principal Stockholder,
(b) will result in or permit the creation or imposition of any
Lien upon any property or asset of such Principal Stockholder used or now
contemplated to be used by the Company, or
(c) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in connection
with the Asset Purchase and the Transactions and as the Securities Act or
applicable state securities laws may apply to compliance by the Principal
Stockholder with the provisions of this Agreement relating to the Public
Offering and pursuant to the HSR Act (if applicable) or as set forth in Section
4.5 of the Disclosure Schedule.
27
<PAGE>
ARTICLE
5
REPRESENTATIONS AND WARRANTIES OF VIALOG AND BUYER
VIALOG and Buyer, jointly and severally, represent, warrant and covenant
to, and agree with, the Company as follows:
5.1 Organization and Qualification. VIALOG is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of
Massachusetts. Buyer is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware.
5.2 Power and Authority. Except for such consents of Authorities as
-------------------
may be necessary in connection with change-of-control transactions with respect
to Governmental Authorities listed in Section 3.1(c) of the Disclosure Schedule,
each of VIALOG and Buyer has all requisite power and authority (corporate and
other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed pursuant hereto or thereto and to consummate
the Asset Purchase and the Transactions. The execution, delivery and performance
of this Agreement and each Collateral Document executed or required to be
executed pursuant hereto or thereto have been duly authorized by all requisite
corporate or other action. This Agreement has been duly executed and delivered
by each of VIALOG and Buyer and constitutes, and each Collateral Document
executed or required to be executed pursuant hereto or thereto when executed and
delivered by it will constitute, legal, valid and binding obligations of VIALOG
and Buyer, respectively, enforceable in accordance with their respective terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference, fraudulent
conveyance and other similar laws relating to or affecting the rights of
creditors and except as the same may be subject to the effect of general
principles of equity.
5.3 No Conflict; Required Filings and Consents. Except for such
------------------------------------------
consents of Authorities as may be necessary in connection with change-of-control
transactions with respect to Governmental Authorities listed in Section 3.1(c)
of the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Collateral Document executed or required to be executed pursuant hereto
or thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of VIALOG and Buyer:
(a) will conflict with, or result in a breach or violation of,
or constitute a default under, any Applicable Law on the part of VIALOG or Buyer
or will conflict with, or result in a breach or violation of, or constitute a
default under, or permit the acceleration of any obligation or liability in, or
but for any requirement of giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default under, or
permit any such acceleration in, any Contractual Obligation of VIALOG or Buyer,
or
28
<PAGE>
(b) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements under Applicable
Law in connection with the Asset Purchase and the Transactions and as the
Securities Act and applicable state securities laws may apply to compliance by
VIALOG with the provisions of this Agreement relating to the Public Offering and
except pursuant to the HSR Act (if applicable).
5.4 Financing. VIALOG has or, upon consummation of the Public
---------
Offering, will have sufficient funds or available financing to enable the Buyer
to pay the Purchase Price and Noncompetition Payment for the Assets as provided
in Sections 2.1 and all fees and expenses related to the Asset Purchase and its
obligations in connection with the Public Offering.
5.5 Broker and Finder. Except for the Underwriter, the fees and
-----------------
expenses of which (other than pursuant to the Underwriting Agreement) are solely
the responsibility of VIALOG, no Person assisted in or brought about the
negotiation of this Agreement or the subject matter of the Transactions in the
capacity of broker, agent or finder or in any similar capacity on behalf of
VIALOG or Buyer.
5.6 Prior Activities of VIALOG or Buyer. Neither VIALOG nor Buyer
-----------------------------------
has incurred any liabilities or Contractual Obligations, except those incurred
in connection with its organization and ordinary course business operations
(including Employment Arrangements), the negotiation of this Agreement and the
performance of this Agreement and of the Participating Agreements with the Other
Participating Companies, the registration of VIALOG Stock under the Securities
Act, compliance with the requirements of the HSR Act (if applicable) and the
performance of all other Governmental Filings, and the financing of the
foregoing. Except as contemplated by the foregoing, neither VIALOG nor Buyer has
engaged in any business activities of any type or kind whatsoever, nor entered
into any agreements or arrangements with any Person, nor is it subject to or
bound by any obligation or undertaking.
5.7 Capitalization of VIALOG and Buyer. The authorized and
----------------------------------
outstanding capital stock of each of VIALOG and Buyer is as set forth in Section
5.7 of the Disclosure Schedule. All of such outstanding capital stock has been
duly authorized and validly issued, is fully paid and non-assessable and is not
subject to any preemptive or similar rights. All shares of common stock of Buyer
held by VIALOG have been duly authorized and validly issued to VIALOG and are
fully paid and non-assessable and are not subject to any preemptive or similar
rights. As of the date of this Agreement, except for this Agreement, the
Participating Agreements, the Underwriting Agreement, and as set forth on
Section 5.7 of the Disclosure Schedule, there are not any outstanding or
authorized subscriptions, options, warrants, calls, rights, commitments or any
other agreements of any character obligating VIALOG or Buyer to issue any shares
of VIALOG Stock or other shares of capital stock of VIALOG or of Buyer, or any
other securities convertible into or evidencing the right to subscribe for any
such shares.
5.8 Registration Statement. The Registration Statement and any
----------------------
amendments thereto will comply when the Registration Statement becomes effective
in all material respects with the provisions of the Securities Act and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
29
<PAGE>
therein not misleading. The Prospectus will not as of the issue date thereof
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this Section 5.8 will not apply to
statements or omissions in the Registration Statement or the Prospectus based on
information relating to the Underwriter furnished to VIALOG in writing by the
Underwriter, or based on information relating to any of the Other Participating
Companies or its stockholders furnished to VIALOG in writing by such
Participating Company or any or its stockholders, or the Company or the
Stockholders furnished to VIALOG in writing by the Company or the Stockholders.
VIALOG will furnish the Company with a copy of the Registration Statement and of
each amendment thereto until the Asset Purchase Closing and thereafter will
furnish the Principal Stockholder with each amendment thereto and the final
Prospectus.
5.9 Solvency. After the Effective Time, and upon the consummation of
--------
the Asset Purchase, the Participating Mergers and the Transactions, VIALOG and
its subsidiaries, individually and taken as a whole, will be solvent.
5.10 Firm Commitment. The contemplated Public Offering shall be a
---------------
firm commitment underwriting and not a best efforts underwriting and all VIALOG
Stock sold in the offering will be purchased by the Underwriter on the Effective
Date and paid for by the Underwriter on the Public Offering Closing Date.
5.11 Participating Agreements of Other Participating Companies.
---------------------------------------------------------
Except as set forth in Section 5.11 of the Disclosure Schedule or as dictated by
the structuring of any transaction with a Participating Company as a merger or
sale of stock rather than a sale of assets or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, each Participating Agreement
entered into among VIALOG, any Subsidiary of VIALOG, and any Other Participating
Company contains provisions substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement, including,
without limitation, the representations and warranties, covenants, termination
provisions and indemnification provisions contained in those Articles. Except as
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a merger of sale
of stock rather than a sale of assets or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, no Participating Agreement
contains any material provision which is not contained in substantially
identical form in this Agreement.
5.12 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as a specific date, all of the
representations and warranties of VIALOG and the Buyer set forth in this Article
will be true and correct in all material respects on the Public Offering Closing
Date with the same force and effect as though made on and as of that date, and
those, if any, which speak as of a specific date will be true and correct in all
material respects as of such date.
30
<PAGE>
ARTICLE
6
ADDITIONAL COVENANTS
6.1 Access to Information; Confidentiality.
--------------------------------------
(a) The Company will afford to VIALOG and the
Representatives of VIALOG full access during normal business hours throughout
the period prior to the Effective Time to all of its (and its Subsidiaries')
properties, books, contracts, commitments and records (including without
limitation Tax Returns) and, during such period, will furnish promptly upon
request (i) a copy of each report, schedule and other document filed or received
by any of them pursuant to the requirements of any Applicable Law (including
without limitation federal or state securities laws) or filed by any of them
with any Authority in connection with the Transactions or which may have a
material effect on their respective businesses, operations, properties,
prospects, personnel, condition (financial or other), or results of operations,
(ii) to the extent not provided for pursuant to the preceding clause, (A) all
financial records, ledgers, workpapers and other sources of financial
information processed or controlled by the Company or its accountants deemed by
the Accountants necessary or useful for the purpose of performing an audit of
the Company and the Company and its Subsidiaries taken as a whole and certifying
financial statements and financial information and (B) all other information
relating to the Company, its Subsidiaries and Stockholders that VIALOG or its
Representatives requires, in either case for inclusion in or in support of the
Registration Statement, and (iii) such other information concerning any of the
foregoing as VIALOG will reasonably request. Subject to the terms and conditions
of the Confidentiality Letter (as defined below), which are expressly
incorporated in this Agreement by reference for the benefit of the parties
hereto, VIALOG will hold and will use commercially reasonable efforts to cause
the Representatives of VIALOG to hold, and the Company will hold and will use
commercially reasonable efforts to cause the Representatives of the Company to
hold, in strict confidence all non-public documents and information furnished
(whether prior or subsequent hereto) to VIALOG or to the Company, as the case
may be, in connection with the Transactions.
(b) Subject to the terms and conditions of the
Confidentiality Letter, VIALOG and the Company may disclose such information as
may be necessary in connection with seeking all Governmental and Private
Authorizations or that is required by Applicable Law to be disclosed. In the
event that this Agreement is terminated in accordance with its terms, VIALOG and
the Company will each promptly redeliver all non-public written material
provided pursuant to this Section or any other provision of this Agreement or
otherwise in connection with the Asset Purchase and the Transactions and will
not retain any copies, extracts or other reproductions in whole or in part of
such written material other than one copy thereof which will be delivered to
independent counsel for such party.
(c) The Company and VIALOG acknowledge that the Company and
VIALOG executed a Second Confidential Disclosure Agreement dated as of June 30,
1996 (the
31
<PAGE>
"Confidentiality Letter"), which separately and as incorporated in this
Agreement will remain in full force and effect after and notwithstanding the
execution and delivery of this Agreement, and that information obtained from the
Company by VIALOG, or its Representatives or by the Company or its
Representatives from VIALOG pursuant to Section 6.1(a), the Confidentiality
Letter or otherwise will be subject to the provisions of the Confidentiality
Letter.
(d) No investigation pursuant to this Section 6.1 will
affect any representation or warranty in this Agreement of any party or any
condition to the obligations of the parties.
6.2 Agreement to Cooperate.
----------------------
(a) Each of the Parties will use commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under Applicable Law to
consummate the Asset Purchase and make effective the Transactions, including
using commercially reasonable efforts (i) to prepare and file with the
applicable Authorities as promptly as practicable after the execution of this
Agreement all requisite applications and amendments thereto, together with
related information, data and exhibits, necessary to request issuance of orders
approving the Asset Purchase and the Transactions by all such applicable
Authorities, each of which must be obtained or become final in order to satisfy
the conditions applicable to it set forth in Section 7; (ii) to obtain all
necessary or appropriate waivers, consents and approvals, (iii) to effect all
necessary registration, filings and submissions (including without limitation
the Registration Statement, other filings under the Securities Act or the HSR
Act and any other submissions requested by the SEC or the Federal Trade
Commission or Department of Justice) and (iv) to lift any injunction or other
legal bar to the Asset Purchase and the Transactions (and, in such case, to
proceed with the Asset Purchase and the Transactions as expeditiously as
possible), subject, however, to the requisite votes of the Stockholders. Each of
the Parties recognizes that the consummation of the Asset Purchase and the
Transactions may be subject to the pre-merger notification requirements of the
HSR Act. Each agrees that, to the extent required by Applicable Law to
consummate the Asset Purchase, it will file with the Antitrust Division of the
Department of Justice and the Federal Trade Commission a Notification and Report
Form in a manner so as to constitute substantial compliance with the
notification requirements of the HSR Act. Each covenants and agrees to use
commercially reasonable efforts to achieve the prompt termination or expiration
of any waiting period or any extensions thereof under the HSR Act.
(b) Each of the Parties agrees to take such actions as may
be necessary to obtain any Governmental Authorizations legally required for the
consummation of the Asset Purchase and the Transactions, including the making of
any Governmental Filings, publications and requests for extensions and waivers.
(c) The Company will use commercially reasonable efforts on
or prior to the Public Offering Closing Date (i) to obtain the satisfaction of
the conditions specified in Sections 7.1 and 7.2; (ii) if requested by VIALOG,
to seek the consents (to the extent required) to the assumption by Buyer of all
long-term debt of each of the Company and each of its Subsidiaries; and (iii) to
attempt to cause those key employees of the Company and its
32
<PAGE>
Subsidiaries designated by VIALOG that are not stockholders to execute and
deliver non-competition agreements substantially conforming in form and
substance to the non-competition agreements currently maintained by VIALOG with
its key employees in the form attached as Exhibit 6.2(c). Each of VIALOG and
--------------
Buyer will use its best efforts on or prior to the Public Offering Closing Date
to obtain the satisfaction of the conditions applicable to it specified in
Sections 7.1 and 7.3. The Principal Stockholder will use commercially reasonable
efforts to obtain the satisfaction of the conditions applicable to the Principal
Stockholder in Section 7.2.
(d) The Company agrees that, except as set forth in Section
3.19 of the Disclosure Schedule, prior to the Public Offering Closing Date it
will not make or permit to be made any material change affecting any bank, trust
company, savings and loan association, brokerage firm or safe deposit box or in
the names of the Persons authorized to draw thereon, to have access thereto or
to authorize transactions therein or in such powers of attorney, or open any
additional accounts or boxes or grant any additional powers of attorney, without
in each case obtaining the prior written consent of VIALOG, which consent VIALOG
will not unreasonably withhold.
(e) The Company will take such steps as are necessary and
appropriate to obtain, and will promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.15(b) of the Disclosure Schedule.
6.3 Assignment of Contracts and Rights. Anything in this Agreement
----------------------------------
to the contrary notwithstanding, this Agreement will not constitute an agreement
to assign any Claim, Contractual Obligation, Governmental Authorization, Lease,
Private Authorization, commitment, sales, service or purchase order, or any
claim, right or benefit arising thereunder or resulting therefrom, if the Asset
Purchase or the Transactions would be deemed an attempted assignment thereof
without the required consent of a third party thereto and would constitute a
breach thereof or in any way affect the rights of VIALOG, Buyer or the Company
thereunder. If such consent is not obtained, or if consummation of the Asset
Purchase and the Transactions would affect the rights of the Company thereunder
so that the Buyer would not in fact receive all such rights, the Company will
cooperate with VIALOG in any arrangement designed to provide for the benefits
thereof to the Buyer, including subcontracting, sub-licensing or subleasing to
the Buyer or enforcement for the benefit of the Buyer of any and all rights of
the Company or its Subsidiaries against a third party thereto arising out of the
breach or cancellation by such third party or otherwise. Any assumption by the
Buyer of the Company's rights thereunder by operation of law in connection with
the Asset Purchase which will require the consent or approval of any third party
will be made subject to such consent or approval being obtained.
6.4 Maintenance of Corporate Existence. Subsequent to the Effective
----------------------------------
Time the Company will and the Principal Stockholder will cause the Company to
maintain its corporate existence and good standing until (a) all of the Escrowed
Funds have been paid to the Company; and (b) all of the Identified Legal Actions
have been settled or finally adjudicated.
33
<PAGE>
6.5 Conduct of Business.
-------------------
(a) Prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated, the Company and its Subsidiaries will (i) use
their best efforts to preserve intact their respective business organizations
and good will, keep available the services of their respective officers and
employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them, (ii)
confer on a regular and frequent basis with one or more representatives of
VIALOG to report operational matters of Materiality and the general status of
ongoing operations, and (iii) notify VIALOG of any emergency or other change in
the normal course of their business and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be Material to the business, operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
(b) Except as set forth in Schedule 6.5(b) (or Section 6.5(b) of
the Disclosure Schedule, as the case may be) or with the written permission of
VIALOG, the Company agrees further that the Company (i) will not make, declare
or pay any dividends or other distributions on its shares or the stock of the
Company's Subsidiaries or redeem or repurchase or otherwise acquire any such
shares (except cancellation of options and warrants as required in this
Agreement), (ii) will not enter into or terminate any Employment Arrangement
with any director or officer, (iii) will not incur any obligation or liability
(absolute or contingent), except current liabilities incurred, and obligations
under contracts entered into, in the ordinary course of business (iv) will not
discharge or satisfy any Lien or Encumbrance or pay any obligation or liability
(absolute or contingent) other than current liabilities shown on its Financial
Statements, and current liabilities incurred since those dates in the ordinary
course of business, (v) will not mortgage, pledge, create a security interest
in, or subject to Lien or other Encumbrance any of its assets, tangible or
intangible, (vi) will not sell or transfer any of its tangible assets or cancel
any debts or claims except in each case in the ordinary course of business,
(vii) will not sell, assign, or transfer any trademark, trade name, patent, or
other Intangible Asset, (viii) will not waive any right of any substantial
value, (ix) will not make any material change in the tax procedures or practices
followed by the Company or any of its Subsidiaries, (x) will not make any change
in credit terms offered by the Company or any of its Subsidiaries, (xi) will not
make any capital expenditure or Material Commitment for any additions or
improvements to its or any of its Subsidiary's property, plant or equipment,
(xii) will not amend its capitalization, or issue any stocks, bonds or other
securities, except that the Company may issue shares pursuant to outstanding
Option Securities and Convertible Securities, (xiii) will not enter into, modify
or extend, or promise any bonus or incentive compensation program that was not
in place prior to June 1, 1996 and (xiv) will otherwise conduct its operation
and the operations of its Subsidiaries according to their ordinary and usual
course of business.
6.6 No Solicitation. The Company will not, nor will it permit any
---------------
Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquires or the making of any proposal with respect to an Other Transaction,
34
<PAGE>
engage in any discussions or negotiations concerning, or provide to any other
person any information or data relating to it or any Subsidiary for the purposes
of, or otherwise cooperate in any way with or assist or participate in, or
facilitate any inquires or the making of any proposal which constitutes, or may
reasonably be expected to lead to, a proposal to seek or effect an Other
Transaction, or agree to or endorse any Other Transaction. Nothing contained in
this Section will prohibit the Company or its Board of Directors from making any
disclosure to Stockholders that, in the reasonable judgment of its Board of
Directors in accordance with, and based upon the written advice of outside
counsel, is required under Applicable Law. The Company will promptly advise
VIALOG of, and communicate the material terms of, any proposal it may receive,
or any inquires it receives which may reasonably be expected to lead to such a
proposal relating to an Other Transaction, and the identity of the Person making
it. The Company will further advise VIALOG of the status and changes in the
material terms of any such proposal or inquiry (or any amendment to any of
them). During the term of this Agreement, the Company will not enter into any
agreement oral or written, and whether or not legally binding, with any Person
that provides for, or in any way facilitates, an Other Transaction, or affects
any other obligation of the Company under this Agreement.
6.7 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) From and after the Effective Time, the Buyer will indemnify,
defend and hold harmless the present and former officers and directors of the
Company for all amounts incurred by the Company as a result of the Buyer's
failure to pay the Assumed Liabilities when due.
(b) This Section 6.7 is intended to be for the benefit of, and will
be enforceable by, the former officers and directors of the Company, their heirs
and personal representatives and will be binding on the Buyer and its respective
successors and assigns.
(c) VIALOG will apply for directors and officers insurance in the
amount of $2,000,000 for the benefit of the directors and officers of VIALOG and
the Buyer.
6.8 Notification of Certain Matters. The Company and the Principal
-------------------------------
Stockholder will give prompt notice to VIALOG, and VIALOG will give prompt
notice to the Company and the Principal Stockholder, of (a) the occurrence or
non-occurrence of any Event the occurrence or non-occurrence of which would be
likely to cause in any material respect (i) any representation or warranty of
the Company, the Principal Stockholder or VIALOG, as the case may be, contained
in this Agreement to be untrue or inaccurate, or (ii) in the case of the Company
or the Principal Stockholder, any change to be made in the Disclosure Schedule
and (b) any failure of the Company, the Principal Stockholder or VIALOG, as the
case may be, to comply with or satisfy, or be able to comply with or satisfy,
any material covenant, condition or agreement to be complied with or satisfied
by it under this Agreement. The delivery of any notice pursuant to this Section
6.8 will not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
6.9 Public Announcements. Until the Asset Purchase Closing, or in the
--------------------
event of termination of this Agreement, the closing of the Public Offering (or
its abandonment), the
35
<PAGE>
Company and the Principal Stockholder will consult with VIALOG before issuing
any press release or otherwise making any public statements with respect to this
Agreement, the Asset Purchase or any Transaction (including the Participating
Mergers or the termination of this Agreement in such event) and will not issue
any such press release or make any such public statement without the prior
consent of VIALOG and the written advice of legal counsel to VIALOG that such
press release or such public statement will not affect the registration of
VIALOG Stock under the Securities Act or the timing of the effectiveness
thereof. The Company and the Principal Stockholder acknowledge and agree that
VIALOG may, without the prior consent of the Company and the Principal
Stockholder, issue such press release or make such public statement as may be
required by Applicable Law or any listing agreement or arrangement to which
VIALOG is a party with a national securities exchange or the National
Association of Securities Dealers, Inc. Automated Quotation System, or as
recommended by outside counsel. VIALOG will exercise commercially reasonable
efforts to furnish the Company and the Principal Stockholder a copy of any press
release relating to Other Participating Companies prior to its publication and
will furnish a copy of any such press release so issued as soon as practicable
after its publication, but any failure on VIALOG's part to do so will not be
deemed a breach of or default under this Agreement. VIALOG will furnish the
Company with a copy of any press release or public information of VIALOG, at a
reasonable time prior to its release for publication.
6.10 Conveyance Taxes. The Parties will cooperate with one another in the
----------------
preparation, execution and filing of all Returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.
6.11 Obligations of VIALOG. VIALOG agrees to take all action necessary to
---------------------
cause the Buyer to perform after the Effective Time its obligations under this
Agreement and will use commercially reasonable efforts to consummate the Asset
Purchase on the terms and conditions set forth in this Agreement.
6.12 Employee Benefits; Severance Policy. VIALOG will cause the Buyer to
-----------------------------------
implement as of the Asset Purchase Closing and to continue through its fiscal
year ending December 31, 1997:
(a) employee incentive compensation and fringe benefits that are
substantially equivalent to those provided to employees of the Company and its
Subsidiaries as in effect on the date of this Agreement, subject to the right of
VIALOG and the Buyer to amend or terminate such programs in accordance with
their terms, provided that after any such amendment or termination the resulting
programs are substantially equivalent to the existing programs, and
(b) employee severance pay and benefits that are substantially
equivalent to the applicable severance programs of the Company and its
Subsidiaries as in effect on the date hereof, subject to the right of VIALOG and
the Buyer to amend or terminate such programs in
36
<PAGE>
accordance with their terms, provided that after any such amendment or
termination, the resulting programs continue are substantially equivalent to the
existing programs.
Notwithstanding the foregoing, as soon as convenient after such period, the
Buyer may, in its sole discretion, substitute employee compensation, benefit and
severance programs for those of the Company as are consistent with the programs
provided to VIALOG's employees and the employees of VIALOG's Subsidiaries.
6.13 Certain Actions Concerning Business Combinations.
------------------------------------------------
(a) Neither the Principal Stockholder nor any Representative
thereof will, during the period commencing on the date of the filing of the
Registration Statement and ending with the earlier to occur of the Asset
Purchase Closing or the termination of this Agreement in accordance with its
terms, directly or indirectly (i) solicit or initiate the submission of
proposals or offers from any Person or, (ii) participate in any discussions
pertaining to, or (iii) furnish any information to any Person other than VIALOG
relating to, any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, the Company or a merger, consolidation or
business combination of the Company or any Subsidiary (other than the Asset
Purchase).
(b) The Company and the Principal Stockholder will not apply, and
will not take any action resulting in the application of, or otherwise elect to
apply, the provisions of applicable Alabama takeover laws, if any, with respect
to or as a result of the Asset Purchase or the Transactions.
6.14 [This Section intentionally left blank]
6.15 Tax Returns. The Principal Stockholder will cause all Tax Returns of
-----------
the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared and filed in a manner consistent with
past practices of the Company. At least thirty days before the due date
(including any extensions) for any such Tax Returns, the Principal Stockholder
or the Company will provide drafts of such Tax Returns to VIALOG for its review
and comment (which reasonable comments will be incorporated into the final Tax
Returns), and VIALOG will cooperate with the Principal Stockholder and provide
the Principal Stockholder with access to any books and records reasonably
necessary for their preparation of such draft Tax Returns.
6.16 Noncompetition. On or before the Asset Purchase Closing, the Company
--------------
and the Principal Stockholder will execute and deliver to VIALOG the
noncompetition agreement contemplated by Section 7.2(d) to be effective as of
the Public Offering Closing Date. From and after the Public Offering Closing
Date, neither the Company nor the Principal Stockholder will compete with VIALOG
or any of its Subsidiaries except to the extent not prohibited by Exhibit
-------
7.2(d).
- -------
37
<PAGE>
6.17 Distributions, Liabilities, Etc.
--------------------------------
(a) The Company and VIALOG acknowledge and agree that the Company
contemplates that (i) prior to the Asset Purchase Closing it will make certain
Distributions to the Stockholders, employees of and consultants to the Company,
(ii) no later than Asset Purchase Closing, it will cause certain Liens to be
discharged in their entirety (with financing statement terminations properly
recorded), and (iii) as of Asset Purchase Closing, it will indemnify VIALOG for
all Retained Liabilities. Schedule 6.17 (or Section 6.17 of the Disclosure
Schedule, as the case may be) lists each such Distribution and Lien;
(b) The Company agrees that Distributions not permitted pursuant to
Section 3.18 will be made by the Company only to the extent provided in Schedule
6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be);
(c) Although the Company may distribute some or all of the Purchase
Price solely to the Principal Stockholder and the Principal Stockholder may
further distribute the same to its wholly owned subsidiaries, the Principal
Stockholder agrees not to otherwise distribute to its stockholders any portion
of the Purchase Price until (i) all of the Escrowed Funds have been paid to the
Company; and (ii) all of the Identified Legal Actions have been settled or
finally adjudicated; and
(d) The Company further agrees that, notwithstanding anything to the
contrary in Section 10.1, it will indemnify VIALOG and Buyer against all Claims
and Expenses incurred by VIALOG and Buyer (or either of them) by virtue of any
failure on the Company's part to secure the discharges from Liens contemplated
by Schedule 6.17 or any damage or harm attributable to a Retained Liability to
be indemnified against hereunder.
6.18 Release from Guarantees. On or prior to the Public Offering Closing
-----------------------
Date, VIALOG will either obtain releases of the guarantees of the Stockholders
of the Assumed Liabilities or discharge or arrange for the discharge of such
Assumed Liabilities. VIALOG will either obtain releases of the guarantees of the
Stockholders of Contractual Obligations assumed by Buyer and which extend beyond
the Public Offering Closing Date or indemnify and hold the Stockholders harmless
from such guarantees.
6.19 No Significant Changes VIALOG agrees that there will be no
----------------------
"significant change" (as defined below) in the conduct of the Business for a
period of one year after the Public Offering Closing Date without the approval
of the Principal Stockholder. "Significant change" means, a physical merging of
the Company's operations with another operation, any change in the position of
those employees who receive employment agreements pursuant to Section 7.2(s), or
a reduction in force or the termination of any employee except as related to
employee performance or the contemplated reorganization of the combined
sales/marketing staff or the accounting function.
38
<PAGE>
6.20 Registration Statement.
----------------------
(a) The Company and the Principal Stockholder will furnish to VIALOG
all necessary information concerning the Company and the Principal Stockholder
for VIALOG to file the Registration Statement.
(b) The Company and the Principal Stockholder have reviewed or have
had reviewed on their behalf, and will be familiar with the information
concerning the Company and the Stockholders (or any of them) in the Prospectus
and will have no knowledge of any material fact, condition or information
concerning the Company and the Stockholders misstated or not disclosed in such
Prospectus.
(c) VIALOG agrees to use its best efforts to prepare and file the
Registration Statement prior to March 15, 1997 and furnish to the Company and
the Principal Stockholder a copy of information concerning the Company and the
Stockholders included therein and each amendment thereto two business days prior
to such filing date.
6.21 Self Dealing. VIALOG agrees that it will not and will not allow any
------------
Subsidiary to enter into contracts and business arrangements with Persons and
Entities owned in whole or in part by officers and directors of VIALOG or any
Subsidiary except on an arms length basis and with the approval of the VIALOG
Board of Directors.
ARTICLE
7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Asset Purchase.
--------------------------------------------------------------------
The respective obligations of each Party to effect the Asset Purchase will be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) This Agreement, the Asset Purchase and the Transactions shall
have been approved and adopted in accordance with the BCA by the affirmative
vote, or to the extent permitted by Applicable Law, by written consent, of the
Stockholders holding at least the minimum number of shares of the Company stock
then issued and outstanding as are required by Applicable Law and the Company's
Organizational Documents for such approval and adoption,
(b) No proceeding before any Authority or Claim by any Person shall
be pending, challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation of the
Asset Purchase or the Public Offering, or seeking material damages or imposing
any Adverse conditions in connection therewith,
(c) All authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, submissions, registrations, notices or
declarations required to be made,
39
<PAGE>
by VIALOG or Buyer and the Company prior to the consummation of the Asset
Purchase and the Transactions shall have been obtained from, and made with, all
required Authorities, except for such authorizations, consents, waivers, orders,
approvals, filings, registrations, notices or declarations the failure to obtain
or make would not, assuming consummation of the Asset Purchase, have an Adverse
Effect on the Company and the Company and its Subsidiaries taken as a whole,
(d) (i) The Registration Statement shall have become effective and
shall contain no untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the shares of VIALOG Stock offered in the Public
Offering shall have been sold and purchased subject only to consummation of the
Asset Purchase, the Participating Mergers and the Transactions, (iii) every
condition to closing the Public Offering (except as provided in clause (iv)
immediately succeeding) shall have been satisfied or properly waived and (iv)
release of the closing documents relating to the Public Offering and
distribution of the proceeds of the sale of all shares of VIALOG Stock sold and
purchased in the Public Offering shall have been unconditionally authorized by
the Underwriter upon consummation of the Asset Purchase and the Participating
Mergers,
(e) The minimum number of Participating Mergers required to prevent
termination pursuant to Section 8.1(b)(ii) of this Agreement shall have been
authorized and approved in accordance with Applicable Law and the Organizational
Documents of the Other Participating Companies, in the case of the Participating
Mergers,
(f) Subject to such material amendments, if any, as shall be
proposed prior to Asset Purchase Closing by VIALOG to be effective immediately
after Asset Purchase Closing, and to the extent reasonably satisfactory to the
Company and the Other Participating Companies, the VIALOG stock option plan
described in the Registration Statement shall have been approved and adopted by
all action (corporate and other) required for implementation thereof, and
(g) Each of the Persons named on Exhibit 7.1(g), including one
--------------
Person proposed by a majority of the chief executive officers of the Company and
the Other Participating Companies acting as a group, shall have been elected a
director of VIALOG, effective immediately after the Public Offering Closing
Date, and all together shall constitute the entire Board of Directors of VIALOG,
each to serve until the election of the successor to, or the earlier resignation
or termination of, such director.
(h) The Buyer shall have entered into an amendment with the
Principal Stockholder of that certain lease for the property located at 1500
Hunter Loop Road, Montgomery, Alabama which amendment shall, among other things,
(i) allow Buyer to terminate the lease upon sixty (60) days notice, and (ii)
allow the Principal Stockholder and its Subsidiaries to locate telephone
switching equipment and related fiberoptic cable termination in an area not to
exceed one hundred square feet for so long as Buyer occupies the facility but at
the sole risk of Principal Stockholder and its Subsidiaries.
40
<PAGE>
7.2 Conditions to Obligations of VIALOG and Buyer. The obligations of
---------------------------------------------
VIALOG and Buyer to effect the Asset Purchase will be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) The Company shall have complied in all material respects with
its agreements contained in this Agreement, the certificates to be furnished to
VIALOG pursuant to this Section shall be true, correct and complete, all
Collateral Documents shall be reasonably satisfactory in form, scope and
substance to VIALOG and its counsel, and VIALOG and its counsel shall have
received all information and copies of all documents, including records of
corporate proceedings, which they may reasonably request in connection
therewith, such documents where appropriate to be certified by proper corporate
officers,
(b) The Company shall have furnished VIALOG and the Underwriters
with the favorable opinion, dated the Public Offering Closing Date of Sirote &
Permutt, P.C., which may contain limitations and qualifications as to scope and
law and rely on certifications as to facts of officers of the Company and public
officials as are reasonable and customary to opinions delivered in the type of
business transactions covered by this Agreement, that shall address the
following:
(i) Due organization, valid existence and good standing of
the Stockholders, the Company and each Subsidiary of
the Company, together with an opinion as to foreign
qualifications,
(ii) Requisite corporate power and authority and all, to
such counsel's knowledge, necessary Governmental
Authorizations for the Company and each Subsidiary to
own, lease and operate its properties and to carry on
its business as it is now being conducted,
(iii) In respect of the Company and each Subsidiary, the
number of shares of capital stock or other voting
securities authorized, issued, reserved for issuance or
outstanding as of the date of this Agreement and the
Effective Time and number of Option Securities and
amount of Convertible Securities outstanding as of such
dates,
(iv) Due authorization, valid issuance, full payment and
non-assessability of outstanding shares of capital
stock of the Company and each Subsidiary and (upon
issuance on the terms and conditions specified in the
Option Securities and Convertible Securities pursuant
to which they are issuable) all shares of such capital
stock subject to issuance and absence of preemptive
rights with respect thereto,
(v) To the knowledge of counsel, (A) there are not
Contractual Obligations to repurchase, redeem or
otherwise acquire any shares of Company stock or any
stock of any Subsidiary, or any Option
41
<PAGE>
Securities and Convertible Securities, (B) the Asset
Purchase will not cause an acceleration of the exercise
or vesting schedule of any Option Securities and
Convertible Securities and (C) all outstanding shares
of stock of each Subsidiary are owned by the Company or
by another Subsidiary, free and clear of any Lien
(except as set forth in Section 3.1(d) of the
Disclosure Schedule),
(vi) Corporate power and authority of the Company and the
Principal Stockholder to execute and deliver the
Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Asset Purchase, to perform their
obligations thereunder and to consummate the Asset
Purchase,
(vii) Due and valid authorization by the Company and the
Stockholders by all necessary corporate (and other)
action of the execution, delivery and performance of
the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Asset Purchase and the consummation by
the Company of the Asset Purchase,
(viii) Due authorization and valid execution and delivery by,
and enforceability against, the Company and the
Principal Stockholder of the Agreement and all
Collateral Documents executed or required to be
executed pursuant hereto or thereto or to consummate
the Asset Purchase and the Transactions except (A) as
such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other
similar laws relating to or affecting the rights of
creditors and as the same may be subject to the effect
of general principles of equity and (B) that no opinion
need be expressed as to the enforceability of
indemnification and noncompetition provisions included
herein;
(ix) The execution and delivery of the Agreement and all
Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Asset
Purchase by the Company and the Principal Stockholder
do not, and the performance of the Agreement and all
Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Asset
Purchase and the consummation of the Transactions by
the Company and the Principal Stockholder will not, (i)
conflict with or violate the Organizational Documents
of the Company, the Principal Stockholder or any
Subsidiary, (ii) conflict with or violate any
Applicable Law, or (iii) to counsel's knowledge,
constitute a breach or default under, or give to others
any right of termination, amendment, acceleration,
increased payments or cancellation of, or result in the
creation of a Lien on any property or
42
<PAGE>
asset of the Company, the Principal Stockholder or any
Subsidiary pursuant to, any Material Agreement to which
the Company, the Principal Stockholder or any
Subsidiary is a party or by which the Company, the
Principal Stockholder or any Subsidiary or any property
or asset of the Company, the Principal Stockholder or
any Subsidiary is bound or affected,
(x) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable are required for the execution and delivery
of the Agreement by the Company and the performance of
the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Asset Purchase and the consummation of
the Asset Purchase by the Company,
(xi) Required filings with the Secretary of State of Alabama
have been made,
(xii) To the knowledge of counsel, absence of pending or
threatened material Legal Action,
(xiii) Nonapplicability of Alabama takeover laws, and
(xiv) such other customary matters concerning the
Stockholders in connection with the Public Offering as
may reasonably be requested by the Underwriter or its
counsel,
(c) No Legal Action or other Claim shall be pending or threatened
at any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages
or other relief in connection with, the execution and delivery of this
Agreement or the consummation of the Asset Purchase and the Transactions or
which might in the reasonable judgment of VIALOG have any Adverse Effect on
the Company or the Company and its Subsidiaries taken as a whole or, assuming
consummation of the Asset Purchase and the Participating Mergers, VIALOG and
its Subsidiaries taken as a whole,
(d) The Company, the Principal Stockholder and other Persons listed
on Schedule 7.2(d) (or Section 7.2(d) of the Disclosure Schedule, as the case
may be) shall have executed and delivered to VIALOG a noncompetition agreement,
substantially in the form of Exhibit 7.2(d),
--------------
(e) The representations, warranties, covenants and agreements of
the Company and the Principal Stockholder contained in this Agreement or
otherwise made in writing by it or on its behalf pursuant to this Agreement or
otherwise made in connection with the Asset Purchase and the Transactions shall
be true and correct in all material respects at and as of the Public Offering
Closing Date with the same force and effect as though made on and as of such
43
<PAGE>
date except those which speak as of a certain date which shall continue to be
true and correct in all material respects as of such date and on the Public
Offering Closing Date, each and all of the agreements and conditions to be
performed or satisfied by the Company or the Principal Stockholder under this
Agreement at or prior to the Public Offering Closing Date shall have been duly
performed or satisfied in all material respects, and the Company shall have
furnished VIALOG with such certificates and other documents evidencing the truth
of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as VIALOG shall have reasonably
requested,
(f) VIALOG shall have received from its Accountants, a certificate
or letter, dated the Public Offering Closing Date, to the effect that, on the
basis of a limited review in accordance with the standards for such reviews
promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No. 1, they
have no reason to believe that the unaudited financial statements set forth in
the Registration Statement were not prepared in accordance with GAAP and
practices consistent with those followed in the preparation of the audited
financial statements audited by the Accountants as contemplated by Section
6.1(a), or that any material modifications of such unaudited financial
statements are required for a fair presentation of the financial position or
results of operations or changes in financial position of the Company or that
during the period from the last day covered by the most recent financial
statements set forth in the Registration Statement prepared by the Accountants
as contemplated by Section 6.1(a) to a date not more than five (5) days prior to
the Public Offering Closing Date, there has been any Adverse Change in the
financial position or results of the operations of the Company or the Company
and its Subsidiaries taken as a whole which is not described in the Registration
Statement,
(g) All actions taken by the Stockholders to approve and adopt this
Agreement, the Asset Purchase and the Transactions shall comply in all respects
with and shall be legal, valid, binding, enforceable and effective under the Law
of the jurisdiction of incorporation of the Company, its Organizational
Documents and all Material Agreements to which it or any of its Subsidiaries is
a party or by which it or any of them or any of its or any of their property or
assets is bound,
(h) The Company shall have obtained consents to the assignment and
continuation of all Material Agreements being assumed by Buyer and described in
Section 7.2(h) of the Disclosure Schedule (the "Assumed Material Agreements")
which, in the reasonable judgment of VIALOG or its counsel, require such
consents, including appropriate binders or consents as to policies of insurance
to be assigned to VIALOG or the Buyer under this Agreement. The Company shall
have obtained satisfaction and discharge of all Liens set forth in Section
3.15(b) of the Disclosure Schedule, and shall have obtained, on terms and
conditions reasonably satisfactory to VIALOG, all Governmental Authorizations
and Private Authorizations, and all modifications of Contractual Obligations
relating to Indebtedness, which VIALOG deems, reasonably necessary or desirable
in order to own and operate the Assets and conduct the Business, substantially
on the basis heretofore owned, operated and conducted by the Company and
proposed to be owned, operated and conducted by VIALOG,
44
<PAGE>
(i) Between the date of this Agreement and the Public Offering
Closing Date, there shall not have occurred and be continuing any Adverse Change
affecting the Company or the Company and its Subsidiaries taken as a whole from
the condition thereof (financial and other) reflected in the Financial
Statements or in the audited financial statements prepared by the Accountants as
contemplated by Section 6.1(a) or in the most recent financial statements set
forth in the Registration Statement,
(j) The filing and waiting period requirements (if applicable)
under the HSR Act relating to the consummation of the Asset Purchase and the
Participating Mergers shall have been complied with,
(k) No Law shall have been enacted or made by or on behalf of any
Authority nor shall any legislation have been introduced and favorably reported
for passage to either House of Congress by any committee, nor shall any Legal
Action by any Authority have been commenced or threatened, nor shall any
decision, order or other action of any Authority have been rendered or taken,
which in VIALOG's reasonable judgment, could have any Adverse Effect on the
Company or the Company and its Subsidiaries taken as a whole, or could restrain,
prevent or change the Asset Purchase or the Transactions or Adversely Affect the
ability of the Principal Stockholder to perform its obligations under this
Agreement, or Adversely Affect the ability of VIALOG to continue to own, operate
and conduct the business of the Buyer, substantially on the basis heretofore
owned, operated and conducted by the Company and as proposed to be owned,
operated and conducted by the Buyer,
(l) VIALOG shall have received copies of any environmental audits
the Company has received in respect of all real property owned or leased by the
Company or any of its Subsidiaries. VIALOG in its sole discretion and at its
sole expense may engage an independent environmental engineer to perform such
audits and the results thereof shall not be materially inconsistent with the
representations and warranties set forth in Section 3.23,
(m) The Company shall have terminated all Employment Arrangements
as of the close of business on the day of the Asset Purchase Closing (to be
effective at the Effective Time) and the Buyer shall have hired substantially
all of said employees effective as of the Effective Time.
(n) The Principal Stockholder and the officers and directors of the
Principal Stockholder shall have delivered to VIALOG an agreement, substantially
in the form of Exhibit 7.2(n), dated the Public Offering Closing Date, releasing
--------------
the Company and its Subsidiaries from any and all Claims against them (other
than Claims arising from the Principal Stockholder or its officers and directors
having acted as a director or officer of the Company or such Subsidiary as
contemplated by Section 6.7),
(o) The Company shall have delivered to Buyer an amendment to its
Certificate of Incorporation changing the name of the Company to a name
acceptable to Buyer and dissimilar to "Call Points, Inc." which amendment shall
be in form for filing with the Delaware Secretary of State.
45
<PAGE>
(p) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, nor shall it have
experienced any material work stoppage,
(q) The Principal Stockholder shall have executed and delivered
to VIALOG an irrevocable power of attorney in the form of Exhibit 6.20(b).
(r) The representations, warranties, covenants and agreements
of the Principal Stockholder contained in this Agreement or otherwise made in
writing by or on behalf of the Principal Stockholder pursuant to this Agreement
or otherwise made in connection with the Asset Purchase and the Transactions
shall be true and correct in all material respects at and as of the Public
Offering Closing Date with the same force and effect as though made on and as of
such date except those which speak as of a certain date which shall continue to
be true and correct in all material respects as of such date and on the Public
Offering Closing Date. Each and all of the agreements and conditions to be
performed or satisfied by the Principal Stockholder under this Agreement at or
prior to the Public Offering Closing Date, including without limitation the
provisions set forth in Section 6.20, shall have been duly performed or
satisfied in all material respects, and the Principal Stockholder shall have
furnished VIALOG with such certificates and other documents evidencing the truth
of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as VIALOG or its counsel shall have
reasonably requested,
(s) The individuals listed on Schedule 7.2(s) (or Section
7.2(s) of the Disclosure Schedule, as the case may be) shall have executed and
delivered to VIALOG an Employment Arrangement substantially in the form of
Exhibit 7.2(s) which shall provide for an annual salary equal to 110% of the
annual salary paid to said individuals by the Company as of April 30, 1996 and
otherwise reasonably satisfactory to VIALOG and its counsel,
(t) Buyer shall have received satisfactory evidence of the
termination of that certain Royalty/Noncompete Agreement dated November 14, 1991
among the Company, Lincoln Telecommunications Company, Consolidated
Communications, Inc. and Rock Hill Telephone Company,
(u) Buyer shall have entered into a perpetual, non-exclusive
royalty free license with the Principal Stockholder whereby Buyer is licensed to
use the software owned by the Principal Stockholder and currently used by the
Company in the operation of the Business, and
(v) Buyer shall have entered into an agreement with Union
Springs Telephone Company, Inc. which memorializes the current oral arrangement
whereby Union Springs Telephone Company provides business telephone lines to the
Company. Said agreement shall, among other things (A) maintain the existing rate
structure, (B) require sixty (60) days written notice prior to termination by
either party, and (C) require Buyer to keep at Union Springs the two bridges
owned by the Company and currently located at Union Springs.
46
<PAGE>
7.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company and the Principal Stockholder to effect the Asset Purchase will be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part to the extent
permitted by Applicable Law:
(a) VIALOG shall have furnished the Company and the Principal
Stockholder with the favorable opinion dated the Public Offering Closing Date of
Mirick, O'Connell, DeMallie & Lougee, llp, counsel to VIALOG and Buyer, which
may contain limitations and qualifications as to scope and law and rely on
certifications as to facts of officers of VIALOG and Buyer and public officials
as are reasonable and customary to opinions delivered in the type of business
transactions covering this Agreement, addressing the following:
(i) Due organization, valid existence and good
standing of VIALOG and Buyer,
(ii) Due authorization and valid execution and delivery
by, and enforceability against VIALOG and Buyer of
the Agreement except (A) as such enforceability
may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other
similar laws relating to or affecting the rights
of creditors and as the same may be subject to the
effect of general principles of equity and (B)
that no opinion need be expressed as to the
enforceability of indemnification provisions,
(iii) The Registration Statement has become effective
under the Securities Act, and to such counsel's
knowledge, no stop order suspending its
effectiveness has been issued and no proceedings
for that purpose have been instituted or
threatened by the SEC,
(iv) The execution and delivery of the Agreement by
VIALOG and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Asset Purchase by it does not, and
the performance of the Agreement and all
Collateral Documents executed or required to be
executed pursuant thereto or to consummate the
Asset Purchase and the consummation of the Asset
Purchase by it will not, (A) conflict with or
violate the Organizational Documents of VIALOG,
(B) conflict with or violate any Applicable Law,
or (C) to counsel's knowledge, constitute a
default under, or give to others any right of
termination, amendment, acceleration, increased
payments or cancellation of, or result in the
creation of a Lien on any property or assets of
VIALOG pursuant to, any Material Agreement to
which it is a party or by which it or any property
or asset of it is bound or affected,
47
<PAGE>
(v) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act,
if applicable are required for the execution and
delivery of the Agreement by VIALOG and the
performance of the Agreement and all Collateral
Documents executed or required to be executed
pursuant thereto or to consummate the Asset
Purchase and the consummation of the Asset
Purchase by them, and
(vi) The required filings with the Delaware Secretary
of State to change the Certificate of
Incorporation as provided in Section 1.7 shall
have been made.
(b) Each of VIALOG and Buyer shall have complied in all
material respects with its agreements contained in this Agreement, and the
certificates to be furnished to the Company pursuant to this Section shall be
true, correct and complete. All Collateral Documents shall be reasonably
satisfactory in form, scope and substance to the Company and its counsel, and
the Company and its counsel shall have received all information and copies of
all documents, including records of corporate proceedings, which they may
reasonably request in connection therewith, such documents where appropriate to
be certified by proper corporate officers,
(c) The representations, warranties, covenants and agreements
of each of VIALOG and Buyer contained in this Agreement or otherwise made in
writing by it or on its behalf pursuant to this Agreement or otherwise made in
connection with the Asset Purchase and the Transactions shall be true and
correct in all material respects at and as of the Public Offering Closing Date
with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date; each and all of the agreements and conditions to be performed or
satisfied by each of VIALOG and Buyer under this Agreement at or prior to the
Public Offering Closing Date shall have been duly performed or satisfied in all
material respects; and each of VIALOG and Buyer shall have furnished the Company
with such certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance of
such agreements or conditions as the Company shall have reasonably requested,
(d) If executed and delivered to VIALOG by the Asset Purchase
Closing, the employment agreements contemplated by Section 7.2(s) and for those
persons listed on Schedule 7.2(s) (or Section 7.2(s) of the Disclosure Schedule,
as the case may be) shall have been executed and delivered by the Buyer at
VIALOG's direction to the indicated person,
(e) The filing and waiting period requirements (if applicable)
under the HSR Act relating to the consummation of the Asset Purchase and the
Participating Mergers shall have been complied with,
(f) VIALOG shall have obtained the insurance set forth in
Sections 6.7(c),
48
<PAGE>
(g) The Company shall have obtained all third party consents
needed for the Buyer to assume and continue those Material Agreements being
assumed by Buyer,
(h) The Buyer and the Principal Stockholder shall have entered
into an agreement whereby the Principal Stockholder and its Subsidiaries may,
for a period of five (5) years commencing on the Effective Time, purchase from
Buyer minutes of long distance usage at Buyer's lowest cost plus $.01 per
minute, and
(i) No Legal Action or other Claim shall be pending or
threatened at any time prior to or on the Public Offering Closing Date before or
by any Authority or by any other Person seeking to restrain or prohibit, or
damages or other relief in connection with, the execution and delivery of this
Agreement or the consummation of the Asset Purchase and the Transactions or
which might in the reasonable judgment of the Company have any Adverse Effect on
VIALOG and its Subsidiaries or the Company and its Subsidiaries taken as a whole
or, assuming consummation of the Asset Purchase and the Participating
Agreements, VIALOG and its Subsidiaries taken as a whole.
ARTICLE
8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time, whether before or after approval of this Agreement, the
Asset Purchase and the Transactions as follows:
(a) by mutual consent of the Company and VIALOG.
(b) by either VIALOG or the Company,
(i) if any permanent injunction, decree or judgment by
any Authority preventing the consummation of the
Asset Purchase or the Public Offering shall have
become final and nonappealable, or if the
terminating party determines in its reasonable
discretion that the Asset Purchase has become
inadvisable or impracticable by reason of the
institution by any Authority or other Person of
material Legal Action, or
(ii) if the Asset Purchase Closing shall not occur on
or before the Termination Date.
(c) by the Company:
49
<PAGE>
(i) in the event of a breach of this Agreement by
VIALOG or Buyer that has not been cured, or if any
representation or warranty of VIALOG or Buyer
shall have become untrue in any material respect,
in either case such that such breach or untruth is
incapable of being cured by the Effective Date or
will prevent or delay consummation of the Asset
Purchase by or beyond the Termination Date, or
(ii) in the event the Public Offering is not a firm
commitment in the manner and upon the terms
described in Section 5.10.
(d) by VIALOG:
(i) if the Asset Purchase and the Transactions fail to
receive the approval required by Applicable Law,
by vote (or to the extent permitted by Applicable
Law, by consent) of the Stockholders,
(ii) if it shall determine in its reasonable discretion
that the Asset Purchase or the Transactions has or
have become inadvisable or impracticable by reason
of the threat by any Authority, or any other
Person of material Legal Action or proceedings
against either or both of the Company and VIALOG
(or Buyer, or a Subsidiary of any of them), it
being understood and agreed that a written request
by governmental authorities for information with
respect to the Transactions, which information
could be used in connection with such Legal Action
or proceedings, may be deemed by VIALOG to be a
threat of material Legal Action or proceedings,
(iii) if arrangements reasonably satisfactory to VIALOG
cannot be made for (A) the assumption by the Buyer
substantially on the terms and conditions in
effect as of the date of this Agreement, or (B)
the Public Offering,
(iv) if the business, assets, prospects, management,
condition (financial or other) or results of
operation of the Company or the Company and its
Subsidiaries taken as a whole shall have been
Adversely Affected, whether by reason of changes
or developments in the economy or industry
generally or operations in the ordinary course of
business or otherwise,
(v) if the Company shall not have received, without
the imposition of any burdensome condition or
material cost, all Governmental Authorizations and
Private Authorizations, or if any Authority or
other Person shall withdraw any such Governmental
Authorizations or Private Authorizations,
50
<PAGE>
(vi) if the terms of this Agreement shall not have been
approved by the Underwriter,
(vii) if the Company shall have suffered any material
damage, destruction or loss (whether or not
covered by insurance) or any material acquisition
or taking of property by any Authority, or if it
or any of its Subsidiaries shall have suffered a
material work stoppage, or
(viii) in the event of a material breach of this
Agreement by the Company or the Principal
Stockholder that has not been cured, or if any
representation or warranty of the Company or the
Principal Stockholder shall have become untrue in
any material respect so that such breach or
untruth is incapable of being substantially cured
by the Effective Date or will prevent or delay
consummation of the Asset Purchase by or beyond
the Termination Date, or if any condition to
VIALOG's obligation to close under this Agreement
shall not have been satisfied.
(e) by VIALOG if (i) the Board of Directors of the Company
shall withdraw, modify or change its recommendation so that it is not in favor
of this Agreement, the Asset Purchase or the Transactions, or shall have
resolved to do any of the foregoing (it being agreed and understood that nothing
in this clause (i) obliges the Company to effect the Asset Purchase if the
conditions set forth in Section 7.1 and Section 7.3 are not satisfied or limits
the rights of the Company to consent to terminate this Agreement pursuant to
Section 8.1(a) or to terminate the Agreement pursuant to Section 8.1(b) or
Section 8.1(c)), (ii) the Board of Directors of the Company shall have
recommended or resolved to recommend to the Stockholders an Other Transaction,
(iii) the Company, the Board of Directors of the Company or the Principal
Stockholder shall have taken any action in contravention of Sections 6.6 or 6.13
or (iv) the Principal Stockholder shall fail to vote to approve and adopt this
Agreement, the Asset Purchase and the Transactions.
8.2 Effect of Termination. Except as provided in Sections 2.2(a),
---------------------
2.2(c), 6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void,
there shall be no liability on the part of any Party, or any of their respective
officers or directors, to the other and all rights and obligations of any Party
shall cease; provided, however, that such termination will not relieve any Party
from liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
8.3 Amendment. This Agreement may be amended by the Parties by action
---------
taken by or on behalf of their respective Boards of Directors and by the
Principal Stockholder at any time prior to the Effective Time; provided,
however, that, after approval of this Agreement and the Asset Purchase by the
Stockholders, no amendment, which under Applicable Law may not be made without
the approval of the Stockholders, may be made without such approval. This
Agreement may not be amended to impose any additional material obligation on a
Party or to
51
<PAGE>
burden or limit a material right of such Party except by an agreement in writing
signed by the Party so affected.
8.4 Waiver. At any time prior to the Effective Time, except to the
------
extent Applicable Law does not permit, either VIALOG or Buyer and the Company
may (a) extend the time for the performance of any of the obligations or other
acts of the other, subject, however, to the terms and conditions of Section 8.1,
(b) waive any inaccuracies in the representations and warranties of the other
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance by the other with any of the agreements,
covenants or conditions contained in this Agreement. Any such extension or
waiver shall be valid only if set forth in an agreement in writing signed by the
Party or Parties to be bound thereby.
8.5 Fees, Expenses and Other Payments. If this Agreement is
---------------------------------
terminated, then all costs and expenses incurred by the Parties in connection
with this Agreement, the Asset Purchase and the Transactions and in connection
with compliance with Applicable Law and Contractual Obligations as a consequence
hereof and thereof, including fees and disbursements of counsel, financial
advisors and accountants, will be borne solely and entirely by the Party which
has incurred such costs and expenses (with respect to such Party, its
"Expenses"). VIALOG acknowledges and agrees that the Company has disclosed that
it is obligated and will become further obligated for Expenses (including fees
and expenses of its counsel, its independent accountants, and its financial
advisor) incurred by it in connection with this Agreement, the Asset Purchase
and the Transactions. It is understood and agreed that certain of such Expenses
may be paid by the Company prior to the execution of this Agreement, and VIALOG
agrees to refrain from taking any action which would prevent or delay the
payment of reasonable Expenses by the Company. Any Expenses incurred and not
paid will constitute liabilities of the Company. VIALOG agrees to take all
action necessary to cause the Company to pay promptly any of the foregoing
reasonable Expenses incurred, but not paid, by the Company prior to the
Effective Time.
8.6 Effect of Investigation. The right of any Party to terminate this
-----------------------
Agreement pursuant to Section 8.1 will remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Party, any
Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
ARTICLE
9
[This space is intentionally left blank]
52
<PAGE>
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification.
---------------
(a) Except as provided in Section 11.1, the Company and the
Principal Stockholder jointly and severally agree to make whole, indemnify and
hold VIALOG, the Buyer, the Underwriters and their respective Affiliates,
agents, successors and assigns (collectively, the "VIALOG Indemnified Parties")
harmless as a result of, from or against:
(i) any and all Claims of the VIALOG Indemnified
Parties or other Persons based upon, attributable
to or resulting from any material inaccuracy in or
material breach of any representation or warranty
on the part of any one or more of the Company or
the Stockholders under this Agreement or any
Collateral Document;
(ii) any and all Claims of the VIALOG Indemnified
Parties or other Persons based upon, attributable
to or resulting from the material breach of any
covenant or other agreement on the part of any one
or more of the Company or the Stockholders under
this Agreement or any Collateral Document;
(iii) any and all Claims of the VIALOG Indemnified
Parties attributable to or resulting from the
Identified Legal Actions; and
(iv) any and all other material Claims of the VIALOG
Indemnified Parties or other Persons incident to
the foregoing or to the enforcement of this
Section.
(b) Except as provided in Section 11.1, VIALOG agrees to make
whole, indemnify and hold the Company, the Principal Stockholder and their
respective Affiliates, agents, heirs, successors and assigns (collectively, the
"Company Indemnified Parties") harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified
Parties or other Persons based upon, attributable
to or resulting from any material inaccuracy in or
material breach of any representation or warranty
on the part of VIALOG or Buyer under this
Agreement or any Collateral Document;
(ii) any and all Claims of the Company Indemnified
Parties or other Persons based upon, attributable
to or resulting from the material
53
<PAGE>
breach of any covenant or other agreement on the
part of VIALOG or Buyer; and
(iii) any and all other material Claims of the Company
Indemnified Parties or other Persons incident to
the foregoing or to the enforcement of this
Section.
(c) Except in connection with an Identified Legal Action,
neither the Company nor the Principal Stockholder will be required to pay to the
VIALOG Indemnified Parties an aggregate amount in excess of an amount equal to
the cash received pursuant to Sections 2.1(a) and 2.1(c). VIALOG will not be
required to pay any Company Indemnified Party an aggregate amount in excess of
an amount equal to the cash delivered to such Company Indemnified Party pursuant
to Sections 2.1(a) and 2.1( c). No Claim for indemnification may be commenced
beyond the period applicable to such Claim set forth in Section 11.1.
(d) Notwithstanding the foregoing, neither the Company nor the
Principal Stockholder will be required to pay any amount for indemnification to
the VIALOG Indemnified Parties, except to the extent that (i) the Claim pertains
to an Identified Legal Action, without regard to the dollar amount thereof or
the aggregate dollar amount of all Claims; or (ii) the aggregate amount of
Claims under this Section 10.1 asserted against the Principal Stockholder
exceeds $100,000.
10.2 Procedures Concerning Claims by Third Parties; Payment of
---------------------------------------------------------
Damages; etc.
------------
(a) If any Legal Action is instituted or asserted by any person
other than such indemnified party in respect of which payment may be sought
hereunder, the indemnified party will reasonably and promptly cause written
notice of the assertion of any Legal Action of which it has knowledge which is
covered by the indemnities under Section 10.1 to be forwarded to the
indemnifying party. In such event, the indemnifying party will have the right,
at its sole option and expense, to be represented by counsel of its choice,
which must be reasonably satisfactory to the indemnified party, and to defend
against, negotiate, settle or otherwise deal with any Legal Action which related
to any Claims instituted or asserted by any Person other than such indemnified
party and indemnified against hereunder; provided, however, that no settlement
thereof will be made without the prior written consent of the indemnified party,
which consent will not be unreasonably withheld, conditioned or delayed. If the
indemnifying party elects to defend against, negotiate, settle or otherwise deal
with any Legal Action which related to any such Claims, it will within thirty
(30) days of receipt of said notice (or sooner, if the nature of the Legal
Action so requires) notify in writing the indemnified party of its intent to do
so. If the indemnifying party elects not to defend against, negotiate, settle or
otherwise deal with any Legal Action which relates to any such Claims, fails to
notify the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Claims under this
Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Legal Action. If the indemnified party defends any
Legal Action, then the indemnifying party will reimburse the indemnified party
for reasonable Claims incurred in defending such Legal Action upon a final
determination that the indemnified party was entitled
54
<PAGE>
to indemnity hereunder. Neither the indemnifying party nor the indemnified party
may settle any Legal Action without the prior written consent of the other
party, which consent will not be unreasonably withheld, conditioned or delayed.
If the indemnifying party will assume the defense of any Legal Action instituted
or asserted by any Person other than an indemnified party, the indemnified party
may participate, at such party's own expense, in the defense of such Legal
Action.
(b) After any final judgment or award will have been rendered
by a court, arbitration board (which may be engaged upon the consent of each of
the indemnifying party and the indemnified parties) or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement will have been consummated, or the indemnified party
and the indemnifying party will have arrived at a mutually binding agreement
with respect to a Legal Action hereunder, the indemnifying party will pay all of
the sums due and owing to the indemnified party by wire transfer of immediately
available funds within five business days after the date of notice of such
judgment or award conditioned, however on the indemnifying party having been
finally determined by the parties' agreement or by final court or arbitration
that the indemnifying party is obligated hereunder to make said payment and
subject to the provisions of this Article 10.
(c) The failure of the indemnified party to give reasonably
prompt notice of any Legal Action instituted or asserted by any Person other
than such indemnified party and indemnified against hereunder will not release,
waive or otherwise affect the indemnifying party's obligations with respect
thereto except to the extent that the indemnifying party can demonstrate actual
loss or material prejudice as a result of such failure.
(d) No legal action to enforce a Claim for indemnity will be
stayed or dismissed for failure to join one or more indemnifying parties or to
permit an indemnifying party to cross-claim against another indemnifying party,
nor will the failure to join as indemnifying party be deemed grounds for
preventing a separate or subsequent Legal Action to enforce a Claim for
indemnification against such party, each such Legal Action being deemed a
separate and independent Claim for indemnification. A Legal Action to enforce a
Claim for indemnity may be instituted in the Commonwealth of Massachusetts, or
the jurisdiction to which each Party consents, or any other state having
jurisdiction with respect thereto.
ARTICLE
11
GENERAL PROVISIONS
11.1 Effectiveness of Representations; etc.
-------------------------------------
(a) Regardless of any investigation made by or on behalf of any
other party hereto, any Person controlling such party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement, the representations, warranties,
55
<PAGE>
covenants and agreements contained in Article 3, Article 4 and Article 5 will
survive the Asset Purchase Closing and remain operative and in full force and
effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until
sixty (60) days after the applicable statute of
limitations, as the same may be extended from time
to time, has terminated;
(ii) Section 3.23, until the sixth anniversary date of
this Agreement; and
(iii) all other Sections, until VIALOG (or its
successor) files an annual report pursuant to the
requirements of the Securities Exchange Act of
1934, as amended, as prescribed thereunder on Form
10-K covering at least two full fiscal years of
operations by VIALOG, but in no event more than
thirty months after the Public Offering Closing
Date (the "Second Annual Filing Date").
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements contained in Article 3,
Article 4 and Article 5, the representations, warranties, covenants and
agreements of each Party will survive and remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other Party,
any Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution and consummation of this Agreement.
11.2 Notices. All notices and other communications given or made
-------
pursuant to this Agreement will be in writing and will be deemed to have been
duly given or made as of the date delivered or transmitted, and will be
effective upon receipt, if delivered personally, mailed by certified mail
(postage prepaid, return receipt requested) to the Parties at the following
addresses or sent by electronic transmission to the fax number specified below:
(a) If to VIALOG or Buyer:
VIALOG Corporation
Attention: Glenn Bolduc, President
46 Manning Road
Billerica, MA 01821
Fax: (508) 667-1944
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, LLP
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
56
<PAGE>
(b) If to the Company:
Call Points, Inc.
Attention: Mrs. Billie Jo Pirnie
301 Interstate Park
Montgomery, AL 36109
with a copy to:
Call Points, Inc.
Attention: Larry Grogan
301 Interstate Park
Montgomery, AL 36109
and
Jeff Kohn, Esq.
Sirote & Permutt P.C.
Colonial Financial Center
1 Commerce Street
Montomery, AL 36104
(c) If to the Principal Stockholder:
Ropir Industries, Inc.
Attention: Mrs. Billie Jo Pirnie
1500 Hunter Loop Road
Montgomery, Alabama 36108
with a copy to:
Jeff Kohn, Esq.
Sirote & Permutt P.C.
Colonial Financial Center
1 Commerce Street
Montomery, AL 36104
Any address for notice as hereinabove provided may be changed by the
party or person for whom the change is made by giving notice of said change in
the manner provided in this Section.
11.3 Headings. The headings contained in this Agreement are for
--------
reference purposes only and will not affect in any way the meaning and
interpretation of this Agreement.
57
<PAGE>
11.4 Severability. If any term or other provision of this Agreement is
-------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner Adverse to any Party. Upon such
determination that any term or other provisions is invalid, illegal or incapable
of being enforced, the Parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement (together with the Disclosure
-----------------
Schedule, the Confidentiality Agreement and the other Collateral Documents
delivered in connection herewith), constitutes the entire agreement of the
Parties and supersedes all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof, including without limitation
that certain Business Combination Agreement, dated July 30, 1996, between the
Company and VIALOG.
11.6 Assignment. This Agreement may not be assigned by operation of law or
-----------
otherwise and any purported assignment will be null and void, provided that
VIALOG may cause a wholly owned Subsidiary of VIALOG to be substituted for
VIALOG as the party to this Agreement and may, in addition, assign the other
rights, but not its obligations, including, without limitation, its obligation
for payment of the Purchase Price and the Noncompetition Payment, under this
Agreement to such Subsidiary.
11.7 Parties in Interest. This Agreement will be binding upon and inure
--------------------
solely to the benefit of each Party, and nothing in this Agreement, express or
implied (other than the provisions of Section 6.7, which provisions are intended
to benefit and may be enforced by the beneficiaries thereof), is intended to or
will confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
11.8 Governing Law. This Agreement will be governed by, and construed in
--------------
accordance with, the substantive laws of the Commonwealth of Massachusetts
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
11.9 Enforcement of the Agreement. Each Party recognizes and agrees that
-----------------------------
each other Party's remedy at law for any breach of the provisions of this
Agreement would be inadequate and agrees that for breach of such provisions,
such Party will, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance to the
extent permitted by Applicable Law. Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
Nothing herein contained will be construed as prohibiting a Party from pursuing
any other remedies available to such Party for any breach or
58
<PAGE>
threatened breach hereof or failure to take or refrain from any action as
required hereunder to consummate the Asset Purchase and carry out the
Transactions.
11.10 Counterparts. This Agreement may be executed in one or more
-------------
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
11.11 Disclosure Supplements. From time to time prior to the Public
-----------------------
Offering Closing Date, the Company will promptly supplement or amend the
Disclosure Schedule delivered in connection with this Agreement, with respect to
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby; provided, however, that no
supplement or amendment to the Disclosure Schedule that constitutes or reflects
a Material Adverse Change to the Company may be made without the prior written
consent of VIALOG.
ARTICLE
12
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural, and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meanings when used in the Disclosure Schedule and each Collateral
Document, notice, certificate, communication, opinion, or other document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
Accountants means KPMG Peat Marwick, LLP.
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") means, with
respect to the Company, any of its Subsidiaries, VIALOG or Buyer, as the case
may be any Event which could reasonably be expected to (a) adversely affect the
validity or enforceability of this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto, or (b) adversely affect
the business, operations, management, properties or the condition, (financial or
other), or results of operation of the Company or the Company and its
Subsidiaries taken as a whole, VIALOG or Buyer, as the case may be or (c) impair
the Company's or VIALOG's ability to fulfill its obligations under the terms of
this Agreement or any Collateral Document executed or required
59
<PAGE>
to be executed pursuant hereto or thereto, or (d) adversely affect the aggregate
rights and remedies of VIALOG or the Company under this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, in all cases, unless otherwise specifically set forth, in a material
respect or manner or to a material degree.
Affiliate or Affiliated means, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, will include any member of such
individual's immediate family or a family trust.
Agreement means this Agreement as originally in effect, including unless
the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits to this Agreement, and as the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
Applicable Law means any Law of any Authority, whether domestic or foreign,
including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or to any of its business or
operations is subject or any of its property or assets is bound.
Assets means with regard to the Business all inventory, machinery,
equipment, Leases, leasehold improvements, real property, furniture, fixtures,
Intangible Assets, intellectual property, computer hardware and software,
proprietary information, customer lists, prepaid items, all receivables, cash
and cash equivalents on hand or otherwise on deposit, rights of the Company
under all Contracts, Governmental Authorizations and Private Authorizations, the
name "Call Points, Inc." together with all books, records and accounts and any
confidential information which has been reduced to writing relating to or
arising out of the Business and any and all other properties or assets of the
Company of every name and nature including the goodwill of the Company in the
Business.
Asset Purchase will have the meaning given to it in the Preamble.
Asset Purchase Closing will have the meaning given to it in Section 1.2.
Assumed Contracts means (a) all Contractual Obligations other than those
set forth in Section 3.9 and Section 3.17(a) of the Disclosure Schedule, and (b)
the Assumed Material Agreements.
Assumed Liabilities means all liabilities and obligations of the Company
directly associated with the operation of the Business, other than the Retained
Liabilities, and which can
60
<PAGE>
be generally described as (a) accounts payable and all similar trade obligations
of the Company existing as of the Asset Purchase Closing, (b) obligations
arising under the Assumed Contracts, (c) the Employee Accruals but in no event
in excess of $100,000, and (d) the arrearage of royalty payments due from the
Company for the one month period prior to the Effective Time under that certain
Royalty/Noncompete Agreement dated November 14, 1991 among the Company, Lincoln
Telecommunications Company, Consolidated Communications Inc. and Rock Hill
Telephone Company, which amount shall in no event exceed the lowest monthly
payment paid by the Company under said agreement in 1996, and (e) current
accounts payable due Union Springs Telephone Company, Inc. for telephone lines
used by the Company and for which Union Springs Telephone Company, Inc. is
compensated under tariffs of the Alabama Public Service Commission which amount
shall in no event exceed an amount equal to the average monthly billing from
Union Springs Telephone Company, Inc. for said telephone lines in 1996.
Assumed Material Agreements will have the meaning given to it in Section
7.2(h).
Authority means any governmental or quasi-governmental authority, whether
administrative, executive, judicial, legislative or other, or any combination
thereof, including without limitation any federal, state, territorial, county,
municipal or other government or governmental or quasi-governmental agency,
arbitrator, authority, board, body, branch, bureau, central bank or comparable
agency or Entity, commission, corporation, court, department, instrumentality,
master, mediator, panel, referee, system or other political unit or subdivision
or other Entity of any of the foregoing, whether domestic or foreign.
BCA will have the meaning given to it in the Preamble.
Benefit Arrangement means any material benefit arrangement that is not a
Plan, including (a) any employment or consulting agreement (b) any arrangement
providing for insurance coverage or workers' compensation benefits, (c) any
incentive bonus or deferred bonus arrangement, (d) any arrangement providing
termination allowance, severance or similar benefits, (e) any equity
compensation plan, (f) any deferred compensation plan and (g) any compensation
policy and practice.
Business means all business of the Company associated with the Assets and
the Assumed Liabilities.
Buyer will have the meaning given to it in the Preamble.
Claims means any and all debts, liabilities, obligations, losses, damages,
deficiencies, assessments and penalties, together with all Legal Actions,
pending or threatened, claims and judgments of whatever kind and nature relating
thereto, and all reasonable fees, costs, expenses and disbursements (including
without limitation attorneys' fees, costs and expenses) relating to any of the
foregoing.
COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
61
<PAGE>
Code will have the meaning given to it in the Preamble.
Collateral Document means any agreement, instrument, certificate, opinion,
memorandum, schedule or other document delivered by a Party or the Stockholder
pursuant to this Agreement or in connection with the Asset Purchase and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Principal Stockholder, on the one hand, or
VIALOG and Buyer on the other, under this Agreement and with respect to opinions
to be delivered pursuant to this Agreement, except to the extent of a Party's
actual knowledge, the Company and the Principal Stockholder or VIALOG and Buyer,
as the case may be, assume no responsibility for the authority of or genuineness
of signatures relating to the others as counterparts or their representations,
warranties, covenants and agreements.
Company will have the meaning given to it in the Preamble.
Company Indemnified Parties will have the meaning given to it in Section
10.1(b).
The Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or the Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after reasonable investigation, will
have reason to believe and will believe that the subject representation or
warranty is true and accurate as stated.
Confidentiality Letter will have the meaning given to it in Section 6.1(c).
Contract or Contractual Obligation means any term, condition, provision,
representation, warranty, agreement, covenant, undertaking, commitment,
indemnity or other obligation set forth in the Organizational Documents of the
obligee or which is outstanding or existing under any instrument, contract,
lease or other contractual undertaking (including without limitation any
instrument relating to or evidencing any Indebtedness) to which the obligee is a
party or by which it or any of its business is subject or property or assets is
bound.
Control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
Convertible Securities means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for common stock, whether or not the
right to convert or exchange thereunder is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-occurrence or
existence or non-existence of some other Event, or both.
62
<PAGE>
DBCL will have the meaning given to it in the Preamble.
Disclosure Schedule means the disclosure schedules dated as of the date of
this Agreement delivered by the Company to VIALOG and VIALOG to the Company.
Distribution means, with respect to the Company or any of its Subsidiaries:
(a) the declaration or payment of any dividend (except dividends payable in
common stock of the Company) on or in respect of any shares of any class of
capital stock of the Company or any shares of capital stock of any Subsidiary
owned by a Person other than the Company or a Subsidiary, (b) the purchase,
redemption or other retirement of any shares of any class of capital stock of
the Company or any shares of capital stock of any Subsidiary owned by a Person
other than the Company or a Subsidiary, and (c) any other distribution on or in
respect of any shares of any class of capital stock of the Company or any shares
of capital stock of any Subsidiary owned by a Person other than the Company or a
Subsidiary.
Effective Date means the effective date of the Registration Statement and
commencement of the Public Offering as authorized by the SEC.
Effective Time will have the meaning given to it in Section 1.6.
Employment Arrangement means, with respect to any Person, any employment,
consulting, retainer, severance or similar contract, agreement, plan,
arrangement or policy (exclusive of any which is terminable within thirty (30)
days without liability, penalty or payment of any kind by such Person or any
Affiliate), or providing for severance, termination payments, insurance coverage
(including any self-insured arrangements), workers compensation, disability
benefits, life, health, medical dental or hospitalization benefits, supplemental
unemployment benefits, vacation or sick leave benefits, pension or retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock purchase or appreciation rights or other forms of incentive compensation
or post-retirement insurance, compensation or benefits, or any collective
bargaining or other labor agreement, whether or not any of the foregoing is
subject to the provisions of ERISA.
Encumber means to suffer, accept, agree to or permit the imposition of a
Lien.
Entity means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
Environmental Laws means any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or
63
<PAGE>
energy, into the environment (including, without limitation, ambient air,
surface water, ground water, mining or reclamation or mined land, land surface
or subsurface strata) or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, disposal, cleanup, transport
or handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances, materials or wastes. Environmental Laws include the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), the Hazardous Material Transportation Act (49
-- ---
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act of 1976
-- ---
(42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33
-- ---
U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
-- --- --
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
- --- -- ---
Occupational Safety and Health Act of 1970 (29 U.S.C. Section 651 et seq.), the
-- ---
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
--
seq.), and the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C.
- ---
Section 1201 et seq.), and any analogous future federal, or present or future
-- ---
state, local or foreign, Laws, and the rules and regulations promulgated
thereunder all as from time to time in effect, and any reference to any
statutory or regulatory provision will be deemed to be a reference to any
successor statutory or regulatory provision.
Environmental Permit means any Governmental Authorization required by or
pursuant to any Environmental Law.
Environmental Requirements means all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
(a) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of, or the remediation, emission,
discharge or release into the air, surface water, groundwater or land
of, Hazardous Materials;
(b) the protection of the health and safety of employees or the public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA means the Employee Retirement Security Act of 1974, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision will be deemed to be a reference to any successor statutory or
regulatory provision.
ERISA Affiliate means any Person that is treated as a single employer with
the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or (o) of
the Code or Section 4001(b)(1) of ERISA.
64
<PAGE>
Event means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Escrow Agent will have the meaning given to it in Section 2.3(b).
Escrowed Funds will have the meaning given to it in Section 2.3(b).
Expenses will have the meaning set forth in Section 8.5.
Final Determination (a) means with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations; and (b) will include the payment of Tax by
the Company or whichever Party is responsible for payment of such Tax under
Applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the other party is notified of such payment and the
party that is responsible for such Tax under this Agreement determines that no
action should be taken to recoup such payment from such Taxing Authority.
Financial Statements will have the meaning given to it in Section 3.2(a).
GAAP means generally accepted accounting principles as in effect from time
to time in the United States of America.
Governmental Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
each applicable Authority.
Governmental Filings means all filings, including franchise and similar Tax
filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with each applicable Authority.
Guaranty or Guaranteed means any agreement, undertaking or arrangement by
which the Company or any of its Subsidiaries, VIALOG or Buyer, as the case may
be, guarantees, endorses or otherwise becomes or is liable, directly or
indirectly, upon any Indebtedness of any other Person including without
limitation the payment of amounts drawn down by beneficiaries of letters of
credit (other than by endorsements of negotiable instruments for deposit or
collection in the ordinary course of business). The amount of the obligor's
obligation under any Guaranty will be deemed to be the outstanding amount (or
maximum permitted amount, if larger) of the Indebtedness directly or indirectly
guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials means any substance (in whatever state or matter): (a)
the presence of which requires investigation or remediation under any
Environmental Law; (b) that is defined
65
<PAGE>
as a "hazardous waste", "hazardous material" or "hazardous substance" under any
Environmental Law; (c) that is toxic, explosive, corrosive, pollutive,
contaminating, flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is regulated by any Authority; (d) that contains or
consists of petroleum or petroleum products, or (e) that contains or consists of
PCBs, asbestos, or urea formaldehyde foam insulation.
HSR Act means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision.
Identified Legal Actions will have the meaning given to it in Section
3.7(a)(i).
Indebtedness means, with respect to the Company or any of its Subsidiaries,
(a) all items, except items of capital stock or of surplus or of general
contingency or deferred tax reserves or any minority interest in any Subsidiary
to the extent such interest is treated as a liability with indeterminate term on
the consolidated balance sheet of the Company, which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of the Company or VIALOG Subsidiary, (b) all obligations
secured by any Lien to which any property or asset owned or held by the Company
or any Subsidiary is subject, whether or not the obligation secured thereby will
have been assumed, and (c) to the extent not otherwise included, all Contractual
Obligations of the Company or any Subsidiary constituting capitalized leases and
all obligations of the Company or any Subsidiary with respect to Leases
constituting part of a sale and leaseback arrangement.
Intangible Assets means all assets and property lacking physical properties
the evidence of ownership of which must customarily be maintained by independent
registration, documentation, certification, recordation or other means.
Law means any (a) administrative, judicial, legislative or other action,
code, consent decree, constitution, decree, directive, enactment, finding,
guideline, law, injunction, interpretation, judgment, order, ordinance, policy
statement, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic of foreign; (b) the common law, or other legal or quasi-
legal precedent; or (c) arbitrator's, mediator's or referee's award, decision,
finding or recommendation; including, in each such case or instance, any
interpretation, directive, guideline or request, whether or not having the force
of law including, in all cases, without limitation any particular section, part
or provision thereof.
Lease means any lease of property, whether real, personal or mixed, and all
amendments thereto.
Legal Action means any litigation or legal or other actions, arbitrations,
counterclaims, investigations, proceedings, requests for material information by
or pursuant to the order of any Authority, or suits, at law or in arbitration,
equity or admiralty commenced by any Person,
66
<PAGE>
whether or not purported to be brought on behalf of a party hereto affecting
such party or any of such party's business, property or assets and specifically
including, but not limited to, the Identified Legal Actions.
Lien means any of the following: mortgage, lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building to use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
Margin Rules means Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
Material or Materiality for the purposes of this Agreement, will, unless
specifically stated to the contrary, be determined without regard to the fact
that various provisions of this Agreement set forth specific dollar amounts.
Material Agreement or Material Commitment means, with respect to the
Company or any of its Subsidiaries or VIALOG or Buyer, any Contractual
Obligation which (a) was not entered into in the ordinary course of business,
(b) was entered into in the ordinary course of business which (i) involves the
purchase, sale or lease of goods or materials or performance of services
aggregating more than Twenty-Five Thousand Dollars ($25,000), (ii) extends for
more than three (3) months, or (iii) is not terminable on thirty (30) days or
less notice without penalty or other payment, (c) involves Indebtedness for
money borrowed in excess of One Hundred Thousand Dollars ($100,000), (d) is or
otherwise constitutes a written agency, dealer, license, distributorship, sales
representative or similar written agreement, or (e) would account for more than
five percent (5%) of purchases or sales made by the Company and its Subsidiaries
during the year ended December 31, 1996.
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
Noncompetition Payment will have the meaning given to it in Section 2.1(c).
Option Securities means all rights, options and warrants, all calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire common stock or Convertible Securities, whether or not the right to
subscribe for, purchase or otherwise acquire is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-occurrence or the
existence or non-existence of some other Event.
67
<PAGE>
Organizational Documents means, with respect to a Person which is a
corporation, its charter, its by-laws, and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock, and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreement among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
Other Participating Companies mean those companies or entities engaged in
the teleconferencing business who execute agreements and plans of
reorganization, stock purchase agreements or asset purchase agreements with
VIALOG which agreements close contemporaneously with this Agreement.
Other Transaction means a transaction or series of related transactions
(other than the Asset Purchase) resulting in (a) any change in control of the
Company, (b) any merger or consolidation of the Company or any of its
Subsidiaries, regardless of whether the Company or such Subsidiary is the
surviving Entity, (c) any tender offer or exchange offer for, or any acquisition
of, any securities of the Company, or (d) any sale or other disposition of
assets of the Company of any Subsidiary not otherwise permitted under Section
3.18.
Participating Agreement will have the meaning given to it in the Preamble.
Participating Companies will mean the Company and the Other Participating
Companies.
Participating Mergers means the mergers of Other Participating Companies
with a Subsidiary of VIALOG pursuant to a Participating Agreement.
Participating Stockholders means the Persons receiving VIALOG Stock
pursuant to the Participating Agreements.
Party means any natural individual or any Entity that has executed this
Agreement.
PBGC means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Person means any natural individual or any Entity.
Plan means any "employee benefit plan" as defined in Section 3(3) of ERISA
(whether or not terminated) which is (or was in the case of a frozen or
terminated plan) maintained by the Company or any Subsidiary or VIALOG or Buyer,
and with respect to which the Company, such Subsidiary or VIALOG or Buyer or, in
the case of any such plan subject to Title IV of ERISA, an ERISA Affiliate is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA, other
than a Multiemployer Plan.
68
<PAGE>
Principal Stockholder will have the meaning given to it in the Preamble.
Private Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than each Authority) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
Prospectus means the form of prospectus first filed by VIALOG in the
Registration Statement, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the Public
Offering.
Public Offering will have the meaning given to it in the Preamble.
Public Offering Closing Date means the date on which the Public Offering is
closed.
Purchase Price will have the meaning given to it in Section 2.1(a).
Registration Statement means the registration statement (including the
Prospectus, exhibits, financial statements and schedules included therein), and
all amendments thereof (including post-effective amendments and any registration
statement filed under Rule 462(b) with respect to the Public Offering), filed
under the Securities Act registering the shares of VIALOG Stock to be sold in
the Public Offering in accordance with the terms and conditions of the
Underwriting Agreement.
Representatives of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
Retained Liabilities means with regard to the Company (a) all obligations
of the Company under this Agreement, (b) all liabilities for Taxes incurred in
respect of or measured by the income of the Company earned on or realized on or
prior to the Asset Purchase Closing, including any gain and income resulting
from, arising under or in connection with the sale of the Assets and the other
transactions contemplated herein, (c) all Claims, regardless of when made or
asserted or imposed or asserted to be imposed by operation of law, pertaining to
the Business, the Assets, any Employment Arrangement or Benefit Arrangement and
which relate to the time period or events occurring on or prior to the Asset
Purchase Closing, (d) all Legal Action to which the Company is a party or
threatened to be a party as of the Asset Purchase Closing including, but not
limited to the Identified Legal Actions, (e) all Indebtedness for borrowed
money, (f) except as specifically identified in the Assumed Liabilities, all
debts, obligations and liabilities of the Company owing to any Affiliate of the
Company, the Principal Stockholder or Affiliate of the Principal Stockholder,
(g) except as specifically identified in the Assumed Liabilities, all
obligations of the Company under that certain Royalty/Noncompete Agreement dated
November 14, 1991 and among the Company, Lincoln Telecommunications Company,
Consolidated Communications Inc. and Rock Hill Telephone Company, (h) all
Contractual Obligations which are not included within the definition of Assumed
Contracts, and (i) any
69
<PAGE>
liability, contract, commitment or other obligation of the Company, known or
unknown, fixed or contingent, the existence of which constitutes or will
constitute a breach of any representation or warranty of the Company or
Principal Stockholder contained in or made pursuant to this Agreement or which
Buyer is not assuming hereunder.
SEC means the Securities and Exchange Commission of the United States or
any successor Authority.
Second Annual Filing Date will have the meaning given to it in Section
11.1(a)(iii).
Securities Act means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations.
Stockholders means the Principal Stockholder and all other Persons who own
or are entitled to receive (pursuant to any Option Securities and Convertible
Securities) any capital stock of the Company.
Subsidiary means, with respect to a Person, any Entity a majority of the
capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Tax (and "Taxable", which means subject to Tax), means with respect to the
Company or any of its Subsidiaries, (a) all taxes (domestic or foreign),
including without limitation any income (net, gross or other including recapture
of any tax items such as investment tax credits), alternative or add-on minimum
tax, gross income, gross receipts, gains, sales, use, leasing, lease, user, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding on amounts paid to or by the
Company or any of its Subsidiaries, payroll, employment, unemployment, social
security, excise severance, stamp, occupation, premium, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest, levies,
assessments, charges, penalties, addition to tax or additional amount imposed by
any Taxing Authority, (b) any joint or several liability of the Company or any
of its Subsidiaries with any other Person for the payment of any amounts of the
type described in (a), and (c) any liability of the Company or any of its
Subsidiaries for the payment of any amounts of the type described in (a) as a
result of any express or implied obligation to indemnify any other Person.
Tax Claim means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
Tax Return or Returns means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority means any Authority responsible for the imposition of any
Tax.
70
<PAGE>
Termination Date means (a) March 15, 1997 unless on or prior to that date
the Registration Statement is filed, in which case such date will automatically
be extended to June 30, 1997, or (b) such date after March 15, 1997 as to which
the parties agree.
Transactions means the other transactions contemplated by this Agreement or
by any Collateral Document executed or required to be executed in connection
herewith or therewith, but will not include the Participating Agreements, the
registration of sale of VIALOG Stock pursuant to the Registration Statement or
any credit facilities between VIALOG and any bank described in the Registration
Statement.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any two of Smith Barney Inc., Salomon Brothers Inc,
Donaldson, Lufkin & Jenrette Securities Corporation or comparable firm as lead
underwriters and any other Person who executes the Underwriting Agreement as an
underwriter of VIALOG Stock in the Public Offering.
Underwriting Agreement means the firm commitment underwriting agreement
between VIALOG and the Underwriter to be filed as an exhibit to the Registration
Statement and to be executed on or about the Effective Date.
VIALOG will have the meaning given to it in the Preamble.
VIALOG Indemnified Parties will have the meaning given to it in Section
10.1(a).
VIALOG Stock will have the meaning given to it in the Preamble.
71
<PAGE>
IN WITNESS WHEREOF, VIALOG, Buyer, the Company and the Principal
Stockholder have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
---------------------------------
Name: Glenn D. Bolduc
Title: President
CALL POINTS ACQUISITION
CORPORATION
By: /s/ Glenn D. Bolduc
---------------------------------
Name: Glenn D. Bolduc
Title: President
CALL POINTS, INC.
By:
---------------------------------
Name:
Title:
ROPIR INDUSTRIES, INC.
By:
---------------------------------
Name:
Title:
72
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE ASSET PURCHASE
AGREEMENT AND PLAN OF REORGANIZATION. THE REGISTRANT AGREES
TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE
TO THE COMMISSION UPON REQUEST.
------------------------------
Section 3.1(a)
. Jurisdiction of Incorporation of the Company.
. Jurisdictions where qualified to do business.
Section 3.1(c)
. Exceptions to No Breach or Default, Etc., upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Lien created or imposed upon execution and delivery of the
Agreement or any Collateral Document.
. Exceptions to No Governmental Authorization or Governmental Filing Required
upon execution and delivery of the Agreement or any Collateral Document.
Section 3.1(d)
. Subsidiaries of the Company, and Jurisdictions of incorporation and where
qualified to do business.
. Capital Stock of any Subsidiary.
. Exceptions to Company's ownership of all Stock of any Subsidiary.
Section 3.2(a)
. Financial Statements of the Company and any Subsidiary, prepared in
accordance with GAAP.
Section 3.2(c)
. The Company's ownership of other Entities.
Section 3.3
. Changes and condition of the Company and any Subsidiary, since the date of
the most recent financial statements.
Section 3.4
. Exceptions to liabilities of the Company or any Subsidiary.
73
<PAGE>
. Any obligations or liabilities, past, present or deferred, or accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in the
balance sheet of the Financial Statements, or notes thereto, and any
obligations or liabilities, other than obligations and liabilities incurred
in the ordinary course of business consistent with past practice of the
Company and any Subsidiary, which will adversely affect the Company or any of
the Company's Subsidiaries.
. Guarantees or Primary or Secondary Liabilities of the Company or any
Subsidiary (except as disclosed in Financial Statements).
Section 3.5(a)
. Exceptions to No Liens with respect to all real property owned or leased, and
to all other assets, tangible and intangible.
. Financing Statements evidencing any Liens.
. Impairments to valid leasehold interests.
Section 3.5(b)
. Real estate owned or leased, and property leased by the Company and any
Subsidiary.
. Material Fixed Assets.
. Title Retention Agreements.
Section 3.5(c)
. Exceptions to compliance with title covenants and conditions and
environmental laws.
. Hazardous Materials used or stored by the Company or any Subsidiary.
Section 3.6
. Private Authorizations material to the Company or any Subsidiary.
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before December
31, 1995.
Section 3.7(b)
. Breaches, violations or defaults under Governmental Authorizations or any
Applicable Law or under any requirement of any insurance carrier.
74
<PAGE>
Section 3.8(a)
. Governmental Authorizations and Intangible Assets upon which the conduct of
business by the Company or any Subsidiary is dependent.
Section 3.8(b)
. Description of Intangible Assets and Governmental Authorizations.
Section 3.9
. Contractual obligations or transactions between the Company or any of its
Subsidiaries and any of its officers, directors, employees, stockholders, or
any Affiliate of any thereof (other than reasonable compensation for services
or out-of-pocket expenses reasonably incurred in support of the Company's
business).
Section 3.10(a)
. Insurance Policies maintained by the Company or any Subsidiary.
. Insurance Carriers which have refused the Company or any Subsidiary insurance
within the past five years.
Section 3.11(a)
. Exceptions to taxation as a Subchapter C corporation.
. Membership in a consolidated group for tax purposes.
Section 3.11(d)
. Tax audits of the Company or any Subsidiary by the IRS or any notifications
thereof.
Section 3.11(e)
. Tax Sharing Agreement or Arrangement of the Company or any Subsidiary.
Section 3.11(f)
. Consents concerning collapsible corporations under Section 341(f) of the
Code.
. Ownership changes within the meaning of Section 382(g) of the Code.
Section 3.12(a)
. ERISA plans, including, inter alia, exceptions to compliance to applicable
----- ----
laws, notices from any authority questioning compliance, deficiencies,
"prohibited transactions", any amounts of
75
<PAGE>
liability, termination proceedings, annual reports, or any membership in or
contributions to multi-employer plans.
Section 3.12(c)
. Basis of funding and current status of any past service liability with
respect to each Employment Arrangement.
Section 3.15(a)
. Authorized and outstanding Capital Stock of the Company.
. Agreements by the Company or any Subsidiary to grant or issue any shares of
its Capital Stock or any Option Security or Convertible Security.
. Any agreement, put or commitment pursuant to which the Company or any
Subsidiary is obligated to purchase, redeem or otherwise acquire any shares
of Capital Stock or any Option Security or Convertible Security.
Section 3.15(b)
. Stockholders.
. Stock not held free and clear of all Liens.
. Persons or groups of persons owning as much as 5% of the Company's
outstanding Common Stock.
Section 3.16(a)
. Employment Arrangements of the Company or any Subsidiary.
. Collective bargaining agreements or pending grievances or labor disputes.
Section 3.16(b)
. Accelerated payments or benefits, including parachute payments, that will be
received as a result of the transactions contemplated by this Agreement.
Section 3.16(c)
. Any unfavorable relationships with employees of the Company or any
Subsidiary.
Section 3.17(a)
. Material Agreements relating to the ownership or operation of the business
and property of the Company or any Subsidiary presently held or used by the
Company or any Subsidiary, or to
76
<PAGE>
which the Company or any Subsidiary is a party, or to which it or any of its
property is subject or bound.
Section 3.17(b)
. Exceptions to satisfaction or performance of Material Agreements by the
Company or any Subsidiary.
Section 3.18(a)
. Exceptions to operation of business in the ordinary course.
Section 3.18(b)
. Distributions from end of most recent fiscal year to the date of this
Agreement.
Section 3.19
. Banks, trust companies, savings and loan associations and brokerage firms in
which the Company or any Subsidiary has an account or safe deposit box, and
the names of all persons with access thereto.
Section 3.20
. Adverse restrictions which impairs the Company or any Subsidiary's ability to
conduct its business or which could have any adverse effect on the Company or
any Subsidiary.
Section 3.22
. Personal injury, warranty claims, etc., pending or threatened.
Section 3.23(a)
. Environmental matters - compliance and Governmental Authorizations and
Private Authorizations.
Section 3.23(b)
. Any actual or expected spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water on any property or facility
owned, leased, operated or occupied by the Company or any Subsidiary.
. Notices or Liens arising under Environmental Law.
Section 3.23(c)
. Above or underground tanks for the storage of Hazardous Materials.
77
<PAGE>
Section 3.23(e)
. Hazardous Materials used in the conduct of business of the Company or any
Subsidiary.
. Description and annual volume of Hazardous Materials used.
. Years during which use occurred.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(f)
. Hazardous Materials generated.
. Annual volume.
. Persons to whom such Hazardous Materials were transferred and/or transported.
Section 3.23(g)
. Environmental site assessments.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
Section 4.4
. Exceptions to good and merchantable title to Shares to be exchanged pursuant
to this Agreement.
Section 4.5(a)
. Conflicts with, breaches of, or defaults under any Contractual Obligation of
Principal Stockholder resulting from the execution and delivery of this
Agreement or any Collateral Document.
Section 4.5(b)
. Liens created or imposed upon any property or asset of Principal Stockholder
as a result of the execution and delivery of this Agreement or any Collateral
Document.
Section 4.5(c)
. Governmental Authorizations, Governmental Filing or Private Authorizations
required as a result of the execution and delivery of this Agreement or any
Collateral Document.
78
<PAGE>
Section 5.7
. Authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary.
. Options, warrant, calls, rights, commitments or any other agreements of any
character obligating VIALOG or VIALOG Merger Subsidiary to issue any shares
of VIALOG Stock or other shares of Capital Stock of VIALOG or VIALOG Merger
Subsidiary, or any other securities convertible into or evidencing the right
to subscribe for any such shares.
Section 5.11
. Provisions in other Participating Agreements of other Participating Companies
not substantially identical in form and substance to the provisions contained
in Articles 3 through 12 of this Agreement.
Section 6.5(b)
. Business (other than business in the ordinary course) the Company will
conduct without the written permission of VIALOG Corporation.
Section 6.17
. Distributions to Stockholders, employees and consultants contemplated to be
made prior to the Merger Closing.
. Liens to be discharged prior to the Merger Closing.
. Certain liabilities for which the Company will indemnify VIALOG as of the
Merger Closing.
Section 7.1(f)
. Awards under Stock Option Plan.
Section 7.2(d)
. Persons executing Non-Competition Agreements.
Section 7.2(h)
. Material Agreements to be Assumed by Buyer.
Section 7.2(n)
. Form of Agreement releasing the Company and any Subsidiary from claims
against them.
79
<PAGE>
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of the
Public Offering Closing Date.
Section 7.2(s)
. Employment Agreement between Principal Stockholder and VIALOG Corporation.
Section 7.2(t)
. Individuals executing and delivering Employment Arrangements for VIALOG
Corporation.
80
<PAGE>
Exhibit 2.5
AMENDED AND RESTATED AGREEMENT AND PLAN OF
REORGANIZATION
BY AND AMONG
VIALOG CORPORATION
KST ACQUISITION CORPORATION
AND
KENDALL SQUARE TELECONFERENCING, INC.
AND
COURTNEY SNYDER, PAUL BALLANTINE,
JOHN HASSETT AND DWIGHT GRADER
Dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 THE MERGER..................................................................................2
SECTION 1.1 The Merger........................................................................2
SECTION 1.2 Action by Stockholders............................................................2
SECTION 1.3 Closing...........................................................................3
SECTION 1.4 Effective Time....................................................................3
SECTION 1.5 Effect of the Merger..............................................................4
SECTION 1.6 Certificate of Incorporation......................................................4
SECTION 1.7 By-laws...........................................................................4
SECTION 1.8 Directors and Officers............................................................4
ARTICLE 2 CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES.......................................4
SECTION 2.1 Conversion of Securities..........................................................4
SECTION 2.2 Exchange of Certificates; Exchange Agent and
Exchange Procedures...............................................................6
SECTION 2.3 Stock Transfer Books..............................................................8
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights....................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................8
SECTION 3.1 Organization and Business; Power and Authority;
Effect of Transaction.............................................................8
SECTION 3.2 Financial and Other Information..................................................10
SECTION 3.3 Changes in Condition.............................................................12
SECTION 3.4 Liabilities......................................................................12
SECTION 3.5 Title to Properties; Leases......................................................12
SECTION 3.6 Compliance with Private Authorizations...........................................14
SECTION 3.7 Compliance with Governmental Authorizations and Applicable Law...................14
SECTION 3.8 Intangible Assets................................................................15
SECTION 3.9 Related Transactions.............................................................16
SECTION 3.10 Insurance........................................................................16
SECTION 3.11 Tax Matters......................................................................16
SECTION 3.12 Employee Retirement Income Security Act of 1974..................................18
SECTION 3.13 Absence of Sensitive Payments....................................................20
SECTION 3.14 Inapplicability of Specified Statutes............................................20
SECTION 3.15 Authorized and Outstanding Capital Stock.........................................21
SECTION 3.16 Employment Arrangements..........................................................21
SECTION 3.17 Material Agreements..............................................................22
SECTION 3.18 Ordinary Course of Business......................................................23
SECTION 3.19 Bank Accounts, Etc...............................................................25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.20 Adverse Restrictions.............................................................25
SECTION 3.21 Broker or Finder.................................................................25
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc.........................25
SECTION 3.23 Environmental Matters............................................................25
SECTION 3.24 Materiality......................................................................28
SECTION 3.25 Solvency.........................................................................28
SECTION 3.26 VIALOG Stock.....................................................................28
SECTION 3.27 Compliance with Regulations Relating to Securities Credit........................28
SECTION 3.28 Certain State Statutes Inapplicable..............................................28
SECTION 3.29 Continuing Representations and Warranties........................................28
SECTION 3.30 Registration Statement...........................................................28
SECTION 3.31 Predecessor Status, etc..........................................................29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDER.......................................................................29
SECTION 4.1 Organization.....................................................................29
SECTION 4.2 Power and Authority..............................................................29
SECTION 4.3 Enforceability...................................................................29
SECTION 4.4 Title to Shares..................................................................30
SECTION 4.5 No Conflict; Required Filings and Consents.......................................30
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VIALOG AND
VIALOG MERGER SUBSIDIARY....................................................................30
SECTION 5.1 Organization and Qualification...................................................30
SECTION 5.2 Power and Authority..............................................................31
SECTION 5.3 No Conflict; Required Filings and Consents.......................................31
SECTION 5.4 Financing........................................................................32
SECTION 5.5 Broker or Finder.................................................................32
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary..........................32
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary............................32
SECTION 5.8 Registration Statement...........................................................32
SECTION 5.9 Solvency.........................................................................33
SECTION 5.10 Firm Commitment..................................................................33
SECTION 5.11 Participating Agreements of Other Participating Companies........................33
SECTION 5.12 Continuing Representations and Warranties........................................33
ARTICLE 6 ADDITIONAL COVENANTS.......................................................................34
SECTION 6.1 Access to Information; Confidentiality...........................................34
SECTION 6.2 Agreement to Cooperate...........................................................35
SECTION 6.3 Assignment of Contracts and Rights...............................................36
SECTION 6.4 Compliance with the Securities Act...............................................36
SECTION 6.5 Conduct of Business..............................................................37
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.6 No Solicitation..................................................................38
SECTION 6.7 Directors' and Officers' Indemnification and Insurance...........................38
SECTION 6.8 Notification of Certain Matters..................................................39
SECTION 6.9 Public Announcements.............................................................39
SECTION 6.10 Conveyance Taxes.................................................................40
SECTION 6.11 Obligations of VIALOG............................................................40
SECTION 6.12 Employee Benefits; Severance Policy..............................................40
SECTION 6.13 Certain Actions Concerning Business Combinations.................................40
SECTION 6.14 Termination of Option Securities and Convertible Securities......................41
SECTION 6.15 Tax Returns......................................................................41
SECTION 6.16 Employment and Noncompetition....................................................41
SECTION 6.17 Distributions, Liabilities, Etc..................................................42
SECTION 6.18 Release from Personal Guarantees.................................................42
SECTION 6.19 No Significant Changes...........................................................42
SECTION 6.20 Registration Statement...........................................................43
SECTION 6.21 Tax Status.......................................................................43
SECTION 6.22 Self Dealing.....................................................................43
ARTICLE 7 CLOSING CONDITIONS.........................................................................43
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger.....................43
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger
Subsidiary.......................................................................45
SECTION 7.3 Conditions to Obligations of the Company.........................................50
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER..........................................................53
SECTION 8.1 Termination......................................................................53
SECTION 8.2 Effect of Termination............................................................55
SECTION 8.3 Amendment........................................................................56
SECTION 8.4 Waiver...........................................................................56
SECTION 8.5 Fees, Expenses and Other Payments................................................56
SECTION 8.6 Effect of Investigation..........................................................56
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER RESTRICTIONS
ON VIALOG STOCK.............................................................................57
SECTION 9.1 Shares not Registered............................................................57
SECTION 9.2 Economic Risk; Sophistication....................................................57
SECTION 9.3 Restrictions on Resale; Legends..................................................57
ARTICLE 10 INDEMNIFICATION...........................................................................58
SECTION 10.1 Indemnification..................................................................58
SECTION 10.2 Procedures Concerning Claims by Third Parties;
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
Payment of Damages; etc..........................................................60
ARTICLE 11 GENERAL PROVISIONS........................................................................61
SECTION 11.1 Effectiveness of Representations; etc............................................61
SECTION 11.2 Notices..........................................................................62
SECTION 11.3 Headings.........................................................................63
SECTION 11.4 Severability.....................................................................63
SECTION 11.5 Entire Agreement.................................................................63
SECTION 11.6 Assignment.......................................................................63
SECTION 11.7 Parties in Interest..............................................................63
SECTION 11.8 Governing Law....................................................................63
SECTION 11.9 Enforcement of the Agreement.....................................................63
SECTION 11.10 Counterparts.....................................................................64
SECTION 11.11 Disclosure Supplements...........................................................64
ARTICLE 12 DEFINITIONS...............................................................................64
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION dated as of
February 28, 1997 among VIALOG CORPORATION, a Massachusetts corporation
("VIALOG") KST Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of VIALOG ("VIALOG Merger Subsidiary"), KENDALL SQUARE
TELECONFERENCING, INC. a Massachusetts corporation (the "Company"), and COURTNEY
SNYDER, PAUL BALLANTINE, JOHN HASSETT and DWIGHT GRADER (the "Principal
Stockholder").
PREAMBLE
1. The Company and VIALOG Merger Subsidiary have agreed to carry out a
business combination transaction upon the terms and subject to the conditions of
this Agreement and in accordance with the Massachusetts Business Corporation Act
(the "BCA") and the General Corporation Law of the State of Delaware (the
"DBCL"), pursuant to which the VIALOG Merger Subsidiary will merge with and into
the Company (the "Merger") and the Stockholders and other Persons holding equity
interests in the Company will convert their holdings into cash and shares of
common stock, $.01 par value per share of VIALOG ("VIALOG Stock"), determined in
accordance with Section 2.1(a).
2. Each of the Other Participating Companies will enter into an
agreement and plan of reorganization or stock or asset purchase agreement with
VIALOG and a wholly-owned Subsidiary of VIALOG (each a "Participating
Agreement") whereby, contemporaneously with the Merger, each Other Participating
Company and a Subsidiary of VIALOG will carry out a business combination
transaction pursuant to which each such Subsidiary will merge with and into one
of the Other Participating Companies or VIALOG or such Subsidiary shall purchase
stock or assets of such Other Participating Companies and stockholders of and
other Persons holding equity interests in the Other Participating Companies will
convert their holdings into cash and shares of VIALOG Stock determined in
accordance with provisions substantially similar to those in Section 2.1(a).
3. Pursuant to the Underwriting Agreement, VIALOG will issue and sell
VIALOG Stock in a firm commitment public offering registered on Form S-1 in
accordance with the requirements of the Securities Act (the "Public Offering").
4. The Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement and the Merger as a
convenient means to accomplish a transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code") and a convenient means to
cause all of the Stockholders to transfer their capital stock of the Company to
VIALOG, has approved this Agreement, the Merger and the Transactions and
1
<PAGE>
has recommended approval and adoption of this Agreement, the Merger and the
Transactions by the Stockholders.
5. The Board of Directors of VIALOG has approved and adopted this
Agreement and has approved the Merger and the Transactions as the sole
stockholder of VIALOG Merger Subsidiary.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE
1
THE MERGER
1.1 The Merger.
----------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the BCA and the DBCL at the Effective Time the
VIALOG Merger Subsidiary will be merged with and into the Company. As a result
of the Merger, the separate existence of the VIALOG Merger Subsidiary will cease
and the Company will continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(b) The Company represents that, at a meeting duly called and held
at which a quorum was present and acting throughout, its Board of Directors has
unanimously (i) determined that this Agreement, the Merger and the Transactions
are fair to and in the best interest of Stockholders, (ii) approved this
Agreement, the Merger and the Transactions, which approval satisfies in full the
requirements of the BCA and Massachusetts law, and (iii) resolved to recommend
approval and adoption by the Stockholders of this Agreement, the Merger and the
Transactions to the extent required and in a manner permitted by Applicable Law.
1.2 Action by Stockholders.
----------------------
(a) The Company, acting through its Board of Directors, will, in
accordance with Applicable Law and its Organizational Documents: (i) as soon as
practicable, duly call, give notice of, convene and hold a special meeting of,
or to the extent permitted by Applicable Law submit for approval and adoption by
written consent by, the Stockholders for the purpose of adopting and approving
this Agreement, the Merger and the Transactions (the "Special Meeting"); (ii)
include in any proxy statement the conclusion and recommendation of the Board of
Directors to the effect that the Board of Directors, having determined that this
Agreement, the
2
<PAGE>
Merger and the Transactions are in the best interests of the Company and the
Stockholders, has approved this Agreement, the Merger and the Transactions and
recommends that the Stockholders vote in favor of the approval and adoption of
this Agreement, the Merger and the Transactions; and (iii) use its reasonable
best efforts to obtain the necessary approval and adoption of this Agreement,
the Merger and the Transactions by the Stockholders.
(b) VIALOG Merger Subsidiary, as soon as practicable, will submit
to VIALOG this Agreement, the Merger and the Transactions for approval and
adoption by written consent as the sole stockholder of VIALOG Merger Subsidiary,
and VIALOG will take all additional actions as such sole stockholder necessary
to adopt and approve this Agreement, the Merger and the Transactions.
(c) The approvals required by Sections 1.2(a) and (b) will occur
prior to the initial filing of the Registration Statement, which is expected to
occur on or before February 28, 1997.
1.3 Closing. Unless this Agreement is terminated pursuant to Section 8.1
-------
and the Merger and the Transactions have been abandoned, and subject to the
satisfaction or, if possible, waiver of conditions set forth in Article 7 other
than Section 7.1(d), the closing of the Merger (the "Merger Closing") will take
place, one day prior to the Effective Date, at the offices of Mirick, O'Connell,
DeMallie & Lougee, LLP, unless another date, time or place is agreed to in
writing by the Parties to this Agreement and each Participating Agreement.
Counsel for the Parties to this Agreement and each Participating Agreement will
hold a pre-closing two days prior to the Effective Date, at the offices of
Mirick, O'Connell, DeMallie & Lougee, LLP, for the purpose of finalizing all
documents to be signed at the Merger Closing. All certificates, legal opinions
and other instruments required to be delivered in order to satisfy the
conditions to the obligations of the Parties to effect the Merger set forth in
Article 7 below shall be delivered at the Merger Closing, and each such
certificate, legal opinion or other instrument shall, except to the extent
otherwise provided in Article 7, be dated as of the anticipated Public Offering
Closing Date, which is expected to occur five business days following the date
of Merger Closing. All such certificates, legal opinions and other instruments
shall be held in escrow by Mirick, O'Connell, DeMallie & Lougee, LLP between the
Merger Closing and the Effective Time and shall be released from escrow
concurrently with the Effective Time on the Public Offering Closing Date. In the
event that the Effective Time and Public Offering Closing Date occur on a date
other than the fifth business day following the Merger Closing, all such
certificates, legal opinions and instruments shall be re-dated as of the Public
Offering Closing Date. The Company, the Principal Stockholder, VIALOG and VIALOG
Merger Subsidiary shall use their respective best efforts to cause each of the
conditions set forth in Article 7 reasonably capable of being satisfied prior to
the Merger Closing, including, without limitation, the conditions set forth in
Sections 7.1(a), (c), (e), (f), (g) and (h), to be satisfied prior to the Merger
Closing.
1.4 Effective Time. On the Public Offering Closing Date, the Parties will
--------------
cause the Merger to be consummated by filing articles or certificates of merger,
as the case may be, with the Secretary of State of Massachusetts and with the
Secretary of State of Delaware, and by making any related filings required under
the BCA and the DBCL. The Merger will become
3
<PAGE>
effective at such time (but not prior to the Public Offering Closing Date) as
such articles or certificates, as the case may be, are duly filed with the
Secretary of State of Massachusetts and the Secretary of State of Delaware,
respectively (the "Effective Time)".
1.5 Effect of the Merger. From and after the Effective Time, the Surviving
--------------------
Corporation will possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of the Company
and VIALOG Merger Subsidiary, and the Merger will otherwise have the effects,
all as provided under the BCA and the DBCL.
1.6 Certificate of Incorporation. From and after the Effective Time, the
----------------------------
Certificate of Incorporation of the Surviving Corporation will be substantially
in the form attached as Exhibit 1.6 until amended in accordance with Applicable
-----------
Law, and the name of the Surviving Corporation will be the name of the Company
or such other name as VIALOG may elect.
1.7 By-laws. From and after the Effective Time, the by-laws of the
-------
Surviving Corporation will be in the form attached as Exhibit 1.7, until amended
-----------
in accordance with Applicable Law.
1.8 Directors and Officers. From and after the Effective Time, until
----------------------
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law (a) the directors of
VIALOG Merger Subsidiary at the Effective Time will be the directors of the
Surviving Corporation and (b) the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation.
ARTICLE
2
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of VIALOG Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each share of common stock, no par value of the Company (the
"Company Stock") issued and outstanding or issuable upon the election to
exercise or convert outstanding Option Securities and Convertible Securities
immediately prior to the Effective Time (other than any shares of Company Stock
to be canceled pursuant to Section 2.1(b)) will be converted into the right to
receive shares of VIALOG Stock (the "Stock Merger Consideration") and cash (the
"Cash Merger Consideration") (together with the Stock Merger Consideration, the
"Merger Consideration") pursuant to the following formula:
Aggregate Merger Consideration = $4,000,000
Aggregate Stock Merger Consideration = 173,913 shares
4
<PAGE>
<TABLE>
<S> <C> <C>
Aggregate Cash Merger Consideration = $2,000,001
Merger Consideration = Aggregate Merger Consideration
------------------------------
Aggregate Equity
Stock Merger Consideration. = Aggregate Stock Merger Consideration
------------------------------------
Aggregate Equity
Cash Merger Consideration.. = Aggregate Cash Merger Consideration
-----------------------------------
Aggregate Equity
</TABLE>
At the Effective Time, all issued and outstanding shares of Company Stock (the
"Shares") will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and certificates previously evidencing any such
Shares (each a "Certificate") will thereafter represent the right to receive,
upon the surrender of such Certificate in accordance with the provisions of
Section 2.2, the number of Shares represented by such Certificate multiplied by
(i) the Stock Merger Consideration plus (ii) the Cash Merger Consideration. A
holder of more than one Certificate will have the right to receive the Stock
Merger Consideration and the Cash Merger Consideration multiplied by the number
of Shares represented by all such Certificates (the "Exchange Merger
Consideration"). The holders of all Certificates may allocate the Stock Merger
Consideration and Cash Merger Consideration disproportionately among all such
holders; provided, however, that (i) a Schedule 2.1 setting forth the allocation
of Stock Merger Consideration and Cash Merger Consideration among the holders of
all Certificates is completed and consented to in writing by all such holders
contemporaneously with the execution and delivery of this Agreement, all in such
form as required by VIALOG; (ii) for each Share, the total of (A) the allocated
Stock Merger Consideration multiplied by the Offering Price, plus (B) the
allocated Cash Merger Consideration, must equal the Merger Consideration, (iii)
the total allocation of the Stock Merger Consideration must equal the Aggregate
Stock Merger Consideration, and (iv) the total allocation of the Cash Merger
Consideration must equal the Aggregate Cash Merger Consideration. Any such
election to allocate the Stock Merger Consideration and Cash Merger
Consideration disproportionately may not thereafter be withdrawn or amended. The
holders of Certificates previously evidencing Shares outstanding immediately
prior to the Effective Time will cease to have any rights with respect to such
Shares except as otherwise provided in this Agreement or by Applicable Law.
(b) Each Share held in the treasury of the Company or by any
direct or indirect wholly-owned Subsidiary of the Company immediately prior to
the Effective Time will automatically be canceled and extinguished without
conversion, and no payment will be made with respect to such Share.
(c) Each share of common stock of VIALOG Merger Subsidiary
outstanding immediately prior to the Effective Time will be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so
5
<PAGE>
converted and will constitute the only outstanding shares of capital stock of
the Surviving Corporation.
(d) In lieu of issuing fractional shares, VIALOG may convert a
holder's right to receive shares of VIALOG Stock pursuant to Section 2.1(a) into
a right to receive the highest whole number of shares of VIALOG Stock
constituting the non-cash portion of the Exchange Merger Consideration plus cash
equal to the fraction of a share of VIALOG Stock to which the holder would
otherwise be entitled multiplied by the Offering Price, and the Exchange Merger
Consideration to which a holder is entitled will be deemed to be such number of
shares of VIALOG Stock plus such cash plus the cash portion of the Exchange
Merger Consideration.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Prior to the Merger Closing, VIALOG will deposit or cause to
be deposited with a bank, trust company or other Entity designated by VIALOG
(the "Exchange Agent"), for the benefit of the holders of Shares for exchange in
accordance with this Article, through the Exchange Agent, the stock portion of
the Merger Consideration multiplied by the number of all Shares issued and
outstanding immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 2.1(b)) (said number of Shares less Shares to be
canceled to be referred to as the "Net Shares"), and within one (1) business day
of the Public Offering Closing Date, a check or checks representing next day
funds from the Underwriter in (or, pursuant to instructions reasonably
satisfactory to the Exchange Agent, wire transfer of) an amount equal to the
Cash Merger Consideration multiplied by the number of Net Shares plus cash in an
amount sufficient to make payment for fractional shares, in exchange for all of
the outstanding Shares (collectively the "Exchange Fund"). The Exchange Agent
will, pursuant to irrevocable instructions from VIALOG, deliver the Exchange
Merger Consideration to be issued pursuant to Section 2.1(a) out of the Exchange
Fund to holders of Shares upon transmittal of Certificates for exchange as
provided therein and in Section 2.2(b). The Exchange Fund will not be used for
any other purposes. Any interest, dividends or other income earned by the
Exchange Fund will be for the account of VIALOG.
(b) As soon as reasonably practicable after the date as of which
the Stockholders act to approve and adopt this Agreement, the Merger and the
Transactions, the Company will notify VIALOG thereof and VIALOG will promptly
instruct the Exchange Agent to deliver to the Stockholders, for the purpose of
accepting Certificates for exchange on the terms provided in Section 2.1(a) at
the Effective Time, and subject to withdrawal of Certificates by their holders
prior thereto, (i) a letter of transmittal (which will specify that delivery
will be effected, and risk of loss and title to the Certificates will pass, only
upon proper delivery of the Certificates to the Exchange Agent and will be in
such form and have such other provisions as VIALOG may reasonably specify), and
(ii) instructions to effect the surrender of the Certificates in exchange for
the Exchange Merger Consideration. Subject to the occurrence of the Effective
Time, upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by VIALOG together with such
letter of transmittal, duly executed, and such other customary documents as may
be reasonably required pursuant to such instructions (collectively, the
"Transmittal Documents"), the holder of such Certificate will
6
<PAGE>
become entitled to receive, as of the Effective Time, in exchange therefor the
Exchange Merger Consideration which such holder has the right to receive
pursuant to Sections 2.1(a) and 2.1(d), and the Certificate so surrendered will
be canceled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, the Exchange Merger
Consideration may be issued and paid in accordance with this Article to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents reasonably required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. The Exchange Merger Consideration will be delivered by the
Exchange Agent within two business days (or such greater period not to exceed
five business days as may be customarily required by the Exchange Agent)
following the later of (i) two business days after the Public Offering Closing
Date, or (ii) surrender of a Certificate and the related Transmittal Documents,
and cash payments for fractional shares and the cash portion of the Exchange
Merger Consideration may be made by check (or, pursuant to instructions
reasonably satisfactory to the Exchange Agent, by wire transfer). No interest
will be payable on the Exchange Merger Consideration regardless of any delay in
making payments. Until surrendered as contemplated by this Section, each
Certificate will be deemed at any time after the Effective Time to evidence only
the right to receive, upon such surrender, the Exchange Merger Consideration,
without interest.
(c) If any Certificate is lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and subject to such other conditions as VIALOG may
impose, the Surviving Corporation will issue in exchange for such lost, stolen
or destroyed Certificate the Exchange Merger Consideration deliverable in
respect thereof as determined in accordance with Sections 2.1(a) and 2.1(d).
VIALOG may, in its discretion and as a condition precedent to authorizing the
issuance thereof by the Surviving Corporation, require the owner of such lost,
stolen or destroyed Certificate to provide a bond or other surety to VIALOG and
the Surviving Corporation in such sum as VIALOG may reasonably direct as
indemnity against any claim that may be made against VIALOG, VIALOG Merger
Subsidiary or the Surviving Corporation (and their Affiliates) with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed
to the holders of the Company Stock for thirty (30) days after the Effective
Time will be delivered to VIALOG upon demand by VIALOG, and any holders of
Certificates who have not theretofore complied with this Article will thereafter
look only to VIALOG for the Exchange Merger Consideration to which they are
entitled pursuant to this Article.
(e) None of VIALOG, VIALOG Merger Subsidiary, the Company or the
Surviving Corporation will be liable to any holder of Shares for any shares of
VIALOG Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Each of VIALOG, the Surviving Corporation and the Exchange
Agent will be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts as
VIALOG, the Surviving Corporation or the
7
<PAGE>
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by VIALOG, the Surviving
Corporation or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by VIALOG, the
Surviving Corporation or the Exchange Agent.
2.3 Stock Transfer Books. At the Effective Time, the stock transfer
--------------------
books of the Company will be closed, and there will be no further registration
of transfers of Shares thereafter on the records of the Company other than to
VIALOG. On or after the Effective Time, any Certificate presented to the
Exchange Agent or the Surviving Corporation will be converted into the Exchange
Merger Consideration.
2.4 Option Securities and Convertible Securities; Payment Rights. At the
------------------------------------------------------------
Effective Time, (a) each outstanding Option Security and each outstanding
Convertible Security exercisable or convertible to purchase Shares as of
immediately prior to the Effective Time, will be canceled and the holder thereof
will be entitled to receive, and will receive, upon payment of the consideration
required to exercise or convert, or debit of such consideration against the
Merger Consideration otherwise due, and termination of such holder's rights to
exercise or convert, as the case may be, all other Option Securities or
Convertible Securities issued to such holder, Merger Consideration in the form
of shares of VIALOG Stock issuable and cash payable with respect to the number
of Shares issuable pursuant to such Option Security or Convertible Security so
exercised or converted, as the case may be, as provided in Section 2.1(a), plus
cash in lieu of receipt of a fractional share in an amount determined as
provided in Section 2.1(d), and (b) each Option Security outstanding not then
exercisable or exercised and the conversion rights of each Convertible Security
outstanding not then convertible or converted will be canceled.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to, and agrees with,
VIALOG and VIALOG Merger Subsidiary as follows:
3.1 Organization and Business; Power and Authority; Effect of
---------------------------------------------------------
Transaction.
-----------
(a) The Company:
(i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation as set forth in Section 3.1(a) of the
Disclosure Schedule,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties and
to conduct its business as
8
<PAGE>
now conducted and as presently proposed to be
conducted, and has in full force and effect all
Governmental Authorizations and Private Authorizations
and has made all Governmental Filings, to the extent
required for such ownership and lease of its property
and conduct of its business, and
(iii) has duly qualified and is authorized to do business
and is in good standing as a foreign corporation in
each jurisdiction (a true and correct list of which is
set forth in Section 3.1(a) of the Disclosure
Schedule) in which the character of its property or
the nature of its business or operations requires such
qualification or authorization, except to the extent
the failure so to qualify or to maintain such
authorizations would not have an Adverse Effect.
(b) The Company has all requisite power and authority (corporate and
other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions. The execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the Stockholders). This
Agreement has been duly executed and delivered by the Company and constitutes,
and each Collateral Document executed or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions, when executed and
delivered by the Company or an Affiliate of the Company will constitute, legal,
valid and binding obligations of the Company or such Affiliate, enforceable in
accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity. The affirmative vote or action by
written consent of 66 2/3% of the votes the holders of the outstanding shares of
the Company are entitled to cast is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve this Agreement,
the Merger and the Transactions under Applicable Law and the Company's
Organizational Documents.
(c) Except as set forth in Section 3.1(c) of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of
the Company or any Subsidiary or will conflict with, or result
in a breach or violation of, or constitute a default under, or
permit the
9
<PAGE>
acceleration of any obligation or liability in, or but for any
requirement of giving of notice or passage of time or both
would constitute such a conflict with, breach or violation of,
or default under, or permit any such acceleration in, any
Contractual Obligation of the Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of any
Lien (except to the extent set forth in Section 3.1(c) of the
Disclosure Schedule) upon any property now owned or leased by
the Company or any such other party, or
(iii) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing
requirements under Applicable Law in connection with the
Merger and the Transactions and as the Securities Act and
applicable state securities laws may apply to compliance by
the Company with the provisions of this Agreement relating to
the Public Offering and registration rights provided for
hereunder and except pursuant to the HSR Act (if applicable).
(d) The Company does not have any Subsidiaries other than those listed
on Section 3.1(d) of the Disclosure Schedule. Each Subsidiary so listed is
wholly-owned, is a corporation which is duly organized, validly existing and in
good standing under the laws of the respective state of incorporation set forth
opposite its name on Section 3.1(d) of the Disclosure Schedule, and is duly
qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown in Section 3.1(d) of the Disclosure Schedule) in which
the character of its property or the nature of its business or operations
requires such qualification or authorization, with full power and authority
(corporate and other) to carry on the business in which it is engaged. Each
Subsidiary has in full force and effect all Governmental Authorizations and
Private Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business. The Company owns all of the outstanding capital stock (as shown on
Section 3.1(d) of the Disclosure Schedule) of each Subsidiary, free and clear of
all Liens (except to the extent set forth in Section 3.1(d) of the Disclosure
Schedule), and all such stock has been duly authorized and validly issued and is
fully paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings with respect to any of
the foregoing, of any nature whatsoever relating to the authorized and unissued
or the outstanding capital stock of any Subsidiary.
3.2 Financial and Other Information.
-------------------------------
(a) The Company has furnished to VIALOG copies of the financial
statements of the Company and its Subsidiaries listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements,
including in each case the notes thereto, have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, do not
10
<PAGE>
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make any
statements contained therein not misleading, and fairly present the financial
condition and results of operations of the Company and its Subsidiaries, on the
bases therein stated, as of the respective dates thereof, and for the respective
periods covered thereby subject, in the case of unaudited financial statements
to normal nonmaterial year-end audit adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements, this
Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or any of the Stockholders pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Stockholders pursuant hereto or thereto or to consummate the
Merger and the Transactions, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated in such document by its terms or necessary in order to make the
statements contained herein or therein not misleading and all such Collateral
Documents are and will be true, correct and complete in all material respects;
provided that:
(i) with respect to projections contained or referred to in the
Disclosure Schedule, the Company represents and warrants only
that such projections were prepared in good faith on the basis
of the past business of the Company and other information and
assumptions which the Company and the Principal Stockholder
believe to be reasonable,
(ii) each such Collateral Document will not be deemed misleading by
virtue of the absence of factual recitations or references not
germane thereto and necessary to the purpose thereof, and
(iii) responses to due diligence requests will not be subject to
this Section 3.2(b) except to the extent that, to the
Company's knowledge, such response is materially misleading.
(c) The Company does not own any capital stock or equity or proprietary
interest in any other Entity or enterprise, however organized and however such
interest may be denominated or evidenced, except as set forth in Sections 3.1(d)
or 3.2(c) of the Disclosure Schedule. None of the Entities, if any, so set forth
in Section 3.2(c) of the Disclosure Schedule is a Subsidiary of the Company
except as so set forth. The Company owns all of the outstanding capital stock or
equity or proprietary interests (as shown on Section 3.2(c) of the Disclosure
Schedule) of each such Entity or other enterprise, free and clear of all Liens
(except to the extent set forth in Section 3.2(c) of the Disclosure Schedule),
and all of such stock or equity or proprietary interests have been duly
authorized and validly issued and are fully paid and non-assessable. There are
no outstanding Option Securities or Convertible Securities, or agreements or
understandings with respect to any of the foregoing, of any nature whatsoever,
except as described in Section 3.2(c) of the Disclosure Schedule.
11
<PAGE>
3.3 Changes in Condition. Since the date of the most recent financial
--------------------
statements forming part of the Financial Statements, except to the extent
specifically described in Section 3.3 of the Disclosure Schedule, there has been
no Adverse Change in the Company or the Company and its Subsidiaries taken as a
whole. There is no Event known to the Company which Adversely Affects, or in the
future might (so far as the Company or the Principal Stockholder can now
reasonably foresee) Adversely Affect, the Company or the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto except for changes in
general economic conditions and to the extent set forth in Section 3.3 of the
Disclosure Schedule.
3.4 Liabilities. At the date of the most recent balance sheet forming part
-----------
of the Financial Statements, neither the Company nor any Subsidiary had any
obligations or liabilities, past, present or deferred, accrued or unaccrued,
fixed, absolute, contingent or other, except as disclosed in such balance sheet,
or the notes thereto, and since such date neither the Company nor any Subsidiary
has incurred any such obligations or liabilities, other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, which do not and, to the Company's
knowledge, will not, in the aggregate, Adversely Affect the Company or the
Company and its Subsidiaries taken as a whole except to the extent set forth in
Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business or as disclosed in the most recent balance sheet, or the notes thereto,
forming part of the Financial Statements or in Section 3.4 of the Disclosure
Schedule.
3.5 Title to Properties; Leases.
---------------------------
(a) Each of the Company and its Subsidiaries has good legal and
insurable title, with respect to all real property owned or leased (in fee
simple if owned and leasehold if leased) and marketable title if owned (in fee
simple), if any, reflected as an asset on the most recent balance sheet forming
part of the Financial Statements, or held by the Company or any of its
Subsidiaries for use in its business if not so reflected, and good indefeasible
and merchantable title to all other assets, tangible and intangible (excluding
leased property), reflected on such balance sheet, or held by the Company or any
of its Subsidiaries for use in its business if not so reflected, or purported to
have been acquired by the Company or any of its Subsidiaries since such date,
except inventory sold or depleted, or property, plant and other equipment used
up or retired, since such date, in each case in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries, free and
clear of all Liens, except such as are reflected in the most recent balance
sheet, or the notes thereto, forming part of the Financial Statements or set
forth in Section 3.5(a) of the Disclosure Schedule. Except for financing
statements evidencing Liens referred to in the preceding sentence (a true,
correct and complete list and description of which is set forth in Section
3.5(a) of the Disclosure Schedule), to the
12
<PAGE>
Company's knowledge, no financing statements under the Uniform Commercial Code
and no other filing which names the Company or any of its Subsidiaries as debtor
or which covers or purports to cover any of the property of the Company or any
of its Subsidiaries is on file in any state or other jurisdiction, and neither
the Company nor any Subsidiary has signed or agreed to sign any such financing
statement or filing or any agreement authorizing any secured party thereunder to
file any such financing statement or filing. Each Lease or other occupancy or
other agreement under which the Company or any of its Subsidiaries holds real or
personal property has been duly authorized, executed and delivered by the
Company or Subsidiary, as the case may be, and, to the Company's knowledge, by
each of the parties thereto. Each such Lease is a legal, valid and binding
obligation of the Company or a Subsidiary, as the case may be, and, to the
Company's knowledge, of each other party thereto, enforceable in accordance with
its terms. Each of the Company and its Subsidiaries has a valid leasehold
interest in and enjoys peaceful and undisturbed possession under all Leases
pursuant to which it holds any real property or tangible personal property, none
of which contains any provision which would impair the Company's ability to use
such property as it is currently used by the Company, except as described in
Section 3.5(a) of the Disclosure Schedule. All of such Leases are valid and
subsisting and in full force and effect. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any other party thereto, is in
default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in any such Lease.
(b) Section 3.5(b) of the Disclosure Schedule contains a true, correct
and complete description of all real estate owned or leased by the Company or
any of its Subsidiaries and all Leases and an identification of all material
items of fixed assets and machinery and equipment. None of the fixed assets and
machinery and equipment is subject to contracts of sale, and none is held by the
Company or any of its Subsidiaries as lessee or as conditional sales venue under
any Lease or conditional sales contract and none is subject to any title
retention agreement, except as set forth in Section 3.5(b) of the Disclosure
Schedule. The real property (other than land), fixtures, fixed assets and
machinery and equipment are in a state of good repair and maintenance and are in
good operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure Schedule:
(i) all real property owned or leased by the Company or any of
its Subsidiaries conforms to and complies with all
applicable title covenants, conditions, restrictions and
reservations and all Environmental Laws and all applicable
zoning, wetlands, land use and other Applicable Law, and
(ii) neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any landlord, tenant or other
occupant or user of any such real property, has used such
real property for the storage or disposal of Hazardous
Materials or engaged in the business of storing or disposing
of Hazardous Materials, except for use in the ordinary
course of business of the type conducted by the Company.
13
<PAGE>
3.6 Compliance with Private Authorizations. Section 3.6 of the Disclosure
--------------------------------------
Schedule sets forth a true, correct and complete list and description of each
Private Authorization which individually is material to the Company or the
Company and its Subsidiaries taken as a whole, all of which are in full force
and effect. Each of the Company and each Subsidiary has obtained all Private
Authorizations which are necessary for the ownership by the Company or each
Subsidiary of its properties and the conduct of its business as now conducted or
as presently proposed to be conducted or which, if not obtained and maintained,
could, singly or in the aggregate, Adversely Affect the Company or the Company
and its Subsidiaries taken as a whole. Neither the Company nor any Subsidiary is
in breach or violation of, or is in default in the performance, observance or
fulfillment of, any Private Authorization, and no Event exists or has occurred,
which constitutes, or but for any requirement of giving of notice or passage of
time or both would constitute, such a breach, violation default, under any
Contractual Obligation or Private Authorization, except for such defaults,
breaches or violations, as do not and, to the Company's knowledge, will not have
in the aggregate any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto or to consummate the
Merger and the Transactions. No Private Authorization is the subject of any
pending or, to the Company's knowledge, threatened attack, revocation or
termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
--------------------------------------------------------------
(a) Section 3.7(a) of the Disclosure Schedule contains a description
of:
(i) all Legal Actions which are pending or, other than those
finally adjudicated or settled on or before December 31,
1995, in which the Company or any of its Subsidiaries, or
any of its officers or directors, is, or at any time
since its organization has been, engaged, or which
involves, or at any time during such period involved, the
business, operations or properties of the Company or any
of its Subsidiaries or, to the Company's knowledge, which
is threatened or contemplated against, or in any other
manner relating Adversely to, the Company or any of its
Subsidiaries or the business, operations or properties,
or the officers or directors, or any of them in
connection therewith; and
(ii) each Governmental Authorization to which the Company or
any Subsidiary is subject and which relates to the
business, operations, properties, prospects, condition
(financial or other), or results of operations of the
Company or the Company and its Subsidiaries taken as a
whole, all of which are in full force and effect.
(b) Each of the Company and each of its Subsidiaries has obtained
all Governmental Authorizations which are necessary for the ownership or uses of
its properties and the conduct of its business as now conducted or as presently
proposed to be conducted by the
14
<PAGE>
Company or which, if not obtained and maintained, could singly or in the
aggregate, have any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole. No Governmental Authorization is the subject of
any pending or, to the Company's knowledge, threatened attack, revocation or
termination. Neither the Company nor any Subsidiary nor any officer or director
(in connection with the business, operations and properties of the Company or
any Subsidiary) is or at any time since January 1, 1991 has been, or is or has
during such time been charged with, or to the knowledge of the Company, is
threatened or under investigation with respect to any material breach or
violation of, or in default in the performance, observance or fulfillment of,
any Governmental Authorization or any Applicable Law, and no Event exists or has
occurred, which constitutes, or but for any requirement of giving of notice or
passage of time or both would constitute, such a breach, violation or default,
under
(i) any Governmental Authorization or any Applicable Law,
except for such breaches, violations or defaults as do
not and, to the Company's knowledge, will not have in
the aggregate any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or the
ability of the Company to perform any of the
obligations set forth in this Agreement or any
Collateral Document executed or required to be
executed pursuant hereto or thereto, or to consummate
the Merger and the Transactions, or
(ii) any requirement of any insurance carrier, applicable
to its business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in
Sections 3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and
matters set forth in the Disclosure Schedule, individually and in the aggregate,
if adversely determined against the Company or any Subsidiary, will not
Adversely Affect the Company or the Company and its Subsidiaries taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions.
3.8 Intangible Assets.
-----------------
(a) Each of the Company and each Subsidiary owns or possesses or
otherwise has the right to use all Governmental Authorizations and other
Intangible Assets necessary for the present and planned future conduct of its
business, without any known conflict with the rights of others. The present and
planned future conduct of business by the Company and each Subsidiary is not
dependent upon any one or more, or all, of such Governmental Authorizations and
other Intangible Assets or rights with respect to any of the foregoing, except
as set forth in Section 3.8(a) of the Disclosure Schedule.
(b) Section 3.8(b) of the Disclosure Schedule sets forth a true,
correct and complete description of all of such Governmental Authorizations and
other Intangible Assets or
15
<PAGE>
rights with respect thereto, including without limitation the nature of the
Company's and each Subsidiary's interest in each and the extent to which the
same have been duly registered in the offices as indicated therein.
3.9 Related Transactions. Section 3.9 of the Disclosure Schedule sets forth
---------------------
a true, correct and complete description of any Contractual Obligation or
transaction, not fully discharged or consummated, as the case may be, on or
before the beginning of the Company's current fiscal year, between the Company
or any of its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services as officers, directors and employees and reimbursement
for out-of-pocket expenses reasonably incurred in support of the Company's
business), now existing or which, at any time since its organization, existed or
occurred, including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any officer, director, stockholder or
employee, or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
3.10 Insurance.
----------
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance
policies maintained by the Company or any Subsidiary and includes insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention.
(b) Neither the Company nor any Subsidiary is in breach or
violation of or in default under any such policy, and all premiums due thereon
have been paid, and each such policy or a comparable replacement policy will
continue to be in force and effect up to and including the Public Offering
Closing Date. The insurance policies so listed and identified are of a nature
and scope and in amounts sufficient to prevent the Company or any Subsidiary
from becoming a coinsurer within the terms of such policies. Except as set forth
in Section 3.10(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has, within the past five (5) years, been refused insurance by any
insurance carrier to which it has applied for insurance.
3.11 Tax Matters.
------------
(a) Each of the Company and each Subsidiary has in accordance with
all Applicable Laws filed all Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Returns and all other governmental
charges and assessments received to date. The Tax Returns of the Company and
each Subsidiary have been prepared in accordance with all Applicable Laws and
generally accepted principles applicable to taxation consistently applied.
16
<PAGE>
All Taxes which the Company and each Subsidiary are required by law to withhold
and collect have been duly withheld and collected and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. Neither
the Company nor any Subsidiary has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of the
Company or any Subsidiary for the fiscal year prior to and including the most
recent fiscal year. Adequate provision has been made on the most recent balance
sheet forming part of the Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other, and to the knowledge of the Company there are no transactions
or matters or any basis which might or could result in additional Taxes of any
nature to the Company or any Subsidiary for which an adequate reserve has not
been provided on such balance sheet. Each of the Company and each Subsidiary has
at all times been taxable as a Subchapter C corporation under the Code, except
as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. Neither
the Company nor any Subsidiary has ever been a member of any consolidated group
(other than exclusively with the Company and its Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes which
have become due pursuant to its Returns and has paid all installments (to the
extent required to avoid material underpayment penalties) of estimated Taxes due
and payable.
(c) From the end of its most recent fiscal year to the date hereof
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business with
respect to current operations or property presently owned.
(d) The information shown on the federal income Tax Returns of the
Company and its Subsidiaries (true, correct and complete copies of which have
been furnished by the Company to VIALOG) is true, correct and complete and
fairly and accurately reflects the information purported to be shown. Federal
and state income Tax Returns of the Company and its Subsidiaries have been
audited by the IRS or applicable state Authority for the taxable periods set
forth in Section 3.11(d) of the Disclosure Schedules, and neither the Company
nor any Subsidiary has been notified regarding any pending audit, except as
shown in Section 3.11(d) of the Disclosure Schedule.
(e) Neither the Company nor any Subsidiary is a party to any tax
sharing agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
(f) Neither the Company nor any Subsidiary has ever (i) filed a
consent under Section 341(f) of the Code concerning collapsible corporations or
(ii) undergone an "ownership change" within the meaning of Section 382(g) of the
Code, except as set forth in Section 3.11(f) of the Disclosure Schedule.
17
<PAGE>
3.12 Employee Retirement Income Security Act of 1974.
------------------------------------------------
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list
of all Plans and Benefit Arrangements maintained by the Company and any of its
Subsidiaries (which for purposes of this Section 3.12 will include any ERISA
Affiliate with respect to any Plan subject to Title IV of ERISA). As to all such
Plans and Benefit Arrangements, and except as disclosed in such Section 3.12(a)
of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply currently, and have
complied in the past, in all material respects both as to form
and operation, with their terms and with all Applicable Laws,
and neither the Company nor any of its Subsidiaries has
received any outstanding notice from any Authority questioning
or challenging such compliance,
(ii) all necessary governmental approvals for each Plan and Benefit
Arrangement have been obtained; the Internal Revenue Service
has issued a favorable determination as to the tax qualified
status of each Plan intended to comply with section 401(a) of
the Code and each amendment thereto, and a recognition of
exemption from federal income taxation under Section 501(a) of
the Code of each Plan which constitutes a funded welfare plan
as defined in Section 3(1) of ERISA; and nothing has occurred
since the date of each such determination or recognition that
would adversely affect such qualification.
(iii) no Plan which is subject to Part 3 of Subtitle B of Title 1 of
ERISA or Section 412 of the Code had an accumulated funding
deficiency (as defined in Section 302(a)(2) of ERISA and
Section 412 of the Code), whether or not waived, as of the
last day of the most recently completed fiscal year of such
Plan,
(iv) there are no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with respect
to any Plan for which the Company or any of its Subsidiaries
has any liability, nor are any of the assets of any Plan
invested in employer securities or employer real property,
(v) no Plan is subject to Title IV of ERISA, or if subject, there
have been no "reportable events" (as described in Section 4043
of ERISA) as to which there is any material risk of
termination of such Plan,
(vi) no material liability to the PBGC has been or is expected by
the Company to be incurred by the Company or any of its
Subsidiaries with respect to any Plan, and there has been no
event or condition
18
<PAGE>
which presents a material risk of termination of any Plan by
the PBGC,
(vii) with respect to each Plan subject to Title IV of ERISA, the
amount for which Company or any of its Subsidiaries would be
liable pursuant to the provisions of Sections 4062, 4063 or
4064 of ERISA would be zero if such Plans terminated on the
date of this Agreement,
(viii) no notice of intent to terminate a Plan has been filed with,
nor has any Plan been terminated pursuant to the provisions of
Section 4041 of ERISA,
(ix) the PBGC has not instituted proceedings to terminate (or
appointed a trustee to administer) a Plan and no event has
occurred or condition exists which might constitute grounds
under the provisions of Section 4042 of ERISA for the
termination of (or the appointment of a trustee to administer)
any such Plan.
(x) no Plan or Benefit Arrangement covers any employee or former
employee of the Company or any of its Subsidiaries that could
give rise to the payment of any amount that would not be
deductible pursuant to the terms of section 280G of the Code,
(xi) there are no Claims (other than routine claims for benefits)
pending or threatened involving any Plan or Benefit
Arrangement or any of the assets thereof,
(xii) except as set forth in Section 3.12(a) of the Disclosure
Schedule (which entry, if applicable, will indicate the
present value of accumulated plan liabilities calculated in a
manner consistent with FAS 106 and the actual annual expense
for such benefits for each of the last two (2) years) and
pursuant to the provisions of COBRA, neither the Company nor
any of its Subsidiaries maintains any Plan that provides
benefits described in Section 3(1) of ERISA to any former
employees or retirees of the Company or any of its
Subsidiaries,
(xiii) all reports, returns and similar items required to be filed
with any Authority or distributed to employees and/or Plan
participants in connection with the maintenance or operation
of any Plan or Benefit Arrangement have been duly and timely
filed and distributed, and there have been no acts or
omissions by the Company or any of its Subsidiaries, which
have given rise to or may reasonably be expected to give rise
to fines, penalties, taxes or related charges under Sections
502(c), 502(i) or 4071 or ERISA or
19
<PAGE>
Chapter 43 or section 6039D of the Code for which the Company
or any of its Subsidiaries may be liable,
(xiv) neither the Company nor any of its Subsidiaries nor any of its
respective directors, officers or employees has committed, nor
to the best of the Company's knowledge has any other fiduciary
committed, any breach of the fiduciary responsibility
standards imposed by ERISA that would subject the Company or
any of its Subsidiaries or any of its respective directors,
officers or employees to liability under ERISA,
(xv) to the extent that the most recent balance sheet forming part
of the Financial Statements does not include a pro rata amount
of the contributions which would otherwise have been made in
accordance with past practices for the Plan years which
include the Public Offering Closing Date, such amounts are set
forth in Section 3.12(a) of the Disclosure Schedule,
(xvi) the Company has furnished to VIALOG a copy of the three most
recently filed annual reports (IRS Form 5500) series and
accountant's opinion, if applicable, for each Plan (and the
three most recent actuarial valuation reports for each Plan,
if any, that is subject to Title IV of ERISA), and all
information provided by the Company to any actuary in
connection with the preparation of any such actuarial
valuation report was true, correct and complete in all
material respects,
(b) Neither the Company nor any of its Subsidiaries is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the basis of
funding, and the current status of, any past service liability with respect to
each Employment Arrangement to which the same is applicable.
3.13 Absence of Sensitive Payments. The Company has not, nor has any
------------------------------
Subsidiary, or, to the Company's knowledge, any of its or any Subsidiary's
officers, directors, employees or Representatives, (a) made any contributions,
payments or gifts to or for the private use of any governmental office, employee
or agent where either the payment or the purpose of such contribution, payment
or gift is illegal under the laws of the United States or the jurisdiction in
which made, (b) established or maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on its books, or (c) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
3.14 Inapplicability of Specified Statutes. Neither the Company nor any
--------------------------------------
Subsidiary is a "holding company", or a "subsidiary company" or an "affiliate"
or a "holding company", as
20
<PAGE>
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or an "investment company" or a company "controlled" by or acting on
behalf of an "investment company", as defined in the Investment Company Act of
1940, as amended.
3.15 Authorized and Outstanding Capital Stock
----------------------------------------
(a) The authorized and outstanding capital stock of the Company is
as set forth in Section 3.15(a) of the Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is fully
paid and non-assessable and is not subject to any preemptive or similar rights.
Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) there is
neither outstanding nor has the Company or any Subsidiary agreed to grant or
issue any shares of its capital stock or any Option Security or Convertible
Security, and (ii) neither the Company nor any Subsidiary is a party to or is
bound by any agreement, put or commitment pursuant to which it is obligated to
purchase, redeem or otherwise acquire any shares of capital stock or any Option
Security or Convertible Security. Between the date of this Agreement and the
Merger Closing, the Company will not, and will not permit any Subsidiary to,
issue, sell or purchase or agree to issue, sell or purchase any capital stock or
any Option Security or Convertible Security of the Company or any Subsidiary. As
of the Effective Time, the rights of the holders of all Option Securities and
Convertible Securities issued by the Company to exercise or convert such
Securities will have been terminated pursuant to the terms thereof.
(b) All of the outstanding capital stock of the Company is owned
by the Stockholders as set forth in Section 3.15(b) of the Disclosure Schedule,
and is, to the Company's knowledge, free and clear of all Liens, except as set
forth in Section 3.15(b) of the Disclosure Schedule. To the Company's knowledge,
no Person, and no group of Persons acting in concert, owns as much as five
percent (5%) of the Company's outstanding Common Stock, and the Company is not
controlled by any other Person, except as set forth in Section 3.15(b) of the
Disclosure Schedule.
3.16 Employment Arrangements.
------------------------
(a) Neither the Company nor any Subsidiary has any obligation or
liability, contingent or other, under any Employment Arrangement (whether or not
listed in Section 3.12(a) of the Disclosure Schedule), other than those listed
or described in Section 3.16(a) of the Disclosure Schedule. Neither the Company
nor any Subsidiary is now or during the past five (5) years has been subject to
or involved in or, to the Company's knowledge, threatened with any election for
the certification of a bargaining representative for any employees, petitions
therefor or other organizational activities, including but not limited to
voluntary requests for recognition as a bargaining representative, or
organizational campaigns of any nature, except as described in Section 3.16(a)
of the Disclosure Schedule. None of the employees of the Company or any
Subsidiary are now, or during the past five (5) years have been, represented by
any labor union or other employee collective bargaining organization. Neither
the Company nor any Subsidiary are parties to any labor or other collective
bargaining agreement, and there are no pending grievances, disputes or
controversies with any union or any other employee collective bargaining
organization of such employees, or, to the Company's knowledge, threats of
strikes, work
21
<PAGE>
stoppages or slowdowns or any pending demands for collective bargaining by any
union or other such organization. The Company and each Subsidiary have performed
all obligations required to be performed under all Employment Arrangements and
are not in breach or violation of or in default or arrears under any of the
terms, provisions or conditions thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, no employee will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employment Arrangement,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(c) The Company considers its and each Subsidiary's relationships
with employees to be good, and except as set forth in Section 3.16(c) of the
Disclosure Schedule, neither the Company nor any Subsidiary has experienced a
work slowdown or stoppage due to labor problems. Neither the Company nor any
Subsidiary has received notice of any claim that it has failed to comply with
any federal or state law, or is the subject of any investigation by any federal
or state agency to determine compliance with any federal or state law, relating
to the employment of labor, including any provisions relating to wages, hours,
collective bargaining, the payment of taxes, discrimination, equal employment
opportunity, employment discrimination, worker injury and/or occupational
safety, nor to the knowledge of the Company is there any basis for such a claim.
(d) Neither the Company nor any Subsidiary has conducted, and on
or prior to the Public Offering Closing Date will not conduct, a "plant closing"
or "mass layoff" of employees of the Company or any Subsidiary as defined by the
Worker Adjustment and Retraining Notification Act of 1988 ("the WARN Act"), 29
U.S.C. 2101-2109 as amended, or discharge, layoff, or reduce the hours of work,
of employees in a sufficient number or manner to trigger any state or local law
or regulation conditioning or regulating in any manner the discharge, layoff, or
reduction in hours of employees or the closing of a facility, plant, workplace,
division or department, from the date hereof or through the Public Offering
Closing Date or during the twelve-month period immediately prior thereto.
3.17 Material Agreements.
--------------------
(a) Listed on Section 3.17(a) of the Disclosure Schedule are all
Material Agreements relating to the ownership or operation of the business and
property of the Company or any Subsidiary presently held or used by the Company
or any Subsidiary or to which the Company or any Subsidiary is a party or to
which it or any or its property is subject or bound. True, complete and correct
copies of each of the Material Agreements have been furnished by the Company to
VIALOG (or true, complete and correct descriptions thereof have been set forth
in Section 3.17(a) of the Disclosure Schedule, if any such Material Agreements
are oral). All of the Material Agreements are valid, binding and legally
enforceable obligations of the parties thereto (except as such enforceability
may be subject to bankruptcy, moratorium, insolvency, reorganization,
arrangement, voidable preference, fraudulent conveyance and other similar laws
22
<PAGE>
relating to or affecting the rights of creditors and except as the same may be
subject to the effect of the general principles of equity), and the Company or
one of its Subsidiaries is validly and lawfully operating its business and
owning its property under each of the Material Agreements. The Company and each
Subsidiary have duly complied with all of the terms and conditions of each
Material Agreement and have not done or performed, or failed to do or perform
(and there is no pending or, to the knowledge of the Company, threatened Claim
that the Company or any Subsidiary has not complied, done and performed or fail
to do and perform) any act the effect of which would be to invalidate or provide
grounds for the other party thereto to terminate (with or without notice,
passage of time or both) such Material Agreement or impair the rights or
benefits, or increase the costs, of the Company or any Subsidiary, under any of
the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section 3.17(a)
of the Disclosure Schedule calling for the delivery of goods or merchandise or
the performance of services can be satisfied or performed by the Company or one
of its Subsidiaries at margins providing an operating profit, except as set
forth in Section 3.17(b) of the Disclosure Schedule.
3.18 Ordinary Course of Business.
----------------------------
(a) The Company and each Subsidiary, from the earlier of the date
of the most recent balance sheet forming part of the Financial Statements or
December 31, 1995 to the date of this Agreement, and until the Public Offering
Closing Date, except as may be described on Section 3.18(a) of the Disclosure
Schedule or as may be required or permitted expressly by the terms of this
Agreement or as may be approved in writing by VIALOG:
(i) has operated, and will continue to operate, its
business in the normal, usual and customary manner in
the ordinary and regular course of business,
consistent with prior practice,
(ii) has not sold or otherwise disposed of, or contracted
to sell or otherwise dispose of, and will not sell or
otherwise dispose of or contract to sell or otherwise
dispose of, any of its properties or assets, other
than in the ordinary course of business,
(iii) except in each case in the ordinary course of business
or as detailed as transactions not in the ordinary
course in the Company's business plan set forth as
Section 3.18(a) of the Disclosure Schedule, and except
as expressly otherwise contemplated hereby,
(A) has not incurred and will not incur any
obligations or liabilities (fixed, contingent or
other),
(B) has not entered and will not enter into any
commitments, and
(c) has not canceled and will not cancel any debts or
claims,
23
<PAGE>
(iv) has not made or committed to make, and will not make
or commit to make, any additions to its property or
any purchases of machinery or equipment, except for
normal maintenance and replacements,
(v) has not discharged or satisfied, and will not
discharge or satisfy, any Lien and has not paid and
will not pay any obligation or liability (absolute or
contingent) other than current liabilities or
obligations under contracts then existing or
thereafter entered into in the ordinary course of
business, and commitments under Leases existing on
that date or incurred since that date in the ordinary
course of business,
(vi) except in the ordinary course, has not increased and
will not increase the compensation payable or to
become payable to any of its directors, officers,
employees, advisers, consultants, salesmen or agents
or otherwise alter, modify or change the terms of
their employment or engagement,
(vii) has not suffered any material damage, destruction or
loss (whether or not covered by insurance) or any
acquisition or taking of property by any Authority,
(viii) has not waived, and will not waive, any rights of
material value without fair and adequate
consideration,
(ix) has not experienced any work stoppage,
(x) has not entered into, amended or terminated and will
not enter into, amend or terminate any Lease,
Governmental Authorization, Private Authorization,
Material Agreement, Employment Arrangement,
Contractual Obligation or transaction with any
Affiliate, except for terminations in the ordinary
course of business in accordance with the terms
thereof,
(xi) has not amended or terminated and will not amend or
terminate, and has kept and will keep in full force
and effect including without limitation renewing to
the extent the same would otherwise expire or
terminate, all insurance policies and coverage,
(xii) has not entered into, and will not enter into, any
other transaction or series of related transactions
which individually or in the aggregate is material to
the Company or the Company and its Subsidiaries taken
as a whole, except in the ordinary course of business,
and
24
<PAGE>
(xiii) has not, nor has any affiliate (as defined in Section
517.021(1) of the Florida Statutes), transacted
business with the government of Cuba or with any
person or affiliate located in Cuba.
(b) From the end of its most recent fiscal year to the date of
this Agreement, except as described in Section 3.18(b) of the Disclosure
Schedule, neither the Company nor any Subsidiary has, or on or prior to the
Public Offering Closing Date will have, declared, made or paid, or agreed to
declare, make or pay, any Distribution.
3.19 Bank Accounts, Etc. A true and correct and complete list as of the
-------------------
date of this Agreement of all banks, trust companies, savings and loan
associations and brokerage firms in which the Company or any Subsidiary has an
account or a safe deposit box and the names of all Persons authorized to draw
thereon, to have access thereto, or to authorize transactions therein, the names
of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof has been previously
delivered to VIALOG.
3.20 Adverse Restrictions. Neither the Company nor any Subsidiary is a
---------------------
party to or subject to, nor is any of its property subject to, any Applicable
Law, Governmental Authorization, Contractual Obligation, Employment Arrangement,
Material Agreement or Private Authorization, or any other obligation or
restriction of any kind or character, or any aggregation thereof, which impairs
the Company's or any Subsidiary's ability to conduct its business as it is
currently being conducted or which could have any Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, except as set forth in
Section 3.20 of the Disclosure Schedule.
3.21 Broker or Finder. No Person assisted in or brought about the
-----------------
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or any Stockholder.
3.22 Personal Injury or Property Damage; Warranty Claims; Etc. Except
---------------------------------------------------------
as set forth in Section 3.22 of the Disclosure Schedule, neither the Company nor
any Subsidiary or any Person acting for or on behalf of the Company or any
Subsidiary, including without limitation any insurance carrier, has at any time
since December 31, 1995, paid, and there is not now pending or, to the knowledge
of the Company, threatened any Claim (or any basis for any such Claim) relating
to, any damages to any third party for injuries to Persons or damage to
property, or for breach of warranty, which, in the case of pending or threatened
Claims, if determined Adversely to the Company or any Subsidiary, individually
or in the aggregate (taking into account unasserted Claims of similar nature),
could have any Adverse Effect on the Company or the Company and its Subsidiaries
taken as a whole.
3.23 Environmental Matters.
----------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Company and each Subsidiary:
25
<PAGE>
(i) is in compliance in all material respects with all
Environmental Laws and has not been notified that it
is liable or potentially liable, has not received any
request for information or other correspondence
concerning any site or facility, and is not a
"responsible party" or "potentially responsible
party" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, the Resource Conservation Recovery Act of
1976, as amended, or any similar state law,
(ii) has not entered into or received any consent decree,
compliance order, or administrative order relating to
Environmental Requirements,
(iii) is not a party in interest or in default under any
judgment, order, writ, injunction or decree or any
final order relating to Environmental Requirements,
and
(iv) has obtained all material Governmental Authorizations
and Private Authorizations (including without
limitation all Environmental Permits) and made all
Governmental Filings which are required to be filed
by the Company and each Subsidiary for the ownership
of its property, facilities and assets and the
operation of its businesses under all Environmental
Laws, is and at all times since its organization has
been in material compliance with the terms and
conditions of all such required Governmental and
Private Authorizations and all Environmental
Requirements, and is not the subject of or, to the
Company's knowledge, threatened with any Legal Action
involving a demand for damages or any other potential
liability with respect to violations or breaches of
any Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure
Schedule:
(i) no spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water has
occurred on any property or facility owned, leased,
operated or occupied by the Company or any Subsidiary
during the period that such facilities and properties
were owned, leased, operated or occupied by it or, to
the knowledge of the Company, at any other time or at
any other facility or site to which Hazardous
Materials from or generated by the Company or any
Subsidiary may have been taken at any time in the
past,
(ii) there has been no spill, disposal, release, burial or
placement of Hazardous Materials, in the soil, air or
water on any property which could reasonably be
expected to result or has resulted in
26
<PAGE>
contamination of or beneath any properties or
facilities owned, leased, operated or occupied by the
Company or any Subsidiary during the period that such
facilities and properties were owned, leased,
operated or occupied by it (or, to the knowledge of
the Company, at any other time), and
(iii) no notice has been received by the Company or any
Subsidiary and no Lien has arisen on its or any
Subsidiary's properties or facilities under
Environmental Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary has any above-ground or
underground tanks on property owned, leased, operated or occupied by it for the
storage of Hazardous Materials.
(d) There has not been, and on or prior to the Public Offering
Closing Date, there will not be, any past or present Events or plans of the
Company or any Subsidiary or any of its predecessors, which, individually or in
the aggregate, constitute a breach of any Environmental Requirements or which,
individually or in the aggregate, may interfere with or prevent continued
compliance with all Environmental Requirements, or which, individually or in the
aggregate, may give rise to any common law, statutory or other legal liability,
or otherwise form the basis of any Claim, assessment or remediation cost, fine,
penalty or assessment based on or related to the transportation, transmission,
gathering, processing, distribution, use, treatment, storage, disposal or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material with respect to the Company or any
Subsidiary or any of its predecessors or its or any of their business,
operations or property which could have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary has used any Hazardous
Materials in the conduct of its business. To the extent that any Hazardous
Materials are so set forth, Section 3.23(e) of the Disclosure Schedule also sets
forth (i) a description of Hazardous Materials used, (ii) the annual volume of
each of the Hazardous Materials used, (iii) the years during which each of the
Hazardous Materials used occurred, and (iv) the Persons to whom such Hazardous
Materials were transferred and/or transported after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a complete
and correct description of all Hazardous Materials generated by the Company or
any Subsidiary which are not set forth in Section 3.23(e), the approximate
annual volumes of each of the Hazardous Materials, and all Persons to whom such
Hazardous Materials have been transferred and/or transported.
(g) No site assessment, audit, study, test or other investigation
has been conducted by or on behalf of the Company or any Subsidiary, nor has the
Company received any notice from any governmental agency, or financial
institution as to environmental matters at any property owned, leased, operated
or occupied by the Company or any Subsidiary, except as set forth in Section
3.23(g) of the Disclosure Schedule.
27
<PAGE>
3.24 Materiality. The matters and items excluded from the
-----------
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to be Adverse to the
Company or the Company and its Subsidiaries taken as a whole.
3.25 Solvency. As of the execution and delivery of this Agreement, the
--------
Company and the Company and its Subsidiaries taken as a whole are and, as of the
Public Offering Closing Date, will be solvent.
3.26 VIALOG Stock. The Stockholders will hold for investment the VIALOG
------------
Stock constituting the Stock Merger Consideration.
3.27 Compliance with Regulations Relating to Securities Credit. None of
---------------------------------------------------------
the borrowings, if any, of the Company were incurred or used for the purpose of
purchasing or carrying any security which at the date of its acquisitions was,
or any security which now is, margin stock or other margin security within the
meaning of Regulations T of the Margin Rules or a "security that is publicly
held," within the meaning of the Margin Rules, and the cash portion of the
proceeds from the consummation of the Transactions will not be used for the
purpose of purchasing or carrying any margin stock or other margin security, or
a "security that is publicly held", or any security issued by VIALOG, or in any
way which would involve the Company in any violation of the Margin Rules, and
neither the Company nor any Subsidiary owns any margin stock or other margin
security, or a "security that is publicly held", and neither the Company nor any
Subsidiary has any present intention of acquiring any margin stock or other
margin security, or any "security that is publicly held".
3.28 Certain State Statutes Inapplicable. The provisions of applicable
-----------------------------------
Massachusetts takeover laws, if any, will not apply to this Agreement, the
Merger or the Transactions.
3.29 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as of a specific date, all of the
representations and warranties of the Company set forth in this Article will be
true and correct in all material respects on the Public Offering Closing Date
with the same force and effect as though made on and as of that date and those,
if any, which speak as a specific date will be true and correct in all material
respects as of such date.
3.30 Registration Statement. All information furnished by or on behalf
----------------------
of the Company or any Stockholder in writing for use in the Registration
Statement and all information relating to the Company in the Prospectus (a copy
of which shall be provided by VIALOG to the Company and Principal Stockholder
for their review) is true, correct and complete and does not contain any untrue
statement of material fact or omit to state any material fact necessary to make
such statements, in the light of the circumstances in which they were made, not
misleading. In the event any such information, through the occurrence or
nonoccurrence of any event or events between the date of this Agreement and the
Public Offering Closing Date, ceases to be true, correct and complete or
contains any untrue statement of material fact or omits to state any material
fact necessary to make such statements, in the light of the circumstances in
which they
28
<PAGE>
were made, not misleading, the Company, upon discovery thereof will provide
VIALOG, in writing, sufficient information to correct such untrue statement or
omission.
3.31 Predecessor Status; etc. Set forth in Section 3.31 of the
------------------------
Disclosure Schedule is a listing of all names of all predecessor companies of
the Company and the names of any Entities from which, since December 31, 1991,
the Company previously acquired material properties or assets. Except as
disclosed in Section 3.31 of the Disclosure Schedule, the Company has never been
a Subsidiary or division of another Entity, nor a part of an acquisition which
was later rescinded. None of the Company, the Principal Stockholder or any
Subsidiary has ever owned any capital stock of VIALOG nor, except as set forth
in Section 3.31 of the Disclosure Schedule, has there been, since December 31,
1991, any sale or spin-off of material assets by the Company or any Subsidiary
other than in the ordinary course of business.
ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL STOCKHOLDER
The Principal Stockholder represents, warrants and covenants to, and
agrees with, VIALOG and VIALOG Merger Subsidiary as follows:
4.1 Organization. The Principal Stockholder (if other than an
------------
individual) is an Entity duly organized, validly existing and in good standing
under the laws or its jurisdiction of organization.
4.2 Power and Authority. The Principal Stockholder (if other than an
-------------------
individual) has adequate power and authority (corporate, partnership, trust or
other) and all necessary Governmental Authorizations and Private Authorizations
in order to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each other Collateral Document executed or required to
be executed pursuant hereto or thereto. The execution, delivery and performance
of this Agreement and each other Collateral Document executed or required to be
executed pursuant hereto or thereto have, to the extent applicable, been duly
authorized by all requisite corporate, partnership, trust or other action,
including that, if required, of the Principal Stockholder's stockholders or
partners.
4.3 Enforceability. This Agreement has been duly executed and
--------------
delivered by the Principal Stockholder and constitutes, and each Collateral
Document executed or required to be executed by the Principal Stockholder
pursuant hereto or thereto when executed and delivered by the Principal
Stockholder will constitute legal, valid and binding obligations of the
Principal Stockholder, enforceable in accordance with their respective terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable
29
<PAGE>
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity.
4.4 Title to Shares. Except as set forth in Section 4.4 of the
---------------
Disclosure Schedule (all of which exceptions will be removed, satisfied or
discharged no later than the Merger Closing), the Principal Stockholder owns and
has good and merchantable title to those Shares owned by the Principal
Stockholder and to be exchanged pursuant to this Agreement, free and clear or
all Liens.
4.5 No Conflict; Required Filings and Consents. Neither the execution
------------------------------------------
and delivery of this Agreement or any Collateral Document executed or required
to be executed pursuant hereto or thereto, nor the consummation of the Merger
and the Transactions, nor compliance with the terms, conditions and provisions
hereof or thereof by the Principal Stockholder:
(a) will materially conflict with, or result in a breach or
violation of, or constitute a default under, any Applicable Law on the part of
such Stockholder or will conflict with, or result in a material breach or
violation of, or constitute a material default in the performance, observance or
fulfillment of, or a material default under, or permit the acceleration of any
obligation or liability in, or, but for any requirements of notice or passage of
time or both, would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
the Principal Stockholder,
(b) will result in or permit the creation or imposition of any
Lien upon any property or asset of the Principal Stockholder used or now
contemplated to be used by the Company, or
(c) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in connection
with the Merger and the Transactions and as the Securities Act or applicable
state securities laws may apply to compliance by the Principal Stockholder with
the provisions of this Agreement relating to the Public Offering and
registration rights, pursuant to the HSR Act (if applicable) or as set forth in
Section 4.5 of the Disclosure Schedule.
ARTICLE
5
REPRESENTATIONS AND WARRANTIES OF VIALOG
AND VIALOG MERGER SUBSIDIARY
VIALOG and VIALOG Merger Subsidiary, jointly and severally, represent,
warrant and covenant to, and agree with, the Company as follows:
5.1 Organization and Qualification. VIALOG is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of
Massachusetts. VIALOG Merger
30
<PAGE>
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware.
5.2 Power and Authority. Except for such consents of Authorities as
-------------------
may be necessary in connection with change-of-control transactions with respect
to Governmental Authorities listed in Section 3.1(c) of the Disclosure Schedule,
each of VIALOG and VIALOG Merger Subsidiary has all requisite power and
authority (corporate and other) and has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto and to consummate the Merger and the Transactions. The execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action. This Agreement has been duly
executed and delivered by each of VIALOG and VIALOG Merger Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto when executed and delivered by it will constitute,
legal, valid and binding obligations of VIALOG and VIALOG Merger Subsidiary,
respectively, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
5.3 No Conflict; Required Filings and Consents. Except for such
------------------------------------------
consents of Authorities as may be necessary in connection with change-of-control
transactions with respect to Governmental Authorities listed in Section 3.1(c)
of the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Collateral Document executed or required to be executed pursuant hereto
or thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of VIALOG and VIALOG
Merger Subsidiary:
(a) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of VIALOG or VIALOG
Merger Subsidiary or will conflict with, or result in a breach or violation of,
or constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of giving of notice or passage of time
or both would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
VIALOG or VIALOG Merger Subsidiary, or
(b) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements under Applicable
Law in connection with the Merger and the Transactions and as the Securities Act
and applicable state securities laws may apply to compliance by VIALOG with the
provisions of this Agreement relating to the Public Offering and registration
rights and except pursuant to the HSR Act (if applicable).
31
<PAGE>
5.4 Financing. VIALOG has or, upon consummation of the Public
---------
Offering, will have sufficient funds or available financing to enable the
Surviving Corporation to pay the Aggregate Merger Consideration for all Shares
of the Company Stock as provided in Sections 2.1(a) and 2.1(d), the
consideration for each Option Security and each Convertible Security as provided
in Section 2.4, and all fees and expenses related to the Merger and its
obligations in connection with the Public Offering.
5.5 Broker or Finder. Except for the Underwriter, the fees and
----------------
expenses of which (other than pursuant to the Underwriting Agreement) are solely
the responsibility of VIALOG, no Person assisted in or brought about the
negotiation of this Agreement or the subject matter of the Transactions in the
capacity of broker, agent or finder or in any similar capacity on behalf of
VIALOG or VIALOG Merger Subsidiary.
5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary. Neither
-------------------------------------------------------
of VIALOG or VIALOG Merger Subsidiary has incurred any liabilities or
Contractual Obligations, except those incurred in connection with its
organization and ordinary course business operations (including Employment
Arrangements), the negotiation of this Agreement and the performance of this
Agreement and of the Participating Agreements with the Other Participating
Companies, the registration of VIALOG Stock under the Securities Act, compliance
with the requirements of the HSR Act (if applicable) and the performance of all
other Governmental Filings, and the financing of the foregoing. Except as
contemplated by the foregoing, neither of VIALOG or VIALOG Merger Subsidiary has
engaged in any business activities of any type or kind whatsoever, nor entered
into any agreements or arrangements with any Person, nor is it subject to or
bound by any obligation or undertaking.
5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary. The
-----------------------------------------------------
authorized and outstanding capital stock of each of VIALOG and VIALOG Merger
Subsidiary is as set forth in Section 5.7 of the Disclosure Schedule. All of
such outstanding capital stock has been duly authorized and validly issued, is
fully paid and non-assessable and is not subject to any preemptive or similar
rights. All shares of common stock of VIALOG Merger Subsidiary held by VIALOG
have been duly authorized and validly issued to VIALOG and are fully paid and
non-assessable and are not subject to any preemptive or similar rights. As of
the date of this Agreement, except for this Agreement, the Participating
Agreements, the Underwriting Agreement, and as set forth on Section 5.7 of the
Disclosure Schedule, there are not any outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments or any other agreements of any
character obligating VIALOG or VIALOG Merger Subsidiary to issue any shares of
VIALOG Stock or other shares of capital stock of VIALOG or of VIALOG Merger
Subsidiary, or any other securities convertible into or evidencing the right to
subscribe for any such shares. When issued in connection with the Merger, the
VIALOG Stock will be duly authorized, validly issued, fully paid and non-
assessable and will not be subject to any preemptive or similar rights.
5.8 Registration Statement. The Registration Statement and any
amendments thereto will comply when the Registration Statement becomes effective
in all material respects with the provisions of the Securities Act and will not
contain any untrue statement of a material fact or
32
<PAGE>
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus will not as of the
issue date thereof contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this Section 5.8
will not apply to statements or omissions in the Registration Statement or the
Prospectus based on information relating to the Underwriter furnished to VIALOG
in writing by the Underwriter, or based on information relating to any of the
Other Participating Companies or its stockholders furnished to VIALOG in writing
by such Participating Company or any or its stockholders, or the Company or the
Stockholders furnished to VIALOG in writing by the Company or any of the
Stockholders. VIALOG will furnish the Company with a copy of the Registration
Statement and of each amendment thereto until the Merger Closing and thereafter
will furnish the Principal Stockholder with each amendment thereto and the final
Prospectus.
5.9 Solvency. After the Effective Time, and upon the consummation of
--------
the Merger, the Participating Mergers and the Transactions, VIALOG and its
subsidiaries, individually and taken as a whole, will be solvent.
5.10 Firm Commitment. The contemplated Public Offering shall be a firm
---------------
commitment underwriting and not a best efforts underwriting and all VIALOG Stock
sold in the offering will be purchased by the Underwriter on the Effective Date
and paid for by the Underwriter on the Public Offering Closing Date.
5.11 Participating Agreements of Other Participating Companies. Except
---------------------------------------------------------
as set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, each Participating Agreement
entered into among VIALOG, any Subsidiary of VIALOG, and any Other Participating
Company contains provisions substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement, including,
without limitation, the representations and warranties, covenants, termination
provisions and indemnification provisions contained in those Articles. Except as
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, no Participating Agreement
contains any material provision which is not contained in substantially
identical form in this Agreement.
5.12 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as a specific date, all of the
representations and warranties of VIALOG and the VIALOG Merger Subsidiary set
forth in this Article will be true and correct in all material respects on the
Public Offering Closing Date with the same force and effect as though made on
and as of that date, and those, if any, which speak as of a specific date will
be true and correct in all material respects as of such date.
33
<PAGE>
ARTICLE
6
ADDITIONAL COVENANTS
6.1 Access to Information; Confidentiality.
--------------------------------------
(a) The Company will afford to VIALOG and the Representatives of
VIALOG full access during normal business hours throughout the period prior to
the Effective Time to all of its (and its Subsidiaries') properties, books,
contracts, commitments and records (including without limitation Tax Returns)
and, during such period, will furnish promptly upon request (i) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of any Applicable Law (including without limitation federal or
state securities laws) or filed by any of them with any Authority in connection
with the Transactions or which may have a material effect on their respective
businesses, operations, properties, prospects, personnel, condition (financial
or other), or results of operations, (ii) to the extent not provided for
pursuant to the preceding clause, (A) all financial records, ledgers, workpapers
and other sources of financial information processed or controlled by the
Company or its accountants deemed by the Accountants necessary or useful for the
purpose of performing an audit of the Company and the Company and its
Subsidiaries taken as a whole and certifying financial statements and financial
information and (B) all other information relating to the Company, its
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Registration Statement, and
(iii) such other information concerning any of the foregoing as VIALOG will
reasonably request. Subject to the terms and conditions of the Confidentiality
Letter (as defined below), which are expressly incorporated in this Agreement by
reference for the benefit of the parties hereto, VIALOG will hold and will use
commercially reasonable efforts to cause the Representatives of VIALOG to hold,
and the Company will hold and will use commercially reasonable efforts to cause
the Representatives of the Company to hold, in strict confidence all non-public
documents and information furnished (whether prior or subsequent hereto) to
VIALOG or to the Company, as the case may be, in connection with the
Transactions.
(b) Subject to the terms and conditions of the Confidentiality
Letter, VIALOG and the Company may disclose such information as may be necessary
in connection with seeking all Governmental and Private Authorizations or that
is required by Applicable Law to be disclosed. In the event that this Agreement
is terminated in accordance with its terms, VIALOG and the Company will each
promptly redeliver all non-public written material provided pursuant to this
Section or any other provision of this Agreement or otherwise in connection with
the Merger and the Transactions and will not retain any copies, extracts or
other reproductions in whole or in part of such written material other than one
copy thereof which will be delivered to independent counsel for such party.
(c) The Company and VIALOG acknowledge that the Company and VIALOG
have executed one or more Confidential Disclosure Agreements (collectively, the
34
<PAGE>
"Confidentiality Letter"), which separately and as incorporated in this
Agreement will remain in full force and effect after and notwithstanding the
execution and delivery of this Agreement, and that information obtained from the
Company by VIALOG, or its Representatives or by the Company or its
Representatives from VIALOG pursuant to Section 6.1(a), the Confidentiality
Letter or otherwise will be subject to the provisions of the Confidentiality
Letter.
(d) No investigation pursuant to this Section 6.1 will affect any
representation or warranty in this Agreement of any party or any condition to
the obligations of the parties.
6.2 Agreement to Cooperate.
----------------------
(a) Each of the Parties will use commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate the
Merger and make effective the Transactions, including using commercially
reasonable efforts (i) to prepare and file with the applicable Authorities as
promptly as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information, data and
exhibits, necessary to request issuance of orders approving the Merger and the
Transactions by all such applicable Authorities, each of which must be obtained
or become final in order to satisfy the conditions applicable to it set forth in
Section 7; (ii) to obtain all necessary or appropriate waivers, consents and
approvals, (iii) to effect all necessary registration, filings and submissions
(including without limitation the Registration Statement, other filings under
the Securities Act or the HSR Act and any other submissions requested by the SEC
or the Federal Trade Commission or Department of Justice) and (iv) to lift any
injunction or other legal bar to the Merger and the Transactions (and, in such
case, to proceed with the Merger and the Transactions as expeditiously as
possible), subject, however, to the requisite votes of the Stockholders. Each of
the Parties recognizes that the consummation of the Merger and the Transactions
may be subject to the pre-merger notification requirements of the HSR Act. Each
agrees that, to the extent required by Applicable Law to consummate the Merger,
it will file with the Antitrust Division of the Department of Justice and the
Federal Trade Commission a Notification and Report Form in a manner so as to
constitute substantial compliance with the notification requirements of the HSR
Act. Each covenants and agrees to use commercially reasonable efforts to achieve
the prompt termination or expiration of any waiting period or any extensions
thereof under the HSR Act.
(b) Each of the Parties agrees to take such actions as may be
necessary to obtain any Governmental Authorizations legally required for the
consummation of the Merger and the Transactions, including the making of any
Governmental Filings, publications and requests for extensions and waivers.
(c) The Company will use commercially reasonable efforts on or
prior to the Public Offering Closing Date (i) to obtain the satisfaction of the
conditions specified in Sections 7.1 and 7.2; (ii) if requested by VIALOG, to
seek the consents (to the extent required) to the continued existence in
accordance with its then-stated terms of all long-term debt of each of the
Company and each of its Subsidiaries; and (iii) to attempt to cause those key
employees of
35
<PAGE>
the Company and its Subsidiaries designated by VIALOG that are not Stockholders
to execute and deliver non-competition agreements substantially conforming in
form and substance to the non-competition agreements currently maintained by
VIALOG with its key employees in the form attached as Exhibit 6.2(c). Each of
VIALOG and VIALOG Merger Subsidiary will use its best efforts on or prior to the
Public Offering Closing Date to obtain the satisfaction of the conditions
applicable to it specified in Sections 7.1 and 7.3. The Principal Stockholder
will use commercially reasonable efforts to obtain the satisfaction of the
conditions applicable to the Principal Stockholder in Section 7.2.
(d) The Company agrees that, except as set forth in Section 3.19
of the Disclosure Schedule, prior to the Public Offering Closing Date it will
not make or permit to be made any material change affecting any bank, trust
company, savings and loan association, brokerage firm or safe deposit box or in
the names of the Persons authorized to draw thereon, to have access thereto or
to authorize transactions therein or in such powers of attorney, or open any
additional accounts or boxes or grant any additional powers of attorney, without
in each case obtaining the prior written consent of VIALOG, which consent VIALOG
will not unreasonably withhold.
(e) The Company will take such steps as are necessary and
appropriate to obtain, and will promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.15(b) of the Disclosure Schedule.
6.3 Assignment of Contracts and Rights. Anything in this Agreement to the
----------------------------------
contrary notwithstanding, this Agreement will not constitute an agreement to
assign any Claim, Contractual Obligation, Governmental Authorization, Lease,
Private Authorization, commitment, sales, service or purchase order, or any
claim, right or benefit arising thereunder or resulting therefrom, if the Merger
or the Transactions would be deemed an attempted assignment thereof without the
required consent of a third party thereto and would constitute a breach thereof
or in any way affect the rights of VIALOG, VIALOG Merger Subsidiary or the
Company thereunder. If such consent is not obtained, or if consummation of the
Merger and the Transactions would affect the rights of the Company thereunder so
that the Surviving Corporation would not in fact receive all such rights, the
Company will cooperate with VIALOG in any arrangement designed to provide for
the benefits thereof to the Surviving Corporation, including subcontracting,
sublicensing or subleasing to the Surviving Corporation or enforcement for the
benefit of the Surviving Corporation of any and all rights of the Company or its
Subsidiaries against a third party thereto arising out of the breach or
cancellation by such third party or otherwise. Any assumption by the Surviving
Corporation of the Company's rights thereunder by operation of law in connection
with the Merger which will require the consent or approval of any third party
will be made subject to such consent or approval being obtained.
6.4 Compliance with the Securities Act. Each of VIALOG and the Company
----------------------------------
will use its commercially reasonable efforts to cause each executive officer,
each director and each other Person who is an "affiliate," as that term is
defined in paragraph (a) of Rule 144 under the Securities Act, of the Company,
or who will, upon consummation of the Merger and the Transactions become, an
"affiliate" of VIALOG, and each Stockholder of the Company, to
36
<PAGE>
deliver to VIALOG on or prior to the Merger Closing a written agreement (the
"Registration Rights Agreement") to the effect that such Person will not offer
to sell, sell or otherwise dispose of any shares of VIALOG Stock issued pursuant
to the consummation of the Transactions, except, in each case, pursuant to an
effective registration statement or in compliance with Rule 144, or in a
transaction which, in the opinion of legal counsel for such "affiliates" (such
legal counsel to be satisfactory to legal counsel for VIALOG), as set forth in a
written opinion satisfactory in form, scope and substance to the legal counsel
of VIALOG, is exempt from registration under the Securities Act and applicable
state securities laws. The Registration Rights Agreement shall be substantially
in the form of Exhibit 6.4. Notwithstanding anything to the contrary in this
Agreement, VIALOG will have no obligation under the Registration Rights
Agreement or otherwise to register under the Securities Act or any applicable
state securities laws, or otherwise to facilitate the transfer of, shares of
VIALOG Stock received by any such Person who fails to execute the Registration
Rights Agreement as provided herein, and such Person will forfeit all "demand
registration" and other rights provided for in the Registration Rights Agreement
and all "piggyback" rights provided for in the Registration Rights Agreement.
6.6 Conduct of Business.
-------------------
(a) Prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated, the Company and its Subsidiaries will (i) use
their best efforts to preserve intact their respective business organizations
and good will, keep available the services of their respective officers and
employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them, (ii)
confer on a regular and frequent basis with one or more representatives of
VIALOG to report operational matters of Materiality and the general status of
ongoing operations, and (iii) notify VIALOG of any emergency or other change in
the normal course of their business and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be Material to the business, operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
(b) Except as set forth in Schedule 6.5(b) (or Section 6.5(b) of
the Disclosure Schedule, as the case may be) or with the written permission of
VIALOG, the Company agrees further that the Company (i) will not make, declare
or pay any dividends or other distributions on any Shares or the stock of the
Company's Subsidiaries or redeem or repurchase or otherwise acquire any Shares
(except cancellation of options and warrants as required in this Agreement),
(ii) will not enter into or terminate any Employment Arrangement with any
director or officer, (iii) will not incur any obligation or liability (absolute
or contingent), except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business (iv) will not
discharge or satisfy any Lien or Encumbrance or pay any obligation or liability
(absolute or contingent) other than current liabilities shown on its Financial
Statements, and current liabilities incurred since those dates in the ordinary
course of business, (v) will not mortgage, pledge, create a security interest
in, or subject to Lien or other Encumbrance any of its assets, tangible or
intangible, (vi) will not sell or transfer any of its tangible assets or cancel
any debts or claims except in each case in the ordinary course of business,
(vii) will not sell, assign, or transfer any
37
<PAGE>
trademark, trade name, patent, or other Intangible Asset, (viii) will not waive
any right of any substantial value, (ix) will not make any material change in
the tax procedures or practices followed by the Company or any of its
Subsidiaries, (x) will not make any change in credit terms offered by the
Company or any of its Subsidiaries, (xi) will not make any capital expenditure
or Material Commitment for any additions or improvements to its or any of its
Subsidiary's property, plant or equipment, (xii) will not amend its
capitalization, or issue any stocks, bonds or other securities, except that the
Company may issue shares pursuant to outstanding Option Securities and
Convertible Securities, (xiii) will not enter into, modify or extend, or promise
any bonus or incentive compensation program that was not in place prior to June
1, 1996 and (xiv) will otherwise conduct its operation and the operations of its
Subsidiaries according to their ordinary and usual course of business.
6.6 No Solicitation. The Company will not, nor will it permit any
---------------
Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquires or the making of any proposal with respect to an Other Transaction,
engage in any discussions or negotiations concerning, or provide to any other
person any information or data relating to it or any Subsidiary for the purposes
of, or otherwise cooperate in any way with or assist or participate in, or
facilitate any inquires or the making of any proposal which constitutes, or may
reasonably be expected to lead to, a proposal to seek or effect an Other
Transaction, or agree to or endorse any Other Transaction. Nothing contained in
this Section will prohibit the Company or its Board of Directors from making any
disclosure to Stockholders that, in the reasonable judgment of its Board of
Directors in accordance with, and based upon the written advice of outside
counsel, is required under Applicable Law. The Company will promptly advise
VIALOG of, and communicate the material terms of, any proposal it may receive,
or any inquires it receives which may reasonably be expected to lead to such a
proposal relating to an Other Transaction, and the identity of the Person making
it. The Company will further advise VIALOG of the status and changes in the
material terms of any such proposal or inquiry (or any amendment to any of
them). During the term of this Agreement, the Company will not enter into any
agreement oral or written, and whether or not legally binding, with any Person
that provides for, or in any way facilitates, an Other Transaction, or affects
any other obligation of the Company under this Agreement.
6.7 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) From and after the Effective Time, the Surviving Corporation
will indemnify, defend and hold harmless the present and former officers and
directors of the Company against all Claims or amounts that are paid in
settlement of, with the approval of the Surviving Corporation, or otherwise in
connection with any Claim based in whole or in part on the fact that such Person
is or was a director or officer of the Company and arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the Merger and the Transactions), in each case to the fullest extent
permitted under the BCA (and will pay any expenses in advance of the final
disposition of any such action or proceeding to each such Person to the fullest
extent permitted under the BCA, upon receipt from the Person to whom expenses
are advanced of an undertaking to repay such advances to the extent required
38
<PAGE>
under the BCA). The Surviving Corporation will observe and comply with the
Company's obligations pursuant to the indemnification agreements, if any, listed
in Section 3.9 of the Disclosure Schedule.
(b) This Section 6.7 is intended to be for the benefit of, and
will be enforceable by, the former officers and directors of the Company, their
heirs and personal representatives and will be binding on the Surviving
Corporation and its respective successors and assigns.
(c) VIALOG will apply for directors and officers insurance in the
amount of $2,000,000 for the benefit of the directors and officers of VIALOG and
the Surviving Corporations.
6.8 Notification of Certain Matters. The Company will give prompt notice
-------------------------------
to VIALOG, and VIALOG will give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any Event the occurrence or non-occurrence of
which would be likely to cause in any material respect (i) any representation or
warranty of the Company or VIALOG, as the case may be, contained in this
Agreement to be untrue or inaccurate, or (ii) in the case of the Company or the
Principal Stockholder, any change to be made in the Disclosure Schedule and (b)
any failure of the Company or VIALOG, as the case may be, to comply with or
satisfy, or be able to comply with or satisfy, any material covenant, condition
or agreement to be complied with or satisfied by it under this Agreement. The
delivery of any notice pursuant to this Section 6.8 will not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
6.9 Public Announcements. Until the Merger Closing, or in the event of
--------------------
termination of this Agreement, the closing of the Public Offering (or its
abandonment), the Company will consult with VIALOG before issuing any press
release or otherwise making any public statements with respect to this
Agreement, the Merger or any Transaction (including the Participating Mergers or
the termination of this Agreement in such event) and will not issue any such
press release or make any such public statement without the prior consent of
VIALOG and the written advice of legal counsel to VIALOG that such press release
or such public statement will not affect the registration of VIALOG Stock under
the Securities Act or the timing of the effectiveness thereof. The Company
acknowledges and agrees that VIALOG may, without the prior consent of the
Company, issue such press release or make such public statement as may be
required by Applicable Law or any listing agreement or arrangement to which
VIALOG is a party with a national securities exchange or the National
Association of Securities Dealers, Inc. Automated Quotation System, or as
recommended by outside counsel. VIALOG will exercise commercially reasonable
efforts to furnish the Company a copy of any press release relating to Other
Participating Companies prior to its publication and will furnish a copy of any
such press release so issued as soon as practicable after its publication, but
any failure on VIALOG's part to do so will not be deemed a breach of or default
under this Agreement. VIALOG will furnish the Company with a copy of any press
release or public information of VIALOG, at a reasonable time prior to its
release for publication.
39
<PAGE>
6.10 Conveyance Taxes. The Parties will cooperate with one another in the
----------------
preparation, execution and filing of all Returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.
6.11 Obligations of VIALOG. VIALOG agrees to take all action necessary to
---------------------
cause VIALOG Merger Subsidiary and the Surviving Corporation to perform their
respective obligations under this Agreement and will use commercially reasonable
efforts to consummate, and cause VIALOG Merger Subsidiary to consummate, the
Merger on the terms and conditions set forth in this Agreement.
6.12 Employee Benefits; Severance Policy. VIALOG will cause the Surviving
-----------------------------------
Corporation to maintain through its fiscal year ending December 31, 1997:
(a) employee incentive compensation and fringe benefits that are
substantially equivalent to those provided to employees of the Company and its
Subsidiaries as in effect on the date of this Agreement, subject to the right of
VIALOG and the Surviving Corporation to amend or terminate such programs in
accordance with their terms, provided that after any such amendment or
termination the resulting programs continue to be substantially equivalent to
the existing programs, and
(b) employee severance pay and benefits that are substantially
equivalent to the applicable severance programs of the Company and its
Subsidiaries as in effect on the date hereof, subject to the right of VIALOG and
the Surviving Corporation to amend or terminate such programs in accordance with
their terms, provided that after any such amendment or termination, the
resulting programs continue to be substantially equivalent to the existing
programs.
Notwithstanding the foregoing, as soon as convenient after such period, the
Surviving Corporation may, in its sole discretion, substitute employee
compensation, benefit and severance programs for those of the Company as are
consistent with the programs provided to VIALOG's employees and the employees of
VIALOG's Subsidiaries.
6.13 Certain Actions Concerning Business Combinations.
------------------------------------------------
(a) Neither the Principal Stockholder nor any Representative
thereof will, during the period commencing on the date of the filing of the
Registration Statement and ending with the earlier to occur of the Merger
Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly (i) solicit or initiate the submission of proposals or
offers from any Person or, (ii) participate in any discussions pertaining to, or
(iii) furnish any information to any Person other than VIALOG relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company or any Subsidiary (other than the Merger).
40
<PAGE>
(b) The Company will not apply, and will not take any action
resulting in the application of, or otherwise elect to apply, the provisions of
applicable Massachusetts takeover laws, if any, with respect to or as a result
of the Merger or the Transactions.
6.14 Termination of Option Securities and Convertible Securities. The
-----------------------------------------------------------
Company will take all action necessary to terminate the exercise rights of all
outstanding Option Securities and the conversion rights of all Convertible
Securities issued by the Company as of the Effective Time to the extent such
option and conversion rights are not exercised prior to the Merger Closing, and
to provide timely notice to all holders of Option Securities and Convertible
Securities notifying them of such termination. Without the prior written consent
of VIALOG, except as set forth in Section 3.15(a) of the Disclosure Schedule,
(a) such termination or notice will not cause an acceleration of the exercise,
conversion or vesting schedule of any Option Security or of any Convertible
Security, and (b) the Company will not otherwise accelerate, or cause an
acceleration of, the exercise, conversion or vesting schedule of any Option
Security or Convertible Security. Prior to the Merger Closing, the Company will
issue Certificates to all holders of properly exercised Option Securities and
properly converted Convertible Securities. Such Certificates will accurately
represent the number of Shares to which such holder is entitled by virtue of
such exercise or conversion and the Company will amend Section 3.15(b) of the
Disclosure Schedule accordingly.
6.15 Tax Returns. The Principal Stockholder will cause all Tax Returns of
-----------
the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared in a manner consistent with past
practices and VIALOG will file such Tax Returns promptly upon receipt thereof
from the Principal Stockholder or the Company. At least thirty days before the
due date (including any extensions) for any such Tax Returns, the Principal
Stockholder or the Company will provide drafts of such Tax Returns to VIALOG for
its review and comment (which reasonable comments will be incorporated into the
final Tax Returns), and VIALOG will cooperate with the Principal Stockholder and
provide the Principal Stockholder with access to any books and records
reasonably necessary for their preparation of such draft Tax Returns. VIALOG
will file no amended Tax Returns with respect to the Company and the
Subsidiaries for any taxable period ending on or before the Effective Time if
the Principal Stockholder reasonably objects thereto and furnishes VIALOG with
indemnification satisfactory in form and substance to it, including without
limitation, indemnification for all interest, penalties and Expenses resulting
from the failure to amend such Tax Returns and all proceedings in connection
therewith.
6.16 Employment and Noncompetition. On or before the Merger Closing, the
-----------------------------
Principal Stockholder will execute and deliver to VIALOG the employment
agreement contemplated by Section 7.2(s) to be effective as of the Public
Offering Closing Date. From and after the Public Offering Closing Date, the
Principal Stockholder will not compete with VIALOG or any of its Subsidiaries
except to the extent not prohibited by Exhibit 7.2(s).
--------------
41
<PAGE>
6.17 Distributions, Liabilities, Etc.
-------------------------------
(a) The Company and VIALOG acknowledge and agree that the Company
contemplates that (i) prior to the Merger Closing it will make certain
Distributions to Stockholders, employees of and consultants to the Company, (ii)
no later than Merger Closing, it will cause certain Liens to be discharged in
their entirety (with financing statement terminations properly recorded), and
(iii) as of Merger Closing, it will indemnify VIALOG for certain liabilities
(except to the extent obligees with respect thereto release the Company and its
Affiliates therefrom), in each case as set forth in the Disclosure Schedule.
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be)
lists each such Distribution, Lien and liability;
(b) The Company agrees that Distributions not permitted pursuant
to Section 3.18 will be made by the Company (or VIALOG or the Surviving Company
if after the Effective Date) only to the extent provided in Schedule 6.17 (or
Section 6.17 of the Disclosure Schedule, as the case may be); and
(c) The Company further agrees that, notwithstanding anything to
the contrary in Section 10.1, it will indemnify VIALOG and VIALOG Merger
Subsidiary against all Claims and Expenses incurred by VIALOG and VIALOG Merger
Subsidiary (or either of them) by virtue of any failure on the Company's part to
secure the discharges from Liens contemplated by Schedule 6.17 (or Section 6.17
of the Disclosure Schedule, as the case may be) or any damage or harm
attributable to a liability to be indemnified against as contemplated by
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be).
6.18 Release from Personal Guarantees. On or prior to the Public Offering
--------------------------------
Closing Date, VIALOG will either obtain releases of the personal guarantees of
the Stockholders of Indebtedness or discharge or arrange for the discharge of
such Indebtedness. VIALOG will either obtain releases of the personal guarantees
of the Stockholders of Contractual Obligations which extend beyond the Public
Offering Closing Date or indemnify and hold the Stockholders harmless from such
personal guarantees.
6.19 No Significant Changes VIALOG agrees that there will be no
----------------------
"significant change" (as defined below) in the conduct of the business of the
Company for a period of two years after the Public Offering Closing Date without
the approval of a majority in interest of the Stockholders. "Significant change"
means any change in the location of the Company's facilities, a physical merging
of the Company's operations with another operation, any change in the position
of those employees who receive employment agreements pursuant to Section 7.2(s),
or a reduction in force or the termination of any employee except as related to
employee performance or the contemplated reorganization of the combined
sales/marketing staff or the accounting function.
42
<PAGE>
6.20 Registration Statement.
----------------------
(a) The Company and the Principal Stockholder will furnish to
VIALOG all necessary information concerning the Company and the Principal
Stockholder for VIALOG to file the Registration Statement.
(b) The Company and the Principal Stockholder have reviewed or
have had reviewed on their behalf, and will be familiar with the information
concerning the Company and the Stockholders (or any of them) in the Prospectus,
which will be furnished to them by VIALOG for their review, and will have no
knowledge of any material fact, condition or information concerning the Company
and the Stockholders misstated or not disclosed in such Prospectus.
(c) VIALOG agrees to use its best efforts to prepare and file the
Registration Statement prior to February 28, 1997 and furnish to the Company and
the Principal Stockholder a copy of information concerning the Company and the
Stockholders included therein and each amendment thereto two business days prior
to such filing date.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder agree to
----------
use their best efforts to maintain the status of the Merger and the
Participating Mergers as a tax free incorporation, provided VIALOG's Accountants
so advise and provided the relative ownership rights of all parties remain the
same.
6.22 Self Dealing. VIALOG agrees that it will not and will not allow any
------------
Subsidiary to enter into contracts and business arrangements with Persons and
Entities owned in whole or in part by officers and directors of VIALOG or any
Subsidiary except on an arms length basis and with the approval of the VIALOG
Board of Directors.
ARTICLE
7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each Party to effect the Merger will be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) This Agreement, the Merger and the Transactions shall have
been approved and adopted in accordance with the BCA by the affirmative vote, or
to the extent permitted by Applicable Law, by written consent, of the
Stockholders holding at least the minimum number of shares of the Company Stock
then issued and outstanding as are required by Applicable Law and the Company's
Organizational Documents for such approval and adoption,
43
<PAGE>
(b) No proceeding before any Authority or Claim by any Person
shall be pending, challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation of the
Merger or the Public Offering, or seeking material damages or imposing any
Adverse conditions in connection therewith,
(c) Other than the filing of merger documents in accordance with
the BCA and the DBCL, all authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, submissions, registrations, notices or
declarations required to be made, by VIALOG or VIALOG Merger Subsidiary and the
Company prior to the consummation of the Merger and the Transactions shall have
been obtained from, and made with, all required Authorities, except for such
authorizations, consents, waivers, orders, approvals, filings, registrations,
notices or declarations the failure to obtain or make would not, assuming
consummation of the Merger, have an Adverse Effect on the Company and the
Company and its Subsidiaries taken as a whole,
(d) (i) The Registration Statement shall have become effective and
shall contain no untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the shares of VIALOG Stock offered in the Public
Offering shall have been sold and purchased subject only to consummation of the
Merger, the Participating Mergers and the Transactions, (iii) every condition to
closing the Public Offering (except as provided in clause (iv) immediately
succeeding) shall have been satisfied or properly waived and (iv) release of the
closing documents relating to the Public Offering and distribution of the
proceeds of the sale of all shares of VIALOG Stock sold and purchased in the
Public Offering shall have been unconditionally authorized by the Underwriter
upon consummation of the Merger and the Participating Mergers,
(e) The minimum number of Participating Mergers required to
prevent termination pursuant to Section 8.1(b)(ii) of this Agreement shall have
been authorized and approved in accordance with Applicable Law and the
Organizational Documents of the Other Participating Companies, in the case of
the Participating Mergers,
(f) Subject to such material amendments, if any, as shall be
proposed prior to Merger Closing by VIALOG to be effective immediately after
Merger Closing, and to the extent reasonably satisfactory to the Company and the
Other Participating Companies, the VIALOG stock option plan described in the
Registration Statement shall have been approved and adopted by all action
(corporate and other) required for implementation thereof,
(g) Each of the Persons named on Exhibit 7.1(g), including one
--------------
Person proposed by a majority of the chief executive officers of the Company and
the Other Participating Companies acting as a group, shall have been elected a
director of VIALOG, effective immediately after the Public Offering Closing
Date, and all together shall constitute the entire Board of Directors of VIALOG,
each to serve until the election of the successor to, or the earlier resignation
or termination of, such director, and
(h) VIALOG shall have delivered to the Exchange Agent that number
of shares of VIALOG Stock as determined pursuant to Section 2.1 of this
Agreement and of the
44
<PAGE>
Participating Agreements issued in the name of the Stockholders and the
stockholders and other Persons holding equity interests in the Participating
Companies.
7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary. The
----------------------------------------------------------------
obligations of VIALOG and VIALOG Merger Subsidiary to effect the Merger will be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) The Company shall have complied in all material respects with
its agreements contained in this Agreement, the certificates to be furnished to
VIALOG pursuant to this Section shall be true, correct and complete, all
Collateral Documents shall be reasonably satisfactory in form, scope and
substance to VIALOG and its counsel, and VIALOG and its counsel shall have
received all information and copies of all documents, including records of
corporate proceedings, which they may reasonably request in connection
therewith, such documents where appropriate to be certified by proper corporate
officers,
(b) The Company shall have furnished VIALOG and the Underwriters
with the favorable opinion, dated the Public Offering Closing Date of Tarlow,
Breed, Hart, Murphy & Rodgers, P.C., which may contain limitations and
qualifications as to scope and law and rely on certifications as to facts of
officers of the Company and public officials as are reasonable and customary to
opinions delivered in the type of business transactions covered by this
Agreement, addressing the following:
(i) Due organization, valid existence and good standing of the
Company and each Subsidiary, together with an opinion as to
foreign qualifications,
(ii) Requisite corporate power and authority and all, to such
counsel's knowledge, necessary Governmental Authorizations
for the Company and each Subsidiary to own, lease and
operate its properties and to carry on its business as it
is now being conducted,
(iii) In respect of the Company and each Subsidiary, the number
of shares of capital stock or other voting securities
authorized, issued, reserved for issuance or outstanding as
of the date of this Agreement and the Effective Time and
number of Option Securities and amount of Convertible
Securities outstanding as of such dates,
(iv) Due authorization, valid issuance, full payment and non-
assessability of outstanding shares of capital stock of the
Company and each Subsidiary and (upon issuance on the terms
and conditions specified in the Option Securities and
Convertible Securities pursuant to which they are issuable)
all shares of such capital stock subject to issuance and
absence of preemptive rights with respect thereto,
45
<PAGE>
(v) To the knowledge of counsel, (A) there are not
Contractual Obligations to repurchase, redeem or
otherwise acquire any shares of Company Stock or any
stock of any Subsidiary, or any Option Securities and
Convertible Securities, (B) the Merger will not cause
an acceleration of the exercise or vesting schedule
of any Option Securities and Convertible Securities
and (C) all outstanding shares of stock of each
Subsidiary are owned by the Company or by another
Subsidiary, free and clear of any Lien (except as set
forth in Section 3.1(d) of the Disclosure Schedule),
(vi) Corporate power and authority of the Company to
execute and deliver the Agreement and all Collateral
Documents executed or required to be executed
pursuant thereto or to consummate the Merger, to
perform its obligations thereunder and to consummate
the Merger,
(vii) Due and valid authorization by the Company and the
Principal Stockholder by all necessary corporate (and
other) action of the execution, delivery and
performance of the Agreement and all Collateral
Documents executed or required to be executed
pursuant thereto or to consummate the Merger and the
consummation by the Company of the Merger,
(viii) Due authorization and valid execution and delivery
by, and enforceability against, the Company and the
Principal Stockholder of the Agreement and all
Collateral Documents executed or required to be
executed pursuant hereto or thereto or to consummate
the Merger and the Transactions except (A) as such
enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other
similar laws relating to or affecting the rights of
creditors and as the same may be subject to the
effect of general principles of equity and (B) that
no opinion need be expressed as to the enforceability
of indemnification and noncompetition provisions
included herein;
(ix) The execution and delivery of the Agreement and all
Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Merger
by the Company do not, and the performance of the
Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Merger and the consummation of the
Transactions by the Company will not, (i) conflict
with or violate the Organizational Documents of the
Company or any Subsidiary, (ii) conflict with or
violate any Applicable Law, or (iii) to
46
<PAGE>
counsel's knowledge, constitute a breach or default
under, or give to others any right of termination,
amendment, acceleration, increased payments or
cancellation of, or result in the creation of a Lien
on any property or asset of the Company or any
Subsidiary pursuant to, any Material Agreement to
which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound or
affected,
(x) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger)
are required for the execution and delivery of the
Agreement by the Company and the performance of the
Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Merger and the consummation of the
Merger by the Company,
(xi) Required filings with the Secretary of State of
Massachusetts have been made,
(xii) To the knowledge of counsel, absence of pending or
threatened material Legal Action,
(xiii) Nonapplicability of Massachusetts takeover laws, and
(xiv) such other customary matters concerning the
Stockholders in connection with the Public Offering
as may reasonably be requested by the Underwriter or
its counsel,
(c) No Legal Action or other Claim shall be pending or threatened
at any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of VIALOG have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or, assuming consummation of the
Merger and the Participating Mergers, VIALOG and its Subsidiaries taken as a
whole,
(d) Each Principal Stockholder (other than a Principal Stockholder
executing and delivering the agreement contemplated by Section 7.2(s)) and other
Persons listed on Schedule 7.2(d) (or Section 7.2(d) of the Disclosure Schedule,
as the case may be) shall have executed and delivered to VIALOG a noncompetition
agreement, substantially in the form of Exhibit 7.2(d),
--------------
(e) The representations, warranties, covenants and agreements of the
Company contained in this Agreement or otherwise made in writing by it or on its
behalf pursuant to this Agreement or otherwise made in connection with the
Merger and the Transactions shall be true
47
<PAGE>
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and the Public Offering Closing
Date, each and all of the agreements and conditions to be performed or satisfied
by the Company under this Agreement at or prior to the Public Offering Closing
Date shall have been duly performed or satisfied in all material respects, and
the Company shall have furnished VIALOG with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as VIALOG
shall have reasonably requested,
(f) VIALOG shall have received from its Accountants, a certificate
or letter, dated the Public Offering Closing Date, to the effect that, on the
basis of a limited review in accordance with the standards for such reviews
promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No. 1, they
have no reason to believe that the unaudited financial statements set forth in
the Registration Statement were not prepared in accordance with GAAP and
practices consistent with those followed in the preparation of the audited
financial statements audited by the Accountants as contemplated by Section
6.1(a), or that any material modifications of such unaudited financial
statements are required for a fair presentation of the financial position or
results of operations or changes in financial position of the Company or that
during the period from the last day covered by the most recent financial
statements set forth in the Registration Statement prepared by the Accountants
as contemplated by Section 6.1(a) to a date not more than five (5) days prior to
the Public Offering Closing Date, there has been any Adverse Change in the
financial position or results of the operations of the Company or the Company
and its Subsidiaries taken as a whole which is not described in the Registration
Statement,
(g) All actions taken by the Stockholders to approve and adopt
this Agreement, the Merger and the Transactions shall comply in all respects
with and shall be legal, valid, binding, enforceable and effective under the Law
of the jurisdiction of incorporation of the Company, its Organizational
Documents and all Material Agreements to which it or any of its Subsidiaries is
a party or by which it or any of them or any of its or any of their property or
assets is bound,
(h) The Company shall have obtained consents to the assignment and
continuation of all Material Agreements which, in the reasonable judgment of
VIALOG or its counsel, require such consents, including appropriate binders or
consents as to policies of insurance to be assigned to VIALOG or the Surviving
Corporation under this Agreement. The Company shall have obtained satisfaction
and discharge of all Liens set forth in Section 3.15(b) of the Disclosure
Schedule, and shall have obtained, on terms and conditions reasonably
satisfactory to VIALOG, all Governmental Authorizations and Private
Authorizations, and all modifications of Contractual Obligations relating to
Indebtedness, which VIALOG deems, reasonably necessary or desirable in order to
own and operate and conduct the business of the Surviving Corporation,
substantially on the basis heretofore owned, operated and conducted by the
Company and proposed to be owned, operated and conducted by VIALOG,
48
<PAGE>
(i) Between the date of this Agreement and the Public Offering
Closing Date, there shall not have occurred and be continuing any Adverse Change
affecting the Company or the Company and its Subsidiaries taken as a whole from
the condition thereof (financial and other) reflected in the Financial
Statements or in the audited financial statements prepared by the Accountants as
contemplated by Section 6.1(a) or in the most recent financial statements set
forth in the Registration Statement,
(j) The filing and waiting period requirements (if applicable) under
the HSR Act relating to the consummation of the Merger and the Participating
Mergers shall have been complied with,
(k) No Law shall have been enacted or made by or on behalf of any
Authority nor shall any legislation have been introduced and favorably reported
for passage to either House of Congress by any committee, nor shall any Legal
Action by any Authority been commenced or threatened, nor shall any decision,
order or other action of any Authority have been rendered or taken, which in
VIALOG's reasonable judgment, could have any Adverse Effect on the Company or
the Company and its Subsidiaries taken as a whole, or could restrain, prevent or
change the Merger or the Transactions or Adversely Affect the ability of the
Principal Stockholder to perform its obligations under this Agreement, or the
ability of VIALOG to continue to own, operate and conduct the business of the
Surviving Corporation, substantially on the basis heretofore owned, operated and
conducted by the Company and as proposed to be owned, operated and conducted by
the Surviving Corporation,
(l) VIALOG shall have received copies of any environmental audits
the Company has received in respect of all real property owned or leased by the
Company or any of its Subsidiaries. VIALOG, in its sole discretion and at its
sole expense, may engage an independent environmental engineer to perform such
audits and the results thereof shall not be materially inconsistent with the
representations and warranties set forth in Section 3.23,
(m) Each of the directors of the Company and each of its Subsidiaries
and each trustee under each Plan shall have submitted his or her unqualified
written resignation, dated as of the Public Offering Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Public
--------------
Offering Closing Date, releasing the Company and its Subsidiaries from any and
all Claims against them (other than Claims arising from such Principal
Stockholder having acted as a director or officer of the Company or such
Subsidiary as contemplated by Section 6.7),
(o) The Registration Rights Agreement shall have been executed and
delivered by the Stockholders and the Executive Officers and principal
Stockholders of VIALOG.
(p) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, nor shall it have
experienced any material work stoppage,
49
<PAGE>
(q) Except for such leases and other Contractual Obligations as
are set forth on Schedule 7.2(q) (or Section 7.2(q) of the Disclosure Schedule,
as the case may be) and are executed, delivered and effective as of the
Effective Time, all Contractual Obligations set forth in Section 3.9 of the
Disclosure Schedule shall have been satisfied and discharged as of the Public
Offering Closing Date,
(r) The representations, warranties, covenants and agreements of
the Principal Stockholder contained in this Agreement or otherwise made in
writing by or on behalf of the Principal Stockholder pursuant to this Agreement
or otherwise made in connection with the Merger and the Transactions shall be
true and correct in all material respects at and as of the Public Offering
Closing Date with the same force and effect as though made on and as of such
date except those which speak as of a certain date which shall continue to be
true and correct in all material respects as of such date and on the Public
Offering Closing Date. Each and all of the agreements and conditions to be
performed or satisfied by the Principal Stockholder under this Agreement at or
prior to the Public Offering Closing Date, including without limitation the
provisions set forth in Section 6.20, shall have been duly performed or
satisfied in all material respects, and the Principal Stockholder shall have
furnished VIALOG with such certificates and other documents evidencing the truth
of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as VIALOG or its counsel shall have
reasonably requested,
(s) Courtney Snyder shall have executed and delivered to VIALOG an
employment and noncompetition agreement, substantially in the form of Exhibit
-------
7.2(s),
- ------
(t) The individuals listed on Schedule 7.2(t) (or Section 7.2(t) of
the Disclosure Schedule, as the case may be) shall have executed and delivered
to VIALOG an Employment Arrangement substantially in the form of Exhibit 7.2(t)
and reasonably satisfactory to VIALOG and its counsel, and
(u) VIALOG shall have received a letter from its Accountants to the
effect that the Merger and the Transactions, the Participating Mergers and the
transactions contemplated thereby, and the acquisition of stock of any Other
Participating Company by VIALOG and the transactions contemplated thereby
together qualify as a transaction to which Section 351 of the Code applies and
will not result in any taxable income or gain or deductible loss to the Company,
VIALOG or VIALOG Merger Subsidiary.
7.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to effect the Merger will be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part to the extent permitted by Applicable Law:
(a) VIALOG shall have furnished the Company and the Principal
Stockholder with the favorable opinion dated the Public Offering Closing Date of
Mirick, O'Connell, DeMallie & Lougee, LLP, counsel to VIALOG and VIALOG Merger
Subsidiary, which may contain limitations and qualifications as to scope and law
and rely on certifications as to facts of officers of VIALOG and VIALOG Merger
Subsidiary and public officials as are reasonable and
50
<PAGE>
customary to opinions delivered in the type of business transactions covered by
this Agreement, addressing the following:
(i) Due organization, valid existence and good standing of
VIALOG and VIALOG Merger Subsidiary,
(ii) Due authorization and valid execution and delivery by,
and enforceability against, VIALOG and VIALOG Merger
Subsidiary of the Agreement except (A) as such
enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other similar laws
relating to or affecting the rights of creditors and as
the same may be subject to the effect of general
principles of equity and (B) that no opinion need be
expressed as to the enforceability of indemnification
provisions,
(iii) Due authorization, valid issuance, full payment and non-
assessability of and absence of preemptive rights with
respect to the shares of VIALOG Stock to be received by
the Stockholders,
(iv) The Registration Statement has become effective under
the Securities Act, and to such counsel's knowledge, no
stop order suspending its effectiveness has been issued
and no proceedings for that purpose have been instituted
or threatened by the SEC,
(v) The execution and delivery of the Agreement by VIALOG
and VIALOG Merger Subsidiary and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger by them do not, and
the performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the consummation
of the Merger by them will not, (A) conflict with or
violate the Organizational Documents of VIALOG or VIALOG
Merger Subsidiary, (B) conflict with or violate any
Applicable Law, or (C) to counsel's knowledge,
constitute a default under, or give to others any right
of termination, amendment, acceleration, increased
payments or cancellation of, or result in the creation
of a Lien on any property or assets of VIALOG or VIALOG
Merger Subsidiary pursuant to, any Material Agreement to
which either is a party or by which either or any
property or asset of either is bound or affected,
(vi) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution and delivery of the Agreement
by VIALOG and VIALOG Merger Subsidiary
51
<PAGE>
and the performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the consummation
of the Merger by them, and
(vii) The required filings with the Delaware Secretary of
State and the Massachusetts Secretary of State shall
have been made, and a Certificate of Merger shall have
been issued by the Massachusetts Secretary of State for
the Merger.
(b) Each of VIALOG and VIALOG Merger Subsidiary shall have complied
in all material respects with its agreements contained in this Agreement, and
the certificates to be furnished to the Company pursuant to this Section shall
be true, correct and complete. All Collateral Documents shall be reasonably
satisfactory in form, scope and substance to the Company and its counsel, and
the Company and its counsel shall have received all information and copies of
all documents, including records of corporate proceedings, which they may
reasonably request in connection therewith, such documents where appropriate to
be certified by proper corporate officers,
(c) The representations, warranties, covenants and agreements of each
of VIALOG and VIALOG Merger Subsidiary contained in this Agreement or otherwise
made in writing by it or on its behalf pursuant to this Agreement or otherwise
made in connection with the Merger and the Transactions shall be true and
correct in all material respects at and as of the Public Offering Closing Date
with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date; each and all of the agreements and conditions to be performed or
satisfied by each of VIALOG and VIALOG Merger Subsidiary under this Agreement at
or prior to the Public Offering Closing Date shall have been duly performed or
satisfied in all material respects; and each of VIALOG and VIALOG Merger
Subsidiary shall have furnished the Company with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as the
Company shall have reasonably requested,
(d) If executed and delivered to VIALOG by the Merger Closing, the
employment agreements contemplated by Section 7.2(s) and for those persons
listed on Schedule 7.2(t) (or Section 7.2(t) of the Disclosure Schedule, as the
case may be) shall have been executed by the Surviving Corporation and delivered
by VIALOG to the indicated person,
(e) The filing and waiting period requirements (if applicable) under
the HSR Act relating to the consummation of the Merger and the Participating
Mergers shall have been complied with,
(f) VIALOG shall have obtained the insurance set forth in Section
6.7(c),
52
<PAGE>
(g) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of the Company have any Adverse Effect on VIALOG and its
Subsidiaries or the Company and its Subsidiaries taken as a whole or, assuming
consummation of the Merger and the Participating Agreements, VIALOG and its
Subsidiaries taken as a whole,
(h) The Company shall have received a letter from the Accountants to
the effect that the Merger and the Transactions qualify as a transaction to
which Section 351 of the Code applies for federal income tax purposes and the
exchange of the Shares for the Stock Merger Consideration, as contemplated
hereby, will not result in any taxable income or gain or deductible loss to the
common stockholders of the Company in their capacities as such common
stockholders to the extent of the Stock Merger Consideration, and
(i) The by-laws of VIALOG shall have been amended to remove the right
of first refusal contained therein and the Company shall have received
certification to its reasonable satisfaction that the VIALOG Stock to be issued
in the Merger will not be subject to any transfer restrictions or purchase
options under VIALOG's Certificate of Incorporation or by-laws.
ARTICLE
8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time, whether before or after approval of this Agreement, the Merger
and the Transactions as follows:
(a) by mutual consent of the Company and VIALOG.
(b) by either VIALOG or the Company,
(i) if any permanent injunction, decree or judgment by any
Authority preventing the consummation of the Merger or
the Public Offering shall have become final and
nonappealable, or if the terminating party determines in
its reasonable discretion that the Merger has become
inadvisable or impracticable by reason of the
institution by any Authority or other Person of material
Legal Action, or
(ii) if the Merger Closing shall not occur on or before the
Termination Date.
(c) by the Company:
53
<PAGE>
(i) in the event of a breach of this Agreement by VIALOG or
VIALOG Merger Subsidiary that has not been cured, or if
any representation or warranty of VIALOG or VIALOG
Merger Subsidiary shall have become untrue in any
material respect, in either case such that such breach
or untruth is incapable of being cured by the Effective
Date or will prevent or delay consummation of the Merger
by or beyond the Termination Date, or
(ii) in the event the Public Offering is not a firm
commitment in the manner and upon the terms described in
Section 5.10.
(d) by VIALOG:
(i) if the Merger and the Transactions fail to receive the
approval required by Applicable Law, by vote (or to the
extent permitted by Applicable Law, by consent) of the
Stockholders, or if any Stockholder entitled to vote (or
entitled to appraisal rights) with respect to the Merger
dissents from the Merger and the Transactions,
(ii) if it shall determine in its reasonable discretion that
the Merger or the Transactions has or have become
inadvisable or impracticable by reason of the threat by
any Authority, or any other Person of material Legal
Action or proceedings against either or both of the
Company and VIALOG (or VIALOG Merger Subsidiary, or a
Subsidiary of any of them), it being understood and
agreed that a written request by governmental
authorities for information with respect to the
Transactions, which information could be used in
connection with such Legal Action or proceedings, may be
deemed by VIALOG to be a threat of material Legal Action
or proceedings,
(iii) if arrangements reasonably satisfactory to VIALOG cannot
be made for (A) the assumption by the Surviving
Corporation substantially on the terms and conditions in
effect as of the date of this Agreement, or for the
prepayment without premium, of all outstanding
Indebtedness of the Company for borrowed money, or (B)
the Public Offering,
(iv) if the business, assets, prospects, management,
condition (financial or other) or results of operation
of the Company or the Company and its Subsidiaries taken
as a whole shall have been Adversely Affected, whether
by reason of changes or developments in the economy or
industry generally or operations in the ordinary course
of business or otherwise,
54
<PAGE>
(v) if the Company shall not have received, without the
imposition of any burdensome condition or material cost,
all Governmental Authorizations and Private
Authorizations, or if any Authority or other Person
shall withdraw any such Governmental Authorizations or
Private Authorizations,
(vi) if the terms of this Agreement shall not have been
approved by the Underwriter,
(vii) if the Company shall have suffered any material damage,
destruction or loss (whether or not covered by
insurance) or any material acquisition or taking of
property by any Authority, or if it or any of its
Subsidiaries shall have suffered a material work
stoppage, or
(viii) in the event of a material breach of this Agreement by
the Company or the Principal Stockholder that has not
been cured, or if any representation or warranty of the
Company or the Principal Stockholder shall have become
untrue in any material respect, so that such breach or
untruth is incapable of being substantially cured by the
Effective Date or will prevent or delay consummation of
the Merger by or beyond the Termination Date, or if any
condition to VIALOG's obligation to close under this
Agreement shall not have been satisfied.
(e) by VIALOG if (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions, or shall have resolved to do any of
the foregoing (it being agreed and understood that nothing in this clause (i)
obliges the Company to effect the Merger if the conditions set forth in Section
7.1 and Section 7.3 are not satisfied or limits the rights of the Company to
consent to terminate this Agreement pursuant to Section 8.1(a) or to terminate
the Agreement pursuant to Section 8.1(b) or Section 8.1(c)), (ii) the Board of
Directors of the Company shall have recommended or resolved to recommend to the
Stockholders an Other Transaction, (iii) the Company, the Board of Directors of
the Company or the Principal Stockholder shall have taken any action in
contravention of Sections 6.6 or 6.13 or (iv) the Principal Stockholder shall
fail to vote to approve and adopt this Agreement, the Merger and the
Transactions.
8.2 Effect of Termination. Except as provided in Sections 2.2(a), 2.2(d),
---------------------
6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void, there shall
be no liability on the part of any Party, or any of their respective officers or
directors, to the other and all rights and obligations of any Party shall cease;
provided, however, that such termination will not relieve any Party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
55
<PAGE>
8.3 Amendment. This Agreement may be amended by the Parties by action taken
---------
by or on behalf of their respective Boards of Directors and by the Principal
Stockholder at any time prior to the Effective Time; provided, however, that,
after approval of this Agreement and the Merger by the Stockholders, no
amendment, which under Applicable Law may not be made without the approval of
the Stockholders, may be made without such approval. This Agreement may not be
amended to impose any additional material obligation on a Party or to burden or
limit a material right of such Party except by an agreement in writing signed by
the Party so affected.
8.4 Waiver. At any time prior to the Effective Time, except to the extent
------
Applicable Law does not permit, either VIALOG or VIALOG Merger Subsidiary and
the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other, subject, however, to the terms and
conditions of Section 8.1, (b) waive any inaccuracies in the representations and
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement and (c) waive compliance by the other with any of the
agreements, covenants or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an agreement in writing
signed by the Party or Parties to be bound thereby.
8.5 Fees, Expenses and Other Payments. If this Agreement is terminated,
---------------------------------
then all costs and expenses incurred by the Parties in connection with this
Agreement, the Merger and the Transactions and in connection with compliance
with Applicable Law and Contractual Obligations as a consequence hereof and
thereof, including fees and disbursements of counsel, financial advisors and
accountants, will be borne solely and entirely by the Party which has incurred
such costs and expenses (with respect to such Party, its "Expenses"). VIALOG
acknowledges and agrees that the Company has disclosed that it is obligated and
will become further obligated for Expenses (including fees and expenses of its
counsel, its independent accountants, and its financial advisor) incurred by it
in connection with this Agreement, the Merger and the Transactions. It is
understood and agreed that certain of such Expenses may be paid by the Company
prior to the execution of this Agreement, and VIALOG agrees to refrain from
taking any action which would prevent or delay the payment of reasonable
Expenses by the Company. Any Expenses incurred and not paid will constitute
liabilities of the Company. VIALOG agrees to take all action necessary to cause
the Surviving Corporation to pay promptly any of the foregoing reasonable
Expenses incurred, but not paid, by the Company prior to the Effective Time.
8.6 Effect of Investigation. The right of any Party to terminate this
-----------------------
Agreement pursuant to Section 8.1 will remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Party, any
Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
56
<PAGE>
ARTICLE
9
FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON VIALOG STOCK
9.1 Shares not Registered. The Principal Stockholder acknowledges that the
---------------------
shares of VIALOG Stock to be delivered to Stockholders pursuant to this
Agreement have not and will not be registered under the Securities Act (except
pursuant to the Registration Rights Agreement) and may not be resold except
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from registration. The Principal Stockholder represents
and warrants that the VIALOG Stock to be acquired by the Stockholders pursuant
to this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
9.2 Economic Risk; Sophistication. The Principal Stockholder represents and
-----------------------------
warrants that the Principal Stockholder and the other Stockholders are able to
bear the economic risk of an investment in the VIALOG Stock acquired pursuant to
this Agreement and can afford to sustain a total loss on such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the VIALOG Stock. The Principal Stockholder acknowledges that
prior to the Merger Closing VIALOG will have furnished a copy of the Prospectus
to the Stockholders and at the Merger Closing the Stockholders will be required
to confirm that VIALOG has responded to due diligence and information requests
made on behalf of the Company similar in extent and scope to the due diligence
requests made to the Company by VIALOG. The Principal Stockholder will at that
time confirm that the Principal Stockholder has had an adequate opportunity to
ask questions and receive answers from the officers of VIALOG (and, in the case
of the other Stockholders, to ask questions and receive answers from the
Principal Stockholder) concerning any and all matters relating to this
Agreement, the Merger, the Transactions, or Other Participating Companies, the
Participating Agreements and the Registration Statement, and have read and
understood the matters described in the copies of the Registration Statement
provided to them including, without limitation, the background and experience of
the officers and directors of VIALOG, the plans for the operations of the
business of VIALOG, the potential dilutive effects of the Public Offering and
future acquisitions and projected uses of the proceeds of the Public Offering.
The Principal Stockholder will confirm at the Merger Closing that the Principal
Stockholder has asked any and all questions in the nature described in the
preceding sentence or otherwise of interest in connection with the exchange of
VIALOG Stock for Shares as provided in this Agreement, and all questions have
been answered to the Principal Stockholder's satisfaction.
9.3 Restrictions on Resale; Legends. The Principal Stockholder agrees, and
-------------------------------
the Company will use commercially reasonable efforts to cause each other
Stockholder to agree, not to offer, sell, assign, exchange, transfer, encumber,
pledge, distribute or otherwise dispose of the VIALOG Stock to be acquired by
them pursuant to this Agreement except after full compliance
57
<PAGE>
with all of the applicable provisions of the Securities Act and applicable state
securities Laws, and any attempt by a Stockholder to do so will be treated as
ineffective for all purposes. The certificates of VIALOG Stock issued pursuant
to Section 2.1(a) of this Agreement will bear the following legend substantially
as set forth:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED OR OTHERWISE DISPOSED OF WITHOUT (1) REGISTRATION
UNDER THE ACT AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION
(SATISFACTORY TO VIALOG) OF COUNSEL (SATISFACTORY TO VIALOG)
THAT REGISTRATION IS NOT REQUIRED.
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification.
---------------
(a) Except as provided in Section 11.1, the Principal
Stockholder agrees to make whole, indemnify and hold VIALOG, VIALOG Merger
Subsidiary, the Surviving Corporation, the Underwriters and their respective
Affiliates, agents, successors and assigns (collectively, the "VIALOG
Indemnified Parties") harmless as a result of, from or against:
(i) any and all Claims of the VIALOG Indemnified
Parties or other Persons based upon, attributable
to or resulting from any material inaccuracy in
or material breach of any representation or
warranty on the part of any one or more of the
Company or the Stockholders under this Agreement
or any Collateral Document;
(ii) any and all Claims of the VIALOG Indemnified
Parties or other Persons based upon, attributable
to or resulting from the material breach of any
covenant or other agreement on the part of any
one or more of the Company or the Stockholders
under this Agreement or any Collateral Document;
(iii) any and all Claims and/or Taxes incurred by the
VIALOG Indemnified Parties or other Persons with
respect to each tax year in which the Company is
not treated as an S corporation because
distributions made by the Company caused it to
violate the single
58
<PAGE>
class of stock rule of IRC Section 1361(b)(1)(D)
and Treasury Regulation 1.1361-1(1); and
(iv) any and all other material Claims of the VIALOG
Indemnified Parties or other Persons incident to
the foregoing or to the enforcement of this
Section.
(b) Except as provided in Section 11.1, VIALOG agrees to make
whole, indemnify and hold the Principal Stockholder (and each Stockholder that
delivers the agreements contemplated by Section 6.4) and their respective
Affiliates, agents, heirs, successors and assigns (collectively, the "Company
Indemnified Parties") harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified
Parties or other Persons based upon, attributable
to or resulting from any material inaccuracy in
or material breach of any representation or
warranty on the part of VIALOG or VIALOG Merger
Subsidiary under this Agreement or any Collateral
Document;
(ii) any and all Claims of the Company Indemnified
Parties or other Persons based upon, attributable
to or resulting from the material breach of any
covenant or other agreement on the part of VIALOG
or VIALOG Merger Subsidiary; and
(iii) any and all other material Claims of the Company
Indemnified Parties or other Persons incident to
the foregoing or to the enforcement of this
Section.
(c) Except in connection with claims pursuant to Section
10.1(a)(iii), no Principal Stockholder will be required to pay to the VIALOG
Indemnified Parties an aggregate amount in excess of an amount equal to the cash
received by such Stockholder as the cash portion of the Exchange Merger
Consideration pursuant to Sections 2.1(a) and 2.4, cash received by such
Stockholder pursuant to Section 2.1(d) plus, with respect to shares of VIALOG
Stock issued to such Stockholder as the stock portion of the Exchange Merger
Consideration pursuant to Section 2.1(a) and Section 2.4, the Indemnity Value
thereof. VIALOG will not be required to pay any Company Indemnified Party an
aggregate amount in excess of the Indemnity Value of the shares of VIALOG Stock
issued to such Company Indemnified Party plus the amount of cash delivered to
such Company Indemnified Party pursuant to Section 2.1(a), Section 2.1(d) and
Section 2.4. No Claim for indemnification may be commenced beyond the period
applicable to such Claim set forth in Section 11.1.
(d) Notwithstanding the foregoing, no Principal Stockholder
will be required to pay any amount for indemnification to the VIALOG Indemnified
Parties except to the extent that (i) the claim is in connection with the
matters set forth in Section 10.1(a)(iii); or (ii) the aggregate amount of
Claims under this Section 10.1 asserted collectively against the Principal
Stockholder exceeds the greater of $100,000 or one quarter of one percent
(.0025%) of the sum of (A) the product of (x) the aggregate number or shares of
VIALOG Stock into which the Shares of the
59
<PAGE>
Stockholders will be converted as set forth in Sections 2.1(a) and 2.4 and (y)
the Offering Price, plus (B) the total amount of cash paid to all Stockholders
pursuant to Sections 2.1(a), 2.1(d) and 2.4.
10.2 Procedures Concerning Claims by Third Parties; Payment of
---------------------------------------------------------
Damages; etc.
- ------------
(a) If any Legal Action is instituted or asserted by any
person other than such indemnified party in respect of which payment may be
sought hereunder, the indemnified party will reasonably and promptly cause
written notice of the assertion of any Legal Action of which it has knowledge
which is covered by the indemnities under Section 10.1 to be forwarded to the
indemnifying party. In such event, the indemnifying party will have the right,
at its sole option and expense, to be represented by counsel of its choice,
which must be reasonably satisfactory to the indemnified party, and to defend
against, negotiate, settle or otherwise deal with any Legal Action which related
to any Claims instituted or asserted by any Person other than such indemnified
party and indemnified against hereunder; provided, however, that no settlement
thereof will be made without the prior written consent of the indemnified party,
which consent will not be unreasonably withheld, conditioned or delayed. If the
indemnifying party elects to defend against, negotiate, settle or otherwise deal
with any Legal Action which related to any such Claims, it will within thirty
(30) days of receipt of said notice (or sooner, if the nature of the Legal
Action so requires) notify in writing the indemnified party of its intent to do
so. If the indemnifying party elects not to defend against, negotiate, settle or
otherwise deal with any Legal Action which relates to any such Claims, fails to
notify the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Claims under this
Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Legal Action. If the indemnified party defends any
Legal Action, then the indemnifying party will reimburse the indemnified party
for reasonable Claims incurred in defending such Legal Action upon a final
determination that the indemnified party was entitled to indemnity hereunder.
Neither the indemnifying party nor the indemnified party may settle any Legal
Action without the prior written consent of the other party, which consent will
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
will assume the defense of any Legal Action instituted or asserted by any Person
other than an indemnified party, the indemnified party may participate, at such
party's own expense, in the defense of such Legal Action.
(b) After any final judgment or award will have been rendered
by a court, arbitration board (which may be engaged upon the consent of each of
the indemnifying party and the indemnified parties) or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement will have been consummated, or the indemnified party
and the indemnifying party will have arrived at a mutually binding agreement
with respect to a Legal Action hereunder, the indemnifying party will pay all of
the sums due and owing to the indemnified party by wire transfer of immediately
available funds, or by delivery of shares of VIALOG Stock, as permitted pursuant
to the definition of Indemnity Value in Article 12, within five business days
after the date of notice of such judgment or award conditioned, however, on the
indemnifying party having been finally determined by the parties' agreement or
60
<PAGE>
by final court or arbitration that the indemnifying party is obligated hereunder
to make said payment and subject to the provisions of this Article 10.
(c) The failure of the indemnified party to give reasonably
prompt notice of any Legal Action instituted or asserted by any Person other
than such indemnified party and indemnified against hereunder will not release,
waive or otherwise affect the indemnifying party's obligations with respect
thereto except to the extent that the indemnifying party can demonstrate actual
loss or material prejudice as a result of such failure.
(d) No legal action to enforce a Claim for indemnity will be
stayed or dismissed for failure to join one or more indemnifying parties or to
permit an indemnifying party to cross-claim against another indemnifying party,
nor will the failure to join as indemnifying party be deemed grounds for
preventing a separate or subsequent Legal Action to enforce a Claim for
indemnification against such party, each such Legal Action being deemed a
separate and independent Claim for indemnification. A Legal Action to enforce a
Claim for indemnity may be instituted in the Commonwealth of Massachusetts, or
the jurisdiction to which each Party consents, or any other state having
jurisdiction with respect thereto.
ARTICLE
11
GENERAL PROVISIONS
11.1 Effectiveness of Representations; etc.
-------------------------------------
(a) Regardless of any investigation made by or on behalf of
any other party hereto, any Person controlling such party or any of their
respective Representatives whether prior to or after the execution and
consummation of this Agreement, the representations, warranties, covenants and
agreements contained in Article 3, Article 4 and Article 5 will survive the
Merger and remain operative and in full force and effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until
sixty (60) days after the applicable statute of
limitations, as the same may be extended from
time to time, has terminated;
(ii) Section 3.23, until the sixth anniversary date of
this Agreement; and
(iii) all other Sections, until VIALOG (or its
successor) files an annual report pursuant to the
requirements of the Securities Exchange Act of
1934, as amended, as prescribed thereunder on
Form 10-K covering at least two full fiscal years
of operations by VIALOG, but in no event more
than thirty months after the Public Offering
Closing Date (the "Second Annual Filing Date").
61
<PAGE>
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements contained in Article 3,
Article 4 and Article 5, the representations, warranties, covenants and
agreements of each Party will survive and remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other Party,
any Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution and consummation of this Agreement.
11.2 Notices. All notices and other communications given or made
-------
pursuant to this Agreement will be in writing and will be deemed to have been
duly given or made as of the date delivered or transmitted, and will be
effective upon receipt, if delivered personally, mailed by certified mail
(postage prepaid, return receipt requested) to the Parties at the following
addresses or sent by electronic transmission to the fax number specified below:
(a) If to VIALOG or VIALOG Merger Subsidiary:
VIALOG Corporation
Attention: Glenn Bolduc, President
46 Manning Road
Billerica, MA 01821
Fax: (508) 667-1944
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, LLP
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
(b) If to the Company:
Kendall Square Teleconferencing, Inc.
Attention: Courtney Snyder, President
One Kendall Square
Cambridge, MA
Fax: 800-252-0644
with a copy to:
William R. Rodgers, Esq.
Tarlow, Breed, Hart, Murphy & Rodgers, P.C.
21 Custom House Street
8th Floor
Boston, MA 02110-3525
Fax: 617-261-7673
62
<PAGE>
Any address for notice as herein above provided may be changed by the
party or person for whom the change is made by giving notice of said change in
the manner provided in this Section.
11.3 Headings. The headings contained in this Agreement are for
--------
reference purposes only and will not affect in any way the meaning and
interpretation of this Agreement.
11.4 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner Adverse to any Party. Upon such
determination that any term or other provisions is invalid, illegal or incapable
of being enforced, the Parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement (together with the Disclosure
----------------
Schedule, the Confidentiality Agreement and the other Collateral Documents
delivered in connection herewith), constitutes the entire agreement of the
Parties and supersedes all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof.
11.6 Assignment. This Agreement may not be assigned by operation of
----------
law or otherwise and any purported assignment will be null and void, provided
that VIALOG may cause a wholly owned Subsidiary of VIALOG or Holding Company to
be substituted for VIALOG or VIALOG Merger Subsidiary as the party to the Merger
and may, in addition, assign the other rights, but not its obligations,
including, without limitation, its obligation for payment of the Aggregate
Merger Consideration, under this Agreement to such Subsidiary or Holding
Company.
11.7 Parties in Interest. This Agreement will be binding upon and
-------------------
inure solely to the benefit of each Party, and nothing in this Agreement,
express or implied (other than the provisions of Section 6.7, which provisions
are intended to benefit and may be enforced by the beneficiaries thereof), is
intended to or will confer upon any Person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
11.8 Governing Law. Except to the extent that Delaware Law may be
-------------
applicable to the Merger, this Agreement will be governed by, and construed in
accordance with, the substantive laws of the Commonwealth of Massachusetts
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
11.9 Enforcement of the Agreement. Each Party recognizes and agrees
----------------------------
that each other Party's remedy at law for any breach of the provisions of this
Agreement would be inadequate and agrees that for breach of such provisions,
such Party will, in addition to such other remedies
63
<PAGE>
as may be available to it at law or in equity or as provided in this Agreement,
be entitled to injunctive relief and to enforce its rights by an action for
specific performance to the extent permitted by Applicable Law. Each party
hereby waives any requirement for security or the posting of any bond or other
surety in connection with any temporary or permanent award of injunctive,
mandatory or other equitable relief. Nothing herein contained will be construed
as prohibiting a Party from pursuing any other remedies available to such Party
for any breach or threatened breach hereof or failure to take or refrain from
any action as required hereunder to consummate the Merger and carry out the
Transactions.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
11.11 Disclosure Supplements. From time to time prior to the Public
----------------------
Offering Closing Date, the Company will promptly supplement or amend the
Disclosure Schedule delivered in connection with this Agreement, with respect to
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby; provided, however, that no
supplement or amendment to the Disclosure Schedule that constitutes or reflects
a Material Adverse Change to the Company may be made without the prior written
consent of VIALOG.
ARTICLE
12
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural, and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meanings when used in the Disclosure Schedule and each Collateral
Document, notice, certificate, communication, opinion, or other document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
Accountants means KPMG Peat Marwick, LLP.
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") means, with
respect to the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, any Event
64
<PAGE>
which could reasonably be expected to (a) adversely affect the validity or
enforceability of this Agreement or any Collateral Document executed or required
to be executed pursuant hereto or thereto, or (b) adversely affect the business,
operations, management, properties or the condition, (financial or other), or
results of operation of the Company or the Company and its Subsidiaries taken as
a whole, VIALOG or VIALOG Merger Subsidiary, as the case may be, or (c) impair
the Company's, VIALOG's or VIALOG Merger Subsidiary's ability to fulfill its
obligations under the terms of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, or (d) adversely
affect the aggregate rights and remedies of VIALOG or the Company under this
Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, in all cases, unless otherwise specifically set
forth, in a material respect or manner or to a material degree.
Affiliate or Affiliated means, with respect to any Person, (a) any
other Person at the time directly or indirectly controlling, controlled by or
under direct or indirect common control with such Person, (b) any other Person
of which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, will include any member of such
individual's immediate family or a family trust.
Aggregate Equity means such number of shares of Company Stock as shall
equal the aggregate of (a) the Shares, and (b) all shares of Company Stock
otherwise issuable based upon the affirmative election to exercise or convert
outstanding Option Securities and/or Convertible Securities pursuant to Section
2.4.
Aggregate Merger Consideration will have the meaning given to it in
Section 2.1(a).
Aggregate Cash Merger Consideration will have the meaning given to it
in Section 2.1(a).
Aggregate Stock Merger Consideration will have the meaning given to it
in Section 2.1(a).
Agreement means this Agreement as originally in effect, including
unless the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits to this Agreement, and as the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
Applicable Law means any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or to any of its business or
operations is subject or any of its property or assets is bound.
65
<PAGE>
Authority means any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
BCA will have the meaning given to it in the Preamble.
Benefit Arrangement means any material benefit arrangement that is not
a Plan, including (a) any employment or consulting agreement, (b) any
arrangement providing for insurance coverage or workers' compensation benefits,
(c) any incentive bonus or deferred bonus arrangement, (d) any arrangement
providing termination allowance, severance or similar benefits, (e) any equity
compensation plan, (f) any deferred compensation plan, and (g) any compensation
policy and practice.
Cash Merger Consideration will have the meaning given to it in Section
2.1(a).
Certificate will have the meaning given to it in Section 2.1(a).
Claims means any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all reasonable fees, costs, expenses and disbursements
(including without limitation attorneys' fees, costs and expenses) relating to
any of the foregoing.
COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
Code will have the meaning given to it in the Preamble.
Collateral Document means any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Principal Stockholder, on the one hand, or
VIALOG and VIALOG Merger Subsidiary on the other, under this Agreement and with
respect to opinions to be delivered pursuant to this Agreement, except to the
extent of a Party's actual knowledge, the Company and the Principal Stockholder
or VIALOG and VIALOG Merger Subsidiary, as the case may be, assume no
responsibility for the authority of or genuineness of signatures relating to the
others as counterparts or their representations, warranties, covenants and
agreements.
Company will have the meaning given to it in the Preamble.
66
<PAGE>
Company Indemnified Parties will have the meaning given to it in
Section 10.1(b).
The Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or the Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after reasonable investigation, will
have reason to believe and will believe that the subject representation or
warranty is true and accurate as stated.
Company Stock will have the meaning given to it in Section 2.1(a).
Confidentiality Letter will have the meaning given to it in Section
6.1(c).
Contract or Contractual Obligation means any term, condition,
provision, representation, warranty, agreement, covenant, undertaking,
commitment, indemnity or other obligation set forth in the Organizational
Documents of the obligee or which is outstanding or existing under any
instrument, contract, lease or other contractual undertaking (including without
limitation any instrument relating to or evidencing any Indebtedness) to which
the obligee is a party or by which it or any of its business is subject or
property or assets is bound.
Control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
Convertible Securities means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or existence or
non-existence of some other Event, or both.
DBCL will have the meaning given to it in the Preamble.
Disclosure Schedule means the disclosure schedules dated as of the date
of this Agreement delivered by the Company to VIALOG and VIALOG to the Company.
Distribution means, with respect to the Company or any of its
Subsidiaries: (a) the declaration or payment of any dividend (except dividends
payable in common stock of the Company) on or in respect of any shares of any
class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary, (b) the
purchase, redemption or other retirement of any shares of any class of capital
stock of the Company or any shares of capital stock of any Subsidiary owned by a
Person other than the Company or a Subsidiary, and (c) any other distribution on
or in respect of any shares of
67
<PAGE>
any class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary.
Effective Date means the effective date of the Registration Statement
and commencement of the Public Offering as authorized by the SEC.
Effective Time will have the meaning given to it in Section 1.4.
Employment Arrangement means, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock purchase or appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA.
Encumber means to suffer, accept, agree to or permit the imposition of
a Lien.
Entity means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
Environmental Laws means any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, mining or reclamation or mined land, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes. Environmental
Laws include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), the Hazardous Material
-- ---
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
-- ---
and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42
-- ---
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
Section 2601 et seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C.
-- ---
Section 651 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
-- ---
U.S.C. Section 136 et seq.), and the Surface Mining Control and Reclamation Act
-- ---
of 1977 (30 U.S.C. Section 1201 et seq.), and any
-- ---
68
<PAGE>
analogous future federal, or present or future state, local or foreign, Laws,
and the rules and regulations promulgated thereunder all as from time to time in
effect, and any reference to any statutory or regulatory provision will be
deemed to be a reference to any successor statutory or regulatory provision.
Environmental Permit means any Governmental Authorization required by
or pursuant to any Environmental Law.
Environmental Requirements means all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
(a) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of, or the
remediation, emission, discharge or release into the air,
surface water, groundwater or land of, Hazardous Materials;
(b) the protection of the health and safety of employees or the
public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA means the Employee Retirement Security Act of 1974, and the rules
and regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision will be deemed to be a reference to any successor statutory or
regulatory provision.
ERISA Affiliate means any Person that is treated as a single employer
with the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
Event means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Exchange Agent will have the meaning given to it in Section 2.2(a).
Exchange Fund will have the meaning given to it in Section 2.2(a).
Exchange Merger Consideration will have the meaning given to it in
Section 2.1(a).
Expenses will have the meaning set forth in Section 8.5.
69
<PAGE>
Final Determination (a) means with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations; and (b) will include the payment of Tax by
the Company or whichever Party is responsible for payment of such Tax under
Applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the other party is notified of such payment and the
party that is responsible for such Tax under this Agreement determines that no
action should be taken to recoup such payment from such Taxing Authority.
Financial Statements will have the meaning given to it in Section
3.2(a).
GAAP means generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
each applicable Authority.
Governmental Filings means all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with each applicable Authority.
Guaranty or Guaranteed means any agreement, undertaking or arrangement
by which the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, guarantees, endorses or otherwise becomes or is
liable, directly or indirectly, upon any Indebtedness of any other Person
including without limitation the payment of amounts drawn down by beneficiaries
of letters of credit (other than by endorsements of negotiable instruments for
deposit or collection in the ordinary course of business). The amount of the
obligor's obligation under any Guaranty will be deemed to be the outstanding
amount (or maximum permitted amount, if larger) of the Indebtedness directly or
indirectly guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials means any substance (in whatever state or matter):
(a) the presence of which requires investigation or remediation under any
Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated by
any Authority; (d) that contains or consists of petroleum or petroleum products,
or (e) that contains or consists of PCBs, asbestos, or urea formaldehyde foam
insulation.
Holding Company means a corporation established by or on behalf of
VIALOG into which VIALOG merges or assigns its rights and obligations hereunder
if the Accountants so
70
<PAGE>
advise for purpose of a tax free incorporation of all parties provided the
relative ownership rights of all parties remain the same.
HSR Act means the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
and the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision.
Indebtedness means, with respect to the Company or any of its
Subsidiaries or VIALOG or VIALOG Merger Subsidiary, as the case may be, (a) all
items, except items of capital stock or of surplus or of general contingency or
deferred tax reserves or any minority interest in any Subsidiary to the extent
such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of the Company or VIALOG, which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of the Company or such Subsidiary or VIALOG or
VIALOG Merger Subsidiary, (b) all obligations secured by any Lien to which any
property or asset owned or held by the Company or any Subsidiary or VIALOG or
any VIALOG Merger Subsidiary is subject, whether or not the obligation secured
thereby will have been assumed, and (c) to the extent not otherwise included,
all Contractual Obligations of the Company or any Subsidiary or VIALOG or any
VIALOG Merger Subsidiary constituting capitalized leases and all obligations of
the Company or any Subsidiary or VIALOG or any VIALOG Merger Subsidiary with
respect to Leases constituting part of a sale and leaseback arrangement.
Indemnity Value means with respect to each share of VIALOG Stock issued
to a Stockholder pursuant to the Merger, the Offering Price. In satisfaction of
a Claim under this Agreement for which a stockholder is liable to VIALOG, until
the Second Annual Filing Date, and in lieu of all cash, such Stockholder may
tender shares of VIALOG Stock valued at the Offering Price and cash in a ratio
not exceeding fifty-one (51) to forty-nine (49), for all payments by such
Stockholder, and after the Second Annual Filing Date, cash and shares of VIALOG
Stock in such proportion as such Stockholder determines.
Intangible Assets means all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
Law means any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ of
any Authority, domestic of foreign; (b) the common law, or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation; including, in each such case or instance,
any interpretation, directive, guideline or request, whether or not having the
force of law including, in all cases, without limitation any particular section,
part or provision thereof.
71
<PAGE>
Lease means any lease of property, whether real, personal or mixed, and
all amendments thereto.
Legal Action means any litigation or legal or other actions,
arbitrations, counterclaims, investigations, proceedings, requests for material
information by or pursuant to the order of any Authority, or suits, at law or in
arbitration, equity or admiralty commenced by any Person, whether or not
purported to be brought on behalf of a party hereto affecting such party or any
of such party's business, property or assets.
Lien means any of the following: mortgage, lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building to use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
Margin Rules means Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
Material or Materiality for the purposes of this Agreement, will,
unless specifically stated to the contrary, be determined without regard to the
fact that various provisions of this Agreement set forth specific dollar
amounts.
Material Agreement or Material Commitment means, with respect to the
Company or any of its Subsidiaries, or VIALOG or VIALOG Merger Subsidiary any
Contractual Obligation which (a) was not entered into in the ordinary course of
business, (b) was entered into in the ordinary course of business which (i)
involves the purchase, sale or lease of goods or materials or performance of
services aggregating more than Twenty-Five Thousand Dollars ($25,000), (ii)
extends for more than three (3) months, or (iii) is not terminable on thirty
(30) days or less notice without penalty or other payment, (c) involves
Indebtedness for money borrowed in excess of One Hundred Thousand Dollars
($100,000), (d) is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement, or (e) would
account for more than five percent (5%) of purchases or sales made by the
Company and its Subsidiaries for the year ended December 31, 1996.
Merger will have the meaning given to it in the Preamble.
Merger Closing will have the meaning given to it in Section 1.3.
Merger Consideration will have the meaning given to it in Section
2.1(a).
72
<PAGE>
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
Net Shares will have the meaning given to it in Section 2.2(a).
Offering Price means $11.50 per share of VIALOG Stock.
Option Securities means all rights, options and warrants, all calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
Organizational Documents means, with respect to a Person which is a
corporation, its charter, its by-laws, and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock, and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreement among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
Other Participating Companies mean those companies or entities engaged
in the teleconferencing business who execute agreements and plans of
reorganization, stock purchase agreements or asset purchase agreements with
VIALOG which agreements close contemporaneously with this Agreement.
Other Transaction means a transaction or series of related transactions
(other than the Merger) resulting in (a) any change in control of the Company,
(b) any merger or consolidation of the Company or any of its Subsidiaries,
regardless of whether the Company or such Subsidiary is the surviving Entity,
(c) any tender offer or exchange offer for, or any acquisition of, any
securities of the Company, or (d) any sale or other disposition of assets of the
Company of any Subsidiary not otherwise permitted under Section 3.18.
Participating Agreement will have the meaning given to it in the
Preamble.
Participating Companies will mean the Company and the Other
Participating Companies.
Participating Mergers means the mergers of each of the Other
Participating Companies with a Subsidiary of VIALOG pursuant to a Participating
Agreement.
Participating Stockholders means the Persons receiving VIALOG Stock
pursuant to the Participating Mergers.
Party means any natural individual or any Entity that has executed this
Agreement.
73
<PAGE>
PBGC means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Person means any natural individual or any Entity.
Plan means any "employee benefit plan" as defined in Section 3(3) of
ERISA (whether or not terminated) which is (or was in the case of a frozen or
terminated plan) maintained by the Company or any Subsidiary or VIALOG or VIALOG
Merger Subsidiary, and with respect to which the Company, such Subsidiary or
VIALOG or VIALOG Merger Subsidiary or, in the case of any such plan subject to
Title IV of ERISA, an ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, other than a Multiemployer Plan.
Principal Stockholder will have the meaning given to it in the
Preamble.
Private Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than each Authority) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
Prospectus means the form of prospectus first filed by VIALOG in the
Registration Statement, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the Public
Offering.
Public Offering will have the meaning given to it in the Preamble.
Public Offering Closing Date means the date on which the Public
Offering is closed.
Registration Rights Agreement will have the meaning given to it in
Section 6.4.
Registration Statement means the registration statement (including the
Prospectus, exhibits, financial statements and schedules included therein), and
all amendments thereof (including post-effective amendments and any registration
statement filed under Rule 462(b) with respect to the Public Offering), filed
under the Securities Act registering the shares of VIALOG Stock to be sold in
the Public Offering in accordance with the terms and conditions of the
Underwriting Agreement.
Representatives of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
SEC means the Securities and Exchange Commission of the United States
or any successor Authority.
Second Annual Filing Date will have the meaning given to it in Section
11.1(a)(iii).
74
<PAGE>
Securities Act means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations.
Shares will have the meaning given to it in Section 2.1(a).
Special Meeting will have the meaning given to it in Section 1.2(a).
Stock Merger Consideration will have the meaning given to it in Section
2.1(a).
Stockholders means the Principal Stockholder and all other Persons
entitled to Merger Consideration (or who would be entitled thereto but for their
dissent from the Merger) pursuant to Sections 2.1(a) or (to the extent Persons
holding Option Securities or Convertible Securities exercise their rights to
acquire Shares prior to the Effective Time, from and after the time they acquire
such Shares) Section 2.4.
Subsidiary means, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Surviving Corporation will have the meaning given to it in Section 1.1.
Tax (and "Taxable", which means subject to Tax), means with respect to
the Company or any of its Subsidiaries or VIALOG or any VIALOG Merger
Subsidiary, (a) all taxes (domestic or foreign), including without limitation
any income (net, gross or other including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, gains, sales, use, leasing, lease, user, ad valorem, transfer,
recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by the Company or
any of its Subsidiaries, or VIALOG or any VIALOG Merger Subsidiary, payroll,
employment, unemployment, social security, excise severance, stamp, occupation,
premium, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, levies, assessments, charges, penalties, addition to
tax or additional amount imposed by any Taxing Authority, (b) any joint or
several liability of the Company or any of its Subsidiaries or VIALOG or any
VIALOG Merger Subsidiary with any other Person for the payment of any amounts of
the type described in (a), and (c) any liability of the Company or any of its
Subsidiaries or VIALOG or any VIALOG Merger Subsidiary for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
Tax Claim means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
75
<PAGE>
Tax Return or Returns means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority means any Authority responsible for the imposition of
any Tax.
Termination Date means (a) March 15, 1997 unless on or prior to that
date the Registration Statement is filed, in which case such date will
automatically be extended to June 30, 1997, or (b) such date after March 15,
1997 as to which the parties agree.
Transactions means the other transactions contemplated by this
Agreement or the Merger or by any Collateral Document executed or required to be
executed in connection herewith or therewith, but will not include the
Participating Mergers, the registration of sale of VIALOG Stock pursuant to the
Registration Statement or any credit facilities between VIALOG and any bank
described in the Registration Statement.
Transmittal Documents will have the meaning given to it in Section
2.2(b).
Underwriter means any two of Smith Barney Inc., Salomon Brothers Inc,
Donaldson, Lufkin & Jenrette Securities Corporation or comparable firm as lead
underwriters and any other Person who executes the Underwriting Agreement as an
underwriter of VIALOG Stock in the Public Offering.
Underwriting Agreement means the firm commitment underwriting agreement
between VIALOG and the Underwriter to be filed as an exhibit to the Registration
Statement and to be executed on or about the Effective Date.
VIALOG will have the meaning given to it in the Preamble.
VIALOG Indemnified Parties will have the meaning given to it in Section
10.1(a).
VIALOG Merger Subsidiary will have the meaning given to it in the
Preamble.
VIALOG Stock will have the meaning given to it in the Preamble.
[This space is intentionally left blank.]
76
<PAGE>
IN WITNESS WHEREOF, VIALOG, VIALOG Merger Subsidiary, the Company and
the Principal Stockholder have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly authorized.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
------------------------------------
Name: Glenn D. Bolduc
Title: President
KST ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
------------------------------------
Name: Glenn D. Bolduc
Title: President
KENDALL SQUARE
TELECONFERENCING, INC.
By: /s/ Courtney Snyder
------------------------------------
Name: Courtney Snyder
Title: President
PRINCIPAL STOCKHOLDER:
/s/ Courtney Snyder
---------------------------------------
Name: Courtney Snyder
/s/ Paul Ballantine
---------------------------------------
Name: Paul Ballantine
/s/ John Hassett
---------------------------------------
Name: John Hassett
/s/ Dwight Grader
---------------------------------------
Name: Dwight Grader
77
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. THE REGISTRANT AGREES
TO FURNISH SUPPLEMENTALY A COPY OF ANY OMITTED SCHEDULE
TO THE COMMISSION UPON REQUEST.
------------------------------
Section 3.1(a)
. Jurisdiction of Incorporation of the Company.
. Jurisdictions where qualified to do business.
Section 3.1(c)
. Exceptions to No Breach or Default, Etc., upon execution and delivery of
the Agreement or any Collateral Document.
. Exceptions to No Lien created or imposed upon execution and delivery of
the Agreement or any Collateral Document.
. Exceptions to No Governmental Authorization or Governmental Filing
Required upon execution and delivery of the Agreement or any Collateral
Document.
Section 3.1(d)
. Subsidiaries of the Company, and Jurisdictions of incorporation and
where qualified to do business.
. Capital Stock of any Subsidiary.
. Exceptions to Company's ownership of all Stock of any Subsidiary.
Section 3.2(a)
. Financial Statements of the Company and any Subsidiary, prepared in
accordance with GAAP.
Section 3.2(c)
. The Company's ownership of other Entities.
Section 3.3
. Changes and condition of the Company and any Subsidiary, since the date
of the most recent financial statements.
Section 3.4
. Exceptions to liabilities of the Company or any Subsidiary.
<PAGE>
. Any obligations or liabilities, past, present or deferred, or accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in
the balance sheet of the Financial Statements, or notes thereto, and any
obligations or liabilities, other than obligations and liabilities
incurred in the ordinary course of business consistent with past
practice of the Company and any Subsidiary, which will adversely affect
the Company or any of the Company's Subsidiaries.
. Guarantees or Primary or Secondary Liabilities of the Company or any
Subsidiary (except as disclosed in Financial Statements).
Section 3.5(a)
. Exceptions to No Liens with respect to all real property owned or
leased, and to all other assets, tangible and intangible.
. Financing Statements evidencing any Liens.
. Impairments to valid leasehold interests.
Section 3.5(b)
. Real estate owned or leased, and property leased by the Company and any
Subsidiary.
. Material Fixed Assets.
. Title Retention Agreements.
Section 3.5(c)
. Exceptions to compliance with title covenants and conditions and
environmental laws.
. Hazardous Materials used or stored by the Company or any Subsidiary.
Section 3.6
. Private Authorizations material to the Company or any Subsidiary.
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before
December 31, 1995.
Section 3.7(b)
. Breaches, violations or defaults under Governmental Authorizations or
any Applicable Law or under any requirement of any insurance carrier.
2
<PAGE>
Section 3.8(a)
. Governmental Authorizations and Intangible Assets upon which the conduct
of business by the Company or any Subsidiary is dependent.
Section 3.8(b)
. Description of Intangible Assets and Governmental Authorizations.
Section 3.9
. Contractual obligations or transactions between the Company or any of
its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services or out-of-pocket expenses reasonably incurred
in support of the Company's business).
Section 3.10(a)
. Insurance Policies maintained by the Company or any Subsidiary.
. Insurance Carriers which have refused the Company or any Subsidiary
insurance within the past five years.
Section 3.11(a)
. Exceptions to taxation as a Subchapter C corporation.
. Membership in a consolidated group for tax purposes.
Section 3.11(d)
. Tax audits of the Company or any Subsidiary by the IRS or any
notifications thereof.
Section 3.11(e)
. Tax Sharing Agreement or Arrangement of the Company or any Subsidiary.
Section 3.11(f)
. Consents concerning collapsible corporations under Section 341(f) of the
Code.
. Ownership changes within the meaning of Section 382(g) of the Code.
Section 3.12(a)
. ERISA plans, including, inter alia, exceptions to compliance to
----- ----
applicable laws, notices from any authority questioning compliance,
deficiencies, "prohibited transactions", any amounts of
3
<PAGE>
liability, termination proceedings, annual reports, or any membership in
or contributions to multi-employer plans.
Section 3.12(c)
. Basis of funding and current status of any past service liability with
respect to each Employment Arrangement.
Section 3.15(a)
. Authorized and outstanding Capital Stock of the Company.
. Agreements by the Company or any Subsidiary to grant or issue any shares
of its Capital Stock or any Option Security or Convertible Security.
. Any agreement, put or commitment pursuant to which the Company or any
Subsidiary is obligated to purchase, redeem or otherwise acquire any
shares of Capital Stock or any Option Security or Convertible Security.
Section 3.15(b)
. Stockholders.
. Stock not held free and clear of all Liens.
. Persons or groups of persons owning as much as 5% of the Company's
outstanding Common Stock.
Section 3.16(a)
. Employment Arrangements of the Company or any Subsidiary.
. Collective bargaining agreements or pending grievances or labor
disputes.
Section 3.16(b)
. Accelerated payments or benefits, including parachute payments, that
will be received as a result of the transactions contemplated by this
Agreement.
Section 3.16(c)
. Any unfavorable relationships with employees of the Company or any
Subsidiary.
Section 3.17(a)
. Material Agreements relating to the ownership or operation of the
business and property of the Company or any Subsidiary presently held or
used by the Company or any Subsidiary, or to
4
<PAGE>
which the Company or any Subsidiary is a party, or to which it or any of
its property is subject or bound.
Section 3.17(b)
. Exceptions to satisfaction or performance of Material Agreements by the
Company or any Subsidiary.
Section 3.18(a)
. Exceptions to operation of business in the ordinary course.
Section 3.18(b)
. Distributions from end of most recent fiscal year to the date of this
Agreement.
Section 3.19
. Banks, trust companies, savings and loan associations and brokerage
firms in which the Company or any Subsidiary has an account or safe
deposit box, and the names of all persons with access thereto.
Section 3.20
. Adverse restrictions which impairs the Company or any Subsidiary's
ability to conduct its business or which could have any adverse effect
on the Company or any Subsidiary.
Section 3.22
. Personal injury, warranty claims, etc., pending or threatened.
Section 3.23(a)
. Environmental matters - compliance and Governmental Authorizations and
Private Authorizations.
Section 3.23(b)
. Any actual or expected spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water on any property or
facility owned, leased, operated or occupied by the Company or any
Subsidiary.
. Notices or Liens arising under Environmental Law.
Section 3.23(c)
. Above or underground tanks for the storage of Hazardous Materials.
5
<PAGE>
Section 3.23(e)
. Hazardous Materials used in the conduct of business of the Company or
any Subsidiary.
. Description and annual volume of Hazardous Materials used.
. Years during which use occurred.
. Persons to whom such Hazardous Materials were transferred and/or
transported.
Section 3.23(f)
. Hazardous Materials generated.
. Annual volume.
. Persons to whom such Hazardous Materials were transferred and/or
transported.
Section 3.23(g)
. Environmental site assessments.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991,
the Company previously acquired material properties or assets.
Section 4.4
. Exceptions to good and merchantable title to Shares to be exchanged
pursuant to this Agreement.
Section 4.5(a)
. Conflicts with, breaches of, or defaults under any Contractual
Obligation of Principal Stockholder resulting from the execution and
delivery of this Agreement or any Collateral Document.
Section 4.5(b)
. Liens created or imposed upon any property or asset of Principal
Stockholder as a result of the execution and delivery of this Agreement
or any Collateral Document.
Section 4.5(c)
. Governmental Authorizations, Governmental Filing or Private
Authorizations required as a result of the execution and delivery of
this Agreement or any Collateral Document.
6
<PAGE>
Section 5.7
. Authorized and outstanding capital stock of each of VIALOG and VIALOG
Merger Subsidiary.
. Options, warrant, calls, rights, commitments or any other agreements of
any character obligating VIALOG or VIALOG Merger Subsidiary to issue any
shares of VIALOG Stock or other shares of Capital Stock of VIALOG or
VIALOG Merger Subsidiary, or any other securities convertible into or
evidencing the right to subscribe for any such shares.
Section 5.11
. Provisions in other Participating Agreements of other Participating
Companies not substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement.
Section 6.5(b)
. Business (other than business in the ordinary course) the Company will
conduct without the written permission of VIALOG Corporation.
Section 6.17
. Distributions to Stockholders, employees and consultants contemplated to
be made prior to the Merger Closing.
. Liens to be discharged prior to the Merger Closing.
. Certain liabilities for which the Company will indemnify VIALOG as of
the Merger Closing.
Section 7.1(f)
. Awards under Stock Option Plan.
Section 7.2(d)
. Persons executing Non-Competition Agreements.
Section 7.2(n)
. Form of Agreement releasing the Company and any Subsidiary from claims
against them.
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of
the Public Offering Closing Date.
7
<PAGE>
Section 7.2(s)
. Employment Agreement between Principal Stockholder and VIALOG
Corporation.
Section 7.2(t)
. Individuals executing and delivering Employment Arrangements for VIALOG
Corporation.
8
<PAGE>
Exhibit 2.6
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
VIALOG CORPORATION
AMCS ACQUISITION CORPORATION
AND
AMERICAN CONFERENCING COMPANY, INC.
AND
DAVID LIPSKY
Dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 THE MERGER..............................................................................2
SECTION 1.1 The Merger....................................................................2
SECTION 1.2 Action by Stockholders........................................................2
SECTION 1.3 Closing.......................................................................3
SECTION 1.4 Effective Time................................................................3
SECTION 1.5 Effect of the Merger..........................................................4
SECTION 1.6 Certificate of Incorporation..................................................4
SECTION 1.7 By-laws.......................................................................4
SECTION 1.8 Directors and Officers........................................................4
ARTICLE 2 CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES...................................4
SECTION 2.1 Conversion of Securities......................................................4
SECTION 2.2 Exchange of Certificates; Exchange Agent and
Exchange Procedures...........................................................6
SECTION 2.3 Stock Transfer Books..........................................................8
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................8
SECTION 3.1 Organization and Business; Power and Authority;
Effect of Transaction.........................................................8
SECTION 3.2 Financial and Other Information..............................................10
SECTION 3.3 Changes in Condition.........................................................12
SECTION 3.4 Liabilities..................................................................12
SECTION 3.5 Title to Properties; Leases..................................................12
SECTION 3.6 Compliance with Private Authorizations.......................................14
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law...............................................................14
SECTION 3.8 Intangible Assets............................................................15
SECTION 3.9 Related Transactions.........................................................16
SECTION 3.10 Insurance....................................................................16
SECTION 3.11 Tax Matters..................................................................16
SECTION 3.12 Employee Retirement Income Security Act of 1974..............................18
SECTION 3.13 Absence of Sensitive Payments................................................20
SECTION 3.14 Inapplicability of Specified Statutes........................................20
SECTION 3.15 Authorized and Outstanding Capital Stock.....................................21
SECTION 3.16 Employment Arrangements......................................................21
SECTION 3.17 Material Agreements..........................................................22
SECTION 3.18 Ordinary Course of Business..................................................23
SECTION 3.19 Bank Accounts, Etc...........................................................25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.20 Adverse Restrictions.........................................................25
SECTION 3.21 Broker or Finder.............................................................25
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc.....................25
SECTION 3.23 Environmental Matters........................................................25
SECTION 3.24 Materiality..................................................................28
SECTION 3.25 Solvency.....................................................................28
SECTION 3.26 VIALOG Stock.................................................................28
SECTION 3.27 Compliance with Regulations Relating to Securities Credit....................28
SECTION 3.28 Certain State Statutes Inapplicable..........................................28
SECTION 3.29 Continuing Representations and Warranties....................................28
SECTION 3.30 Registration Statement.......................................................28
SECTION 3.31 Predecessor Status, etc......................................................29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDER.................................................................29
SECTION 4.1 Organization.................................................................29
SECTION 4.2 Power and Authority..........................................................29
SECTION 4.3 Enforceability...............................................................29
SECTION 4.4 Title to Shares..............................................................30
SECTION 4.5 No Conflict; Required Filings and Consents...................................30
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VIALOG AND
VIALOG MERGER SUBSIDIARY....................................................................30
SECTION 5.1 Organization and Qualification...............................................30
SECTION 5.2 Power and Authority..........................................................31
SECTION 5.3 No Conflict; Required Filings and Consents...................................31
SECTION 5.4 Financing....................................................................32
SECTION 5.5 Broker or Finder.............................................................32
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary......................32
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary........................32
SECTION 5.8 Registration Statement.......................................................32
SECTION 5.9 Solvency.....................................................................33
SECTION 5.10 Firm Commitment..............................................................33
SECTION 5.11 Participating Agreements of Other Participating Companies....................33
SECTION 5.12 Continuing Representations and Warranties....................................33
ARTICLE 6 ADDITIONAL COVENANTS...................................................................34
SECTION 6.1 Access to Information; Confidentiality.......................................34
SECTION 6.2 Agreement to Cooperate.......................................................35
SECTION 6.3 Assignment of Contracts and Rights...........................................36
SECTION 6.4 Compliance with the Securities Act...........................................36
SECTION 6.5 Conduct of Business..........................................................37
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.6 No Solicitation..............................................................38
SECTION 6.7 Directors' and Officers' Indemnification and Insurance.......................38
SECTION 6.8 Notification of Certain Matters..............................................39
SECTION 6.9 Public Announcements.........................................................39
SECTION 6.10 Conveyance Taxes.............................................................40
SECTION 6.11 Obligations of VIALOG........................................................40
SECTION 6.12 Employee Benefits; Severance Policy..........................................40
SECTION 6.13 Certain Actions Concerning Business Combinations.............................40
SECTION 6.14 Termination of Option Securities and Convertible Securities..................41
SECTION 6.15 Tax Returns..................................................................41
SECTION 6.16 Employment and Noncompetition................................................41
SECTION 6.17 Distributions, Liabilities, Etc..............................................42
SECTION 6.18 Release from Personal Guarantees.............................................42
SECTION 6.19 No Significant Changes.......................................................42
SECTION 6.20 Registration Statement.......................................................43
SECTION 6.21 Tax Status...................................................................43
SECTION 6.22 Self Dealing.................................................................43
ARTICLE 7 CLOSING CONDITIONS.....................................................................43
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger.................43
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger
Subsidiary...................................................................45
SECTION 7.3 Conditions to Obligations of the Company.....................................50
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER......................................................53
SECTION 8.1 Termination..................................................................53
SECTION 8.2 Effect of Termination........................................................56
SECTION 8.3 Amendment....................................................................56
SECTION 8.4 Waiver.......................................................................56
SECTION 8.5 Fees, Expenses and Other Payments............................................56
SECTION 8.6 Effect of Investigation......................................................56
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER RESTRICTIONS
ON VIALOG STOCK.......................................................................57
SECTION 9.1 Shares not Registered........................................................57
SECTION 9.2 Economic Risk; Sophistication................................................57
SECTION 9.3 Restrictions on Resale; Legends..............................................58
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 10 INDEMNIFICATION.......................................................................58
SECTION 10.1 Indemnification..............................................................58
SECTION 10.2 Procedures Concerning Claims by Third Parties;
Payment of Damages; etc......................................................60
ARTICLE 11 GENERAL PROVISIONS....................................................................61
SECTION 11.1 Effectiveness of Representations; etc........................................61
SECTION 11.2 Notices......................................................................62
SECTION 11.3 Headings.....................................................................63
SECTION 11.4 Severability.................................................................63
SECTION 11.5 Entire Agreement.............................................................63
SECTION 11.6 Assignment...................................................................63
SECTION 11.7 Parties in Interest..........................................................63
SECTION 11.8 Governing Law................................................................63
SECTION 11.9 Enforcement of the Agreement.................................................63
SECTION 11.10 Counterparts.................................................................64
SECTION 11.11 Disclosure Supplements.......................................................64
ARTICLE 12 DEFINITIONS...........................................................................64
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION dated as of
February 28, 1997 among VIALOG CORPORATION, a Massachusetts corporation
("VIALOG"), AMCS Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of VIALOG ("VIALOG Merger Subsidiary"), AMERICAN CONFERENCING
COMPANY, INC., a New Jersey corporation (the "Company"), and DAVID LIPSKY (the
"Principal Stockholder").
PREAMBLE
1. The Company and VIALOG Merger Subsidiary have agreed to carry out
a business combination transaction upon the terms and subject to the conditions
of this Agreement and in accordance with the New Jersey Business Corporation Act
(the "BCA") and the General Corporation Law of the State of Delaware (the
"DBCL"), pursuant to which the VIALOG Merger Subsidiary will merge with and into
the Company (the "Merger") and the Stockholders and other Persons holding equity
interests in the Company will convert their holdings into cash and shares of
common stock, $.01 par value per share of VIALOG ("VIALOG Stock"), determined in
accordance with Section 2.1(a).
2. Each of the Other Participating Companies will enter into an
agreement and plan of reorganization or stock or asset purchase agreement with
VIALOG and a wholly-owned Subsidiary of VIALOG (each a "Participating
Agreement") whereby, contemporaneously with the Merger, each Other Participating
Company and a Subsidiary of VIALOG will carry out a business combination
transaction pursuant to which each such Subsidiary will merge with and into one
of the Other Participating Companies or VIALOG or such Subsidiary shall purchase
stock or assets of such Other Participating Companies and stockholders of and
other Persons holding equity interests in the Other Participating Companies will
convert their holdings into cash and shares of VIALOG Stock determined in
accordance with provisions substantially similar to those in Section 2.1(a).
3. Pursuant to the Underwriting Agreement, VIALOG will issue and sell
VIALOG Stock in a firm commitment public offering registered on Form S-1 in
accordance with the requirements of the Securities Act (the "Public Offering").
4. The Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement and the Merger as a
convenient means to accomplish a transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code") and a convenient means to
cause all of the Stockholders to transfer their capital stock of the Company to
VIALOG, has approved this Agreement, the Merger and the Transactions and
1
<PAGE>
has recommended approval and adoption of this Agreement, the Merger and the
Transactions by the Stockholders.
5. The Board of Directors of VIALOG has approved and adopted this Agreement
and has approved the Merger and the Transactions as the sole stockholder of
VIALOG Merger Subsidiary.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE
1
THE MERGER
1.1 The Merger.
----------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the BCA and the DBCL at the Effective Time the
VIALOG Merger Subsidiary will be merged with and into the Company. As a result
of the Merger, the separate existence of the VIALOG Merger Subsidiary will cease
and the Company will continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(b) The Company represents that, at a meeting duly called and held at
which a quorum was present and acting throughout, its Board of Directors has
unanimously (i) determined that this Agreement, the Merger and the Transactions
are fair to and in the best interest of Stockholders, (ii) approved this
Agreement, the Merger and the Transactions, which approval satisfies in full the
requirements of the BCA and New Jersey law, and (iii) resolved to recommend
approval and adoption by the Stockholders of this Agreement, the Merger and the
Transactions to the extent required and in a manner permitted by Applicable Law.
1.2 Action by Stockholders.
----------------------
(a) The Company, acting through its Board of Directors, will, in
accordance with Applicable Law and its Organizational Documents: (i) as soon as
practicable, duly call, give notice of, convene and hold a special meeting of,
or to the extent permitted by Applicable Law submit for approval and adoption by
written consent by, the Stockholders for the purpose of adopting and approving
this Agreement, the Merger and the Transactions (the "Special Meeting"); (ii)
include in any proxy statement the conclusion and recommendation of the Board of
Directors to the effect that the Board of Directors, having determined that this
Agreement, the
2
<PAGE>
Merger and the Transactions are in the best interests of the Company and the
Stockholders, has approved this Agreement, the Merger and the Transactions and
recommends that the Stockholders vote in favor of the approval and adoption of
this Agreement, the Merger and the Transactions; and (iii) use its reasonable
best efforts to obtain the necessary approval and adoption of this Agreement,
the Merger and the Transactions by the Stockholders.
(b) VIALOG Merger Subsidiary, as soon as practicable, will submit to
VIALOG this Agreement, the Merger and the Transactions for approval and adoption
by written consent as the sole stockholder of VIALOG Merger Subsidiary, and
VIALOG will take all additional actions as such sole stockholder necessary to
adopt and approve this Agreement, the Merger and the Transactions.
(c) The approvals required by Sections 1.2(a) and (b) will occur
prior to the initial filing of the Registration Statement, which is expected to
occur on or before February 28, 1997.
1.3 Closing. Unless this Agreement is terminated pursuant to Section 8.1
-------
and the Merger and the Transactions have been abandoned, and subject to the
satisfaction or, if possible, waiver of conditions set forth in Article 7 other
than Section 7.1(d), the closing of the Merger (the "Merger Closing") will take
place, one day prior to the Effective Date, at the offices of Mirick, O'Connell,
DeMallie & Lougee, LLP, unless another date, time or place is agreed to in
writing by the Parties to this Agreement and each Participating Agreement.
Counsel for the Parties to this Agreement and each Participating Agreement will
hold a pre-closing two days prior to the Effective Date, at the offices of
Mirick, O'Connell, DeMallie & Lougee, LLP, for the purpose of finalizing all
documents to be signed at the Merger Closing. All certificates, legal opinions
and other instruments required to be delivered in order to satisfy the
conditions to the obligations of the Parties to effect the Merger set forth in
Article 7 below shall be delivered at the Merger Closing, and each such
certificate, legal opinion or other instrument shall, except to the extent
otherwise provided in Article 7, be dated as of the anticipated Public Offering
Closing Date, which is expected to occur five business days following the date
of Merger Closing. All such certificates, legal opinions and other instruments
shall be held in escrow by Mirick, O'Connell, DeMallie & Lougee, LLP between the
Merger Closing and the Effective Time and shall be released from escrow
concurrently with the Effective Time on the Public Offering Closing Date. In the
event that the Effective Time and Public Offering Closing Date occur on a date
other than the fifth business day following the Merger Closing, all such
certificates, legal opinions and instruments shall be re-dated as of the Public
Offering Closing Date. The Company, the Principal Stockholder, VIALOG and VIALOG
Merger Subsidiary shall use their respective best efforts to cause each of the
conditions set forth in Article 7 reasonably capable of being satisfied prior to
the Merger Closing, including, without limitation, the conditions set forth in
Sections 7.1(a), (c), (e), (f), (g) and (h), to be satisfied prior to the Merger
Closing.
1.4 Effective Time. On the Public Offering Closing Date, the Parties will
--------------
cause the Merger to be consummated by filing articles or certificates of merger,
as the case may be, with the Secretary of State of New Jersey and with the
Secretary of State of Delaware, and by making any related filings required under
the BCA and the DBCL. The Merger will become effective at
3
<PAGE>
such time (but not prior to the Public Offering Closing Date) as such articles
or certificates, as the case may be, are duly filed with the Secretary of State
of New Jersey and the Secretary of State of Delaware, respectively (the
"Effective Time)".
1.5 Effect of the Merger. From and after the Effective Time, the Surviving
--------------------
Corporation will possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of the Company
and VIALOG Merger Subsidiary, and the Merger will otherwise have the effects,
all as provided under the BCA and the DBCL.
1.6 Certificate of Incorporation. From and after the Effective Time, the
----------------------------
Certificate of Incorporation of the Surviving Corporation will be substantially
in the form attached as Exhibit 1.6 until amended in accordance with Applicable
-----------
Law, and the name of the Surviving Corporation will be the name of the Company
or such other name as VIALOG may elect.
1.7 By-laws. From and after the Effective Time, the by-laws of the
-------
Surviving Corporation will be in the form attached as Exhibit 1.7, until amended
-----------
in accordance with Applicable Law.
1.8 Directors and Officers. From and after the Effective Time, until
----------------------
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law (a) the directors of
VIALOG Merger Subsidiary at the Effective Time will be the directors of the
Surviving Corporation and (b) the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation.
ARTICLE
2
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of VIALOG Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each share of common stock, no par value of the Company (the
"Company Stock") issued and outstanding or issuable upon the election to
exercise or convert outstanding Option Securities and Convertible Securities
immediately prior to the Effective Time (other than any shares of Company Stock
to be canceled pursuant to Section 2.1(b)) will be converted into the right to
receive shares of VIALOG Stock (the "Stock Merger Consideration") and cash (the
"Cash Merger Consideration") (together with the Stock Merger Consideration, the
"Merger Consideration") pursuant to the following formula:
Aggregate Merger Consideration = $2,800,000
Aggregate Stock Merger Consideration = 133,913 shares
4
<PAGE>
<TABLE>
<S> <C> <C>
Aggregate Cash Merger Consideration = $1,260,001
Merger Consideration = Aggregate Merger Consideration
------------------------------
Aggregate Equity
Stock Merger Consideration = Aggregate Stock Merger Consideration
------------------------------------
Aggregate Equity
Cash Merger Consideration = Aggregate Cash Merger Consideration
-----------------------------------
Aggregate Equity
</TABLE>
At the Effective Time, all issued and outstanding shares of Company Stock (the
"Shares") will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and certificates previously evidencing any such
Shares (each a "Certificate") will thereafter represent the right to receive,
upon the surrender of such Certificate in accordance with the provisions of
Section 2.2, the number of Shares represented by such Certificate multiplied by
(i) the Stock Merger Consideration plus (ii) the Cash Merger Consideration. A
holder of more than one Certificate will have the right to receive the Stock
Merger Consideration and the Cash Merger Consideration multiplied by the number
of Shares represented by all such Certificates (the "Exchange Merger
Consideration"). The holders of all Certificates may allocate the Stock Merger
Consideration and Cash Merger Consideration disproportionately among all such
holders; provided, however, that (i) a Schedule 2.1 setting forth the allocation
of Stock Merger Consideration and Cash Merger Consideration among the holders of
all Certificates is completed and consented to in writing by all such holders
contemporaneously with the execution and delivery of this Agreement, all in such
form as required by VIALOG; (ii) for each Share, the total of (A) the allocated
Stock Merger Consideration multiplied by the Offering Price, plus (B) the
allocated Cash Merger Consideration, must equal the Merger Consideration, (iii)
the total allocation of the Stock Merger Consideration must equal the Aggregate
Stock Merger Consideration, and (iv) the total allocation of the Cash Merger
Consideration must equal the Aggregate Cash Merger Consideration. Any such
election to allocate the Stock Merger Consideration and Cash Merger
Consideration disproportionately may not thereafter be withdrawn or amended. The
holders of Certificates previously evidencing Shares outstanding immediately
prior to the Effective Time will cease to have any rights with respect to such
Shares except as otherwise provided in this Agreement or by Applicable Law.
(b) Each Share held in the treasury of the Company or by any direct
or indirect wholly-owned Subsidiary of the Company immediately prior to the
Effective Time will automatically be canceled and extinguished without
conversion, and no payment will be made with respect to such Share.
(c) Each share of common stock of VIALOG Merger Subsidiary
outstanding immediately prior to the Effective Time will be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so
5
<PAGE>
converted and will constitute the only outstanding shares of capital stock of
the Surviving Corporation.
(d) In lieu of issuing fractional shares, VIALOG may convert a
holder's right to receive shares of VIALOG Stock pursuant to Section 2.1(a) into
a right to receive the highest whole number of shares of VIALOG Stock
constituting the non-cash portion of the Exchange Merger Consideration plus cash
equal to the fraction of a share of VIALOG Stock to which the holder would
otherwise be entitled multiplied by the Offering Price, and the Exchange Merger
Consideration to which a holder is entitled will be deemed to be such number of
shares of VIALOG Stock plus such cash plus the cash portion of the Exchange
Merger Consideration.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Prior to the Merger Closing, VIALOG will deposit or cause to
be deposited with a bank, trust company or other Entity designated by VIALOG
(the "Exchange Agent"), for the benefit of the holders of Shares for exchange in
accordance with this Article, through the Exchange Agent, the stock portion of
the Merger Consideration multiplied by the number of all Shares issued and
outstanding immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 2.1(b)) (said number of Shares less Shares to be
canceled to be referred to as the "Net Shares"), and within one (1) business day
of the Public Offering Closing Date, a check or checks representing next day
funds from the Underwriter in (or, pursuant to instructions reasonably
satisfactory to the Exchange Agent, wire transfer of) an amount equal to the
Cash Merger Consideration multiplied by the number of Net Shares plus cash in an
amount sufficient to make payment for fractional shares, in exchange for all of
the outstanding Shares (collectively the "Exchange Fund"). The Exchange Agent
will, pursuant to irrevocable instructions from VIALOG, deliver the Exchange
Merger Consideration to be issued pursuant to Section 2.1(a) out of the Exchange
Fund to holders of Shares upon transmittal of Certificates for exchange as
provided therein and in Section 2.2(b). The Exchange Fund will not be used for
any other purposes. Any interest, dividends or other income earned by the
Exchange Fund will be for the account of VIALOG.
(b) As soon as reasonably practicable after the date as of which
the Stockholders act to approve and adopt this Agreement, the Merger and the
Transactions, the Company will notify VIALOG thereof and VIALOG will promptly
instruct the Exchange Agent to deliver to the Stockholders, for the purpose of
accepting Certificates for exchange on the terms provided in Section 2.1(a) at
the Effective Time, and subject to withdrawal of Certificates by their holders
prior thereto, (i) a letter of transmittal (which will specify that delivery
will be effected, and risk of loss and title to the Certificates will pass, only
upon proper delivery of the Certificates to the Exchange Agent and will be in
such form and have such other provisions as VIALOG may reasonably specify), and
(ii) instructions to effect the surrender of the Certificates in exchange for
the Exchange Merger Consideration. Subject to the occurrence of the Effective
Time, upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by VIALOG together with such
letter of transmittal, duly executed, and such other customary documents as may
be reasonably required pursuant to such instructions (collectively, the
"Transmittal Documents"), the holder of such Certificate will
6
<PAGE>
become entitled to receive, as of the Effective Time, in exchange therefor the
Exchange Merger Consideration which such holder has the right to receive
pursuant to Sections 2.1(a) and 2.1(d), and the Certificate so surrendered will
be canceled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, the Exchange Merger
Consideration may be issued and paid in accordance with this Article to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents reasonably required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. The Exchange Merger Consideration will be delivered by the
Exchange Agent within two business days (or such greater period not to exceed
five business days as may be customarily required by the Exchange Agent)
following the later of (i) two business days after the Public Offering Closing
Date, or (ii) surrender of a Certificate and the related Transmittal Documents,
and cash payments for fractional shares and the cash portion of the Exchange
Merger Consideration may be made by check (or, pursuant to instructions
reasonably satisfactory to the Exchange Agent, by wire transfer). No interest
will be payable on the Exchange Merger Consideration regardless of any delay in
making payments. Until surrendered as contemplated by this Section, each
Certificate will be deemed at any time after the Effective Time to evidence only
the right to receive, upon such surrender, the Exchange Merger Consideration,
without interest.
(c) If any Certificate is lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and subject to such other conditions as VIALOG may
impose, the Surviving Corporation will issue in exchange for such lost, stolen
or destroyed Certificate the Exchange Merger Consideration deliverable in
respect thereof as determined in accordance with Sections 2.1(a) and 2.1(d).
VIALOG may, in its discretion and as a condition precedent to authorizing the
issuance thereof by the Surviving Corporation, require the owner of such lost,
stolen or destroyed Certificate to provide a bond or other surety to VIALOG and
the Surviving Corporation in such sum as VIALOG may reasonably direct as
indemnity against any claim that may be made against VIALOG, VIALOG Merger
Subsidiary or the Surviving Corporation (and their Affiliates) with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed
to the holders of the Company Stock for thirty (30) days after the Effective
Time will be delivered to VIALOG upon demand by VIALOG, and any holders of
Certificates who have not theretofore complied with this Article will thereafter
look only to VIALOG for the Exchange Merger Consideration to which they are
entitled pursuant to this Article.
(e) None of VIALOG, VIALOG Merger Subsidiary, the Company or the
Surviving Corporation will be liable to any holder of Shares for any shares of
VIALOG Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Each of VIALOG, the Surviving Corporation and the Exchange
Agent will be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts as
VIALOG, the Surviving Corporation or the
7
<PAGE>
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by VIALOG, the Surviving
Corporation or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by VIALOG, the
Surviving Corporation or the Exchange Agent.
2.3 Stock Transfer Books. At the Effective Time, the stock transfer books
--------------------
of the Company will be closed, and there will be no further registration of
transfers of Shares thereafter on the records of the Company other than to
VIALOG. On or after the Effective Time, any Certificate presented to the
Exchange Agent or the Surviving Corporation will be converted into the Exchange
Merger Consideration.
2.4 Option Securities and Convertible Securities; Payment Rights. At the
------------------------------------------------------------
Effective Time, (a) each outstanding Option Security and each outstanding
Convertible Security exercisable or convertible to purchase Shares as of
immediately prior to the Effective Time, will be canceled and the holder thereof
will be entitled to receive, and will receive, upon payment of the consideration
required to exercise or convert, or debit of such consideration against the
Merger Consideration otherwise due, and termination of such holder's rights to
exercise or convert, as the case may be, all other Option Securities or
Convertible Securities issued to such holder, Merger Consideration in the form
of shares of VIALOG Stock issuable and cash payable with respect to the number
of Shares issuable pursuant to such Option Security or Convertible Security so
exercised or converted, as the case may be, as provided in Section 2.1(a), plus
cash in lieu of receipt of a fractional share in an amount determined as
provided in Section 2.1(d), and (b) each Option Security outstanding not then
exercisable or exercised and the conversion rights of each Convertible Security
outstanding not then convertible or converted will be canceled.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to, and agrees with, VIALOG
and VIALOG Merger Subsidiary as follows:
3.1 Organization and Business; Power and Authority; Effect of
---------------------------------------------------------
Transaction.
-----------
(a) The Company:
(i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation as set forth in Section 3.1(a) of the
Disclosure Schedule,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties and to
conduct its business
8
<PAGE>
as now conducted and as presently proposed to be
conducted, and has in full force and effect all
Governmental Authorizations and Private Authorizations
and has made all Governmental Filings, to the extent
required for such ownership and lease of its property
and conduct of its business, and
(iii) has duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set
forth in Section 3.1(a) of the Disclosure Schedule) in
which the character of its property or the nature of
its business or operations requires such qualification
or authorization, except to the extent the failure so
to qualify or to maintain such authorizations would not
have an Adverse Effect.
(b) The Company has all requisite power and authority (corporate
and other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions. The execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the Stockholders). This
Agreement has been duly executed and delivered by the Company and constitutes,
and each Collateral Document executed or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions, when executed and
delivered by the Company or an Affiliate of the Company will constitute, legal,
valid and binding obligations of the Company or such Affiliate, enforceable in
accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity. The affirmative vote or action by
written consent of 100% of the votes the holders of the outstanding shares of
the Company are entitled to cast is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve this Agreement,
the Merger and the Transactions under Applicable Law and the Company's
Organizational Documents.
(c) Except as set forth in Section 3.1(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation
of, or constitute a default under, any Applicable Law
on the part of the Company or any Subsidiary or will
conflict with, or result in a breach or violation of,
or constitute a default under, or permit the
9
<PAGE>
acceleration of any obligation or liability in, or but
for any requirement of giving of notice or passage of
time or both would constitute such a conflict with,
breach or violation of, or default under, or permit any
such acceleration in, any Contractual Obligation of the
Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of
any Lien (except to the extent set forth in Section
3.1(c) of the Disclosure Schedule) upon any property
now owned or leased by the Company or any such other
party, or
(iii) will require any Governmental Authorization or
Governmental Filing or Private Authorization, except
for filing requirements under Applicable Law in
connection with the Merger and the Transactions and as
the Securities Act and applicable state securities laws
may apply to compliance by the Company with the
provisions of this Agreement relating to the Public
Offering and registration rights provided for hereunder
and except pursuant to the HSR Act. (if applicable).
(d) The Company does not have any Subsidiaries other than those
listed on Section 3.1(d) of the Disclosure Schedule. Each Subsidiary so listed
is wholly-owned, is a corporation which is duly organized, validly existing and
in good standing under the laws of the respective state of incorporation set
forth opposite its name on Section 3.1(d) of the Disclosure Schedule, and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown in Section 3.1(d) of the Disclosure Schedule) in which
the character of its property or the nature of its business or operations
requires such qualification or authorization, with full power and authority
(corporate and other) to carry on the business in which it is engaged. Each
Subsidiary has in full force and effect all Governmental Authorizations and
Private Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business. The Company owns all of the outstanding capital stock (as shown on
Section 3.1(d) of the Disclosure Schedule) of each Subsidiary, free and clear of
all Liens (except to the extent set forth in Section 3.1(d) of the Disclosure
Schedule), and all such stock has been duly authorized and validly issued and is
fully paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings with respect to any of
the foregoing, of any nature whatsoever relating to the authorized and unissued
or the outstanding capital stock of any Subsidiary.
3.2 Financial and Other Information.
--------------------------------
(a) The Company has furnished to VIALOG copies of the financial
statements of the Company and its Subsidiaries listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements,
including in each case the notes thereto, have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, do not
10
<PAGE>
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make any
statements contained therein not misleading, and fairly present the financial
condition and results of operations of the Company and its Subsidiaries, on the
bases therein stated, as of the respective dates thereof, and for the respective
periods covered thereby subject, in the case of unaudited financial statements
to normal nonmaterial year-end audit adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements,
this Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or any of the Stockholders pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Stockholders pursuant hereto or thereto or to consummate the
Merger and the Transactions, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated in such document by its terms or necessary in order to make the
statements contained herein or therein not misleading and all such Collateral
Documents are and will be true, correct and complete in all material respects;
provided that:
(i) with respect to projections contained or referred to in
the Disclosure Schedule, the Company represents and
warrants only that such projections were prepared in
good faith on the basis of the past business of the
Company and other information and assumptions which the
Company and the Principal Stockholder believe to be
reasonable,
(ii) each such Collateral Document will not be deemed
misleading by virtue of the absence of factual
recitations or references not germane thereto and
necessary to the purpose thereof, and
(iii) responses to due diligence requests will not be subject
to this Section 3.2(b) except to the extent that, to
the Company's knowledge, such response is materially
misleading.
(c) The Company does not own any capital stock or equity or
proprietary interest in any other Entity or enterprise, however organized and
however such interest may be denominated or evidenced, except as set forth in
Sections 3.1(d) or 3.2(c) of the Disclosure Schedule. None of the Entities, if
any, so set forth in Section 3.2(c) of the Disclosure Schedule is a Subsidiary
of the Company except as so set forth. The Company owns all of the outstanding
capital stock or equity or proprietary interests (as shown on Section 3.2(c) of
the Disclosure Schedule) of each such Entity or other enterprise, free and clear
of all Liens (except to the extent set forth in Section 3.2(c) of the Disclosure
Schedule), and all of such stock or equity or proprietary interests have been
duly authorized and validly issued and are fully paid and non-assessable. There
are no outstanding Option Securities or Convertible Securities, or agreements or
understandings with respect to any of the foregoing, of any nature whatsoever,
except as described in Section 3.2(c) of the Disclosure Schedule.
11
<PAGE>
3.3 Changes in Condition. Since the date of the most recent financial
--------------------
statements forming part of the Financial Statements, except to the extent
specifically described in Section 3.3 of the Disclosure Schedule, there has been
no Adverse Change in the Company or the Company and its Subsidiaries taken as a
whole. There is no Event known to the Company which Adversely Affects, or in the
future might (so far as the Company or the Principal Stockholder can now
reasonably foresee) Adversely Affect, the Company or the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto except for changes in
general economic conditions and to the extent set forth in Section 3.3 of the
Disclosure Schedule.
3.4 Liabilities. At the date of the most recent balance sheet forming
-----------
part of the Financial Statements, neither the Company nor any Subsidiary had any
obligations or liabilities, past, present or deferred, accrued or unaccrued,
fixed, absolute, contingent or other, except as disclosed in such balance sheet,
or the notes thereto, and since such date neither the Company nor any Subsidiary
has incurred any such obligations or liabilities, other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, which do not and, to the Company's
knowledge, will not, in the aggregate, Adversely Affect the Company or the
Company and its Subsidiaries taken as a whole except to the extent set forth in
Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business or as disclosed in the most recent balance sheet, or the notes thereto,
forming part of the Financial Statements or in Section 3.4 of the Disclosure
Schedule.
3.5 Title to Properties; Leases.
---------------------------
(a) Each of the Company and its Subsidiaries has good legal and
insurable title, with respect to all real property owned or leased (in fee
simple if owned and leasehold if leased) and marketable title if owned (in fee
simple), if any, reflected as an asset on the most recent balance sheet forming
part of the Financial Statements, or held by the Company or any of its
Subsidiaries for use in its business if not so reflected, and good indefeasible
and merchantable title to all other assets, tangible and intangible (excluding
leased property), reflected on such balance sheet, or held by the Company or any
of its Subsidiaries for use in its business if not so reflected, or purported to
have been acquired by the Company or any of its Subsidiaries since such date,
except inventory sold or depleted, or property, plant and other equipment used
up or retired, since such date, in each case in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries, free and
clear of all Liens, except such as are reflected in the most recent balance
sheet, or the notes thereto, forming part of the Financial Statements or set
forth in Section 3.5(a) of the Disclosure Schedule. Except for financing
statements evidencing Liens referred to in the preceding sentence (a true,
correct and complete list and description of which is set forth in Section
3.5(a) of the Disclosure Schedule), to the
12
<PAGE>
Company's knowledge, no financing statements under the Uniform Commercial Code
and no other filing which names the Company or any of its Subsidiaries as debtor
or which covers or purports to cover any of the property of the Company or any
of its Subsidiaries is on file in any state or other jurisdiction, and neither
the Company nor any Subsidiary has signed or agreed to sign any such financing
statement or filing or any agreement authorizing any secured party thereunder to
file any such financing statement or filing. Each Lease or other occupancy or
other agreement under which the Company or any of its Subsidiaries holds real or
personal property has been duly authorized, executed and delivered by the
Company or Subsidiary, as the case may be, and, to the Company's knowledge, by
each of the parties thereto. Each such Lease is a legal, valid and binding
obligation of the Company or a Subsidiary, as the case may be, and, to the
Company's knowledge, of each other party thereto, enforceable in accordance with
its terms. Each of the Company and its Subsidiaries has a valid leasehold
interest in and enjoys peaceful and undisturbed possession under all Leases
pursuant to which it holds any real property or tangible personal property, none
of which contains any provision which would impair the Company's ability to use
such property as it is currently used by the Company, except as described in
Section 3.5(a) of the Disclosure Schedule. All of such Leases are valid and
subsisting and in full force and effect. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any other party thereto, is in
default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in any such Lease.
3.5 Section 3.5(b) of the Disclosure Schedule contains a true, correct
and complete description of all real estate owned or leased by the Company or
any of its Subsidiaries and all Leases and an identification of all material
items of fixed assets and machinery and equipment. None of the fixed assets and
machinery and equipment is subject to contracts of sale, and none is held by the
Company or any of its Subsidiaries as lessee or as conditional sales venue under
any Lease or conditional sales contract and none is subject to any title
retention agreement, except as set forth in Section 3.5(b) of the Disclosure
Schedule. The real property (other than land), fixtures, fixed assets and
machinery and equipment are in a state of good repair and maintenance and are in
good operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure
Schedule:
(i) all real property owned or leased by the Company or any
of its Subsidiaries conforms to and complies with all
applicable title covenants, conditions, restrictions
and reservations and all Environmental Laws and all
applicable zoning, wetlands, land use and other
Applicable Law, and
(ii) neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any landlord, tenant or other
occupant or user of any such real property, has used
such real property for the storage or disposal of
Hazardous Materials or engaged in the business of
storing or disposing of Hazardous Materials, except for
use in the ordinary course of business of the type
conducted by the Company.
13
<PAGE>
3.6 Compliance with Private Authorizations. Section 3.6 of the Disclosure
--------------------------------------
Schedule sets forth a true, correct and complete list and description of each
Private Authorization which individually is material to the Company or the
Company and its Subsidiaries taken as a whole, all of which are in full force
and effect. Each of the Company and each Subsidiary has obtained all Private
Authorizations which are necessary for the ownership by the Company or each
Subsidiary of its properties and the conduct of its business as now conducted or
as presently proposed to be conducted or which, if not obtained and maintained,
could, singly or in the aggregate, Adversely Affect the Company or the Company
and its Subsidiaries taken as a whole. Neither the Company nor any Subsidiary is
in breach or violation of, or is in default in the performance, observance or
fulfillment of, any Private Authorization, and no Event exists or has occurred,
which constitutes, or but for any requirement of giving of notice or passage of
time or both would constitute, such a breach, violation default, under any
Contractual Obligation or Private Authorization, except for such defaults,
breaches or violations, as do not and, to the Company's knowledge, will not have
in the aggregate any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto or to consummate the
Merger and the Transactions. No Private Authorization is the subject of any
pending or, to the Company's knowledge, threatened attack, revocation or
termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
--------------------------------------------------------------
(a) Section 3.7(a) of the Disclosure Schedule contains a
description of:
(i) all Legal Actions which are pending or, other than
those finally adjudicated or settled on or before
December 31, 1995, in which the Company or any of its
Subsidiaries, or any of its officers or directors, is,
or at any time since its organization has been,
engaged, or which involves, or at any time during such
period involved, the business, operations or properties
of the Company or any of its Subsidiaries or, to the
Company's knowledge, which is threatened or
contemplated against, or in any other manner relating
Adversely to, the Company or any of its Subsidiaries or
the business, operations or properties, or the officers
or directors, or any of them in connection therewith;
and
(ii) each Governmental Authorization to which the Company or
any Subsidiary is subject and which relates to the
business, operations, properties, prospects, condition
(financial or other), or results of operations of the
Company or the Company and its Subsidiaries taken as a
whole, all of which are in full force and effect.
(b) Each of the Company and each of its Subsidiaries has obtained
all Governmental Authorizations which are necessary for the ownership or uses of
its properties and the conduct of its business as now conducted or as presently
proposed to be conducted by the
14
<PAGE>
Company or which, if not obtained and maintained, could singly or in the
aggregate, have any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole. No Governmental Authorization is the subject of
any pending or, to the Company's knowledge, threatened attack, revocation or
termination. Neither the Company nor any Subsidiary nor any officer or director
(in connection with the business, operations and properties of the Company or
any Subsidiary) is or at any time since January 1, 1991 has been, or is or has
during such time been charged with, or to the knowledge of the Company, is
threatened or under investigation with respect to any material breach or
violation of, or in default in the performance, observance or fulfillment of,
any Governmental Authorization or any Applicable Law, and no Event exists or has
occurred, which constitutes, or but for any requirement of giving of notice or
passage of time or both would constitute, such a breach, violation or default,
under
(i) any Governmental Authorization or any Applicable Law,
except for such breaches, violations or defaults as do
not and, to the Company's knowledge, will not have in
the aggregate any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or the
ability of the Company to perform any of the
obligations set forth in this Agreement or any
Collateral Document executed or required to be executed
pursuant hereto or thereto, or to consummate the Merger
and the Transactions, or
(ii) any requirement of any insurance carrier, applicable to
its business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in
Sections 3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and
matters set forth in the Disclosure Schedule, individually and in the aggregate,
if adversely determined against the Company or any Subsidiary, will not
Adversely Affect the Company or the Company and its Subsidiaries taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions.
3.8 Intangible Assets.
-----------------
(a) Each of the Company and each Subsidiary owns or possesses or
otherwise has the right to use all Governmental Authorizations and other
Intangible Assets necessary for the present and planned future conduct of its
business, without any known conflict with the rights of others. The present and
planned future conduct of business by the Company and each Subsidiary is not
dependent upon any one or more, or all, of such Governmental Authorizations and
other Intangible Assets or rights with respect to any of the foregoing, except
as set forth in Section 3.8(a) of the Disclosure Schedule.
(b) Section 3.8(b) of the Disclosure Schedule sets forth a true,
correct and complete description of all of such Governmental Authorizations and
other Intangible Assets or
15
<PAGE>
rights with respect thereto, including without limitation the nature of the
Company's and each Subsidiary's interest in each and the extent to which the
same have been duly registered in the offices as indicated therein.
3.9 Related Transactions. Section 3.9 of the Disclosure Schedule sets
--------------------
forth a true, correct and complete description of any Contractual Obligation or
transaction, not fully discharged or consummated, as the case may be, on or
before the beginning of the Company's current fiscal year, between the Company
or any of its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services as officers, directors and employees and reimbursement
for out-of-pocket expenses reasonably incurred in support of the Company's
business), now existing or which, at any time since its organization, existed or
occurred, including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any officer, director, stockholder or
employee, or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
3.10 Insurance.
---------
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance
policies maintained by the Company or any Subsidiary and includes insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention.
(b) Neither the Company nor any Subsidiary is in breach or
violation of or in default under any such policy, and all premiums due thereon
have been paid, and each such policy or a comparable replacement policy will
continue to be in force and effect up to and including the Public Offering
Closing Date. The insurance policies so listed and identified are of a nature
and scope and in amounts sufficient to prevent the Company or any Subsidiary
from becoming a coinsurer within the terms of such policies. Except as set forth
in Section 3.10(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has, within the past five (5) years, been refused insurance by any
insurance carrier to which it has applied for insurance.
3.11 Tax Matters.
-----------
(a) Each of the Company and each Subsidiary has in accordance with
all Applicable Laws filed all Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Returns and all other governmental
charges and assessments received to date. The Tax Returns of the Company and
each Subsidiary have been prepared in accordance with all Applicable Laws and
generally accepted principles applicable to taxation consistently applied.
16
<PAGE>
All Taxes which the Company and each Subsidiary are required by law to withhold
and collect have been duly withheld and collected and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. Neither
the Company nor any Subsidiary has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of the
Company or any Subsidiary for the fiscal year prior to and including the most
recent fiscal year. Adequate provision has been made on the most recent balance
sheet forming part of the Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other, and to the knowledge of the Company there are no transactions
or matters or any basis which might or could result in additional Taxes of any
nature to the Company or any Subsidiary for which an adequate reserve has not
been provided on such balance sheet. Each of the Company and each Subsidiary has
at all times been taxable as a Subchapter C corporation under the Code, except
as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. Neither
the Company nor any Subsidiary has ever been a member of any consolidated group
(other than exclusively with the Company and its Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes
which have become due pursuant to its Returns and has paid all installments (to
the extent required to avoid material underpayment penalties) of estimated Taxes
due and payable.
(c) From the end of its most recent fiscal year to the date hereof
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business with
respect to current operations or property presently owned.
(d) The information shown on the federal income Tax Returns of the
Company and its Subsidiaries (true, correct and complete copies of which have
been furnished by the Company to VIALOG) is true, correct and complete and
fairly and accurately reflects the information purported to be shown. Federal
and state income Tax Returns of the Company and its Subsidiaries have been
audited by the IRS or applicable state Authority for the taxable periods set
forth in Section 3.11(d) of the Disclosure Schedules, and neither the Company
nor any Subsidiary has been notified regarding any pending audit, except as
shown in Section 3.11(d) of the Disclosure Schedule.
(e) Neither the Company nor any Subsidiary is a party to any tax
sharing agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
(f) Neither the Company nor any Subsidiary has ever (i) filed a
consent under Section 341(f) of the Code concerning collapsible corporations or
(ii) undergone an "ownership change" within the meaning of Section 382(g) of the
Code, except as set forth in Section 3.11(f) of the Disclosure Schedule.
17
<PAGE>
3.12 Employee Retirement Income Security Act of 1974.
-----------------------------------------------
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list of
all Plans and Benefit Arrangements maintained by the Company and any of its
Subsidiaries (which for purposes of this Section 3.12 will include any ERISA
Affiliate with respect to any Plan subject to Title IV of ERISA). As to all such
Plans and Benefit Arrangements, and except as disclosed in such Section 3.12(a)
of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply currently, and
have complied in the past, in all material respects both
as to form and operation, with their terms and with all
Applicable Laws, and neither the Company nor any of its
Subsidiaries has received any outstanding notice from
any Authority questioning or challenging such
compliance,
(ii) all necessary governmental approvals for each Plan and
Benefit Arrangement have been obtained; the Internal
Revenue Service has issued a favorable determination as
to the tax qualified status of each Plan intended to
comply with section 401(a) of the Code and each
amendment thereto, and a recognition of exemption from
federal income taxation under Section 501(a) of the Code
of each Plan which constitutes a funded welfare plan as
defined in Section 3(1) of ERISA; and nothing has
occurred since the date of each such determination or
recognition that would adversely affect such
qualification.
(iii) no Plan which is subject to Part 3 of Subtitle B of
Title 1 of ERISA or Section 412 of the Code had an
accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA and Section 412 of the Code), whether
or not waived, as of the last day of the most recently
completed fiscal year of such Plan,
(iv) there are no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan for which the Company or any of its
Subsidiaries has any liability, nor are any of the
assets of any Plan invested in employer securities or
employer real property,
(v) no Plan is subject to Title IV of ERISA, or if subject,
there have been no "reportable events" (as described in
Section 4043 of ERISA) as to which there is any material
risk of termination of such Plan,
(vi) no material liability to the PBGC has been or is
expected by the Company to be incurred by the Company or
any of its Subsidiaries with respect to any Plan, and
there has been no event or condition
18
<PAGE>
which presents a material risk of termination of any
Plan by the PBGC,
(vii) with respect to each Plan subject to Title IV of ERISA,
the amount for which Company or any of its Subsidiaries
would be liable pursuant to the provisions of Sections
4062, 4063 or 4064 of ERISA would be zero if such Plans
terminated on the date of this Agreement,
(viii) no notice of intent to terminate a Plan has been filed
with, nor has any Plan been terminated pursuant to the
provisions of Section 4041 of ERISA,
(ix) the PBGC has not instituted proceedings to terminate (or
appointed a trustee to administer) a Plan and no event
has occurred or condition exists which might constitute
grounds under the provisions of Section 4042 of ERISA
for the termination of (or the appointment of a trustee
to administer) any such Plan.
(x) no Plan or Benefit Arrangement covers any employee or
former employee of the Company or any of its
Subsidiaries that could give rise to the payment of any
amount that would not be deductible pursuant to the
terms of section 280G of the Code,
(xi) there are no Claims (other than routine claims for
benefits) pending or threatened involving any Plan or
Benefit Arrangement or any of the assets thereof,
(xii) except as set forth in Section 3.12(a) of the Disclosure
Schedule (which entry, if applicable, will indicate the
present value of accumulated plan liabilities calculated
in a manner consistent with FAS 106 and the actual
annual expense for such benefits for each of the last
two (2) years) and pursuant to the provisions of COBRA,
neither the Company nor any of its Subsidiaries
maintains any Plan that provides benefits described in
Section 3(1) of ERISA to any former employees or
retirees of the Company or any of its Subsidiaries,
(xiii) all reports, returns and similar items required to be
filed with any Authority or distributed to employees
and/or Plan participants in connection with the
maintenance or operation of any Plan or Benefit
Arrangement have been duly and timely filed and
distributed, and there have been no acts or omissions by
the Company or any of its Subsidiaries, which have given
rise to or may reasonably be expected to give rise to
fines, penalties, taxes or related charges under
Sections 502(c), 502(i) or 4071 or ERISA or
19
<PAGE>
Chapter 43 or section 6039D of the Code for which the
Company or any of its Subsidiaries may be liable,
(xiv) neither the Company nor any of its Subsidiaries nor any
of its respective directors, officers or employees has
committed, nor to the best of the Company's knowledge
has any other fiduciary committed, any breach of the
fiduciary responsibility standards imposed by ERISA that
would subject the Company or any of its Subsidiaries or
any of its respective directors, officers or employees
to liability under ERISA,
(xv) to the extent that the most recent balance sheet forming
part of the Financial Statements does not include a pro
rata amount of the contributions which would otherwise
have been made in accordance with past practices for the
Plan years which include the Public Offering Closing
Date, such amounts are set forth in Section 3.12(a) of
the Disclosure Schedule,
(xvi) the Company has furnished to VIALOG a copy of the three
most recently filed annual reports (IRS Form 5500)
series and accountant's opinion, if applicable, for each
Plan (and the three most recent actuarial valuation
reports for each Plan, if any, that is subject to Title
IV of ERISA), and all information provided by the
Company to any actuary in connection with the
preparation of any such actuarial valuation report was
true, correct and complete in all material respects,
(b) Neither the Company nor any of its Subsidiaries is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the basis
of funding, and the current status of, any past service liability with respect
to each Employment Arrangement to which the same is applicable.
3.13 Absence of Sensitive Payments. The Company has not, nor has any
-----------------------------
Subsidiary, or, to the Company's knowledge, any of its or any Subsidiary's
officers, directors, employees or Representatives, (a) made any contributions,
payments or gifts to or for the private use of any governmental office, employee
or agent where either the payment or the purpose of such contribution, payment
or gift is illegal under the laws of the United States or the jurisdiction in
which made, (b) established or maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on its books, or (c) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
3.14 Inapplicability of Specified Statutes. Neither the Company nor any
-------------------------------------
Subsidiary is a "holding company", or a "subsidiary company" or an "affiliate"
or a "holding company", as
20
<PAGE>
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or an "investment company" or a company "controlled" by or acting on
behalf of an "investment company", as defined in the Investment Company Act of
1940, as amended.
3.15 Authorized and Outstanding Capital Stock
----------------------------------------
(a) The authorized and outstanding capital stock of the Company is
as set forth in Section 3.15(a) of the Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is fully
paid and non-assessable and is not subject to any preemptive or similar rights.
Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) there is
neither outstanding nor has the Company or any Subsidiary agreed to grant or
issue any shares of its capital stock or any Option Security or Convertible
Security, and (ii) neither the Company nor any Subsidiary is a party to or is
bound by any agreement, put or commitment pursuant to which it is obligated to
purchase, redeem or otherwise acquire any shares of capital stock or any Option
Security or Convertible Security. Between the date of this Agreement and the
Merger Closing, the Company will not, and will not permit any Subsidiary to,
issue, sell or purchase or agree to issue, sell or purchase any capital stock or
any Option Security or Convertible Security of the Company or any Subsidiary. As
of the Effective Time, the rights of the holders of all Option Securities and
Convertible Securities issued by the Company to exercise or convert such
Securities will have been terminated pursuant to the terms thereof.
(b) All of the outstanding capital stock of the Company is owned by
the Stockholders as set forth in Section 3.15(b) of the Disclosure Schedule, and
is, to the Company's knowledge, free and clear of all Liens, except as set forth
in Section 3.15(b) of the Disclosure Schedule. To the Company's knowledge, no
Person, and no group of Persons acting in concert, owns as much as five percent
(5%) of the Company's outstanding Common Stock, and the Company is not
controlled by any other Person, except as set forth in Section 3.15(b) of the
Disclosure Schedule.
3.16 Employment Arrangements.
-----------------------
(a) Neither the Company nor any Subsidiary has any obligation or
liability, contingent or other, under any Employment Arrangement (whether or not
listed in Section 3.12(a) of the Disclosure Schedule), other than those listed
or described in Section 3.16(a) of the Disclosure Schedule. Neither the Company
nor any Subsidiary is now or during the past five (5) years has been subject to
or involved in or, to the Company's knowledge, threatened with any election for
the certification of a bargaining representative for any employees, petitions
therefor or other organizational activities, including but not limited to
voluntary requests for recognition as a bargaining representative, or
organizational campaigns of any nature, except as described in Section 3.16(a)
of the Disclosure Schedule. None of the employees of the Company or any
Subsidiary are now, or during the past five (5) years have been, represented by
any labor union or other employee collective bargaining organization. Neither
the Company nor any Subsidiary are parties to any labor or other collective
bargaining agreement, and there are no pending grievances, disputes or
controversies with any union or any other employee collective bargaining
organization of such employees, or, to the Company's knowledge, threats of
strikes, work
21
<PAGE>
stoppages or slowdowns or any pending demands for collective bargaining by any
union or other such organization. The Company and each Subsidiary have performed
all obligations required to be performed under all Employment Arrangements and
are not in breach or violation of or in default or arrears under any of the
terms, provisions or conditions thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, no employee will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employment Arrangement,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(c) The Company considers its and each Subsidiary's relationships
with employees to be good, and except as set forth in Section 3.16(c) of the
Disclosure Schedule, neither the Company nor any Subsidiary has experienced a
work slowdown or stoppage due to labor problems. Neither the Company nor any
Subsidiary has received notice of any claim that it has failed to comply with
any federal or state law, or is the subject of any investigation by any federal
or state agency to determine compliance with any federal or state law, relating
to the employment of labor, including any provisions relating to wages, hours,
collective bargaining, the payment of taxes, discrimination, equal employment
opportunity, employment discrimination, worker injury and/or occupational
safety, nor to the knowledge of the Company is there any basis for such a claim.
(d) Neither the Company nor any Subsidiary has conducted, and on or
prior to the Public Offering Closing Date will not conduct, a "plant closing" or
"mass layoff" of employees of the Company or any Subsidiary as defined by the
Worker Adjustment and Retraining Notification Act of 1988 ("the WARN Act"), 29
U.S.C. 2101-2109 as amended, or discharge, layoff, or reduce the hours of work,
of employees in a sufficient number or manner to trigger any state or local law
or regulation conditioning or regulating in any manner the discharge, layoff, or
reduction in hours of employees or the closing of a facility, plant, workplace,
division or department, from the date hereof or through the Public Offering
Closing Date or during the twelve-month period immediately prior thereto.
3.17 Material Agreements.
-------------------
(a) Listed on Section 3.17(a) of the Disclosure Schedule are all
Material Agreements relating to the ownership or operation of the business and
property of the Company or any Subsidiary presently held or used by the Company
or any Subsidiary or to which the Company or any Subsidiary is a party or to
which it or any or its property is subject or bound. True, complete and correct
copies of each of the Material Agreements have been furnished by the Company to
VIALOG (or true, complete and correct descriptions thereof have been set forth
in Section 3.17(a) of the Disclosure Schedule, if any such Material Agreements
are oral). All of the Material Agreements are valid, binding and legally
enforceable obligations of the parties thereto (except as such enforceability
may be subject to bankruptcy, moratorium, insolvency, reorganization,
arrangement, voidable preference, fraudulent conveyance and other similar laws
22
<PAGE>
relating to or affecting the rights of creditors and except as the same may be
subject to the effect of the general principles of equity), and the Company or
one of its Subsidiaries is validly and lawfully operating its business and
owning its property under each of the Material Agreements. The Company and each
Subsidiary have duly complied with all of the terms and conditions of each
Material Agreement and have not done or performed, or failed to do or perform
(and there is no pending or, to the knowledge of the Company, threatened Claim
that the Company or any Subsidiary has not complied, done and performed or fail
to do and perform) any act the effect of which would be to invalidate or provide
grounds for the other party thereto to terminate (with or without notice,
passage of time or both) such Material Agreement or impair the rights or
benefits, or increase the costs, of the Company or any Subsidiary, under any of
the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section 3.17(a)
of the Disclosure Schedule calling for the delivery of goods or merchandise or
the performance of services can be satisfied or performed by the Company or one
of its Subsidiaries at margins providing an operating profit, except as set
forth in Section 3.17(b) of the Disclosure Schedule.
3.18 Ordinary Course of Business.
---------------------------
(a) The Company and each Subsidiary, from the earlier of the date
of the most recent balance sheet forming part of the Financial Statements or
December 31, 1995 to the date of this Agreement, and until the Public Offering
Closing Date, except as may be described on Section 3.18(a) of the Disclosure
Schedule or as may be required or permitted expressly by the terms of this
Agreement or as may be approved in writing by VIALOG:
(i) has operated, and will continue to operate, its business
in the normal, usual and customary manner in the
ordinary and regular course of business, consistent with
prior practice,
(ii) has not sold or otherwise disposed of, or contracted to
sell or otherwise dispose of, and will not sell or
otherwise dispose of or contract to sell or otherwise
dispose of, any of its properties or assets, other than
in the ordinary course of business,
(iii) except in each case in the ordinary course of business
or as detailed as transactions not in the ordinary
course in the Company's business plan set forth as
Section 3.18(a) of the Disclosure Schedule, and except
as expressly otherwise contemplated hereby,
(A) has not incurred and will not incur any
obligations or liabilities (fixed, contingent or
other),
(B) has not entered and will not enter into any
commitments, and
(C) has not canceled and will not cancel any debts or
claims,
23
<PAGE>
(iv) has not made or committed to make, and will not make or
commit to make, any additions to its property or any
purchases of machinery or equipment, except for normal
maintenance and replacements,
(v) has not discharged or satisfied, and will not discharge
or satisfy, any Lien and has not paid and will not pay
any obligation or liability (absolute or contingent)
other than current liabilities or obligations under
contracts then existing or thereafter entered into in
the ordinary course of business, and commitments under
Leases existing on that date or incurred since that date
in the ordinary course of business,
(vi) except in the ordinary course, has not increased and
will not increase the compensation payable or to become
payable to any of its directors, officers, employees,
advisers, consultants, salesmen or agents or otherwise
alter, modify or change the terms of their employment or
engagement,
(vii) has not suffered any material damage, destruction or
loss (whether or not covered by insurance) or any
acquisition or taking of property by any Authority,
(viii) has not waived, and will not waive, any rights of
material value without fair and adequate consideration,
(ix) has not experienced any work stoppage,
(x) has not entered into, amended or terminated and will not
enter into, amend or terminate any Lease, Governmental
Authorization, Private Authorization, Material
Agreement, Employment Arrangement, Contractual
Obligation or transaction with any Affiliate, except for
terminations in the ordinary course of business in
accordance with the terms thereof,
(xi) has not amended or terminated and will not amend or
terminate, and has kept and will keep in full force and
effect including without limitation renewing to the
extent the same would otherwise expire or terminate, all
insurance policies and coverage,
(xii) has not entered into, and will not enter into, any other
transaction or series of related transactions which
individually or in the aggregate is material to the
Company or the Company and its Subsidiaries taken as a
whole, except in the ordinary course of business, and
24
<PAGE>
(xiii) has not, nor has any affiliate (as defined in Section
517.021(1) of the Florida Statutes), transacted business
with the government of Cuba or with any person or
affiliate located in Cuba.
(b) From the end of its most recent fiscal year to the date of this
Agreement, except as described in Section 3.18(b) of the Disclosure Schedule,
neither the Company nor any Subsidiary has, or on or prior to the Public
Offering Closing Date will have, declared, made or paid, or agreed to declare,
make or pay, any Distribution.
3.19 Bank Accounts, Etc. A true and correct and complete list as of the
------------------
date of this Agreement of all banks, trust companies, savings and loan
associations and brokerage firms in which the Company or any Subsidiary has an
account or a safe deposit box and the names of all Persons authorized to draw
thereon, to have access thereto, or to authorize transactions therein, the names
of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof has been previously
delivered to VIALOG.
3.20 Adverse Restrictions. Neither the Company nor any Subsidiary is a
--------------------
party to or subject to, nor is any of its property subject to, any Applicable
Law, Governmental Authorization, Contractual Obligation, Employment Arrangement,
Material Agreement or Private Authorization, or any other obligation or
restriction of any kind or character, or any aggregation thereof, which impairs
the Company's or any Subsidiary's ability to conduct its business as it is
currently being conducted or which could have any Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, except as set forth in
Section 3.20 of the Disclosure Schedule.
3.21 Broker or Finder. No Person assisted in or brought about the
----------------
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or any Stockholder.
3.22 Personal Injury or Property Damage; Warranty Claims; Etc. Except as
--------------------------------------------------------
set forth in Section 3.22 of the Disclosure Schedule, neither the Company nor
any Subsidiary or any Person acting for or on behalf of the Company or any
Subsidiary, including without limitation any insurance carrier, has at any time
since December 31, 1995, paid, and there is not now pending or, to the knowledge
of the Company, threatened any Claim (or any basis for any such Claim) relating
to, any damages to any third party for injuries to Persons or damage to
property, or for breach of warranty, which, in the case of pending or threatened
Claims, if determined Adversely to the Company or any Subsidiary, individually
or in the aggregate (taking into account unasserted Claims of similar nature),
could have any Adverse Effect on the Company or the Company and its Subsidiaries
taken as a whole.
3.23 Environmental Matters.
---------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Company and each Subsidiary:
25
<PAGE>
(i) is in compliance in all material respects with all
Environmental Laws and has not been notified that it is
liable or potentially liable, has not received any request
for information or other correspondence concerning any
site or facility, and is not a "responsible party" or
"potentially responsible party" under the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation Recovery Act
of 1976, as amended, or any similar state law,
(ii) has not entered into or received any consent decree,
compliance order, or administrative order relating to
Environmental Requirements,
(iii) is not a party in interest or in default under any
judgment, order, writ, injunction or decree or any final
order relating to Environmental Requirements, and
(iv) has obtained all material Governmental Authorizations and
Private Authorizations (including without limitation all
Environmental Permits) and made all Governmental Filings
which are required to be filed by the Company and each
Subsidiary for the ownership of its property, facilities
and assets and the operation of its businesses under all
Environmental Laws, is and at all times since its
organization has been in material compliance with the
terms and conditions of all such required Governmental and
Private Authorizations and all Environmental Requirements,
and is not the subject of or, to the Company's knowledge,
threatened with any Legal Action involving a demand for
damages or any other potential liability with respect to
violations or breaches of any Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure
Schedule:
(i) no spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water has occurred
on any property or facility owned, leased, operated or
occupied by the Company or any Subsidiary during the
period that such facilities and properties were owned,
leased, operated or occupied by it or, to the knowledge of
the Company, at any other time or at any other facility or
site to which Hazardous Materials from or generated by the
Company or any Subsidiary may have been taken at any time
in the past,
(ii) there has been no spill, disposal, release, burial or
placement of Hazardous Materials, in the soil, air or
water on any property which could reasonably be expected
to result or has resulted in
26
<PAGE>
contamination of or beneath any properties or facilities
owned, leased, operated or occupied by the Company or any
Subsidiary during the period that such facilities and
properties were owned, leased, operated or occupied by it
(or, to the knowledge of the Company, at any other time),
and
(iii) no notice has been received by the Company or any
Subsidiary and no Lien has arisen on its or any
Subsidiary's properties or facilities under Environmental
Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary has any above-ground or
underground tanks on property owned, leased, operated or occupied by it for the
storage of Hazardous Materials.
(d) There has not been, and on or prior to the Public Offering
Closing Date, there will not be, any past or present Events or plans of the
Company or any Subsidiary or any of its predecessors, which, individually or in
the aggregate, constitute a breach of any Environmental Requirements or which,
individually or in the aggregate, may interfere with or prevent continued
compliance with all Environmental Requirements, or which, individually or in the
aggregate, may give rise to any common law, statutory or other legal liability,
or otherwise form the basis of any Claim, assessment or remediation cost, fine,
penalty or assessment based on or related to the transportation, transmission,
gathering, processing, distribution, use, treatment, storage, disposal or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material with respect to the Company or any
Subsidiary or any of its predecessors or its or any of their business,
operations or property which could have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary has used any Hazardous
Materials in the conduct of its business. To the extent that any Hazardous
Materials are so set forth, Section 3.23(e) of the Disclosure Schedule also sets
forth (i) a description of Hazardous Materials used, (ii) the annual volume of
each of the Hazardous Materials used, (iii) the years during which each of the
Hazardous Materials used occurred, and (iv) the Persons to whom such Hazardous
Materials were transferred and/or transported after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a complete
and correct description of all Hazardous Materials generated by the Company or
any Subsidiary which are not set forth in Section 3.23(e), the approximate
annual volumes of each of the Hazardous Materials, and all Persons to whom such
Hazardous Materials have been transferred and/or transported.
(g) No site assessment, audit, study, test or other investigation
has been conducted by or on behalf of the Company or any Subsidiary, nor has the
Company received any notice from any governmental agency, or financial
institution as to environmental matters at any property owned, leased, operated
or occupied by the Company or any Subsidiary, except as set forth in Section
3.23(g) of the Disclosure Schedule.
27
<PAGE>
3.24 Materiality. The matters and items excluded from the representations
-----------
and warranties set forth in this Article by operation of the materiality
exceptions and materiality qualifications contained in such representations and
warranties, in the aggregate for all such excluded matters and items, are not
and could not reasonably be expected to be Adverse to the Company or the Company
and its Subsidiaries taken as a whole.
3.25 Solvency. As of the execution and delivery of this Agreement, the
--------
Company and the Company and its Subsidiaries taken as a whole are and, as of the
Public Offering Closing Date, will be solvent.
3.26 VIALOG Stock. The Stockholders will hold for investment the VIALOG
------------
Stock constituting the Stock Merger Consideration.
3.27 Compliance with Regulations Relating to Securities Credit. None of
---------------------------------------------------------
the borrowings, if any, of the Company were incurred or used for the purpose of
purchasing or carrying any security which at the date of its acquisitions was,
or any security which now is, margin stock or other margin security within the
meaning of Regulations T of the Margin Rules or a "security that is publicly
held," within the meaning of the Margin Rules, and the cash portion of the
proceeds from the consummation of the Transactions will not be used for the
purpose of purchasing or carrying any margin stock or other margin security, or
a "security that is publicly held", or any security issued by VIALOG, or in any
way which would involve the Company in any violation of the Margin Rules, and
neither the Company nor any Subsidiary owns any margin stock or other margin
security, or a "security that is publicly held", and neither the Company nor any
Subsidiary has any present intention of acquiring any margin stock or other
margin security, or any "security that is publicly held".
3.28 Certain State Statutes Inapplicable. The provisions of applicable New
-----------------------------------
Jersey takeover laws, if any, will not apply to this Agreement, the Merger or
the Transactions.
3.29 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as of a specific date, all of the
representations and warranties of the Company set forth in this Article will be
true and correct in all material respects on the Public Offering Closing Date
with the same force and effect as though made on and as of that date and those,
if any, which speak as a specific date will be true and correct in all material
respects as of such date.
3.30 Registration Statement. All information furnished by or on behalf of
----------------------
the Company or any Stockholder in writing for use in the Registration Statement
and all information relating to the Company in the Prospectus (a copy of which
shall be provided by VIALOG to the Company and Principal Stockholder for their
review) is true, correct and complete and does not contain any untrue statement
of material fact or omit to state any material fact necessary to make such
statements, in the light of the circumstances in which they were made, not
misleading. In the event any such information, through the occurrence or
nonoccurrence of any event or events between the date of this Agreement and the
Public Offering Closing Date, ceases to be true, correct and complete or
contains any untrue statement of material fact or omits to state any material
fact necessary to make such statements, in the light of the circumstances in
which they
28
<PAGE>
were made, not misleading, the Company, upon discovery thereof will provide
VIALOG, in writing, sufficient information to correct such untrue statement or
omission.
3.31 Predecessor Status; etc. Set forth in Section 3.31 of the Disclosure
-----------------------
Schedule is a listing of all names of all predecessor companies of the Company
and the names of any Entities from which, since December 31, 1991, the Company
previously acquired material properties or assets. Except as disclosed in
Section 3.31 of the Disclosure Schedule, the Company has never been a Subsidiary
or division of another Entity, nor a part of an acquisition which was later
rescinded. None of the Company, the Principal Stockholder or any Subsidiary has
ever owned any capital stock of VIALOG nor, except as set forth in Section 3.31
of the Disclosure Schedule, has there been, since December 31, 1991, any sale or
spin-off of material assets by the Company or any Subsidiary other than in the
ordinary course of business.
ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL STOCKHOLDER
The Principal Stockholder represents, warrants and covenants to, and agrees
with, VIALOG and VIALOG Merger Subsidiary as follows:
4.1 Organization. The Principal Stockholder (if other than an individual)
------------
is an Entity duly organized, validly existing and in good standing under the
laws or its jurisdiction of organization.
4.2 Power and Authority. The Principal Stockholder (if other than an
-------------------
individual) has adequate power and authority (corporate, partnership, trust or
other) and all necessary Governmental Authorizations and Private Authorizations
in order to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each other Collateral Document executed or required to
be executed pursuant hereto or thereto. The execution, delivery and performance
of this Agreement and each other Collateral Document executed or required to be
executed pursuant hereto or thereto have, to the extent applicable, been duly
authorized by all requisite corporate, partnership, trust or other action,
including that, if required, of the Principal Stockholder's stockholders or
partners.
Enforceability. This Agreement has been duly executed and delivered
--------------
by the Principal Stockholder and constitutes, and each Collateral Document
executed or required to be executed by the Principal Stockholder pursuant hereto
or thereto when executed and delivered by the Principal Stockholder will
constitute legal, valid and binding obligations of the Principal Stockholder,
enforceable in accordance with their respective terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable
29
<PAGE>
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity.
4.4 Title to Shares. Except as set forth in Section 4.4 of the Disclosure
---------------
Schedule (all of which exceptions will be removed, satisfied or discharged no
later than the Merger Closing), the Principal Stockholder owns and has good and
merchantable title to those Shares owned by the Principal Stockholder and to be
exchanged pursuant to this Agreement, free and clear or all Liens.
4.5 No Conflict; Required Filings and Consents. Neither the execution and
------------------------------------------
delivery of this Agreement or any Collateral Document executed or required to be
executed pursuant hereto or thereto, nor the consummation of the Merger and the
Transactions, nor compliance with the terms, conditions and provisions hereof or
thereof by the Principal Stockholder:
(a) will materially conflict with, or result in a breach or violation
of, or constitute a default under, any Applicable Law on the part of such
Stockholder or will conflict with, or result in a material breach or violation
of, or constitute a material default in the performance, observance or
fulfillment of, or a material default under, or permit the acceleration of any
obligation or liability in, or, but for any requirements of notice or passage of
time or both, would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
the Principal Stockholder,
(b) will result in or permit the creation or imposition of any Lien
upon any property or asset of the Principal Stockholder used or now contemplated
to be used by the Company, or
(c) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in connection
with the Merger and the Transactions and as the Securities Act or applicable
state securities laws may apply to compliance by the Principal Stockholder with
the provisions of this Agreement relating to the Public Offering and
registration rights, pursuant to the HSR Act (if applicable) or as set forth in
Section 4.5 of the Disclosure Schedule.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF VIALOG
AND VIALOG MERGER SUBSIDIARY
VIALOG and VIALOG Merger Subsidiary, jointly and severally, represent,
warrant and covenant to, and agree with, the Company as follows:
5.1 Organization and Qualification. VIALOG is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of
Massachusetts. VIALOG Merger
30
<PAGE>
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware.
5.2 Power and Authority. Except for such consents of Authorities as may
-------------------
be necessary in connection with change-of-control transactions with respect to
Governmental Authorities listed in Section 3.1(c) of the Disclosure Schedule,
each of VIALOG and VIALOG Merger Subsidiary has all requisite power and
authority (corporate and other) and has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto and to consummate the Merger and the Transactions. The execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action. This Agreement has been duly
executed and delivered by each of VIALOG and VIALOG Merger Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto when executed and delivered by it will constitute,
legal, valid and binding obligations of VIALOG and VIALOG Merger Subsidiary,
respectively, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
5.3 No Conflict; Required Filings and Consents. Except for such consents
------------------------------------------
of Authorities as may be necessary in connection with change-of-control
transactions with respect to Governmental Authorities listed in Section 3.1(c)
of the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Collateral Document executed or required to be executed pursuant hereto
or thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of VIALOG and VIALOG
Merger Subsidiary:
(a) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of VIALOG or VIALOG
Merger Subsidiary or will conflict with, or result in a breach or violation of,
or constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of giving of notice or passage of time
or both would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
VIALOG or VIALOG Merger Subsidiary, or
(b) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements under Applicable
Law in connection with the Merger and the Transactions and as the Securities Act
and applicable state securities laws may apply to compliance by VIALOG with the
provisions of this Agreement relating to the Public Offering and registration
rights and except pursuant to the HSR Act (if applicable).
31
<PAGE>
5.4 Financing. VIALOG has or, upon consummation of the Public Offering,
---------
will have sufficient funds or available financing to enable the Surviving
Corporation to pay the Aggregate Merger Consideration for all Shares of the
Company Stock as provided in Sections 2.1(a) and 2.1(d), the consideration for
each Option Security and each Convertible Security as provided in Section 2.4,
and all fees and expenses related to the Merger and its obligations in
connection with the Public Offering.
5.5 Broker or Finder. Except for the Underwriter, the fees and expenses
----------------
of which (other than pursuant to the Underwriting Agreement) are solely the
responsibility of VIALOG, no Person assisted in or brought about the negotiation
of this Agreement or the subject matter of the Transactions in the capacity of
broker, agent or finder or in any similar capacity on behalf of VIALOG or VIALOG
Merger Subsidiary.
5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary. Neither of
-------------------------------------------------------
VIALOG or VIALOG Merger Subsidiary has incurred any liabilities or Contractual
Obligations, except those incurred in connection with its organization and
ordinary course business operations (including Employment Arrangements), the
negotiation of this Agreement and the performance of this Agreement and of the
Participating Agreements with the Other Participating Companies, the
registration of VIALOG Stock under the Securities Act, compliance with the
requirements of the HSR Act (if applicable) and the performance of all other
Governmental Filings, and the financing of the foregoing. Except as contemplated
by the foregoing, neither of VIALOG or VIALOG Merger Subsidiary has engaged in
any business activities of any type or kind whatsoever, nor entered into any
agreements or arrangements with any Person, nor is it subject to or bound by any
obligation or undertaking.
5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary. The authorized
-----------------------------------------------------
and outstanding capital stock of each of VIALOG and VIALOG Merger Subsidiary is
as set forth in Section 5.7 of the Disclosure Schedule. All of such outstanding
capital stock has been duly authorized and validly issued, is fully paid and
non-assessable and is not subject to any preemptive or similar rights. All
shares of common stock of VIALOG Merger Subsidiary held by VIALOG have been duly
authorized and validly issued to VIALOG and are fully paid and non-assessable
and are not subject to any preemptive or similar rights. As of the date of this
Agreement, except for this Agreement, the Participating Agreements, the
Underwriting Agreement, and as set forth on Section 5.7 of the Disclosure
Schedule, there are not any outstanding or authorized subscriptions, options,
warrants, calls, rights, commitments or any other agreements of any character
obligating VIALOG or VIALOG Merger Subsidiary to issue any shares of VIALOG
Stock or other shares of capital stock of VIALOG or of VIALOG Merger Subsidiary,
or any other securities convertible into or evidencing the right to subscribe
for any such shares. When issued in connection with the Merger, the VIALOG Stock
will be duly authorized, validly issued, fully paid and non-assessable and will
not be subject to any preemptive or similar rights.
5.8 Registration Statement. The Registration Statement and any amendments
----------------------
thereto will comply when the Registration Statement becomes effective in all
material respects with the provisions of the Securities Act and will not contain
any untrue statement of a material fact or
32
<PAGE>
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus will not as of the
issue date thereof contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this Section 5.8
will not apply to statements or omissions in the Registration Statement or the
Prospectus based on information relating to the Underwriter furnished to VIALOG
in writing by the Underwriter, or based on information relating to any of the
Other Participating Companies or its stockholders furnished to VIALOG in writing
by such Participating Company or any or its stockholders, or the Company or the
Stockholders furnished to VIALOG in writing by the Company or any of the
Stockholders. VIALOG will furnish the Company with a copy of the Registration
Statement and of each amendment thereto until the Merger Closing and thereafter
will furnish the Principal Stockholder with each amendment thereto and the final
Prospectus.
5.9 Solvency. After the Effective Time, and upon the consummation of the
--------
Merger, the Participating Mergers and the Transactions, VIALOG and its
subsidiaries, individually and taken as a whole, will be solvent.
5.10 Firm Commitment. The contemplated Public Offering shall be a firm
---------------
commitment underwriting and not a best efforts underwriting and all VIALOG Stock
sold in the offering will be purchased by the Underwriter on the Effective Date
and paid for by the Underwriter on the Public Offering Closing Date.
5.11 Participating Agreements of Other Participating Companies. Except as
---------------------------------------------------------
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, each Participating Agreement
entered into among VIALOG, any Subsidiary of VIALOG, and any Other Participating
Company contains provisions substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement, including,
without limitation, the representations and warranties, covenants, termination
provisions and indemnification provisions contained in those Articles. Except as
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, no Participating Agreement
contains any material provision which is not contained in substantially
identical form in this Agreement.
5.12 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as a specific date, all of the
representations and warranties of VIALOG and the VIALOG Merger Subsidiary set
forth in this Article will be true and correct in all material respects on the
Public Offering Closing Date with the same force and effect as though made on
and as of that date, and those, if any, which speak as of a specific date will
be true and correct in all material respects as of such date.
33
<PAGE>
ARTICLE
ADDITIONAL COVENANTS
6.1 Access to Information; Confidentiality.
--------------------------------------
(a) The Company will afford to VIALOG and the Representatives of
VIALOG full access during normal business hours throughout the period prior to
the Effective Time to all of its (and its Subsidiaries') properties, books,
contracts, commitments and records (including without limitation Tax Returns)
and, during such period, will furnish promptly upon request (i) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of any Applicable Law (including without limitation federal or
state securities laws) or filed by any of them with any Authority in connection
with the Transactions or which may have a material effect on their respective
businesses, operations, properties, prospects, personnel, condition (financial
or other), or results of operations, (ii) to the extent not provided for
pursuant to the preceding clause, (A) all financial records, ledgers, workpapers
and other sources of financial information processed or controlled by the
Company or its accountants deemed by the Accountants necessary or useful for the
purpose of performing an audit of the Company and the Company and its
Subsidiaries taken as a whole and certifying financial statements and financial
information and (B) all other information relating to the Company, its
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Registration Statement, and
(iii) such other information concerning any of the foregoing as VIALOG will
reasonably request. Subject to the terms and conditions of the Confidentiality
Letter (as defined below), which are expressly incorporated in this Agreement by
reference for the benefit of the parties hereto, VIALOG will hold and will use
commercially reasonable efforts to cause the Representatives of VIALOG to hold,
and the Company will hold and will use commercially reasonable efforts to cause
the Representatives of the Company to hold, in strict confidence all non-public
documents and information furnished (whether prior or subsequent hereto) to
VIALOG or to the Company, as the case may be, in connection with the
Transactions.
(b) Subject to the terms and conditions of the Confidentiality
Letter, VIALOG and the Company may disclose such information as may be necessary
in connection with seeking all Governmental and Private Authorizations or that
is required by Applicable Law to be disclosed. In the event that this Agreement
is terminated in accordance with its terms, VIALOG and the Company will each
promptly redeliver all non-public written material provided pursuant to this
Section or any other provision of this Agreement or otherwise in connection with
the Merger and the Transactions and will not retain any copies, extracts or
other reproductions in whole or in part of such written material other than one
copy thereof which will be delivered to independent counsel for such party.
(c) The Company and VIALOG acknowledge that the Company and VIALOG
executed one or more Confidential Disclosure Agreements (collectively, the
"Confidentiality
34
<PAGE>
Letter"), which separately and as incorporated in this Agreement will remain in
full force and effect after and notwithstanding the execution and delivery of
this Agreement, and that information obtained from the Company by VIALOG, or its
Representatives or by the Company or its Representatives from VIALOG pursuant to
Section 6.1(a), the Confidentiality Letter or otherwise will be subject to the
provisions of the Confidentiality Letter.
(d) No investigation pursuant to this Section 6.1 will affect any
representation or warranty in this Agreement of any party or any condition to
the obligations of the parties.
6.2 Agreement to Cooperate.
----------------------
(a) Each of the Parties will use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate the
Merger and make effective the Transactions, including using commercially
reasonable efforts (i) to prepare and file with the applicable Authorities as
promptly as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information, data and
exhibits, necessary to request issuance of orders approving the Merger and the
Transactions by all such applicable Authorities, each of which must be obtained
or become final in order to satisfy the conditions applicable to it set forth in
Section 7; (ii) to obtain all necessary or appropriate waivers, consents and
approvals, (iii) to effect all necessary registration, filings and submissions
(including without limitation the Registration Statement, other filings under
the Securities Act or the HSR Act and any other submissions requested by the SEC
or the Federal Trade Commission or Department of Justice) and (iv) to lift any
injunction or other legal bar to the Merger and the Transactions (and, in such
case, to proceed with the Merger and the Transactions as expeditiously as
possible), subject, however, to the requisite votes of the Stockholders. Each of
the Parties recognizes that the consummation of the Merger and the Transactions
may be subject to the pre-merger notification requirements of the HSR Act. Each
agrees that, to the extent required by Applicable Law to consummate the Merger,
it will file with the Antitrust Division of the Department of Justice and the
Federal Trade Commission a Notification and Report Form in a manner so as to
constitute substantial compliance with the notification requirements of the HSR
Act. Each covenants and agrees to use commercially reasonable efforts to achieve
the prompt termination or expiration of any waiting period or any extensions
thereof under the HSR Act.
(b) Each of the Parties agrees to take such actions as may be
necessary to obtain any Governmental Authorizations legally required for the
consummation of the Merger and the Transactions, including the making of any
Governmental Filings, publications and requests for extensions and waivers.
(c) The Company will use commercially reasonable efforts on or prior
to the Public Offering Closing Date (i) to obtain the satisfaction of the
conditions specified in Sections 7.1 and 7.2; (ii) if requested by VIALOG, to
seek the consents (to the extent required) to the continued existence in
accordance with its then-stated terms of all long-term debt of each of the
Company and each of its Subsidiaries; and (iii) to attempt to cause those key
employees of
<PAGE>
the Company and its Subsidiaries designated by VIALOG that are not Stockholders
to execute and deliver non-competition agreements substantially conforming in
form and substance to the non-competition agreements currently maintained by
VIALOG with its key employees in the form attached as Exhibit 6.2(c). Each of
--------------
VIALOG and VIALOG Merger Subsidiary will use its best efforts on or prior to the
Public Offering Closing Date to obtain the satisfaction of the conditions
applicable to it specified in Sections 7.1 and 7.3. The Principal Stockholder
will use commercially reasonable efforts to obtain the satisfaction of the
conditions applicable to the Principal Stockholder in Section 7.2.
(d) The Company agrees that, except as set forth in Section 3.19 of
the Disclosure Schedule, prior to the Public Offering Closing Date it will not
make or permit to be made any material change affecting any bank, trust company,
savings and loan association, brokerage firm or safe deposit box or in the names
of the Persons authorized to draw thereon, to have access thereto or to
authorize transactions therein or in such powers of attorney, or open any
additional accounts or boxes or grant any additional powers of attorney, without
in each case obtaining the prior written consent of VIALOG, which consent VIALOG
will not unreasonably withhold.
(c) The Company will take such steps as are necessary and appropriate
to obtain, and will promptly obtain, satisfaction and discharge of all Liens set
forth in Section 3.15(b) of the Disclosure Schedule.
6.3 Assignment of Contracts and Rights. Anything in this Agreement to the
----------------------------------
contrary notwithstanding, this Agreement will not constitute an agreement to
assign any Claim, Contractual Obligation, Governmental Authorization, Lease,
Private Authorization, commitment, sales, service or purchase order, or any
claim, right or benefit arising thereunder or resulting therefrom, if the Merger
or the Transactions would be deemed an attempted assignment thereof without the
required consent of a third party thereto and would constitute a breach thereof
or in any way affect the rights of VIALOG, VIALOG Merger Subsidiary or the
Company thereunder. If such consent is not obtained, or if consummation of the
Merger and the Transactions would affect the rights of the Company thereunder so
that the Surviving Corporation would not in fact receive all such rights, the
Company will cooperate with VIALOG in any arrangement designed to provide for
the benefits thereof to the Surviving Corporation, including subcontracting,
sub-licensing or subleasing to the Surviving Corporation or enforcement for the
benefit of the Surviving Corporation of any and all rights of the Company or its
Subsidiaries against a third party thereto arising out of the breach or
cancellation by such third party or otherwise. Any assumption by the Surviving
Corporation of the Company's rights thereunder by operation of law in connection
with the Merger which will require the consent or approval of any third party
will be made subject to such consent or approval being obtained.
6.4 Compliance with the Securities Act. Each of VIALOG and the Company
----------------------------------
will use its commercially reasonable efforts to cause each executive officer,
each director and each other Person who is an "affiliate," as that term is
defined in paragraph (a) of Rule 144 under the Securities Act, of the Company,
or who will, upon consummation of the Merger and the Transactions become, an
"affiliate" of VIALOG, and each Stockholder of the Company, to
36
<PAGE>
deliver to VIALOG on or prior to the Merger Closing a written agreement (the
"Registration Rights Agreement") to the effect that such Person will not offer
to sell, sell or otherwise dispose of any shares of VIALOG Stock issued pursuant
to the consummation of the Transactions, except, in each case, pursuant to an
effective registration statement or in compliance with Rule 144, or in a
transaction which, in the opinion of legal counsel for such "affiliates" (such
legal counsel to be satisfactory to legal counsel for VIALOG), as set forth in a
written opinion satisfactory in form, scope and substance to the legal counsel
of VIALOG, is exempt from registration under the Securities Act and applicable
state securities laws. The Registration Rights Agreement shall be substantially
in the form of Exhibit 6.4. Notwithstanding anything to the contrary in this
-----------
Agreement, VIALOG will have no obligation under the Registration Rights
Agreement or otherwise to register under the Securities Act or any applicable
state securities laws, or otherwise to facilitate the transfer of, shares of
VIALOG Stock received by any such Person who fails to execute the Registration
Rights Agreement as provided herein, and such Person will forfeit all "demand
registration" and other rights provided for in the Registration Rights Agreement
and all "piggyback" rights provided for in the Registration Rights Agreement.
6.5 Conduct of Business.
-------------------
(a) Prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated, the Company and its Subsidiaries will (i) use
their best efforts to preserve intact their respective business organizations
and good will, keep available the services of their respective officers and
employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them, (ii)
confer on a regular and frequent basis with one or more representatives of
VIALOG to report operational matters of Materiality and the general status of
ongoing operations, and (iii) notify VIALOG of any emergency or other change in
the normal course of their business and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be Material to the business, operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
(b) Except as set forth in Schedule 6.5(b) (or Section 6.5(b) of the
Disclosure Schedule, as the case may be) or with the written permission of
VIALOG, the Company agrees further that the Company (i) will not make, declare
or pay any dividends or other distributions on any Shares or the stock of the
Company's Subsidiaries or redeem or repurchase or otherwise acquire any Shares
(except cancellation of options and warrants as required in this Agreement),
(ii) will not enter into or terminate any Employment Arrangement with any
director or officer, (iii) will not incur any obligation or liability (absolute
or contingent), except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business (iv) will not
discharge or satisfy any Lien or Encumbrance or pay any obligation or liability
(absolute or contingent) other than current liabilities shown on its Financial
Statements, and current liabilities incurred since those dates in the ordinary
course of business, (v) will not mortgage, pledge, create a security interest
in, or subject to Lien or other Encumbrance any of its assets, tangible or
intangible, (vi) will not sell or transfer any of its tangible assets or cancel
any debts or claims except in each case in the ordinary course of business,
(vii) will not sell, assign, or transfer any
37
<PAGE>
trademark, trade name, patent, or other Intangible Asset, (viii) will not waive
any right of any substantial value, (ix) will not make any material change in
the tax procedures or practices followed by the Company or any of its
Subsidiaries, (x) will not make any change in credit terms offered by the
Company or any of its Subsidiaries, (xi) will not make any capital expenditure
or Material Commitment for any additions or improvements to its or any of its
Subsidiary's property, plant or equipment, (xii) will not amend its
capitalization, or issue any stocks, bonds or other securities, except that the
Company may issue shares pursuant to outstanding Option Securities and
Convertible Securities, (xiii) will not enter into, modify or extend, or promise
any bonus or incentive compensation program that was not in place prior to June
1, 1996 and (xiv) will otherwise conduct its operation and the operations of its
Subsidiaries according to their ordinary and usual course of business.
6.6 No Solicitation. The Company will not, nor will it permit any
---------------
Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquires or the making of any proposal with respect to an Other Transaction,
engage in any discussions or negotiations concerning, or provide to any other
person any information or data relating to it or any Subsidiary for the purposes
of, or otherwise cooperate in any way with or assist or participate in, or
facilitate any inquires or the making of any proposal which constitutes, or may
reasonably be expected to lead to, a proposal to seek or effect an Other
Transaction, or agree to or endorse any Other Transaction. Nothing contained in
this Section will prohibit the Company or its Board of Directors from making any
disclosure to Stockholders that, in the reasonable judgment of its Board of
Directors in accordance with, and based upon the written advice of outside
counsel, is required under Applicable Law. The Company will promptly advise
VIALOG of, and communicate the material terms of, any proposal it may receive,
or any inquires it receives which may reasonably be expected to lead to such a
proposal relating to an Other Transaction, and the identity of the Person making
it. The Company will further advise VIALOG of the status and changes in the
material terms of any such proposal or inquiry (or any amendment to any of
them). During the term of this Agreement, the Company will not enter into any
agreement oral or written, and whether or not legally binding, with any Person
that provides for, or in any way facilitates, an Other Transaction, or affects
any other obligation of the Company under this Agreement.
6.7 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) From and after the Effective Time, the Surviving Corporation will
indemnify, defend and hold harmless the present and former officers and
directors of the Company against all Claims or amounts that are paid in
settlement of, with the approval of the Surviving Corporation, or otherwise in
connection with any Claim based in whole or in part on the fact that such Person
is or was a director or officer of the Company and arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the Merger and the Transactions), in each case to the fullest extent
permitted under the BCA (and will pay any expenses in advance of the final
disposition of any such action or proceeding to each such Person to the fullest
extent permitted under the BCA, upon receipt from the Person to whom expenses
are advanced of an undertaking to repay such advances to the extent required
38
<PAGE>
under the BCA). The Surviving Corporation will observe and comply with the
Company's obligations pursuant to the indemnification agreements, if any, listed
in Section 3.9 of the Disclosure Schedule.
(b) This Section 6.7 is intended to be for the benefit of, and will
be enforceable by, the former officers and directors of the Company, their heirs
and personal representatives and will be binding on the Surviving Corporation
and its respective successors and assigns.
(c) VIALOG will apply for directors and officers insurance in the
amount of $2,000,000 for the benefit of the directors and officers of VIALOG and
the Surviving Corporations.
6.8 Notification of Certain Matters. The Company will give prompt notice
-------------------------------
to VIALOG, and VIALOG will give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any Event the occurrence or non-occurrence of
which would be likely to cause in any material respect (i) any representation or
warranty of the Company or VIALOG, as the case may be, contained in this
Agreement to be untrue or inaccurate, or (ii) in the case of the Company or the
Principal Stockholder, any change to be made in the Disclosure Schedule and (b)
any failure of the Company or VIALOG, as the case may be, to comply with or
satisfy, or be able to comply with or satisfy, any material covenant, condition
or agreement to be complied with or satisfied by it under this Agreement. The
delivery of any notice pursuant to this Section 6.8 will not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
6.9 Public Announcements. Until the Merger Closing, or in the event of
--------------------
termination of this Agreement, the closing of the Public Offering (or its
abandonment), the Company will consult with VIALOG before issuing any press
release or otherwise making any public statements with respect to this
Agreement, the Merger or any Transaction (including the Participating Mergers or
the termination of this Agreement in such event) and will not issue any such
press release or make any such public statement without the prior consent of
VIALOG and the written advice of legal counsel to VIALOG that such press release
or such public statement will not affect the registration of VIALOG Stock under
the Securities Act or the timing of the effectiveness thereof. The Company
acknowledges and agrees that VIALOG may, without the prior consent of the
Company, issue such press release or make such public statement as may be
required by Applicable Law or any listing agreement or arrangement to which
VIALOG is a party with a national securities exchange or the National
Association of Securities Dealers, Inc. Automated Quotation System, or as
recommended by outside counsel. VIALOG will exercise commercially reasonable
efforts to furnish the Company a copy of any press release relating to Other
Participating Companies prior to its publication and will furnish a copy of any
such press release so issued as soon as practicable after its publication, but
any failure on VIALOG's part to do so will not be deemed a breach of or default
under this Agreement. VIALOG will furnish the Company with a copy of any press
release or public information of VIALOG, at a reasonable time prior to its
release for publication.
39
<PAGE>
6.10 Conveyance Taxes. The Parties will cooperate with one another in the
----------------
preparation, execution and filing of all Returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.
6.11 Obligations of VIALOG. VIALOG agrees to take all action necessary to
---------------------
cause VIALOG Merger Subsidiary and the Surviving Corporation to perform their
respective obligations under this Agreement and will use commercially reasonable
efforts to consummate, and cause VIALOG Merger Subsidiary to consummate, the
Merger on the terms and conditions set forth in this Agreement.
6.12 Employee Benefits; Severance Policy. VIALOG will cause the Surviving
-----------------------------------
Corporation to maintain through its fiscal year ending December 31, 1997:
(a) employee incentive compensation and fringe benefits that are
substantially equivalent to those provided to employees of the Company and its
Subsidiaries as in effect on the date of this Agreement, subject to the right of
VIALOG and the Surviving Corporation to amend or terminate such programs in
accordance with their terms, provided that after any such amendment or
termination the resulting programs continue to be substantially equivalent to
the existing programs, and
(b) employee severance pay and benefits that are substantially
equivalent to the applicable severance programs of the Company and its
Subsidiaries as in effect on the date hereof, subject to the right of VIALOG and
the Surviving Corporation to amend or terminate such programs in accordance with
their terms, provided that after any such amendment or termination, the
resulting programs continue to be substantially equivalent to the existing
programs.
Notwithstanding the foregoing, as soon as convenient after such period, the
Surviving Corporation may, in its sole discretion, substitute employee
compensation, benefit and severance programs for those of the Company as are
consistent with the programs provided to VIALOG's employees and the employees of
VIALOG's Subsidiaries.
6.13 Certain Actions Concerning Business Combinations.
------------------------------------------------
(a) Neither the Principal Stockholder nor any Representative thereof
will, during the period commencing on the date of the filing of the Registration
Statement and ending with the earlier to occur of the Merger Closing or the
termination of this Agreement in accordance with its terms, directly or
indirectly (i) solicit or initiate the submission of proposals or offers from
any Person or, (ii) participate in any discussions pertaining to, or (iii)
furnish any information to any Person other than VIALOG relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company or any Subsidiary (other than the Merger).
40
<PAGE>
(b) The Company will not apply, and will not take any action
resulting in the application of, or otherwise elect to apply, the provisions of
applicable New Jersey takeover laws, if any, with respect to or as a result of
the Merger or the Transactions.
6.14 Termination of Option Securities and Convertible Securities. The
-----------------------------------------------------------
Company will take all action necessary to terminate the exercise rights of all
outstanding Option Securities and the conversion rights of all Convertible
Securities issued by the Company as of the Effective Time to the extent such
option and conversion rights are not exercised prior to the Merger Closing, and
to provide timely notice to all holders of Option Securities and Convertible
Securities notifying them of such termination. Without the prior written consent
of VIALOG, except as set forth in Section 3.15(a) of the Disclosure Schedule,
(a) such termination or notice will not cause an acceleration of the exercise,
conversion or vesting schedule of any Option Security or of any Convertible
Security, and (b) the Company will not otherwise accelerate, or cause an
acceleration of, the exercise, conversion or vesting schedule of any Option
Security or Convertible Security. Prior to the Merger Closing, the Company will
issue Certificates to all holders of properly exercised Option Securities and
properly converted Convertible Securities. Such Certificates will accurately
represent the number of Shares to which such holder is entitled by virtue of
such exercise or conversion and the Company will amend Section 3.15(b) of the
Disclosure Schedule accordingly.
6.15 Tax Returns. The Principal Stockholder will cause all Tax Returns of
-----------
the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared in a manner consistent with past
practices and VIALOG will file such Tax Returns promptly upon receipt thereof
from the Principal Stockholder or the Company. At least thirty days before the
due date (including any extensions) for any such Tax Returns, the Principal
Stockholder or the Company will provide drafts of such Tax Returns to VIALOG for
its review and comment (which reasonable comments will be incorporated into the
final Tax Returns), and VIALOG will cooperate with the Principal Stockholder and
provide the Principal Stockholder with access to any books and records
reasonably necessary for their preparation of such draft Tax Returns. VIALOG
will file no amended Tax Returns with respect to the Company and the
Subsidiaries for any taxable period ending on or before the Effective Time if
the Principal Stockholder reasonably objects thereto and furnishes VIALOG with
indemnification satisfactory in form and substance to it, including without
limitation, indemnification for all interest, penalties and Expenses resulting
from the failure to amend such Tax Returns and all proceedings in connection
therewith.
6.16 Employment and Noncompetition. On or before the Merger Closing, the
-----------------------------
Principal Stockholder will execute and deliver to VIALOG the employment
agreement contemplated by Section 7.2(s) to be effective as of the Public
Offering Closing Date. From and after the Public Offering Closing Date, the
Principal Stockholder will not compete with VIALOG or any of its Subsidiaries
except to the extent not prohibited by Exhibit 7.2(s).
--------------
41
<PAGE>
6.17 Distributions, Liabilities, Etc.
--------------------------------
(a) The Company and VIALOG acknowledge and agree that the Company
contemplates that (i) prior to the Merger Closing it will make certain
Distributions to Stockholders, employees of and consultants to the Company, (ii)
no later than Merger Closing, it will cause certain Liens to be discharged in
their entirety (with financing statement terminations properly recorded), and
(iii) as of Merger Closing, it will indemnify VIALOG for certain liabilities
(except to the extent obligees with respect thereto release the Company and its
Affiliates therefrom), in each case as set forth in the Disclosure Schedule.
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be)
lists each such Distribution, Lien and liability;
(b) The Company agrees that Distributions not permitted pursuant to
Section 3.18 will be made by the Company (or VIALOG or the Surviving Company if
after the Effective Date) only to the extent provided in Schedule 6.17 (or
Section 6.17 of the Disclosure Schedule, as the case may be); and
(c) The Company further agrees that, notwithstanding anything to the
contrary in Section 10.1, it will indemnify VIALOG and VIALOG Merger Subsidiary
against all Claims and Expenses incurred by VIALOG and VIALOG Merger Subsidiary
(or either of them) by virtue of any failure on the Company's part to secure the
discharges from Liens contemplated by Schedule 6.17 (or Section 6.17 of the
Disclosure Schedule, as the case may be) or any damage or harm attributable to a
liability to be indemnified against as contemplated by Schedule 6.17 (or Section
6.17 of the Disclosure Schedule, as the case may be).
6.18 Release from Personal Guarantees. On or prior to the Public Offering
--------------------------------
Closing Date, VIALOG will either obtain releases of the personal guarantees of
the Stockholders of Indebtedness or discharge or arrange for the discharge of
such Indebtedness. VIALOG will either obtain releases of the personal guarantees
of the Stockholders of Contractual Obligations which extend beyond the Public
Offering Closing Date or indemnify and hold the Stockholders harmless from such
personal guarantees.
6.19 No Significant Changes VIALOG agrees that there will be no
----------------------
"significant change" (as defined below) in the conduct of the business of the
Company for a period of two years after the Public Offering Closing Date without
the approval of a majority in interest of the Stockholders. "Significant change"
means any change in the location of the Company's facilities, a physical merging
of the Company's operations with another operation, any change in the position
of those employees who receive employment agreements pursuant to Section 7.2(s),
or a reduction in force or the termination of any employee except as related to
employee performance or the contemplated reorganization of the combined
sales/marketing staff or the accounting function.
42
<PAGE>
6.20 Registration Statement.
----------------------
(a) The Company and the Principal Stockholder will furnish to VIALOG
all necessary information concerning the Company and the Principal Stockholder
for VIALOG to file the Registration Statement.
(b) The Company and the Principal Stockholder have reviewed or have
had reviewed on their behalf, and will be familiar with the information
concerning the Company and the Stockholders (or any of them) in the Prospectus,
which will be furnished to them by VIALOG for their review, and will have no
knowledge of any material fact, condition or information concerning the Company
and the Stockholders misstated or not disclosed in such Prospectus.
(c) VIALOG agrees to use its best efforts to prepare and file the
Registration Statement prior to February 28, 1997 and furnish to the Company and
the Principal Stockholder a copy of information concerning the Company and the
Stockholders included therein and each amendment thereto two business days prior
to such filing date.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder agree
----------
to use their best efforts to maintain the status of the Merger and the
Participating Mergers as a tax free incorporation, provided VIALOG's Accountants
so advise and provided the relative ownership rights of all parties remain the
same.
6.22 Self Dealing. VIALOG agrees that it will not and will not allow any
------------
Subsidiary to enter into contracts and business arrangements with Persons and
Entities owned in whole or in part by officers and directors of VIALOG or any
Subsidiary except on an arms length basis and with the approval of the VIALOG
Board of Directors.
ARTICLE
7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each Party to effect the Merger will be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) This Agreement, the Merger and the Transactions shall have
been approved and adopted in accordance with the BCA by the affirmative vote, or
to the extent permitted by Applicable Law, by written consent, of the
Stockholders holding at least the minimum number of shares of the Company Stock
then issued and outstanding as are required by Applicable Law and the Company's
Organizational Documents for such approval and adoption,
43
<PAGE>
(b) No proceeding before any Authority or Claim by any Person shall
be pending, challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation of the
Merger or the Public Offering, or seeking material damages or imposing any
Adverse conditions in connection therewith,
(c) Other than the filing of merger documents in accordance with the
BCA and the DBCL, all authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, submissions, registrations, notices or
declarations required to be made, by VIALOG or VIALOG Merger Subsidiary and the
Company prior to the consummation of the Merger and the Transactions shall have
been obtained from, and made with, all required Authorities, except for such
authorizations, consents, waivers, orders, approvals, filings, registrations,
notices or declarations the failure to obtain or make would not, assuming
consummation of the Merger, have an Adverse Effect on the Company and the
Company and its Subsidiaries taken as a whole,
(d) (i) The Registration Statement shall have become effective and
shall contain no untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the shares of VIALOG Stock offered in the Public
Offering shall have been sold and purchased subject only to consummation of the
Merger, the Participating Mergers and the Transactions, (iii) every condition to
closing the Public Offering (except as provided in clause (iv) immediately
succeeding) shall have been satisfied or properly waived and (iv) release of the
closing documents relating to the Public Offering and distribution of the
proceeds of the sale of all shares of VIALOG Stock sold and purchased in the
Public Offering shall have been unconditionally authorized by the Underwriter
upon consummation of the Merger and the Participating Mergers,
(e) The minimum number of Participating Mergers required to prevent
termination pursuant to Section 8.1(b)(ii) of this Agreement shall have been
authorized and approved in accordance with Applicable Law and the Organizational
Documents of the Other Participating Companies, in the case of the Participating
Mergers,
(f) Subject to such material amendments, if any, as shall be proposed
prior to Merger Closing by VIALOG to be effective immediately after Merger
Closing, and to the extent reasonably satisfactory to the Company and the Other
Participating Companies, the VIALOG stock option plan described in the
Registration Statement shall have been approved and adopted by all action
(corporate and other) required for implementation thereof,
(g) Each of the Persons named on Exhibit 7.1(g), including one Person
--------------
proposed by a majority of the chief executive officers of the Company and the
Other Participating Companies acting as a group, shall have been elected a
director of VIALOG, effective immediately after the Public Offering Closing
Date, and all together shall constitute the entire Board of Directors of VIALOG,
each to serve until the election of the successor to, or the earlier resignation
or termination of, such director, and
(h) VIALOG shall have delivered to the Exchange Agent that number of
shares of VIALOG Stock as determined pursuant to Section 2.1 of this Agreement
and of the
44
<PAGE>
Participating Agreements issued in the name of the Stockholders and the
stockholders and other Persons holding equity interests in the Participating
Companies.
7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary. The
----------------------------------------------------------------
obligations of VIALOG and VIALOG Merger Subsidiary to effect the Merger will be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) The Company shall have complied in all material respects
with its agreements contained in this Agreement, the certificates to be
furnished to VIALOG pursuant to this Section shall be true, correct and
complete, all Collateral Documents shall be reasonably satisfactory in form,
scope and substance to VIALOG and its counsel, and VIALOG and its counsel shall
have received all information and copies of all documents, including records of
corporate proceedings, which they may reasonably request in connection
therewith, such documents where appropriate to be certified by proper corporate
officers,
(b) The Company shall have furnished VIALOG and the Underwriters with
the favorable opinion, dated the Public Offering Closing Date of Wells,
Jaworski, Lieberman & Paton, which may contain limitations and qualifications as
to scope and law and rely on certifications as to facts of officers of the
Company and public officials as are reasonable and customary to opinions
delivered in the type of business transactions covered by this Agreement,
addressing the following:
(i) Due organization, valid existence and good standing of the
Company and each Subsidiary, together with an opinion as to
foreign qualifications,
(ii) Requisite corporate power and authority and all, to such
counsel's knowledge, necessary Governmental Authorizations
for the Company and each Subsidiary to own, lease and
operate its properties and to carry on its business as it
is now being conducted,
(iii) In respect of the Company and each Subsidiary, the number
of shares of capital stock or other voting securities
authorized, issued, reserved for issuance or outstanding as
of the date of this Agreement and the Effective Time and
number of Option Securities and amount of Convertible
Securities outstanding as of such dates,
(iv) Due authorization, valid issuance, full payment and non-
assessability of outstanding shares of capital stock of the
Company and each Subsidiary and (upon issuance on the terms
and conditions specified in the Option Securities and
Convertible Securities pursuant to which they are issuable)
all shares of such capital stock subject to issuance and
absence of preemptive rights with respect thereto,
45
<PAGE>
(v) To the knowledge of counsel, (A) there are not Contractual
Obligationsto repurchase, redeem or otherwise acquire any
shares of Company Stock or any stock of any Subsidiary, or
any Option Securities and Convertible Securities, (B) the
Merger will not cause an acceleration of the exercise or
vesting schedule of any To the knowledge of counsel, (A)
there are not Contractual Option Securities and
Convertible Securities and (C) all outstanding shares of
stock of each Subsidiary are owned by the Company or by
another Subsidiary, free and clear of any Lien (except as
set forth in Section 3.1(d) of the Disclosure Schedule),
(vi) Corporate power and authority of the Company to execute
and deliver the Agreement and all Collateral Documents
executed or required to be executed pursuant thereto or to
consummate the Merger, to perform its obligations
thereunder and to consummate the Merger,
(vii) Due and valid authorization by the Company and the
Principal Stockholder by all necessary corporate (and
other) action of the execution, delivery and performance
of the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to consummate
the Merger and the consummation by the Company of the
Merger,
(viii) Due authorization and valid execution and delivery by, and
enforceability against, the Company and the Principal
Stockholder of the Agreement and all Collateral Documents
executed or required to be executed pursuant hereto or
thereto or to consummate the Merger and the Transactions
except (A) as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization,
arrangement, voidable preference, fraudulent conveyance
and other similar laws relating to or affecting the rights
of creditors and as the same may be subject to the effect
of general principles of equity and (B) that no opinion
need be expressed as to the enforceability of
indemnification and noncompetition provisions included
herein;
(ix) The execution and delivery of the Agreement and all
Collateral Documents executed or required to be executed
pursuant thereto or to consummate the Merger by the
Company do not, and the performance of the Agreement and
all Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Merger and
the consummation of the Transactions by the Company will
not, (i) conflict with or violate the Organizational
Documents of the Company or any Subsidiary, (ii) conflict
with or violate any Applicable Law, or (iii) to
46
<PAGE>
counsel's knowledge, constitute a breach or default under,
or give to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or
result in the creation of a Lien on any property or asset
of the Company or any Subsidiary pursuant to, any Material
Agreement to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary or any
property or asset of the Company or any Subsidiary is
bound or affected,
(x) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution and delivery of the Agreement
by the Company and the performance of the Agreement and
all Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Merger and
the consummation of the Merger by the Company,
(xi) Required filings with the Secretary of State of New Jersey
have been made,
(xii) To the knowledge of counsel, absence of pending or
threatened material Legal Action,
(xiii) Nonapplicability of New Jersey takeover laws, and
(xiv) such other customary matters concerning the Stockholders
in connection with the Public Offering as may reasonably
be requested by the Underwriter or its counsel,
(c) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of VIALOG have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or, assuming consummation of the
Merger and the Participating Mergers, VIALOG and its Subsidiaries taken as a
whole,
(d) Each Principal Stockholder (other than a Principal Stockholder
executing and delivering the agreement contemplated by Section 7.2(s)) and other
Persons listed on Schedule 7.2(d) (or Section 7.2(d) of the Disclosure Schedule,
as the case may be) shall have executed and delivered to VIALOG a noncompetition
agreement, substantially in the form of Exhibit 7.2(d),
--------------
(e) The representations, warranties, covenants and agreements of the
Company contained in this Agreement or otherwise made in writing by it or on its
behalf pursuant to this Agreement or otherwise made in connection with the
Merger and the Transactions shall be true
47
<PAGE>
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and the Public Offering Closing
Date, each and all of the agreements and conditions to be performed or satisfied
by the Company under this Agreement at or prior to the Public Offering Closing
Date shall have been duly performed or satisfied in all material respects, and
the Company shall have furnished VIALOG with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as VIALOG
shall have reasonably requested,
(f) VIALOG shall have received from its Accountants, a certificate or
letter, dated the Public Offering Closing Date, to the effect that, on the basis
of a limited review in accordance with the standards for such reviews
promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No. 1, they
have no reason to believe that the unaudited financial statements set forth in
the Registration Statement were not prepared in accordance with GAAP and
practices consistent with those followed in the preparation of the audited
financial statements audited by the Accountants as contemplated by Section
6.1(a), or that any material modifications of such unaudited financial
statements are required for a fair presentation of the financial position or
results of operations or changes in financial position of the Company or that
during the period from the last day covered by the most recent financial
statements set forth in the Registration Statement prepared by the Accountants
as contemplated by Section 6.1(a) to a date not more than five (5) days prior to
the Public Offering Closing Date, there has been any Adverse Change in the
financial position or results of the operations of the Company or the Company
and its Subsidiaries taken as a whole which is not described in the Registration
Statement,
(g) All actions taken by the Stockholders to approve and adopt this
Agreement, the Merger and the Transactions shall comply in all respects with and
shall be legal, valid, binding, enforceable and effective under the Law of the
jurisdiction of incorporation of the Company, its Organizational Documents and
all Material Agreements to which it or any of its Subsidiaries is a party or by
which it or any of them or any of its or any of their property or assets is
bound,
(h) The Company shall have obtained consents to the assignment and
continuation of all Material Agreements which, in the reasonable judgment of
VIALOG or its counsel, require such consents, including appropriate binders or
consents as to policies of insurance to be assigned to VIALOG or the Surviving
Corporation under this Agreement. The Company shall have obtained satisfaction
and discharge of all Liens set forth in Section 3.15(b) of the Disclosure
Schedule, and shall have obtained, on terms and conditions reasonably
satisfactory to VIALOG, all Governmental Authorizations and Private
Authorizations, and all modifications of Contractual Obligations relating to
Indebtedness, which VIALOG deems, reasonably necessary or desirable in order to
own and operate and conduct the business of the Surviving Corporation,
substantially on the basis heretofore owned, operated and conducted by the
Company and proposed to be owned, operated and conducted by VIALOG,
48
<PAGE>
(i) Between the date of this Agreement and the Public Offering Closing
Date, there shall not have occurred and be continuing any Adverse Change
affecting the Company or the Company and its Subsidiaries taken as a whole from
the condition thereof (financial and other) reflected in the Financial
Statements or in the audited financial statements prepared by the Accountants as
contemplated by Section 6.1(a) or in the most recent financial statements set
forth in the Registration Statement,
(j) The filing and waiting period requirements (if applicable) under
the HSR Act relating to the consummation of the Merger and the Participating
Mergers shall have been complied with,
(k) No Law shall have been enacted or made by or on behalf of any
Authority nor shall any legislation have been introduced and favorably reported
for passage to either House of Congress by any committee, nor shall any Legal
Action by any Authority been commenced or threatened, nor shall any decision,
order or other action of any Authority have been rendered or taken, which in
VIALOG's reasonable judgment, could have any Adverse Effect on the Company or
the Company and its Subsidiaries taken as a whole, or could restrain, prevent or
change the Merger or the Transactions or Adversely Affect the ability of the
Principal Stockholder to perform its obligations under this Agreement, or the
ability of VIALOG to continue to own, operate and conduct the business of the
Surviving Corporation, substantially on the basis heretofore owned, operated and
conducted by the Company and as proposed to be owned, operated and conducted by
the Surviving Corporation,
(l) VIALOG shall have received copies of any environmental audits the
Company has received in respect of all real property owned or leased by the
Company or any of its Subsidiaries. VIALOG, in its sole discretion and at its
sole expense, may engage an independent environmental engineer to perform such
audits and the results thereof shall not be materially inconsistent with the
representations and warranties set forth in Section 3.23,
(m) Each of the directors of the Company and each of its Subsidiaries
and each trustee under each Plan shall have submitted his or her unqualified
written resignation, dated as of the Public Offering Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Public
--------------
Offering Closing Date, releasing the Company and its Subsidiaries from any and
all Claims against them (other than Claims arising from such Principal
Stockholder having acted as a director or officer of the Company or such
Subsidiary as contemplated by Section 6.7),
(o) The Registration Rights Agreement shall have been executed and
delivered by the Stockholders and the Executive Officers and principal
Stockholders of VIALOG.
(p) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, nor shall it have
experienced any material work stoppage,
49
<PAGE>
(q) Except for such leases and other Contractual Obligations as are set
forth on Schedule 7.2(q) (or Section 7.2(q) of the Disclosure Schedule, as the
case may be) and are executed, delivered and effective as of the Effective Time,
all Contractual Obligations set forth in Section 3.9 of the Disclosure Schedule
shall have been satisfied and discharged as of the Public Offering Closing Date,
(r) The representations, warranties, covenants and agreements of the
Principal Stockholder contained in this Agreement or otherwise made in writing
by or on behalf of the Principal Stockholder pursuant to this Agreement or
otherwise made in connection with the Merger and the Transactions shall be true
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date. Each and all of the agreements and conditions to be performed or
satisfied by the Principal Stockholder under this Agreement at or prior to the
Public Offering Closing Date, including without limitation the provisions set
forth in Section 6.20, shall have been duly performed or satisfied in all
material respects, and the Principal Stockholder shall have furnished VIALOG
with such certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance of
such agreements or conditions as VIALOG or its counsel shall have reasonably
requested,
(s) The Principal Stockholder shall have executed and delivered to
VIALOG an employment and noncompetition agreement, substantially in the form of
Exhibit 7.2(s),
- --------------
(r) The individuals listed on Schedule 7.2(t) (or Section 7.2(t) of the
Disclosure Schedule, as the case may be) shall have executed and delivered to
VIALOG an Employment Arrangement substantially in the form of Exhibit 7.2(t) and
reasonably satisfactory to VIALOG and its counsel, and
(u) VIALOG shall have received a letter from its Accountants to the
effect that the Merger and the Transactions, the Participating Mergers and the
transactions contemplated thereby, and the acquisition of stock of any Other
Participating Company by VIALOG and the transactions contemplated thereby
together qualify as a transaction to which Section 351 of the Code applies and
will not result in any taxable income or gain or deductible loss to the Company,
VIALOG or VIALOG Merger Subsidiary.
7.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to effect the Merger will be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part to the extent permitted by Applicable Law:
(a) VIALOG shall have furnished the Company and the Principal
Stockholder with the favorable opinion dated the Public Offering Closing Date of
Mirick, O'Connell, DeMallie & Lougee, LLP, counsel to VIALOG and VIALOG Merger
Subsidiary, which may contain limitations and qualifications as to scope and law
and rely on certifications as to facts of officers of VIALOG and VIALOG Merger
Subsidiary and public officials as are reasonable and
50
<PAGE>
customary to opinions delivered in the type of business transactions covered by
this Agreement, addressing the following:
(i) Due organization, valid existence and good standing of
VIALOG and VIALOG Merger Subsidiary,
(ii) Due authorization and valid execution and delivery by, and
enforceability against, VIALOG and VIALOG Merger
Subsidiary of the Agreement except (A) as such
enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other similar laws
relating to or affecting the rights of creditors and as
the same may be subject to the effect of general
principles of equity and (B) that no opinion need be
expressed as to the enforceability of indemnification
provisions,
(iii) Due authorization, valid issuance, full payment and non-
assessability of and absence of preemptive rights with
respect to the shares of VIALOG Stock to be received by
the Stockholders,
(iv) The Registration Statement has become effective under the
Securities Act, and to such counsel's knowledge, no stop
order suspending its effectiveness has been issued and no
proceedings for that purpose have been instituted or
threatened by the SEC,
(v) The execution and delivery of the Agreement by VIALOG and
VIALOG Merger Subsidiary and all Collateral Documents
executed or required to be executed pursuant thereto or to
consummate the Merger by them do not, and the performance
of the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to consummate
the Merger and the consummation of the Merger by them will
not, (A) conflict with or violate the Organizational
Documents of VIALOG or VIALOG Merger Subsidiary, (B)
conflict with or violate any Applicable Law, or (C) to
counsel's knowledge, constitute a default under, or give
to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or
result in the creation of a Lien on any property or assets
of VIALOG or VIALOG Merger Subsidiary pursuant to, any
Material Agreement to which either is a party or by which
either or any property or asset of either is bound or
affected,
(vi) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution and delivery of the Agreement
by VIALOG and VIALOG Merger Subsidiary
51
<PAGE>
and the performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the consummation
of the Merger by them, and
(vii) The required filings with the Delaware Secretary of State
and the New Jersey Secretary of State shall have been
made, and a Certificate of Merger shall have been issued
by the New Jersey Secretary of State for the Merger.
(b) Each of VIALOG and VIALOG Merger Subsidiary shall have complied in
all material respects with its agreements contained in this Agreement, and the
certificates to be furnished to the Company pursuant to this Section shall be
true, correct and complete. All Collateral Documents shall be reasonably
satisfactory in form, scope and substance to the Company and its counsel, and
the Company and its counsel shall have received all information and copies of
all documents, including records of corporate proceedings, which they may
reasonably request in connection therewith, such documents where appropriate to
be certified by proper corporate officers,
(c) The representations, warranties, covenants and agreements of each
of VIALOG and VIALOG Merger Subsidiary contained in this Agreement or otherwise
made in writing by it or on its behalf pursuant to this Agreement or otherwise
made in connection with the Merger and the Transactions shall be true and
correct in all material respects at and as of the Public Offering Closing Date
with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date; each and all of the agreements and conditions to be performed or
satisfied by each of VIALOG and VIALOG Merger Subsidiary under this Agreement at
or prior to the Public Offering Closing Date shall have been duly performed or
satisfied in all material respects; and each of VIALOG and VIALOG Merger
Subsidiary shall have furnished the Company with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as the
Company shall have reasonably requested,
(d) If executed and delivered to VIALOG by the Merger Closing, the
employment agreements contemplated by Section 7.2(s) and for those persons
listed on Schedule 7.2(t) (or Section 7.2(t) of the Disclosure Schedule, as the
case may be) shall have been executed by the Surviving Corporation and delivered
by VIALOG to the indicated person,
(e) The filing and waiting period requirements (if applicable) under
the HSR Act relating to the consummation of the Merger and the Participating
Mergers shall have been complied with,
(f) VIALOG shall have obtained the insurance set forth in Section
6.7(c),
52
<PAGE>
(g) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of the Company have any Adverse Effect on VIALOG and its
Subsidiaries or the Company and its Subsidiaries taken as a whole or, assuming
consummation of the Merger and the Participating Agreements, VIALOG and its
Subsidiaries taken as a whole,
(h) The Company shall have received a letter from the Accountants to
the effect that the Merger and the Transactions qualify as a transaction to
which Section 351 of the Code applies for federal income tax purposes and the
exchange of the Shares for the Stock Merger Consideration, as contemplated
hereby, will not result in any taxable income or gain or deductible loss to the
common stockholders of the Company in their capacities as such common
stockholders to the extent of the Stock Merger Consideration, and
(i) The by-laws of VIALOG shall have been amended to remove the right
of first refusal contained therein and the Company shall have received
certification to its reasonable satisfaction that the VIALOG Stock to be issued
in the Merger will not be subject to any transfer restrictions or purchase
options under VIALOG's Certificate of Incorporation or by-laws.
ARTICLE
8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time, whether before or after approval of this Agreement, the Merger
and the Transactions as follows:
(a) by mutual consent of the Company and VIALOG.
(b) by either VIALOG or the Company,
(i) if any permanent injunction, decree or judgment by any
Authority preventing the consummation of the Merger or the
Public Offering shall have become final and nonappealable,
or if the terminating party determines in its reasonable
discretion that the Merger has become inadvisable or
impracticable by reason of the institution by any
Authority or other Person of material Legal Action, or
53
<PAGE>
(ii) if the Merger Closing shall not occur on or before the
Termination Date.
(c) by the Company:
(i) in the event of a breach of this Agreement by VIALOG or
VIALOG Merger Subsidiary that has not been cured, or if
any representation or warranty of VIALOG or VIALOG Merger
Subsidiary shall have become untrue in any material
respect, in either case such that such breach or untruth
is incapable of being cured by the Effective Date or will
prevent or delay consummation of the Merger by or beyond
the Termination Date, or
(ii) in the event the Public Offering is not a firm commitment
in the manner and upon the terms described in Section
5.10.
(d) by VIALOG:
(i) if the Merger and the Transactions fail to receive the
approval required by Applicable Law, by vote (or to the
extent permitted by Applicable Law, by consent) of the
Stockholders, or if any Stockholder entitled to vote (or
entitled to appraisal rights) with respect to the Merger
dissents from the Merger and the Transactions,
(ii) if it shall determine in its reasonable discretion that
the Merger or the Transactions has or have become
inadvisable or impracticable by reason of the threat by
any Authority, or any other Person of material Legal
Action or proceedings against either or both of the
Company and VIALOG (or VIALOG Merger Subsidiary, or a
Subsidiary of any of them), it being understood and agreed
that a written request by governmental authorities for
information with respect to the Transactions, which
information could be used in connection with such Legal
Action or proceedings, may be deemed by VIALOG to be a
threat of material Legal Action or proceedings,
(iii) if arrangements reasonably satisfactory to VIALOG cannot
be made for (A) the assumption by the Surviving
Corporation substantially on the terms and conditions in
effect as of the date of this Agreement, or for the
prepayment without premium, of all outstanding
Indebtedness of the Company for borrowed money, or (B) the
Public Offering,
54
<PAGE>
(iv) if the business, assets, prospects, management, condition
(financial or other) or results of operation of the
Company or the Company and its Subsidiaries taken as a
whole shall have been Adversely Affected, whether by
reason of changes or developments in the economy or
industry generally or operations in the ordinary course of
business or otherwise,
(v) if the Company shall not have received, without the
imposition of any burdensome condition or material cost,
all Governmental Authorizations and Private
Authorizations, or if any Authority or other Person shall
withdraw any such Governmental Authorizations or Private
Authorizations,
(vi) if the terms of this Agreement shall not have been
approved by the Underwriter,
(vii) if the Company shall have suffered any material damage,
destruction or loss (whether or not covered by insurance)
or any material acquisition or taking of property by any
Authority, or if it or any of its Subsidiaries shall have
suffered a material work stoppage, or
(viii) in the event of a material breach of this Agreement by the
Company or the Principal Stockholder that has not been
cured, or if any representation or warranty of the Company
or the Principal Stockholder shall have become untrue in
any material respect, so that such breach or untruth is
incapable of being substantially cured by the Effective
Date or will prevent or delay consummation of the Merger
by or beyond the Termination Date, or if any condition to
VIALOG's obligation to close under this Agreement shall
not have been satisfied.
(e) by VIALOG if (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions, or shall have resolved to do any of
the foregoing (it being agreed and understood that nothing in this clause (i)
obliges the Company to effect the Merger if the conditions set forth in Section
7.1 and Section 7.3 are not satisfied or limits the rights of the Company to
consent to terminate this Agreement pursuant to Section 8.1(a) or to terminate
the Agreement pursuant to Section 8.1(b) or Section 8.1(c)), (ii) the Board of
Directors of the Company shall have recommended or resolved to recommend to the
Stockholders an Other Transaction, (iii) the Company, the Board of Directors of
the Company or the Principal Stockholder shall have taken any action in
contravention of Sections 6.6 or 6.13 or (iv) the Principal Stockholder shall
fail to vote to approve and adopt this Agreement, the Merger and the
Transactions.
55
<PAGE>
8.2 Effect of Termination. Except as provided in Sections 2.2(a), 2.2(d),
---------------------
6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void, there shall
be no liability on the part of any Party, or any of their respective officers or
directors, to the other and all rights and obligations of any Party shall cease;
provided, however, that such termination will not relieve any Party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
8.3 Amendment. This Agreement may be amended by the Parties by action
---------
taken by or on behalf of their respective Boards of Directors and by the
Principal Stockholder at any time prior to the Effective Time; provided,
however, that, after approval of this Agreement and the Merger by the
Stockholders, no amendment, which under Applicable Law may not be made without
the approval of the Stockholders, may be made without such approval. This
Agreement may not be amended to impose any additional material obligation on a
Party or to burden or limit a material right of such Party except by an
agreement in writing signed by the Party so affected.
8.4 Waiver. At any time prior to the Effective Time, except to the extent
------
Applicable Law does not permit, either VIALOG or VIALOG Merger Subsidiary and
the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other, subject, however, to the terms and
conditions of Section 8.1, (b) waive any inaccuracies in the representations and
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement and (c) waive compliance by the other with any of the
agreements, covenants or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an agreement in writing
signed by the Party or Parties to be bound thereby.
8.5 Fees, Expenses and Other Payments. If this Agreement is terminated,
---------------------------------
then all costs and expenses incurred by the Parties in connection with this
Agreement, the Merger and the Transactions and in connection with compliance
with Applicable Law and Contractual Obligations as a consequence hereof and
thereof, including fees and disbursements of counsel, financial advisors and
accountants, will be borne solely and entirely by the Party which has incurred
such costs and expenses (with respect to such Party, its "Expenses"). VIALOG
acknowledges and agrees that the Company has disclosed that it is obligated and
will become further obligated for Expenses (including fees and expenses of its
counsel, its independent accountants, and its financial advisor) incurred by it
in connection with this Agreement, the Merger and the Transactions. It is
understood and agreed that certain of such Expenses may be paid by the Company
prior to the execution of this Agreement, and VIALOG agrees to refrain from
taking any action which would prevent or delay the payment of reasonable
Expenses by the Company. Any Expenses incurred and not paid will constitute
liabilities of the Company. VIALOG agrees to take all action necessary to cause
the Surviving Corporation to pay promptly any of the foregoing reasonable
Expenses incurred, but not paid, by the Company prior to the Effective Time.
8.6 Effect of Investigation. The right of any Party to terminate this
-----------------------
Agreement pursuant to Section 8.1 will remain operative and in full force and
effect regardless of any
56
<PAGE>
investigation made by or on behalf of any Party, any Person controlling any such
Party or any of their respective Representatives whether prior to or after the
execution of this Agreement.
ARTICLE
9
FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON VIALOG STOCK
9.1 Shares not Registered. The Principal Stockholder acknowledges that
---------------------
the shares of VIALOG Stock to be delivered to Stockholders pursuant to this
Agreement have not and will not be registered under the Securities Act (except
pursuant to the Registration Rights Agreement) and may not be resold except
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from registration. The Principal Stockholder represents
and warrants that the VIALOG Stock to be acquired by the Stockholders pursuant
to this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
9.2 Economic Risk; Sophistication. The Principal Stockholder represents
-----------------------------
and warrants that the Principal Stockholder and the other Stockholders are able
to bear the economic risk of an investment in the VIALOG Stock acquired pursuant
to this Agreement and can afford to sustain a total loss on such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the VIALOG Stock. The Principal Stockholder acknowledges that
prior to the Merger Closing VIALOG will have furnished a copy of the Prospectus
to the Stockholders and at the Merger Closing the Stockholders will be required
to confirm that VIALOG has responded to due diligence and information requests
made on behalf of the Company similar in extent and scope to the due diligence
requests made to the Company by VIALOG. The Principal Stockholder will at that
time confirm that the Principal Stockholder has had an adequate opportunity to
ask questions and receive answers from the officers of VIALOG (and, in the case
of the other Stockholders, to ask questions and receive answers from the
Principal Stockholder) concerning any and all matters relating to this
Agreement, the Merger, the Transactions, or Other Participating Companies, the
Participating Agreements and the Registration Statement, and have read and
understood the matters described in the copies of the Registration Statement
provided to them including, without limitation, the background and experience of
the officers and directors of VIALOG, the plans for the operations of the
business of VIALOG, the potential dilutive effects of the Public Offering and
future acquisitions and projected uses of the proceeds of the Public Offering.
The Principal Stockholder will confirm at the Merger Closing that the Principal
Stockholder has asked any and all questions in the nature described in the
preceding sentence or otherwise of interest in connection with the exchange of
VIALOG Stock for Shares as provided in this Agreement, and all questions have
been answered to the Principal Stockholder's satisfaction.
57
<PAGE>
9.3 Restrictions on Resale; Legends. The Principal Stockholder agrees,
-------------------------------
and the Company will use commercially reasonable efforts to cause each other
Stockholder to agree, not to offer, sell, assign, exchange, transfer, encumber,
pledge, distribute or otherwise dispose of the VIALOG Stock to be acquired by
them pursuant to this Agreement except after full compliance with all of the
applicable provisions of the Securities Act and applicable state securities
Laws, and any attempt by a Stockholder to do so will be treated as ineffective
for all purposes. The certificates of VIALOG Stock issued pursuant to Section
2.1(a) of this Agreement will bear the following legend substantially as set
forth:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE
STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED OR OTHERWISE
DISPOSED OF WITHOUT (1) REGISTRATION UNDER THE ACT AND ANY APPLICABLE
STATE LAW, OR (2) AN OPINION (SATISFACTORY TO VIALOG) OF COUNSEL
(SATISFACTORY TO VIALOG) THAT REGISTRATION IS NOT REQUIRED.
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification.
---------------
(a) Except as provided in Section 11.1, the Principal Stockholder
agrees to make whole, indemnify and hold VIALOG, VIALOG Merger Subsidiary, the
Surviving Corporation, the Underwriters and their respective Affiliates, agents,
successors and assigns (collectively, the "VIALOG Indemnified Parties") harmless
as a result of, from or against:
(i) any and all Claims of the VIALOG Indemnified Parties or
other Persons based upon, attributable to or resulting
from any material inaccuracy in or material breach of any
representation or warranty on the part of any one or more
of the Company or the Stockholders under this Agreement
or any Collateral Document;
(ii) any and all Claims of the VIALOG Indemnified Parties or
other Persons based upon, attributable to or resulting
from the material breach of any covenant or other
agreement on the part of any one or more of the Company
or the Stockholders under this Agreement or any
Collateral Document;
58
<PAGE>
(iii) any and all other material Claims of the VIALOG
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(b) Except as provided in Section 11.1, VIALOG agrees to make
whole, indemnify and hold the Principal Stockholder (and each Stockholder that
delivers the agreements contemplated by Section 6.4) and their respective
Affiliates, agents, heirs, successors and assigns (collectively, the "Company
Indemnified Parties") harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified Parties or
other Persons based upon, attributable to or resulting
from any material inaccuracy in or material breach of any
representation or warranty on the part of VIALOG or
VIALOG Merger Subsidiary under this Agreement or any
Collateral Document;
(ii) any and all Claims of the Company Indemnified Parties or
other Persons based upon, attributable to or resulting
from the material breach of any covenant or other
agreement on the part of VIALOG or VIALOG Merger
Subsidiary; and
(iii) any and all other material Claims of the Company
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(c) No Principal Stockholder will be required to pay to the VIALOG
Indemnified Parties an aggregate amount in excess of an amount equal to the cash
received by such Stockholder as the cash portion of the Exchange Merger
Consideration pursuant to Sections 2.1(a) and 2.4, cash received by such
Stockholder pursuant to Section 2.1(d) plus, with respect to shares of VIALOG
Stock issued to such Stockholder as the stock portion of the Exchange Merger
Consideration pursuant to Section 2.1(a) and Section 2.4, the Indemnity Value
thereof. VIALOG will not be required to pay any Company Indemnified Party an
aggregate amount in excess of the Indemnity Value of the shares of VIALOG Stock
issued to such Company Indemnified Party plus the amount of cash delivered to
such Company Indemnified Party pursuant to Section 2.1(a), Section 2.1(d) and
Section 2.4. No Claim for indemnification may be commenced beyond the period
applicable to such Claim set forth in Section 11.1.
(d) Notwithstanding the foregoing, no Principal Stockholder will be
required to pay any amount for indemnification to the VIALOG Indemnified Parties
except to the extent the aggregate amount of Claims under this Section 10.1
asserted collectively against the Principal Stockholder exceeds the greater of
$100,000 or one quarter of one percent (.0025%) of the sum of (i) the product of
(x) the aggregate number or shares of VIALOG Stock into which the Shares of the
Stockholders will be converted as set forth in Sections 2.1(a) and 2.4 and (y)
the Offering Price, plus (ii) the total amount of cash paid to all Stockholders
pursuant to Sections 2.1(a), 2.1(d) and 2.4.
59
<PAGE>
10.2 Procedures Concerning Claims by Third Parties; Payment of Damages;
-----------------------------------------------------------------
etc.
- ---
(a) If any Legal Action is instituted or asserted by any person
other than such indemnified party in respect of which payment may be sought
hereunder, the indemnified party will reasonably and promptly cause written
notice of the assertion of any Legal Action of which it has knowledge which is
covered by the indemnities under Section 10.1 to be forwarded to the
indemnifying party. In such event, the indemnifying party will have the right,
at its sole option and expense, to be represented by counsel of its choice,
which must be reasonably satisfactory to the indemnified party, and to defend
against, negotiate, settle or otherwise deal with any Legal Action which related
to any Claims instituted or asserted by any Person other than such indemnified
party and indemnified against hereunder; provided, however, that no settlement
thereof will be made without the prior written consent of the indemnified party,
which consent will not be unreasonably withheld, conditioned or delayed. If the
indemnifying party elects to defend against, negotiate, settle or otherwise deal
with any Legal Action which related to any such Claims, it will within thirty
(30) days of receipt of said notice (or sooner, if the nature of the Legal
Action so requires) notify in writing the indemnified party of its intent to do
so. If the indemnifying party elects not to defend against, negotiate, settle or
otherwise deal with any Legal Action which relates to any such Claims, fails to
notify the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Claims under this
Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Legal Action. If the indemnified party defends any
Legal Action, then the indemnifying party will reimburse the indemnified party
for reasonable Claims incurred in defending such Legal Action upon a final
determination that the indemnified party was entitled to indemnity hereunder.
Neither the indemnifying party nor the indemnified party may settle any Legal
Action without the prior written consent of the other party, which consent will
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
will assume the defense of any Legal Action instituted or asserted by any Person
other than an indemnified party, the indemnified party may participate, at such
party's own expense, in the defense of such Legal Action.
(b) After any final judgment or award will have been rendered by a
court, arbitration board (which may be engaged upon the consent of each of the
indemnifying party and the indemnified parties) or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement will have been consummated, or the indemnified party
and the indemnifying party will have arrived at a mutually binding agreement
with respect to a Legal Action hereunder, the indemnifying party will pay all of
the sums due and owing to the indemnified party by wire transfer of immediately
available funds, or by delivery of shares of VIALOG Stock, as permitted pursuant
to the definition of Indemnity Value in Article 12, within five business days
after the date of notice of such judgment or award conditioned, however, on the
indemnifying party having been finally determined by the parties' agreement or
by final court or arbitration that the indemnifying party is obligated hereunder
to make said payment and subject to the provisions of this Article 10.
(c) The failure of the indemnified party to give reasonably
prompt notice of any Legal Action instituted or asserted by any Person other
than such indemnified party and
60
<PAGE>
indemnified against hereunder will not release, waive or otherwise affect the
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual loss or material prejudice as a
result of such failure.
(d) No legal action to enforce a Claim for indemnity will be stayed
or dismissed for failure to join one or more indemnifying parties or to permit
an indemnifying party to cross-claim against another indemnifying party, nor
will the failure to join as indemnifying party be deemed grounds for preventing
a separate or subsequent Legal Action to enforce a Claim for indemnification
against such party, each such Legal Action being deemed a separate and
independent Claim for indemnification. A Legal Action to enforce a Claim for
indemnity may be instituted in the Commonwealth of Massachusetts, or the
jurisdiction to which each Party consents, or any other state having
jurisdiction with respect thereto.
ARTICLE
11
GENERAL PROVISIONS
11.1 Effectiveness of Representations; etc.
-------------------------------------
(a) Regardless of any investigation made by or on behalf of any
other party hereto, any Person controlling such party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement, the representations, warranties, covenants and agreements contained
in Article 3, Article 4 and Article 5 will survive the Merger and remain
operative and in full force and effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until sixty
(60) days after the applicable statute of limitations, as
the same may be extended from time to time, has
terminated;
(ii) Section 3.23, until the sixth anniversary date of this
Agreement; and
(iii) all other Sections, until VIALOG (or its successor) files
an annual report pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, as
prescribed thereunder on Form 10-K covering at least two
full fiscal years of operations by VIALOG, but in no
event more than thirty months after the Public Offering
Closing Date (the "Second Annual Filing Date").
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements contained in Article 3,
Article 4 and Article 5, the representations, warranties, covenants and
agreements of each Party will survive and remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any
61
<PAGE>
other Party, any Person controlling any such Party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement.
11.2 Notices. All notices and other communications given or made pursuant
-------
to this Agreement will be in writing and will be deemed to have been duly given
or made as of the date delivered or transmitted, and will be effective upon
receipt, if delivered personally, mailed by certified mail (postage prepaid,
return receipt requested) to the Parties at the following addresses or sent by
electronic transmission to the fax number specified below:
(a) If to VIALOG or VIALOG Merger Subsidiary:
VIALOG Corporation
Attention: Glenn Bolduc, President
46 Manning Road
Billerica, MA 01821
Fax: (508) 667-1944
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, LLP
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
(b) If to the Company:
David Lipsky, President
American Conferencing Company, Inc.
67 East Ridgewood Avenue
Ridgewood, NJ 07450
Fax: (201) 612-5009
with a copy to:
Jeffrey Worob, Esq.
Wells, Jaworski, Lieberman & Paton
12 Route 17 North, Third Floor
P.O. Box 1827
Paramus, NJ 07653-1827
Tel: (201) 587-0888
Fax: (201) 587-8845
62
<PAGE>
Any address for notice as herein above provided may be changed by the
party or person for whom the change is made by giving notice of said change in
the manner provided in this Section.
11.3 Headings. The headings contained in this Agreement are for reference
--------
purposes only and will not affect in any way the meaning and interpretation of
this Agreement.
11.4 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner Adverse to any Party. Upon such
determination that any term or other provisions is invalid, illegal or incapable
of being enforced, the Parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement (together with the Disclosure
----------------
Schedule, the Confidentiality Agreement and the other Collateral Documents
delivered in connection herewith), constitutes the entire agreement of the
Parties and supersedes all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof.
11.6 Assignment. This Agreement may not be assigned by operation of law or
----------
otherwise and any purported assignment will be null and void, provided that
VIALOG may cause a wholly owned Subsidiary of VIALOG or Holding Company to be
substituted for VIALOG or VIALOG Merger Subsidiary as the party to the Merger
and may, in addition, assign the other rights, but not its obligations,
including, without limitation, its obligation for payment of the Aggregate
Merger Consideration, under this Agreement to such Subsidiary or Holding
Company.
11.7 Parties in Interest. This Agreement will be binding upon and inure
-------------------
solely to the benefit of each Party, and nothing in this Agreement, express or
implied (other than the provisions of Section 6.7, which provisions are intended
to benefit and may be enforced by the beneficiaries thereof), is intended to or
will confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
11.8 Governing Law. Except to the extent that Delaware Law may be
-------------
applicable to the Merger, this Agreement will be governed by, and construed in
accordance with, the substantive laws of the Commonwealth of Massachusetts
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
11.9 Enforcement of the Agreement. Each Party recognizes and agrees that
----------------------------
each other Party's remedy at law for any breach of the provisions of this
Agreement would be inadequate and agrees that for breach of such provisions,
such Party will, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to
63
<PAGE>
injunctive relief and to enforce its rights by an action for specific
performance to the extent permitted by Applicable Law. Each party hereby waives
any requirement for security or the posting of any bond or other surety in
connection with any temporary or permanent award of injunctive, mandatory or
other equitable relief. Nothing herein contained will be construed as
prohibiting a Party from pursuing any other remedies available to such Party for
any breach or threatened breach hereof or failure to take or refrain from any
action as required hereunder to consummate the Merger and carry out the
Transactions.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
11.11 Disclosure Supplements. From time to time prior to the Public
----------------------
Offering Closing Date, the Company will promptly supplement or amend the
Disclosure Schedule delivered in connection with this Agreement, with respect to
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby; provided, however, that no
supplement or amendment to the Disclosure Schedule that constitutes or reflects
a Material Adverse Change to the Company may be made without the prior written
consent of VIALOG.
ARTICLE
12
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural, and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meanings when used in the Disclosure Schedule and each Collateral
Document, notice, certificate, communication, opinion, or other document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
Accountants means KPMG Peat Marwick, LLP.
Adverse, Adversely, when used alone or in conjunction with other
terms (including without limitation "Affect," "Change" and "Effect") means, with
respect to the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, any Event which could reasonably be expected to
(a) adversely affect the validity or enforceability of this
64
<PAGE>
Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, or (b) adversely affect the business, operations,
management, properties or the condition, (financial or other), or results of
operation of the Company or the Company and its Subsidiaries taken as a whole,
VIALOG or VIALOG Merger Subsidiary, as the case may be, or (c) impair the
Company's, VIALOG's or VIALOG Merger Subsidiary's ability to fulfill its
obligations under the terms of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, or (d) adversely
affect the aggregate rights and remedies of VIALOG or the Company under this
Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, in all cases, unless otherwise specifically set
forth, in a material respect or manner or to a material degree.
Affiliate or Affiliated means, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, will include any member of such
individual's immediate family or a family trust.
Aggregate Equity means such number of shares of Company Stock as
shall equal the aggregate of (a) the Shares, and (b) all shares of Company Stock
otherwise issuable based upon the affirmative election to exercise or convert
outstanding Option Securities and/or Convertible Securities pursuant to Section
2.4.
Aggregate Merger Consideration will have the meaning given to it in Section
2.1(a).
Aggregate Cash Merger Consideration will have the meaning given to it
in Section 2.1(a).
Aggregate Stock Merger Consideration will have the meaning given to it in
Section 2.1(a).
Agreement means this Agreement as originally in effect, including unless
the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits to this Agreement, and as the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
Applicable Law means any Law of any Authority, whether domestic or foreign,
including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or to any of its business or
operations is subject or any of its property or assets is bound.
65
<PAGE>
Authority means any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
BCA will have the meaning given to it in the Preamble.
Benefit Arrangement means any material benefit arrangement that is
not a Plan, including (a) any employment or consulting agreement, (b) any
arrangement providing for insurance coverage or workers' compensation benefits,
(c) any incentive bonus or deferred bonus arrangement, (d) any arrangement
providing termination allowance, severance or similar benefits, (e) any equity
compensation plan, (f) any deferred compensation plan, and (g) any compensation
policy and practice.
Cash Merger Consideration will have the meaning given to it in
Section 2.1(a).
Certificate will have the meaning given to it in Section 2.1(a).
Claims means any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all reasonable fees, costs, expenses and disbursements
(including without limitation attorneys' fees, costs and expenses) relating to
any of the foregoing.
COBRA means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title
I of ERISA.
Code will have the meaning given to it in the Preamble.
Collateral Document means any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Principal Stockholder, on the one hand, or
VIALOG and VIALOG Merger Subsidiary on the other, under this Agreement and with
respect to opinions to be delivered pursuant to this Agreement, except to the
extent of a Party's actual knowledge, the Company and the Principal Stockholder
or VIALOG and VIALOG Merger Subsidiary, as the case may be, assume no
responsibility for the authority of or genuineness of signatures relating to the
others as counterparts or their representations, warranties, covenants and
agreements.
Company will have the meaning given to it in the Preamble.
66
<PAGE>
Company Indemnified Parties will have the meaning given to it in
Section 10.1(b).
The Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or the Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after reasonable investigation, will
have reason to believe and will believe that the subject representation or
warranty is true and accurate as stated.
Company Stock will have the meaning given to it in Section 2.1(a).
Confidentiality Letter will have the meaning given to it in Section
6.1(c).
Contract or Contractual Obligation means any term, condition,
provision, representation, warranty, agreement, covenant, undertaking,
commitment, indemnity or other obligation set forth in the Organizational
Documents of the obligee or which is outstanding or existing under any
instrument, contract, lease or other contractual undertaking (including without
limitation any instrument relating to or evidencing any Indebtedness) to which
the obligee is a party or by which it or any of its business is subject or
property or assets is bound.
Control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
Convertible Securities means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or existence or
non-existence of some other Event, or both.
DBCL will have the meaning given to it in the Preamble.
Disclosure Schedule means the disclosure schedules dated as of the
date of this Agreement delivered by the Company to VIALOG and VIALOG to the
Company.
Distribution means, with respect to the Company or any of its
Subsidiaries: (a) the declaration or payment of any dividend (except dividends
payable in common stock of the Company) on or in respect of any shares of any
class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary, (b) the
purchase, redemption or other retirement of any shares of any class of capital
stock of the Company or any shares of capital stock of any Subsidiary owned by a
Person other than the Company or a Subsidiary, and (c) any other distribution on
or in respect of any shares of
67
<PAGE>
any class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary.
Effective Date means the effective date of the Registration Statement
and commencement of the Public Offering as authorized by the SEC.
Effective Time will have the meaning given to it in Section 1.4.
Employment Arrangement means, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock purchase or appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA.
Encumber means to suffer, accept, agree to or permit the imposition
of a Lien.
Entity means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
Environmental Laws means any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, mining or reclamation or mined land, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes. Environmental
Laws include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), the Hazardous Material
-- ---
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
-- ---
and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42
-- ---
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
Section 2601 et seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C.
-- ---
Section 651 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
-- ---
U.S.C. Section 136 et seq.), and the Surface Mining Control and Reclamation Act
-- ---
of 1977 (30 U.S.C. Section 1201 et seq.), and any
-- ---
68
<PAGE>
analogous future federal, or present or future state, local or foreign, Laws,
and the rules and regulations promulgated thereunder all as from time to time in
effect, and any reference to any statutory or regulatory provision will be
deemed to be a reference to any successor statutory or regulatory provision.
Environmental Permit means any Governmental Authorization required by
or pursuant to any Environmental Law.
Environmental Requirements means all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
(a) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of, or the
remediation, emission, discharge or release into the air,
surface water, groundwater or land of, Hazardous Materials;
(b) the protection of the health and safety of employees or the
public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA means the Employee Retirement Security Act of 1974, and the
rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision.
ERISA Affiliate means any Person that is treated as a single employer
with the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
Event means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Exchange Agent will have the meaning given to it in Section 2.2(a).
Exchange Fund will have the meaning given to it in Section 2.2(a).
Exchange Merger Consideration will have the meaning given to it in
Section 2.1(a).
Expenses will have the meaning set forth in Section 8.5.
69
<PAGE>
Final Determination (a) means with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations; and (b) will include the payment of Tax by
the Company or whichever Party is responsible for payment of such Tax under
Applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the other party is notified of such payment and the
party that is responsible for such Tax under this Agreement determines that no
action should be taken to recoup such payment from such Taxing Authority.
Financial Statements will have the meaning given to it in Section
3.2(a).
GAAP means generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authorizations means all approvals, concessions,
consents, franchises, licenses, permits, plans, registrations and other
authorizations of each applicable Authority.
Governmental Filings means all filings, including franchise and
similar Tax filings, and the payment of all fees, assessments, interest and
penalties associated with such filings, with each applicable Authority.
Guaranty or Guaranteed means any agreement, undertaking or
arrangement by which the Company or any of its Subsidiaries, VIALOG or VIALOG
Merger Subsidiary, as the case may be, guarantees, endorses or otherwise becomes
or is liable, directly or indirectly, upon any Indebtedness of any other Person
including without limitation the payment of amounts drawn down by beneficiaries
of letters of credit (other than by endorsements of negotiable instruments for
deposit or collection in the ordinary course of business). The amount of the
obligor's obligation under any Guaranty will be deemed to be the outstanding
amount (or maximum permitted amount, if larger) of the Indebtedness directly or
indirectly guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials means any substance (in whatever state or
matter): (a) the presence of which requires investigation or remediation under
any Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated by
any Authority; (d) that contains or consists of petroleum or petroleum products,
or (e) that contains or consists of PCBs, asbestos, or urea formaldehyde foam
insulation.
Holding Company means a corporation established by or on behalf of
VIALOG into which VIALOG merges or assigns its rights and obligations hereunder
if the Accountants so
70
<PAGE>
advise for purpose of a tax free incorporation of all parties provided the
relative ownership rights of all parties remain the same.
HSR Act means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, and the rules and regulations thereunder, all as from time to time in
effect, or any successor law, rules or regulations, and any reference to any
statutory or regulatory provision will be deemed to be a reference to any
successor statutory or regulatory provision.
Indebtedness means, with respect to the Company or any of its
Subsidiaries or VIALOG or VIALOG Merger Subsidiary, as the case may be, (a) all
items, except items of capital stock or of surplus or of general contingency or
deferred tax reserves or any minority interest in any Subsidiary to the extent
such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of the Company or VIALOG, which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of the Company or such Subsidiary or VIALOG or
VIALOG Merger Subsidiary, (b) all obligations secured by any Lien to which any
property or asset owned or held by the Company or any Subsidiary or VIALOG or
any VIALOG Merger Subsidiary is subject, whether or not the obligation secured
thereby will have been assumed, and (c) to the extent not otherwise included,
all Contractual Obligations of the Company or any Subsidiary or VIALOG or any
VIALOG Merger Subsidiary constituting capitalized leases and all obligations of
the Company or any Subsidiary or VIALOG or any VIALOG Merger Subsidiary with
respect to Leases constituting part of a sale and leaseback arrangement.
Indemnity Value means with respect to each share of VIALOG Stock
issued to a Stockholder pursuant to the Merger, the Offering Price. In
satisfaction of a Claim under this Agreement for which a stockholder is liable
to VIALOG, until the Second Annual Filing Date, and in lieu of all cash, such
Stockholder may tender shares of VIALOG Stock valued at the Offering Price and
cash in a ratio not exceeding fifty-one (51) to forty-nine (49), for all
payments by such Stockholder, and after the Second Annual Filing Date, cash and
shares of VIALOG Stock in such proportion as such Stockholder determines.
Intangible Assets means all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
Law means any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ of
any Authority, domestic of foreign; (b) the common law, or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation; including, in each such case or instance,
any interpretation, directive, guideline or request, whether or not having the
force of law including, in all cases, without limitation any particular section,
part or provision thereof.
71
<PAGE>
Lease means any lease of property, whether real, personal or mixed,
and all amendments thereto.
Legal Action means any litigation or legal or other actions,
arbitrations, counterclaims, investigations, proceedings, requests for material
information by or pursuant to the order of any Authority, or suits, at law or in
arbitration, equity or admiralty commenced by any Person, whether or not
purported to be brought on behalf of a party hereto affecting such party or any
of such party's business, property or assets.
Lien means any of the following: mortgage, lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building to use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
Margin Rules means Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
Material or Materiality for the purposes of this Agreement, will,
unless specifically stated to the contrary, be determined without regard to the
fact that various provisions of this Agreement set forth specific dollar
amounts.
Material Agreement or Material Commitment means, with respect to the
Company or any of its Subsidiaries, or VIALOG or VIALOG Merger Subsidiary any
Contractual Obligation which (a) was not entered into in the ordinary course of
business, (b) was entered into in the ordinary course of business which
(i) involves the purchase, sale or lease of goods or materials or performance of
services aggregating more than Twenty-Five Thousand Dollars ($25,000), (ii)
extends for more than three (3) months, or (iii) is not terminable on thirty
(30) days or less notice without penalty or other payment, (c) involves
Indebtedness for money borrowed in excess of One Hundred Thousand Dollars
($100,000), (d) is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement, or (e) would
account for more than five percent (5%) of purchases or sales made by the
Company and its Subsidiaries for the year ended December 31, 1996.
Merger will have the meaning given to it in the Preamble.
Merger Closing will have the meaning given to it in Section 1.3.
Merger Consideration will have the meaning given to it in Section
2.1(a).
72
<PAGE>
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
Net Shares will have the meaning given to it in Section 2.2(a).
Offering Price means $11.50 per share of VIALOG Stock.
Option Securities means all rights, options and warrants, all calls
or commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
Organizational Documents means, with respect to a Person which is a
corporation, its charter, its by-laws, and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock, and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreement among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
Other Participating Companies mean those companies or entities
engaged in the teleconferencing business who execute agreements and plans of
reorganization, stock purchase agreements or asset purchase agreements with
VIALOG which agreements close contemporaneously with this Agreement.
Other Transaction means a transaction or series of related
transactions (other than the Merger) resulting in (a) any change in control of
the Company, (b) any merger or consolidation of the Company or any of its
Subsidiaries, regardless of whether the Company or such Subsidiary is the
surviving Entity, (c) any tender offer or exchange offer for, or any acquisition
of, any securities of the Company, or (d) any sale or other disposition of
assets of the Company of any Subsidiary not otherwise permitted under Section
3.18.
Participating Agreement will have the meaning given to it in the
Preamble.
Participating Companies will mean the Company and the Other
Participating Companies.
Participating Mergers means the mergers of each of the Other
Participating Companies with a Subsidiary of VIALOG pursuant to a Participating
Agreement.
Participating Stockholders means the Persons receiving VIALOG Stock
pursuant to the Participating Mergers.
Party means any natural individual or any Entity that has executed
this Agreement.
73
<PAGE>
PBGC means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Person means any natural individual or any Entity.
Plan means any "employee benefit plan" as defined in Section 3(3) of
ERISA (whether or not terminated) which is (or was in the case of a frozen or
terminated plan) maintained by the Company or any Subsidiary or VIALOG or VIALOG
Merger Subsidiary, and with respect to which the Company, such Subsidiary or
VIALOG or VIALOG Merger Subsidiary or, in the case of any such plan subject to
Title IV of ERISA, an ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, other than a Multiemployer Plan.
Principal Stockholder will have the meaning given to it in the
Preamble.
Private Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than each Authority) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
Prospectus means the form of prospectus first filed by VIALOG in the
Registration Statement, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the Public
Offering.
Public Offering will have the meaning given to it in the Preamble.
Public Offering Closing Date means the date on which the Public
Offering is closed.
Registration Rights Agreement will have the meaning given to it in
Section 6.4.
Registration Statement means the registration statement (including
the Prospectus, exhibits, financial statements and schedules included therein),
and all amendments thereof (including post-effective amendments and any
registration statement filed under Rule 462(b) with respect to the Public
Offering), filed under the Securities Act registering the shares of VIALOG Stock
to be sold in the Public Offering in accordance with the terms and conditions of
the Underwriting Agreement.
Representatives of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
SEC means the Securities and Exchange Commission of the United States
or any successor Authority.
Second Annual Filing Date will have the meaning given to it in
Section 11.1(a)(iii).
74
<PAGE>
Securities Act means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations.
Shares will have the meaning given to it in Section 2.1(a).
Special Meeting will have the meaning given to it in Section 1.2(a).
Stock Merger Consideration will have the meaning given to it in
Section 2.1(a).
Stockholders means the Principal Stockholder and all other Persons
entitled to Merger Consideration (or who would be entitled thereto but for their
dissent from the Merger) pursuant to Sections 2.1(a) or (to the extent Persons
holding Option Securities or Convertible Securities exercise their rights to
acquire Shares prior to the Effective Time, from and after the time they acquire
such Shares) Section 2.4.
Subsidiary means, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Surviving Corporation will have the meaning given to it in Section
1.1.
Tax (and "Taxable", which means subject to Tax), means with respect
to the Company or any of its Subsidiaries or VIALOG or any VIALOG Merger
Subsidiary, (a) all taxes (domestic or foreign), including without limitation
any income (net, gross or other including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, gains, sales, use, leasing, lease, user, ad valorem, transfer,
recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by the Company or
any of its Subsidiaries, or VIALOG or any VIALOG Merger Subsidiary, payroll,
employment, unemployment, social security, excise severance, stamp, occupation,
premium, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, levies, assessments, charges, penalties, addition to
tax or additional amount imposed by any Taxing Authority, (b) any joint or
several liability of the Company or any of its Subsidiaries or VIALOG or any
VIALOG Merger Subsidiary with any other Person for the payment of any amounts of
the type described in (a), and (c) any liability of the Company or any of its
Subsidiaries or VIALOG or any VIALOG Merger Subsidiary for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
Tax Claim means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
75
<PAGE>
Tax Return or Returns means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority means any Authority responsible for the imposition
of any Tax.
Termination Date means (a) March 15, 1997 unless on or prior to that
date the Registration Statement is filed, in which case such date will
automatically be extended to June 30, 1997, or (b) such date after March 15,
1997 as to which the parties agree.
Transactions means the other transactions contemplated by this
Agreement or the Merger or by any Collateral Document executed or required to be
executed in connection herewith or therewith, but will not include the
Participating Mergers, the registration of sale of VIALOG Stock pursuant to the
Registration Statement or any credit facilities between VIALOG and any bank
described in the Registration Statement.
Transmittal Documents will have the meaning given to it in Section
2.2(b).
Underwriter means any two of Smith Barney Inc., Salomon Brothers Inc,
Donaldson, Lufkin & Jenrette Securities Corporation or comparable firm as lead
underwriters and any other Person who executes the Underwriting Agreement as an
underwriter of VIALOG Stock in the Public Offering.
Underwriting Agreement means the firm commitment underwriting
agreement between VIALOG and the Underwriter to be filed as an exhibit to the
Registration Statement and to be executed on or about the Effective Date.
VIALOG will have the meaning given to it in the Preamble.
VIALOG Indemnified Parties will have the meaning given to it in
Section 10.1(a).
VIALOG Merger Subsidiary will have the meaning given to it in the
Preamble.
VIALOG Stock will have the meaning given to it in the Preamble.
[This space is intentionally left blank.]
76
<PAGE>
IN WITNESS WHEREOF, VIALOG, VIALOG Merger Subsidiary, the Company and
the Principal Stockholder have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly authorized.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
----------------------------------------
Name: Glenn D. Bolduc
Title: President
AMCS ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
----------------------------------------
Name: Glenn D. Bolduc
Title: President
AMERICAN CONFERENCING COMPANY, INC.
By: /s/ David Lipsky
----------------------------------------
Name: David Lipsky
Title: President
PRINCIPAL STOCKHOLDER:
/s/ David Lipsky
-------------------------------------------
Name: David Lipsky
77
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. THE REGISTRANT AGREES
TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE
TO THE COMMISSION UPON REQUEST.
------------------------------
Section 3.1(a)
. Jurisdiction of Incorporation of the Company.
. Jurisdictions where qualified to do business.
Section 3.1(c)
. Exceptions to No Breach or Default, Etc., upon execution and delivery of
the Agreement or any Collateral Document.
. Exceptions to No Lien created or imposed upon execution and delivery of
the Agreement or any Collateral Document.
. Exceptions to No Governmental Authorization or Governmental Filing
Required upon execution and delivery of the Agreement or any Collateral
Document.
Section 3.1(d)
. Subsidiaries of the Company, and Jurisdictions of incorporation and
where qualified to do business.
. Capital Stock of any Subsidiary.
. Exceptions to Company's ownership of all Stock of any Subsidiary.
Section 3.2(a)
. Financial Statements of the Company and any Subsidiary, prepared in
accordance with GAAP.
Section 3.2(c)
. The Company's ownership of other Entities.
Section 3.3
. Changes and condition of the Company and any Subsidiary, since the date
of the most recent financial statements.
Section 3.4
. Exceptions to liabilities of the Company or any Subsidiary.
<PAGE>
. Any obligations or liabilities, past, present or deferred, or accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in
the balance sheet of the Financial Statements, or notes thereto, and any
obligations or liabilities, other than obligations and liabilities
incurred in the ordinary course of business consistent with past
practice of the Company and any Subsidiary, which will adversely affect
the Company or any of the Company's Subsidiaries.
. Guarantees or Primary or Secondary Liabilities of the Company or any
Subsidiary (except as disclosed in Financial Statements).
Section 3.5(a)
. Exceptions to No Liens with respect to all real property owned or
leased, and to all other assets, tangible and intangible.
. Financing Statements evidencing any Liens.
. Impairments to valid leasehold interests.
Section 3.5(b)
. Real estate owned or leased, and property leased by the Company and any
Subsidiary.
. Material Fixed Assets.
. Title Retention Agreements.
Section 3.5(c)
. Exceptions to compliance with title covenants and conditions and
environmental laws.
. Hazardous Materials used or stored by the Company or any Subsidiary.
Section 3.6
. Private Authorizations material to the Company or any Subsidiary.
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before
December 31, 1995.
Section 3.7(b)
. Breaches, violations or defaults under Governmental Authorizations or
any Applicable Law or under any requirement of any insurance carrier.
2
<PAGE>
Section 3.8(a)
. Governmental Authorizations and Intangible Assets upon which the conduct
of business by the Company or any Subsidiary is dependent.
Section 3.8(b)
. Description of Intangible Assets and Governmental Authorizations.
Section 3.9
. Contractual obligations or transactions between the Company or any of
its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services or out-of-pocket expenses reasonably incurred
in support of the Company's business).
Section 3.10(a)
. Insurance Policies maintained by the Company or any Subsidiary.
. Insurance Carriers which have refused the Company or any Subsidiary
insurance within the past five years.
Section 3.11(a)
. Exceptions to taxation as a Subchapter C corporation.
. Membership in a consolidated group for tax purposes.
Section 3.11(d)
. Tax audits of the Company or any Subsidiary by the IRS or any
notifications thereof.
Section 3.11(e)
. Tax Sharing Agreement or Arrangement of the Company or any Subsidiary.
Section 3.11(f)
. Consents concerning collapsible corporations under Section 341(f) of the
Code.
. Ownership changes within the meaning of Section 382(g) of the Code.
Section 3.12(a)
. ERISA plans, including, inter alia, exceptions to compliance to
----- ----
applicable laws, notices from any authority questioning compliance,
deficiencies, "prohibited transactions", any amounts of
3
<PAGE>
liability, termination proceedings, annual reports, or any membership in
or contributions to multi-employer plans.
Section 3.12(c)
. Basis of funding and current status of any past service liability with
respect to each Employment Arrangement.
Section 3.15(a)
. Authorized and outstanding Capital Stock of the Company.
. Agreements by the Company or any Subsidiary to grant or issue any shares
of its Capital Stock or any Option Security or Convertible Security.
. Any agreement, put or commitment pursuant to which the Company or any
Subsidiary is obligated to purchase, redeem or otherwise acquire any
shares of Capital Stock or any Option Security or Convertible Security.
Section 3.15(b)
. Stockholders.
. Stock not held free and clear of all Liens.
. Persons or groups of persons owning as much as 5% of the Company's
outstanding Common Stock.
Section 3.16(a)
. Employment Arrangements of the Company or any Subsidiary.
. Collective bargaining agreements or pending grievances or labor
disputes.
Section 3.16(b)
. Accelerated payments or benefits, including parachute payments, that
will be received as a result of the transactions contemplated by this
Agreement.
Section 3.16(c)
. Any unfavorable relationships with employees of the Company or any
Subsidiary.
Section 3.17(a)
. Material Agreements relating to the ownership or operation of the
business and property of the Company or any Subsidiary presently held or
used by the Company or any Subsidiary, or to
4
<PAGE>
which the Company or any Subsidiary is a party, or to which it or any of
its property is subject or bound.
Section 3.17(b)
. Exceptions to satisfaction or performance of Material Agreements by the
Company or any Subsidiary.
Section 3.18(a)
. Exceptions to operation of business in the ordinary course.
Section 3.18(b)
. Distributions from end of most recent fiscal year to the date of this
Agreement.
Section 3.19
. Banks, trust companies, savings and loan associations and brokerage
firms in which the Company or any Subsidiary has an account or safe
deposit box, and the names of all persons with access thereto.
Section 3.20
. Adverse restrictions which impairs the Company or any Subsidiary's
ability to conduct its business or which could have any adverse effect
on the Company or any Subsidiary.
Section 3.22
. Personal injury, warranty claims, etc., pending or threatened.
Section 3.23(a)
. Environmental matters - compliance and Governmental Authorizations and
Private Authorizations.
Section 3.23(b)
. Any actual or expected spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water on any property or
facility owned, leased, operated or occupied by the Company or any
Subsidiary.
. Notices or Liens arising under Environmental Law.
Section 3.23(c)
. Above or underground tanks for the storage of Hazardous Materials.
5
<PAGE>
Section 3.23(e)
. Hazardous Materials used in the conduct of business of the Company or
any Subsidiary.
. Description and annual volume of Hazardous Materials used.
. Years during which use occurred.
. Persons to whom such Hazardous Materials were transferred and/or
transported.
Section 3.23(f)
. Hazardous Materials generated.
. Annual volume.
. Persons to whom such Hazardous Materials were transferred and/or
transported.
Section 3.23(g)
. Environmental site assessments.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991,
the Company previously acquired material properties or assets.
Section 4.4
. Exceptions to good and merchantable title to Shares to be exchanged
pursuant to this Agreement.
Section 4.5(a)
. Conflicts with, breaches of, or defaults under any Contractual
Obligation of Principal Stockholder resulting from the execution and
delivery of this Agreement or any Collateral Document.
Section 4.5(b)
. Liens created or imposed upon any property or asset of Principal
Stockholder as a result of the execution and delivery of this Agreement
or any Collateral Document.
Section 4.5(c)
. Governmental Authorizations, Governmental Filing or Private
Authorizations required as a result of the execution and delivery of
this Agreement or any Collateral Document.
6
<PAGE>
Section 5.7
. Authorized and outstanding capital stock of each of VIALOG and VIALOG
Merger Subsidiary.
. Options, warrant, calls, rights, commitments or any other agreements of
any character obligating VIALOG or VIALOG Merger Subsidiary to issue any
shares of VIALOG Stock or other shares of Capital Stock of VIALOG or
VIALOG Merger Subsidiary, or any other securities convertible into or
evidencing the right to subscribe for any such shares.
Section 5.11
. Provisions in other Participating Agreements of other Participating
Companies not substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement.
Section 6.5(b)
. Business (other than business in the ordinary course) the Company will
conduct without the written permission of VIALOG Corporation.
Section 6.17
. Distributions to Stockholders, employees and consultants contemplated to
be made prior to the Merger Closing.
. Liens to be discharged prior to the Merger Closing.
. Certain liabilities for which the Company will indemnify VIALOG as of
the Merger Closing.
Section 7.1(f)
. Awards under Stock Option Plan.
Section 7.2(d)
. Persons executing Non-Competition Agreements.
Section 7.2(n)
. Form of Agreement releasing the Company and any Subsidiary from claims
against them.
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of
the Public Offering Closing Date.
7
<PAGE>
Section 7.2(s)
. Employment Agreement between Principal Stockholder and VIALOG
Corporation.
Section 7.2(t)
. Individuals executing and delivering Employment Arrangements for VIALOG
Corporation.
8
<PAGE>
Exhibit 2.7
AMENDED AND RESTATED AGREEMENT AND PLAN OF
REORGANIZATION
BY AND AMONG
VIALOG CORPORATION
CDC ACQUISITION CORPORATION
AND
COMMUNICATION DEVELOPMENT CORPORATION
AND
PATTI R. BISBANO
AND
MAURYA SUDA
Dated as of February 28, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 THE MERGER............................................................................................2
SECTION 1.1 The Merger........................................................................2
SECTION 1.2 Action by Stockholders............................................................2
SECTION 1.3 Closing...........................................................................3
SECTION 1.4 Effective Time....................................................................3
SECTION 1.5 Effect of the Merger..............................................................4
SECTION 1.6 Certificate of Incorporation......................................................4
SECTION 1.7 By-laws...........................................................................4
SECTION 1.8 Directors and Officers............................................................4
ARTICLE 2 CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES.................................................4
SECTION 2.1 Conversion of Securities..........................................................4
SECTION 2.2 Exchange of Certificates; Exchange Agent and
Exchange Procedures...............................................................6
SECTION 2.3 Stock Transfer Books..............................................................8
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights....................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................8
SECTION 3.1 Organization and Business; Power and Authority;
Effect of Transaction.............................................................8
SECTION 3.2 Financial and Other Information..................................................10
SECTION 3.3 Changes in Condition.............................................................12
SECTION 3.4 Liabilities......................................................................12
SECTION 3.5 Title to Properties; Leases......................................................12
SECTION 3.6 Compliance with Private Authorizations...........................................14
SECTION 3.7 Compliance with Governmental Authorizations and Applicable Law...................14
SECTION 3.8 Intangible Assets................................................................15
SECTION 3.9 Related Transactions.............................................................16
SECTION 3.10 Insurance........................................................................16
SECTION 3.11 Tax Matters......................................................................16
SECTION 3.12 Employee Retirement Income Security Act of 1974..................................18
SECTION 3.13 Absence of Sensitive Payments....................................................20
SECTION 3.14 Inapplicability of Specified Statutes............................................20
SECTION 3.15 Authorized and Outstanding Capital Stock.........................................21
SECTION 3.16 Employment Arrangements..........................................................21
SECTION 3.17 Material Agreements..............................................................22
SECTION 3.18 Ordinary Course of Business......................................................23
SECTION 3.19 Bank Accounts, Etc...............................................................25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.20 Adverse Restrictions.............................................................25
SECTION 3.21 Broker or Finder.................................................................25
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc.........................25
SECTION 3.23 Environmental Matters............................................................25
SECTION 3.24 Materiality......................................................................28
SECTION 3.25 Solvency.........................................................................28
SECTION 3.26 VIALOG Stock.....................................................................28
SECTION 3.27 Compliance with Regulations Relating to Securities Credit........................28
SECTION 3.28 Certain State Statutes Inapplicable..............................................28
SECTION 3.29 Continuing Representations and Warranties........................................28
SECTION 3.30 Registration Statement...........................................................28
SECTION 3.31 Predecessor Status, etc..........................................................29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDER.................................................................................29
SECTION 4.1 Organization.....................................................................29
SECTION 4.2 Power and Authority..............................................................29
SECTION 4.3 Enforceability...................................................................29
SECTION 4.4 Title to Shares..................................................................30
SECTION 4.5 No Conflict; Required Filings and Consents.......................................30
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VIALOG AND
VIALOG MERGER SUBSIDIARY..............................................................................30
SECTION 5.1 Organization and Qualification...................................................30
SECTION 5.2 Power and Authority..............................................................31
SECTION 5.3 No Conflict; Required Filings and Consents.......................................31
SECTION 5.4 Financing........................................................................32
SECTION 5.5 Broker or Finder.................................................................32
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary..........................32
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary............................32
SECTION 5.8 Registration Statement...........................................................32
SECTION 5.9 Solvency.........................................................................33
SECTION 5.10 Firm Commitment..................................................................33
SECTION 5.11 Participating Agreements of Other Participating Companies........................33
SECTION 5.12 Continuing Representations and Warranties........................................33
ARTICLE 6 ADDITIONAL COVENANTS.................................................................................34
SECTION 6.1 Access to Information; Confidentiality...........................................34
SECTION 6.2 Agreement to Cooperate...........................................................35
SECTION 6.3 Assignment of Contracts and Rights...............................................36
SECTION 6.4 Compliance with the Securities Act...............................................36
SECTION 6.5 Conduct of Business..............................................................37
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.6 No Solicitation..................................................................38
SECTION 6.7 Directors' and Officers' Indemnification and Insurance...........................38
SECTION 6.8 Notification of Certain Matters..................................................39
SECTION 6.9 Public Announcements.............................................................39
SECTION 6.10 Conveyance Taxes.................................................................40
SECTION 6.11 Obligations of VIALOG............................................................40
SECTION 6.12 Employee Benefits; Severance Policy..............................................40
SECTION 6.13 Certain Actions Concerning Business Combinations.................................40
SECTION 6.14 Termination of Option Securities and Convertible Securities......................41
SECTION 6.15 Tax Returns......................................................................41
SECTION 6.16 Employment and Noncompetition....................................................41
SECTION 6.17 Distributions, Liabilities, Etc..................................................42
SECTION 6.18 Release from Personal Guarantees.................................................42
SECTION 6.19 No Significant Changes...........................................................42
SECTION 6.20 Registration Statement...........................................................43
SECTION 6.21 Tax Status.......................................................................43
SECTION 6.22 Self Dealing.....................................................................43
ARTICLE 7 CLOSING CONDITIONS...................................................................................43
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger.....................43
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger
Subsidiary.......................................................................45
SECTION 7.3 Conditions to Obligations of the Company.........................................50
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER....................................................................53
SECTION 8.1 Termination......................................................................53
SECTION 8.2 Effect of Termination............................................................55
SECTION 8.3 Amendment........................................................................56
SECTION 8.4 Waiver...........................................................................56
SECTION 8.5 Fees, Expenses and Other Payments................................................56
SECTION 8.6 Effect of Investigation..........................................................56
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER RESTRICTIONS
ON VIALOG STOCK.......................................................................................57
SECTION 9.1 Shares not Registered............................................................57
SECTION 9.2 Economic Risk; Sophistication....................................................57
SECTION 9.3 Restrictions on Resale; Legends..................................................57
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 10 INDEMNIFICATION.....................................................................................58
SECTION 10.1 Indemnification..................................................................58
SECTION 10.2 Procedures Concerning Claims by Third Parties;
Payment of Damages; etc..........................................................59
ARTICLE 11 GENERAL PROVISIONS..................................................................................61
SECTION 11.1 Effectiveness of Representations; etc............................................61
SECTION 11.2 Notices..........................................................................61
SECTION 11.3 Headings.........................................................................62
SECTION 11.4 Severability.....................................................................62
SECTION 11.5 Entire Agreement.................................................................63
SECTION 11.6 Assignment.......................................................................63
SECTION 11.7 Parties in Interest..............................................................63
SECTION 11.8 Governing Law....................................................................63
SECTION 11.9 Enforcement of the Agreement.....................................................63
SECTION 11.10 Counterparts.....................................................................63
SECTION 11.11 Disclosure Supplements...........................................................64
ARTICLE 12 DEFINITIONS.........................................................................................64
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION dated as of
February 28, 1997 among VIALOG CORPORATION, a Massachusetts corporation
("VIALOG"), CDC Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of VIALOG ("VIALOG Merger Subsidiary"), COMMUNICATION DEVELOPMENT
CORPORATION, a Connecticut corporation (the "Company"), and PATTI R. BISBANO and
MAURYA SUDA (the "Principal Stockholders").
PREAMBLE
1. The Company and VIALOG Merger Subsidiary have agreed to carry out
a business combination transaction upon the terms and subject to the conditions
of this Agreement and in accordance with the Connecticut Business Corporation
Act (the "BCA") and the General Corporation Law of the State of Delaware (the
"DBCL"), pursuant to which the VIALOG Merger Subsidiary will merge with and into
the Company (the "Merger") and the Stockholders and other Persons holding equity
interests in the Company will convert their holdings into cash and shares of
common stock, $.01 par value per share of VIALOG ("VIALOG Stock"), determined in
accordance with Section 2.1(a).
2. Each of the Other Participating Companies will enter into an
agreement and plan of reorganization or stock or asset purchase agreement with
VIALOG and a wholly-owned Subsidiary of VIALOG (each a "Participating
Agreement") whereby, contemporaneously with the Merger, each Other Participating
Company and a Subsidiary of VIALOG will carry out a business combination
transaction pursuant to which each such Subsidiary will merge with and into one
of the Other Participating Companies or VIALOG or such Subsidiary shall purchase
stock or assets of such Other Participating Companies and stockholders of and
other Persons holding equity interests in the Other Participating Companies will
convert their holdings into cash and shares of VIALOG Stock determined in
accordance with provisions substantially similar to those in Section 2.1(a).
3. Pursuant to the Underwriting Agreement, VIALOG will issue and sell
VIALOG Stock in a firm commitment public offering registered on Form S-1 in
accordance with the requirements of the Securities Act (the "Public Offering").
4. The Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement and the Merger as a
convenient means to accomplish a transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code") and a convenient means to
cause all of the Stockholders to transfer their capital stock of the Company to
VIALOG, has approved this Agreement, the Merger and the Transactions and
1
<PAGE>
has recommended approval and adoption of this Agreement, the Merger and the
Transactions by the Stockholders.
5. The Board of Directors of VIALOG has approved and adopted this
Agreement and has approved the Merger and the Transactions as the sole
stockholder of VIALOG Merger Subsidiary.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE
1
THE MERGER
1.1 The Merger.
----------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the BCA and the DBCL at the Effective Time the
VIALOG Merger Subsidiary will be merged with and into the Company. As a result
of the Merger, the separate existence of the VIALOG Merger Subsidiary will cease
and the Company will continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(b) The Company represents that, at a meeting duly called and held
at which a quorum was present and acting throughout, its Board of Directors has
unanimously (i) determined that this Agreement, the Merger and the Transactions
are fair to and in the best interest of Stockholders, (ii) approved this
Agreement, the Merger and the Transactions, which approval satisfies in full the
requirements of the BCA and Connecticut law, and (iii) resolved to recommend
approval and adoption by the Stockholders of this Agreement, the Merger and the
Transactions to the extent required and in a manner permitted by Applicable Law.
1.2 Action by Stockholders.
----------------------
(a) The Company, acting through its Board of Directors, will, in
accordance with Applicable Law and its Organizational Documents: (i) as soon as
practicable, duly call, give notice of, convene and hold a special meeting of,
or to the extent permitted by Applicable Law submit for approval and adoption by
written consent by, the Stockholders for the purpose of adopting and approving
this Agreement, the Merger and the Transactions (the "Special Meeting"); (ii)
include in any proxy statement the conclusion and recommendation of the Board of
Directors to the effect that the Board of Directors, having determined that this
Agreement, the
2
<PAGE>
Merger and the Transactions are in the best interests of the Company and the
Stockholders, has approved this Agreement, the Merger and the Transactions and
recommends that the Stockholders vote in favor of the approval and adoption of
this Agreement, the Merger and the Transactions; and (iii) use its reasonable
best efforts to obtain the necessary approval and adoption of this Agreement,
the Merger and the Transactions by the Stockholders.
(b) VIALOG Merger Subsidiary, as soon as practicable, will submit
to VIALOG this Agreement, the Merger and the Transactions for approval and
adoption by written consent as the sole stockholder of VIALOG Merger Subsidiary,
and VIALOG will take all additional actions as such sole stockholder necessary
to adopt and approve this Agreement, the Merger and the Transactions.
(c) The approvals required by Sections 1.2(a) and (b) will occur
prior to the initial filing of the Registration Statement, which is expected to
occur on or before February 28, 1997.
1.3 Closing. Unless this Agreement is terminated pursuant to Section 8.1
-------
and the Merger and the Transactions have been abandoned, and subject to the
satisfaction or, if possible, waiver of conditions set forth in Article 7 other
than Section 7.1(d), the closing of the Merger (the "Merger Closing") will take
place, one day prior to the Effective Date, at the offices of Mirick, O'Connell,
DeMallie & Lougee, LLP, unless another date, time or place is agreed to in
writing by the Parties to this Agreement and each Participating Agreement.
Counsel for the Parties to this Agreement and each Participating Agreement will
hold a pre-closing two days prior to the Effective Date, at the offices of
Mirick, O'Connell, DeMallie & Lougee, LLP, for the purpose of finalizing all
documents to be signed at the Merger Closing. All certificates, legal opinions
and other instruments required to be delivered in order to satisfy the
conditions to the obligations of the Parties to effect the Merger set forth in
Article 7 below shall be delivered at the Merger Closing, and each such
certificate, legal opinion or other instrument shall, except to the extent
otherwise provided in Article 7, be dated as of the anticipated Public Offering
Closing Date, which is expected to occur five business days following the date
of Merger Closing. All such certificates, legal opinions and other instruments
shall be held in escrow by Mirick, O'Connell, DeMallie & Lougee, LLP between the
Merger Closing and the Effective Time and shall be released from escrow
concurrently with the Effective Time on the Public Offering Closing Date. In the
event that the Effective Time and Public Offering Closing Date occur on a date
other than the fifth business day following the Merger Closing, all such
certificates, legal opinions and instruments shall be re-dated as of the Public
Offering Closing Date. The Company, the Principal Stockholder, VIALOG and VIALOG
Merger Subsidiary shall use their respective best efforts to cause each of the
conditions set forth in Article 7 reasonably capable of being satisfied prior to
the Merger Closing, including, without limitation, the conditions set forth in
Sections 7.1(a), (c), (e), (f), (g) and (h), to be satisfied prior to the Merger
Closing.
1.4 Effective Time. On the Public Offering Closing Date, the Parties will
--------------
cause the Merger to be consummated by filing articles or certificates of merger,
as the case may be, with the Secretary of State of Connecticut and with the
Secretary of State of Delaware, and by making any related filings required under
the BCA and the DBCL. The Merger will become effective at
3
<PAGE>
such time (but not prior to the Public Offering Closing Date) as such articles
or certificates, as the case may be, are duly filed with the Secretary of State
of Connecticut and the Secretary of State of Delaware, respectively (the
"Effective Time)".
1.5 Effect of the Merger. From and after the Effective Time, the
--------------------
Surviving Corporation will possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and VIALOG Merger Subsidiary, and the Merger will otherwise have the
effects, all as provided under the BCA and the DBCL.
1.6 Certificate of Incorporation. From and after the Effective Time, the
----------------------------
Certificate of Incorporation of the Surviving Corporation will be substantially
in the form attached as Exhibit 1.6 until amended in accordance with Applicable
Law, and the name of the Surviving Corporation will be the name of the Company
or such other name as VIALOG may elect.
1.7 By-laws. From and after the Effective Time, the by-laws of the
-------
Surviving Corporation will be in the form attached as Exhibit 1.7, until amended
in accordance with Applicable Law.
1.8 Directors and Officers. From and after the Effective Time, until
----------------------
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law (a) the directors of
VIALOG Merger Subsidiary at the Effective Time will be the directors of the
Surviving Corporation and (b) the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation.
ARTICLE
2
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of VIALOG Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each share of common stock, no par value of the Company (the
"Company Stock") issued and outstanding or issuable upon the election to
exercise or convert outstanding Option Securities and Convertible Securities
immediately prior to the Effective Time (other than any shares of Company Stock
to be canceled pursuant to Section 2.1(b)) will be converted into the right to
receive shares of VIALOG Stock (the "Stock Merger Consideration") and cash (the
"Cash Merger Consideration") (together with the Stock Merger Consideration, the
"Merger Consideration") pursuant to the following formula:
Aggregate Merger Consideration = $2,190,000
Aggregate Stock Merger Consideration = 95,217 shares
4
<PAGE>
Aggregate Cash Merger Consideration = $1,095,005
Merger Consideration = Aggregate Merger Consideration
------------------------------
Aggregate Equity
Stock Merger Consideration = Aggregate Stock Merger Consideration
------------------------------------
Aggregate Equity
Cash Merger Consideration = Aggregate Cash Merger Consideration
-----------------------------------
Aggregate Equity
At the Effective Time, all issued and outstanding shares of Company Stock (the
"Shares") will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and certificates previously evidencing any such
Shares (each a "Certificate") will thereafter represent the right to receive,
upon the surrender of such Certificate in accordance with the provisions of
Section 2.2, the number of Shares represented by such Certificate multiplied by
(i) the Stock Merger Consideration plus (ii) the Cash Merger Consideration. A
holder of more than one Certificate will have the right to receive the Stock
Merger Consideration and the Cash Merger Consideration multiplied by the number
of Shares represented by all such Certificates (the "Exchange Merger
Consideration"). The holders of all Certificates may allocate the Stock Merger
Consideration and Cash Merger Consideration disproportionately among all such
holders; provided, however, that (i) a Schedule 2.1 setting forth the allocation
of Stock Merger Consideration and Cash Merger Consideration among the holders of
all Certificates is completed and consented to in writing by all such holders
contemporaneously with the execution and delivery of this Agreement, all in such
form as required by VIALOG; (ii) for each Share, the total of (A) the allocated
Stock Merger Consideration multiplied by the Offering Price, plus (B) the
allocated Cash Merger Consideration, must equal the Merger Consideration, (iii)
the total allocation of the Stock Merger Consideration must equal the Aggregate
Stock Merger Consideration, and (iv) the total allocation of the Cash Merger
Consideration must equal the Aggregate Cash Merger Consideration. Any such
election to allocate the Stock Merger Consideration and Cash Merger
Consideration disproportionately may not thereafter be withdrawn or amended. The
holders of Certificates previously evidencing Shares outstanding immediately
prior to the Effective Time will cease to have any rights with respect to such
Shares except as otherwise provided in this Agreement or by Applicable Law.
(b) Each Share held in the treasury of the Company or by any
direct or indirect wholly-owned Subsidiary of the Company immediately prior to
the Effective Time will automatically be canceled and extinguished without
conversion, and no payment will be made with respect to such Share.
(c) Each share of common stock of VIALOG Merger Subsidiary
outstanding immediately prior to the Effective Time will be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so
5
<PAGE>
converted and will constitute the only outstanding shares of capital stock of
the Surviving Corporation.
(d) In lieu of issuing fractional shares, VIALOG may convert a
holder's right to receive shares of VIALOG Stock pursuant to Section 2.1(a) into
a right to receive the highest whole number of shares of VIALOG Stock
constituting the non-cash portion of the Exchange Merger Consideration plus cash
equal to the fraction of a share of VIALOG Stock to which the holder would
otherwise be entitled multiplied by the Offering Price, and the Exchange Merger
Consideration to which a holder is entitled will be deemed to be such number of
shares of VIALOG Stock plus such cash plus the cash portion of the Exchange
Merger Consideration.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Prior to the Merger Closing, VIALOG will deposit or cause to
be deposited with a bank, trust company or other Entity designated by VIALOG
(the "Exchange Agent"), for the benefit of the holders of Shares for exchange in
accordance with this Article, through the Exchange Agent, the stock portion of
the Merger Consideration multiplied by the number of all Shares issued and
outstanding immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 2.1(b)) (said number of Shares less Shares to be
canceled to be referred to as the "Net Shares"), and within one (1) business day
of the Public Offering Closing Date, a check or checks representing next day
funds from the Underwriter in (or, pursuant to instructions reasonably
satisfactory to the Exchange Agent, wire transfer of) an amount equal to the
Cash Merger Consideration multiplied by the number of Net Shares plus cash in an
amount sufficient to make payment for fractional shares, in exchange for all of
the outstanding Shares (collectively the "Exchange Fund"). The Exchange Agent
will, pursuant to irrevocable instructions from VIALOG, deliver the Exchange
Merger Consideration to be issued pursuant to Section 2.1(a) out of the Exchange
Fund to holders of Shares upon transmittal of Certificates for exchange as
provided therein and in Section 2.2(b). The Exchange Fund will not be used for
any other purposes. Any interest, dividends or other income earned by the
Exchange Fund will be for the account of VIALOG.
(b) As soon as reasonably practicable after the date as of which
the Stockholders act to approve and adopt this Agreement, the Merger and the
Transactions, the Company will notify VIALOG thereof and VIALOG will promptly
instruct the Exchange Agent to deliver to the Stockholders, for the purpose of
accepting Certificates for exchange on the terms provided in Section 2.1(a) at
the Effective Time, and subject to withdrawal of Certificates by their holders
prior thereto, (i) a letter of transmittal (which will specify that delivery
will be effected, and risk of loss and title to the Certificates will pass, only
upon proper delivery of the Certificates to the Exchange Agent and will be in
such form and have such other provisions as VIALOG may reasonably specify), and
(ii) instructions to effect the surrender of the Certificates in exchange for
the Exchange Merger Consideration. Subject to the occurrence of the Effective
Time, upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by VIALOG together with such
letter of transmittal, duly executed, and such other customary documents as may
be reasonably required pursuant to such instructions (collectively, the
"Transmittal Documents"), the holder of such Certificate will
6
<PAGE>
become entitled to receive, as of the Effective Time, in exchange therefor the
Exchange Merger Consideration which such holder has the right to receive
pursuant to Sections 2.1(a) and 2.1(d), and the Certificate so surrendered will
be canceled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, the Exchange Merger
Consideration may be issued and paid in accordance with this Article to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents reasonably required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. The Exchange Merger Consideration will be delivered by the
Exchange Agent within two business days (or such greater period not to exceed
five business days as may be customarily required by the Exchange Agent)
following the later of (i) two business days after the Public Offering Closing
Date, or (ii) surrender of a Certificate and the related Transmittal Documents,
and cash payments for fractional shares and the cash portion of the Exchange
Merger Consideration may be made by check (or, pursuant to instructions
reasonably satisfactory to the Exchange Agent, by wire transfer). No interest
will be payable on the Exchange Merger Consideration regardless of any delay in
making payments. Until surrendered as contemplated by this Section, each
Certificate will be deemed at any time after the Effective Time to evidence only
the right to receive, upon such surrender, the Exchange Merger Consideration,
without interest.
(c) If any Certificate is lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and subject to such other conditions as VIALOG may
impose, the Surviving Corporation will issue in exchange for such lost, stolen
or destroyed Certificate the Exchange Merger Consideration deliverable in
respect thereof as determined in accordance with Sections 2.1(a) and 2.1(d).
VIALOG may, in its discretion and as a condition precedent to authorizing the
issuance thereof by the Surviving Corporation, require the owner of such lost,
stolen or destroyed Certificate to provide a bond or other surety to VIALOG and
the Surviving Corporation in such sum as VIALOG may reasonably direct as
indemnity against any claim that may be made against VIALOG, VIALOG Merger
Subsidiary or the Surviving Corporation (and their Affiliates) with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed
to the holders of the Company Stock for thirty (30) days after the Effective
Time will be delivered to VIALOG upon demand by VIALOG, and any holders of
Certificates who have not theretofore complied with this Article will thereafter
look only to VIALOG for the Exchange Merger Consideration to which they are
entitled pursuant to this Article.
(e) None of VIALOG, VIALOG Merger Subsidiary, the Company or the
Surviving Corporation will be liable to any holder of Shares for any shares of
VIALOG Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Each of VIALOG, the Surviving Corporation and the Exchange
Agent will be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts as
VIALOG, the Surviving Corporation or the
7
<PAGE>
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by VIALOG, the Surviving
Corporation or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by VIALOG, the
Surviving Corporation or the Exchange Agent.
2.3 Stock Transfer Books. At the Effective Time, the stock transfer books
--------------------
of the Company will be closed, and there will be no further registration of
transfers of Shares thereafter on the records of the Company other than to
VIALOG. On or after the Effective Time, any Certificate presented to the
Exchange Agent or the Surviving Corporation will be converted into the Exchange
Merger Consideration.
2.4 Option Securities and Convertible Securities; Payment Rights. At the
------------------------------------------------------------
Effective Time, (a) each outstanding Option Security and each outstanding
Convertible Security exercisable or convertible to purchase Shares as of
immediately prior to the Effective Time, will be canceled and the holder thereof
will be entitled to receive, and will receive, upon payment of the consideration
required to exercise or convert, or debit of such consideration against the
Merger Consideration otherwise due, and termination of such holder's rights to
exercise or convert, as the case may be, all other Option Securities or
Convertible Securities issued to such holder, Merger Consideration in the form
of shares of VIALOG Stock issuable and cash payable with respect to the number
of Shares issuable pursuant to such Option Security or Convertible Security so
exercised or converted, as the case may be, as provided in Section 2.1(a), plus
cash in lieu of receipt of a fractional share in an amount determined as
provided in Section 2.1(d), and (b) each Option Security outstanding not then
exercisable or exercised and the conversion rights of each Convertible Security
outstanding not then convertible or converted will be canceled.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to, and agrees with,
VIALOG and VIALOG Merger Subsidiary as follows:
3.1 Organization and Business; Power and Authority; Effect of
---------------------------------------------------------
Transaction.
-----------
(a) The Company:
(i) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation as set forth in Section 3.1(a) of the
Disclosure Schedule,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties and to
conduct its business as
8
<PAGE>
now conducted and as presently proposed to be conducted,
and has in full force and effect all Governmental
Authorizations and Private Authorizations and has made
all Governmental Filings, to the extent required for
such ownership and lease of its property and conduct of
its business, and
(iii) has duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set
forth in Section 3.1(a) of the Disclosure Schedule) in
which the character of its property or the nature of its
business or operations requires such qualification or
authorization, except to the extent the failure so to
qualify or to maintain such authorizations would not
have an Adverse Effect.
(b) The Company has all requisite power and authority (corporate
and other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions. The execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the Stockholders). This
Agreement has been duly executed and delivered by the Company and constitutes,
and each Collateral Document executed or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions, when executed and
delivered by the Company or an Affiliate of the Company will constitute, legal,
valid and binding obligations of the Company or such Affiliate, enforceable in
accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity. The affirmative vote or action by
written consent of 51% of the votes the holders of the outstanding shares of the
Company are entitled to cast is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve this Agreement,
the Merger and the Transactions under Applicable Law and the Company's
Organizational Documents.
(c) Except as set forth in Section 3.1(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation
of, or constitute a default under, any Applicable Law on
the part of the Company or any Subsidiary or will
conflict with, or result in a breach or violation of, or
constitute a default under, or permit the
9
<PAGE>
acceleration of any obligation or liability in, or but
for any requirement of giving of notice or passage of
time or both would constitute such a conflict with,
breach or violation of, or default under, or permit any
such acceleration in, any Contractual Obligation of the
Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of
any Lien (except to the extent set forth in Section
3.1(c) of the Disclosure Schedule) upon any property now
owned or leased by the Company or any such other party,
or
(iii) will require any Governmental Authorization or
Governmental Filing or Private Authorization, except for
filing requirements under Applicable Law in connection
with the Merger and the Transactions and as the
Securities Act and applicable state securities laws may
apply to compliance by the Company with the provisions
of this Agreement relating to the Public Offering and
registration rights provided for hereunder and except
pursuant to the HSR Act. (if applicable).
(d) The Company does not have any Subsidiaries other than those
listed on Section 3.1(d) of the Disclosure Schedule. Each Subsidiary so listed
is wholly-owned, is a corporation which is duly organized, validly existing and
in good standing under the laws of the respective state of incorporation set
forth opposite its name on Section 3.1(d) of the Disclosure Schedule, and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown in Section 3.1(d) of the Disclosure Schedule) in which
the character of its property or the nature of its business or operations
requires such qualification or authorization, with full power and authority
(corporate and other) to carry on the business in which it is engaged. Each
Subsidiary has in full force and effect all Governmental Authorizations and
Private Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business. The Company owns all of the outstanding capital stock (as shown on
Section 3.1(d) of the Disclosure Schedule) of each Subsidiary, free and clear of
all Liens (except to the extent set forth in Section 3.1(d) of the Disclosure
Schedule), and all such stock has been duly authorized and validly issued and is
fully paid and non-assessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings with respect to any of
the foregoing, of any nature whatsoever relating to the authorized and unissued
or the outstanding capital stock of any Subsidiary.
3.2 Financial and Other Information.
-------------------------------
(a) The Company has furnished to VIALOG copies of the financial
statements of the Company and its Subsidiaries listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements,
including in each case the notes thereto, have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, do not
10
<PAGE>
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make any
statements contained therein not misleading, and fairly present the financial
condition and results of operations of the Company and its Subsidiaries, on the
bases therein stated, as of the respective dates thereof, and for the respective
periods covered thereby subject, in the case of unaudited financial statements
to normal nonmaterial year-end audit adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements,
this Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or any of the Stockholders pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Stockholders pursuant hereto or thereto or to consummate the
Merger and the Transactions, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated in such document by its terms or necessary in order to make the
statements contained herein or therein not misleading and all such Collateral
Documents are and will be true, correct and complete in all material respects;
provided that:
(i) with respect to projections contained or referred to in
the Disclosure Schedule, the Company represents and
warrants only that such projections were prepared in
good faith on the basis of the past business of the
Company and other information and assumptions which the
Company and the Principal Stockholder believe to be
reasonable,
(ii) each such Collateral Document will not be deemed
misleading by virtue of the absence of factual
recitations or references not germane thereto and
necessary to the purpose thereof, and
(iii) responses to due diligence requests will not be subject
to this Section 3.2(b) except to the extent that, to the
Company's knowledge, such response is materially
misleading.
(c) The Company does not own any capital stock or equity or
proprietary interest in any other Entity or enterprise, however organized and
however such interest may be denominated or evidenced, except as set forth in
Sections 3.1(d) or 3.2(c) of the Disclosure Schedule. None of the Entities, if
any, so set forth in Section 3.2(c) of the Disclosure Schedule is a Subsidiary
of the Company except as so set forth. The Company owns all of the outstanding
capital stock or equity or proprietary interests (as shown on Section 3.2(c) of
the Disclosure Schedule) of each such Entity or other enterprise, free and clear
of all Liens (except to the extent set forth in Section 3.2(c) of the Disclosure
Schedule), and all of such stock or equity or proprietary interests have been
duly authorized and validly issued and are fully paid and non-assessable. There
are no outstanding Option Securities or Convertible Securities, or agreements or
understandings with respect to any of the foregoing, of any nature whatsoever,
except as described in Section 3.2(c) of the Disclosure Schedule.
11
<PAGE>
3.3 Changes in Condition. Since the date of the most recent financial
--------------------
statements forming part of the Financial Statements, except to the extent
specifically described in Section 3.3 of the Disclosure Schedule, there has been
no Adverse Change in the Company or the Company and its Subsidiaries taken as a
whole. There is no Event known to the Company which Adversely Affects, or in the
future might (so far as the Company or the Principal Stockholder can now
reasonably foresee) Adversely Affect, the Company or the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto except for changes in
general economic conditions and to the extent set forth in Section 3.3 of the
Disclosure Schedule.
3.4 Liabilities. At the date of the most recent balance sheet forming
-----------
part of the Financial Statements, neither the Company nor any Subsidiary had any
obligations or liabilities, past, present or deferred, accrued or unaccrued,
fixed, absolute, contingent or other, except as disclosed in such balance sheet,
or the notes thereto, and since such date neither the Company nor any Subsidiary
has incurred any such obligations or liabilities, other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, which do not and, to the Company's
knowledge, will not, in the aggregate, Adversely Affect the Company or the
Company and its Subsidiaries taken as a whole except to the extent set forth in
Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business or as disclosed in the most recent balance sheet, or the notes thereto,
forming part of the Financial Statements or in Section 3.4 of the Disclosure
Schedule.
3.5 Title to Properties; Leases.
---------------------------
(a) Each of the Company and its Subsidiaries has good legal and
insurable title, with respect to all real property owned or leased (in fee
simple if owned and leasehold if leased) and marketable title if owned (in fee
simple), if any, reflected as an asset on the most recent balance sheet forming
part of the Financial Statements, or held by the Company or any of its
Subsidiaries for use in its business if not so reflected, and good indefeasible
and merchantable title to all other assets, tangible and intangible (excluding
leased property), reflected on such balance sheet, or held by the Company or any
of its Subsidiaries for use in its business if not so reflected, or purported to
have been acquired by the Company or any of its Subsidiaries since such date,
except inventory sold or depleted, or property, plant and other equipment used
up or retired, since such date, in each case in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries, free and
clear of all Liens, except such as are reflected in the most recent balance
sheet, or the notes thereto, forming part of the Financial Statements or set
forth in Section 3.5(a) of the Disclosure Schedule. Except for financing
statements evidencing Liens referred to in the preceding sentence (a true,
correct and complete list and description of which is set forth in Section
3.5(a) of the Disclosure Schedule), to the
12
<PAGE>
Company's knowledge, no financing statements under the Uniform Commercial Code
and no other filing which names the Company or any of its Subsidiaries as debtor
or which covers or purports to cover any of the property of the Company or any
of its Subsidiaries is on file in any state or other jurisdiction, and neither
the Company nor any Subsidiary has signed or agreed to sign any such financing
statement or filing or any agreement authorizing any secured party thereunder to
file any such financing statement or filing. Each Lease or other occupancy or
other agreement under which the Company or any of its Subsidiaries holds real or
personal property has been duly authorized, executed and delivered by the
Company or Subsidiary, as the case may be, and, to the Company's knowledge, by
each of the parties thereto. Each such Lease is a legal, valid and binding
obligation of the Company or a Subsidiary, as the case may be, and, to the
Company's knowledge, of each other party thereto, enforceable in accordance with
its terms. Each of the Company and its Subsidiaries has a valid leasehold
interest in and enjoys peaceful and undisturbed possession under all Leases
pursuant to which it holds any real property or tangible personal property, none
of which contains any provision which would impair the Company's ability to use
such property as it is currently used by the Company, except as described in
Section 3.5(a) of the Disclosure Schedule. All of such Leases are valid and
subsisting and in full force and effect. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any other party thereto, is in
default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in any such Lease.
(b) Section 3.5(b) of the Disclosure Schedule contains a true,
correct and complete description of all real estate owned or leased by the
Company or any of its Subsidiaries and all Leases and an identification of all
material items of fixed assets and machinery and equipment. None of the fixed
assets and machinery and equipment is subject to contracts of sale, and none is
held by the Company or any of its Subsidiaries as lessee or as conditional sales
venue under any Lease or conditional sales contract and none is subject to any
title retention agreement, except as set forth in Section 3.5(b) of the
Disclosure Schedule. The real property (other than land), fixtures, fixed assets
and machinery and equipment are in a state of good repair and maintenance and
are in good operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure
Schedule:
(i) all real property owned or leased by the Company or any
of its Subsidiaries conforms to and complies with all
applicable title covenants, conditions, restrictions and
reservations and all Environmental Laws and all
applicable zoning, wetlands, land use and other
Applicable Law, and
(ii) neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any landlord, tenant or other
occupant or user of any such real property, has used
such real property for the storage or disposal of
Hazardous Materials or engaged in the business of
storing or disposing of Hazardous Materials, except for
use in the ordinary course of business of the type
conducted by the Company.
13
<PAGE>
3.6 Compliance with Private Authorizations. Section 3.6 of the Disclosure
--------------------------------------
Schedule sets forth a true, correct and complete list and description of each
Private Authorization which individually is material to the Company or the
Company and its Subsidiaries taken as a whole, all of which are in full force
and effect. Each of the Company and each Subsidiary has obtained all Private
Authorizations which are necessary for the ownership by the Company or each
Subsidiary of its properties and the conduct of its business as now conducted or
as presently proposed to be conducted or which, if not obtained and maintained,
could, singly or in the aggregate, Adversely Affect the Company or the Company
and its Subsidiaries taken as a whole. Neither the Company nor any Subsidiary is
in breach or violation of, or is in default in the performance, observance or
fulfillment of, any Private Authorization, and no Event exists or has occurred,
which constitutes, or but for any requirement of giving of notice or passage of
time or both would constitute, such a breach, violation default, under any
Contractual Obligation or Private Authorization, except for such defaults,
breaches or violations, as do not and, to the Company's knowledge, will not have
in the aggregate any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto or to consummate the
Merger and the Transactions. No Private Authorization is the subject of any
pending or, to the Company's knowledge, threatened attack, revocation or
termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
--------------------------------------------------------------
(a) Section 3.7(a) of the Disclosure Schedule contains a
description of:
(i) all Legal Actions which are pending or, other than those
finally adjudicated or settled on or before December 31,
1995, in which the Company or any of its Subsidiaries,
or any of its officers or directors, is, or at any time
since its organization has been, engaged, or which
involves, or at any time during such period involved,
the business, operations or properties of the Company or
any of its Subsidiaries or, to the Company's knowledge,
which is threatened or contemplated against, or in any
other manner relating Adversely to, the Company or any
of its Subsidiaries or the business, operations or
properties, or the officers or directors, or any of them
in connection therewith; and
(ii) each Governmental Authorization to which the Company or
any Subsidiary is subject and which relates to the
business, operations, properties, prospects, condition
(financial or other), or results of operations of the
Company or the Company and its Subsidiaries taken as a
whole, all of which are in full force and effect.
(b) Each of the Company and each of its Subsidiaries has obtained
all Governmental Authorizations which are necessary for the ownership or uses of
its properties and the conduct of its business as now conducted or as presently
proposed to be conducted by the
14
<PAGE>
Company or which, if not obtained and maintained, could singly or in the
aggregate, have any Adverse Effect on the Company or the Company and its
Subsidiaries taken as a whole. No Governmental Authorization is the subject of
any pending or, to the Company's knowledge, threatened attack, revocation or
termination. Neither the Company nor any Subsidiary nor any officer or director
(in connection with the business, operations and properties of the Company or
any Subsidiary) is or at any time since January 1, 1991 has been, or is or has
during such time been charged with, or to the knowledge of the Company, is
threatened or under investigation with respect to any material breach or
violation of, or in default in the performance, observance or fulfillment of,
any Governmental Authorization or any Applicable Law, and no Event exists or has
occurred, which constitutes, or but for any requirement of giving of notice or
passage of time or both would constitute, such a breach, violation or default,
under
(i) any Governmental Authorization or any Applicable Law,
except for such breaches, violations or defaults as do
not and, to the Company's knowledge, will not have in
the aggregate any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or the
ability of the Company to perform any of the obligations
set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or
thereto, or to consummate the Merger and the
Transactions, or
(ii) any requirement of any insurance carrier, applicable to
its business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in
Sections 3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and
matters set forth in the Disclosure Schedule, individually and in the aggregate,
if adversely determined against the Company or any Subsidiary, will not
Adversely Affect the Company or the Company and its Subsidiaries taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions.
3.8 Intangible Assets.
-----------------
(a) Each of the Company and each Subsidiary owns or possesses or
otherwise has the right to use all Governmental Authorizations and other
Intangible Assets necessary for the present and planned future conduct of its
business, without any known conflict with the rights of others. The present and
planned future conduct of business by the Company and each Subsidiary is not
dependent upon any one or more, or all, of such Governmental Authorizations and
other Intangible Assets or rights with respect to any of the foregoing, except
as set forth in Section 3.8(a) of the Disclosure Schedule.
(b) Section 3.8(b) of the Disclosure Schedule sets forth a true,
correct and complete description of all of such Governmental Authorizations and
other Intangible Assets or
15
<PAGE>
rights with respect thereto, including without limitation the nature of the
Company's and each Subsidiary's interest in each and the extent to which the
same have been duly registered in the offices as indicated therein.
3.9 Related Transactions. Section 3.9 of the Disclosure Schedule sets
--------------------
forth a true, correct and complete description of any Contractual Obligation or
transaction, not fully discharged or consummated, as the case may be, on or
before the beginning of the Company's current fiscal year, between the Company
or any of its Subsidiaries and any of its officers, directors, employees,
stockholders, or any Affiliate of any thereof (other than reasonable
compensation for services as officers, directors and employees and reimbursement
for out-of-pocket expenses reasonably incurred in support of the Company's
business), now existing or which, at any time since its organization, existed or
occurred, including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any officer, director, stockholder or
employee, or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
3.10 Insurance.
---------
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance
policies maintained by the Company or any Subsidiary and includes insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention.
(b) Neither the Company nor any Subsidiary is in breach or
violation of or in default under any such policy, and all premiums due thereon
have been paid, and each such policy or a comparable replacement policy will
continue to be in force and effect up to and including the Public Offering
Closing Date. The insurance policies so listed and identified are of a nature
and scope and in amounts sufficient to prevent the Company or any Subsidiary
from becoming a coinsurer within the terms of such policies. Except as set forth
in Section 3.10(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has, within the past five (5) years, been refused insurance by any
insurance carrier to which it has applied for insurance.
3.11 Tax Matters.
-----------
(a) Each of the Company and each Subsidiary has in accordance with
all Applicable Laws filed all Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Returns and all other governmental
charges and assessments received to date. The Tax Returns of the Company and
each Subsidiary have been prepared in accordance with all Applicable Laws and
generally accepted principles applicable to taxation consistently applied.
16
<PAGE>
All Taxes which the Company and each Subsidiary are required by law to withhold
and collect have been duly withheld and collected and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. Neither
the Company nor any Subsidiary has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of the
Company or any Subsidiary for the fiscal year prior to and including the most
recent fiscal year. Adequate provision has been made on the most recent balance
sheet forming part of the Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other, and to the knowledge of the Company there are no transactions
or matters or any basis which might or could result in additional Taxes of any
nature to the Company or any Subsidiary for which an adequate reserve has not
been provided on such balance sheet. Each of the Company and each Subsidiary has
at all times been taxable as a Subchapter C corporation under the Code, except
as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. Neither
the Company nor any Subsidiary has ever been a member of any consolidated group
(other than exclusively with the Company and its Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes
which have become due pursuant to its Returns and has paid all installments (to
the extent required to avoid material underpayment penalties) of estimated Taxes
due and payable.
(c) From the end of its most recent fiscal year to the date hereof
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business with
respect to current operations or property presently owned.
(d) The information shown on the federal income Tax Returns of the
Company and its Subsidiaries (true, correct and complete copies of which have
been furnished by the Company to VIALOG) is true, correct and complete and
fairly and accurately reflects the information purported to be shown. Federal
and state income Tax Returns of the Company and its Subsidiaries have been
audited by the IRS or applicable state Authority for the taxable periods set
forth in Section 3.11(d) of the Disclosure Schedules, and neither the Company
nor any Subsidiary has been notified regarding any pending audit, except as
shown in Section 3.11(d) of the Disclosure Schedule.
(e) Neither the Company nor any Subsidiary is a party to any tax
sharing agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
(f) Neither the Company nor any Subsidiary has ever (i) filed a
consent under Section 341(f) of the Code concerning collapsible corporations or
(ii) undergone an "ownership change" within the meaning of Section 382(g) of the
Code, except as set forth in Section 3.11(f) of the Disclosure Schedule.
17
<PAGE>
3.12 Employee Retirement Income Security Act of 1974.
-----------------------------------------------
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list
of all Plans and Benefit Arrangements maintained by the Company and any of its
Subsidiaries (which for purposes of this Section 3.12 will include any ERISA
Affiliate with respect to any Plan subject to Title IV of ERISA). As to all such
Plans and Benefit Arrangements, and except as disclosed in such Section 3.12(a)
of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply currently,
and have complied in the past, in all material
respects both as to form and operation, with their
terms and with all Applicable Laws, and neither the
Company nor any of its Subsidiaries has received any
outstanding notice from any Authority questioning or
challenging such compliance,
(ii) all necessary governmental approvals for each Plan
and Benefit Arrangement have been obtained; the
Internal Revenue Service has issued a favorable
determination as to the tax qualified status of each
Plan intended to comply with section 401(a) of the
Code and each amendment thereto, and a recognition of
exemption from federal income taxation under Section
501(a) of the Code of each Plan which constitutes a
funded welfare plan as defined in Section 3(1) of
ERISA; and nothing has occurred since the date of
each such determination or recognition that would
adversely affect such qualification.
(iii) no Plan which is subject to Part 3 of Subtitle B of
Title 1 of ERISA or Section 412 of the Code had an
accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most
recently completed fiscal year of such Plan,
(iv) there are no "prohibited transactions" (as described
in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Plan for which the Company or any
of its Subsidiaries has any liability, nor are any of
the assets of any Plan invested in employer
securities or employer real property,
(v) no Plan is subject to Title IV of ERISA, or if
subject, there have been no "reportable events" (as
described in Section 4043 of ERISA) as to which there
is any material risk of termination of such Plan,
(vi) no material liability to the PBGC has been or is
expected by the Company to be incurred by the Company
or any of its Subsidiaries with respect to any Plan,
and there has been no event or condition
18
<PAGE>
which presents a material risk of termination of any
Plan by the PBGC,
(vii) with respect to each Plan subject to Title IV of
ERISA, the amount for which Company or any of its
Subsidiaries would be liable pursuant to the
provisions of Sections 4062, 4063 or 4064 of ERISA
would be zero if such Plans terminated on the date of
this Agreement,
(viii) no notice of intent to terminate a Plan has been
filed with, nor has any Plan been terminated pursuant
to the provisions of Section 4041 of ERISA,
(ix) the PBGC has not instituted proceedings to terminate
(or appointed a trustee to administer) a Plan and no
event has occurred or condition exists which might
constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any such
Plan.
(x) no Plan or Benefit Arrangement covers any employee or
former employee of the Company or any of its
Subsidiaries that could give rise to the payment of
any amount that would not be deductible pursuant to
the terms of section 280G of the Code,
(xi) there are no Claims (other than routine claims for
benefits) pending or threatened involving any Plan or
Benefit Arrangement or any of the assets thereof,
(xii) except as set forth in Section 3.12(a) of the
Disclosure Schedule (which entry, if applicable, will
indicate the present value of accumulated plan
liabilities calculated in a manner consistent with
FAS 106 and the actual annual expense for such
benefits for each of the last two (2) years) and
pursuant to the provisions of COBRA, neither the
Company nor any of its Subsidiaries maintains any
Plan that provides benefits described in Section 3(1)
of ERISA to any former employees or retirees of the
Company or any of its Subsidiaries,
(xiii) all reports, returns and similar items required to be
filed with any Authority or distributed to employees
and/or Plan participants in connection with the
maintenance or operation of any Plan or Benefit
Arrangement have been duly and timely filed and
distributed, and there have been no acts or omissions
by the Company or any of its Subsidiaries, which have
given rise to or may reasonably be expected to give
rise to fines, penalties, taxes or related charges
under Sections 502(c), 502(i) or 4071 or ERISA or
19
<PAGE>
Chapter 43 or section 6039D of the Code for which the
Company or any of its Subsidiaries may be liable,
(xiv) neither the Company nor any of its Subsidiaries nor
any of its respective directors, officers or
employees has committed, nor to the best of the
Company's knowledge has any other fiduciary
committed, any breach of the fiduciary responsibility
standards imposed by ERISA that would subject the
Company or any of its Subsidiaries or any of its
respective directors, officers or employees to
liability under ERISA,
(xv) to the extent that the most recent balance sheet
forming part of the Financial Statements does not
include a pro rata amount of the contributions which
would otherwise have been made in accordance with
past practices for the Plan years which include the
Public Offering Closing Date, such amounts are set
forth in Section 3.12(a) of the Disclosure Schedule,
(xvi) the Company has furnished to VIALOG a copy of the
three most recently filed annual reports (IRS Form
5500) series and accountant's opinion, if applicable,
for each Plan (and the three most recent actuarial
valuation reports for each Plan, if any, that is
subject to Title IV of ERISA), and all information
provided by the Company to any actuary in connection
with the preparation of any such actuarial valuation
report was true, correct and complete in all material
respects,
(b) Neither the Company nor any of its Subsidiaries is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the
basis of funding, and the current status of, any past service liability with
respect to each Employment Arrangement to which the same is applicable.
3.13 Absence of Sensitive Payments. The Company has not, nor has any
-----------------------------
Subsidiary, or, to the Company's knowledge, any of its or any Subsidiary's
officers, directors, employees or Representatives, (a) made any contributions,
payments or gifts to or for the private use of any governmental office, employee
or agent where either the payment or the purpose of such contribution, payment
or gift is illegal under the laws of the United States or the jurisdiction in
which made, (b) established or maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on its books, or (c) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
3.14 Inapplicability of Specified Statutes. Neither the Company nor any
-------------------------------------
Subsidiary is a "holding company", or a "subsidiary company" or an "affiliate"
or a "holding company", as
20
<PAGE>
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or an "investment company" or a company "controlled" by or acting on
behalf of an "investment company", as defined in the Investment Company Act of
1940, as amended.
3.15 Authorized and Outstanding Capital Stock
----------------------------------------
(a) The authorized and outstanding capital stock of the Company is
as set forth in Section 3.15(a) of the Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is fully
paid and non-assessable and is not subject to any preemptive or similar rights.
Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) there is
neither outstanding nor has the Company or any Subsidiary agreed to grant or
issue any shares of its capital stock or any Option Security or Convertible
Security, and (ii) neither the Company nor any Subsidiary is a party to or is
bound by any agreement, put or commitment pursuant to which it is obligated to
purchase, redeem or otherwise acquire any shares of capital stock or any Option
Security or Convertible Security. Between the date of this Agreement and the
Merger Closing, the Company will not, and will not permit any Subsidiary to,
issue, sell or purchase or agree to issue, sell or purchase any capital stock or
any Option Security or Convertible Security of the Company or any Subsidiary. As
of the Effective Time, the rights of the holders of all Option Securities and
Convertible Securities issued by the Company to exercise or convert such
Securities will have been terminated pursuant to the terms thereof.
(b) All of the outstanding capital stock of the Company is owned
by the Stockholders as set forth in Section 3.15(b) of the Disclosure Schedule,
and is, to the Company's knowledge, free and clear of all Liens, except as set
forth in Section 3.15(b) of the Disclosure Schedule. To the Company's knowledge,
no Person, and no group of Persons acting in concert, owns as much as five
percent (5%) of the Company's outstanding Common Stock, and the Company is not
controlled by any other Person, except as set forth in Section 3.15(b) of the
Disclosure Schedule.
3.16 Employment Arrangements.
-----------------------
(a) Neither the Company nor any Subsidiary has any obligation or
liability, contingent or other, under any Employment Arrangement (whether or not
listed in Section 3.12(a) of the Disclosure Schedule), other than those listed
or described in Section 3.16(a) of the Disclosure Schedule. Neither the Company
nor any Subsidiary is now or during the past five (5) years has been subject to
or involved in or, to the Company's knowledge, threatened with any election for
the certification of a bargaining representative for any employees, petitions
therefor or other organizational activities, including but not limited to
voluntary requests for recognition as a bargaining representative, or
organizational campaigns of any nature, except as described in Section 3.16(a)
of the Disclosure Schedule. None of the employees of the Company or any
Subsidiary are now, or during the past five (5) years have been, represented by
any labor union or other employee collective bargaining organization. Neither
the Company nor any Subsidiary are parties to any labor or other collective
bargaining agreement, and there are no pending grievances, disputes or
controversies with any union or any other employee collective bargaining
organization of such employees, or, to the Company's knowledge, threats of
strikes, work
21
<PAGE>
stoppages or slowdowns or any pending demands for collective bargaining by any
union or other such organization. The Company and each Subsidiary have performed
all obligations required to be performed under all Employment Arrangements and
are not in breach or violation of or in default or arrears under any of the
terms, provisions or conditions thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, no employee will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employment Arrangement,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(c) The Company considers its and each Subsidiary's relationships
with employees to be good, and except as set forth in Section 3.16(c) of the
Disclosure Schedule, neither the Company nor any Subsidiary has experienced a
work slowdown or stoppage due to labor problems. Neither the Company nor any
Subsidiary has received notice of any claim that it has failed to comply with
any federal or state law, or is the subject of any investigation by any federal
or state agency to determine compliance with any federal or state law, relating
to the employment of labor, including any provisions relating to wages, hours,
collective bargaining, the payment of taxes, discrimination, equal employment
opportunity, employment discrimination, worker injury and/or occupational
safety, nor to the knowledge of the Company is there any basis for such a claim.
(d) Neither the Company nor any Subsidiary has conducted, and on
or prior to the Public Offering Closing Date will not conduct, a "plant closing"
or "mass layoff" of employees of the Company or any Subsidiary as defined by the
Worker Adjustment and Retraining Notification Act of 1988 ("the WARN Act"), 29
U.S.C. 2101-2109 as amended, or discharge, layoff, or reduce the hours of work,
of employees in a sufficient number or manner to trigger any state or local law
or regulation conditioning or regulating in any manner the discharge, layoff, or
reduction in hours of employees or the closing of a facility, plant, workplace,
division or department, from the date hereof or through the Public Offering
Closing Date or during the twelve-month period immediately prior thereto.
3.17 Material Agreements.
-------------------
(a) Listed on Section 3.17(a) of the Disclosure Schedule are all
Material Agreements relating to the ownership or operation of the business and
property of the Company or any Subsidiary presently held or used by the Company
or any Subsidiary or to which the Company or any Subsidiary is a party or to
which it or any or its property is subject or bound. True, complete and correct
copies of each of the Material Agreements have been furnished by the Company to
VIALOG (or true, complete and correct descriptions thereof have been set forth
in Section 3.17(a) of the Disclosure Schedule, if any such Material Agreements
are oral). All of the Material Agreements are valid, binding and legally
enforceable obligations of the parties thereto (except as such enforceability
may be subject to bankruptcy, moratorium, insolvency, reorganization,
arrangement, voidable preference, fraudulent conveyance and other similar laws
22
<PAGE>
relating to or affecting the rights of creditors and except as the same may be
subject to the effect of the general principles of equity), and the Company or
one of its Subsidiaries is validly and lawfully operating its business and
owning its property under each of the Material Agreements. The Company and each
Subsidiary have duly complied with all of the terms and conditions of each
Material Agreement and have not done or performed, or failed to do or perform
(and there is no pending or, to the knowledge of the Company, threatened Claim
that the Company or any Subsidiary has not complied, done and performed or fail
to do and perform) any act the effect of which would be to invalidate or provide
grounds for the other party thereto to terminate (with or without notice,
passage of time or both) such Material Agreement or impair the rights or
benefits, or increase the costs, of the Company or any Subsidiary, under any of
the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section 3.17(a)
of the Disclosure Schedule calling for the delivery of goods or merchandise or
the performance of services can be satisfied or performed by the Company or one
of its Subsidiaries at margins providing an operating profit, except as set
forth in Section 3.17(b) of the Disclosure Schedule.
3.18 Ordinary Course of Business.
---------------------------
(a) The Company and each Subsidiary, from the earlier of the date
of the most recent balance sheet forming part of the Financial Statements or
December 31, 1995 to the date of this Agreement, and until the Public Offering
Closing Date, except as may be described on Section 3.18(a) of the Disclosure
Schedule or as may be required or permitted expressly by the terms of this
Agreement or as may be approved in writing by VIALOG:
(i) has operated, and will continue to operate, its business in
the normal, usual and customary manner in the ordinary and
regular course of business, consistent with prior practice,
(ii) has not sold or otherwise disposed of, or contracted to
sell or otherwise dispose of, and will not sell or
otherwise dispose of or contract to sell or otherwise
dispose of, any of its properties or assets, other than in
the ordinary course of business,
(iii) except in each case in the ordinary course of business or
as detailed as transactions not in the ordinary course in
the Company's business plan set forth as Section 3.18(a) of
the Disclosure Schedule, and except as expressly otherwise
contemplated hereby,
(A) has not incurred and will not incur any obligations or
liabilities (fixed, contingent or other),
(B) has not entered and will not enter into any
commitments, and
(C) has not canceled and will not cancel any debts or
claims,
23
<PAGE>
(iv) has not made or committed to make, and will not make or
commit to make, any additions to its property or any
purchases of machinery or equipment, except for normal
maintenance and replacements,
(v) has not discharged or satisfied, and will not discharge or
satisfy, any Lien and has not paid and will not pay any
obligation or liability (absolute or contingent) other
than current liabilities or obligations under contracts
then existing or thereafter entered into in the ordinary
course of business, and commitments under Leases existing
on that date or incurred since that date in the ordinary
course of business,
(vi) except in the ordinary course, has not increased and will
not increase the compensation payable or to become payable
to any of its directors, officers, employees, advisers,
consultants, salesmen or agents or otherwise alter, modify
or change the terms of their employment or engagement,
(vii) has not suffered any material damage, destruction or loss
(whether or not covered by insurance) or any acquisition
or taking of property by any Authority,
(viii) has not waived, and will not waive, any rights of material
value without fair and adequate consideration,
(ix) has not experienced any work stoppage,
(x) has not entered into, amended or terminated and will not
enter into, amend or terminate any Lease, Governmental
Authorization, Private Authorization, Material Agreement,
Employment Arrangement, Contractual Obligation or
transaction with any Affiliate, except for terminations in
the ordinary course of business in accordance with the
terms thereof,
(xi) has not amended or terminated and will not amend or
terminate, and has kept and will keep in full force and
effect including without limitation renewing to the extent
the same would otherwise expire or terminate, all
insurance policies and coverage,
(xii) has not entered into, and will not enter into, any other
transaction or series of related transactions which
individually or in the aggregate is material to the
Company or the Company and its Subsidiaries taken as a
whole, except in the ordinary course of business, and
24
<PAGE>
(xii) has not, nor has any affiliate (as defined in Section
517.021(1) of the Florida Statutes), transacted business
with the government of Cuba or with any person or
affiliate located in Cuba.
(b) From the end of its most recent fiscal year to the date of
this Agreement, except as described in Section 3.18(b) of the Disclosure
Schedule, neither the Company nor any Subsidiary has, or on or prior to the
Public Offering Closing Date will have, declared, made or paid, or agreed to
declare, make or pay, any Distribution.
3.19 Bank Accounts, Etc. A true and correct and complete list as of the
-------------------
date of this Agreement of all banks, trust companies, savings and loan
associations and brokerage firms in which the Company or any Subsidiary has an
account or a safe deposit box and the names of all Persons authorized to draw
thereon, to have access thereto, or to authorize transactions therein, the names
of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof has been previously
delivered to VIALOG.
3.20 Adverse Restrictions. Neither the Company nor any Subsidiary is a
--------------------
party to or subject to, nor is any of its property subject to, any Applicable
Law, Governmental Authorization, Contractual Obligation, Employment Arrangement,
Material Agreement or Private Authorization, or any other obligation or
restriction of any kind or character, or any aggregation thereof, which impairs
the Company's or any Subsidiary's ability to conduct its business as it is
currently being conducted or which could have any Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, except as set forth in
Section 3.20 of the Disclosure Schedule.
3.21 Broker or Finder. No Person assisted in or brought about the
----------------
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or any Stockholder.
3.22 Personal Injury or Property Damage; Warranty Claims; Etc. Except as
---------------------------------------------------------
set forth in Section 3.22 of the Disclosure Schedule, neither the Company nor
any Subsidiary or any Person acting for or on behalf of the Company or any
Subsidiary, including without limitation any insurance carrier, has at any time
since December 31, 1995, paid, and there is not now pending or, to the knowledge
of the Company, threatened any Claim (or any basis for any such Claim) relating
to, any damages to any third party for injuries to Persons or damage to
property, or for breach of warranty, which, in the case of pending or threatened
Claims, if determined Adversely to the Company or any Subsidiary, individually
or in the aggregate (taking into account unasserted Claims of similar nature),
could have any Adverse Effect on the Company or the Company and its Subsidiaries
taken as a whole.
3.23 Environmental Matters.
----------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Company and each Subsidiary:
25
<PAGE>
(i) is in compliance in all material respects with all
Environmental Laws and has not been notified that it is
liable or potentially liable, has not received any request
for information or other correspondence concerning any site
or facility, and is not a "responsible party" or
"potentially responsible party" under the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation Recovery Act of
1976, as amended, or any similar state law,
(ii) has not entered into or received any consent decree,
compliance order, or administrative order relating to
Environmental Requirements,
(iii) is not a party in interest or in default under any
judgment, order, writ, injunction or decree or any final
order relating to Environmental Requirements, and
(iv) has obtained all material Governmental Authorizations and
Private Authorizations (including without limitation all
Environmental Permits) and made all Governmental Filings
which are required to be filed by the Company and each
Subsidiary for the ownership of its property, facilities
and assets and the operation of its businesses under all
Environmental Laws, is and at all times since its
organization has been in material compliance with the terms
and conditions of all such required Governmental and
Private Authorizations and all Environmental Requirements,
and is not the subject of or, to the Company's knowledge,
threatened with any Legal Action involving a demand for
damages or any other potential liability with respect to
violations or breaches of any Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure
Schedule:
(i) no spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water has occurred
on any property or facility owned, leased, operated or
occupied by the Company or any Subsidiary during the period
that such facilities and properties were owned, leased,
operated or occupied by it or, to the knowledge of the
Company, at any other time or at any other facility or site
to which Hazardous Materials from or generated by the
Company or any Subsidiary may have been taken at any time
in the past,
(ii) there has been no spill, disposal, release, burial or
placement of Hazardous Materials, in the soil, air or water
on any property which could reasonably be expected to
result or has resulted in
26
<PAGE>
contamination of or beneath any properties or facilities
owned, leased, operated or occupied by the Company or any
Subsidiary during the period that such facilities and
properties were owned, leased, operated or occupied by it
(or, to the knowledge of the Company, at any other time),
and
(iii) no notice has been received by the Company or any
Subsidiary and no Lien has arisen on its or any
Subsidiary's properties or facilities under Environmental
Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary has any above-ground or
underground tanks on property owned, leased, operated or occupied by it for the
storage of Hazardous Materials.
(d) There has not been, and on or prior to the Public Offering
Closing Date, there will not be, any past or present Events or plans of the
Company or any Subsidiary or any of its predecessors, which, individually or in
the aggregate, constitute a breach of any Environmental Requirements or which,
individually or in the aggregate, may interfere with or prevent continued
compliance with all Environmental Requirements, or which, individually or in the
aggregate, may give rise to any common law, statutory or other legal liability,
or otherwise form the basis of any Claim, assessment or remediation cost, fine,
penalty or assessment based on or related to the transportation, transmission,
gathering, processing, distribution, use, treatment, storage, disposal or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material with respect to the Company or any
Subsidiary or any of its predecessors or its or any of their business,
operations or property which could have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary has used any Hazardous
Materials in the conduct of its business. To the extent that any Hazardous
Materials are so set forth, Section 3.23(e) of the Disclosure Schedule also sets
forth (i) a description of Hazardous Materials used, (ii) the annual volume of
each of the Hazardous Materials used, (iii) the years during which each of the
Hazardous Materials used occurred, and (iv) the Persons to whom such Hazardous
Materials were transferred and/or transported after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a complete
and correct description of all Hazardous Materials generated by the Company or
any Subsidiary which are not set forth in Section 3.23(e), the approximate
annual volumes of each of the Hazardous Materials, and all Persons to whom such
Hazardous Materials have been transferred and/or transported.
(g) No site assessment, audit, study, test or other investigation
has been conducted by or on behalf of the Company or any Subsidiary, nor has the
Company received any notice from any governmental agency, or financial
institution as to environmental matters at any property owned, leased, operated
or occupied by the Company or any Subsidiary, except as set forth in Section
3.23(g) of the Disclosure Schedule.
27
<PAGE>
3.24 Materiality. The matters and items excluded from the representations
-----------
and warranties set forth in this Article by operation of the materiality
exceptions and materiality qualifications contained in such representations and
warranties, in the aggregate for all such excluded matters and items, are not
and could not reasonably be expected to be Adverse to the Company or the Company
and its Subsidiaries taken as a whole.
3.25 Solvency. As of the execution and delivery of this Agreement, the
--------
Company and the Company and its Subsidiaries taken as a whole are and, as of the
Public Offering Closing Date, will be solvent.
3.26 VIALOG Stock. The Stockholders will hold for investment the VIALOG
------------
Stock constituting the Stock Merger Consideration.
3.27 Compliance with Regulations Relating to Securities Credit. None of the
---------------------------------------------------------
borrowings, if any, of the Company were incurred or used for the purpose of
purchasing or carrying any security which at the date of its acquisitions was,
or any security which now is, margin stock or other margin security within the
meaning of Regulations T of the Margin Rules or a "security that is publicly
held," within the meaning of the Margin Rules, and the cash portion of the
proceeds from the consummation of the Transactions will not be used for the
purpose of purchasing or carrying any margin stock or other margin security, or
a "security that is publicly held", or any security issued by VIALOG, or in any
way which would involve the Company in any violation of the Margin Rules, and
neither the Company nor any Subsidiary owns any margin stock or other margin
security, or a "security that is publicly held", and neither the Company nor any
Subsidiary has any present intention of acquiring any margin stock or other
margin security, or any "security that is publicly held".
3.28 Certain State Statutes Inapplicable. The provisions of applicable
-----------------------------------
Connecticut takeover laws, if any, will not apply to this Agreement, the Merger
or the Transactions.
3.29 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as of a specific date, all of the
representations and warranties of the Company set forth in this Article will be
true and correct in all material respects on the Public Offering Closing Date
with the same force and effect as though made on and as of that date and those,
if any, which speak as a specific date will be true and correct in all material
respects as of such date.
3.30 Registration Statement. All information furnished by or on behalf of
----------------------
the Company or any Stockholder in writing for use in the Registration Statement
and all information relating to the Company in the Prospectus (a copy of which
shall be provided by VIALOG to the Company and Principal Stockholder for their
review) is true, correct and complete and does not contain any untrue statement
of material fact or omit to state any material fact necessary to make such
statements, in the light of the circumstances in which they were made, not
misleading. In the event any such information, through the occurrence or
nonoccurrence of any event or events between the date of this Agreement and the
Public Offering Closing Date, ceases to be true, correct and complete or
contains any untrue statement of material fact or omits to state any material
fact necessary to make such statements, in the light of the circumstances in
which they
28
<PAGE>
were made, not misleading, the Company, upon discovery thereof will provide
VIALOG, in writing, sufficient information to correct such untrue statement or
omission.
3.31 Predecessor Status; etc. Set forth in Section 3.31 of the Disclosure
-----------------------
Schedule is a listing of all names of all predecessor companies of the Company
and the names of any Entities from which, since December 31, 1991, the Company
previously acquired material properties or assets. Except as disclosed in
Section 3.31 of the Disclosure Schedule, the Company has never been a Subsidiary
or division of another Entity, nor a part of an acquisition which was later
rescinded. None of the Company, the Principal Stockholder or any Subsidiary has
ever owned any capital stock of VIALOG nor, except as set forth in Section 3.31
of the Disclosure Schedule, has there been, since December 31, 1991, any sale or
spin-off of material assets by the Company or any Subsidiary other than in the
ordinary course of business.
ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL STOCKHOLDER
The Principal Stockholder represents, warrants and covenants to, and
agrees with, VIALOG and VIALOG Merger Subsidiary as follows:
4.1 Organization. The Principal Stockholder (if other than an individual)
------------
is an Entity duly organized, validly existing and in good standing under the
laws or its jurisdiction of organization.
4.2 Power and Authority. The Principal Stockholder (if other than an
-------------------
individual) has adequate power and authority (corporate, partnership, trust or
other) and all necessary Governmental Authorizations and Private Authorizations
in order to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each other Collateral Document executed or required to
be executed pursuant hereto or thereto. The execution, delivery and performance
of this Agreement and each other Collateral Document executed or required to be
executed pursuant hereto or thereto have, to the extent applicable, been duly
authorized by all requisite corporate, partnership, trust or other action,
including that, if required, of the Principal Stockholder's stockholders or
partners.
4.3 Enforceability. This Agreement has been duly executed and delivered by
--------------
the Principal Stockholder and constitutes, and each Collateral Document executed
or required to be executed by the Principal Stockholder pursuant hereto or
thereto when executed and delivered by the Principal Stockholder will constitute
legal, valid and binding obligations of the Principal Stockholder, enforceable
in accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable
29
<PAGE>
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity.
4.4 Title to Shares. Except as set forth in Section 4.4 of the Disclosure
---------------
Schedule (all of which exceptions will be removed, satisfied or discharged no
later than the Merger Closing), the Principal Stockholder owns and has good and
merchantable title to those Shares owned by the Principal Stockholder and to be
exchanged pursuant to this Agreement, free and clear or all Liens.
4.5 No Conflict; Required Filings and Consents. Neither the execution and
------------------------------------------
delivery of this Agreement or any Collateral Document executed or required to be
executed pursuant hereto or thereto, nor the consummation of the Merger and the
Transactions, nor compliance with the terms, conditions and provisions hereof or
thereof by the Principal Stockholder:
(a) will materially conflict with, or result in a breach or
violation of, or constitute a default under, any Applicable Law on the part of
such Stockholder or will conflict with, or result in a material breach or
violation of, or constitute a material default in the performance, observance or
fulfillment of, or a material default under, or permit the acceleration of any
obligation or liability in, or, but for any requirements of notice or passage of
time or both, would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
the Principal Stockholder,
(b) will result in or permit the creation or imposition of any
Lien upon any property or asset of the Principal Stockholder used or now
contemplated to be used by the Company, or
(c) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in connection
with the Merger and the Transactions and as the Securities Act or applicable
state securities laws may apply to compliance by the Principal Stockholder with
the provisions of this Agreement relating to the Public Offering and
registration rights, pursuant to the HSR Act (if applicable) or as set forth in
Section 4.5 of the Disclosure Schedule.
ARTICLE
5
REPRESENTATIONS AND WARRANTIES OF VIALOG
AND VIALOG MERGER SUBSIDIARY
VIALOG and VIALOG Merger Subsidiary, jointly and severally, represent,
warrant and covenant to, and agree with, the Company as follows:
5.1 Organization and Qualification. VIALOG is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of
Massachusetts. VIALOG Merger
30
<PAGE>
Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware.
5.2 Power and Authority. Except for such consents of Authorities as may
-------------------
be necessary in connection with change-of-control transactions with respect to
Governmental Authorities listed in Section 3.1(c) of the Disclosure Schedule,
each of VIALOG and VIALOG Merger Subsidiary has all requisite power and
authority (corporate and other) and has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto and to consummate the Merger and the Transactions. The execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action. This Agreement has been duly
executed and delivered by each of VIALOG and VIALOG Merger Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto when executed and delivered by it will constitute,
legal, valid and binding obligations of VIALOG and VIALOG Merger Subsidiary,
respectively, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
5.3 No Conflict; Required Filings and Consents. Except for such consents
------------------------------------------
of Authorities as may be necessary in connection with change-of-control
transactions with respect to Governmental Authorities listed in Section 3.1(c)
of the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Collateral Document executed or required to be executed pursuant hereto
or thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of VIALOG and VIALOG
Merger Subsidiary:
(a) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of VIALOG or VIALOG
Merger Subsidiary or will conflict with, or result in a breach or violation of,
or constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of giving of notice or passage of time
or both would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Contractual Obligation of
VIALOG or VIALOG Merger Subsidiary, or
(b) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements under Applicable
Law in connection with the Merger and the Transactions and as the Securities Act
and applicable state securities laws may apply to compliance by VIALOG with the
provisions of this Agreement relating to the Public Offering and registration
rights and except pursuant to the HSR Act (if applicable).
31
<PAGE>
5.4 Financing. VIALOG has or, upon consummation of the Public Offering,
---------
will have sufficient funds or available financing to enable the Surviving
Corporation to pay the Aggregate Merger Consideration for all Shares of the
Company Stock as provided in Sections 2.1(a) and 2.1(d), the consideration for
each Option Security and each Convertible Security as provided in Section 2.4,
and all fees and expenses related to the Merger and its obligations in
connection with the Public Offering.
5.5 Broker or Finder. Except for the Underwriter, the fees and expenses
----------------
of which (other than pursuant to the Underwriting Agreement) are solely the
responsibility of VIALOG, no Person assisted in or brought about the negotiation
of this Agreement or the subject matter of the Transactions in the capacity of
broker, agent or finder or in any similar capacity on behalf of VIALOG or VIALOG
Merger Subsidiary.
5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary. Neither of
-------------------------------------------------------
VIALOG or VIALOG Merger Subsidiary has incurred any liabilities or Contractual
Obligations, except those incurred in connection with its organization and
ordinary course business operations (including Employment Arrangements), the
negotiation of this Agreement and the performance of this Agreement and of the
Participating Agreements with the Other Participating Companies, the
registration of VIALOG Stock under the Securities Act, compliance with the
requirements of the HSR Act (if applicable) and the performance of all other
Governmental Filings, and the financing of the foregoing. Except as contemplated
by the foregoing, neither of VIALOG or VIALOG Merger Subsidiary has engaged in
any business activities of any type or kind whatsoever, nor entered into any
agreements or arrangements with any Person, nor is it subject to or bound by any
obligation or undertaking.
5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary. The authorized
-----------------------------------------------------
and outstanding capital stock of each of VIALOG and VIALOG Merger Subsidiary is
as set forth in Section 5.7 of the Disclosure Schedule. All of such outstanding
capital stock has been duly authorized and validly issued, is fully paid and
non-assessable and is not subject to any preemptive or similar rights. All
shares of common stock of VIALOG Merger Subsidiary held by VIALOG have been duly
authorized and validly issued to VIALOG and are fully paid and non-assessable
and are not subject to any preemptive or similar rights. As of the date of this
Agreement, except for this Agreement, the Participating Agreements, the
Underwriting Agreement, and as set forth on Section 5.7 of the Disclosure
Schedule, there are not any outstanding or authorized subscriptions, options,
warrants, calls, rights, commitments or any other agreements of any character
obligating VIALOG or VIALOG Merger Subsidiary to issue any shares of VIALOG
Stock or other shares of capital stock of VIALOG or of VIALOG Merger Subsidiary,
or any other securities convertible into or evidencing the right to subscribe
for any such shares. When issued in connection with the Merger, the VIALOG Stock
will be duly authorized, validly issued, fully paid and non-assessable and will
not be subject to any preemptive or similar rights.
5.8 Registration Statement. The Registration Statement and any amendments
----------------------
thereto will comply when the Registration Statement becomes effective in all
material respects with the provisions of the Securities Act and will not contain
any untrue statement of a material fact or
32
<PAGE>
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus will not as of the
issue date thereof contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this Section 5.8
will not apply to statements or omissions in the Registration Statement or the
Prospectus based on information relating to the Underwriter furnished to VIALOG
in writing by the Underwriter, or based on information relating to any of the
Other Participating Companies or its stockholders furnished to VIALOG in writing
by such Participating Company or any or its stockholders, or the Company or the
Stockholders furnished to VIALOG in writing by the Company or any of the
Stockholders. VIALOG will furnish the Company with a copy of the Registration
Statement and of each amendment thereto until the Merger Closing and thereafter
will furnish the Principal Stockholder with each amendment thereto and the final
Prospectus.
5.9 Solvency. After the Effective Time, and upon the consummation of the
--------
Merger, the Participating Mergers and the Transactions, VIALOG and its
subsidiaries, individually and taken as a whole, will be solvent.
5.10 Firm Commitment. The contemplated Public Offering shall be a firm
---------------
commitment underwriting and not a best efforts underwriting and all VIALOG Stock
sold in the offering will be purchased by the Underwriter on the Effective Date
and paid for by the Underwriter on the Public Offering Closing Date.
5.11 Participating Agreements of Other Participating Companies. Except as
---------------------------------------------------------
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, each Participating Agreement
entered into among VIALOG, any Subsidiary of VIALOG, and any Other Participating
Company contains provisions substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement, including,
without limitation, the representations and warranties, covenants, termination
provisions and indemnification provisions contained in those Articles. Except as
set forth in Section 5.11 of the Disclosure Schedule or as dictated by the
structuring of any transaction with a Participating Company as a sale of assets
or stock rather than a merger or as set forth in any employment or
noncompetition agreement required to be executed as a condition to closing
pursuant to Article 7 of a Participating Agreement, no Participating Agreement
contains any material provision which is not contained in substantially
identical form in this Agreement.
5.12 Continuing Representations and Warranties. Except for those
-----------------------------------------
representations and warranties which speak as a specific date, all of the
representations and warranties of VIALOG and the VIALOG Merger Subsidiary set
forth in this Article will be true and correct in all material respects on the
Public Offering Closing Date with the same force and effect as though made on
and as of that date, and those, if any, which speak as of a specific date will
be true and correct in all material respects as of such date.
33
<PAGE>
ARTICLE
6
ADDITIONAL COVENANTS
6.1 Access to Information; Confidentiality.
--------------------------------------
(a) The Company will afford to VIALOG and the Representatives of
VIALOG full access during normal business hours throughout the period prior to
the Effective Time to all of its (and its Subsidiaries') properties, books,
contracts, commitments and records (including without limitation Tax Returns)
and, during such period, will furnish promptly upon request (i) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of any Applicable Law (including without limitation federal or
state securities laws) or filed by any of them with any Authority in connection
with the Transactions or which may have a material effect on their respective
businesses, operations, properties, prospects, personnel, condition (financial
or other), or results of operations, (ii) to the extent not provided for
pursuant to the preceding clause, (A) all financial records, ledgers, workpapers
and other sources of financial information processed or controlled by the
Company or its accountants deemed by the Accountants necessary or useful for the
purpose of performing an audit of the Company and the Company and its
Subsidiaries taken as a whole and certifying financial statements and financial
information and (B) all other information relating to the Company, its
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Registration Statement, and
(iii) such other information concerning any of the foregoing as VIALOG will
reasonably request. Subject to the terms and conditions of the Confidentiality
Letter (as defined below), which are expressly incorporated in this Agreement by
reference for the benefit of the parties hereto, VIALOG will hold and will use
commercially reasonable efforts to cause the Representatives of VIALOG to hold,
and the Company will hold and will use commercially reasonable efforts to cause
the Representatives of the Company to hold, in strict confidence all non-public
documents and information furnished (whether prior or subsequent hereto) to
VIALOG or to the Company, as the case may be, in connection with the
Transactions.
(b) Subject to the terms and conditions of the Confidentiality
Letter, VIALOG and the Company may disclose such information as may be necessary
in connection with seeking all Governmental and Private Authorizations or that
is required by Applicable Law to be disclosed. In the event that this Agreement
is terminated in accordance with its terms, VIALOG and the Company will each
promptly redeliver all non-public written material provided pursuant to this
Section or any other provision of this Agreement or otherwise in connection with
the Merger and the Transactions and will not retain any copies, extracts or
other reproductions in whole or in part of such written material other than one
copy thereof which will be delivered to independent counsel for such party.
(c) The Company and VIALOG acknowledge that the Company and VIALOG
executed a Confidential Disclosure Agreement dated May 10, 1996, and a Second
Confidential
34
<PAGE>
Disclosure Agreement dated May 31, 1996, (collectively, the "Confidentiality
Letter"), which separately and as incorporated in this Agreement will remain in
full force and effect after and notwithstanding the execution and delivery of
this Agreement, and that information obtained from the Company by VIALOG, or its
Representatives or by the Company or its Representatives from VIALOG pursuant to
Section 6.1(a), the Confidentiality Letter or otherwise will be subject to the
provisions of the Confidentiality Letter.
(d) No investigation pursuant to this Section 6.1 will affect any
representation or warranty in this Agreement of any party or any condition to
the obligations of the parties.
6.2 Agreement to Cooperate.
----------------------
(a) Each of the Parties will use commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate the
Merger and make effective the Transactions, including using commercially
reasonable efforts (i) to prepare and file with the applicable Authorities as
promptly as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information, data and
exhibits, necessary to request issuance of orders approving the Merger and the
Transactions by all such applicable Authorities, each of which must be obtained
or become final in order to satisfy the conditions applicable to it set forth in
Section 7; (ii) to obtain all necessary or appropriate waivers, consents and
approvals, (iii) to effect all necessary registration, filings and submissions
(including without limitation the Registration Statement, other filings under
the Securities Act or the HSR Act and any other submissions requested by the SEC
or the Federal Trade Commission or Department of Justice) and (iv) to lift any
injunction or other legal bar to the Merger and the Transactions (and, in such
case, to proceed with the Merger and the Transactions as expeditiously as
possible), subject, however, to the requisite votes of the Stockholders. Each of
the Parties recognizes that the consummation of the Merger and the Transactions
may be subject to the pre-merger notification requirements of the HSR Act. Each
agrees that, to the extent required by Applicable Law to consummate the Merger,
it will file with the Antitrust Division of the Department of Justice and the
Federal Trade Commission a Notification and Report Form in a manner so as to
constitute substantial compliance with the notification requirements of the HSR
Act. Each covenants and agrees to use commercially reasonable efforts to achieve
the prompt termination or expiration of any waiting period or any extensions
thereof under the HSR Act.
(b) Each of the Parties agrees to take such actions as may be
necessary to obtain any Governmental Authorizations legally required for the
consummation of the Merger and the Transactions, including the making of any
Governmental Filings, publications and requests for extensions and waivers.
(c) The Company will use commercially reasonable efforts on or
prior to the Public Offering Closing Date (i) to obtain the satisfaction of the
conditions specified in Sections 7.1 and 7.2; (ii) if requested by VIALOG, to
seek the consents (to the extent required) to the continued existence in
accordance with its then-stated terms of all long-term debt of each of
35
<PAGE>
the Company and each of its Subsidiaries; and (iii) to attempt to cause those
key employees of the Company and its Subsidiaries designated by VIALOG that are
not Stockholders to execute and deliver non-competition agreements substantially
conforming in form and substance to the non-competition agreements currently
maintained by VIALOG with its key employees in the form attached as Exhibit
-------
6.2(c). Each of VIALOG and VIALOG Merger Subsidiary will use its best efforts on
- ------
or prior to the Public Offering Closing Date to obtain the satisfaction of the
conditions applicable to it specified in Sections 7.1 and 7.3. The Principal
Stockholder will use commercially reasonable efforts to obtain the satisfaction
of the conditions applicable to the Principal Stockholder in Section 7.2.
(d) The Company agrees that, except as set forth in Section 3.19
of the Disclosure Schedule, prior to the Public Offering Closing Date it will
not make or permit to be made any material change affecting any bank, trust
company, savings and loan association, brokerage firm or safe deposit box or in
the names of the Persons authorized to draw thereon, to have access thereto or
to authorize transactions therein or in such powers of attorney, or open any
additional accounts or boxes or grant any additional powers of attorney, without
in each case obtaining the prior written consent of VIALOG, which consent VIALOG
will not unreasonably withhold.
(e) The Company will take such steps as are necessary and
appropriate to obtain, and will promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.15(b) of the Disclosure Schedule.
6.3 Assignment of Contracts and Rights. Anything in this Agreement to the
----------------------------------
contrary notwithstanding, this Agreement will not constitute an agreement to
assign any Claim, Contractual Obligation, Governmental Authorization, Lease,
Private Authorization, commitment, sales, service or purchase order, or any
claim, right or benefit arising thereunder or resulting therefrom, if the Merger
or the Transactions would be deemed an attempted assignment thereof without the
required consent of a third party thereto and would constitute a breach thereof
or in any way affect the rights of VIALOG, VIALOG Merger Subsidiary or the
Company thereunder. If such consent is not obtained, or if consummation of the
Merger and the Transactions would affect the rights of the Company thereunder so
that the Surviving Corporation would not in fact receive all such rights, the
Company will cooperate with VIALOG in any arrangement designed to provide for
the benefits thereof to the Surviving Corporation, including subcontracting,
sub-licensing or subleasing to the Surviving Corporation or enforcement for the
benefit of the Surviving Corporation of any and all rights of the Company or its
Subsidiaries against a third party thereto arising out of the breach or
cancellation by such third party or otherwise. Any assumption by the Surviving
Corporation of the Company's rights thereunder by operation of law in connection
with the Merger which will require the consent or approval of any third party
will be made subject to such consent or approval being obtained.
6.4 Compliance with the Securities Act. Each of VIALOG and the Company
----------------------------------
will use its commercially reasonable efforts to cause each executive officer,
each director and each other Person who is an "affiliate," as that term is
defined in paragraph (a) of Rule 144 under the Securities Act, of the Company,
or who will, upon consummation of the Merger and the
36
<PAGE>
Transactions become, an "affiliate" of VIALOG, and each Stockholder of the
Company, to deliver to VIALOG on or prior to the Merger Closing a written
agreement (the "Registration Rights Agreement") to the effect that such Person
will not offer to sell, sell or otherwise dispose of any shares of VIALOG Stock
issued pursuant to the consummation of the Transactions, except, in each case,
pursuant to an effective registration statement or in compliance with Rule 144,
or in a transaction which, in the opinion of legal counsel for such "affiliates"
(such legal counsel to be satisfactory to legal counsel for VIALOG), as set
forth in a written opinion satisfactory in form, scope and substance to the
legal counsel of VIALOG, is exempt from registration under the Securities Act
and applicable state securities laws. The Registration Rights Agreement shall be
substantially in the form of Exhibit 6.4. Notwithstanding anything to the
-----------
contrary in this Agreement, VIALOG will have no obligation under the
Registration Rights Agreement or otherwise to register under the Securities Act
or any applicable state securities laws, or otherwise to facilitate the transfer
of, shares of VIALOG Stock received by any such Person who fails to execute the
Registration Rights Agreement as provided herein, and such Person will forfeit
all "demand registration" and other rights provided for in the Registration
Rights Agreement and all "piggyback" rights provided for in the Registration
Rights Agreement.
6.5 Conduct of Business.
-------------------
(a) Prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated, the Company and its Subsidiaries will (i) use
their best efforts to preserve intact their respective business organizations
and good will, keep available the services of their respective officers and
employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them, (ii)
confer on a regular and frequent basis with one or more representatives of
VIALOG to report operational matters of Materiality and the general status of
ongoing operations, and (iii) notify VIALOG of any emergency or other change in
the normal course of their business and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be Material to the business, operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
(b) Except as set forth in Schedule 6.5(b) (or Section 6.5(b) of
the Disclosure Schedule, as the case may be) or with the written permission of
VIALOG, the Company agrees further that the Company (i) will not make, declare
or pay any dividends or other distributions on any Shares or the stock of the
Company's Subsidiaries or redeem or repurchase or otherwise acquire any Shares
(except cancellation of options and warrants as required in this Agreement),
(ii) will not enter into or terminate any Employment Arrangement with any
director or officer, (iii) will not incur any obligation or liability (absolute
or contingent), except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business (iv) will not
discharge or satisfy any Lien or Encumbrance or pay any obligation or liability
(absolute or contingent) other than current liabilities shown on its Financial
Statements, and current liabilities incurred since those dates in the ordinary
course of business, (v) will not mortgage, pledge, create a security interest
in, or subject to Lien or other Encumbrance any of its assets, tangible or
intangible, (vi) will not sell or transfer any of its tangible assets or cancel
any debts or claims
37
<PAGE>
except in each case in the ordinary course of business, (vii) will not sell,
assign, or transfer any trademark, trade name, patent, or other Intangible
Asset, (viii) will not waive any right of any substantial value, (ix) will not
make any material change in the tax procedures or practices followed by the
Company or any of its Subsidiaries, (x) will not make any change in credit terms
offered by the Company or any of its Subsidiaries, (xi) will not make any
capital expenditure or Material Commitment for any additions or improvements to
its or any of its Subsidiary's property, plant or equipment, (xii) will not
amend its capitalization, or issue any stocks, bonds or other securities, except
that the Company may issue shares pursuant to outstanding Option Securities and
Convertible Securities, (xiii) will not enter into, modify or extend, or promise
any bonus or incentive compensation program that was not in place prior to June
1, 1996 and (xiv) will otherwise conduct its operation and the operations of its
Subsidiaries according to their ordinary and usual course of business.
6.6 No Solicitation. The Company will not, nor will it permit any
---------------
Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquires or the making of any proposal with respect to an Other Transaction,
engage in any discussions or negotiations concerning, or provide to any other
person any information or data relating to it or any Subsidiary for the purposes
of, or otherwise cooperate in any way with or assist or participate in, or
facilitate any inquires or the making of any proposal which constitutes, or may
reasonably be expected to lead to, a proposal to seek or effect an Other
Transaction, or agree to or endorse any Other Transaction. Nothing contained in
this Section will prohibit the Company or its Board of Directors from making any
disclosure to Stockholders that, in the reasonable judgment of its Board of
Directors in accordance with, and based upon the written advice of outside
counsel, is required under Applicable Law. The Company will promptly advise
VIALOG of, and communicate the material terms of, any proposal it may receive,
or any inquires it receives which may reasonably be expected to lead to such a
proposal relating to an Other Transaction, and the identity of the Person making
it. The Company will further advise VIALOG of the status and changes in the
material terms of any such proposal or inquiry (or any amendment to any of
them). During the term of this Agreement, the Company will not enter into any
agreement oral or written, and whether or not legally binding, with any Person
that provides for, or in any way facilitates, an Other Transaction, or affects
any other obligation of the Company under this Agreement.
6.7 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) From and after the Effective Time, the Surviving Corporation
will indemnify, defend and hold harmless the present and former officers and
directors of the Company against all Claims or amounts that are paid in
settlement of, with the approval of the Surviving Corporation, or otherwise in
connection with any Claim based in whole or in part on the fact that such Person
is or was a director or officer of the Company and arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the Merger and the Transactions), in each case to the fullest extent
permitted under the BCA (and will pay any expenses in advance of the final
disposition of any such action or proceeding to each such Person to the fullest
extent permitted under the BCA, upon receipt from the Person to
38
<PAGE>
whom expenses are advanced of an undertaking to repay such advances to the
extent required under the BCA). The Surviving Corporation will observe and
comply with the Company's obligations pursuant to the indemnification
agreements, if any, listed in Section 3.9 of the Disclosure Schedule.
(b) This Section 6.7 is intended to be for the benefit of, and
will be enforceable by, the former officers and directors of the Company, their
heirs and personal representatives and will be binding on the Surviving
Corporation and its respective successors and assigns.
(c) VIALOG will apply for directors and officers insurance in the
amount of $2,000,000 for the benefit of the directors and officers of VIALOG and
the Surviving Corporations.
6.8 Notification of Certain Matters. The Company will give prompt notice
-------------------------------
to VIALOG, and VIALOG will give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any Event the occurrence or non-occurrence of
which would be likely to cause in any material respect (i) any representation or
warranty of the Company or VIALOG, as the case may be, contained in this
Agreement to be untrue or inaccurate, or (ii) in the case of the Company or the
Principal Stockholder, any change to be made in the Disclosure Schedule and (b)
any failure of the Company or VIALOG, as the case may be, to comply with or
satisfy, or be able to comply with or satisfy, any material covenant, condition
or agreement to be complied with or satisfied by it under this Agreement. The
delivery of any notice pursuant to this Section 6.8 will not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
6.9 Public Announcements. Until the Merger Closing, or in the event of
--------------------
termination of this Agreement, the closing of the Public Offering (or its
abandonment), the Company will consult with VIALOG before issuing any press
release or otherwise making any public statements with respect to this
Agreement, the Merger or any Transaction (including the Participating Mergers or
the termination of this Agreement in such event) and will not issue any such
press release or make any such public statement without the prior consent of
VIALOG and the written advice of legal counsel to VIALOG that such press release
or such public statement will not affect the registration of VIALOG Stock under
the Securities Act or the timing of the effectiveness thereof. The Company
acknowledges and agrees that VIALOG may, without the prior consent of the
Company, issue such press release or make such public statement as may be
required by Applicable Law or any listing agreement or arrangement to which
VIALOG is a party with a national securities exchange or the National
Association of Securities Dealers, Inc. Automated Quotation System, or as
recommended by outside counsel. VIALOG will exercise commercially reasonable
efforts to furnish the Company a copy of any press release relating to Other
Participating Companies prior to its publication and will furnish a copy of any
such press release so issued as soon as practicable after its publication, but
any failure on VIALOG's part to do so will not be deemed a breach of or default
under this Agreement. VIALOG will furnish the Company with a copy of any press
release or public information of VIALOG, at a reasonable time prior to its
release for publication.
39
<PAGE>
6.10 Conveyance Taxes. The Parties will cooperate with one another in the
----------------
preparation, execution and filing of all Returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.
6.11 Obligations of VIALOG. VIALOG agrees to take all action necessary to
---------------------
cause VIALOG Merger Subsidiary and the Surviving Corporation to perform their
respective obligations under this Agreement and will use commercially reasonable
efforts to consummate, and cause VIALOG Merger Subsidiary to consummate, the
Merger on the terms and conditions set forth in this Agreement.
6.12 Employee Benefits; Severance Policy. VIALOG will cause the
-----------------------------------
Surviving Corporation to maintain through its fiscal year ending December 31,
1997:
(a) employee incentive compensation and fringe benefits that are
substantially equivalent to those provided to employees of the Company and its
Subsidiaries as in effect on the date of this Agreement, subject to the right of
VIALOG and the Surviving Corporation to amend or terminate such programs in
accordance with their terms, provided that after any such amendment or
termination the resulting programs continue to be substantially equivalent to
the existing programs, and
(b) employee severance pay and benefits that are substantially
equivalent to the applicable severance programs of the Company and its
Subsidiaries as in effect on the date hereof, subject to the right of VIALOG and
the Surviving Corporation to amend or terminate such programs in accordance with
their terms, provided that after any such amendment or termination, the
resulting programs continue to be substantially equivalent to the existing
programs.
Notwithstanding the foregoing, as soon as convenient after such
period, the Surviving Corporation may, in its sole discretion, substitute
employee compensation, benefit and severance programs for those of the Company
as are consistent with the programs provided to VIALOG's employees and the
employees of VIALOG's Subsidiaries.
6.13 Certain Actions Concerning Business Combinations.
------------------------------------------------
(a) Neither the Principal Stockholder nor any Representative
thereof will, during the period commencing on the date of the filing of the
Registration Statement and ending with the earlier to occur of the Merger
Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly (i) solicit or initiate the submission of proposals or
offers from any Person or, (ii) participate in any discussions pertaining to, or
(iii) furnish any information to any Person other than VIALOG relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company or any Subsidiary (other than the Merger).
40
<PAGE>
(b) The Company will not apply, and will not take any action
resulting in the application of, or otherwise elect to apply, the provisions of
applicable Connecticut takeover laws, if any, with respect to or as a result of
the Merger or the Transactions.
6.14 Termination of Option Securities and Convertible Securities. The
-----------------------------------------------------------
Company will take all action necessary to terminate the exercise rights of all
outstanding Option Securities and the conversion rights of all Convertible
Securities issued by the Company as of the Effective Time to the extent such
option and conversion rights are not exercised prior to the Merger Closing, and
to provide timely notice to all holders of Option Securities and Convertible
Securities notifying them of such termination. Without the prior written consent
of VIALOG, except as set forth in Section 3.15(a) of the Disclosure Schedule,
(a) such termination or notice will not cause an acceleration of the exercise,
conversion or vesting schedule of any Option Security or of any Convertible
Security, and (b) the Company will not otherwise accelerate, or cause an
acceleration of, the exercise, conversion or vesting schedule of any Option
Security or Convertible Security. Prior to the Merger Closing, the Company will
issue Certificates to all holders of properly exercised Option Securities and
properly converted Convertible Securities. Such Certificates will accurately
represent the number of Shares to which such holder is entitled by virtue of
such exercise or conversion and the Company will amend Section 3.15(b) of the
Disclosure Schedule accordingly.
6.15 Tax Returns. The Principal Stockholder will cause all Tax Returns
-----------
of the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared in a manner consistent with past
practices and VIALOG will file such Tax Returns promptly upon receipt thereof
from the Principal Stockholder or the Company. At least thirty days before the
due date (including any extensions) for any such Tax Returns, the Principal
Stockholder or the Company will provide drafts of such Tax Returns to VIALOG for
its review and comment (which reasonable comments will be incorporated into the
final Tax Returns), and VIALOG will cooperate with the Principal Stockholder and
provide the Principal Stockholder with access to any books and records
reasonably necessary for their preparation of such draft Tax Returns. VIALOG
will file no amended Tax Returns with respect to the Company and the
Subsidiaries for any taxable period ending on or before the Effective Time if
the Principal Stockholder reasonably objects thereto and furnishes VIALOG with
indemnification satisfactory in form and substance to it, including without
limitation, indemnification for all interest, penalties and Expenses resulting
from the failure to amend such Tax Returns and all proceedings in connection
therewith.
6.16 Employment and Noncompetition. On or before the Merger Closing,
-----------------------------
the Principal Stockholder will execute and deliver to VIALOG the employment
agreement contemplated by Section 7.2(s) to be effective as of the Public
Offering Closing Date. From and after the Public Offering Closing Date, the
Principal Stockholder will not compete with VIALOG or any of its Subsidiaries
except to the extent not prohibited by Exhibit 7.2(s).
--------------
41
<PAGE>
6.17 Distributions, Liabilities, Etc.
-------------------------------
(a) The Company and VIALOG acknowledge and agree that the Company
contemplates that (i) prior to the Merger Closing it will make certain
Distributions to Stockholders, employees of and consultants to the Company, (ii)
no later than Merger Closing, it will cause certain Liens to be discharged in
their entirety (with financing statement terminations properly recorded), and
(iii) as of Merger Closing, it will indemnify VIALOG for certain liabilities
(except to the extent obligees with respect thereto release the Company and its
Affiliates therefrom), in each case as set forth in the Disclosure Schedule.
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be)
lists each such Distribution, Lien and liability;
(b) The Company agrees that Distributions not permitted pursuant
to Section 3.18 will be made by the Company (or VIALOG or the Surviving Company
if after the Effective Date) only to the extent provided in Schedule 6.17 (or
Section 6.17 of the Disclosure Schedule, as the case may be); and
(c) The Company further agrees that, notwithstanding anything to
the contrary in Section 10.1, it will indemnify VIALOG and VIALOG Merger
Subsidiary against all Claims and Expenses incurred by VIALOG and VIALOG Merger
Subsidiary (or either of them) by virtue of any failure on the Company's part to
secure the discharges from Liens contemplated by Schedule 6.17 (or Section 6.17
of the Disclosure Schedule, as the case may be) or any damage or harm
attributable to a liability to be indemnified against as contemplated by
Schedule 6.17 (or Section 6.17 of the Disclosure Schedule, as the case may be).
6.18 Release from Personal Guarantees. On or prior to the Public
--------------------------------
Offering Closing Date, VIALOG will either obtain releases of the personal
guarantees of the Stockholders of Indebtedness or discharge or arrange for the
discharge of such Indebtedness. VIALOG will either obtain releases of the
personal guarantees of the Stockholders of Contractual Obligations which extend
beyond the Public Offering Closing Date or indemnify and hold the Stockholders
harmless from such personal guarantees.
6.19 No Significant Changes VIALOG agrees that there will be no
----------------------
"significant change" (as defined below) in the conduct of the business of the
Company for a period of two years after the Public Offering Closing Date without
the approval of a majority in interest of the Stockholders. "Significant change"
means any change in the location of the Company's facilities, a physical merging
of the Company's operations with another operation, any change in the position
of those employees who receive employment agreements pursuant to Section 7.2(s),
or a reduction in force or the termination of any employee except as related to
employee performance or the contemplated reorganization of the combined
sales/marketing staff or the accounting function.
42
<PAGE>
6.20 Registration Statement.
----------------------
(a) The Company and the Principal Stockholder will furnish to
VIALOG all necessary information concerning the Company and the Principal
Stockholder for VIALOG to file the Registration Statement.
(b) The Company and the Principal Stockholder have reviewed or
have had reviewed on their behalf, and will be familiar with the information
concerning the Company and the Stockholders (or any of them) in the Prospectus,
which will be furnished to them by VIALOG for their review, and will have no
knowledge of any material fact, condition or information concerning the Company
and the Stockholders misstated or not disclosed in such Prospectus.
(c) VIALOG agrees to use its best efforts to prepare and file the
Registration Statement prior to February 28, 1997 and furnish to the Company and
the Principal Stockholder a copy of information concerning the Company and the
Stockholders included therein and each amendment thereto two business days prior
to such filing date.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder
----------
agree to use their best efforts to maintain the status of the Merger and the
Participating Mergers as a tax free incorporation, provided VIALOG's Accountants
so advise and provided the relative ownership rights of all parties remain the
same.
6.22 Self Dealing. VIALOG agrees that it will not and will not allow
------------
any Subsidiary to enter into contracts and business arrangements with Persons
and Entities owned in whole or in part by officers and directors of VIALOG or
any Subsidiary except on an arms length basis and with the approval of the
VIALOG Board of Directors.
ARTICLE
7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each Party to effect the Merger will be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) This Agreement, the Merger and the Transactions shall have
been approved and adopted in accordance with the BCA by the affirmative vote, or
to the extent permitted by Applicable Law, by written consent, of the
Stockholders holding at least the minimum number of shares of the Company Stock
then issued and outstanding as are required by Applicable Law and the Company's
Organizational Documents for such approval and adoption,
43
<PAGE>
(b) No proceeding before any Authority or Claim by any Person
shall be pending, challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation of the
Merger or the Public Offering, or seeking material damages or imposing any
Adverse conditions in connection therewith,
(c) Other than the filing of merger documents in accordance with
the BCA and the DBCL, all authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, submissions, registrations, notices or
declarations required to be made, by VIALOG or VIALOG Merger Subsidiary and the
Company prior to the consummation of the Merger and the Transactions shall have
been obtained from, and made with, all required Authorities, except for such
authorizations, consents, waivers, orders, approvals, filings, registrations,
notices or declarations the failure to obtain or make would not, assuming
consummation of the Merger, have an Adverse Effect on the Company and the
Company and its Subsidiaries taken as a whole,
(d) (i) The Registration Statement shall have become effective and
shall contain no untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the shares of VIALOG Stock offered in the Public
Offering shall have been sold and purchased subject only to consummation of the
Merger, the Participating Mergers and the Transactions, (iii) every condition to
closing the Public Offering (except as provided in clause (iv) immediately
succeeding) shall have been satisfied or properly waived and (iv) release of the
closing documents relating to the Public Offering and distribution of the
proceeds of the sale of all shares of VIALOG Stock sold and purchased in the
Public Offering shall have been unconditionally authorized by the Underwriter
upon consummation of the Merger and the Participating Mergers,
(e) The minimum number of Participating Mergers required to
prevent termination pursuant to Section 8.1(b)(ii) of this Agreement shall have
been authorized and approved in accordance with Applicable Law and the
Organizational Documents of the Other Participating Companies, in the case of
the Participating Mergers,
(f) Subject to such material amendments, if any, as shall be
proposed prior to Merger Closing by VIALOG to be effective immediately after
Merger Closing, and to the extent reasonably satisfactory to the Company and the
Other Participating Companies, the VIALOG stock option plan described in the
Registration Statement shall have been approved and adopted by all action
(corporate and other) required for implementation thereof,
(g) Each of the Persons named on Exhibit 7.1(g), including one
--------------
Person proposed by a majority of the chief executive officers of the Company and
the Other Participating Companies acting as a group, shall have been elected a
director of VIALOG, effective immediately after the Public Offering Closing
Date, and all together shall constitute the entire Board of Directors of VIALOG,
each to serve until the election of the successor to, or the earlier resignation
or termination of, such director, and
(h) VIALOG shall have delivered to the Exchange Agent that number
of shares of VIALOG Stock as determined pursuant to Section 2.1 of this
Agreement and of the
44
<PAGE>
Participating Agreements issued in the name of the Stockholders and the
stockholders and other Persons holding equity interests in the Participating
Companies.
7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary.
----------------------------------------------------------------
The obligations of VIALOG and VIALOG Merger Subsidiary to effect the Merger will
be subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived, in whole or in part, to
the extent permitted by Applicable Law:
(a) The Company shall have complied in all material respects with
its agreements contained in this Agreement, the certificates to be furnished to
VIALOG pursuant to this Section shall be true, correct and complete, all
Collateral Documents shall be reasonably satisfactory in form, scope and
substance to VIALOG and its counsel, and VIALOG and its counsel shall have
received all information and copies of all documents, including records of
corporate proceedings, which they may reasonably request in connection
therewith, such documents where appropriate to be certified by proper corporate
officers,
(b) The Company shall have furnished VIALOG and the Underwriters
with the favorable opinion, dated the Public Offering Closing Date of Michael
Ronan, Esquire, which may contain limitations and qualifications as to scope and
law and rely on certifications as to facts of officers of the Company and public
officials as are reasonable and customary to opinions delivered in the type of
business transactions covered by this Agreement, addressing the following:
(i) Due organization, valid existence and good standing of
the Company and each Subsidiary, together with an
opinion as to foreign qualifications,
(ii) Requisite corporate power and authority and all, to
such counsel's knowledge, necessary Governmental
Authorizations for the Company and each Subsidiary to
own, lease and operate its properties and to carry on
its business as it is now being conducted,
(iii) In respect of the Company and each Subsidiary, the
number of shares of capital stock or other voting
securities authorized, issued, reserved for issuance or
outstanding as of the date of this Agreement and the
Effective Time and number of Option Securities and
amount of Convertible Securities outstanding as of such
dates,
(iv) Due authorization, valid issuance, full payment and
non-assessability of outstanding shares of capital
stock of the Company and each Subsidiary and (upon
issuance on the terms and conditions specified in the
Option Securities and Convertible Securities pursuant
to which they are issuable) all shares of such capital
stock subject to issuance and absence of preemptive
rights with respect thereto,
45
<PAGE>
(v) To the knowledge of counsel, (A) there are not
Contractual Obligations to repurchase, redeem or
otherwise acquire any shares of Company Stock or any
stock of any Subsidiary, or any Option Securities and
Convertible Securities, (B) the Merger will not cause
an acceleration of the exercise or vesting schedule of
any Option Securities and Convertible Securities and
(C) all outstanding shares of stock of each Subsidiary
are owned by the Company or by another Subsidiary, free
and clear of any Lien (except as set forth in Section
3.1(d) of the Disclosure Schedule),
(vi) Corporate power and authority of the Company to execute
and deliver the Agreement and all Collateral Documents
executed or required to be executed pursuant thereto or
to consummate the Merger, to perform its obligations
thereunder and to consummate the Merger,
(vii) Due and valid authorization by the Company and the
Principal Stockholder by all necessary corporate (and
other) action of the execution, delivery and
performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the
consummation by the Company of the Merger,
(viii) Due authorization and valid execution and delivery by,
and enforceability against, the Company and the
Principal Stockholder of the Agreement and all
Collateral Documents executed or required to be
executed pursuant hereto or thereto or to consummate
the Merger and the Transactions except (A) as such
enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other
similar laws relating to or affecting the rights of
creditors and as the same may be subject to the effect
of general principles of equity and (B) that no opinion
need be expressed as to the enforceability of
indemnification and noncompetition provisions included
herein;
(ix) The execution and delivery of the Agreement and all
Collateral Documents executed or required to be
executed pursuant thereto or to consummate the Merger
by the Company do not, and the performance of the
Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Merger and the consummation of the
Transactions by the Company will not, (i) conflict with
or violate the Organizational Documents of the Company
or any Subsidiary, (ii) conflict with or violate any
Applicable Law, or (iii) to
46
<PAGE>
counsel's knowledge, constitute a breach or default
under, or give to others any right of termination,
amendment, acceleration, increased payments or
cancellation of, or result in the creation of a Lien on
any property or asset of the Company or any Subsidiary
pursuant to, any Material Agreement to which the
Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any property or asset of
the Company or any Subsidiary is bound or affected,
(x) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution and delivery of the
Agreement by the Company and the performance of the
Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to
consummate the Merger and the consummation of the
Merger by the Company,
(xi) Required filings with the Secretary of State of
Connecticut have been made,
(xii) To the knowledge of counsel, absence of pending or
threatened material Legal Action,
(xiii) Nonapplicability of Connecticut takeover laws, and
(xiv) such other customary matters concerning the
Stockholders in connection with the Public Offering as
may reasonably be requested by the Underwriter or its
counsel,
(c) No Legal Action or other Claim shall be pending or threatened
at any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of VIALOG have any Adverse Effect on the Company or the
Company and its Subsidiaries taken as a whole or, assuming consummation of the
Merger and the Participating Mergers, VIALOG and its Subsidiaries taken as a
whole,
(d) Each Principal Stockholder (other than a Principal Stockholder
executing and delivering the agreement contemplated by Section 7.2(s)) and other
Persons listed on Schedule 7.2(d) (or Section 7.2(d) of the Disclosure Schedule,
as the case may be) shall have executed and delivered to VIALOG a noncompetition
agreement, substantially in the form of Exhibit 7.2(d),
--------------
(e) The representations, warranties, covenants and agreements of
the Company contained in this Agreement or otherwise made in writing by it or on
its behalf pursuant to this Agreement or otherwise made in connection with the
Merger and the Transactions shall be true
47
<PAGE>
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and the Public Offering Closing
Date, each and all of the agreements and conditions to be performed or satisfied
by the Company under this Agreement at or prior to the Public Offering Closing
Date shall have been duly performed or satisfied in all material respects, and
the Company shall have furnished VIALOG with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as VIALOG
shall have reasonably requested,
(f) VIALOG shall have received from its Accountants, a certificate
or letter, dated the Public Offering Closing Date, to the effect that, on the
basis of a limited review in accordance with the standards for such reviews
promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No. 1, they
have no reason to believe that the unaudited financial statements set forth in
the Registration Statement were not prepared in accordance with GAAP and
practices consistent with those followed in the preparation of the audited
financial statements audited by the Accountants as contemplated by Section
6.1(a), or that any material modifications of such unaudited financial
statements are required for a fair presentation of the financial position or
results of operations or changes in financial position of the Company or that
during the period from the last day covered by the most recent financial
statements set forth in the Registration Statement prepared by the Accountants
as contemplated by Section 6.1(a) to a date not more than five (5) days prior to
the Public Offering Closing Date, there has been any Adverse Change in the
financial position or results of the operations of the Company or the Company
and its Subsidiaries taken as a whole which is not described in the Registration
Statement,
(g) All actions taken by the Stockholders to approve and adopt
this Agreement, the Merger and the Transactions shall comply in all respects
with and shall be legal, valid, binding, enforceable and effective under the Law
of the jurisdiction of incorporation of the Company, its Organizational
Documents and all Material Agreements to which it or any of its Subsidiaries is
a party or by which it or any of them or any of its or any of their property or
assets is bound,
(h) The Company shall have obtained consents to the assignment and
continuation of all Material Agreements which, in the reasonable judgment of
VIALOG or its counsel, require such consents, including appropriate binders or
consents as to policies of insurance to be assigned to VIALOG or the Surviving
Corporation under this Agreement. The Company shall have obtained satisfaction
and discharge of all Liens set forth in Section 3.15(b) of the Disclosure
Schedule, and shall have obtained, on terms and conditions reasonably
satisfactory to VIALOG, all Governmental Authorizations and Private
Authorizations, and all modifications of Contractual Obligations relating to
Indebtedness, which VIALOG deems, reasonably necessary or desirable in order to
own and operate and conduct the business of the Surviving Corporation,
substantially on the basis heretofore owned, operated and conducted by the
Company and proposed to be owned, operated and conducted by VIALOG,
48
<PAGE>
(i) Between the date of this Agreement and the Public Offering
Closing Date, there shall not have occurred and be continuing any Adverse Change
affecting the Company or the Company and its Subsidiaries taken as a whole from
the condition thereof (financial and other) reflected in the Financial
Statements or in the audited financial statements prepared by the Accountants as
contemplated by Section 6.1(a) or in the most recent financial statements set
forth in the Registration Statement,
(j) The filing and waiting period requirements (if applicable)
under the HSR Act relating to the consummation of the Merger and the
Participating Mergers shall have been complied with,
(k) No Law shall have been enacted or made by or on behalf of any
Authority nor shall any legislation have been introduced and favorably reported
for passage to either House of Congress by any committee, nor shall any Legal
Action by any Authority been commenced or threatened, nor shall any decision,
order or other action of any Authority have been rendered or taken, which in
VIALOG's reasonable judgment, could have any Adverse Effect on the Company or
the Company and its Subsidiaries taken as a whole, or could restrain, prevent or
change the Merger or the Transactions or Adversely Affect the ability of the
Principal Stockholder to perform its obligations under this Agreement, or the
ability of VIALOG to continue to own, operate and conduct the business of the
Surviving Corporation, substantially on the basis heretofore owned, operated and
conducted by the Company and as proposed to be owned, operated and conducted by
the Surviving Corporation,
(l) VIALOG shall have received copies of any environmental audits
the Company has received in respect of all real property owned or leased by the
Company or any of its Subsidiaries. VIALOG, in its sole discretion and at its
sole expense, may engage an independent environmental engineer to perform such
audits and the results thereof shall not be materially inconsistent with the
representations and warranties set forth in Section 3.23,
(m) Each of the directors of the Company and each of its
Subsidiaries and each trustee under each Plan shall have submitted his or her
unqualified written resignation, dated as of the Public Offering Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Public
--------------
Offering Closing Date, releasing the Company and its Subsidiaries from any and
all Claims against them (other than Claims arising from such Principal
Stockholder having acted as a director or officer of the Company or such
Subsidiary as contemplated by Section 6.7),
(o) The Registration Rights Agreement shall have been executed and
delivered by the Stockholders and the Executive Officers and principal
Stockholders of VIALOG.
(p) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, nor shall it have
experienced any material work stoppage,
49
<PAGE>
(q) Except for such leases and other Contractual Obligations as
are set forth on Schedule 7.2(q) (or Section 7.2(q) of the Disclosure Schedule,
as the case may be) and are executed, delivered and effective as of the
Effective Time, all Contractual Obligations set forth in Section 3.9 of the
Disclosure Schedule shall have been satisfied and discharged as of the Public
Offering Closing Date,
(r) The representations, warranties, covenants and agreements of
the Principal Stockholder contained in this Agreement or otherwise made in
writing by or on behalf of the Principal Stockholder pursuant to this Agreement
or otherwise made in connection with the Merger and the Transactions shall be
true and correct in all material respects at and as of the Public Offering
Closing Date with the same force and effect as though made on and as of such
date except those which speak as of a certain date which shall continue to be
true and correct in all material respects as of such date and on the Public
Offering Closing Date. Each and all of the agreements and conditions to be
performed or satisfied by the Principal Stockholder under this Agreement at or
prior to the Public Offering Closing Date, including without limitation the
provisions set forth in Section 6.20, shall have been duly performed or
satisfied in all material respects, and the Principal Stockholder shall have
furnished VIALOG with such certificates and other documents evidencing the truth
of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as VIALOG or its counsel shall have
reasonably requested,
(s) The Principal Stockholder shall have executed and delivered to
VIALOG an employment and noncompetition agreement, substantially in the form of
Exhibit 7.2(s) and an irrevocable power of attorney substantially in the form of
- --------------
Exhibit 6.20(b),
(t) The individuals listed on Schedule 7.2(t) (or Section 7.2(t)
of the Disclosure Schedule, as the case may be) shall have executed and
delivered to VIALOG an Employment Arrangement substantially in the form of
Exhibit 7.2(t) and reasonably satisfactory to VIALOG and its counsel, and
(u) VIALOG shall have received a letter from its Accountants to
the effect that the Merger and the Transactions, the Participating Mergers and
the transactions contemplated thereby, and the acquisition of stock of any Other
Participating Company by VIALOG and the transactions contemplated thereby
together qualify as a transaction to which Section 351 of the Code applies and
will not result in any taxable income or gain or deductible loss to the Company,
VIALOG or VIALOG Merger Subsidiary.
7.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to effect the Merger will be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part to the extent permitted by Applicable Law:
(a) VIALOG shall have furnished the Company and the Principal
Stockholder with the favorable opinion dated the Public Offering Closing Date of
Mirick, O'Connell, DeMallie & Lougee, LLP, counsel to VIALOG and VIALOG Merger
Subsidiary, which may contain limitations and qualifications as to scope and law
and rely on certifications as to facts of
50
<PAGE>
officers of VIALOG and VIALOG Merger Subsidiary and public officials as are
reasonable and customary to opinions delivered in the type of business
transactions covered by this Agreement, addressing the following:
(i) Due organization, valid existence and good standing of
VIALOG and VIALOG Merger Subsidiary,
(ii) Due authorization and valid execution and delivery by,
and enforceability against, VIALOG and VIALOG Merger
Subsidiary of the Agreement except (A) as such
enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other
similar laws relating to or affecting the rights of
creditors and as the same may be subject to the effect
of general principles of equity and (B) that no opinion
need be expressed as to the enforceability of
indemnification provisions,
(iii) Due authorization, valid issuance, full payment and
non-assessability of and absence of preemptive rights
with respect to the shares of VIALOG Stock to be
received by the Stockholders,
(iv) The Registration Statement has become effective under
the Securities Act, and to such counsel's knowledge, no
stop order suspending its effectiveness has been issued
and no proceedings for that purpose have been
instituted or threatened by the SEC,
(v) The execution and delivery of the Agreement by VIALOG
and VIALOG Merger Subsidiary and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger by them do not, and
the performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the
consummation of the Merger by them will not, (A)
conflict with or violate the Organizational Documents
of VIALOG or VIALOG Merger Subsidiary, (B) conflict
with or violate any Applicable Law, or (C) to counsel's
knowledge, constitute a default under, or give to
others any right of termination, amendment,
acceleration, increased payments or cancellation of, or
result in the creation of a Lien on any property or
assets of VIALOG or VIALOG Merger Subsidiary pursuant
to, any Material Agreement to which either is a party
or by which either or any property or asset of either
is bound or affected,
(vi) No consents from or filings with any Governmental
Authority (other than filings under the HSR Act, if
applicable, and filings of certificates of merger) are
required for the execution and delivery
51
<PAGE>
of the Agreement by VIALOG and VIALOG Merger
Subsidiary and the performance of the Agreement
and all Collateral Documents executed or required
to be executed pursuant thereto or to consummate
the Merger and the consummation of the Merger by
them, and
(vii) The required filings with the Delaware Secretary
of State and the Connecticut Secretary of State
shall have been made, and a Certificate of Merger
shall have been issued by the Connecticut
Secretary of State for the Merger.
(b) Each of VIALOG and VIALOG Merger Subsidiary shall have
complied in all material respects with its agreements contained in this
Agreement, and the certificates to be furnished to the Company pursuant to this
Section shall be true, correct and complete. All Collateral Documents shall be
reasonably satisfactory in form, scope and substance to the Company and its
counsel, and the Company and its counsel shall have received all information and
copies of all documents, including records of corporate proceedings, which they
may reasonably request in connection therewith, such documents where appropriate
to be certified by proper corporate officers,
(c) The representations, warranties, covenants and agreements of
each of VIALOG and VIALOG Merger Subsidiary contained in this Agreement or
otherwise made in writing by it or on its behalf pursuant to this Agreement or
otherwise made in connection with the Merger and the Transactions shall be true
and correct in all material respects at and as of the Public Offering Closing
Date with the same force and effect as though made on and as of such date except
those which speak as of a certain date which shall continue to be true and
correct in all material respects as of such date and on the Public Offering
Closing Date; each and all of the agreements and conditions to be performed or
satisfied by each of VIALOG and VIALOG Merger Subsidiary under this Agreement at
or prior to the Public Offering Closing Date shall have been duly performed or
satisfied in all material respects; and each of VIALOG and VIALOG Merger
Subsidiary shall have furnished the Company with such certificates and other
documents evidencing the truth of such representations, warranties, covenants
and agreements and the performance of such agreements or conditions as the
Company shall have reasonably requested,
(d) If executed and delivered to VIALOG by the Merger Closing, the
employment agreements contemplated by Section 7.2(s) and for those persons
listed on Schedule 7.2(t) (or Section 7.2(t) of the Disclosure Schedule, as the
case may be) shall have been executed by the Surviving Corporation and delivered
by VIALOG to the indicated person,
(e) The filing and waiting period requirements (if applicable)
under the HSR Act relating to the consummation of the Merger and the
Participating Mergers shall have been complied with,
(f) VIALOG shall have obtained the insurance set forth in Section
6.7(c),
52
<PAGE>
(g) No Legal Action or other Claim shall be pending or threatened
at any time prior to or on the Public Offering Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or damages or
other relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
reasonable judgment of the Company have any Adverse Effect on VIALOG and its
Subsidiaries or the Company and its Subsidiaries taken as a whole or, assuming
consummation of the Merger and the Participating Agreements, VIALOG and its
Subsidiaries taken as a whole,
(h) The Company shall have received a letter from the Accountants
to the effect that the Merger and the Transactions qualify as a transaction to
which Section 351 of the Code applies for federal income tax purposes and the
exchange of the Shares for the Stock Merger Consideration, as contemplated
hereby, will not result in any taxable income or gain or deductible loss to the
common stockholders of the Company in their capacities as such common
stockholders to the extent of the Stock Merger Consideration, and
(i) The by-laws of VIALOG shall have been amended to remove the
right of first refusal contained therein and the Company shall have received
certification to its reasonable satisfaction that the VIALOG Stock to be issued
in the Merger will not be subject to any transfer restrictions or purchase
options under VIALOG's Certificate of Incorporation or by-laws.
ARTICLE
8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time, whether before or after approval of this Agreement, the Merger
and the Transactions as follows:
(a) by mutual consent of the Company and VIALOG.
(b) by either VIALOG or the Company,
(i) if any permanent injunction, decree or judgment by
any Authority preventing the consummation of the
Merger or the Public Offering shall have become final
and nonappealable, or if the terminating party
determines in its reasonable discretion that the
Merger has become inadvisable or impracticable by
reason of the institution by any Authority or other
Person of material Legal Action, or
(ii) if the Merger Closing shall not occur on or before
the Termination Date.
53
<PAGE>
(c) by the Company:
(i) in the event of a breach of this Agreement by VIALOG
or VIALOG Merger Subsidiary that has not been cured,
or if any representation or warranty of VIALOG or
VIALOG Merger Subsidiary shall have become untrue in
any material respect, in either case such that such
breach or untruth is incapable of being cured by the
Effective Date or will prevent or delay consummation
of the Merger by or beyond the Termination Date, or
(ii) in the event the Public Offering is not a firm
commitment in the manner and upon the terms
described in Section 5.10.
(d) by VIALOG:
(i) if the Merger and the Transactions fail to receive
the approval required by Applicable Law, by vote (or
to the extent permitted by Applicable Law, by
consent) of the Stockholders, or if any Stockholder
entitled to vote (or entitled to appraisal rights)
with respect to the Merger dissents from the Merger
and the Transactions,
(ii) if it shall determine in its reasonable discretion
that the Merger or the Transactions has or have
become inadvisable or impracticable by reason of the
threat by any Authority, or any other Person of
material Legal Action or proceedings against either
or both of the Company and VIALOG (or VIALOG Merger
Subsidiary, or a Subsidiary of any of them), it
being understood and agreed that a written request
by governmental authorities for information with
respect to the Transactions, which information could
be used in connection with such Legal Action or
proceedings, may be deemed by VIALOG to be a threat
of material Legal Action or proceedings,
(iii) if arrangements reasonably satisfactory to VIALOG
cannot be made for (A) the assumption by the
Surviving Corporation substantially on the terms and
conditions in effect as of the date of this
Agreement, or for the prepayment without premium, of
all outstanding Indebtedness of the Company for
borrowed money, or (B) the Public Offering,
(iv) if the business, assets, prospects, management,
condition (financial or other) or results of
operation of the Company or the Company and its
Subsidiaries taken as a whole shall have been
Adversely Affected, whether by reason of changes or
developments in the economy or industry generally or
operations in the ordinary course of business or
otherwise,
54
<PAGE>
(v) if the Company shall not have received, without the
imposition of any burdensome condition or material
cost, all Governmental Authorizations and Private
Authorizations, or if any Authority or other Person
shall withdraw any such Governmental Authorizations
or Private Authorizations,
(vi) if the terms of this Agreement shall not have been
approved by the Underwriter,
(vii) if the Company shall have suffered any material
damage, destruction or loss (whether or not covered
by insurance) or any material acquisition or taking
of property by any Authority, or if it or any of its
Subsidiaries shall have suffered a material work
stoppage, or
(viii) in the event of a material breach of this Agreement
by the Company or the Principal Stockholder that has
not been cured, or if any representation or warranty
of the Company or the Principal Stockholder shall
have become untrue in any material respect, so that
such breach or untruth is incapable of being
substantially cured by the Effective Date or will
prevent or delay consummation of the Merger by or
beyond the Termination Date, or if any condition to
VIALOG's obligation to close under this Agreement
shall not have been satisfied.
(e) by VIALOG if (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions, or shall have resolved to do any of
the foregoing (it being agreed and understood that nothing in this clause
(i) obliges the Company to effect the Merger if the conditions set forth in
Section 7.1 and Section 7.3 are not satisfied or limits the rights of the
Company to consent to terminate this Agreement pursuant to Section 8.1(a) or to
terminate the Agreement pursuant to Section 8.1(b) or Section 8.1(c)), (ii) the
Board of Directors of the Company shall have recommended or resolved to
recommend to the Stockholders an Other Transaction, (iii) the Company, the Board
of Directors of the Company or the Principal Stockholder shall have taken any
action in contravention of Sections 6.6 or 6.13 or (iv) the Principal
Stockholder shall fail to vote to approve and adopt this Agreement, the Merger
and the Transactions.
8.2 Effect of Termination. Except as provided in Sections 2.2(a), 2.2(d),
---------------------
6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void, there shall
be no liability on the part of any Party, or any of their respective officers or
directors, to the other and all rights and obligations of any Party shall cease;
provided, however, that such termination will not relieve any Party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
55
<PAGE>
8.4 Amendment. This Agreement may be amended by the Parties by action
---------
taken by or on behalf of their respective Boards of Directors and by the
Principal Stockholder at any time prior to the Effective Time; provided,
however, that, after approval of this Agreement and the Merger by the
Stockholders, no amendment, which under Applicable Law may not be made without
the approval of the Stockholders, may be made without such approval. This
Agreement may not be amended to impose any additional material obligation on a
Party or to burden or limit a material right of such Party except by an
agreement in writing signed by the Party so affected.
8.5 Waiver. At any time prior to the Effective Time, except to the extent
------
Applicable Law does not permit, either VIALOG or VIALOG Merger Subsidiary and
the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other, subject, however, to the terms and
conditions of Section 8.1, (b) waive any inaccuracies in the representations and
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement and (c) waive compliance by the other with any of the
agreements, covenants or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an agreement in writing
signed by the Party or Parties to be bound thereby.
8.5 Fees, Expenses and Other Payments. If this Agreement is terminated,
---------------------------------
then all costs and expenses incurred by the Parties in connection with this
Agreement, the Merger and the Transactions and in connection with compliance
with Applicable Law and Contractual Obligations as a consequence hereof and
thereof, including fees and disbursements of counsel, financial advisors and
accountants, will be borne solely and entirely by the Party which has incurred
such costs and expenses (with respect to such Party, its "Expenses"). VIALOG
acknowledges and agrees that the Company has disclosed that it is obligated and
will become further obligated for Expenses (including fees and expenses of its
counsel, its independent accountants, and its financial advisor) incurred by it
in connection with this Agreement, the Merger and the Transactions. It is
understood and agreed that certain of such Expenses may be paid by the Company
prior to the execution of this Agreement, and VIALOG agrees to refrain from
taking any action which would prevent or delay the payment of reasonable
Expenses by the Company. Any Expenses incurred and not paid will constitute
liabilities of the Company. VIALOG agrees to take all action necessary to cause
the Surviving Corporation to pay promptly any of the foregoing reasonable
Expenses incurred, but not paid, by the Company prior to the Effective Time.
8.6 Effect of Investigation. The right of any Party to terminate this
-----------------------
Agreement pursuant to Section 8.1 will remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Party, any
Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
56
<PAGE>
ARTICLE
9
FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON VIALOG STOCK
9.1 Shares not Registered. The Principal Stockholder acknowledges that
---------------------
the shares of VIALOG Stock to be delivered to Stockholders pursuant to this
Agreement have not and will not be registered under the Securities Act (except
pursuant to the Registration Rights Agreement) and may not be resold except
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from registration. The Principal Stockholder represents
and warrants that the VIALOG Stock to be acquired by the Stockholders pursuant
to this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
9.2 Economic Risk; Sophistication. The Principal Stockholder represents
-----------------------------
and warrants that the Principal Stockholder and the other Stockholders are able
to bear the economic risk of an investment in the VIALOG Stock acquired pursuant
to this Agreement and can afford to sustain a total loss on such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the VIALOG Stock. The Principal Stockholder acknowledges that
prior to the Merger Closing VIALOG will have furnished a copy of the Prospectus
to the Stockholders and at the Merger Closing the Stockholders will be required
to confirm that VIALOG has responded to due diligence and information requests
made on behalf of the Company similar in extent and scope to the due diligence
requests made to the Company by VIALOG. The Principal Stockholder will at that
time confirm that the Principal Stockholder has had an adequate opportunity to
ask questions and receive answers from the officers of VIALOG (and, in the case
of the other Stockholders, to ask questions and receive answers from the
Principal Stockholder) concerning any and all matters relating to this
Agreement, the Merger, the Transactions, or Other Participating Companies, the
Participating Agreements and the Registration Statement, and have read and
understood the matters described in the copies of the Registration Statement
provided to them including, without limitation, the background and experience of
the officers and directors of VIALOG, the plans for the operations of the
business of VIALOG, the potential dilutive effects of the Public Offering and
future acquisitions and projected uses of the proceeds of the Public Offering.
The Principal Stockholder will confirm at the Merger Closing that the Principal
Stockholder has asked any and all questions in the nature described in the
preceding sentence or otherwise of interest in connection with the exchange of
VIALOG Stock for Shares as provided in this Agreement, and all questions have
been answered to the Principal Stockholder's satisfaction.
9.3 Restrictions on Resale; Legends. The Principal Stockholder agrees,
-------------------------------
and the Company will use commercially reasonable efforts to cause each other
Stockholder to agree, not to offer, sell, assign, exchange, transfer, encumber,
pledge, distribute or otherwise dispose of the VIALOG Stock to be acquired by
them pursuant to this Agreement except after full compliance
57
<PAGE>
with all of the applicable provisions of the Securities Act and applicable state
securities Laws, and any attempt by a Stockholder to do so will be treated as
ineffective for all purposes. The certificates of VIALOG Stock issued pursuant
to Section 2.1(a) of this Agreement will bear the following legend substantially
as set forth:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED OR OTHERWISE DISPOSED OF WITHOUT (1) REGISTRATION
UNDER THE ACT AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION
(SATISFACTORY TO VIALOG) OF COUNSEL (SATISFACTORY TO VIALOG)
THAT REGISTRATION IS NOT REQUIRED.
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification.
---------------
(a) Except as provided in Section 11.1, the Principal Stockholder
agrees to make whole, indemnify and hold VIALOG, VIALOG Merger Subsidiary, the
Surviving Corporation, the Underwriters and their respective Affiliates, agents,
successors and assigns (collectively, the "VIALOG Indemnified Parties") harmless
as a result of, from or against:
(i) any and all Claims of the VIALOG Indemnified Parties
or other Persons based upon, attributable to or
resulting from any material inaccuracy in or material
breach of any representation or warranty on the part
of any one or more of the Company or the Stockholders
under this Agreement or any Collateral Document;
(ii) any and all Claims of the VIALOG Indemnified Parties
or other Persons based upon, attributable to or
resulting from the material breach of any covenant or
other agreement on the part of any one or more of the
Company or the Stockholders under this Agreement or
any Collateral Document;
(iii) any and all other material Claims of the VIALOG
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(b) Except as provided in Section 11.1, VIALOG agrees to make
whole, indemnify and hold the Principal Stockholder (and each Stockholder that
delivers the agreements
58
<PAGE>
contemplated by Section 6.4) and their respective Affiliates, agents, heirs,
successors and assigns (collectively, the "Company Indemnified Parties")
harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified
Parties or other Persons based upon, attributable to
or resulting from any material inaccuracy in or
material breach of any representation or warranty on
the part of VIALOG or VIALOG Merger Subsidiary under
this Agreement or any Collateral Document;
(ii) any and all Claims of the Company Indemnified
Parties or other Persons based upon, attributable to
or resulting from the material breach of any
covenant or other agreement on the part of VIALOG or
VIALOG Merger Subsidiary; and
(iii) any and all other material Claims of the Company
Indemnified Parties or other Persons incident to the
foregoing or to the enforcement of this Section.
(c) No Principal Stockholder will be required to pay to the VIALOG
Indemnified Parties an aggregate amount in excess of an amount equal to the cash
received by such Stockholder as the cash portion of the Exchange Merger
Consideration pursuant to Sections 2.1(a) and 2.4, cash received by such
Stockholder pursuant to Section 2.1(d) plus, with respect to shares of VIALOG
Stock issued to such Stockholder as the stock portion of the Exchange Merger
Consideration pursuant to Section 2.1(a) and Section 2.4, the Indemnity Value
thereof. VIALOG will not be required to pay any Company Indemnified Party an
aggregate amount in excess of the Indemnity Value of the shares of VIALOG Stock
issued to such Company Indemnified Party plus the amount of cash delivered to
such Company Indemnified Party pursuant to Section 2.1(a), Section 2.1(d) and
Section 2.4. No Claim for indemnification may be commenced beyond the period
applicable to such Claim set forth in Section 11.1.
(d) Notwithstanding the foregoing, no Principal Stockholder will
be required to pay any amount for indemnification to the VIALOG Indemnified
Parties except to the extent the aggregate amount of Claims under this Section
10.1 asserted collectively against the Principal Stockholder exceeds the greater
of $100,000 or one quarter of one percent (.0025%) of the sum of (i) the product
of (x) the aggregate number or shares of VIALOG Stock into which the Shares of
the Stockholders will be converted as set forth in Sections 2.1(a) and 2.4 and
(y) the Offering Price, plus (ii) the total amount of cash paid to all
Stockholders pursuant to Sections 2.1(a), 2.1(d) and 2.4.
10.2 Procedures Concerning Claims by Third Parties; Payment of Damages;
------------------------------------------------------------------
etc.
---
(a) If any Legal Action is instituted or asserted by any person
other than such indemnified party in respect of which payment may be sought
hereunder, the indemnified party will reasonably and promptly cause written
notice of the assertion of any Legal Action of which it has knowledge which is
covered by the indemnities under Section 10.1 to be forwarded to the
indemnifying party. In such event, the indemnifying party will have the right,
at its sole option
59
<PAGE>
and expense, to be represented by counsel of its choice, which must be
reasonably satisfactory to the indemnified party, and to defend against,
negotiate, settle or otherwise deal with any Legal Action which related to any
Claims instituted or asserted by any Person other than such indemnified party
and indemnified against hereunder; provided, however, that no settlement thereof
will be made without the prior written consent of the indemnified party, which
consent will not be unreasonably withheld, conditioned or delayed. If the
indemnifying party elects to defend against, negotiate, settle or otherwise deal
with any Legal Action which related to any such Claims, it will within thirty
(30) days of receipt of said notice (or sooner, if the nature of the Legal
Action so requires) notify in writing the indemnified party of its intent to do
so. If the indemnifying party elects not to defend against, negotiate, settle or
otherwise deal with any Legal Action which relates to any such Claims, fails to
notify the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Claims under this
Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Legal Action. If the indemnified party defends any
Legal Action, then the indemnifying party will reimburse the indemnified party
for reasonable Claims incurred in defending such Legal Action upon a final
determination that the indemnified party was entitled to indemnity hereunder.
Neither the indemnifying party nor the indemnified party may settle any Legal
Action without the prior written consent of the other party, which consent will
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
will assume the defense of any Legal Action instituted or asserted by any Person
other than an indemnified party, the indemnified party may participate, at such
party's own expense, in the defense of such Legal Action.
(b) After any final judgment or award will have been rendered by a
court, arbitration board (which may be engaged upon the consent of each of the
indemnifying party and the indemnified parties) or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement will have been consummated, or the indemnified party
and the indemnifying party will have arrived at a mutually binding agreement
with respect to a Legal Action hereunder, the indemnifying party will pay all of
the sums due and owing to the indemnified party by wire transfer of immediately
available funds, or by delivery of shares of VIALOG Stock, as permitted pursuant
to the definition of Indemnity Value in Article 12, within five business days
after the date of notice of such judgment or award conditioned, however, on the
indemnifying party having been finally determined by the parties' agreement or
by final court or arbitration that the indemnifying party is obligated hereunder
to make said payment and subject to the provisions of this Article 10.
(c) The failure of the indemnified party to give reasonably prompt
notice of any Legal Action instituted or asserted by any Person other than such
indemnified party and indemnified against hereunder will not release, waive or
otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss or
material prejudice as a result of such failure.
(d) No legal action to enforce a Claim for indemnity will be
stayed or dismissed for failure to join one or more indemnifying parties or to
permit an indemnifying party to cross-claim against another indemnifying party,
nor will the failure to join as indemnifying party be
60
<PAGE>
deemed grounds for preventing a separate or subsequent Legal Action to enforce a
Claim for indemnification against such party, each such Legal Action being
deemed a separate and independent Claim for indemnification. A Legal Action to
enforce a Claim for indemnity may be instituted in the Commonwealth of
Massachusetts, or the jurisdiction to which each Party consents, or any other
state having jurisdiction with respect thereto.
ARTICLE
11
GENERAL PROVISIONS
11.1 Effectiveness of Representations; etc.
-------------------------------------
(a) Regardless of any investigation made by or on behalf of any
other party hereto, any Person controlling such party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement, the representations, warranties, covenants and agreements contained
in Article 3, Article 4 and Article 5 will survive the Merger and remain
operative and in full force and effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until
sixty (60) days after the applicable statute of
limitations, as the same may be extended from time to
time, has terminated;
(ii) Section 3.23, until the sixth anniversary date of
this Agreement; and
(iii) all other Sections, until VIALOG (or its successor)
files an annual report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended,
as prescribed thereunder on Form 10-K covering at
least two full fiscal years of operations by VIALOG,
but in no event more than thirty months after the
Public Offering Closing Date (the "Second Annual
Filing Date").
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements contained in Article 3,
Article 4 and Article 5, the representations, warranties, covenants and
agreements of each Party will survive and remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other Party,
any Person controlling any such Party or any of their respective Representatives
whether prior to or after the execution and consummation of this Agreement.
11.2 Notices. All notices and other communications given or made pursuant
-------
to this Agreement will be in writing and will be deemed to have been duly given
or made as of the date delivered or transmitted, and will be effective upon
receipt, if delivered personally, mailed by certified mail (postage prepaid,
return receipt requested) to the Parties at the following addresses or sent by
electronic transmission to the fax number specified below:
61
<PAGE>
(a) If to VIALOG or VIALOG Merger Subsidiary:
VIALOG Corporation
Attention: Glenn Bolduc, President
46 Manning Road
Billerica, MA 01821
Fax: (508) 667-1944
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, LLP
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
(b) If to the Company:
Communication Development Corporation
Attention: Patti R. Bisbano or Maurya Suda
30 Main Street, Suite 400
Danbury, CT 01680
with a copy to:
Michael Ronan, Esq.
Law Offices of Michael Ronan
30 Main Street, Suite 500
Danbury, CT 01680
Fax: (203) 778-9623
Any address for notice as herein above provided may be changed by the
party or person for whom the change is made by giving notice of said change in
the manner provided in this Section.
11.3 Headings. The headings contained in this Agreement are for reference
--------
purposes only and will not affect in any way the meaning and interpretation of
this Agreement.
11.4 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner Adverse to any Party. Upon such
determination that any term or other provisions is invalid, illegal or incapable
of being enforced, the Parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by
62
<PAGE>
Applicable Law in an acceptable manner to the end that the Transactions are
fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement (together with the Disclosure
----------------
Schedule, the Confidentiality Agreement and the other Collateral Documents
delivered in connection herewith), constitutes the entire agreement of the
Parties and supersedes all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof.
11.6 Assignment. This Agreement may not be assigned by operation of law or
----------
otherwise and any purported assignment will be null and void, provided that
VIALOG may cause a wholly owned Subsidiary of VIALOG or Holding Company to be
substituted for VIALOG or VIALOG Merger Subsidiary as the party to the Merger
and may, in addition, assign the other rights, but not its obligations,
including, without limitation, its obligation for payment of the Aggregate
Merger Consideration, under this Agreement to such Subsidiary or Holding
Company.
11.7 Parties in Interest. This Agreement will be binding upon and inure
-------------------
solely to the benefit of each Party, and nothing in this Agreement, express or
implied (other than the provisions of Section 6.7, which provisions are intended
to benefit and may be enforced by the beneficiaries thereof), is intended to or
will confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
11.8 Governing Law. Except to the extent that Delaware Law may be
-------------
applicable to the Merger, this Agreement will be governed by, and construed in
accordance with, the substantive laws of the Commonwealth of Massachusetts
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
11.9 Enforcement of the Agreement. Each Party recognizes and agrees that
----------------------------
each other Party's remedy at law for any breach of the provisions of this
Agreement would be inadequate and agrees that for breach of such provisions,
such Party will, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance to the
extent permitted by Applicable Law. Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
Nothing herein contained will be construed as prohibiting a Party from pursuing
any other remedies available to such Party for any breach or threatened breach
hereof or failure to take or refrain from any action as required hereunder to
consummate the Merger and carry out the Transactions.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
63
<PAGE>
11.11 Disclosure Supplements. From time to time prior to the Public
----------------------
Offering Closing Date, the Company will promptly supplement or amend the
Disclosure Schedule delivered in connection with this Agreement, with respect to
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby; provided, however, that no
supplement or amendment to the Disclosure Schedule that constitutes or reflects
a Material Adverse Change to the Company may be made without the prior written
consent of VIALOG.
ARTICLE
12
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural, and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meanings when used in the Disclosure Schedule and each Collateral
Document, notice, certificate, communication, opinion, or other document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
Accountants means KPMG Peat Marwick, LLP.
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") means, with
respect to the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, any Event which could reasonably be expected to
(a) adversely affect the validity or enforceability of this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, or (b) adversely affect the business, operations, management,
properties or the condition, (financial or other), or results of operation of
the Company or the Company and its Subsidiaries taken as a whole, VIALOG or
VIALOG Merger Subsidiary, as the case may be, or (c) impair the Company's,
VIALOG's or VIALOG Merger Subsidiary's ability to fulfill its obligations under
the terms of this Agreement or any Collateral Document executed or required to
be executed pursuant hereto or thereto, or (d) adversely affect the aggregate
rights and remedies of VIALOG or the Company under this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, in all cases, unless otherwise specifically set forth, in a material
respect or manner or to a material degree.
Affiliate or Affiliated means, with respect to any Person, (a) any
other Person at the time directly or indirectly controlling, controlled by or
under direct or indirect common control with
64
<PAGE>
such Person, (b) any other Person of which such Person at the time owns, or has
the right to acquire, directly or indirectly, twenty percent (20%) or more of
any class of the capital stock or beneficial interest, (c) any other Person
which at the time owns, or has the right to acquire, directly or indirectly,
twenty percent (20%) or more of any class of the capital stock or beneficial
interest of such Person, (d) any executive officer or director of such Person,
(e) with respect to any partnership, joint venture or similar Entity, any
general partner thereof, and (f) when used with respect to an individual, will
include any member of such individual's immediate family or a family trust.
Aggregate Equity means such number of shares of Company Stock as shall
equal the aggregate of (a) the Shares, and (b) all shares of Company Stock
otherwise issuable based upon the affirmative election to exercise or convert
outstanding Option Securities and/or Convertible Securities pursuant to Section
2.4.
Aggregate Merger Consideration will have the meaning given to it in
Section 2.1(a).
Aggregate Cash Merger Consideration will have the meaning given to it
in Section 2.1(a).
Aggregate Stock Merger Consideration will have the meaning given to it
in Section 2.1(a).
Agreement means this Agreement as originally in effect, including
unless the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits to this Agreement, and as the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
Applicable Law means any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or to any of its business or
operations is subject or any of its property or assets is bound.
Authority means any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
BCA will have the meaning given to it in the Preamble.
Benefit Arrangement means any material benefit arrangement that is not
a Plan, including (a) any employment or consulting agreement, (b) any
arrangement providing for insurance coverage or workers' compensation benefits,
(c) any incentive bonus or deferred bonus arrangement, (d) any arrangement
providing termination allowance, severance or similar
65
<PAGE>
benefits, (e) any equity compensation plan, (f) any deferred compensation plan,
and (g) any compensation policy and practice.
Cash Merger Consideration will have the meaning given to it in Section
2.1(a).
Certificate will have the meaning given to it in Section 2.1(a).
Claims means any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all reasonable fees, costs, expenses and disbursements
(including without limitation attorneys' fees, costs and expenses) relating to
any of the foregoing.
COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
Code will have the meaning given to it in the Preamble.
Collateral Document means any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Principal Stockholder, on the one hand, or
VIALOG and VIALOG Merger Subsidiary on the other, under this Agreement and with
respect to opinions to be delivered pursuant to this Agreement, except to the
extent of a Party's actual knowledge, the Company and the Principal Stockholder
or VIALOG and VIALOG Merger Subsidiary, as the case may be, assume no
responsibility for the authority of or genuineness of signatures relating to the
others as counterparts or their representations, warranties, covenants and
agreements.
Company will have the meaning given to it in the Preamble.
Company Indemnified Parties will have the meaning given to it in
Section 10.1(b).
The Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or the Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after reasonable investigation, will
have reason to believe and will believe that the subject representation or
warranty is true and accurate as stated.
Company Stock will have the meaning given to it in Section 2.1(a).
Confidentiality Letter will have the meaning given to it in Section
6.1(c).
Contract or Contractual Obligation means any term, condition,
provision, representation, warranty, agreement, covenant, undertaking,
commitment, indemnity or other obligation set forth
66
<PAGE>
in the Organizational Documents of the obligee or which is outstanding or
existing under any instrument, contract, lease or other contractual undertaking
(including without limitation any instrument relating to or evidencing any
Indebtedness) to which the obligee is a party or by which it or any of its
business is subject or property or assets is bound.
Control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
Convertible Securities means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or existence or
non-existence of some other Event, or both.
DBCL will have the meaning given to it in the Preamble.
Disclosure Schedule means the disclosure schedules dated as of the date
of this Agreement delivered by the Company to VIALOG and VIALOG to the Company.
Distribution means, with respect to the Company or any of its
Subsidiaries: (a) the declaration or payment of any dividend (except dividends
payable in common stock of the Company) on or in respect of any shares of any
class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary, (b) the
purchase, redemption or other retirement of any shares of any class of capital
stock of the Company or any shares of capital stock of any Subsidiary owned by a
Person other than the Company or a Subsidiary, and (c) any other distribution on
or in respect of any shares of any class of capital stock of the Company or any
shares of capital stock of any Subsidiary owned by a Person other than the
Company or a Subsidiary.
Effective Date means the effective date of the Registration Statement
and commencement of the Public Offering as authorized by the SEC.
Effective Time will have the meaning given to it in Section 1.4.
Employment Arrangement means, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for
67
<PAGE>
deferred compensation, profit-sharing, bonuses, stock options, stock purchase or
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits, or any collective bargaining or other labor
agreement, whether or not any of the foregoing is subject to the provisions of
ERISA.
Encumber means to suffer, accept, agree to or permit the imposition of
a Lien.
Entity means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
Environmental Laws means any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, mining or reclamation or mined land, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes. Environmental
Laws include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), the Hazardous Material
-- ---
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
-- ---
and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42
-- ---
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
Section 2601 et seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C.
-- ---
Section 651 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
-- ---
U.S.C. Section 136 et seq.), and the Surface Mining Control and Reclamation Act
-- ---
of 1977 (30 U.S.C. Section 1201 et seq.), and any analogous future federal, or
-- ---
present or future state, local or foreign, Laws, and the rules and regulations
promulgated thereunder all as from time to time in effect, and any reference to
any statutory or regulatory provision will be deemed to be a reference to any
successor statutory or regulatory provision.
Environmental Permit means any Governmental Authorization required by
or pursuant to any Environmental Law.
Environmental Requirements means all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
68
<PAGE>
(a) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of, or the
remediation, emission, discharge or release into the air,
surface water, groundwater or land of, Hazardous Materials;
(b) the protection of the health and safety of employees or the
public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA means the Employee Retirement Security Act of 1974, and the rules
and regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision will be deemed to be a reference to any successor statutory or
regulatory provision.
ERISA Affiliate means any Person that is treated as a single employer
with the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
Event means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Exchange Agent will have the meaning given to it in Section 2.2(a).
Exchange Fund will have the meaning given to it in Section 2.2(a).
Exchange Merger Consideration will have the meaning given to it in
Section 2.1(a).
Expenses will have the meaning set forth in Section 8.5.
Final Determination (a) means with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations; and (b) will include the payment of Tax by
the Company or whichever Party is responsible for payment of such Tax under
Applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the other party is notified of such payment and the
party that is responsible for such Tax under this Agreement determines that no
action should be taken to recoup such payment from such Taxing Authority.
Financial Statements will have the meaning given to it in Section
3.2(a).
69
<PAGE>
GAAP means generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
each applicable Authority.
Governmental Filings means all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with each applicable Authority.
Guaranty or Guaranteed means any agreement, undertaking or arrangement
by which the Company or any of its Subsidiaries, VIALOG or VIALOG Merger
Subsidiary, as the case may be, guarantees, endorses or otherwise becomes or is
liable, directly or indirectly, upon any Indebtedness of any other Person
including without limitation the payment of amounts drawn down by beneficiaries
of letters of credit (other than by endorsements of negotiable instruments for
deposit or collection in the ordinary course of business). The amount of the
obligor's obligation under any Guaranty will be deemed to be the outstanding
amount (or maximum permitted amount, if larger) of the Indebtedness directly or
indirectly guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials means any substance (in whatever state or matter):
(a) the presence of which requires investigation or remediation under any
Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated by
any Authority; (d) that contains or consists of petroleum or petroleum products,
or (e) that contains or consists of PCBs, asbestos, or urea formaldehyde foam
insulation.
Holding Company means a corporation established by or on behalf of
VIALOG into which VIALOG merges or assigns its rights and obligations hereunder
if the Accountants so advise for purpose of a tax free incorporation of all
parties provided the relative ownership rights of all parties remain the same.
HSR Act means the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
and the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision.
Indebtedness means, with respect to the Company or any of its
Subsidiaries or VIALOG or VIALOG Merger Subsidiary, as the case may be, (a) all
items, except items of capital stock or of surplus or of general contingency or
deferred tax reserves or any minority interest in any Subsidiary to the extent
such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of the Company or VIALOG, which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of the Company or such Subsidiary or VIALOG or
VIALOG Merger Subsidiary, (b) all obligations
70
<PAGE>
secured by any Lien to which any property or asset owned or held by the Company
or any Subsidiary or VIALOG or any VIALOG Merger Subsidiary is subject, whether
or not the obligation secured thereby will have been assumed, and (c) to the
extent not otherwise included, all Contractual Obligations of the Company or any
Subsidiary or VIALOG or any VIALOG Merger Subsidiary constituting capitalized
leases and all obligations of the Company or any Subsidiary or VIALOG or any
VIALOG Merger Subsidiary with respect to Leases constituting part of a sale and
leaseback arrangement.
Indemnity Value means with respect to each share of VIALOG Stock issued
to a Stockholder pursuant to the Merger, the Offering Price. In satisfaction of
a Claim under this Agreement for which a stockholder is liable to VIALOG, until
the Second Annual Filing Date, and in lieu of all cash, such Stockholder may
tender shares of VIALOG Stock valued at the Offering Price and cash in a ratio
not exceeding fifty-one (51) to forty-nine (49), for all payments by such
Stockholder, and after the Second Annual Filing Date, cash and shares of VIALOG
Stock in such proportion as such Stockholder determines.
Intangible Assets means all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
Law means any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ of
any Authority, domestic of foreign; (b) the common law, or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation; including, in each such case or instance,
any interpretation, directive, guideline or request, whether or not having the
force of law including, in all cases, without limitation any particular section,
part or provision thereof.
Lease means any lease of property, whether real, personal or mixed, and
all amendments thereto.
Legal Action means any litigation or legal or other actions,
arbitrations, counterclaims, investigations, proceedings, requests for material
information by or pursuant to the order of any Authority, or suits, at law or in
arbitration, equity or admiralty commenced by any Person, whether or not
purported to be brought on behalf of a party hereto affecting such party or any
of such party's business, property or assets.
Lien means any of the following: mortgage, lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building to use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any
71
<PAGE>
financing lease involving substantially the same economic effect as any of the
foregoing; the filing of any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction; restriction on sale, transfer,
assignment, disposition or other alienation; or any option, equity, claim or
right of or obligation to, any other Person, of whatever kind and character.
Margin Rules means Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
Material or Materiality for the purposes of this Agreement, will,
unless specifically stated to the contrary, be determined without regard to the
fact that various provisions of this Agreement set forth specific dollar
amounts.
Material Agreement or Material Commitment means, with respect to the
Company or any of its Subsidiaries, or VIALOG or VIALOG Merger Subsidiary any
Contractual Obligation which (a) was not entered into in the ordinary course of
business, (b) was entered into in the ordinary course of business which (i)
involves the purchase, sale or lease of goods or materials or performance of
services aggregating more than Twenty-Five Thousand Dollars ($25,000), (ii)
extends for more than three (3) months, or (iii) is not terminable on thirty
(30) days or less notice without penalty or other payment, (c) involves
Indebtedness for money borrowed in excess of One Hundred Thousand Dollars
($100,000), (d) is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement, or (e) would
account for more than five percent (5%) of purchases or sales made by the
Company and its Subsidiaries for the year ended December 31, 1996.
Merger will have the meaning given to it in the Preamble.
Merger Closing will have the meaning given to it in Section 1.3.
Merger Consideration will have the meaning given to it in Section
2.1(a).
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
Net Shares will have the meaning given to it in Section 2.2(a).
Offering Price means $11.50 per share of VIALOG Stock.
Option Securities means all rights, options and warrants, all calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
72
<PAGE>
Organizational Documents means, with respect to a Person which is a
corporation, its charter, its by-laws, and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock, and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreement among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
Other Participating Companies mean those companies or entities engaged
in the teleconferencing business who execute agreements and plans of
reorganization, stock purchase agreements or asset purchase agreements with
VIALOG which agreements close contemporaneously with this Agreement.
Other Transaction means a transaction or series of related transactions
(other than the Merger) resulting in (a) any change in control of the Company,
(b) any merger or consolidation of the Company or any of its Subsidiaries,
regardless of whether the Company or such Subsidiary is the surviving Entity,
(c) any tender offer or exchange offer for, or any acquisition of, any
securities of the Company, or (d) any sale or other disposition of assets of the
Company of any Subsidiary not otherwise permitted under Section 3.18.
Participating Agreement will have the meaning given to it in the
Preamble.
Participating Companies will mean the Company and the Other
Participating Companies.
Participating Mergers means the mergers of each of the Other
Participating Companies with a Subsidiary of VIALOG pursuant to a Participating
Agreement.
Participating Stockholders means the Persons receiving VIALOG Stock
pursuant to the Participating Mergers.
Party means any natural individual or any Entity that has executed this
Agreement.
PBGC means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Person means any natural individual or any Entity.
Plan means any "employee benefit plan" as defined in Section 3(3) of
ERISA (whether or not terminated) which is (or was in the case of a frozen or
terminated plan) maintained by the Company or any Subsidiary or VIALOG or VIALOG
Merger Subsidiary, and with respect to which the Company, such Subsidiary or
VIALOG or VIALOG Merger Subsidiary or, in the case of any such plan subject to
Title IV of ERISA, an ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, other than a Multiemployer Plan.
Principal Stockholder will have the meaning given to it in the
Preamble.
73
<PAGE>
Private Authorizations means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than each Authority) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
Prospectus means the form of prospectus first filed by VIALOG in the
Registration Statement, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the Public
Offering.
Public Offering will have the meaning given to it in the Preamble.
Public Offering Closing Date means the date on which the Public
Offering is closed.
Registration Rights Agreement will have the meaning given to it in
Section 6.4.
Registration Statement means the registration statement (including the
Prospectus, exhibits, financial statements and schedules included therein), and
all amendments thereof (including post-effective amendments and any registration
statement filed under Rule 462(b) with respect to the Public Offering), filed
under the Securities Act registering the shares of VIALOG Stock to be sold in
the Public Offering in accordance with the terms and conditions of the
Underwriting Agreement.
Representatives of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
SEC means the Securities and Exchange Commission of the United States
or any successor Authority.
Second Annual Filing Date will have the meaning given to it in Section
11.1(a)(iii).
Securities Act means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations.
Shares will have the meaning given to it in Section 2.1(a).
Special Meeting will have the meaning given to it in Section 1.2(a).
Stock Merger Consideration will have the meaning given to it in Section
2.1(a).
Stockholders means the Principal Stockholder and all other Persons
entitled to Merger Consideration (or who would be entitled thereto but for their
dissent from the Merger) pursuant to Sections 2.1(a) or (to the extent Persons
holding Option Securities or Convertible Securities
74
<PAGE>
exercise their rights to acquire Shares prior to the Effective Time, from and
after the time they acquire such Shares) Section 2.4.
Subsidiary means, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Surviving Corporation will have the meaning given to it in Section 1.1.
Tax (and "Taxable", which means subject to Tax), means with respect to
the Company or any of its Subsidiaries or VIALOG or any VIALOG Merger
Subsidiary, (a) all taxes (domestic or foreign), including without limitation
any income (net, gross or other including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, gains, sales, use, leasing, lease, user, ad valorem, transfer,
recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by the Company or
any of its Subsidiaries, or VIALOG or any VIALOG Merger Subsidiary, payroll,
employment, unemployment, social security, excise severance, stamp, occupation,
premium, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, levies, assessments, charges, penalties, addition to
tax or additional amount imposed by any Taxing Authority, (b) any joint or
several liability of the Company or any of its Subsidiaries or VIALOG or any
VIALOG Merger Subsidiary with any other Person for the payment of any amounts of
the type described in (a), and (c) any liability of the Company or any of its
Subsidiaries or VIALOG or any VIALOG Merger Subsidiary for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
Tax Claim means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
Tax Return or Returns means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority means any Authority responsible for the imposition of
any Tax.
Termination Date means (a) March 15, 1997 unless on or prior to that
date the Registration Statement is filed, in which case such date will
automatically be extended to June 30, 1997, or (b) such date after March 15,
1997 as to which the parties agree.
Transactions means the other transactions contemplated by this
Agreement or the Merger or by any Collateral Document executed or required to be
executed in connection herewith or therewith, but will not include the
Participating Mergers, the registration of sale of VIALOG Stock pursuant to the
Registration Statement or any credit facilities between VIALOG and any bank
described in the Registration Statement.
75
<PAGE>
Transmittal Documents will have the meaning given to it in Section
2.2(b).
Underwriter means any two of Smith Barney Inc., Salomon Brothers Inc,
Donaldson, Lufkin & Jenrette Securities Corporation or comparable firm as lead
underwriters and any other Person who executes the Underwriting Agreement as an
underwriter of VIALOG Stock in the Public Offering.
Underwriting Agreement means the firm commitment underwriting agreement
between VIALOG and the Underwriter to be filed as an exhibit to the Registration
Statement and to be executed on or about the Effective Date.
VIALOG will have the meaning given to it in the Preamble.
VIALOG Indemnified Parties will have the meaning given to it in Section
10.1(a).
VIALOG Merger Subsidiary will have the meaning given to it in the
Preamble.
VIALOG Stock will have the meaning given to it in the Preamble.
[This space is intentionally left blank.]
76
<PAGE>
IN WITNESS WHEREOF, VIALOG, VIALOG Merger Subsidiary, the Company and
the Principal Stockholder have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly authorized.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
---------------------------------
Name: Glenn D. Bolduc
Title: President
CDC ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
---------------------------------
Name: Glenn D. Bolduc
Title: President
COMMUNICATION DEVELOPMENT
CORPORATION
By: /s/ Patti R. Bisbano
---------------------------------
Name: Patti R. Bisbano
Title: President
PRINCIPAL STOCKHOLDER:
/s/ Patti Bisbano
------------------------------------
Name: Patti Bisbano
/s/ Maurya Suda
------------------------------------
Name: Maurya Suda
77
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. THE REGISTRANT AGRESS
TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE
TO THE COMMISSION UPON REQUEST.
------------------------------
Section 3.1(a)
. Jurisdiction of Incorporation of the Company.
. Jurisdictions where qualified to do business.
Section 3.1(c)
. Exceptions to No Breach or Default, Etc., upon execution and delivery of
the Agreement or any Collateral Document.
. Exceptions to No Lien created or imposed upon execution and delivery of
the Agreement or any Collateral Document.
. Exceptions to No Governmental Authorization or Governmental Filing
Required upon execution and delivery of the Agreement or any Collateral
Document.
Section 3.1(d)
. Subsidiaries of the Company, and Jurisdictions of incorporation and where
qualified to do business.
. Capital Stock of any Subsidiary.
. Exceptions to Company's ownership of all Stock of any Subsidiary.
Section 3.2(a)
. Financial Statements of the Company and any Subsidiary, prepared in
accordance with GAAP.
Section 3.2(c)
. The Company's ownership of other Entities.
Section 3.3
. Changes and condition of the Company and any Subsidiary, since the date of
the most recent financial statements.
Section 3.4
. Exceptions to liabilities of the Company or any Subsidiary.
<PAGE>
. Any obligations or liabilities, past, present or deferred, or accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in the
balance sheet of the Financial Statements, or notes thereto, and any
obligations or liabilities, other than obligations and liabilities incurred
in the ordinary course of business consistent with past practice of the
Company and any Subsidiary, which will adversely affect the Company or any
of the Company's Subsidiaries.
. Guarantees or Primary or Secondary Liabilities of the Company or any
Subsidiary (except as disclosed in Financial Statements).
Section 3.5(a)
. Exceptions to No Liens with respect to all real property owned or leased,
and to all other assets, tangible and intangible.
. Financing Statements evidencing any Liens.
. Impairments to valid leasehold interests.
Section 3.5(b)
. Real estate owned or leased, and property leased by the Company and any
Subsidiary.
. Material Fixed Assets.
. Title Retention Agreements.
Section 3.5(c)
. Exceptions to compliance with title covenants and conditions and
environmental laws.
. Hazardous Materials used or stored by the Company or any Subsidiary.
Section 3.6
. Private Authorizations material to the Company or any Subsidiary.
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before
December 31, 1995.
Section 3.7(b)
. Breaches, violations or defaults under Governmental Authorizations or any
Applicable Law or under any requirement of any insurance carrier.
2
<PAGE>
Section 3.8(a)
. Governmental Authorizations and Intangible Assets upon which the conduct
of business by the Company or any Subsidiary is dependent.
Section 3.8(b)
. Description of Intangible Assets and Governmental Authorizations.
Section 3.9
. Contractual obligations or transactions between the Company or any of its
Subsidiaries and any of its officers, directors, employees, stockholders,
or any Affiliate of any thereof (other than reasonable compensation for
services or out-of-pocket expenses reasonably incurred in support of the
Company's business).
Section 3.10(a)
. Insurance Policies maintained by the Company or any Subsidiary.
. Insurance Carriers which have refused the Company or any Subsidiary
insurance within the past five years.
Section 3.11(a)
. Exceptions to taxation as a Subchapter C corporation.
. Membership in a consolidated group for tax purposes.
Section 3.11(d)
. Tax audits of the Company or any Subsidiary by the IRS or any
notifications thereof.
Section 3.11(e)
. Tax Sharing Agreement or Arrangement of the Company or any Subsidiary.
Section 3.11(f)
. Consents concerning collapsible corporations under Section 341(f) of the
Code.
. Ownership changes within the meaning of Section 382(g) of the Code.
Section 3.12(a)
. ERISA plans, including, inter alia, exceptions to compliance to applicable
----- ----
laws, notices from any authority questioning compliance, deficiencies,
"prohibited transactions", any amounts of
3
<PAGE>
liability, termination proceedings, annual reports, or any membership in or
contributions to multi-employer plans.
Section 3.12(c)
. Basis of funding and current status of any past service liability with
respect to each Employment Arrangement.
Section 3.15(a)
. Authorized and outstanding Capital Stock of the Company.
. Agreements by the Company or any Subsidiary to grant or issue any shares
of its Capital Stock or any Option Security or Convertible Security.
. Any agreement, put or commitment pursuant to which the Company or any
Subsidiary is obligated to purchase, redeem or otherwise acquire any
shares of Capital Stock or any Option Security or Convertible Security.
Section 3.15(b)
. Stockholders.
. Stock not held free and clear of all Liens.
. Persons or groups of persons owning as much as 5% of the Company's
outstanding Common Stock.
Section 3.16(a)
. Employment Arrangements of the Company or any Subsidiary.
. Collective bargaining agreements or pending grievances or labor disputes.
Section 3.16(b)
. Accelerated payments or benefits, including parachute payments, that will
be received as a result of the transactions contemplated by this
Agreement.
Section 3.16(c)
. Any unfavorable relationships with employees of the Company or any
Subsidiary.
Section 3.17(a)
. Material Agreements relating to the ownership or operation of the business
and property of the Company or any Subsidiary presently held or used by
the Company or any Subsidiary, or to
4
<PAGE>
which the Company or any Subsidiary is a party, or to which it or any of
its property is subject or bound.
Section 3.17(b)
. Exceptions to satisfaction or performance of Material Agreements by the
Company or any Subsidiary.
Section 3.18(a)
. Exceptions to operation of business in the ordinary course.
Section 3.18(b)
. Distributions from end of most recent fiscal year to the date of this
Agreement.
Section 3.19
. Banks, trust companies, savings and loan associations and brokerage firms
in which the Company or any Subsidiary has an account or safe deposit box,
and the names of all persons with access thereto.
Section 3.20
. Adverse restrictions which impairs the Company or any Subsidiary's ability
to conduct its business or which could have any adverse effect on the
Company or any Subsidiary.
Section 3.22
. Personal injury, warranty claims, etc., pending or threatened.
Section 3.23(a)
. Environmental matters - compliance and Governmental Authorizations and
Private Authorizations.
Section 3.23(b)
. Any actual or expected spill, disposal, release, burial or placement of
Hazardous Materials in the soil, air or water on any property or facility
owned, leased, operated or occupied by the Company or any Subsidiary.
. Notices or Liens arising under Environmental Law.
Section 3.23(c)
. Above or underground tanks for the storage of Hazardous Materials.
5
<PAGE>
Section 3.23(e)
. Hazardous Materials used in the conduct of business of the Company or any
Subsidiary.
. Description and annual volume of Hazardous Materials used.
. Years during which use occurred.
. Persons to whom such Hazardous Materials were transferred and/or
transported.
Section 3.23(f)
. Hazardous Materials generated.
. Annual volume.
. Persons to whom such Hazardous Materials were transferred and/or
transported.
Section 3.23(g)
. Environmental site assessments.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
Section 4.4
. Exceptions to good and merchantable title to Shares to be exchanged
pursuant to this Agreement.
Section 4.5(a)
. Conflicts with, breaches of, or defaults under any Contractual Obligation
of Principal Stockholder resulting from the execution and delivery of this
Agreement or any Collateral Document.
Section 4.5(b)
. Liens created or imposed upon any property or asset of Principal
Stockholder as a result of the execution and delivery of this Agreement or
any Collateral Document.
Section 4.5(c)
. Governmental Authorizations, Governmental Filing or Private Authorizations
required as a result of the execution and delivery of this Agreement or
any Collateral Document.
6
<PAGE>
Section 5.7
. Authorized and outstanding capital stock of each of VIALOG and VIALOG
Merger Subsidiary.
. Options, warrant, calls, rights, commitments or any other agreements of
any character obligating VIALOG or VIALOG Merger Subsidiary to issue any
shares of VIALOG Stock or other shares of Capital Stock of VIALOG or
VIALOG Merger Subsidiary, or any other securities convertible into or
evidencing the right to subscribe for any such shares.
Section 5.11
. Provisions in other Participating Agreements of other Participating
Companies not substantially identical in form and substance to the
provisions contained in Articles 3 through 12 of this Agreement.
Section 6.5(b)
. Business (other than business in the ordinary course) the Company will
conduct without the written permission of VIALOG Corporation.
Section 6.17
. Distributions to Stockholders, employees and consultants contemplated to
be made prior to the Merger Closing.
. Liens to be discharged prior to the Merger Closing.
. Certain liabilities for which the Company will indemnify VIALOG as of the
Merger Closing.
Section 7.1(f)
. Awards under Stock Option Plan.
Section 7.2(d)
. Persons executing Non-Competition Agreements.
Section 7.2(n)
. Form of Agreement releasing the Company and any Subsidiary from claims
against them.
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of the
Public Offering Closing Date.
7
<PAGE>
Section 7.2(s)
. Employment Agreement between Principal Stockholder and VIALOG Corporation.
Section 7.2(t)
. Individuals executing and delivering Employment Arrangements for VIALOG
Corporation.
8
<PAGE>
Exhibit 3.1
FEDERAL IDENTIFICATION
NO. 04-3305282
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
We, Glenn D. Bolduc ,*President
and John J. Hassett ,*Clerk
of VIALOG CORPORATION ,
(Exact name of corporation)
located at 46 Manning Road, Billerica, MA 01821 ,
(Street address of corporation Massachusetts)
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted at a meeting held on February 27, 1997 by a vote of the
directors.
ARTICLE I
The name of the corporation is:
VIALOG CORPORATION
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
For the purpose of acquiring existing other businesses.
In general to carry on any lawful business whatsoever in connection with
the foregoing and which is calculated directly or indirectly to promote the
interest of the corporation or enhance the value of its property.
To engage in any business or other activity which a corporation organized
under Massachusetts General Laws, Chapter 156B, may lawfully carry on, whether
or not related to those activities referred to in the preceding paragraphs.
*Delete the inapplicable words. *Delete the inapplicable clause.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on a separate 8 1/2 x 11 sheets of
paper with a left margin of at least 1 inch. Additions to more than one article
may be made on a single sheet so long as each article requiring each addition is
clearly indicated.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
WITHOUT PAR VALUE WITH PAR VALUE
TYPE NUMBER OF SHARES TYPE NUMBER OF PAR VALUE
SHARES
Common: Common: 30,000,000 $.01
Preferred: Preferred: 10,000,000 $.01
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
I. PROVISIONS GENERALLY APPLICABLE TO PREFERRED SHARES
The description of the Preferred Stock is as follows:
1. CERTIFICATE OF DESIGNATION. The Board of Directors is authorized,
subject to limitations described by law and the provisions of this Article IV,
to provide for the issuance of shares of Preferred Stock with or without series,
and, by filing a certificate pursuant to the applicable law of the Commonwealth
of Massachusetts (the "Certificate of Designation"), to establish from time to
time the number of shares to be included in each such series and to fix the
designation, preferences, voting powers, qualifications and special or relative
rights or privileges of the shares of each such series. In the event that at any
time the Board of Directors shall have established and designated one or more
shares of Preferred Stock consisting of a number of shares less than all of the
authorized number of shares of Preferred Stock, the remaining authorized shares
of Preferred Stock shall be deemed to be shares of an undesignated series of
Preferred Stock until designated by the Board of Directors as being a part of a
series previously established or a new series then being established by the
Board of Directors. Notwithstanding the fixing of the number of shares
constituting a particular series, the Board of Directors may at any time
thereafter authorize the issuance of additional shares of the same series except
as set forth in the Certificate of Designation.
2. AUTHORITY OF THE BOARD. The authority of the Board of Directors with
respect to each series of Preferred Stock shall include, but not be limited to,
determination of the following:
2
<PAGE>
(a) the number of shares constituting that series, which number may
be increased or decreased (but not below the number of shares of such series
then outstanding) from time to time by the Board of Directors, and the
distinctive designation of that series;
(b) whether any dividend shall be paid on shares of that series, and,
if so, the dividend rate on the shares of that series; whether dividends shall
be cumulative and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) whether shares of that series shall have voting rights in
addition to the voting rights provided by law and, if so, the terms of such
voting rights;
(d) whether shares of that series shall be convertible into shares of
Common Stock or another security and, if so, the terms and conditions of such
conversion, including provisions for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(e) whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates; and whether that series shall have a sinking fund
for the redemption or purchase of shares of that series and, if so, the terms
and amount of such sinking fund;
(f) whether, in the event of purchase or redemption of the shares of
that series, any shares of that series shall be restored to the status of
authorized but unissued shares or shall have such other status as shall be set
forth in the Certificate of Designation;
(g) the rights of the shares of that series in the event of the sale,
conveyance, exchange or transfer of all or substantially all of the property and
assets of the Corporation, or the merger or consolidation of the Corporation
into or with any other Corporation, or the merger of any other corporation into
it, or the voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of shares of that
series to payment in any such event;
(h) whether the shares of that series shall carry any preemptive
right in or preemptive right to subscribe to any additional shares of Preferred
Stock or any shares of any other class of stock which may at any time be
authorized or issued, or any bonds, debentures or other securities convertible
into shares of stock of any class of the Corporation, or options or warrants
carrying rights to purchase such shares or securities; and
(i) any other designation, preferences, voting powers,
qualifications, and special or relative rights or privileges of the shares of
that series.
3
<PAGE>
II. PROVISIONS APPLICABLE TO COMMON SHARES
1. NO PREFERENCE. None of the Common Shares shall be entitled to any
preference, and each Common Share shall be equal to every other such share in
every respect. Each Common Share shall be entitled to one vote.
2. LIQUIDATION RIGHTS. Holders of Common Stock are entitled to share
ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities of the Company and any preferential liquidation
rights of any Preferred Stock then outstanding.
3. DIVIDEND RIGHTS. Subject to the provisions with respect to the
Preferred Shares, and not otherwise, such dividends, payable in cash, shares or
otherwise, as may be determined by the Board of Directors may be declared and
paid on the Common Shares from time to time out of any funds lawfully available
therefor, and except as specified by the Board of Directors, the Preferred
Shares shall not be entitled to participate, as such, in any such dividend.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
A. INDEMNIFICATION
The Corporation will indemnify directors, officers, employees and other
agents, present or former, of the Corporation and persons who serve at its
request as directors, officers, employees or agents of another organization, or
who serve at its request in any capacity with respect to any employee benefit
plan, to the extent and as provided in the By-Laws.
B. STOCKHOLDERS' MEETINGS
Meetings of stockholders of this Corporation may be held anywhere in the
United States.
C. AMENDMENT OF BY-LAWS
The By-Laws may provide that the Board of Directors, as well as the
stockholders, may make, amend or repeal the By-Laws of this Corporation, except
with respect to any provision thereof which by law, by these Articles or by the
By-Laws, requires action by the stockholders.
4
<PAGE>
Any By-Law adopted by the Board of Directors may be amended or repealed by the
stockholders.
D. ACTING AS A PARTNER
This Corporation may be a partner or joint venturer in any business
enterprise which it would have power to conduct by itself.
E. INTERESTED TRANSACTIONS
The directors will have the power to fix from time to time their
compensation. No person shall be disqualified from holding any office by reason
of any Interest (as defined below). In the absence of fraud, any director,
officer or stockholder of this Corporation individually, or any individual
having any Interest in any Concern (as defined below) in which any such
directors, officers, stockholders or individuals have any interest, may be a
party to, or may be pecuniarily or otherwise interested in, any contract,
transaction or other act of this Corporation, and
(1) such contract, transactions or act shall not be in any way
invalidated or otherwise affected by that fact;
(2) no such director, officer, stockholder or individual shall be
liable to account to this Corporation for any profit or benefit
realized through any such contract, transaction or act; and
(3) any such director of this Corporation may be counted in
determining the existence of a quorum at any meeting of the
directors or of any committee thereof which shall authorize any
such contract, transaction or act, and may vote to authorize the
same.
For purposes of this Article, the term "Interest" will mean personal interest as
a director, officer, stockholder, shareholder, trustee, member or beneficiary of
any Concern; and the term "Concern" will mean any corporation, association,
trust, partnership, firm, person or other entity other than this Corporation.
F. LIMITATION OF LIABILITY OF DIRECTORS
No director of this Corporation will be personally liable to this
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing such liability;
provided, that the foregoing will not eliminate the liability of a director
(i) for any breach of such director's duty of loyalty to this Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 61
or 62 of Chapter 156B of the Massachusetts General Laws, or (iv) for any
transaction from which such director derived an improper personal benefit. No
amendment or repeal of this Article will adversely affect the rights and
protection
5
<PAGE>
afforded to a director of this Corporation under this Article for acts or
omissions which occurred while this Article was in effect.
G. TERM OF OFFICE FOR THE BOARD OF DIRECTORS
The Directors shall be classified with respect to the time for which they
shall severally hold office by dividing them into three classes, each consisting
of one-third, or as equal in number as possible, of the whole number of the
Board of Directors, and all Directors shall hold office until their successors
are chosen and qualified, or until their earlier death, resignation, or removal.
At the first meeting held for election of the Board of Directors following
adoption of these Restated Articles, Directors of the first class ("Class I
Directors") shall be elected for a term of one year; Directors of the Second
Class ("Class II Directors") shall be elected for a term of two years; Directors
of the Third Class ("Class III Directors") shall be elected for a term of three
years. At each annual meeting thereafter, the successors to the class of
Directors whose term expires at that meeting shall be elected to hold office for
a term continuing until the annual meeting held in the third year following the
year of their election and until their successors are duly elected and
qualified.
**If there are no provisions state "None"
Note: The preceding six (6) articles are considered to be permanent and may ONLY
be changed by filing appropriate Articles of Amendment.
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
46 Manning Road, Billerica, MA 01821
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President: Glenn D. Bolduc 7 Springvale Street 7 Springvale Street
Hollis, NH 03049 Hollis, NH 03049
Treasurer: Bruce T. Guzowski 437 Puritan Road 437 Puritan Road
Swampscott, MA 01907 Swampscott, MA 01907
Clerk: John J. Hassett 8 Harbor View 8 Harbor View
Marblehead, MA 01945 Marblehead, MA 01945
6
<PAGE>
Directors: John J. Hassett 8 Harbor View Same as above
Marblehead, MA 01945
Glenn D. Bolduc 7 Springvale Street 7 Springvale Street
Hollis, NH 03049 Hollis, NH 03049
Bruce T. Buzowski 437 Puritan Road 437 Puritan Road
Swampscott, MA 01907 Swampscott, MA 01907
Assistant
Clerk David L. Lougee Ridge Road Ridge Road
Hardwick, MA 01037 Hardwick, MA 01037
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of:
December
d. The name and business address of the resident agent, if any, of the
corporation is:
N/A
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
None
SIGNED UNDER THE PENALTIES OF PERJURY, this 27th day of February, 1997,
/s/ Glenn D. Bolduc
Glenn D. Bolduc , *President
/s/ John J. Hassett
John J. Hassett , *Clerk
*Delete the inapplicable words. **If there are no amendments, state 'None'.
7
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
I hereby approve the within Restated Articles of Organization and, the filing
fee in the amount of $_________ having been paid, said articles are deemed to
have been filed with me this______ day of____________________,19_.
Effective Date:__________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
David L. Lougee, Esq.
Mirick, O'Connell, DeMallie & Lougee, LLP
1700 Bank of Boston Tower, 100 Front Street
Worcester, MA 01608-1477
Telephone: (508) 799-0541
8
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
----------------------------
VIALOG CORPORATION
ARTICLE I
STOCKHOLDERS
------------
1. Place of Meetings. All meetings of stockholders shall be held
-----------------
within Massachusetts unless the Articles of Organization permit the holding of
stockholder meetings outside Massachusetts, in which event such meetings may be
held either within or without Massachusetts. Meetings of stockholders shall be
held at the principal office of the corporation unless a different place is
fixed by the Directors or the President and stated in the notice of the meeting.
2. Annual Meetings. The annual meeting of stockholders shall be held
---------------
on the second Monday in May in each year (or if that be a legal holiday in the
place where the meeting is to be held, on the next succeeding full business day)
at 10:00 o'clock a.m., unless a different hour and date (which date shall be
within six months after the end of the fiscal year of the corporation) is fixed
by the Directors or the President and stated in the notice of the meeting. The
purposes for which the annual meeting is to be held, in addition to those
prescribed by law, by the Articles of Organization or by these By-Laws, may be
specified by the Directors or the President. If no annual meeting is held in
accordance with the foregoing provisions, a special meeting may be held in lieu
thereof and any action taken at such meeting shall have the same effect as if
taken at the annual meeting.
3. Special Meetings. Special meetings of stockholders may be called
----------------
by the President or by the Directors. So long as the Corporation does not have a
class of voting stock registered under the Securities Exchange Act of 1934, upon
written application of one or more stockholders who hold at least ten (10%)
percent of the capital stock entitled to vote at the meeting, special meetings
shall be called by the Clerk, or in the case of the death, absence, incapacity
or refusal of the Clerk, by any other officer. If the Corporation does have a
class of voting stock registered under the Securities Exchange Act of 1934, upon
written application of one or more stockholders who hold at least thirty-five
(35%) percent of the capital stock entitled to vote at the meeting, special
meetings shall be called by the Clerk, or in the case of the death, absence,
incapacity or refusal of the Clerk, by any other officer. The call for the
meeting shall state the place, date, hour and purposes of the meeting. Business
transacted at any special meeting of the stockholders shall be limited to
matters relating to the purpose or purposes stated in the notice of meeting.
4. Notice of Meetings. A written notice of every meeting of
------------------
stockholders, stating the place, date and hour thereof and the purposes for
which the meeting is to be held, shall be given by the Clerk or other person
calling the meeting at least seven (7) days before the meeting
<PAGE>
to each stockholder entitled to vote thereat and to each stockholder who, by
law, by the Articles of Organization or by these By-Laws, is entitled to such
notice, by leaving such notice with him or at his residence or usual place of
business, or by mailing it postage prepaid and addressed to him at his address
as it appears upon the books of the corporation. Whenever any notice is required
to be given to a stockholder by law, by the Articles of Organization or by these
By-Laws, no such notice need be given if a written waiver of notice, executed
before or after the meeting by the stockholder or his attorney thereunto duly
authorized, is filed with the records of the meeting.
5. Quorum. Unless the Articles of Organization otherwise provide, a
------
majority in interest of all stock issued, outstanding and entitled to vote on
any matter shall constitute a quorum with respect to that matter; except that if
two or more classes of stock are outstanding and entitled to vote as separate
classes, then in the case of each such class a quorum shall consist of a
majority in interest of the stock of that class issued, outstanding and entitled
to vote.
6. Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the vote of the holders of a majority of the stock
present or represented at the meeting, although less than a quorum, or by any
officer entitled to preside or to act as Clerk of such meeting, if no
stockholder is present or represented. It shall not be necessary to notify any
stockholder of any adjournment. Any business which could have been transacted at
any meeting of the stockholders as originally called may be transacted at any
adjournment thereof.
7. Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held by him of record according to the records
of the corporation, and a proportionate vote for a fractional share so held by
him, unless otherwise provided by the Articles of Organization. Stockholders may
vote either in person or by written proxy dated not more than six (6) months
before the meeting named therein; provided, that a proxy coupled with an
interest sufficient in law to support an irrevocable power, including, without
limitation, an interest in the shares or in the corporation generally, may be
made irrevocable if it so provides, need not specify the meeting to which it
relates, and shall be valid and enforceable until the interest terminates, or
for such shorter period as may be specified in the proxy. Proxies shall be filed
with the Clerk of the meeting or of any adjournment thereof before being voted.
Except as otherwise limited therein, proxies shall entitle the persons named
therein to vote at any adjournment of such meeting but shall not be valid after
final adjournment of such meeting. A proxy with respect to stock held in the
name of two or more persons shall be valid if executed by one of them unless, at
or prior to exercise of the proxy, the corporation receives a specific written
notice to the contrary from any one of them. A proxy purported to be executed by
or on behalf of a stockholder shall be deemed valid unless challenged at or
prior to its exercise.
8. Action at Meeting. When a quorum is present, the holders of a
-----------------
majority of the stock present or represented and voting on a matter (or if there
are two or more classes of stock entitled to vote as separate classes, then in
the case of each such class, the holders of a majority of the stock of that
class present or represented and voting on a matter), except where a larger vote
is required by law, by the Articles of Organization or by these By-Laws, shall
decide any
2
<PAGE>
matter to be voted on by the stockholders. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election. No ballot shall be required for such election unless requested
by a stockholder present or represented at the meeting and entitled to vote in
the election. The corporation shall not directly or indirectly vote any shares
of its stock other than shares held directly or indirectly by it in a fiduciary
capacity.
9. Inspectors of Election. The Board of Directors, in advance of
----------------------
any meeting of stockholders, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at the meeting may, and on the request of any stockholder
entitled to vote thereat shall, appoint one or more inspectors. If one or more
inspectors are not so appointed, then the presiding officer shall act as the
inspector of the election. In case any person appointed fails to appear or act,
the vacancy may be filled by appointment made by the Board in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. No director or officer
of the corporation shall be eligible to act as an inspector of an election of
directors of the corporation.
The inspectors shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder entitled to vote thereat,
the inspectors shall make a report in writing of any challenge, question or
matter determined by them and execute a certificate of any fact found by them.
10. Action Without Meeting. Any action to be taken by stockholders
----------------------
may be taken without a meeting if all stockholders entitled to vote on the
matter consent to the action by a writing filed with the records of the meetings
of stockholders. Such consent shall be treated for all purposes as a vote at a
meeting.
ARTICLE II
DIRECTORS
---------
1. Powers. The business of the corporation shall be managed by a
------
board of Directors who may exercise all the powers of the corporation except as
otherwise provided by law, by the Articles of Organization or by these By-Laws.
In the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full Board
until the vacancy is filled.
2. Election. A Board of Directors of such number (not less than
--------
three) as shall be fixed by the stockholders shall be elected by the
stockholders at the annual meeting. Whenever
3
<PAGE>
the number of stockholders shall be less than three the number of Directors must
be equal to or greater than the number of stockholders.
3. Vacancies. If the office of any Director, or any other
---------
office, becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, including by enlargement of
the Board of Directors, the Board of Directors or remaining Directors if less
than a quorum may, by majority vote, choose a successor or successors, who shall
hold office for the unexpired term in respect of which such vacancy occurred and
until his successor be chosen and qualified, or until his earlier death,
resignation or removal.
4. Enlargement of the Board. The number of the Board of Directors
------------------------
may be increased at any meeting of the stockholders or by a vote of the
Directors then in office.
5. Tenure. The Directors shall be classified with respect to the
------
time for which they shall severally hold office by dividing them into three
classes, each consisting of one-third, or as equal in number as possible, of the
whole number of the Board of Directors, and all Directors shall hold office
until their successors are chosen and qualified, or until their earlier death,
resignation, or removal. At the first meeting held for election of the Board of
Directors following adoption of these By-Laws, Directors of the first class
("Class I Directors") shall be elected for a term of one year; Directors of the
second class ("Class II Directors") shall be elected for a term of two years;
Directors of the third class ("Class III Directors") shall be elected for a term
of three years; and at each annual election thereafter, successors to the class
of Directors whose terms shall expire that year shall be elected to hold office
for a term of three years, so that the term of office of one class of Directors
shall expire in each year. Any Director may resign by delivering his written
resignation to the corporation at its principal office or to the President,
Clerk or Secretary, except that no Director shall resign by delivering such
resignation to himself. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
6. Removal. A Director may be removed from office for cause by vote
-------
of a majority of the stock outstanding and entitled to vote in the election of
Directors, provided that the Directors of a class elected by a particular class
of stockholders may be removed only by the vote of the holders of a majority of
the shares of such class. A Director may be removed for cause only after
reasonable notice and opportunity to be heard before the body proposing to
remove him.
7. Meetings. Regular meetings of the Directors may be held without
--------
call or notice at such places, within or without Massachusetts, and at such
times as the Directors may from time to time determine, provided that any
Director who is absent when such determination is made shall be given notice of
the determination. A regular meeting of the Directors may be held without a call
or notice at the same place as the annual meeting of stockholders or the special
meeting held in lieu thereof, following such meeting of stockholders.
Special meetings of the Directors may be held at any time and place,
within or without Massachusetts, designated in a call by the President,
Treasurer or two or more Directors.
4
<PAGE>
8. Notice of Special Meetings. Notice of all special meetings of the
--------------------------
Directors shall be given to each Director by the Secretary, or if there be no
Secretary by the Clerk or Assistant Clerk, or in case of the death, absence,
incapacity or refusal of such persons, by the officer or one of the Directors
calling the meeting. Notice shall be given to each Director in person or by
telephone or by telegram sent to his business or home address at least forty-
eight (48) hours in advance of the meeting, or by written notice mailed to his
business or home address at least seventy-two (72) hours in advance of the
meeting. Notice need not be given to any Director if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A notice or waiver of
notice of a Directors' meeting need not specify the purposes of the meeting.
9. Quorum. At any meeting of the Directors, a majority of the
------
Directors then in office shall constitute a quorum. In the event that one or
more Directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each such Director so disqualified; provided,
however, that in no case shall less than one-third (1/3) of the total number of
Directors constitute a quorum. Less than a quorum may adjourn any meeting from
time to time without further notice.
10. Action at Meeting. At any meeting of the Directors at which
-----------------
a quorum is present, the vote of a majority of those present, unless a different
vote is specified by law, by the Articles of Organization or by these By-Laws,
shall be sufficient to take any action.
11. Meeting by Conference. Members of the Board or any committee
---------------------
designated thereby may participate in a meeting of such Board or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and participation by such means shall constitute presence in person at a
meeting.
12. Action by Consent. Any action by the Directors may be taken
-----------------
without a meeting if a written consent thereto is signed by all the Directors
and filed with the records of the meetings of Directors. Such consent shall be
treated for all purposes as a vote at a meeting.
13. Committees. The Directors may, by vote of a majority of the
----------
Directors then in office, elect from their number an executive committee or
other committees and may by like vote delegate thereto some or all of their
powers except those which by law, the Articles of Organization or these By-Laws,
they are prohibited from delegating. Each committee is to consist of two or more
Directors. The Board may designate one or more Directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Each such committee shall keep minutes
and make such reports as the Board of Directors may from time to time request.
Except as the Directors may otherwise determine, any such committee may make
rules
5
<PAGE>
for the conduct of its business but, unless otherwise provided by the Directors
or in such rules, its business shall be conducted as nearly as may be in the
same manner as is provided by these By-Laws for the Directors.
ARTICLE III
OFFICERS
--------
1. Enumeration. The officers of the corporation shall consist of a
-----------
President, a Treasurer, a Clerk and such other officers, including a Chairman of
the Board, one or more Vice Presidents, Assistant Treasurers, Assistant Clerks
and Secretary as the Directors may determine.
2. Election. The President, Treasurer and Clerk shall be elected
--------
annually by the Directors at their first meeting following the annual meeting of
stockholders. Other officers may be appointed by the Directors at such meeting
or at any other meeting.
3. Qualification. The President shall be a Director. No officer need
-------------
be a stockholder. Any two or more offices may be held by the same person. The
Clerk shall be a resident of Massachusetts unless the corporation has a resident
agent appointed for the purpose of service of process. Any officer may be
required by the Directors to give bond for the faithful performance of his
duties to the corporation in such amount and with such sureties as the Directors
may determine.
4. Tenure. Except as otherwise provided by law, by the Articles of
------
Organization or by these By-Laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the annual meeting of
stockholders or special meeting in lieu thereof and thereafter until their
successors are chosen and qualified; and all other officers shall hold office
until the first meeting of the Directors following the annual meeting of
stockholders or special meeting in lieu thereof unless a different term is
specified in the vote choosing or appointing them. Any officer may resign by
delivering his written resignation to the corporation at its principal office or
to the President, Clerk or Secretary, except that no officer shall resign by
delivering such resignation to himself, and such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
5. Removal. The Directors may remove any officer with or without
-------
cause by a vote of a majority of the entire number of Directors then in office,
provided that an officer may be removed for cause only after reasonable notice
and opportunity to be heard by the Board of Directors prior to action thereon.
Except as the Board of Directors may otherwise determine, no officer who resigns
or is removed shall have any right to any compensation as an officer for any
period following his resignation or removal, or any right to damages on account
of such removal, unless such compensation is expressly provided for in a duly
authorized written agreement with the corporation.
6
<PAGE>
6. Vacancies. The Board of Directors may fill any vacancy occurring
---------
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Clerk. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
7. Chairman of the Board. If the Directors appoint a Chairman of
---------------------
the Board, he shall, when present, preside at all meetings of the Directors and
shall have such other powers and duties as are usually vested in the office of
Chairman of the Board or as may be vested in him by the Board of Directors.
8. President. Unless otherwise provided by the Directors, the
---------
President shall be the chief executive officer of the corporation and shall,
subject to the direction of the Directors, have general supervision and control
of its business. Unless otherwise provided by the Directors, the President shall
preside, when present, at all meetings of stockholders and of the Directors
(except as provided in Section 7 of this Article III).
9. Vice President. The Vice President or, if there shall be more
--------------
than one, the Vice Presidents in the order determined by the Directors shall, in
the absence or disability of the President, perform the duties and exercise the
powers of the President and shall perform such other duties, and shall have such
other powers, as the Directors may from time to time prescribe.
10. Treasurer and Assistant Treasurers. The Treasurer shall, subject
----------------------------------
to the direction of the Directors, have general charge of the financial affairs
of the corporation and shall cause to be kept accurate books of account. He
shall have custody of all funds, securities and valuable documents of the
corporation, except as the Directors may otherwise provide.
The Assistant Treasurer or, if there shall be more than one, the
Assistant Treasurers in the order determined by the Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and shall have such
other powers as the Directors may from time to time prescribe.
11. Clerk and Assistant Clerks. The Clerk shall keep a record of the
--------------------------
meetings of stockholders. Unless a transfer agent is appointed, the Clerk shall
keep or cause to be kept in Massachusetts at the principal office of the
corporation or at his office the stock and transfer records of the corporation
in which are contained the names of all stockholders and the record address and
the amount of stock held by each. If there is no Secretary or Assistant
Secretary, the Clerk shall keep a record of the meetings of the Directors.
The Assistant Clerk, or if there shall be more than one, the
Assistant Clerks in the order determined by the Directors shall, in the absence
or disability of the Clerk, perform the duties and exercise the powers of the
Clerk and shall perform such other duties, and shall have such other powers, as
the Directors may from time to time prescribe.
12. Secretary and Assistant Secretaries. If a Secretary is appointed,
-----------------------------------
he shall attend all meetings of the Directors and shall keep a record of the
meetings of the Directors. He shall,
7
<PAGE>
when required, notify the Directors of their meetings and shall have such other
powers, and shall perform such other duties, as the Directors may from time to
time prescribe.
The Assistant Secretary or, if there shall be more than one, the
Assistant Secretaries in the order determined by the Directors shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties, and shall have such
other powers, as the Directors may from time to time prescribe.
13. Other Powers and Duties. Each officer shall, subject to these
-----------------------
By-Laws, have in addition to the duties and powers specifically set forth in
these By-Laws such duties and powers as are customarily incident to his office
and such duties and powers as the Directors may from time to time designate.
ARTICLE IV
CAPITAL STOCK
-------------
1. Certificates of Stock. Each stockholder shall be entitled to
---------------------
a certificate of the capital stock of the corporation in such form as may be
prescribed from time to time by the Directors. The certificate shall be signed
by the Chairman of the Board, President or a Vice President, and by the
Treasurer or an Assistant Treasurer, but when a certificate is countersigned by
a transfer agent or a registrar, other than a Director, officer or employee of
the corporation, such signatures may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer at the
time of its issue.
Every certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Articles of Organization, the By-Laws or
any agreement to which the corporation is a party, shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restrictions and a statement
that the corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge. Every certificate issued
when the corporation is authorized to issue more than one class or series of
stock shall set forth on its face or back either the full text of the
preferences, voting powers, qualifications and special and relative rights of
the shares of each class and series authorized to be issued, or a statement of
the existence of such preferences, powers, qualifications and rights, and a
statement that the corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge.
2. Transfers. Shares of stock may be transferred on the books of
---------
the corporation by the surrender to the corporation or its transfer agent of the
certificate therefor, properly endorsed, or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed
and with such proof of the authenticity of signature as the corporation or its
transfer agent may reasonably require. Except as may be otherwise required by
law, by the
8
<PAGE>
Articles of Organization or by these By-Laws, the corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
corporation in accordance with the requirements of these By-Laws. It shall be
the duty of each stockholder to notify the corporation of his post office
address and of his taxpayer identification number.
3. Record Date. The Directors may fix in advance a time not more
-----------
than sixty (60) days preceding the date of any meeting of stockholders, or the
date for the payment of any dividend, or the making of any distribution to
stockholders, or the last day on which the consent or dissent of stockholders
may be effectively expressed for any purpose, as the record date for determining
the stockholders having the right to notice of and to vote at such meeting, and
any adjournment thereof, or the right to receive such dividend or distribution,
or the right to give such consent or dissent. In such case only stockholders of
record on such record date shall have such right, notwithstanding any transfer
of stock on the books of the corporation after the record date. Without fixing
such record date, the Directors may for any of such purposes close the transfer
books for all or any part of such period. If no record date is fixed, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day before the day on
which notice is given, or, if notice is waived, at the close of business on the
day before the day on which the meeting is held. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
4. Replacement of Certificates. In case of the alleged loss or
---------------------------
destruction or the mutilation of a certificate of stock, a duplicate certificate
may be issued in place thereof upon such terms as the Directors may prescribe,
including the presentation of reasonable evidence of such loss, destruction or
mutilation, and the giving of such indemnity as the Directors may require, for
the protection of the corporation or any transfer agent or registrar.
5. Issue of Capital Stock. Unless otherwise voted by the
----------------------
stockholders, the whole or any part of any unissued balance of the authorized
capital stock of the corporation, or the whole or any part of the capital stock
of the corporation held in its treasury, may be issued or disposed of by vote of
the Directors in such manner, for such consideration, and on such terms as the
Directors may determine.
9
<PAGE>
ARTICLE V
MISCELLANEOUS PROVISIONS
------------------------
1. Fiscal Year. Except as from time to time otherwise determined by
-----------
the Directors, the fiscal year of the corporation shall end on December 31.
2. Seal. The seal of the corporation shall, subject to alteration by
----
the Directors, bear its name, the word "Massachusetts" and the year of its
incorporation.
3. Execution of Instruments. All deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations authorized to be executed by an
officer of the corporation in its behalf shall be signed by the President or the
Treasurer, except as the Directors may generally or in particular cases
otherwise determine.
4. Voting of Securities. Except as the Directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of and act as, or appoint
any person or persons to act as, proxy or attorney-in-fact for this corporation
(with or without power of substitution) at any meeting of stockholders or
shareholders of any corporation or organization, the securities of which may be
held by the corporation (including securities of the corporation held directly
or indirectly by it in a fiduciary capacity).
5. Corporate Records. The original or attested copies of the
-----------------
Articles of Organization, By-Laws and records of all meetings of the
incorporators and stockholders, and the stock and transfer records which shall
contain the names of all stockholders and the record address and the amount of
stock held by each shall be kept in Massachusetts at the principal office of the
corporation or at an office of its transfer agent or of the Clerk. Said copies
and records need not all be kept in the same office. They shall be available at
all reasonable times to the inspection of any stockholder for any proper
purpose, but not to secure a list of stockholders for the purpose of selling
said list or copies thereof, or of using the same for a purpose other than in
the interest of the applicant, as a stockholder, relative to the affairs of the
corporation.
6. Evidence of Authority. A certificate by the Clerk or Secretary or
---------------------
Assistant Clerk or Assistant Secretary, or a temporary Clerk or temporary
Secretary, as to any action taken by the stockholders, Directors, Executive
Committee or any officer or representative of the corporation shall, as to all
persons who rely thereon in good faith, be conclusive evidence of such action.
7. Articles of Organization. All references in these By-Laws to the
------------------------
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation as amended and in effect from time to time.
8. Transactions With Interested Parties. In the absence of fraud, no
------------------------------------
contract or other transaction between this corporation and any other corporation
or any firm, association, partnership or person shall be affected or invalidated
by the fact that any Director or officer of this corporation is pecuniarily or
otherwise interested in, or is a Director, member or officer of,
10
<PAGE>
such other corporation or of such firm, association or partnership, or is a
party to or is pecuniarily or otherwise interested in such contract or other
transaction, or is in any way connected with any person or persons, firm,
association, partnership or corporation pecuniarily or otherwise interested
therein; provided that the fact that he individually or as a Director, member or
officer of such corporation, firm, association or partnership is such a party or
is so interested shall be disclosed to or shall have been known by the Board of
Directors or a majority of such members thereof as shall be present at a meeting
of the Board of Directors at which action upon any such contract or transaction
shall be taken. Any Director may be counted in determining the existence of a
quorum and may vote at any meeting of the Board of Directors of this corporation
for the purpose of authorizing any such contract or transaction with like force
and effect as if he were not so interested, or were not a Director, member or
officer of such other corporation, firm, association or partnership; provided
that any vote with respect to such contract or transaction must be adopted by a
majority of the Directors then in office who have no interest in such contract
or transaction.
9. Indemnification. The corporation shall, to the fullest extent
---------------
permitted by law, indemnify and hold harmless each person, now or hereafter an
officer, Director, employee or agent of the corporation and any person who
serves at its request as a Director, officer, employee or other agent of another
organization, or who serves at its request in any capacity with respect to any
employee benefit plan, from and against any and all claims and liabilities to
which he may be or become subject by reason of his being or having been an
officer, Director, employee or agent of the corporation or by reason of his
alleged acts or omissions as an officer, Director, employee or agent of the
corporation, except in relation to matters as to which such officer, Director,
employee or agent of the corporation shall have been guilty of willful
malfeasance, bad faith, gross negligence or reckless disregard of his duties in
the conduct of his office. The corporation shall indemnify and reimburse each
officer, Director, employee or agent of the corporation and any person who
serves at its request as a Director, officer, employee or other agent of another
organization, or who serves at its request in any capacity with respect to any
employee benefit plan, against and for any and all legal and other expenses
reasonably incurred by him in connection with any such claims and liabilities,
actual or threatened, whether or not, at or prior to the time when so
indemnified, held harmless and reimbursed, he had ceased being an officer,
Director, employee or agent of the corporation, or ceased so serving in any
capacity with respect to any employee benefit plan, except in relation to
matters as to which such officer, Director, employee or agent shall have been
guilty of willful malfeasance, bad faith, gross negligence or reckless disregard
of his duties in the conduct of his office; provided, however, that the
corporation prior to such final adjudication may compromise and settle any such
claims and liabilities and pay such expenses, if such settlement or payment or
both appears, in the judgment of a majority of the Board of Directors, to be for
the best interest of the corporation, evidenced by a resolution to that effect
adopted after receipt by the corporation of a written opinion of counsel for the
corporation that such officer, Director, employee or agent has not been guilty
of willful malfeasance, bad faith, gross negligence or reckless disregard of
his duties in the conduct of his office in connection with the matters involved
in such compromise, settlement and payment. Nothing herein contained is
intended to, or shall, prevent a settlement by the corporation prior to final
adjudication of any claim, including claims for reimbursement or indemnification
under this By-Law, against the corporation when such settlement appears to be
11
<PAGE>
in the interest of the corporation. Each such person shall, by reason of his
continuing such service or accepting such election or employment, have the right
to be reimbursed and indemnified by the corporation, as above set forth with the
same force and effect as if the corporation, to induce him to continue so to
serve or to accept such election or employment, specifically agreed in writing
to reimburse and indemnify him in accordance with the foregoing provisions of
this section. No Director or officer of the corporation shall be liable to
anyone for making any determination as to the existence or absence of liability
of the corporation hereunder or for making or refusing to make any payment
hereunder in reliance upon advice of counsel. The right of indemnification
herein provided shall not be exclusive of any other rights to which any officer,
Director, employee or agent may otherwise be lawfully entitled. The right of
indemnification herein provided may be incorporated into individual
indemnification agreements between the corporation and any Director, officer,
employee or agent.
10. Amendments. These By-Laws may be amended or repealed and new
----------
by-laws adopted either (a) by the stockholders at any regular or special meeting
of the stockholders by the affirmative vote of the holders of at least a
majority in interest of the capital stock then outstanding and then entitled to
vote, provided that notice of the proposed amendment or repeal and adoption
stating the change or the substance thereof shall have been given in the notice
of such meeting or in the waiver of notice with respect to such meeting, or (b)
by vote of a majority of the Board of Directors then in office, provided that
(i) the Board of Directors may not amend or repeal any provision of these By-
Laws which by law, by the Articles of Organization or by these By-Laws requires
action by the stockholders, (ii) not later than the time of giving notice of the
meeting of stockholders next following the amendment or repeal of these By-Laws
and adoption of new by-laws by the Board of Directors, notice thereof stating
the change or the substance of such change shall be given to all stockholders
entitled to vote on amending these By-Laws, and (iii) any amendment or repeal of
these By-Laws by the Board of Directors and any by-law adopted by the Board of
Directors may be amended or repealed by the stockholders.
11. Control Share Acquisition. Until such time as this section shall
-------------------------
be repealed or these By-Laws shall be amended to provide otherwise, including
without limitation, during any time in which the corporation shall be an
"issuing public corporation" as defined in Chapter 110D of the Massachusetts
General Laws, the provisions of Chapter 110D of the Massachusetts General Laws
shall not apply to "control share acquisitions," as defined in Chapter 110D, of
the shares of the corporation's stock.
12. Severability. Any determination that any provision of these
------------
By-Laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-Laws.
13. Pronouns. All pronouns used in these By-Laws shall be deemed to
--------
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
12
<PAGE>
Exhibit 10.1
INTERPLAY CORPORATION
1996 STOCK PLAN
---------------
1. Purpose. This 1996 Stock Plan is designed to enable INTERPLAY
-------
CORPORATION and its Affiliates to attract and retain capable key employees,
officers, directors and consultants and to motivate such persons to exert their
best efforts on behalf of the Company by providing them with compensation in the
manner provided in this Plan.
2. Definitions.
-----------
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" means Common Stock awarded under this Plan.
"Affiliate" means any parent corporation or subsidiary corporation of the
Company as defined in Section 424 of the Code.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee established to administer this Plan as
provided in Section 3 or, if no such committee is established, the Board.
"Common Stock" means shares of common stock of the Company and such
substitutions therefor as are determined by the Committee pursuant to Section 11
to be appropriate.
"Company" means Interplay Corporation, a Massachusetts corporation, and all
of its Affiliates.
"Date of Grant" means the date on which the Committee authorizes the grant
of a Stock Right, or such later date as may be specified by the Committee at the
time of such authorization.
"Disability" means a disability that entitles the Grantee to disability
income benefits under the terms of any long-term disability plan maintained by
the Company which covers the Grantee, or if no such plan exists or is applicable
to the Grantee, the permanent and total disability of the Grantee within the
meaning of Section 22(e)(3) of the Code.
"Disqualifying Disposition" means any disposition (including any sale) by an
Optionee of Common Stock acquired pursuant to the exercise of an ISO before the
later of (a) two years after the Date of Grant of the ISO or (b) one year after
the date the Optionee acquired such Common
<PAGE>
Stock by exercising the ISO. The foregoing rules do not apply to dispositions
of Common Stock after the death of an Optionee by his or her legal repre-
sentative, devisees or heirs.
"Grantee" means a person to whom a Stock Right has been granted under this
Plan.
"ISO" means an Option which qualifies as an incentive stock option under
Section 422(b) of the Code.
"Non-Qualified Option" means an Option which does not qualify as an ISO.
"Option" means a right to purchase Common Stock granted pursuant to this
Plan.
"Optionee" means a person to whom an Option has been granted under this
Plan.
"Plan" means the Interplay Corporation 1996 Stock Plan.
"Purchase" means the right to make a direct purchase of Common Stock
granted pursuant to this Plan.
"Stock Appreciation Right" means a right granted under Section 7.
"Stock Rights" collectively refers to Options, Awards, Purchases and Stock
Appreciation Rights.
3. Administration of the Plan.
--------------------------
(a) The Board may administer this Plan or may appoint a Committee to
administer this Plan. Members of the Committee, while members, will be eligible
to participate in this Plan only as provided in Section 3(d). The Committee
will have the authority to (i) determine the employees and other persons to whom
Stock Rights may be granted; (ii) determine when Options, Awards and Stock
Appreciation Rights may be granted or Purchases made; (iii) determine the
purchase price, if any, of Stock Rights and the shares underlying them; (iv)
determine the other terms and provisions of each Stock Right (which may vary
among Grantees in the Committee's discretion), including but not limited to the
timing, vesting and duration of the exercise period and the nature and duration
of transfer and/or forfeiture restrictions; (v) amend, modify, convert, or
replace any Stock Right to the extent allowed by law, (vi) accelerate
exercisability of any Stock Right in whole or in part, subject only to the ISO
acceleration provisions of Section 422(d) of the Code (if applicable); (vii)
employ attorneys, consultants, accountants or other persons upon whose advice
the Committee may rely; and (viii) interpret this Plan and prescribe and rescind
rules and regulations relating to it. All actions taken and all interpretations
and determinations made by the Committee in good faith will be final and binding
on all parties, unless otherwise determined by the Board.
2
<PAGE>
(b) No member of the Board or the Committee will be liable for any
action or determination made in good faith with respect to this Plan or any
Stock Right granted under it. Each member of the Committee will be indemnified
and held harmless by the Company against any cost or expense (including counsel
fees) reasonably incurred by such member or liability (including any sum paid in
settlement of a claim with the approval of the Company) arising out of any act
or omission to act in connection with this Plan unless arising out of such
member's own fraud or bad faith. Such indemnification will be in addition to
any rights of indemnification the members of the Committee may have as directors
or otherwise under the by-laws of the Company, or any agreement, vote of
stockholders or disinterested directors, or otherwise.
(c) The Committee may select one of its members as its chair, and will
hold meetings at its discretion. A majority of the Committee will constitute a
quorum. The acts of a majority of the members of the Committee present at any
meeting at which a quorum is present or acts reduced to or approved in writing
by a majority of the members of the Committee will be the valid acts of the
Committee. From time to time the Board may increase the size of the Committee
and appoint additional members, remove members (with or without cause) and
appoint replacement members, fill vacancies however caused, and remove all
members of the Committee and thereafter directly administer this Plan.
(d) Stock Rights may be granted to members of the Committee pursuant
to this Plan if such grants have been approved by a majority vote of the
disinterested members of the Board. If the Company is or becomes registered
under the Act, the Committee will be qualified as required by Rule 16b-3, as
amended, and other applicable rules under or successors to Section 16(b) of the
Act.
4. Stock. The aggregate number of shares of Common Stock which may be
-----
issued under this Plan is One Million Eighty Thousand (1,080,000), subject to
adjustment as provided in Section 11. The Committee may grant Options and Stock
Appreciation Rights and may authorize Purchases and Awards with respect to such
shares in such combinations and for such amount of shares as it determines are
appropriate, provided that the aggregate number of shares issuable upon exercise
of such Options, Purchases and Stock Appreciation Rights and upon grant of such
Awards does not exceed such number, as adjusted. Stock subject to Stock Rights
may be authorized but unissued shares of Common Stock or Common Stock held in
the treasury of the Company. If any Option expires or terminates for any reason
without having been exercised in full or ceases for any reason to be exercisable
in whole or in part, or if the Company reacquires any unvested shares issued
pursuant to Stock Rights, then the unpurchased shares subject to such Option and
any unvested shares so reacquired by the Company will again be available for
grants of Stock Rights.
5. Granting of Stock Rights. The Committee is authorized to grant
------------------------
Stock Rights to such employees, consultants and officers and directors (whether
or not an employee) of the Company at such time or times as it may determine,
all in the sole exercise of its discretion. Each Stock Right will be evidenced
by a written agreement in such form as the Committee may from time to time
approve. Each agreement for an ISO will provide that the Optionee notify the
Company in writing immediately after the Optionee makes a Disqualifying
Disposition of any
3
<PAGE>
Common Stock acquired pursuant to the exercise of the ISO. The Committee may
from time to time confer authority on one or more of its own members and/or one
or more officers of the Company to execute and deliver such agreements. The
officers of the Company are authorized and directed to take any and all action
necessary or advisable from time to time to carry out the terms of each
agreement entered into pursuant to this Plan.
6. Option Price and Term; ISO Limitations.
--------------------------------------
(a) The exercise price for each ISO share will be at least equal to
the fair market value per share on the Date of Grant. However, if the Optionee
owns more than ten percent of the total combined voting power of all classes of
stock of the Company, the exercise price must be at least one hundred ten
percent (110%) of the fair market value per share on the Date of Grant,
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse. The Committee may determine the exercise price of
Non-Qualified Options in its sole discretion.
(b) Each Option will expire on the date specified by the Committee.
However, any ISOs granted to an employee owning more than ten percent of the
total combined voting power of all classes of stock of the Company must expire
not more than five years from the Date of Grant and all other ISOs must expire
not more than ten years from the Date of Grant.
(c) ISOs may be granted only to employees of the Company. Non-
Qualified Options may be granted to any director or officer (whether or not an
employee), employee or consultant of the Company.
(d) To the extent that the aggregate fair market value of Common Stock
with respect to which ISOs (determined without regard to this Section) are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company exceeds $100,000, such ISOs will be treated as Non-
Qualified Options.
(e) The fair market value of a share of Common Stock on the Date of
Grant will be the mean between the highest and lowest quoted selling prices on
such date on the securities market where the Common Stock of the Company is
traded, or if there were no sales on the Date of Grant, on the next preceding
date within a reasonable period (as determined in the sole discretion of the
Committee) on which there were sales. In the event that there were no sales in
such a market within a reasonable period or if the Common Stock is not publicly
traded on the Date of Grant, the fair market value will be as determined in good
faith by the Board in its sole discretion after taking into consideration all
factors which it deems appropriate including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at arm's
length.
4
<PAGE>
7. Stock Appreciation Rights.
-------------------------
(a) The Committee will have the authority to grant Stock Appreciation
Rights with or apart from the grant of Options under this Plan. Stock
Appreciation Rights may be paid in cash or shares of Common Stock, or any
combination of each, as the Committee may determine and will be subject to such
terms and conditions as the Committee may specify.
(b) Each Stock Appreciation Right granted with a specified Option will
entitle the Grantee to receive the following amount if and when the specified
Option becomes exercisable: unless the Committee determines otherwise, the
amount to be received by the Grantee will equal the difference between (i) the
fair market value of a share of Common Stock on the date of exercise of the
Right and (ii) the exercise price of a share under the specified Option.
(c) Each Stock Appreciation Right granted without reference to a
specified Option will entitle the Grantee to receive, unless the Committee
determines otherwise, the difference between (i) the fair market value of a
share of Common Stock on the date of exercise of the Right and (ii) the fair
market value of a share of Common Stock on the date the Right was granted.
(d) Notwithstanding the foregoing, for those Grantees subject to
Section 16(b) of the Act, any transaction involving the exercise of a Stock
Appreciation Right will be structured to satisfy the requirements of Rule 16b-3.
8. Means of Exercising Stock Rights. A Stock Right (or any part thereof)
--------------------------------
will be exercised by giving written notice to the Company at its principal
office address identifying the Stock Right being exercised, specifying the
portion of the Stock Right being exercised (including the number of shares, if
any, for which Stock Right is being exercised), and accompanied by full payment
of the purchase price (if any) either (a) in United States cash or cash
equivalent or, at the discretion of the Committee, (b) in shares of Common Stock
having a fair market value on the date of exercise equal to the exercise price
of the Stock Right, (c) by delivery of the Grantee's promissory note, (d) by
written notice to the Company to withhold from those shares of Common Stock that
would otherwise be obtained on the exercise of such Stock Right the number of
shares having a fair market value on the date of exercise equal to the exercise
price, or (e) by any combination of the foregoing. The holder of a Stock Right
will not have the rights of a shareholder with respect to any shares covered by
the Stock Right until the date of issuance of a stock certificate for such
shares. Except as otherwise determined by the Committee, no adjustment will be
made for dividends or similar rights for which the record date is before the
date such stock certificate is issued.
9. Termination of Employment; Limitations on Exercise.
--------------------------------------------------
(a) If a Grantee's employment with or service to the Company
terminates other than by reason of death or Disability, (i) no further vesting
of the Grantee's Options and Stock Appreciation Rights will occur subsequent to
the date of termination, (ii) the Grantee's
5
<PAGE>
ISOs will terminate 90 days after the date of termination, or on their specified
expiration dates, if earlier, (iii) the Grantee's Non-Qualified Stock Options
and Stock Appreciation Rights will terminate one (1) year after the date of
termination, or on their specified expiration dates, if earlier, and (iv) all
other types of Stock Rights will be forfeited except to the extent otherwise
provided by the Committee. Nothing in this Plan will be deemed to give any
Grantee the right to continued employment with the Company.
(b) If a Grantee's employment or other service to the Company is
terminated due to the Grantee's death or Disability, any Options or Stock
Appreciation Rights granted under this Plan to such Grantee may be exercised, up
to that portion of the Option or Stock Appreciation Right which the Grantee
could have exercised on the date of death or Disability, by the Grantee, or in
the case of death, the Grantee's estate, personal representative or any
beneficiary who has acquired the Options or Stock Appreciation Rights by will or
by the laws of descent and distribution, at any time prior to the earlier of the
specified expiration date of the Option or Stock Appreciation Right or one year
after the Grantee's death or Disability. The Grantee's rights with respect to
any other type of Stock Rights held by the Grantee at the time of death or
Disability will be subject to such terms as the Committee shall determine.
10. Assignability. No Stock Right will be assignable or transferable by a
-------------
Grantee, either voluntarily or by operation of law, except by will or by the
laws of descent and distribution. During the lifetime of the Grantee no Stock
Right will be exercisable by or payable to anyone other than the Grantee or his
legal representative.
11. Adjustments. Notwithstanding any other provision of this Plan, the
-----------
Committee may at any time make or provide for such adjustments to this Plan, to
the number and class of shares available under this Plan or to any outstanding
Stock Rights, as it deems appropriate to prevent dilution or enlargement of
rights, including adjustments in the event of distributions to holders of Common
Stock of other than a normal cash dividend, and changes in the outstanding
Common Stock by reason of stock dividends, split-ups, recapitalizations,
mergers, consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations and the like. In the event of any general offer
to holders of Common Stock relating to the acquisition of their shares, the
Committee may make such adjustment as it deems equitable in respect of
outstanding Stock Rights including, in the Committee's discretion, revision of
outstanding Stock Rights, so that they may be exercisable for the consideration
payable in the acquisition transaction. Any such determination by the Committee
will be conclusive.
12. Amendment of Plan. The Board may terminate or amend this Plan in
-----------------
any manner allowed by law at any time, provided that no amendment to this Plan
will be effective without approval of the stockholders of the Company if
stockholder approval of the amendment is then acquired under Rule 16b-3 of the
Act, Sections 162(m) or 422 of the Code, the rules of any stock exchange or
other applicable federal or state law. In no event may action of the Board or
stockholders alter or impair the rights of a Grantee, without the Grantee's
consent, under any Stock Right previously granted to such Grantee. Stock Rights
may be granted prior to the date of stockholder approval of this Plan.
6
<PAGE>
13. Application Of Funds. All proceeds received by the Company with
--------------------
respect to Stock Rights will be used for general corporate purposes.
14. Governmental Regulation. The Company's obligation to sell and
-----------------------
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares and the availability of a federal and
appropriate state securities law exemptions.
15. Withholding of Additional Income Taxes. It will be a condition of
--------------------------------------
the Company's obligation to issue Common Stock upon exercise of a Stock Right
that the person exercising the Stock Right pay, or make provision satisfactory
to the Company for the payment of, any taxes which the Company is obligated to
collect with respect to the issue of Common Stock upon such exercise.
16. Governing Law. This Plan and any agreements entered into under this
-------------
Plan will be governed and construed in accordance with the laws of the
Commonwealth of Massachusetts.
17. Effective Date. This Plan is effective as of February 14, 1996, the
--------------
date of its adoption by the Company's Board of Directors and its approval by the
Company's stockholders. Unless previously terminated, the Plan will terminate
at midnight on February 14, 2006 and no Stock Right may be granted after such
date.
7
<PAGE>
Exhibit 10.2
ALLY CAPITAL CORPORATION
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT is made as of the 1/st/ day of April,
1996, by and between ALLY CAPITAL CORPORATION ("Lessor") and CONFERENCE SOURCE
INTERNATIONAL, INC. ("Lessee"). All of the defined terms and rules of
construction pertaining to this Lease are set forth in Section 17 hereof.
1. TERM AND RENT.
(a) Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the Equipment described in each Equipment Schedule to be executed
pursuant hereto. This Lease shall be effective from and after the date of
execution hereof, whether or not any Equipment Schedule has been entered into,
and as an inducement to Lessor to enter into this Lease, Lessee agrees that it
shall, pursuant to the terms hereof, be liable for, subject to, undertake or
comply with, as the case may be, all of the representations, warranties,
agreements, disclaimers, waivers and indemnifications made herein that pertain
to Lessee and Lessor generally, or to events that arise or occur in connection
with transactions that the parties intend to document under an Equipment
Schedule, whether or not such Equipment Schedule is ever effectively entered
into, and any other provisions of any of the Lease Documents that may be
necessary or appropriate for the interpretation or enforcement of the foregoing.
The Term of this Lease with respect to any item of the Equipment shall consist
of the Term set forth in the Equipment Schedule relating thereto; and, except as
otherwise expressly provided herein, Lessor's and Lessee's respective rights and
obligations thereunder (including Lessee's obligation to pay Basic Rent for the
items of Equipment described therein) shall commence and continue at all times
from and after the effective date thereof, and terminate upon the expiration of
the Term thereof and Lessee's complete performance of all of its obligations
thereunder.
(b) Lessee shall pay Lessor Basic Rent for the Equipment, without any
deduction or setoff and without prior notice or demand, in the aggregate amounts
specified in each Equipment Schedule, and Supplemental Rent, promptly as such
Rent shall become due and owing. In addition to each such payment of Rent, on
the due date therefor, Lessee shall be liable for and shall pay to Lessor an
Administrative Fee; provided, however, to the extent such payment of Rent shall
be received by Lessor in good collected indefeasible funds on the due date
therefor, Lessee shall be relieved of its obligation to pay the Administrative
Fee attributable to such Rent payment. Lessee agrees that it shall have no right
to, and it shall not, pay any Rent prior to the due date thereof. Each
Equipment Schedule shall be and remain a non-cancelable net lease, and Lessee
shall not be entitled to any abatement or reduction of Rent due thereunder for
any reason.
- -------------------
THE ONE AND ONLY ORIGINAL OF THIS EQUIPMENT SCHEDULE IS MARKED "ORIGINAL" AT THE
TOP OF THIS PAGE AND SHALL CONSTITUTE THE ONLY CHATTEL PAPER ORIGINAL FOR THE
PURPOSES OF ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. EACH OTHER SIGNED VERSION
IS MARKED "DUPLICATE".
<PAGE>
Without limiting the foregoing, Lessee's obligation to pay Rent, and to
otherwise perform its obligations under the Lease Documents, are and shall be
absolute and unconditional until, with respect to each Equipment Schedule, such
Equipment Schedule terminates in accordance with its terms and shall not be
affected by any circumstances, happenings or events whatsoever and whenever and
howsoever occurring, including, any right of setoff, counterclaim, recoupment,
deduction, defense or other right which Lessee may have against Lessor, the
manufacturer or vendor of the Equipment, or anyone else for any reason
whatsoever. If for any reason whatsoever, any Equipment Schedule shall be
terminated in whole or in part by operation of law or otherwise (other than
pursuant to the expiration of the Term of the applicable Equipment Schedule),
Lessee nonetheless agrees to pay to Lessor an amount equal to each payment of
Rent at the time such payment would have become due and payable in accordance
with the terms hereof had such Equipment Schedule not been terminated in whole
or in part. Rent is payable as and when specified in the Equipment Schedule, or
as otherwise provided herein, by mailing the same to Lessor at its address
specified pursuant to this Lease; and shall be effective upon receipt.
Timeliness of Lessee's payment and other performance of its obligations under
the Lease Documents is of the essence.
Notwithstanding anything in this Section 1(b) to the contrary, Lessee
shall be entitled to a credit in an amount equal to the Abatement Amount against
its obligation to pay Basic Rent for any item(s) of Equipment suffering an
Impairment of Use conditioned upon the following: (A) Lessee provides Lessor
with written notice of such Impairment of Use within two business days after
having written notice or actual knowledge thereof (whichever occurs first), with
a full and complete description of such Impairment of Use, including the nature
and extent thereof, and (B) Lessee provides to Lessor all necessary and
appropriate cooperation with respect to Lessor's or its designee's
investigation, replacement, curing action or other action with respect to such
Impairment of Use. In furtherance of the foregoing, Lessee (i) agrees that in
the event Lessor replaces any item of Equipment with Replacement Equipment,
Lessor shall be deemed to have cured any Impairment of Use with respect to such
replaced items of Equipment, on and as of the date of Lessee's acceptance of
such Replacement Equipment; (ii) shall execute a supplement to the appropriate
Equipment Schedule thereby substituting the Replacement Equipment for such
replaced item of Equipment; (iii) shall without further action be deemed to have
conveyed to Lessor good title, free and clear of all Liens, to any item of
Equipment replaced pursuant hereto or for which the Abatement Period pertaining
thereto extends to the expiration of the Term of the Equipment Schedule, by
making it available to Lessor, and (iv) shall execute and deliver to Lessor a
bill of sale pertaining thereto that is acceptable to Lessor.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE. Lessee represents,
warrants and covenants that: (a) It is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware, is duly
qualified to do business in all jurisdictions where failure to be so qualified
would have a material adverse effect on the financial condition, business or
operations of Lessee, or impair the enforcement of its obligations under the
Lease Documents. (b) The execution, delivery and performance of the Lease
Documents and compliance with the terms thereof: (i) have been duly authorized
by all necessary corporate action on the part of Lessee; (ii) do not require the
approval of any stockholder, trustee or holder of any obligations of Lessee
except such as have been duly obtained; and (iii) do not and will not
2
<PAGE>
contravene any Law, now binding on Lessee, or the charter or by-laws of Lessee,
or contravene the provisions of, or constitute a default under, or result in the
creation of any Lien upon the property of Lessee under, any indenture, mortgage,
contract or other agreement to which Lessee is a party or by which it or its
property is bound. (c) The Lease Documents, when entered into, will constitute
legal, valid and binding obligations of Lessee, enforceable against Lessee in
accordance with the terms thereof. (d) There are no pending actions or
proceedings to which Lessee is a party, and there are no other pending or
threatened actions or proceedings of which Lessee has knowledge, before any
Government Authority, which, either individually or in the aggregate, would
adversely affect the financial condition of Lessee, or the ability of Lessee to
perform its obligations under, or comply with the terms of, the Lease Documents.
(e) Lessee is not in default under any obligation for the payment of borrowed
money, for the deferred purchase price of property or for the payment of any
rent under any lease agreement which, either individually or in the aggregate,
would have the same such effect. (f) With respect to the Equipment covered by
each Equipment Schedule, under the Applicable Laws of the state(s) in which such
Equipment is to be located, such Equipment consists solely of personal property
and not fixtures. (g) The financial statements of Lessee (copies of which have
been furnished to Lessor) have been prepared in accordance with GAAP, and fairly
present Lessee's financial condition and the results of its operations as of the
date of and for the period covered by such statements, and since the date of
such statements there has been no material adverse change in such conditions or
operations. (h) The address stated below the signature of Lessee is the chief
place of business and chief executive office (which terms shall have the
meanings provided in Article 9 of the Code) of Lessee; and Lessee does not
conduct business under a trade, assumed or fictitious name. (i) With respect to
the Equipment covered by each Equipment Schedule, Lessor will have a valid,
perfected, first priority security interest in such Equipment pursuant to the
Code and other Applicable Law upon its purchase of such Equipment and its filing
all of the UCCs executed by Lessee in connection therewith. (j) With respect
hereto and to each Equipment Schedule, Lessee has not permitted, and will not
permit, any person to engage in any activity that could result in the imposition
of liability under Applicable Law on Lessee, Lessor or any owner or operator of
the Equipment, or would otherwise impair Lessor's rights or title pertaining
thereto.
3. FINANCIALS, FURTHER ASSURANCES AND NOTICES. Lessee covenants and agrees
as follows: (a) Lessee will, if requested by Lessor, furnish Lessor (i) within
one hundred twenty (120) days after the end of each fiscal year of Lessee, a
balance sheet of Lessee as at the end of such year, and the related statement of
income and statement of changes in financial position of Lessee for such fiscal
year, prepared in accordance with GAAP, all in reasonable detail and certified
by independent certified public accountants of recognized standing selected by
Lessee; (ii) within sixty (60) days after the end of each quarter of Lessee's
fiscal year, a balance sheet of Lessee as at the end of such quarter, and the
related statement of income and statement of changes in financial position of
Lessee for such quarter, prepared in accordance with GAAP; and (iii) within
thirty (30) days after the date on which they are filed, all regular periodic
reports, forms and other filings required to be made by Lessee to the Securities
and Exchange Commission, if any. (b) Lessee will promptly execute and deliver to
Lessor such further documents, instruments and assurances and take such further
action as Lessor from time to time may reasonably request in order to carry out
the intent and purpose of this Lease and to establish
3
<PAGE>
and protect the rights and remedies created or intended to be created in favor
of Lessor under the Lease Documents. (c) Lessee shall provide written notice to
Lessor: (i) thirty (30) days prior to any contemplated change in the name or
address of Lessee; (ii) promptly upon the occurrence of any default or Default;
and (iii) promptly upon the commencement of proceedings under Federal bankruptcy
laws or any other insolvency laws (as now or hereafter in effect) involving
Lessee or any person (other than Lessor) holding an interest in the Equipment or
related property as the debtor.
4. CONDITIONS PRECEDENT. Lessor's obligations under each Equipment Schedule,
including Lessor's obligation to purchase and participate in the financing of
any Equipment to be leased thereunder, are conditioned upon:
(a) Lessor having received, at least two (2) business days prior to the
date upon which Lessor purchases the Equipment or has committed to purchase same
(if sooner), all of the following in form and substance satisfactory to Lessor:
(i) evidence as to due compliance with the insurance provisions hereof; (ii)
UCCs and all other filings and recordings with respect to the transactions
contemplated thereunder which are necessary or appropriate to establish,
protect, perfect or give first priority to Lessor's title in the Equipment
leased thereunder; (iii) if requested by Lessor, a certificate of Lessee's
Secretary certifying: (1) resolutions of Lessee's Board of Directors duly
authorizing the leasing of the Equipment under such Equipment Schedule and the
execution, delivery and performance thereof and of all related Lease Documents,
and (2) the incumbency and specimen signatures of the officers of Lessee
authorized to execute such documents; (iv) if requested by Lessor, an opinion of
counsel for Lessee as to each of the matters set forth in subsections (a)
through (i) (other than subsection (g)) of Section 2 hereof; (v) the only
manually executed original of such Equipment Schedule and all other Lease
Documents, (vi) to the extent requested by Lessor, copies or reports of searches
conducted at the appropriate recordation offices against Lessee, the Equipment
and premises at which the Equipment is or is to be located; (vii) a copy of an
executed bill of sale to Lessor for the Equipment together with an invoice of
the seller thereof specifying the purchase price for such Equipment; (viii) all
Purchase Documents pertaining to the Equipment and, to the extent requested by
Lessor, an acknowledgment and assignment of Lessee's rights, if any, under such
Purchase Documents, including all warranties, indemnities, licenses, remedies
and other rights thereunder, which Lessor shall be entitled to exercise in
connection with its exercise of its remedies under Section 15 of this Lease;
(ix) if Lessor is purchasing the Equipment from Lessee, all of the operating
records pertaining to the maintenance and use of the Equipment; and (x) such
other documents, agreements, instruments, certificates, opinions, assurances, as
Lessor may reasonably require.
(b) (i) The representations and warranties of Lessee herein or in any
of the other Lease Documents, and of each other person (other than Lessor) in
any of the other documents or agreements delivered to Lessor pursuant hereto or
thereto shall be true and correct on and as of the effective date of such
Equipment Schedule with the same effect as though made on and as of such date
(Lessee's execution and delivery of the Equipment Schedule shall constitute an
acknowledgment of the same); and (ii) there shall be no default or Default under
the Equipment Schedule or any other Lease Documents, nor shall there have
occurred any casualty or Total
4
<PAGE>
Loss, or event or condition which with notice or passage time, or both, would
constitute a casualty or Total Loss with respect to the equipment to be leased
under the Equipment Schedule.
(c) (i) Lessor shall be permitted under all Applicable Laws to purchase
and provide financing to Lessee for the Equipment and to enter into the
transactions contemplated herein and in the Equipment Schedule; and (ii) there
shall have been no change in Law or proposed change in Law or in Lessee's
financial condition which could make it inadvisable for Lessor to do so, in
Lessor's sole discretion.
(d) (i) if Lessor is purchasing the Equipment from Lessee, Lessee shall
have paid all amounts due to the Supplier (including any vendor or manufacturer)
and to any other persons from whom Lessee acquired any right, title or interest
in the Equipment, or with respect to any improvements thereon, additions
thereto, or transportation or storage thereof, on or prior to the effective date
of the Equipment Schedule; (ii) the Equipment shall have been delivered to and
accepted by Lessee, and be in the condition and repair required hereby; and
(iii) Lessor shall have received a bill of sale from the Supplier, on or prior
to the effective date of the Equipment Schedule, that is valid and legally
binding, and effective to convey to Lessor good title to the Equipment to be
leased thereunder, free and clear of any Lien.
5. DELIVERY, INSPECTION AND ACCEPTANCE BY LESSEE. Lessee shall provide an
acceptable installation environment as specified in any applicable
manufacturer's manual or by Applicable Law, and, except as otherwise specified
by manufacturer, shall furnish all labor required to install the Equipment.
Upon delivery, Lessee shall inspect the Equipment and, if the same is found to
be in good order and in compliance with the provisions of any applicable Supply
Contract, accept delivery of the same and execute and deliver to Lessor an
Equipment Schedule containing a complete description of the accepted Equipment.
The Lessee acknowledges that its execution and delivery of any Equipment
Schedule shall constitute conclusive evidence that as between Lessor and Lessee,
the Equipment shall be deemed to have been finally and irrevocably accepted by
Lessee pursuant to this Lease and such Equipment Schedule. Lessor shall not be
liable for loss or damage occasioned by any cause, circumstance or event of
whatsoever nature relating to delivery, inspection, installation or acceptance,
including the failure of or delay in delivery, delivery to the wrong place,
delivery of improper equipment or property other than the Equipment, damage to
the Equipment, governmental regulations, strike, embargo or other cause,
circumstance or event, whether of like or unlike nature. All expenses incurred
in connection with Lessor's purchase of the Equipment (including taxes,
shipment, delivery and installation) shall be the responsibility of Lessee and
shall be either, at Lessor's sole option, capitalized or expensed or paid by
Lessee upon demand. If as a result of any damage to the Equipment, strike,
embargo or other similar cause certified to Lessor in writing by Lessee's
responsible officer and verified to Lessor's satisfaction by such other evidence
relating thereto as Lessor may reasonably request, Lessee shall refuse to accept
delivery of the Equipment, Lessee will be assigned all rights and shall assume,
indemnify and hold Lessor harmless from all obligations as purchaser of the
Equipment and all other Claims relating thereto pursuant to Section 13 hereof.
5
<PAGE>
6. USE AND MAINTENANCE.
(a) Lessee shall (i) use the Equipment solely in the conduct of its
business, for the purpose for which the Equipment was designed, in a careful and
proper manner and not discontinue use of the Equipment; (ii) operate, maintain,
inspect, service, repair, overhaul and test the Equipment, and maintain all
records, logs and other materials relating thereto, in accordance with (1) all
maintenance and operating manuals or service agreements, whenever furnished or
entered into, including any subsequent amendments, supplements, renewals or
replacements thereof, issued by the manufacturer or service provider, (2) the
requirements of all applicable insurance policies, (3) the Purchase Documents,
so as to preserve all of Lessee's and Lessor's rights thereunder, including all
rights to any warranties, indemnities or other rights or remedies, (4)
Applicable Laws, and (5) consistent with the prudent practice of other similar
companies in the same business as Lessee, but in any event, to no lesser
standard than that employed by Lessee for comparable equipment owned or leased
by it; (iii) not change the location of any Equipment as specified in the
Equipment Schedule without the prior written consent of Lessor; (iv) not attach
or incorporate the Equipment to or in any other item of equipment in such a
manner that the Equipment may be deemed to have become an accession to or a part
of such other item of equipment; (v) cause each principal item of the Equipment
to be continually marked, in a plain and distinct manner, with the name of
Lessor or its designee followed by the words "Owner and Lessor," or other
appropriate words designated by Lessor on labels furnished by Lessor, and (vi)
cause the Equipment to be kept and maintained in good operating condition and in
the same condition as when delivered to Lessee hereunder, except for ordinary
wear and tear resulting despite Lessee's full compliance with the terms hereof.
With respect to Lessee's agreement in subclause (ii) above to maintain, inspect,
service, repair, overhaul and test each item of Equipment in accordance with
sub-subclauses (1), (3) and (5), Lessee shall undertake and be responsible for
the foregoing in exchange for a credit to Lessee's rental obligations the amount
of which has been calculated and agreed to by both Lessee and Lessor as fair and
complete consideration for such undertaking and responsibility as it may now and
hereafter exist (including the payment of all charges, fees, costs and expenses
relating thereto), and accounted for in the amount of Basic Rent Lessee has
agreed to pay for such item of Equipment by its execution and delivery of the
Equipment Schedule relating thereto. In furtherance of the foregoing, Lessee
acknowledges and agrees that (A) the credit provided for in the preceding
sentence shall fully discharge Lessor for all purposes from performing or
complying with any of the obligations specified in such sentence (to the extent
Lessor would be deemed to have had any responsibility therefor), and (B) it
shall also undertake, be responsible for and otherwise fully perform and comply
with all of the obligations provided for herein that are not specified in the
preceding sentence, and that it shall not be entitled to any credit or other
compensation with respect thereto, nor shall Lessor have any responsibility to
Lessee or any other person with respect to the performance or non-performance
of, or compliance or non-compliance with, any of such obligations, or any other
obligations not expressly assumed by it hereunder.
(b) If any parts of the Equipment become worn out, lost, destroyed,
damaged beyond repair or otherwise permanently rendered unfit for use, Lessee,
at its own expense, will within a reasonable time replace such parts with
replacement parts that are free and clear of all
6
<PAGE>
Liens and have a value and utility at least equal to the value, condition and
utility that such replaced parts would have had if maintained in the condition
and repair required by the terms hereof. In the event that any Applicable Law
requires alteration or modification to the Equipment, Lessee will conform
thereto or obtain conformance therewith, and shall otherwise cause the altered
or modified Equipment to comply with the provisions hereof. With respect to
parts, additions or improvements which are added to the Equipment that are
essential to the operation of the Equipment, are necessary to cause it to be in
compliance with the provisions of this Lease or which cannot be detached from
the Equipment without materially interfering with the operation of the Equipment
or adversely affecting the value, condition and utility which the Equipment
would have had without the addition thereof, title thereto shall immediately
vest in Lessor to the same extent and with the same priority as Lessor holds in
the Equipment, without cost or expense to Lessor, or any further action by any
other person, and such parts, improvement and additions shall be deemed
incorporated in the Equipment and subject to the terms of this Lease as if
originally leased hereunder. Lessor agrees that upon Lessee's replacing a part
in full compliance with the provisions of this subsection (b), all of Lessor's
right, title and interest in and to any part so replaced shall without further
action vest in Lessee "AS IS, WHERE IS," and otherwise subject to the provisions
of Section 7 hereof. Lessee shall not make any material alterations to the
Equipment without the prior written consent of Lessor, which consent shall not
be unreasonably withheld.
(c) Upon the twenty-four (24) hours' written or telephonic request of
Lessor, Lessee shall provide to Lessor any information reasonably requested by
Lessor pertaining to the Equipment or Lessee, including, the location and
condition of the Equipment. Upon reasonable advance notice (which the parties
agree shall be no less than forty-eight (48) hours' written or telephonic
request) Lessee shall afford Lessor access to Lessee's premises where the
Equipment is located for the purpose of inspecting such Equipment, all
applicable maintenance and other records, Permits, licenses and any notices or
directives from any manufacturer, vendor, service provider or Governmental
Authority, at any reasonable time during normal business hours; provided,
however, if a Default or default shall have occurred and be continuing, no
notice of any inspection by Lessor shall be required. In the event Lessee fails
or is unable to perform any of its obligations hereunder, Lessor shall have the
right, but not the obligation, to perform the same, and Lessee shall forthwith
reimburse Lessor on an after-tax basis, as Supplemental Rent, for all costs and
expenses incurred by Lessor in performing the same. Lessor shall not have any
duty to make or cause to be made any inspection, repair, restoration,
replacement, renewal, addition or improvement of any nature or description with
respect to the Equipment, or the related property or to incur any cost or
expense in connection with any Lease Document and Lessor shall not incur any
liability or obligation to any person by reason of Lessor's doing, causing to be
done or failing to do any of the foregoing, in its discretion.
7. DISCLAIMER OF WARRANTIES. LESSEE HEREBY ACKNOWLEDGES AND AGREES THAT:
EXCEPT FOR THE WARRANTY IN SECTION 16(d) HEREOF, THE EQUIPMENT AND THE RIGHTS,
TITLE AND INTEREST BEING CONVEYED HEREIN WITH RESPECT THERETO, ARE BEING
CONVEYED AND DELIVERED TO LESSEE "AS IS" AND "WHERE IS" WITHOUT ANY RECOURSE TO
LESSOR, AND LESSOR HAS NOT MADE, AND HEREBY DISCLAIMS, LIABILITY FOR, AND LESSEE
HEREBY
7
<PAGE>
WAIVES ALL RIGHTS AGAINST LESSOR RELATING TO, ANY AND ALL WARRANTIES,
GUARANTIES, REPRESENTATIONS OR OBLIGATIONS OF ANY KIND WITH RESPECT THERETO,
EITHER EXPRESS OR IMPLIED, ARISING BY APPLICABLE LAW OR OTHERWISE, INCLUDING (A)
ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTIES, REPRESENTATIONS OR OBLIGATIONS OF
OR ARISING FROM OR IN (1) MERCHANTABILITY OR FITNESS FOR PARTICULAR USE OR
PURPOSE, (2) COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR (3)
TORT (WHETHER OR NOT ARISING FROM THE ACTUAL IMPLIED OR IMPUTED NEGLIGENCE OF
LESSOR OR STRICT LIABILITY) OR UNDER THE CODE OR OTHER APPLICABLE LAW WITH
RESPECT TO THE EQUIPMENT, INCLUDING ITS TITLE OR FREEDOM FROM LIENS, FREEDOM
FROM TRADEMARK, PATENT OR COPYRIGHT INFRINGEMENT, LATENT DEFECTS (WHETHER OR NOT
DISCOVERABLE), CONDITION, MANUFACTURE, DESIGN, SERVICING OR COMPLIANCE WITH
APPLICABLE LAW AND (B) ALL OBLIGATIONS AND LIABILITIES OF LESSOR, AND RIGHTS AND
REMEDIES OF LESSEE, HOWSOEVER ARISING UNDER ANY APPLICABLE LAW WITH RESPECT TO
THE MATTERS WAIVED AND DISCLAIMED, INCLUDING, FOR LOSS OF USE, REVENUE OR PROFIT
WITH RESPECT TO THE EQUIPMENT, OR ANY LIABILITY OF LESSEE OR LESSOR TO ANY THIRD
PARTY, OR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (AS SUCH TERMS
ARE USED IN SECTION 2719(3) OF THE CODE, OR OTHER APPLICABLE LAW) EXCEPT TO THE
EXTENT THE WAIVER OF SAME IS PROHIBITED BY APPLICABLE LAW; all such risks, as
between Lessor and Lessee, are to be born by Lessee; and Lessor's agreement to
enter into this Lease and any Equipment Schedule is in reliance upon the freedom
from and the complete negation of liability or responsibility for the matters
waived and disclaimed herein. Lessee agrees that the only representations,
warranties, guaranties or indemnities made with respect to the Equipment are
those made by the Supplier thereof; and, provided that no Default or default has
then occurred and is continuing under the pertinent Equipment Schedule, Lessor
(a) shall cooperate fully with Lessee with respect to the resolution of such
claims, in good faith and by appropriate proceedings at Lessee's expense, (b)
hereby assigns to Lessee, for and during the term of this Lease, any applicable
warranties, indemnities or other similar rights under any Supply Contracts
(excluding any refunds or other similar payments reflecting a decrease in the
value of any such Equipment, which amount shall during the existence of any
default or Default be received by and paid to Lessor, for application to
Lessee's obligations under the Equipment Schedule relating thereto) applicable
to any Equipment, and (c) hereby authorizes Lessee to obtain all services,
warranties or (except as provided in (b) above) amounts from the Supplier of
such Equipment to be used to repair such Equipment (and such amounts shall be
used by Lessee to repair such Equipment). Any such claim shall not affect in any
manner the unconditional obligation of Lessee to make rent payments hereunder.
8. FEES AND TAXES.
(a) To the extent permitted by Law, Lessee shall file any necessary
report and return for, shall pay promptly when due, shall otherwise be liable to
reimburse Lessor (on an after-tax basis) for, and agrees to indemnify and hold
Lessor harmless from all Impositions.
8
<PAGE>
(b) If any report, return or property listing, or any Imposition is, by
Law, required to be filed by, assessed or billed to, or paid by, Lessor, Lessee
will do all things required to be done by Lessor (to the extent permitted by
Law) in connection therewith and is hereby authorized by Lessor to act on behalf
of Lessor in all respects, including, the contest or protest, in good faith and
by appropriate proceedings, of the validity of any Imposition, or the amount
thereof. Lessor agrees fully to cooperate with Lessee in any such contest, and
Lessee agrees promptly to indemnify Lessor for all reasonable expenses incurred
by Lessor in the course of such cooperation. An Imposition or Claim therefor
shall be paid, subject to refund proceedings, if failure to pay would adversely
affect the title or rights of Lessor in the Equipment or otherwise hereunder.
Provided that no Default or default has occurred and is then continuing, if
Lessor obtains a refund of any Imposition which has been paid (by Lessee, or by
Lessor and for which Lessor has been fully reimbursed by Lessee), Lessor shall
promptly pay to Lessee the net amount of such refund actually received. Lessee
will cause all billings of such charges to Lessor to be made to Lessor in care
of Lessee and will, in preparing any report or return required by Law, show the
ownership of the Equipment in Lessee, and shall send a copy of any such report
or return to Lessor. If Lessee fails to pay any such charges when due, except
any Imposition being contested in good faith and by appropriate proceedings as
above provided for a reasonable period of time, Lessor at its option may do so,
in which event the amount so paid (including any penalty incurred as a result of
Lessee's failure), plus an Administrative Fee shall be paid by Lessee to Lessor
with the next installment of Basic Rent.
(c) The provisions of this Section 8 shall not apply to any Imposition
(i) imposed as a result of any voluntary transfer or disposition by Lessor of
all or any portion of its interest in the Equipment pursuant to Section 15
hereof; (ii) that Lessee is contesting in good faith, by appropriate proceedings
and is otherwise permitted pursuant to the provisions of this Lease until the
conclusion of such contest; except, that Lessee's right to contest any
Imposition and thereby avoid its obligation to pay any such Imposition is
conditioned upon the existence of such Imposition during any such contest not
causing any material danger of the sale, forfeiture or loss of the Equipment; or
(iii) imposed on Lessor that is based on, or measured by gross or net income
taxes (including, capital gains taxes, minimum taxes, income taxes collected by
withholding and taxes on tax preference items), except for Lessee's obligation
to pay indemnities and reimbursements on an "after-tax basis", and as otherwise
expressly provided herein.
9. INTENT, TITLE AND LIENS.
(a) The parties intend and agree that the Equipment shall remain
personal property, and that Lessor's title thereto or the priority of such title
not be impaired, notwithstanding the manner in which it may be affixed to any
real or personal property. Lessee shall obtain and deliver to Lessor (to be
recorded at Lessee's expense), from any person having an interest in any real or
personal property to or upon which the Equipment is to be attached or located,
as the case may be, waivers of any Lien or which such person might have or
hereafter obtain or claim with respect to the Equipment.
(b) During the Term of each Equipment Schedule, and until Lessee either
purchases such Equipment upon the expiration of the Initial Term, or upon the
expiration of any
9
<PAGE>
Renewal Term with respect thereto, and upon Lessee's full performance of all its
obligations under or relating to such Equipment Schedule, Lessor shall retain
title to such Equipment; provided, that, Lessee and Lessor acknowledge that
transactions documented hereunder and under each Equipment Schedule shall
constitute a "Lease intended as security," or "security interest," as the case
may be, under Applicable Law (including under Section 1201(37) of the Code). In
furtherance thereof, (i) in order to secure the prompt payment and performance
as and when due of all of Lessee's obligations (both now existing and hereafter
arising) under each such Equipment Schedule and all of the other Lease
Documents, Lessee shall be deemed to have granted, and it hereby grants to
Lessor a first priority security interest in and assigns and conveys the
following (whether now existing or hereafter created): (A) the Equipment leased
pursuant to such Equipment Schedule, (B) all subleases thereof (including all of
Lessee's rights, but none of its obligations thereunder, including all amounts
payable thereunder) all accounts, contract rights and general intangibles
(including all licenses, patents, copyrights, maskworks and trade secrets)
relating to the Equipment, and (C) all replacements and Proceeds (cash and non-
cash), including the proceeds of all insurance policies, of the property and
rights described in (A) and (B), and (ii) Lessee agrees that with respect to the
Equipment, in addition to all of the other rights and remedies available to
Lessor hereunder upon the occurrence of a Default, Lessor shall have all of the
rights and remedies of a first priority perfected secured party under the Code.
Lessee may not dispose of any of the Equipment except to the extent expressly
provided herein, notwithstanding the fact that proceeds constitute a part of the
Equipment.
(c) Lessee will not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to any of the Equipment, title
thereto or any interest therein, except Permitted Liens. Lessee shall notify
Lessor immediately upon receipt of notice of any Lien affecting the Equipment in
whole or in part, and defend Lessor's title therein and the first priority
thereof against all persons holding or claiming to hold a Lien; and any Claims
suffered by Lessor as a result thereof shall be covered by the indemnity in
Section 13 hereof.
(d) Owner for Federal Tax Purposes. It is hereby agreed between Lessee
and Lessor that, for Federal income tax purposes (i) the Lease is, and will be
consistently treated as, a finance lease rather than a true lease; (ii) Lessee
will be the owner of the Equipment to be delivered under this Lease; (iii)
Lessee will not claim any rental deduction for amounts paid to Lessor under the
Lease; (iv) Lessor will not claim any cost recovery or depreciation deductions
with respect to the Equipment delivered under this Lease; (v) neither Lessor nor
Lessee will at any time take any action, directly or in directly, or file any
returns or other documents inconsistent with the foregoing; and (vi) Lessor and
Lessee will file such returns, take such actions and execute such documents as
may be reasonable and necessary to facilitate accomplishment of the intent
expressed in subparagraphs (i) through (iv) of this Section 9(d).
10. INSURANCE.
(a) Lessee shall obtain and maintain all-risk insurance coverages with
respect to the Equipment insuring against, among other things: casualty
coverage, including, loss or damage to the Equipment due to fire and the risks
normally included in extended coverage, malicious mischief and vandalism, for
not less than the greater of the Equipment's full
10
<PAGE>
replacement value or the Stipulated Loss Value; and public liability coverage
including, both personal injury and property damage, with a combined single
limit per occurrence of not less than the amount specified in each Equipment
Schedule, with no deductible. All such insurance shall be in form and amount and
with companies reasonably satisfactory to Lessor. All insurance for loss or
damage shall provide that losses, if any, shall be payable to Lessor as sole
loss payee and Lessee shall utilize its best efforts to have all checks relating
to any such losses delivered promptly to Lessor. Lessor shall be named as an
additional insured with respect to all such liability insurance. Lessee shall
pay the premiums therefor and deliver to Lessor evidence satisfactory to Lessor
of such insurance coverage. Lessee shall cause to be provided to Lessor, not
less than fifteen (15) days prior to the scheduled expiration or lapse of such
insurance coverage, evidence satisfactory to Lessor of renewal or replacement
coverage. Each insurer shall agree, by endorsement upon the policy or policies
issued by it or by independent instrument furnished to Lessor, that (i) no
cancellation, lapse, expiration or adverse change reducing the coverage thereof
shall be effective unless Lessor has been given thirty (30) days' prior written
notice thereof, (ii) insurance as to the interest of any named additional
insured or loss payee other than Lessee shall not be invalidated by any actions,
inactions, breach of warranty, declaration or condition or negligence of Lessee
or any person other than such additional insured with respect to such policy or
policies; (iii) such insurance is primary with respect to any other insurance
carried by or available to Lessor, (iv) the insurer waivers any right of
subrogation and any setoff, counterclaim, or other deduction, whether by
attachment or otherwise, against Lessor, and (v) with respect to the liability
coverage, all of the provisions of such coverage, except the limits of
liability, shall operate in the same manner as if there were a separate policy
with and covering Lessee and Lessor. The proceeds of such insurance payable as a
result of loss of or damage to the Equipment shall be applied as required by the
provisions of Section 11 hereof.
(b) With respect to Lessee's agreement to obtain and maintain the
casualty and liability insurance coverage for each item of Equipment required in
clause (a) above, Lessee shall undertake and be responsible for the foregoing in
exchange for a credit to Lessee's rental obligations the amount of which has
been calculated and agreed to by both Lessee and Lessor as fair and complete
consideration for such undertaking and responsibility as it may now and
hereafter exist (including the payment by Lessor of all premiums, costs and
expenses relating thereto), and accounted for in the amount of Basic Rent for
such item of Equipment by its execution and delivery of the Equipment Schedule
relating thereto. In furtherance of the foregoing, Lessee acknowledges and
agrees that (A) the credit provided for in the preceding sentence shall fully
discharge Lessor for all purposes from so obtaining or maintaining any such
insurance coverage (to the extent Lessor would be deemed to have had any
responsibility therefor), and (B) it shall also undertake, be responsible for
and otherwise fully perform and comply with all of the obligations provided for
herein that are not related to the obtaining and maintaining of such insurance
coverage, and that it shall not be entitled to any credit or other compensation,
nor shall Lessor have any responsibility to Lessee or any other person, with
respect to such obligations or any other obligations not expressly assumed by it
hereunder.
11
<PAGE>
11. LOSS AND DAMAGE.
(a) Lessee assumes the risk of direct and consequential loss and damage
to the Equipment from all causes. Except as provided in this Section 11 for
discharge upon payment of Stipulated Loss Value, no loss or damage to the
Equipment or any part thereof shall release or impair any obligations of Lessee
under this Lease. Without limiting Sections 5, 7, 8, 13 or any other provision
hereof, Lessee agrees that Lessor shall not incur any liability to Lessee for
any loss of business, loss of profits, expenses, or any other Claims resulting
to Lessee by reason of any failure of or delay in delivery or any delay caused
by any non-performance, defective performance, or breakdown of the Equipment,
nor shall Lessor at any time be responsible for personal injury or the loss or
destruction of any other property resulting from the Equipment. In the event of
loss or damage to any item of Equipment which does not constitute a Total Loss,
Lessee shall, at its sole cost and expense, promptly repair and restore such
item of Equipment to the condition required by this Lease. Provided that no
Default or default has occurred and is then continuing, upon receipt of evidence
reasonably satisfactory to Lessor of completion of such repairs, Lessor will
apply any net insurance proceeds received by Lessor on account of such loss to
the cost of repairs. Upon the occurrence of a Total Loss during the Term of this
Lease, Lessee shall give prompt notice thereof to Lessor. On the next date for
the payment of Basic Rent, Lessee shall pay to Lessor the Rent due on that date
plus the Stipulated Loss Value of the item or items of the Equipment with
respect to which the Total Loss has occurred and any other sums due hereunder
with respect to that Equipment (less any net insurance proceeds or net
condemnation award actually paid to Lessor to compensate it for such Total
Loss). Upon Lessor's receipt of such payment in good collected indefeasible
funds with respect to an Equipment Schedule, such Equipment Schedule and the
obligation to make future payments of Basic Rent thereunder shall terminate
solely with respect to the Equipment or items thereof so paid for and (unless
any insurer shall otherwise demand) Lessor shall be deemed to have conveyed all
of its right, title and interest therein to Lessee "AS IS, WHERE IS" and
otherwise subject to Section 7 hereof. Stipulated Loss Value shall be determined
as of the next date on which a payment of Basic Rent is or would be due after a
Total Loss or other termination of the subject Equipment Schedule, after payment
of any Basic Rent due on such date, and the applicable percentage factor shall
be that which is set forth on the SLV Schedule with respect to such Basic Rent
payment.
(b) Notwithstanding the foregoing or any other provision hereof to the
contrary, in the event any item(s) of Equipment suffers a Total Loss and the
insurance carrier providing coverage obtained by Lessee against such Total Loss,
has as a result of such Total Loss, agreed in writing to pay to Lessor as the
sole loss payee proceeds of such coverage in an amount equal to the Stipulated
Loss Value (determined as of the Basic Rent payment date next preceding such
Total Loss, but otherwise in accordance with the preceding clause(b)), Lessee's
obligation to pay future installments of Basic Rent for such item(s) of
Equipment suffering a Total Loss shall cease as of the Basic Rent payment date
preceding the Total Loss thereof, and Lessee shall thereupon be relieved of its
obligation to pay the Stipulated Loss Value thereof; provided, that (i) Lessee
has given prompt written notice of such Total Loss to Lessor and the appropriate
insurer(s) (which notice shall include Lessee's written election that it intends
that this clause(b) shall apply to such Total Loss); (ii) no default or Default
occurs prior to Lessor's receipt of all
12
<PAGE>
amounts due from Lessee and such insurer pursuant hereto in good collected
indefeasible funds; (iii) such insurer neither (A) repudiates its obligation to
the amount required above or fails to pay such amount to Lessor in good
collected indefeasible funds within 90 days after the date of the Total Loss,
nor (B) suffers an event of the type described in Section 14(a)(iv); and (iv)
Lessee takes all actions as shall be requested by Lessor with respect to the
insurance coverage, or otherwise necessary to facilitate the payment of the
insurance proceeds required above. Upon the failure of any of the conditions set
forth in the proviso in the preceding sentence, Lessee shall immediately be
liable to and pay to Lessor the full amounts that would otherwise have been due
pursuant to paragraph (a) of this Section 11. To the extent Lessee's obligation
to pay the Stipulated Loss Value of any item of Equipment is satisfied by
Lessor's receipt of insurance proceeds as provided above, and not by funds in
such amount paid by Lessee in the manner required herein, Lessor shall have no
obligation to convey such item of Equipment to Lessee.
12. REDELIVERY.
(a) In the event Lessor exercises its remedies under Section 14(c)(2)
hereof, Lessee shall, at its own expense, return the Equipment to Lessor within
the period designated by Lessor, in a condition that satisfies all of the
requirements of this Lease (including Section 6 hereof), and free and clear of
all Liens except Liens resulting from claims against Lessor not relating to the
ownership or operation of such Equipment, by delivery to such place within the
Continental United States as Lessor shall specify. In addition to Lessor's
other rights and remedies hereunder, if repairs are necessary to place the
Equipment in the condition required in this Section, Lessee shall be liable for
and pay to Lessor the full amount of the costs and expenses incurred and/or paid
by Lessor to accomplish such repairs.
13. INDEMNITY. Lessee assumes and agrees to indemnify, defend and keep
harmless, even if such Claims are groundless, false or fraudulent, Lessor (which
for the purposes of this Section 13 shall also include Ally Capital Corporation
and its affiliates ("Ally"), and any assignee of Lessor's rights, obligations,
title or interest under any Equipment Schedule notwithstanding any assignment
made by Ally of its interests herein), its agents and employees, from and
against any and all Claims (other than, with respect to any such indemnitee,
such as may directly and proximately result from the gross negligence or willful
misconduct of such indemnitee; but Lessee does agree to so indemnify each such
indemnitee against its own negligence), by paying (on an after-tax-basis, if to
Lessor) or otherwise discharging same, when and as such Claims shall become due,
including any Claims arising on account of (a) this Lease, any Equipment
Schedule, or any other Lease Documents, or (b) the Equipment, or any part
thereof, including the ordering, acquisition, delivery, installation or
rejection of the Equipment, the possession, maintenance, use, condition, or
ownership or operation of any item of Equipment, and by whomsoever owned, used
or operated, during the term of this Lease or any Equipment Schedule with
respect to that item of Equipment, the existence of latent and other defects
(whether or not discoverable by Lessor or Lessee) any claim in tort for
negligence or strict liability, and any claim for patent, trademark or copyright
infringement, or the loss, damage, destruction, removal, return, surrender, sale
or other disposition of the Equipment, or any item thereof, or for whatever
other reason whatsoever. Lessor shall give Lessee prompt notice of any claim or
liability hereby indemnified against and Lessee shall be entitled to control
13
<PAGE>
the defense thereof, so long as Lessee is not in Default; provided, however,
that Lessor shall have the right to approve defense counsel selected by Lessee.
14. DEFAULT; REMEDIES.
(a) A default shall be deemed to have occurred hereunder (solely
with respect to the obligations and other matters addressed in the second
sentence of Section 1 hereof) and under an Equipment Schedule ("Default") if (i)
Lessee shall fail to make any payment of Rent or any other payment hereunder,
thereunder, or under any other Lease Document relating thereto, within ten (10)
days after the same shall have become due; or (ii) Lessee shall fail to obtain
and maintain the insurance required pursuant thereto; (iii) (1) Lessee shall
fail to perform or observe any other covenant, condition or agreement to be
performed or observed by it thereunder or under any other Lease Document
relating thereto and such failure shall continue unremedied for a period of
thirty (30) days after the earlier of (A) actual knowledge thereof by any
officer of Lessee, or (B) written notice thereof to Lessee by Lessor; or (2)
Lessee repudiates this Lease or such Equipment Schedule, or any part hereof or
thereof, or attempts to reject or revoke acceptance of any Equipment to be
leased or leased thereunder (except for any rejection permitted by the last
sentence of Section 5 of this Lease), or (iv) Lessee shall (1) be generally not
paying its debts as they become due; or (2) take action for the purpose of
invoking the protection of any bankruptcy or insolvency law, or any such law is
invoked against or with respect to Lessee or its property, and any such petition
filed against Lessee is not dismissed within sixty (60) days; or (v) Lessee
shall make or permit any unauthorized Lien against or assignment or transfer
thereof or of the Equipment or of any interest therein; (vi) any certificate,
statement, representation, warranty or audit contained herein, therein or in any
other Lease Document heretofore or hereafter furnished with respect thereto by
or on behalf of Lessee proving to have been false in any material respect at the
time as of which the facts therein set forth were stated or certified, or having
omitted any substantial contingent or unliquidated liability or claim against
Lessee; or (vii) Lessee shall be in default under any material obligation for
the payment of borrowed money, for the deferred purchase price of property or
for the payment of any rent under any lease agreement, and the applicable grace
period with respect thereto shall have expired; or (viii) Lessee shall have
terminated its corporate existence, consolidated with, merged into, or conveyed
or leased substantially all of its assets as an entirety to any person (such
actions being referred to as an "Event"), unless such person is organized and
existing under the laws of the United States or any state, and not less than
sixty (60) days prior to such Event: (1) such person executes and delivers to
Lessor an agreement satisfactory in form and substance to Lessor, in its sole
discretion, containing an effective assumption by such person of the sole
responsibility for, and agreement to pay, perform, comply with and otherwise be
liable for, in a due and punctual manner, all of Lessee's obligations having
previously arisen, or then or thereafter arising, under any and all of the Lease
Documents; and (2) Lessor is satisfied as to the creditworthiness of such
person, and of its conformance to the other standard criteria used by Lessor (or
Lessor's affiliate or agent to the extent such affiliate or agent and not
Lessor, regularly makes decisions on Lessor's behalf to participate or not
participate in the extension of lease financing to an equipment user); or (ix)
there occurs a default under any guaranty executed in connection with such
Equipment Schedule; or if there is an anticipatory repudiation of Lessee's
obligations hereunder, under such Equipment Schedule or any other Lease
Documents; or (x) if Lessee is a
14
<PAGE>
privately held corporation and effective control of Lessee's voting capital
stock, issued and outstanding from time to time, is not retained by the present
stockholders (unless Lessee shall have provided sixty (60) days' prior written
notice to Lessor of the proposed disposition of stock and Lessor shall have
consented thereto in writing); or (xi) if Lessee is a publicly held corporation
and, as a result of or in connection with a material change in the ownership of
Lessee's capital stock, Lessee's debt to worth ratio then equals or exceeds
twice Lessee's debt to worth ratio as of the date of this Lease, without the
prior written consent of Lessor. As used herein, "debt to worth ratio" shall
mean the ratio of (1) Lessee's total liabilities which, in accordance with GAAP,
would be included in the liability side of a balance sheet, to (2) Lessee's
tangible net worth including the sum of the par or stated value of all
outstanding capital stock, surplus and undivided profits, less any amounts
attributable to goodwill, patents, copyrights, mailing lists, catalogs,
trademarks, bond discount and underwriting expenses, organization expense and
other intangibles, all as determined in accordance with GAAP.
(b) Although each Equipment Schedule executed pursuant to this Lease
shall constitute a separate instrument of lease, the occurrence of a Default
hereunder or with respect to any Equipment Schedule shall, at the sole
discretion of Lessor constitute a Default with respect to any one or more of the
remaining Equipment Schedules. Notwithstanding anything set forth herein, Lessor
may, but shall not have any obligations to (Lessee hereby waiving any rights it
may have to require Lessor to marshall assets), (i) exercise all rights and
remedies hereunder independently with respect to each Equipment Schedule; or
(ii) apply any collateral and the proceeds thereof in which Lessor holds a
security interest with respect to a particular Equipment Schedule to Lessee's
obligations under such Equipment Schedule or any one or all of the remaining
Equipment Schedules.
(c) Upon a Default hereunder or under an Equipment Schedule, as the
case may be, Lessor may, at its option, declare this Lease or such Equipment
Schedule to be in default either with or without written notice to Lessee
(without election of remedies), and at any time thereafter, may exercise any and
all rights and remedies of a secured party under the Code and in addition
thereto, at its sole discretion, do any one or more of the following, all of
which are authorized by Lessee with respect to such Equipment Schedule as Lessor
in its sole discretion shall elect (to the extent permitted by, and subject to
compliance with, any mandatory requirements of Applicable Law then in effect):
(i) (1) declare the following amounts to be immediately due
and payable, as liquidated damages and not as a penalty (and in lieu of future
rentals and other obligations then due thereunder), and demand or sue for,
collect and apply, (A) all Basic Rent due and unpaid as of the payment date
immediately preceding the Default, plus a pro-rated daily rent in the amount set
----
forth in Section 3(b)(i) of such Equipment Schedule for the period from such
preceding payment date to the date of Lessor's declaration (to the extent such
daily rent is not accounted for in clause (B)), (B) by acceleration, the unpaid
principal portion of the aggregate Basic Rent payments due on or after such date
for the remaining period of the Initial Term and the Renewal Term (whether or
not Lessee has exercised its renewal option thereunder) of such Equipment
Schedule, which principal amount shall be equal to the Stipulated Loss Value of
the Equipment leased thereunder (determined as of the Basic Rent date next
preceding the Default),
15
<PAGE>
(C) all Supplemental Rent and all other sums due thereunder as of the date of
such Default; and (D) all such other charges permitted by Applicable Law that,
when received by Lessor together with all other payments due to Lessor under
this Section 15(c), shall make Lessor whole with respect to all harms, damages,
losses and expenses suffered by Lessor as a result of the Default and Lessee's
failure to pay any Rent due as a result thereof on the date required hereunder;
provided, that if a Default described in subsection (a)(iv) above, or if a
Default shall have occurred and be continuing at any time after the occurrence
of an event that is similar in nature to any of the events described in
subsection (a)(iv), then, without further action or notice of any kind, the
amounts described above shall immediately become due and payable; and/or
(ii) (1) require Lessee to assemble any or all of the
Equipment at the location to which the Equipment was delivered or the location
to which such Equipment may have been moved by Lessee or to return promptly, any
or all of the Equipment to Lessor at the location, and otherwise in accordance
with all of the terms of Section 12 hereof, and/or (2) take possession of and
render unusable by Lessee any or all of the Equipment, wherever it may be
located, without any court order or other process of law (and if Lessor does
seek the entry of such an order, Lessee agrees to waive any notice or
opportunity to be heard with respect thereto) and without liability for any
damages occasioned by such taking of possession (any such taking of possession
shall constitute an automatic termination of this Lease as it applies to those
items taken without further notice, and such taking of possession shall not
prohibit Lessor from exercising its other remedies hereunder); and/or (3) at
Lessor's request, Lessee shall promptly execute and deliver to Lessor such
instruments of title and other documents as Lessor may deem necessary or
advisable to enable Lessor or an agent or representative designated by Lessor,
at such time or times and place or places as Lessor may specify, to obtain
possession of all or any part of any rights in respect of the Equipment the
possession of which Lessor shall at the time be entitled hereunder; and if
Lessee shall for any reason fail to execute and deliver such instruments and
documents after such demand by Lessor, Lessor may (A) obtain a judgment
conferring on Lessor the right to immediate possession and requiring Lessee to
deliver such instruments and documents to Lessor, to the entry of which judgment
Lessee hereby specifically consents, and (B) pursue all or part of such
Equipment wherever it may be found and may enter any of the premises wherever
such Equipment may be, or is supposed to be, and search for such Equipment and
take possession of and remove same; and/or (4) have the right, but without any
obligation, to (A) use, operate, store, control, insure or manage the Equipment
and to carry on the business and to exercise all rights and powers of Lessee
relating to the Equipment as Lessor shall deem best, including the right to
remove Liens, cure violations of Applicable Law, and enter into any and all such
agreements with respect thereto and with respect to the maintenance, condition,
operation, leasing, storage or disposition of the Equipment or any part thereof
as Lessor may determine, (B) collect and receive all Proceeds, without
prejudice, however, to the right of Lessor under any provision of this Lease to
collect and receive all cash held by, or required to be deposited with, Lessor
hereunder, and (C) apply such Proceeds, less costs of collection, in the manner
provided in clause (iii)(A) below; and/or
(iii) subject to any right of Lessee to redeem such
Equipment, sell or otherwise dispose of any or all of such Equipment, whether or
not in Lessor's possession, and without instituting any legal proceedings
whatsoever, in a commercially reasonable manner at
16
<PAGE>
public or private sale with notice to Lessee (the parties agreeing that ten (10)
days' prior written notice shall constitute adequate notice of any such sale);
and such sale or disposition may be (1) by public auction to the highest bidder,
in one lot as an entirety or in separate lots, either for cash or on credit and
on such terms as Lessor may determine, and at any place (whether or not it be
the location of the Equipment or any part thereof) designated in such notice,
and (2) be adjourned from time to time by announcement at the time and place
appointed for such sale or sales, or for any such adjourned sale or sales,
without further published notice, and Lessor may bid for and purchase, at its
sole discretion, the Equipment or any part thereof at such sale, it being
understood, however, that without the consent of Lessor, neither Lessee nor any
affiliate of Lessee or any other person acting directly or indirectly for or on
behalf of Lessee or any affiliate of Lessee may be the purchaser at any such
private sale (except for the full amount due to Lessor under such Equipment
Schedule, and under any other Lease Documents collateralized thereby); and apply
the proceeds of such disposition and all Proceeds: (A) First, to the payment of
-----
all costs of enforcement, including expenses of any sale, lease or other
disposition, expenses of any taking, attorneys' fees, court costs and other
expenses incurred or advances made by Lessor in protection of its rights or
otherwise pursuant to its exercise of remedies and to provide adequate indemnity
to Lessor against all Impositions and Liens which by Law have, or may have,
priority over the rights of Lessor to the money so received by Lessor; (B)
Second, to the payment of Lessee's obligations under the Equipment Schedule, and
- ------
under any other Lease Documents collateralized thereby; and (C) Third, to the
-----
payment of any surplus thereafter remaining to Lessee or to whosoever may be
entitled thereto; and in the event that the proceeds and Remaining Proceeds are
insufficient to pay the amounts specified in clauses (A) and (B) above, Lessor
may collect such deficiency from Lessee; and/or terminate this Lease or such
Equipment Schedule; and/or
(iv) terminate this lease or such Equipment Schedule; and/or
(v) proceed by appropriate court action, either at law or
in equity or in bankruptcy, whether for the specific performance of any covenant
or agreement herein contained or in execution or aid of any power herein
granted; or for foreclosure hereunder, or for the appointment of a receiver or
receivers for the Equipment or any part thereof, for the recovery of a judgment
for the obligations thereby secured or for the enforcement of any other proper,
legal or equitable remedy available under Applicable Law, including Section 9501
et seq. of the Code.
- -- ----
(d) Unless otherwise provided above, a termination pursuant hereto
shall occur only upon written notice by Lessor to Lessee and, unless Lessor is
terminating this Lease, only with respect to the Equipment Schedule as Lessor
specifically elects to terminate in such notice. Except as to the Equipment
Schedule with respect to which there is a termination, the remaining Equipment
Schedules shall continue in full force and effect and Lessee shall be and remain
liable for the full performance of all its obligations thereunder and under the
remaining Lease Documents. In addition, Lessee shall be liable for all
reasonable legal fees, all court costs and other expenses incurred by reason of
any Default or the exercise of Lessor's remedies, including all expenses
incurred in connection with the return of any Equipment in accordance with the
terms of Section 12 hereof or in placing such Equipment in the condition
required by Section 12. No right or remedy referred to in this Section 14 is
intended to be exclusive, but each shall be cumulative and shall be in addition
to any other remedy referred to above or otherwise available
17
<PAGE>
at law or in equity, and may be exercised concurrently or separately from time
to time. The failure of Lessor to exercise the rights granted hereunder upon any
default or Default by Lessee shall not constitute a waiver of any such right
upon the continuation or reoccurrence of any such default or Default. In no
event shall the execution of an Equipment Schedule constitute a waiver by Lessor
of any pre-existing default or Default in the performance of the terms and
conditions hereof.
15. ASSIGNMENT BY LESSOR AND LESSEE. WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR (WHICH SHALL NOT UNREASONABLY BE WITHHELD), LESSEE WILL NOT ASSIGN ANY OF
ITS RIGHTS NOR DELEGATE ANY OF ITS OBLIGATIONS HEREUNDER, SUBLET THE EQUIPMENT
OR OTHERWISE PERMIT THE EQUIPMENT TO BE OPERATED OR USED BY, OR TO COME INTO OR
REMAIN IN THE POSSESSION OF, ANYONE BUT LESSEE. ANY UNPERMITTED SUBLEASE OR
ASSIGNMENT BY LESSEE SHALL BE VOID AB INITIO. No assignment or sublease,
-- ------
whether authorized in this Section or in violation of the terms hereof, shall
relieve Lessee of its obligations under any Lease Document and Lessee shall
remain primarily liable under all of the Lease Documents. Lessor may at any
time assign any or all of its rights, obligations, title and interest under any
or all of the Lease Documents, to any other person, so long as notice is sent to
Lessee. Such notice shall provide the name and address of Lessor's assignee and
the percentage interest such assignee has acquired in the Lease. Lessee shall
acknowledge receipt of such notice in writing. Upon receipt of such notice from
Lessor, Lessee shall enter in its books and records the name and address of the
assignee (and its percentage interest in the Lease) as the new Lessor under the
Lease. In the event Lessor expressly retains the obligations of the lessor
under any Lease Document in any such assignment, Lessor's assignee shall not be
obligated to perform any duty, covenant or condition required to be performed by
the lessor under the terms of such Lease Document (other than the covenant of
quiet enjoyment specified in Section 16(d) hereof); and no breach or default by
Lessor hereunder or pursuant to any other agreement between Lessor and Lessee,
should there be one, shall excuse performance by Lessee of any provision hereof,
it being understood that in the event of a default or breach by Lessor that
Lessee shall pursue any rights on account thereof solely against Lessor. Lessee
agrees that any such assignment shall not materially change Lessee's duties or
obligations under the Lease or any Equipment Schedule nor materially increase
Lessee's risks or burdens. Upon such assignment and except as may otherwise be
provided therein all references in this Lease, or such other assigned Lease
Document, to Lessor shall include such assignee. Subject always to the
foregoing, this Lease inures to the benefit of, and is binding upon, the
successors and assigns of the parties hereto.
16. MISCELLANEOUS.
(a) This Lease, each Equipment Schedule, any other Lease Documents
and any commitment letter executed by the parties pertaining to such Equipment
Schedules, constitute the entire agreement between the parties with respect to
the subject matter hereof and thereof and shall not be amended or altered in any
manner except by a document in writing executed by both parties. This Lease and
all of the other Lease Documents may be executed in any number of counterparts
and by different parties hereto or thereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together
18
<PAGE>
consist of but one and the same instrument; provided, however, that to the
extent that this Lease or any Equipment Schedule constitutes chattel paper (as
such term is defined in the Code) no security interest in this Lease or such
Equipment Schedule may be created thereby by the transfer or possession of any
counterpart hereof or thereof, as the case may be, other than the originally
executed counterpart bearing the mark "Original" on the first page hereof or
thereof, which counterpart shall constitute the "Original" hereof or thereof, as
the case may be, for purposes of the Code.
(b) Any provision of this Lease or any other Lease Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without limiting the
generality of the foregoing, in the event any court shall determine that any
provision hereof was unconscionable when made, such court is hereby authorized
by Lessor and Lessee to limit the application of such unconscionable provision
to the extent necessary to avoid any unconscionable result.
(c) Each execution by Lessee of an Equipment Schedule shall be
deemed a reaffirmation and warranty that there shall have been no material
adverse change in the business or financial condition of Lessee from the date of
execution hereof. Except as otherwise expressly provided herein, it is hereby
agreed that (i) all agreements, indemnities, representations and warranties
contained herein or in any other Lease Document shall survive, and shall
continue in effect following the execution and delivery of this Lease and all
such other Lease Documents; and (ii) with respect to each Equipment Schedule,
the provisions of Sections 7, 8, 12 and 14, together with any of Lessee's
obligations under the other provisions of this Lease, as incorporated therein,
which have accrued but not been fully satisfied, performed or complied with
prior to the termination of such Equipment Schedule, shall survive the
termination thereof to the extent necessary for their full and complete
performance.
(d) Subject to the terms and conditions hereof, neither Lessor nor
any person authorized by Lessor shall interfere with Lessee's right to peaceably
and quietly hold, possess and use the Equipment during the term of the Equipment
Schedule relating thereto. Any action by Lessee against Lessor for any default
by Lessor under this Lease or any Equipment Schedule, shall be commenced within
one (1) year after any such cause of action accrues.
(e) Lessee irrevocably appoints Lessor as Lessee's attorney-in-fact
(which power shall be deemed coupled with an interest) to execute on Lessee's
behalf and file all UCCs and amendments Lessor deems advisable to establish,
protect, perfect or obtain priority for the security interest granted herein, to
execute, endorse and deliver any documents and checks or drafts relating to or
received in payment for any loss or damage under the policies of insurance
required by the provisions of Section 10 hereof, but only to the extent that the
same relates to the Equipment.
(f) LESSOR AND LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH LESSEE AND/OR LESSOR MAY BE PARTIES
19
<PAGE>
ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS LEASE OR ANY OF THE LEASE
DOCUMENTS. IT IS HEREBY AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS LEASE
OR SUCH OTHER LEASE DOCUMENTS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY MADE BY THE PARTIES AND THE PARTIES HEREBY ACKNOWLEDGE THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. EACH
OF LESSOR AND LESSEE FURTHER ACKNOWLEDGE THAT IT HAS BEEN REPRESENTED IN THE
SIGNING OF THIS LEASE AND THE OTHER LEASE DOCUMENTS AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT
THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(g) All notices (excluding billings and communications in the
ordinary course of business) hereunder shall be in writing, delivered personally
or by overnight courier service, sent by facsimile transmission (with
confirmation of receipt), or sent by certified mail, return receipt requested,
addressed to the other party at its respective address stated below the
signature of such party or at such other address as such party shall from time
to time designate in writing to the other party, and shall be effective from the
date of mailing.
(h) This Lease and all of the other Lease Documents shall not be
effective unless and until accepted by execution by an officer of Lessor at the
address, in the State of California, as set forth below the signature of Lessor.
THIS LEASE AND ALL OF THE OTHER LEASE DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
(WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF
THE EQUIPMENT. The parties agree that any action or proceeding arising out of or
relating to this Lease may be commenced in any state or Federal court in the
State of California, and agree that a summons and complaint commencing an action
or proceeding in any such court shall be properly served and shall confer
personal jurisdiction if served personally or by certified mail to it at its
address hereinbelow set forth, or as it may provide in writing from time to
time, or as otherwise provided under the laws of the State of California.
17. DEFINITIONS AND RULES OF CONSTRUCTION.
(a) The following terms, when capitalized (if applicable) or
otherwise used as below, have the following meanings:
20
<PAGE>
"Abatement Amount": with respect to any Abatement Period, an amount
equal to (i) any installment(s) of Basic Rent, and any fraction thereof,
accruing pursuant to the Equipment Schedule covering the item of Equipment
having suffered an Impairment of Use, multiplied by (ii) a fraction having (x) a
----------
numerator equal to the amount of Total Invoice Cost allocable to such item of
Equipment, and (y) a denominator equal to the Total Invoice Cost of all of the
items of Equipment then being leased to Lessee under such Equipment Schedule.
"Abatement Period": with respect to any item of Equipment, that
period commencing upon the Impairment Date relating thereto, and continuing
until the earlier of (i) Lessor having either (x) cured the Impairment of Use
relating thereto, or (y) provided Lessee with Replacement Equipment in
substitution therefor, or (ii) the expiration of the Term of such Equipment
Schedule.
"Administrative Fee": with respect to each payment of Rent that shall
become due and payable hereunder or under or with respect to any Equipment
Schedule, an amount equal to five (5) percent of such Rent payment; provided,
that if such charge exceeds the highest charges of such type permitted by
Applicable Law, then the Administrative Fee shall be the highest such charges
permitted by Applicable Law.
"Applicable Law": any applicable Law, including any Law that may
apply to Lessee, its properties and operations, the Equipment or related
property or the operation, modification, condition, maintenance, ownership,
leasing or use thereof (including any product thereof), or any transaction
contemplated hereunder or under any other Lease Document, including any
environmental law, federal or state securities law, commercial law (pertaining
to the rights and obligations of sellers, purchasers, debtors, secured parties,
or to any other pertinent matter), zoning, sanitation, siting or building law,
energy, occupational safety and health practices, or any other Law.
"Base Lease Commencement Date": for each Equipment Schedule, as
defined in Section 2 thereof.
"Basic Rent": the rental installments payable pursuant to each
Equipment Schedule for the Interim Term, the Basic Term and the Renewal Term, in
the amounts and on the dates set forth therein.
"business day": any day, other than a Saturday, Sunday, or legal
holiday for commercial banks under the laws of the State of the governing Law of
this Lease.
"Claims": all claims, harms, judgments, good faith settlements
entered into, suits, actions, debts, obligations, damages (whether incidental,
consequential or direct), demands (for compensation, indemnification,
reimbursement or otherwise) losses, penalties, fines, liabilities (including
strict liability), charges that Lessor has incurred or is responsible for in the
nature of interest, Liens, and costs (including attorneys' fees and
disbursements and any other legal or non-legal expenses of investigation or
defense of any Claim, whether or not such Claim is ultimately defeated, or
enforcing the rights, remedies or indemnities provided for hereunder, or
otherwise
21
<PAGE>
available at law or equity to Lessor), of whatever kind or nature, contingent or
otherwise, matured or unmatured, foreseeable or unforeseeable, by or against any
person.
"Code" or "Uniform Commercial Code": the Uniform Commercial Code as
in effect in California or in any other applicable jurisdiction; and any
reference to an article or section thereof shall mean the corresponding article
or section (however termed) of any such other applicable version of the Uniform
Commercial Code.
"default": except when inconsistent with the context of any provision
hereof, an event which, but for the lapse of time or the giving of notice or
both, would be a Default.
"Equipment": with respect to each Equipment Schedule, the property
described therein, together with all appliances, parts, instruments,
accessories, furnishings, which are from time to time incorporated in the
Equipment, or having been so incorporated, are later removed therefrom, unless
title thereto is expressly released by Lessor, and all replacements of, and all
additions, improvements and accessions to any and all thereof, and all books and
records and general intangibles (including all licenses, patents, copyrights and
trade secrets) relating thereto; and when used in the context of Lessor's title
to the Equipment (whether relating to the creation, grant, perfection, release,
priority, enforcement or application of proceeds thereof) shall also include all
other property in which Lessor is granted a security interest hereunder or from
time to time under any Equipment Schedule.
"Equipment Schedule": any Equipment Schedule to be executed
pursuant hereto.
"GAAP": generally accepted accounting principle, applied
consistently.
"Governmental Authority": any federal, state, county, municipal,
regional or other governmental authority, agency, board, body, instrumentality
or court, in each case, whether domestic or foreign.
"Impairment Date": the date of the occurrence of any Impairment of
Use.
"Impairment Event": with respect to any item of Equipment, Lessor's
breach of its agreements in Section 16(d).
"Supplemental Rent": all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others
hereunder, or under any other Lease Document, with respect to an Equipment
Schedule, including the Stipulated Loss Value, the Purchase Price, all
Administrative Fees and payments constituting indemnities, reimbursements,
expenses and other charges payable pursuant to the terms thereof.
"Supplier": the person from whom Lessor is purchasing the
Equipment.
"Supply Contract": any written contract from the Supplier of the
Equipment, pursuant to which Lessor has purchased the Equipment for lease to
Lessee under an Equipment Schedule.
22
<PAGE>
"Term": the period for which Equipment is leased under any Equipment
Schedule, including the Interim Term, the Initial Term and, to the extent Lessee
does not purchase the Equipment on the last day of the Initial Term, the Renewal
Term.
"title": When used in the context of Lessor's title to any Equipment,
such title retained by Lessor, which, after giving effect to the provisions of
this Lease, constitutes a first priority security interest in such Equipment
under Applicable Law.
"Total Invoice Cost": with respect to each Equipment Schedule, the
amount specified as such thereon.
"Impairment of Use": Lessee is denied use or possession of any item
of Equipment to a material extent, as a direct and primary result of an
Impairment Event, provided, that such event is certified to Lessor in writing by
Lessee's responsible officer, and verified to Lessor's satisfaction by Lessor's
independent investigation or such other evidence relating thereto as Lessor may
reasonably request.
"Imposition": with respect to each Equipment Schedule, any title,
recordation, documentary stamp and other fees, taxes, assessments and all other
charges or withholdings of any nature (together with any penalties or fines
thereon) arising at any time upon or relating thereto or to the Equipment leased
thereunder, or the delivery, acquisition, ownership, use, operation, leasing or
other disposition of such Equipment or upon the Rent payable thereunder, whether
the same be assessed to Lessor or Lessee.
"Initial Term": for each Equipment Schedule, the monthly period
specified in Section 2 thereof commencing on the Base Lease Commencement Date.
"Interim Term": for each Equipment Schedule, the period from the
effective date thereof to the Base Lease Commencement Date.
"Law": any law, rule, regulation, ordinance, order, code, common law,
interpretation, judgment, directive, decree, treaty, injunction, writ,
determination, award, Permit or similar norm or decision of any Governmental
Authority.
"Lease": this Equipment Lease Agreement.
"Lease Documents": collectively, the Lease, the Equipment Schedules,
and all instruments, documents, certificates and agreements delivered pursuant
hereto.
"Lien": any mortgage, pledge, lease, sublease, security interest,
attachment, charge, encumbrance or right or claim of others whatsoever
(including any conditional sale or other retention agreement).
"Permit": any action, approval, certificate of occupancy, consent,
waiver, exemption, variance, franchise, order, permit, authorization, right or
license, or other form of legally required permission, of or from a Governmental
Authority.
23
<PAGE>
"Permitted Lien": (a) Lessor's and Lessee's respective rights, titles
and interest in the Equipment, (b) mechanics, materialmen, laborers, employees
or suppliers Liens and similar Liens arising by operation of Law and incurred by
Lessee in the ordinary course of business for sums that are not yet delinquent
or are being contested in good faith by negotiations or by appropriate
proceedings which suspend the collection and enforcement thereof (provided, that
the existence of such Lien while such negotiations or proceedings are pending
does not involve any substantial risk (in Lessor's discretion) of the sale,
forfeiture or loss of the Equipment or any therein, and for which adequate
reserves have been provided in accordance with GAAP), and (c) Liens arising out
of any judgments or awards against Lessee which have been adequately bonded to
protect Lessor's interests or with respect to which a stay of execution has been
obtained pending an appeal or a proceeding for review.
"person": any individual, corporation, partnership, joint venture, or
other legal entity or a Governmental Authority, whether related or unrelated to
Lessee or Lessor.
"Proceeds": all tolls, rents, revenues, issues, income, products,
profits and other proceeds of the Equipment or any part thereof.
"Purchase Documents": all documents, instruments, licenses and
agreements pertaining to the acquisition of any of the rights, title and
interests in the Equipment.
"Purchase Price": for each Equipment Schedule, the amount specified
as such therein.
"Renewal Term": for each Equipment Schedule, unless Lessee elects to
purchase the Equipment on the last day of the Initial Term, the consecutive
monthly period set forth therein.
"Rent": collectively, the Basic Rent and the Supplemental Rent.
"Replacement Equipment": any item(s) of Equipment substituted by
Lessor for any item of Equipment suffering an Impairment of Use, having the same
value, utility and condition that the replaced item of Equipment had on the date
next preceding the Impairment Date.
"Stipulated Loss Value": with respect to each Equipment Schedule, the
product of the Total Invoice Cost of the Equipment leased thereunder, and the
applicability percentage factors set forth on the Schedule of Stipulated Loss
Values attached hereto.
"Total Loss": any of (a) the actual or constructive total loss of any
item of the Equipment; or (b) the loss, disappearance, theft or destruction of
any item of the Equipment; or (c) damage (including any contamination by
hazardous substances) to any item of the Equipment to such extent as shall make
repair thereof uneconomical, or shall render any item of the Equipment
permanently unfit for normal use, for any reason whatsoever; or (d) the
condemnation, confiscation, requisition, seizure, forfeiture or other taking of
title to or use of any item of the Equipment, or any imposition of a Lien
thereon by any Governmental Authority in
24
<PAGE>
excess of $20,000 or (e) as a result of any Law or other action taken by any
Governmental Authority, the use of the Equipment in the normal course of
Lessee's business shall have been prohibited (i) indefinitely or (ii) for a
period in excess of (1) 60 days, or (2) for a period that extends beyond the
then existing Term; all of the foregoing, to the extent established to the
reasonable satisfaction of Lessor.
"UCC": a Uniform Commercial Code financing statement.
(b) Any defined term used in the singular preceded by "any" indicates
any number of the members of the relevant class. (i) "including" shall mean
containing, embracing or involving all of the enumerated items, but not limited
to such items unless such term is followed by the words "and limited to," or
similar words; and (ii) use of the word "or" shall mean at least one, but not
necessarily only one, of the alternatives enumerated. Any Lease Document or
other agreement or instrument referred to herein means such agreement or
instrument as supplemented and amended from time to time. Any reference to
Lessor or Lessee shall include their permitted successors and assigns. Any
reference to a Law shall also mean such Law as amended, superseded or replaced
from time to time. Unless otherwise expressly provided herein to the contrary,
all actions that Lessee takes or is required to take under this Lease or any
other Lease Document, shall be taken at Lessee's sole cost and expense, and all
such costs and expenses shall constitute Claims and be covered by Section 14
hereof. To the extent Lessor is required to give its consent to Lessee with
respect to any matter, the reasonableness of Lessor's withholding of such
consent shall be determined based on the then existing circumstances; provided,
that Lessor's withholding of its consent shall be deemed reasonable for all
purposes if (i) the taking of the action that is the subject of such request,
might result (in Lessor's discretion), in (1) an impairment of Lessor's rights,
title or interests hereunder or under any Equipment Schedule or other Lease
Document, or to the Equipment, or (2) expose Lessor to any Claims, or (ii) to
the extent Lessee fails to provide promptly to Lessor any filings, certificates,
opinions or indemnities specified by Lessor to Lessee in writing.
(c) Lessor and Lessee agree that the definitions and rules of
construction herein shall constitute an integral part of this Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed as of the day and year first above set forth.
By:/s/ /s/
---------------------------------- ----------------------------------------
Name: James A. Kamradt Name: Judy B. Crawford
Title: Vice President-Production Title: President
2330 Marinship Way, Suite 300 100 Hartsfield Centre Parkway, Suite 300
Sausalito, California 94965 Atlanta, GA 30354
25
<PAGE>
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that Conference Source International, Inc. a
Georgia corporation ("Seller") for good and valuable consideration, paid by Ally
Capital Corporation (herein "Buyer"), at or before the execution and delivery of
these presents, the receipt of which is hereby acknowledged, does hereby grant,
bargain, sell, assign, transfer and set over unto Buyer, its successors and
assigns, all right, title and interest in and to the following personal
property:
See Exhibit "A" attached hereto and made a part hereof
together with all parts and accessories attached thereto (all such personal
property, parts and accessories being herein collectively called the
"Equipment").
TO HAVE AND TO HOLD, all and singular the Equipment to Buyer, its successors and
assigns, for its and their own use and benefit forever.
And Seller hereby warrants to Buyer, its successors and assigns, that
immediately prior to the delivery of this Bill of Sale, Seller had legal title
to the Equipment and good and lawful right to sell the same, and that title to
the Equipment is hereby duly vested in Buyer free and clear of all claims,
liens, encumbrances and rights of others of any nature; and Seller covenants and
agrees with Buyer, its successors and assigns, that it will warrant and defend
such title forever against all claims and demands whatsoever.
IN WITNESS WHEREOF Seller has caused this Bill of Sale to be executed and
delivered in its name as of this 2 day of April, 1996
CONFERENCE SOURCE INTERNATIONAL, INC.
By: /s/ Judy B. Crawford
Name: Judith B. Crawford
Title: President
26
<PAGE>
Exhibit A
This Exhibit A is attached to Bill of Sale that is a part of an Equipment Lease
Agreement dated April 1, 1996 (the "Lease") between ALLY CAPITAL CORPORATION
("Lessor") and CONFERENCE SOURCE INTERNATIONAL, INC. ("Lessee").
Equipment Location:
- -------------------
100 Hartsfield Centre Parkway, Suite 300
Atlanta, GA 30354
Vendor
MultiLink, Inc.
6 Riverside Drive Suite 2
Andover, MA 01810
2 One Hundred forty-four (144) port MultiLink System 70 equipped with eight
operator workstations each
Basic System 70 configured with 144 ports and eight operator workstations:
- --------------------------------------------------------------------------
486DX2 CPU card with 16MB RAM
340 MB Hard Disk Drive
5.25" and 3.5" Combination Floppy Disk Drive
(1) Internal Modem
(6) Digital Signal Processor (DSP) Conferencing Cards, each with (4) DSP's
3) Dual TI Interface Cards
24 Channel Analog Interface Card
8-Port Serial I/O Card
8 Channel Annunciator Feature
Current Release of System Software
Each Operator Workstation includes:
14" Wyse 60 Operator Display Screen
ASCII Keyboard
Audio Console
Binaural Headset
1 Complete Set of Manuals (each)
27
<PAGE>
Vendor
E. S. Services
2753 Eagle Ridge Road
Marietta, GA 30062
1 Pentium 133 Novell Server
1 Mid Tower Case with 250 Power Supply
1 32 MB Memory
2 1.2 and 1.44 Floppy Disk Drives
2 Seagate ST32550 2.3 GB Drives
2 Adaptee 2940 SCSI Adapters
1 MB PCI Video Adapter
1 3COM PCI Ethernet Adapter
1 CTX GM 1765 17" SVGA Monitor
1 2 Serial and 1 Parallel Ports
1 101 key keyboard
1 Genius Mouse
1 Microsoft DOS 6.22
1 Microsoft Windows 3.11
1 Install Novell 3.11 on Server
1 Pentium 133 Novell Server
1 Mid Tower Case with 250 Wall Power Supply
1 32 MB Memory
2 1.2 and 1.44 Floppy Disk Driver
2 Seagate ST32550 2.3 GB Drives
2 Adaptec 2940 SCSI Controllers
1 MB PCI Video Adapter
1 3COM PCI Ethernet Adapter
1 2 Serial 1 Parallel Ports
1 SOCOS 14" SVGA Monitor
1 101 key keyboard
1 Genius Mouse
Multimedia Kit Including
1 Quad Speed CD-Rom
1 Soundblaster adapter
1 PC Multimedia Speakers
1 Microsoft Windows 95 Software
3 4 mb SIMM Memory
2 8 MB SIMM Memory
1 1.6 GB Western Digital Fixed Disk
28
<PAGE>
Schedule of Stipulated Loss Values
This Schedule of Stipulated Loss Values is attached to Equipment Schedule dated
April 1, 1996 that is part of an Equipment Lease Agreement dated April 1, 1996
(the "Lease") between ALLY CAPITAL CORPORATION ("Lessor") and Conference Source
International ("Lessee"). For each payment of Basic Rent, the applicable
percentage shall be applied to the Total Invoice Cost of the Equipment in order
to determine the Stipulated Loss Value at that time.
<TABLE>
<CAPTION>
Stipulated Loss Value
Payment Number as a % of Total Cost
-------------- --------------------
<S> <C>
1 - 12 110% - 92%
13 - 24 91% - 73%
25 - 36 72% - 54%
37 - 48 53% - 35%
</TABLE>
For payments 49 and thereafter, the applicable percentage shall decline from 30%
by 1/4% per month, beginning with payment number 43, but in no event shall the
applicable percentage be less than 20%.
<PAGE>
GUARANTY
To: ALLY CAPITAL CORPORATION
2330 Marinship Way, Suite 300
Sausalito, CA 94965
Subject: CONFERENCE SOURCE INTERNATIONAL, INC.
-------------------------------------
Gentlemen:
To induce you to enter into one or more security agreements, including but not
limited to conditional sale agreements, leases, chattel and/or real estate
mortgages, notes or other deferred or time payment paper and any and all
agreements relating to the purchase of such paper or documents (all of the
foregoing hereinafter called "Security Obligations") with the above-captioned
(hereinafter called the "Subject"), and/or to induce you to purchase and/or
accept an assignment of Security Obligations from Subject and/or to induce you
to purchase and/or accept one or more assignments from any party or parties of
one or more Security Obligations having Subject as obligor thereon, and/or in
consideration of your having heretofore done any or all of the foregoing, we the
undersigned (and each of us if more than one) agree to be, without deduction by
reason of set-off, defense or counterclaim of Subject, jointly, severally and
directly liable to you for the due performance of all such Security Obligations
both present and future, and any and all subsequent renewals, continuations,
modifications, supplements and amendments thereof, and for the payment of any
and all debts of Subject of whatever nature, whether matured or unmatured,
whether absolute or contingent and whether now or hereafter existing or arising
or contracted or incurred or owing to or acquired by you by assignment, transfer
or otherwise. Any and all present and future debts and obligations of Subject to
us are hereby waived and postponed in favor of and subordinated to the full
payment and performance of all present and future debts and obligations of
Subject to you. We hereby waive notice of acceptance hereof and of all notices
of any kind to which we may be entitled, including without limitation any and
all demands of payment, notices of non-payment, protest and dishonor to use or
Subject or makers, or endorsers of any notes or other instruments for which we
are or may be liable hereunder. You shall be entitled to hold any and all sums
to our credit and any of our property at any time in your possession as security
for any and all of our obligations to you, no matter how or when arising and
whether under this instrument or otherwise. We further waive notice of, and
hereby consent to, any agreement or arrangements whatever with Subject or anyone
else, including without limitation, agreements and arrangements for payment
extension, subordination, composition, arrangement, discharge or release of the
whole or any part of the Security Obligations, or for release of collateral
and/or other guarantors, or for the change or surrender of any and all security,
or for compromise, whether by way of acceptance of partial payment or of returns
of merchandise or of dividends or in any other way whatsoever, and the same
shall in no way impair our liability hereunder. The liability hereunder of each
of the undersigned is direct and unconditional and may be enforced without
requiring you first to resort to any other right, remedy or security and shall
survive any repossession of property whether or not such constitutes an election
of remedies against Subject; nothing shall discharge or satisfy our liability
hereunder
<PAGE>
except the full performance and payment of all Security Obligations with
interest. We shall have no right of subrogation, reimbursement or indemnity
whatsoever and no right of recourse to our with respect to any assets or
property of Subject or to any collateral for Security Obligations, unless and
until all Security Obligations shall have been paid and performed in full. As
part of the consideration for your entering into and/or purchasing and/or
accepting an assignment of one or more Security Obligations with Subject as
obligor thereon, we hereby designate and appoint your legal counsel as our true
and lawful attorney-in-fact and agent for each of us and in our name, place and
stead to accept service of any process. You agree to notify us by depositing in
the United States mail, certified mail, postage prepaid, written notice of such
service, addressed to us at our address shown herein below, within (3) days of
such service having been effected. We hereby irrevocably authorize any attorney
of any court of record to appear for and confess judgment against any one or
more of us (except in any jurisdiction where such action is not permitted by
law) for all unpaid balances and other monies due to you from Subject, plus
expenses and 15% added for attorney's fees, without stay of execution, and we
hereby waive and release relief from any and all appraisement, stay or exemption
laws then in force. We agree that if we or Subject shall at any time become
insolvent, or make a general assignment, or if a petition in bankruptcy or any
insolvency or reorganization proceeding shall be commenced by, against or in
respect to us or Subject, any and all of our obligations shall, at your sole
option, forthwith become due and payable without notice. This instrument is a
continuing guaranty and shall continue in full force and effect, notwithstanding
the death of any of us until the full performance, payment and discharge of all
Security Obligation, and thereafter until actual receipt by you from us of our
obligations shall, at your sole option, forthwith become due and payable without
notice. This instrument is a continuing guaranty and shall continue in full
force and effect, notwithstanding the death of any of us until the full
performance, payment and discharge of all Security Obligation, and thereafter
until actual receipt by you from us of written notice of termination; such
termination shall be applicable only to transactions having their inception
thereafter. Termination by one or more of us shall not affect the liability of
such of us as do not give such notice of termination.
Any indebtedness of Subject now or hereafter held by undersigned is hereby
subordinated to the indebtedness of Subject to you. Such indebtedness of Subject
to undersigned is assigned to you as security for this Guaranty and the
indebtedness and if you request, shall be collected and received by undersigned
as trustee for you and paid over to you on account of the indebtedness of
Subject to you but without reducing or affecting in any manner our liability
under the provisions of this Guaranty. Any notes now or hereafter evidencing
such indebtedness of Subject to undersigned shall be marked with a legend that
the same are subject to this Guaranty and, if you so request, shall be delivered
to you. Undersigned will, and you are hereby authorized, in the name of the
undersigned from time to time to execute and file financing statements and
continuation statements and execute such other documents and take such other
actions as you deem necessary or appropriate to perfect, preserve and enforce
your rights hereunder.
The words "you" and "your" as used herein shall mean and include and this
instrument shall apply in favor of and be severally enforceable by any addressee
hereinabove named and/or any concern which is or may at anytime be the parent,
subsidiary or assignee thereof. We hereby waive any and all right to a trial by
jury in any action or proceeding based hereon. This
<PAGE>
instrument cannot be changed orally, shall be interpreted according to the laws
of the State of California, shall be binding upon the heirs, executors,
administrators, successors and assigns of each of the undersigned and shall
endure to the benefit of your successors and assigns.
Dated: 4/1/96.
------
Witness:
/s/ /s/
- -------------------------------------- -------------------------------------
DUANE D. DORLAN Name: Judy B. Crawford
Address: 7730 Dun Vegan Close
Dunwoody, GA 30350
<PAGE>
GUARANTY
To: ALLY CAPITAL CORPORATION
2330 Marinship Way, Suite 300
Sausalito, CA 94965
Subject: CONFERENCE SOURCE INTERNATIONAL, INC.
-------------------------------------
Gentlemen:
To induce you to enter into one or more security agreements, including but not
limited to conditional sale agreements, leases, chattel and/or real estate
mortgages, notes or other deferred or time payment paper and any and all
agreements relating to the purchase of such paper or documents (all of the
foregoing hereinafter called "Security Obligations") with the above-captioned
(hereinafter called the "Subject"), and/or to induce you to purchase and/or
accept an assignment of Security Obligations from Subject and/or to induce you
to purchase and/or accept one or more assignments from any party or parties of
one or more Security Obligations having Subject as obligor thereon, and/or in
consideration of your having heretofore done any or all of the foregoing, we the
undersigned (and each of us if more than one) agree to be, without deduction by
reason of set-off, defense or counterclaim of Subject, jointly, severally and
directly liable to you for the due performance of all such Security Obligations
both present and future, and any and all subsequent renewals, continuations,
modifications, supplements and amendments thereof, and for the payment of any
and all debts of Subject of whatever nature, whether matured or unmatured,
whether absolute or contingent and whether now or hereafter existing or arising
or contracted or incurred or owing to or acquired by you by assignment, transfer
or otherwise. Any and all present and future debts and obligations of Subject to
us are hereby waived and postponed in favor of and subordinated to the full
payment and performance of all present and future debts and obligations of
Subject to you. We hereby waive notice of acceptance hereof and of all notices
of any kind to which we may be entitled, including without limitation any and
all demands of payment, notices of non-payment, protest and dishonor to use or
Subject or makers, or endorsers of any notes or other instruments for which we
are or may be liable hereunder. You shall be entitled to hold any and all sums
to our credit and any of our property at any time in your possession as security
for any and all of our obligations to you, no matter how or when arising and
whether under this instrument or otherwise. We further waive notice of, and
hereby consent to, any agreement or arrangements whatever with Subject or anyone
else, including without limitation, agreements and arrangements for payment
extension, subordination, composition, arrangement, discharge or release of the
whole or any part of the Security Obligations, or for release of collateral
and/or other guarantors, or for the change or surrender of any and all security,
or for compromise, whether by way of acceptance of partial payment or of returns
of merchandise or of dividends or in any other way whatsoever, and the same
shall in no way impair our liability hereunder. The liability hereunder of each
of the undersigned is direct and unconditional and may be enforced without
requiring you first to resort to any other right, remedy or security and shall
survive any repossession of property whether or not such constitutes an election
of remedies against Subject; nothing shall discharge or satisfy our liability
hereunder
<PAGE>
except the full performance and payment of all Security Obligations with
interest. We shall have no right of subrogation, reimbursement or indemnity
whatsoever and no right of recourse to our with respect to any assets or
property of Subject or to any collateral for Security Obligations, unless and
until all Security Obligations shall have been paid and performed in full. As
part of the consideration for your entering into and/or purchasing and/or
accepting an assignment of one or more Security Obligations with Subject as
obligor thereon, we hereby designate and appoint your legal counsel as our true
and lawful attorney-in-fact and agent for each of us and in our name, place and
stead to accept service of any process. You agree to notify us by depositing in
the United States mail, certified mail, postage prepaid, written notice of such
service, addressed to us at our address shown herein below, within (3) days of
such service having been effected. We hereby irrevocably authorize any attorney
of any court of record to appear for and confess judgment against any one or
more of us (except in any jurisdiction where such action is not permitted by
law) for all unpaid balances and other monies due to you from Subject, plus
expenses and 15% added for attorney's fees, without stay of execution, and we
hereby waive and release relief from any and all appraisement, stay or exemption
laws then in force. We agree that if we or Subject shall at any time become
insolvent, or make a general assignment, or if a petition in bankruptcy or any
insolvency or reorganization proceeding shall be commenced by, against or in
respect to us or Subject, any and all of our obligations shall, at your sole
option, forthwith become due and payable without notice. This instrument is a
continuing guaranty and shall continue in full force and effect, notwithstanding
the death of any of us until the full performance, payment and discharge of all
Security Obligation, and thereafter until actual receipt by you from us of our
obligations shall, at your sole option, forthwith become due and payable without
notice. This instrument is a continuing guaranty and shall continue in full
force and effect, notwithstanding the death of any of us until the full
performance, payment and discharge of all Security Obligation, and thereafter
until actual receipt by you from us of written notice of termination; such
termination shall be applicable only to transactions having their inception
thereafter. Termination by one or more of us shall not affect the liability of
such of us as do not give such notice of termination.
Any indebtedness of Subject now or hereafter held by undersigned is hereby
subordinated to the indebtedness of Subject to you. Such indebtedness of Subject
to undersigned is assigned to you as security for this Guaranty and the
indebtedness and if you request, shall be collected and received by undersigned
as trustee for you and paid over to you on account of the indebtedness of
Subject to you but without reducing or affecting in any manner our liability
under the provisions of this Guaranty. Any notes now or hereafter evidencing
such indebtedness of Subject to undersigned shall be marked with a legend that
the same are subject to this Guaranty and, if you so request, shall be delivered
to you. Undersigned will, and you are hereby authorized, in the name of the
undersigned from time to time to execute and file financing statements and
continuation statements and execute such other documents and take such other
actions as you deem necessary or appropriate to perfect, preserve and enforce
your rights hereunder.
The words "you" and "your" as used herein shall mean and include and this
instrument shall apply in favor of and be severally enforceable by any addressee
hereinabove named and/or any concern which is or may at anytime be the parent,
subsidiary or assignee thereof. We hereby waive any and all right to a trial by
jury in any action or proceeding based hereon. This
<PAGE>
instrument cannot be changed orally, shall be interpreted according to the laws
of the State of California, shall be binding upon the heirs, executors,
administrators, successors and assigns of each of the undersigned and shall
endure to the benefit of your successors and assigns.
Dated: 4/1/96.
------
Witness:
/s/ /s/
- -------------------------------------- -------------------------------------
DUANE D. DORLAN Name: Olen E. Crawford
Address: 7730 Dun Vegan Close
Dunwoody, GA 30350
<PAGE>
ENVIRONMENTAL RIDER
RIDER NO. 01.
--
This Rider is a part of that certain Equipment Lease Agreement dated as
of April 1, 1996 (the Lease) between ALLY CAPITAL CORPORATION ("Lessor") and
CONFERENCE SOURCE INTERNATIONAL, INC. ("Lessee").
In addition to and without limiting any of the other provisions of this
Lease, Lessee and Lessor hereby agree as follows:
A. DEFINITIONS AND RULES OF CONSTRUCTION. Section 17 of this Lease is
hereby supplemented by adding the following terms, which when capitalized (or
otherwise used) as below, shall have the following meanings:
"Applicable Law": shall also include any Applicable Permit.
"Applicable Permit": any Permit, including any zoning, environmental
protection, pollution, sanitation, safety, energy, siting or building Permit
that Lessee shall be required to obtain to comply with Applicable Law, including
any Permit that is necessary to operate, modify, construct, convey, maintain,
acquire, own, lease, sublease or use the Equipment (including any product
thereof), or related property, to own, lease or operate Lessee's properties,
conduct its business or necessary to enter into any of these Lease Documents or
to consummate any of the transactions contemplated thereby.
"Claims": shall also include all Environmental Claims.
"Environmental Claims": any Claims by a Governmental Authority or other
person that are incurred, arise or effectuated at any time as a result of the
existence of any Environmental Contamination or violation of any Environmental
Law pertaining to any Equipment or related property, or allegation thereof,
regardless of whether the existence (alleged or otherwise) of such Environmental
Contamination or the violation of Environmental Law originated or resulted from
the Equipment or related property, or arose prior to the present ownership or
operation of the Equipment or related property, including: (a) Claims for
personal injury or injury to or destruction, loss or diminution in value of
property or natural resources occurring to, upon, near or off any Equipment or
related property, foreseeable or unforeseeable; (b) Claims relating to any
Remedial Action, including any demolition and rebuilding of any improvements on
real property; (c) Claims for indemnity or reimbursement or for the disgorgement
of amounts paid to Lessor or on its behalf, or resulting from any failure to
report discharges promptly; and (d) Claims incurred for the services of
attorneys, engineers, consultants, contractors, experts, laboratories and all
other costs reasonably incurred in connection with the investigation or Remedial
Actions taken with respect to Hazardous Substances or violation of Environmental
Law, including the preparation of any feasibility studies or reports of the
performance of any Remedial Action.
<PAGE>
"Environmental Contamination": any existence, uncontained presence, leak,
discharge, emission, aggregation, release, or abandonment, or threat or
suspicion of any of the foregoing, or abandonment of Hazardous Substances in,
upon, about, beneath, or off the Equipment or related property or arising from
the Equipment or related property, that may require Remedial Action or may
result in a violation of any Environmental Law pertaining to the Equipment or
related property, or may result in Claims.
"Environmental Law" or "environmental law": any Applicable Law relating
to safety, land use, pollution or protection of human health or species of
wildlife or plants or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including, Laws relating to
(a) maintenance of a public or private nuisance, (b) carrying on of an
abnormally dangerous activity, (c) industrial hygiene, (d) Environmental
Contamination, including to air, water, land, groundwater or personal property,
(e) withdrawal or use of groundwater, (f) Hazardous Substances, including the
treatment, manufacture, processing, distribution, use, analysis, generation,
storage, disposal, handling or transportation thereof and (g) any regulation,
order, notice or demand issued pursuant to such Laws, in each case, applicable
to Lessee or Lessor, the Equipment or any related property, or the ownership or
operation thereof, including the following: (i) the Clean Air Act, (ii) the
Federal Water Pollution Control Act, the Clean Water Act and the Safe Drinking
Water Act, (iii) the Toxic Substances Control Act, (iv) the Comprehensive
Environmental Response Compensation Liability Act of 1980, as amended
("CERCLA"), (v) the Resource Conservation and Recovery Act ("RCRA"), (vi) the
Solid and Hazardous Waste Amendments of 1984, (vii) the Occupational Safety and
Health Act, (viii) the Emergency Planning and Community Right-to-Know Act of
1978, (ix) the Solid Waste Disposal Act, (x) the Superfund Amendment and
Reauthorization Act ("SARA"), (xi) the Hazardous Material Transportation act,
(xii) the Endangered Species Act, (xiii) the Federal Insecticide, Fungicide and
Rodenticide Act, (xiv) the Environmental Laws listed on Annex No. 2 to each
Equipment Schedule and (xv) any other Applicable Laws addressing matters similar
to the foregoing Laws.
"Hazardous Substances" or "hazardous substances": any and all hazardous
or toxic substances, materials, and wastes, including any material, waste or
substance which is (a) oil or petroleum, or their products or by-products
(including sludge or residue), chemical liquids or solid, liquid or gaseous
products or by-products, (b) asbestos, (c) polychlorinated biphenils, or
(d) designated as hazardous or toxic or regulated as such under any Applicable
Law, including RCRA, CERCLA, SARA, the Clean Water Act, the United States
Department of Transportation Hazardous Materials Table or by the Environmental
Protection Agency, or defined as a "hazardous material," "hazardous substance"
or "hazardous waste" under any other Applicable Laws.
"herein," "hereof," "hereunder," etc.: in, of, under, etc. this Lease
(and not merely in, of, under, etc. the section or provision where the reference
occurs).
"related property": with respect to any Equipment, the land and
buildings at which such Equipment is or shall become located or any personalty
or real property (including any body of
<PAGE>
water) to or upon which the Equipment may now or hereafter be attached, situated
on or near, or adjacent to.
"Remedial Action": any clean-up, remedial action, removal, response,
abatement, containment, closure, excavation, restoration or monitoring where
undertaken to comply with Environmental Law, whether or not required by any
Government Authority, or reasonably necessary to make full economic use of the
Equipment or related property.
B. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
representations, warranties and covenants provided in Section 2 of this Lease,
Lessee hereby represents, warrants to and covenants with Lessor that:
With respect to the Equipment covered by each Equipment Schedule:
(i) There are no applicably permitted Hazardous Substances contained therein or
at, upon, under or within any related property that does or shall cause Lessee
to be in violation of this Lease or Applicable Law; (ii) Lessee has not caused
or permitted to occur, or suffered the occurrence of and shall not permit to
exist, any condition which may cause any Environmental Contamination of such
Equipment or at, upon, under or within any related property that does or shall
cause Lessee to be in violation of this Lease or result in a violation of
Applicable Law; (iii) neither Lessee, nor any other party has been is or will be
involved in activities relating to the Equipment or any related property that
could lead to (1) the imposition of liability on Lessor, Lessee, or on any
subsequent or former owner or operator of the Equipment or (2) the creation of a
Lien on the Equipment under Applicable Law (including any Environmental Laws);
(iv) Lessee has not permitted, and will not permit, any person to engage in any
activity that could result in the imposition of liability under any
Environmental Laws on Lessee, Lessor or any owner or operator of the Equipment,
or would otherwise impair Lessor's rights or title pertaining thereto; (v) all
of the Environmental Laws applicable to the Equipment, or to the operation or
ownership thereof, are listed on Annex No. 1 to such Equipment Schedule, and
Lessee is in full compliance therewith; and (vi) all Applicable Permits,
registrations, filings or notices necessary for Lessee to comply with any
Applicable Laws, are listed on Annex No. 2 to such Equipment Schedule, Lessee
has obtained, completed or given, as the case may be, and is maintaining in good
standing, all such Permits, registrations, filings or notices and is in full
compliance with all of the terms thereof; all actions necessary for the renewal
thereof have timely been taken (including the filing of any applications); and
all of the foregoing are in full force and effect and there are no proceedings
or investigations pending or, to the best knowledge of Lessee, threatened that
seek the revocation, cancellation, suspension or adverse modification thereof.
C. NOTICES. In addition to the notices required by Section 3 of this
Lease, Lessee shall provide written notice to Lessor (i) promptly upon Lessee
becoming aware of (A) any alleged violation of Applicable Law, or (B) any
threatened or actual suspension, revocation or recision of any Permit necessary
for Lessee to be in compliance with the terms hereof; and (ii) promptly after
any of the Equipment becomes lost, stolen, missing, destroyed, materially
damaged, worn out, or subject to or causing, or threatening to cause, any
Environmental Contamination.
<PAGE>
D. CONDITIONS PRECEDENT. In addition to the conditions precedent set
forth in Section 4 of this Lease, Lessor's obligations under each Equipment
Schedule (including Lessor's obligation to purchase and participate in the
financing of the Equipment to be leased thereunder) are conditioned upon
Lessor's having received all of the following, in form and substance
satisfactory to Lessor, at least two (2) business days prior to the date upon
which Lessor purchases the Equipment or has committed to purchase same (if
sooner): (i) to the extent requested by Lessor, a report, audit or opinion, as
the case may be, from an appraiser, environmental engineer, or other expert,
regarding any matters specified by Lessor (1) including the value of the
Equipment, as of the effective date of the Equipment Schedule, and at the
expiration of the Initial Term and any Renewal Term, or (2) the then existing
condition of the Equipment or any of the related property, including, the
absence of any past or existing violations of Applicable Law (including any
Environmental Laws); and (ii) if Lessor is purchasing the Equipment from Lessee,
(1) all of the operating records pertaining to the storage or transportation of
the Equipment and any Environmental Contamination relating to the Equipment or
the related property and (2) copies of all enforcement actions for alleged
violations of Applicable Laws (including Environmental Laws), and any and all
information concerning any pending investigations pertaining to alleged
violations of Applicable Laws (including any Environmental Laws).
E. USE AND MAINTENANCE. In addition to the requirements of Section 6 of
this Lease, and without limiting the generality of subsection (a) of Section 4
of this Lease, Lessee agrees to comply strictly and in all respects with all
Applicable Laws (including all Environmental Laws) pertaining to the Equipment
or related property (without regard to which person such Applicable Laws shall,
by their terms, be nominally imposed), unless Lessee shall be contesting the
validity thereof in good faith and by appropriate proceedings, but only so long
as Lessee's failure to so comply during the existence of such proceedings shall
not (i) involve any material risk of the sale, forfeiture or loss of such
Equipment, or any part thereof or interest therein, (ii) result in, or involve
any substantial probability of resulting in, the creation of any Lien (other
than a Permitted Lien) on or with respect to such Equipment, or any part thereof
or interest therein, and (iii) involve the risk of the imposition of civil or
criminal fines or penalties on Lessor, Lessee, or generally to the operators or
holders of title to or other interests in the Equipment. Lessee will maintain
all records, logs and other materials required by any Governmental Authority
having jurisdiction to be maintained in respect of any Equipment, without regard
to which person any such requirements shall, by their terms, be nominally
imposed. Lessee will procure and pay for all Permits, franchises, inspections
and licenses necessary or appropriate in connection with any Equipment and any
repair, restoration, replacement, renewal, addition or improvement thereof and
thereto that may be required pursuant to the first sentence of this paragraph.
Lessee shall promptly forward to Lessor copies of all orders, notices, Permits,
applications or other communications and reports in connection with any
discharge or the presence of any Hazardous Substances or any other matters
relating to the Environmental Laws or similar Applicable Laws, as they may
affect Lessee, the Equipment or Lessor's or Lessee's right, title, or interest
therein. Promptly upon the written request of Lessor, from time to time, Lessee
shall provide Lessor with environmental site assessments or environmental audit
reports prepared by an environmental engineering firm acceptable to Lessor, to
assess with a reasonable degree of certainty the presence or absence of any
Hazardous
<PAGE>
Substances and the potential cost in connection with any Remedial Action
pertaining to the Equipment or related property.
F. DISCLAIMER OF WARRANTIES. In addition to the waivers, disclaimers
and acknowledgments made in the Lease and each Equipment Schedule, Lessee
further acknowledges that: Lessor has made the Equipment available to Lessee for
examination, demanded that Lessee inspect the Equipment using a professional in
the field of inspections pertaining to such Equipment (including compliance with
the Environmental Laws), and Lessee has, pursuant to such demand examined the
Equipment (using such an experienced inspector); the Equipment is not to be
used, and is not being acquired hereby, for use in any respect for Lessee's or
any other person's personal or family purposes, and as such, the Equipment does
not constitute "consumer goods" as such term is defined under Applicable Law;
the Equipment was selected by Lessee on the basis of its own respective
judgment, Lessee has not asked for, been given or relied upon any statements,
representations, guaranties or warranties of Lessor; Lessor is not in the
business of manufacturing or assembling Equipment or otherwise in the business
of being a vendor or supplier, but is instead in the business of providing
financial accommodations including lease financing; AND THE PROVISIONS OF THIS
PARAGRAPH F AND SECTION 7 OF THIS LEASE HAVE BEEN NEGOTIATED BY LESSOR AND
LESSEE AND, EXCEPT FOR THE WARRANTY MADE BY LESSOR IN SECTION 16(d) HEREOF, ARE
INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS,
GUARANTIES, OBLIGATIONS OR WARRANTIES OF LESSOR EXPRESS OR IMPLIED WITH RESPECT
TO THE EQUIPMENT THAT MAY ARISE PURSUANT TO ANY APPLICABLE LAW (INCLUDING ANY
ENVIRONMENTAL LAW) NOW OR HEREAFTER IN EFFECT.
G. INSURANCE. In addition to the requirements of Section 10 of this
Lease, to the extent available, both the casualty and liability insurance
coverage shall insure against loss of or damage to the Equipment, or liability
to Lessor or Lessee, resulting from Environmental Claims; provided, that Lessee
shall only be obligated to obtain coverage against such Environmental Claims to
the extent such insurance shall be available at an aggregate cost, with respect
to the Equipment, of no greater than 2.5% of the Total Invoice Cost thereof;
provided, further, that notwithstanding the then current cost of said coverage,
Lessee shall obtain such coverage to the extent it is typically obtained and
maintained by companies and businesses similar to Lessee, in connection with
their ownership or operation of, or other activities in connection with,
equipment that is the same as or similar to the Equipment, or to the extent
Lessee currently maintains such coverage with respect to its other similar
equipment. All said insurance shall be in form and amount and with companies
reasonably satisfactory to Lessor.
H. REDELIVERY. In addition to the requirements of Section 12 of this
Lease, Lessee agrees that with respect to any Equipment or item thereof that
Lessee shall be required to return or turn over to Lessor, to the extent the
continued possession and operation of the Equipment or item of Equipment is
necessary for Lessee to remain in compliance with Applicable Law, Lessee shall
immediately replace such Equipment or item of Equipment, and in any event,
Lessee shall not upon such removal take any action or fail to take any action
the effect of which will result in a violation of Applicable Law (including any
Environmental Law); and
<PAGE>
without limiting the generality of any other provision hereof, Lessee agrees to
return such Equipment or item of Equipment to Lessor, free from any Hazardous
Substances, and dispose of such Hazardous Substances in compliance with all
Applicable Law.
I. REMEDIES. Section 14 of the Lease shall be supplemented as follows:
(a) Lessee agrees that Lessor's remedies provided in Section 14 and certain
other Sections of this Lease shall also expressly include the right to take
Remedial Action and be reimbursed, made whole, indemnified, held harmless and
otherwise protected by Lessee against any resulting or related Claims incurred
or suffered in connection therewith; except that Lessee agrees that Lessor shall
not have any obligation whatsoever to undertake or consummate the same or to
take or refrain from taking any other action with respect thereto or otherwise
relating to or arising in connection with any Environmental Claim, Environmental
Contamination, Environmental Law or Hazardous Substance pursuant to the
pertinent terms of this Lease including Sections 12, 13 and 14;
(b) Lessee agrees that to the extent Lessor's ability to dispose
of the Equipment in a commercially reasonable manner may be impeded by any
violations of Applicable Law that have occurred with respect thereto, or
Lessor's actions with respect to same might result in an Environmental Claim,
Lessee hereby waives, without limiting the generality of any other waivers,
disclaimers or indemnities herein, any claim, right, action or defense otherwise
available to it against Lessor in connection with such disposition or Lessor's
deficiency claim. Lessee hereby acknowledges that: (i) Lessor's election to
dispose of the Equipment at any point after a Default has occurred with respect
to an Equipment Schedule may be affected by the Equipment's non-compliance with
the provisions hereof; (ii) Lessee, pursuant to its representations, agreements
and indemnities hereunder, is ultimately responsible to Lessor for any harms
(including any Environmental Claims) suffered by Lessor in connection with any
such non-compliance; and (iii) to avoid or mitigate the imposition of Claims
(including Environmental Claims) resulting from such non-compliance it will
benefit Lessee even if such efforts (which may include abandoning the Equipment
or selling it expeditiously or after an extended period) result in there being a
deficiency, or greater amount thereof, under the Equipment Schedules; and
(iv) in furtherance thereof, Lessee hereby waives, without limiting the
generality of any other waivers, disclaimers or indemnities herein, any claim,
right, action or defense otherwise available to it against Lessor in connection
with such disposition or deficiency claim.
J. EFFECT OF RIDER. Except as supplemented hereby, this Lease remains
unmodified by the provisions of this Rider, which provisions are, for all
purposes, hereby incorporated into and made a part of this Lease and each
Equipment Schedule.
<PAGE>
ALLY CAPITAL CORPORATION CONFERENCE SOURCE INTERNATIONAL,
INC.
Lessee
By: /s/ James A. Kamradt By: /s/ Judy B. Crawford
Name: James A. Kamradt Name: Judith B. Crawford
Title: Vice President-Production Title: President
<PAGE>
ALLY
NOTICE OF ASSIGNMENT
Ms. Judy Crawford
President
Conference Source International, Inc.
100 Hartsfield Centre Parkway
Suite 300
Atlanta, GA 30354
RE: Equipment Lease Agreement dated April 1, 1996
Please be advised that ALLY CAPITAL CORPORATION, Lessor in the above referenced
Lease, has assigned all of its right, title and interest in Equipment Schedule
dated April 1, 1996 to the referenced Lease to Environmental Allies N.V., 6
John B. Gorsiraweg, Curacao, Netherland Antilles.
Please acknowledge receipt of this Notice and Lessor's compliance with Section
15 of the Lease by signing below and returning the original of this Notice to
the above address.
Sincerely,
/s/
Louann Smallwood
Portfolio Manager
Acknowledged and Accepted:
CONFERENCE SOURCE INTERNATIONAL, INC.
By: /s/ Judy B. Crawford
Name: Judith B. Crawford
Title: President
<PAGE>
Exhibit 10.3
JACOM COMPUTER SERVICES INC.
207 Washington Street, Northvale, New Jersey 07647-0947
Lease Number 9494
---------
LEASE AGREEMENT
This agreement is made the 22nd day of December, 1994 between Jacom Computer
Services, Inc., its principal office at 207 Washington Street, Northvale, New
Jersey 07647 (the "Lessor") and Conference Source International, Inc., 100
Hartsfield Centre Pkwy, Suite 300, Atlanta, Georgia 30364 (the "Lessee").
1. LEASE.
Lessor agrees to lease to Lessee, and Lessee agrees to hire from Lessor, the
computer equipment (the "Equipment") described in an Equipment Schedule or
Schedules executed and delivered by Lessor and Lessee concurrently with this
Agreement or subsequent thereto. Neither Lessor or Lessee shall have any
obligations hereunder until the execution and delivery of such Equipment
Schedule or Schedules. The terms and conditions contained herein (including the
Supplements, if any annexed hereto) and in such Equipment Schedule or Schedules
shall govern the leasing and use of the Equipment.
2. ADDITIONAL DEFINITIONS.
(a) The "Installation Date" means the date on which the Equipment is installed
at Lessee's site.
(b) The "Commencement Date" means, as to the Equipment designated on any
Equipment Schedule, where the Installation Date for such Equipment falls on
the first day of the month, that date, and in any other case, the first day
of the month following the month in which such Installation Date falls.
3. TERMS OF LEASE.
(a) The term of this Agreement, as to all Equipment designated on any Equipment
Schedule, shall commence on the Installation Date for such Equipment, and
shall continue for an initial period ending that number of months from the
applicable Commencement Date (the "Initial Period"); thereafter, the term
of this Agreement for all such Equipment shall be automatically extended
for successive three-month periods unless and until terminated by either
party giving to the other not less than six months' prior written notice.
Any such termination shall be effective only on the last day of the Initial
Period or the last day of any such successive periods. No Equipment
Schedule may be terminated with respect to less than all items of Equipment
identified therein.
<PAGE>
(b) Any notice of termination given by either party under this Agreement or
under any Supplement annexed hereto may not be revoked without the written
consent of the other party.
4. RENTALS.
As to all Equipment, the monthly rental payable by Lessee to Lessor is as set
forth in the applicable Schedule. Rental shall begin on the Installation Date
and shall be due and payable by Lessee in advance on the first day of each
month. If the Installation Date does not fall on the first day of a month, the
first payment shall be pro rata portion of the monthly rental, calculated on a
30-day basis, due and payable on the Installation Date. In addition to the
monthly rental set forth in the Schedule, Lessee shall pay to Lessor an amount
equal to all taxes paid, payable or required to be collected by Lessor, however
designated, which are levied or based on such rental, on this Agreement, or on
the Equipment or its use, lease operation, control, or value, including without
limitation, state and local privilege or excise taxes based on gross revenue,
any penalties or interest in connection therewith or taxes or amounts in lieu
thereof paid or payable by Lessor in respect of the foregoing, but excluding
taxes based on Lessor's net income. Personal property taxes on the Equipment
shall be paid by Lessee. Lessee agrees to file, on behalf of Lessor, all
required property tax returns and reports concerning the Equipment with all
appropriate governmental agencies, and, within not more than 45 days after the
due date of such filing, to send Lessor confirmation of such filing.
Interest on any past due payment shall accrue at the rate of 1 3/4% per month,
or if such rate shall exceed the maximum rate allowed by law, then at such
maximum rate, and shall be payable on demand. Charges for taxes, penalties and
interest shall be promptly paid by Lessee when invoiced by Lessor.
5. INSTALLATION AND USE OF EQUIPMENT.
(a) Lessee will provide the required suitable electric current to operate the
Equipment and suitable place of installation for the Equipment with all
appropriate facilities as specified by the manufacturer.
(b) Subject to the terms of this Agreement, Lessee shall be entitled to
unlimited usage of the Equipment without extra charge by Lessor and may
sell time on the Equipment to third parties.
(c) Lessee will at all times keep the Equipment in its sole possession and
control. The Equipment shall not be moved from the locations stated in the
Equipment Schedules without the prior written consent of Lessor.
(d) After prior notice to Lessor, Lessee may, at its own expense, make
alterations in or add attachments to the Equipment, provided that such
alterations or attachments do not decrease the value of the Equipment or
interfere with the normal and satisfactory operation or maintenance of the
Equipment or with Lessee's ability to obtain and
2
<PAGE>
maintain the maintenance contract required by this Agreement. Unless Lessor
shall otherwise agree in writing, all such alterations and attachments
shall be and become the property of Lessor or, at the option of Lessee,
shall be removed by Lessee and the Equipment restored at Lessee's expense
to its original condition, reasonable wear and tear only excepted.
6. MAINTENANCE AND REPAIRS.
(a) Lessee shall, during the continuance of this Agreement, at its expense,
keep the Equipment in good working order and condition and make all
necessary adjustments, repairs and replacements thereto. Lessee shall not
use or permit the Equipment to be used for any purpose for which, in the
opinion of manufacturer, the Equipment is not designed or reasonably
suitable.
(b) Without limiting the generality of the foregoing, Lessee shall, during the
continuance of this Agreement, at its own expense, enter into and maintain
in force a contract with the manufacturer (or other qualified service
organization approved in writing by both parties) covering at least prime
shift maintenance of each item of Equipment. Such contract as to each item
shall commence upon expiration of the warranty period, if any, relating to
such items. Lessee shall furnish Lessor with a copy of such contract(s)
upon demand.
(c) At the termination of this Agreement, Lessee shall, at its expense, return
the Equipment to Lessor (at the location designated by Lessor within the
continental United States) in the same operating order, repair, condition
and appearance as on the Installation Date, reasonable wear and tear only
excepted with all engineering changes prescribed by the manufacturer prior
thereto incorporated therein, and Lessee shall arrange and pay for such
repairs (if any) as are necessary for the manufacturer to accept the
equipment under contract maintenance at its then standard rates.
(d) Lessee shall comply with all governmental laws, regulations and
requirements, and all insurance requirements, if any, with respect to the
use, maintenance and operation of the Equipment.
7. OWNERSHIP AND INSPECTION.
(a) The Equipment shall at all times remain the property of the Lessor. Lessor
may affix or request Lessee to affix tags, decals or plates to the
Equipment indicating Lessor's ownership, and Lessee shall not permit their
removal or concealment.
(b) It is the intention and understanding of both Lessor and Lessee that the
Equipment shall be and at all times remain separately identifiable personal
property. Lessee shall not permit the Equipment to be installed in, or
used, stored or maintained with, any personal property in such manner or
under such circumstances that such Equipment might be or become an
accession to or confused with such other personal property; provided,
however, that the use or maintenance in accordance with normal operating
procedures of Lessee of the Equipment with any other computer equipment
owned by or leased to
3
<PAGE>
Lessee shall not be a violation of the foregoing provisions of this
sentence. Lessee shall not permit the Equipment to be installed in or used,
stored, or maintained with, any real property in such a manner or under
such circumstances that any person might acquire any rights in such
Equipment paramount to the rights of Lessor by reason of such Equipment
being deemed to be real property or a fixture thereon.
(c) Lessee shall keep the Equipment free and clear of all liens and
encumbrances. Lessee shall not assign this Agreement or any of its rights
hereunder or sublease the Equipment without the prior written consent of
Lessor, except that Lessee may, at its expense, upon prior written notice
to Lessor, assign this Agreement or sublease the Equipment to any parent or
subsidiary corporation, or to a corporation which shall have acquired all
or substantially all of the property of Lessee by merger, consolidation or
purchase. No permitted assignment or sublease shall relieve Lessee of any
of its obligations hereunder.
(d) Lessor or its agents shall have free access to the Equipment at all
reasonable times for the purpose of inspection and for any other purpose
contemplated in this Agreement.
(e) Lessee shall immediately notify Lessor of all details concerning any damage
or loss arising out of the improper manufacture, functioning or operation
of the Equipment.
8. WARRANTIES.
(a) Lessor shall, at the request and expense of Lessee, enforce for the benefit
of Lessee any rights which Lessor shall be entitled to enforce against the
manufacturer in respect of the Equipment.
(b) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, THERE ARE NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND EXPRESS OR IMPLIED, WITH RESPECT
TO THE CONDITION OR PERFORMANCE OF THE EQUIPMENT, ITS MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR WITH RESPECT TO PATENT INFRINGEMENT OR
THE LIKE. LESSOR SHALL HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM, LOSS OR
DAMAGE OF ANY KIND OR NATURE WHATSOEVER, NOR SHALL THERE BE ANY ABATEMENT
OF RENTAL, ARISING OUT OF OR IN CONNECTION WITH (i) THE DEFICIENCY OR
INADEQUACY OF THE EQUIPMENT FOR ANY PURPOSE, WHETHER OR NOT KNOWN OR
DISCLOSED TO LESSOR, (ii) ANY DEFICIENCY OR DEFECT IN THE EQUIPMENT, (iii)
THE USE OR PERFORMANCE OF THE EQUIPMENT, (iv) ANY INTERRUPTION OR LOSS OF
SERVICE OR USE OF THE EQUIPMENT, or (v) ANY LOSS OF BUSINESS OR OTHER
CONSEQUENTIAL LOSS OR DAMAGE WHETHER OR NOT RESULTING FROM ANY OF THE
FOREGOING. LESSEE WILL DEFIND, INDEMNIFY AND HOLD LESSOR HARMLESS AGAINST
ANY AND ALL CLAIMS, DEMANDS AND LIABILITIES ARISING OUT OF OR IN CONNECTION
WITH THE DESIGN, MANUFACTURE, POSSESSION OR OPERATION OF THE EQUIPMENT.
4
<PAGE>
9. SECURITY INTEREST.
(a) In the event that Lessor transfers or assigns or grants a security interest
in all or any part of its rights in this Agreement, the Equipment and/or
sums payable hereunder to the third party, whether as collateral security
for any loans or advances made or to be made to Lessor, by such third party
or otherwise, Lessee, upon receipt of notice of any such transfer or
assignment and instructions from Lessor, shall pay its obligations
hereunder or amounts equal thereto to the third party (or to any other
party designated by the third party), and Lessee's obligations hereunder
shall be absolute and unconditional and shall not be subject to any
abatement, reduction, recoupment, defense, offset or counterclaim available
to Lessee against Lessor for any reason whatsoever; nor, except as
otherwise expressly provided herein, shall this Agreement terminate, or the
respective obligations of Lessor or Lessee be otherwise affected, by reason
of any defect in the Equipment, condition, design, operation or fitness for
use thereof or any loss or destruction of the Equipment or any part
thereof, the prohibition of or other restriction against Lessee's use of
the Equipment, the interference with such use by any private person or
entity, or by reason of any failure by Lessor to perform any of its
obligations herein contained, or by reason of any other indebtedness or
liability, howsoever and whenever arising, of Lessor to Lessee or to any
other person, firm or corporation or to any governmental authority or for
any other cause whether similar or dissimilar to the foregoing, any present
or future law to the contrary notwithstanding, it being the intention of
the parties hereto that the Rental payable by Lessee hereunder shall
continue to be payable in all events and at the times herein provided,
except as otherwise expressly provided for herein.
(b) On the Installation Date as to each Equipment Schedule, Lessee will furnish
to Lessor, and/or its assignee, a certificate signed by an officer of
Lessee to the effect that: Lessee has full power and authority to enter
into this Agreement; this Agreement has been duly authorized; executed and
delivered by Lessee and is its valid and binding obligation, enforceable in
accordance with its terms; no approval, consent, or withholding of
objection is required from any governmental authority with respect to the
entering into or performance of this Agreement by Lessee; the entering into
or performance of this Agreement by Lessee does not and will not violate a
judgment, order, law or regulation applicable to Lessee or any provision of
Lessee's certificate of incorporation or by-laws or result in a breach of,
or constitute a default under, or result in the creation of any lien,
charge, security interest or other encumbrance upon any assets of Lessee or
on the Equipment or this Agreement pursuant to, any indenture, mortgage,
deed of trust, bank loan, credit agreement or other instrument to which
Lessee is a party or by which it or its assets may be bound; the Equipment
is located at Lessee's facility as shown on the Schedule; the Equipment has
been and is then operating to the satisfaction of Lessee; Lessee has no
right, title or interest in the Equipment or any part thereof except the
rights, title and interest therein as Lessee thereof under this Agreement;
and that, on the Installation Date, this Agreement is in full force and
effect, neither party is in default hereunder, and Lessee's obligations
hereunder are subject to no defenses, setoffs or counterclaims. In
addition, Lessee agrees promptly to execute and deliver to Lessor standard
form UCC-1 financing statements (to be filed for information purposes only)
as
5
<PAGE>
well as such other agreements, documents, instruments and certificates as
Lessor may reasonably request (including, without limitation, an opinion of
counsel and certified copies of Board resolutions, both in form and
substance satisfactory to Lessor) in order to effect Lessor's purchase of
the Equipment or financing thereof.
10. MISCELLANEOUS CHARGES.
Except as otherwise specifically provided in this Agreement, it is understood
and agreed that this is a net lease, and that, as between Lessor and Lessee,
Lessee shall be responsible for all costs and expenses of every nature
whatsoever arising out of or in connection with or related to this Agreement or
the Equipment (such as, but not limited to, transportation in and out,
transportation insurance, rigging, drayage, packing, installation and disconnect
charges).
11. RISK OF LOSS ON LESSEE.
Lessee shall obtain and maintain from the time Lessee executes a document
evidencing physical receipt of the Equipment and for the entire term of this
Agreement, at its own expense, property damage and liability insurance and
insurance against loss or damage to the Equipment including, without limitation,
loss by fire (including so-called extended coverage) theft and such other risks
of loss as are customarily insured against the type of Equipment leased
hereunder by any businesses in which Lessee is engaged, in such amounts, in such
form and with such insurers as shall be satisfactory to Lessor; provided,
however, that the amount of insurance against loss or damage to the Equipment
shall not be less than the greater of the full replacement value of the
Equipment or the installments of rent then remaining unpaid hereunder plus any
renewal or purchase options contained herein. Each insurance policy will name
Lessee as an insured and Lessor as an additional insured and loss payee thereof
as Lessor's interest may appear, and shall contain a clause requiring the
insurer to give Lessor at least 10 days prior written notice of any alteration
in the terms of such policy or of the cancellation thereof. Lessee shall
furnish to Lessor a certificate of insurance or other evidence satisfactory to
Lessor that such insurance coverage is in effect provided, however, that Lessor
shall be under no duty either to ascertain the existence of or to examine such
insurance policy, or to advise Lessee in the event such insurance coverage shall
not comply with the requirements hereof. Lessee further agrees to give Lessor
prompt notice of any damage to, or loss of, the Equipment, or any part thereof.
Lessor shall be named as the Loss Payee on such policies, which shall be written
by an insurance company of recognized responsibility. Lessee agrees to insure
the interests of any third party (referred to in Paragraph 9 of this Agreement)
under a standard mortgagee clause. Evidence of such insurance coverage shall be
furnished to Lessor upon demand.
If any item of Equipment is rendered unusable as a result of any physical damage
to, or destruction of, the Equipment, the Lessee shall give Lessor immediate
notice thereof and this Agreement shall continue in full force and effect
without any abatement of rental. Lessee shall determine, within fifteen ( 15)
days after the date of occurrence of such damage or destruction, whether such
item of Equipment can be repaired. In the event Lessee determines that such
item of Equipment can be repaired, Lessee, at its expense, shall cause such item
of Equipment to be promptly repaired. In the event Lessee determines that the
item of Equipment cannot be
6
<PAGE>
repaired, Lessee, at its expense, shall promptly replace such item of Equipment
and convey title to such replacement to Lessor free of all liens and
encumbrances, and this Lease shall continue in full force and effect as though
such damage or destruction had not occurred. All proceeds of insurance received
by Lessor or Lessee under the policy referred to in the proceeding paragraph of
this paragraph shall be applied toward the cost of any such repair or
replacement.
12. INDEMNIFICATION.
Lessee hereby agrees to assume liability for, and does hereby agree to
indemnify, protect, save and keep harmless Lessor and its respective successors,
assigns, legal representatives, agents and servants, from and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, expenses or disbursements (including legal fees and expenses) of
any kind and nature whatsoever which may be imposed on, incurred by or asserted
against Lessor or any of its respective successors, assigns, legal
representatives, agents and servants (whether or not also indemnified against by
the manufacturer(s) or any other person), in any way relating to or arising out
of this Lease or any document contemplated hereby, or the performance or
enforcement of any of the terms hereof, or in any way relating to or arising out
of the manufacture, purchase, acceptance, rejection, return lease, ownership,
possession, use, condition, operation, sale or other disposition of the
Equipment or any accident in connection therewith (including, without
limitation, latent or other defects, whether or not discoverable); provided,
however, that Lessee shall not be required to indemnify Lessor or its respective
successors, assigns, legal representatives, agent and servants, for loss or
liability in respect of any item of Equipment arising from acts or events which
occur after possession of such item of Equipment has been returned to Lessor or
loss or liability resulting from the willful misconduct or gross negligence of
the party otherwise to be indemnified hereunder. Lessee agrees that Lessor
shall not be liable to Lessee for any liability, claim, loss, damage or expense
of any kind or nature arising in strict liability or caused directly or
indirectly by the inadequacy of the Equipment for any purpose or any deficiency
or defect therein or the use or maintenance thereof or any repairs, servicing or
adjustments thereto or any delay in providing or failure to provide any thereof
or any interruption or loss of service or use thereof or any loss of business.
13. REMEDIES.
Lessee shall be in default hereunder, and there shall be a breach of this
Agreement, if:
(a) Lessee fails to pay any installment of rent within twenty (20) days when
the same becomes due and payable.
(b) Lessee attempts to remove, sell, transfer, encumber, sublet or part with
possession of the Equipment or any items thereof, except as expressly
permitted herein.
7
<PAGE>
(c) Lessee shall fail to observe or perform any of the other obligations
required to be observed or performed by Lessee hereunder, and such failure
shall continue uncured for ten (10) days after written notice thereof to
Lessee by Lessor.
(d) Lessee ceases doing business as a going concern, makes an assignment for
the benefit of creditors, admits in writing its inability to pay its debts
as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar arrangement under any present or future statute, law
or regulation, or files an answer admitting the material allegations of a
petition filed against it in any such proceeding, consents to, or
acquiesces in the appointment of, a trustee, receiver, or liquidator of it
or of all or any substantial part of its assets or properties, or if it or
its shareholders shall take any action looking to its dissolution or
liquidation.
(e) Within 30 days after the commencement of any proceedings against Lessee
seeking reorganization, arrangement, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation,
such proceedings shall not have been dismissed, or if within 30 days after
the appointment without Lessee's consent or acquiescence of any trustee,
receiver or liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated.
In the event that Lessee is in default hereunder, then, in any such event,
Lessor may at its option do any or all of the following: (i) by notice to Lessee
terminate this Agreement as to all or any Equipment Schedules; (ii) whether or
not this Agreement is terminated as to all or any Equipment Schedules, take
possession of any or all of the Equipment on any Equipment Schedule wherever
situated, and for such purpose, enter upon any premises without liability for so
doing; (iii) sell, dispose of, hold, use or lease any Equipment on any Equipment
Schedule as Lessor in its sole discretion may decide, without any duty to
account to Lessee; (iv) by notice to Lessee, declare immediately due and payable
all monies to be paid by Lessee during the Initial Period or, if the Initial
Period has then expired, declare immediately due and payable all monies to be
paid during any term (extended as provided in Paragraph 3(a) hereof) then in
effect, and Lessee shall thereupon be obliged to pay such monies to Lessor
immediately. Lessee shall in any event remain fully liable for reasonable
damages as provided by law and for all costs and expenses incurred by Lessor on
account of such default, including all court costs and reasonable attorneys'
fees. The waiver by Lessor of any breach of any obligation of Lessee shall not
be deemed a waiver of such obligation or of any subsequent breach of the same or
any other obligation. The subsequent acceptance of rental payments hereunder by
Lessor shall not be deemed a waiver of any prior existing breach by Lessee
regardless of Lessor's knowledge of such prior existing breach at the time of
acceptance of such rental payments. The rights afforded Lessor under this
Paragraph shall not be deemed to be exclusive, but shall be in addition to any
rights or remedies provided by law.
8
<PAGE>
14. PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR.
If Lessee shall be in default hereunder, Lessor may thereafter, without thereby
waiving any obligation of Lessee or such default make the payment or perform or
comply with the agreement, the nonpayment, nonperformance or noncompliance with
which caused such default, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, shall be
payable by Lessee upon demand.
15. GENERAL.
(a) This Agreement shall not be binding upon Lessor unless signed on its behalf
by a duly authorized officer. This Agreement shall be deemed to have been
made in the State of New York and shall be governed in all respects by the
laws of such State.
(b) This Agreement (including the attached Equipment Schedules and Supplements)
constitutes the entire Agreement between Lessee and Lessor with Respect to
the Equipment, and no covenant, condition or other term or provision may be
waived or modified orally.
(c) All notices hereunder shall be in writing and shall be delivered in person
or sent by registered or certified mail, postage prepaid, to the address of
the other party as set forth herein or to such other address as such party
shall have designated by proper notice.
LESSOR: LESSEE:
JACOM COMPUTER SERVICES, INC. CONFERENCE SOURCE
INTERNATIONAL, INC.
By By /s/
-------------------------------- -----------------------------------
9
<PAGE>
EQUIPMENT SCHEDULE NO. 1
LEASE AGREEMENT NO. 9494 DATED: DECEMBER 22, 1994 ("LEASE")
BETWEEN JACOM COMPUTER SERVICES, INC. ("LESSOR")
AND CONFERENCE SOURCE INTERNATIONAL, INC. ("LESSEE")
COUNTERPART # OF 3 COUNTERPARTS
1. Equipment:
Item No. Qty Equip. Type Model/Feature Description
- -------- --- ----------- ------------- -----------
SEE ATTACHED SCHEDULE "A" FOR EQUIPMENT LISTING
2. Equipment Location: 100 HARTSFIELD CENTRE PKWY
ATLANTA, GA 30364
3. Initial Period: 36 Months from Commencement Date
(Last Two Months Payable in Advance)
4. Monthly Rental: $15,385.00
All of the terms and conditions of the above described Lease Agreement #9494
dated December 22, 1994 are incorporated herein by reference. Each Equipment
Schedule shall constitute a separate Lease Agreement.
Lessor: Lessee:
JACOM COMPUTER SERVICES, INC. CONFERENCE SOURCE
INTERNATIONAL, INC.
By: By: /s/
-------------------------------- ----------------------------------
Title: Title: [illegible]
----------------------------- -------------------------------
Date: Date: December 28, 1994
------------------------------ --------------------------------
10
<PAGE>
ATTACHMENT TO
EQUIPMENT SCHEDULE NO. 1
LEASE AGREEMENT NO. 9494 DATED DECEMBER 22, 1994 ("LEASE")
BETWEEN JACOM COMPUTER SERVICES, INC. ("LESSOR")
AND CONFERENCE SOURCE INTERNATIONAL, INC. ("LESSEE")
<TABLE>
<CAPTION>
BRIDGE 1 BRIDGE 2
HC5145 HC5145
ITEM CTL PART # DESCRIPTION QUANTITY QUANTITY
- ---------- ------------ -------------------------------- -------- --------
<S> <C> <C> <C> <C>
ISIO 2033-1900-00 INTELLIGENT SERIAL INTERFACE 4 4
XYCOM 2033-2000-00 XVME-PIO PARALLEL INTERFACE CARD 1 1
OLC 2033-1100-00 OPERATOR LINE CARD 12 10
CLC 2033-1200-00 CONTROLLER LINE CARD 1 1
NLC 2033-0900-00 NETWORK LINE CARD 1 1
CPM2 2033-0110-03 CHANNEL PROCESSING MODULE 11 11
DCM 700-0204-03 DIGITAL CONFERENCING MODULE 2 3
RCM 700-0201-03 ROUTING CONTROL 1 1
WYSE 370 201-0010-00 WYSE COLOR TERMINAL 10 8
OIM 2073-0010-00 OPERATOR INTERFACE MODULE 10 8
WYSE 60 201-0104 WYSE 60 TERMINAL (MONOCHROME) 1 1
VRM 700-0211-02 VOICE RESPONSE MODULE 1 1
</TABLE>
11
<PAGE>
[JACOM COMPUTER SERVICES, INC. LETTERHEAD APPEARS HERE]
December 22, 1994
Conference Source International, Inc.
100 Hartsfield Centre Pkwy
Suite 300
Atlanta, GA 30364
REF: LEASE AGREEMENT 9494 SCHEDULE 1
So long as no Event of Default (as defined in Lease Agreement 9494
Schedule 1) shall have occurred and be continuing, Lessee shall have the option
to purchase all items of the equipment in Lease Agreement 9494 Schedule 1; "AS
IS" and "WHERE IS", upon expiration of the Initial Period applicable to the
equipment designated in the lease by giving notice of such exercise to Lessor
not later than Ninety days (90) prior to the Lease ending date as defined in
Lease Agreement 9494 Schedule 1. By the giving of such notice Lessee
acknowledges and agrees that its option to purchase the equipment shall be its
binding obligation and that said notice and the exercise of such option may not
be thereafter rescinded without the written agreement of Lessor.
The total purchase price of the equipment shall be $1.00. The Purchase
Price shall be paid in cash or certified or bank check payable to Lessor's order
on or before the expiration date of the term of the lease.
Very truly yours,
JACOM COMPUTER SERVICES, INC.
/s/ Mark Kitaeff
12
<PAGE>
Exhibit 10.4
Equipment Lease
This form is subject to Federal and State legal requirements.
1. Equipment Leased.
Lessor hereby leases to Lessee, and Lessee hereby hires and takes from Lessor
the following-described personal property (hereinafter, with all attachments,
replacement parts, substitutions, additions, repairs and accessories
incorporated therein and/or affixed thereto, and proceeds, referred to as
"Equipment"): Describe Equipment fully, including make, kind of unit, model and
serial numbers, and any other pertinent information.
One (1) Deltacom Confertech Allegro Conference Bridge Audio Teleconferencing
System S/N: Listing of equipment w/ serial numbers attached.
And Lessor agrees within 0 days from the date hereof to cause said Equipment to
be delivered to Lessee, f.o.b.
- --------------------------------------------------------------------------------
2. Term.
This Lease is for a term of 60 months, on ____________________________, and
ending on ___________________________.
3. Rentals.
For said term or any portion thereof, Lessee shall pay to Lessor rentals
aggregating $122,343.00, of which $4,078.10 is herewith paid in advance and the
balance of the rental, $118,264.90, is payable in 58 equal, successive, monthly
rental payments of $2,039.05 each, of which the first is due ___________________
and the others on a like date of each month thereafter, until fully paid.
4. Purchase Option.
At the expiration of the original term hereof, if Lessee has paid in full all
rentals owing under this Lease, and be not then in default hereunder, Lessee
shall have the option to purchase all but not less than all the items of
Equipment hereunder upon giving written notice to Lessor not less than 30 days
prior to the expiration of the original term hereof.
The purchase price shall be $1.00.
<PAGE>
5. Use, Nature and Location of Equipment.
Lessee warrants and agrees that the Equipment is to be used primary for:
x business or commercial purposes (other than agricultural),
- ---
___ agricultural purposes (see definition on the final page), or
___ both agricultural and business or commercial purposes.
Lessee and Lessor agree that regardless of the manner of affixation, the
Equipment shall remain personal property and not become part of the real estate.
Lessee agrees to keep the Equipment at
100 Hartsfield Centre Pkwy., Ste. 300 Atlanta Fulton GA 30354
- --------------------------------------------------------------------
Address City County State Zip code
but upon prior written notice to Lessor may change the location of the Equipment
within such State. Lessee will not remove the Equipment from such State without
the prior written consent of Lessor (except that in the State of Pennsylvania,
the Equipment will not be removed from the above location without such prior
written consent).
6. Repairs.
Lessor shall not be obligated to install, erect, test, adjust, service or make
any repairs or replacements; Lessee shall not incur for Lessor's account or
liability any expense therefor without Lessor's prior written consent. Lessee
shall inspect the Equipment within 48 hours after its receipt; unless within
said time Lessee notifies Lessor, stating the details of any defects, Lessee
shall be conclusively presumed to have accepted the Equipment in its then
condition. Thereafter, Lessee shall effect and bear the expense of all
necessary repairs, maintenance, operation and replacements required to be made
to maintain the Equipment in good condition, normal wear and tear excepted.
7. Operators.
Lessee shall cause the Equipment to be operated by competent employees only, and
shall pay all expenses of operation.
8. Liability.
Lessee shall indemnify and save Lessor harmless from any and all injury to or
loss of the Equipment from whatever cause, and from liability arising out of the
use, maintenance and/or delivery thereof, but shall be credited with any amounts
received by Lessor from insurance procured by Lessee. Damage for any loss or
injury shall be based on the then true and reasonable market value of the
Equipment irrespective of rentals theretofore paid or accrued.
9. Insurance.
All risk of loss, damage to or destruction of the collateral shall at all times
be on Lessee. Lessee will procure forthwith and maintain at Lessee's expense
insurance against all risks of loss or
<PAGE>
physical damage to the collateral for the full insurable value thereof for [ ]
life of this Lease plus breach of warranty insurance and such other) insurance
thereon in amounts and against such risks as Lessor may specify, and shall
promptly deliver each policy to Lessor with a standard long-form mortgagee
endorsement attached thereto showing loss payable to Lessor; and providing
Lessor with not less than 30 days written notice of cancellation; each such
policy shall be in form, terms and amount and with insurance carriers
satisfactory to Lessor; Lessor's acceptance of policies in lesser amounts or
risks shall not be a waiver of Lessee's foregoing obligation. As to Lessor's
interest in such policy, no act or omission of Lessee or any of its officers,
agents, employees or representatives shall affect the obligations of the insurer
to pay the full amount of any loss.
Lessee hereby assigns to Lessor any monies which may become payable under any
such policy of insurance and irrevocably constitutes and appoints Lessor as
Lessee's attorney in fact (a) to hold each original insurance policy, (b) to
make, settle and adjust claims under each policy of insurance, (c) to make
claims for any monies which may become payable under such and other insurance on
the collateral including returned or unearned premiums, and (d) to endorse
Lessee's name on any check, draft or other instrument received in payment of
claims or returned or unearned premiums under each policy and to apply the funds
to the payment of the indebtedness owing to Lessor; provided, however, Lessor is
under no obligation to do any of the foregoing.
Should Lessee fail to furnish such insurance policy to Lessor, or to maintain
such policy in full force, or to pay any premium in whole or in part relating
thereto, then Lessor, without waiving or releasing any default or obligation by
Lessee, may (but shall be under no obligation to) obtain and maintain insurance
and pay the premium therefor on behalf of Lessee and charge the premium to
Lessee's indebtedness under this Lease. The full amount of any such premium
paid by Lessor shall be payable by Lessee upon demand, and failure to pay same
shall constitute an event of default under this Lease.
10. Taxes.
Lessee shall comply with and conform to all laws, ordinances and regulations
relating to the ownership, possession, use or maintenance of the Equipment, and
save Lessor harmless against actual or asserted violations, and pay all costs
and expenses of every character occasioned by or arising out of such use.
Lessee agrees that, during the term of this Lease, in addition to the rent and
all other amounts provided herein to be paid, it will promptly pay all taxes,
assessments and other governmental charges (including penalties and interest, if
any, and fees for titling or registration, if required) levied or assessed:
(a) upon the interest of the Lessee in the Equipment or upon the use or
operation thereof or on the earnings arising therefrom; and
(b) against Lessor on account of its acquisition or ownership of the
Equipment or any part thereof; or the use or operation thereof of
the leasing thereof to the Lessee, or the rent herein provided for,
or the earnings arising therefrom, exclusive, however, of any taxes
based on net income of Lessor.
<PAGE>
Lessee agrees to file, in behalf of Lessor, all required tax returns and reports
concerning the equipment with all appropriate governmental agencies, and within
not more than 45 days after the due date of such filing, to send Lessor
confirmation, in form satisfactory to Lessor, of such filing.
11. Title.
All said Equipment shall remain personal property, and title thereto shall
remain in Lessor exclusively. Lessee shall keep the Equipment free from any and
all liens and claims, and shall do or permit no act or thing whereby Lessor's
title or rights may be encumbered or impaired. Upon expiration or termination
hereof by other than default, the Equipment shall be returned unencumbered to
Lessor by Lessee at the place where the rent is payable or to such other place
as Lessor and Lessee agree upon, at Lessee's sole expense and in the same
condition as when received by Lessee, normal wear and tear resulting from proper
use thereof alone excepted. Lessee shall pay rent at the said rate until all
said Equipment arrives at Lessor's premises, or other place designated by
Lessor.
12. Inspection.
Lessee shall, whenever requested, advise Lessor of the exact location and
condition of the Equipment and shall give Lessor immediate notice of any
attachment or other judicial process affecting the Equipment, and indemnify and
save Lessor harmless [ ] any loss or damage caused thereby. Lessor may, for the
purpose of inspection, at all reasonable times enter upon any job, building or
place where the Equipment is located; and may remove the Equipment forthwith,
without notice to Lessee, if the Equipment is, in the opinion of Lessor, being
used beyond its capacity or in any manner improperly cared for or abused.
13. Non-Waiver.
Time is of the essence. Lessor's failure at any time to require strict
performance by Lessee of any of the provisions hereof shall not waive or
diminish Lessor's right thereafter to demand strict compliance therewith or with
any other provision. Waiver of any default shall not waive any other default.
No remedy of Lessor hereunder shall be exclusive of any other remedy herein or
by law provided, but each shall be cumulative and in addition to every other
remedy.
14. No Warranty.
Lessor, not being the manufacturer of the Equipment, nor manufacturer's agent,
makes no warranty or representation, either express or implied, as to the
fitness, quality, design, condition, capacity, suitability, merchantability or
performance of the Equipment or of the material or workmanship thereof, it being
agreed that the equipment is leased "as is" and that all such risks, as between
the Lessor and the Lessee, are to be borne by the Lessee at its sole risk and
expense. Lessee accordingly agrees not to assert any claim whatsoever against
the Lessor based thereon. Lessee further agrees, regardless of cause, not to
assert any claim whatsoever against the Lessor for loss of anticipatory profits
or consequential damages. No oral agreement, guaranty, promise,
<PAGE>
condition, representation or warranty shall be binding; all prior conversations,
agreements or representations related hereto and/or to said Equipment are
integrated herein.
15. Possession.
Lessor covenants to and with Lessee that Lessor is the lawful owner of said
Equipment free from all encumbrances and that, conditioned upon Lessee's
performing the conditions hereof, Lessee shall peaceably and quietly hold,
possess and use the equipment during said term without let or hindrance.
16. Performance of Obligations of Lessee by Lessor.
In the event that the Lessee shall fail duly and promptly to perform any of its
obligations under the provisions of this Lease, the Lessor may, at its option,
perform the same for the account of Lessee without thereby waiving such default,
and any amount paid or expense (including reasonable attorneys' fees), penalty
or other liability incurred by the Lessor in such performance, together with
interest at the rate of 1 1/2% per month thereon until paid by the Lessee to
the Lessor, shall be payable by the Lessee upon demand as additional rent for
the Equipment.
17. Further Assurances.
Lessee shall execute and deliver to Lessor, upon Lessor's request such
instruments and assurances as Lessor deems necessary or advisable for the
confirmation or perfection of this Lease and Lessor's rights hereunder.
18. Default.
An Event of Default shall occur if:
(a) Lessee fails to pay when due any installment of rent and such
failure continues for a period of 10 days;
(b) Lessee shall fail to perform or observe any covenant, condition or
agreement to be performed or observed by it hereunder and such
failure continues uncured for 15 days after written notice thereof
to Lessee by Lessor;
(c) Lessee dies, ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a voluntary
petition in bankruptcy, is adjudicated a bankrupt or an insolvent,
files a petition seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar arrangement under any present or future statute, law or
regulation, or files an answer admitting the material allegations
of a petition filed against it in any such proceeding, consents to
or acquiesces in the appointment of a trustee, receiver, or
liquidator of it or of all or any substantial part of its assets or
properties, or if it or its shareholders shall take any action
looking to its dissolution or liquidation;
<PAGE>
(d) within 60 days after the commencement of any proceedings against
Lessee seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceedings shall not have
been dismissed, or if within 60 days after the appointment without
Lessee's consent or acquiescence of any trustee, receiver or
liquidator of it or of all or any substantial part of its assets
and properties, such appointment shall not be vacated; or
(e) Lessee attempts to remove, sell, transfer, encumber, part with
possession or sublet the Equipment or any item thereof.
Upon the occurrence of an Event of Default, Lessor, at its option, may:
(a) declare all sums due and to become due hereunder immediately due
and payable;
(b) proceed by appropriate court action or actions or other proceedings
either at law or equity to enforce performance by the Lessee of any
and all covenants of this Lease and to recover damages for the
breach thereof;
(c) demand that Lessee deliver the Equipment forthwith to Lessor at
Lessee's expense at such place as Lessor may designate; and
(d) Lessor and/or its agents may, without notice or liability or legal
process, enter into any premises of or under control or
jurisdiction of Lessee or any agent of Lessee where the Equipment
may be or by Lessor is believed to be, and repossess all or any
item thereof, disconnecting and separating all thereof from any
other property and using all force necessary or permitted by
applicable law so to do, Lessee hereby expressly waiving all
further rights to possession of the Equipment and all claims for
injuries suffered through or loss caused by such repossession;
Lessor may sell or lease the Equipment at a time and location of
its choosing provided that the Lessor acts in good faith and in a
commercially reasonable manner, but the Lessor shall, nevertheless,
be entitled to recover immediately as liquidated damages for loss
of the bargain and not as a penalty any unpaid rent that accrued on
or before the occurrence of the event of default plus an amount
equal to the difference between the aggregate rent reserved
hereunder for the unexpired term of this Lease and the then
aggregate rental value of all Equipment for such unexpired term,
provided, however, that if any statute governing the proceeding in
which such damages are to be proved specifies the amount of such
claim, Lessor shall be entitled to prove as and for damages for the
breach an amount equal to that allowed under such statute. The
provisions of this Paragraph shall be without prejudice to any
rights given to the Lessor by such statute to prove for any amounts
allowed thereby. Should any proceedings be instituted by or against
Lessor for monies due to Lessor hereunder and/or for possession of
any or all of the Equipment or for any other relief, Lessee shall
pay a reasonable sum as attorneys' fees. No remedy referred to
herein is intended to be exclusive of any
<PAGE>
other remedy statedherein or of any other remedy otherwise
available to Lessor at law or in equity.
19. Assignments.
Without the prior written consent of Lessor, Lessee shall not assign this Lease
or its interests hereunder or enter into any sub-lease with respect to the
Equipment covered hereby, it being agreed Lessor will not unreasonably withhold
its consent to a sub-lease of the Equipment. The conditions hereof shall bind
any permitted successors and assigns of Lessee. Lessor may assign the rents
reserved herein or all or any of Lessor's other rights hereunder. After such
assignment, Lessor shall not be assignee's agent for any purpose; Lessee will
settle all claims arising out of alleged breach of warranties or otherwise,
defenses, set-offs and counterclaims it may have against Lessor directly with
Lessor, and not set up any such against Lessor's assignee, Lessor hereby
agreeing to remain responsible therefor. Lessee on receiving notice of any such
assignment shall abide thereby and make payment as may therein be directed.
Following such assignment, solely for the purpose of determining assignee's
rights hereunder, the term "Lessor" shall be deemed to include or refer to
Lessor's assignee.
20. Miscellaneous.
Lessee will not change or remove any insignia or lettering on the Equipment and
shall conspicuously identify each item of the Equipment by suitable lettering
thereon to indicate Lessor's ownership. All transportation charges shall be
borne by Lessee. All notices relating hereto shall be sent certified mail,
return receipt requested to Lessor or Lessee at its respective address shown
herein or at any later address last known to the sender. If any part hereof is
contrary to, prohibited by or deemed invalid under applicable laws or
regulations of any jurisdiction, such provision shall be inapplicable and deemed
omitted but shall not invalidate the remaining provisions hereof. Lessee waives
all rights under all exemption laws. Lessee acknowledges the receipt of a true
copy of this Lease. The Lease is irrevocable for the full term hereof and for
the aggregate rental herein reserved, and the rent shall not abate by reason of
termination of Lessee's right of possession and/or the taking of possession by
Lessor or for any other reason. Any payment not made when due shall, at the
option of Lessor, bear late charges thereon calculated at the rate of 1 1/2% per
month, but in no event greater than the highest rate permitted by relevant law.
In the event this Lease is deemed to be a lease intended as security, Lessee
grants Lessor a security interest in the Equipment as security for all of
Lessee's indebtedness and obligations owing under this Lease as well as all
other present and future indebtedness and obligations of Lessee to Lessor of
every kind and nature whatsoever. Lessee shall be responsible for and pay to
Lessor a returned check fee, not to exceed the maximum permitted by law, which
fee will be equal to the sum of (i) the actual bank charges incurred by Lessor
plus (ii) all other actual costs and expenses incurred by Lessor. The return
check fee is payable upon demand as additional rent under this Equipment Lease.
This Lease contains the entire agreement between the parties with respect to the
Equipment, and may not be altered, modified, terminated or discharged except by
a writing signed by the party against whom such alteration, modification,
termination or discharge is sought. Lessee's initials
<PAGE>
If Lessee is a corporation, this Lease is executed by authority of its Board of
Directors.
Dated: 11/11/96
--------
Lessee:
Conference Source International, Inc.
- --------------------------------------------------------------------------------
Name of individual, corporation or partnership
By /s/ Title Treasurer
------------------------------------ ------------------------------------
If corporation, have signed by President, Vice President or Treasurer, and
give official title. If owner or partner, state which.
100 Hartsfield Centre Pkwy., Suite 300
- --------------------------------------------------------------------------------
Address
Atlanta GA 30354
- --------------------------------------------------------------------------------
City State Zip Code
Lessor:
The CIT Group/Equipment Financing, Inc.
- --------------------------------------------------------------------------------
Name of Individual, corporation or partnership
By_________________________________________Title________________________________
If corporation, have signed by President, Vice President or Treasurer, and
give official title. If owner or partner, state which.
900 Ashwood Parkway, 6/th/ Floor
- --------------------------------------------------------------------------------
Address
Atlanta GA 30338
- --------------------------------------------------------------------------------
City State Zip Code
________________________________________________________________________________
If Debtor is a partnership, enter:
Partners' names Home addresses
- --------------- --------------
________________________________________________________________________________
<PAGE>
NOTICE: Do not use this form for transactions for personal, family or household
purposes. For agricultural and other transactions subject to Federal or
State regulations, consult legal counsel to determine documentation
requirements.
Agricultural purposes generally means farming, including dairy farming, but it
also includes the transportation, harvesting, and processing of farm, dairy, or
forest products if what is transported, harvested, or processed is farm, dairy,
or forest products grown or bred by the user of the Equipment itself. It does
not apply, for instance, to a logger who harvests someone else's forest, or a
[ ] who prepares land or harvests products on someone else's farm.
<PAGE>
Lease Guaranty
To:
The CIT Group/Equipment Financing, Inc.
- --------------------------------------------------------------------------------
Lessor
900 Ashwood Parkway, 6/th/ Floor
- --------------------------------------------------------------------------------
Address
Atlanta GA 30338
- --------------------------------------------------------------------------------
City State Zip Code
Re:
Conference Source International, Inc.
- --------------------------------------------------------------------------------
Lessee
100 Hartsfield Centre Pkwy., Suite 300
- --------------------------------------------------------------------------------
Address
Atlanta GA 30354
- --------------------------------------------------------------------------------
City State Zip Code
Date of Lease
-------------------------------
Aggregate Unpaid Rentals $122,343.00
------------------
Each of us severally requests you as lessor to enter into a certain lease
agreement dated as set forth above, with the above-named lessee, and to induce
you to do so and in consideration thereof and of benefits to accrue to each of
us therefrom, each of us, as a primary obligor, jointly, severally and
unconditionally guarantees to you that the lessee will fully and promptly pay,
when due, every rental installment and all other sums payable under such lease
and perform all of lessee's present and future obligations to you under this
lease, irrespective of any invalidity or unenforceability of any such obligation
or the insufficiency, invalidity or unenforceability of any security therefor,
and agrees, without your first having to proceed against the lessee or to
liquidate the lease agreement or the leased property, to pay on demand the
entire unpaid balance of the rentals and any other amounts due under said lease
and to become due you from the lessee and all losses, costs, attorneys' fees or
expenses which may be suffered by you by reason of lessee's default or default
of any of the undersigned; and agrees to be bound by and on demand to pay any
deficiency established by a sale of the lease and/or the leased property, with
or without notice to us. This guaranty is an unconditional guarantee of payment
and performance. No guarantor shall be released or discharged, either in whole
or in part, by your failure or delay to perfect or continue the perfection of
any security interest in any property which secures the
<PAGE>
obligations of lessee or any of us to you, or to protect the property covered by
such security interest.
No termination hereof shall be effected by the death of any or all of us. No
termination shall be effective except by notice sent to you by certified mail
return receipt requested naming a termination date effective not less than 90
days after the receipt of such notice by you; or effective as to any of us who
has not given such notice; or affect any transaction effected prior to the
effective date of termination.
Each of us waives: notice of acceptance hereof; presentment, demand, protest and
notice of nonpayment or protest as to any note or obligation signed, accepted,
endorsed or assigned to you by lessee; all exemptions and homestead laws and any
other demands and notices required by law; any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which any
of us may now or hereafter have against the lessee or any other person directly
or contingently liable for the obligations guaranteed hereunder, or against or
with respect to the lessee's property (including, without limitation, property
collateralizing its obligations to you), arising from the existence or
performance of this guaranty; all setoffs and counterclaims; and any duty on
your part (should such duty exist) to disclose to any of us any matter, fact or
thing related to the business operations or condition (financial or otherwise)
of the lessee or its affiliates or property, whether now or hereafter known by
you.
You may at any time, without our consent, without notice to us and without
affecting or impairing the obligation of any of us hereunder, do any of the
following:
(a) renew, extend, (including extensions beyond the original term of
such lease), modify, release or discharge any obligations of
lessee, of co-guarantors (whether hereunder or under a separate
instrument) or of any other party at any time directly or
contingently liable for the payment of lessee's obligations under
the lease;
(b) agree to the substitution of a lessee;
(c) accept partial payments of lessee's obligations under the lease;
(d) accept new or additional documents, instruments or agreements
relating to or in substitution of lessee's obligations under the
lease;
(e) settle, release (by operation of law or otherwise), compound,
compromise, collect or liquidate any of lessee's obligations under
the lease or the leased property in any manner;
(f) consent to the transfer or return of the leased property and take
and hold additional security or guaranties for lessee's obligations
under the lease;
(g) amend, exchange, release or waive any security or guaranty; or
<PAGE>
(h) bid and purchase at any sale of the lease or the leased property
and apply any proceeds or security, and direct the order and manner
of sale.
If a claim is made upon you at any time for repayment or recovery of any
amount(s) or other value received by you, from any source, in payment of or on
account of any of the obligations of the lessee guaranteed hereunder and you
repay or otherwise become liable for all or any part of such claim by reason of:
(a) any judgment, decree or order of any court or administrative body
having competent jurisdiction; or
(b) any settlement or compromise of any such claim,
we shall remain jointly and severally liable to you hereunder for the amount so
repaid or for which you are otherwise liable to the same extent as if such
amount(s) had never been received by you, notwithstanding any termination hereof
or the cancellation of any note or other agreement evidencing any of the
obligations of the lessee.
This guaranty shall bind our respective heirs, administrators, representatives,
successors, and assigns, and shall inure to your successors and assigns,
including, but not limited to, any party to whom you may assign such lease, we
hereby waiving notice of any such assignment. All of your rights are cumulative
and not alternative.
By execution of this guaranty each guarantor hereunder agrees to waive all
rights to trial by jury in any action, proceeding, or counterclaim on any matter
whatsoever arising out of, in connection with, or related to this guaranty.
Executed 11/11/96 .
-----------------------
Individual NOTE: Individual guarantors must sign without titles.
Guarantors Sign "John Smith," not "John Smith, President."
Use street addresses not P.O. Boxes.
Judy B. Crawford /s/ Individually
- ----------------------------------------------------------
7730 Dunvegan Close, Dunwoody, GA 30350 Home Address
- ----------------------------------------------------------
<PAGE>
EXHIBIT A
TO PURCHASE AGREEMENT
BETWEEN CONFERENCE SOURCE INTERNATIONAL, INC.,
AND DELTACOM, INC.
Description of Bridge and Inventory
-----------------------------------
Conference Bridge:
- ------------------
One (1) 144 Port Allegro X/CS Audio Teleconferencing System, Serial #HC-5166,
including:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Quantity Description Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
One (1) Network Line Card NL-000194
One (1) Routing Control Module RC-000223
One (1) 3.5" Desk Drive Module 182414192310
One (1) Tape Drive Module 935420
One (1) Central Processing Unit 40 B/16 989M220N8511
One (1) Parallel Interface Module (XYCOM-290) 416535
One (1) Control Line Card CL-000190
One (1) Voice Response Module VR-000259
One (1) Digital Conferencing Module DC-000335
One (1) Digital Conferencing Module DC-000438
One (1) Intelligent Serial Interface Module - 2 831B211M4106
One (1) Intelligent Serial Interface Module - 2 306B211M4209
One (1) Intelligent Serial Interface Module - 2 306B211M4205
One (1) Intelligent Serial Interface Module - 2 831B211M4137
One (1) Operator Interface Module N/A
One (1) Operator Interface Module N/A
One (1) Operator Interface Module N/A
One (1) Operator Interface Module N/A
One (1) Operator Interface Module N/A
One (1) Operator Interface Module N/A
One (1) Operator Headset Assembly 15738
One (1) Operator Headset Assembly 15739
One (1) Operator Headset Assembly 2301
One (1) Operator Headset Assembly 15814
One (1) Operator Headset Assembly 15815
One (1) Terminal Station OLZ14500966
One (1) Terminal Station OLZ14500980
One (1) Terminal Station OLZ14101458
One (1) Terminal Station OLZ14101302
One (1) Terminal Station OLZ14500959
One (1) Terminal Station OLZ14101305
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
One (1) Operator Line Card OL-000434
One (1) Operator Line Card OL-000590
One (1) Operator Line Card OL-000591
One (1) Operator Line Card OL-000572
One (1) Operator Line Card OL-000495
One (1) Operator Line Card OL-000399
One (1) Operator Line Card OL-000595
One (1) Channel Processor Module CP2-001172
One (1) Channel Processor Module CP2-001110
One (1) Channel Processor Module CP2-001203
One (1) Channel Processor Module CP2-001207
One (1) Channel Processor Module CP2-001202
One (1) Channel Processor Module CP2-001195
One (1) Channel Processor Module CP2-001187
</TABLE>
Inventory:
- ----------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Quantity Description Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
One (1) Channel Processor Module 511M2217N5940
One (1) Parallel Interface Module 416549
One (1) Disk Drive Module 182415183610F
One (1) Intelligent Serial Interface Module 204B300A0177
One (1) Network Line Card NL-000198
One (1) Routing Control Module RC-000158
One (1) Digital Conferencing Module DC-000378
One (1) Operator Interface Module N/A
One (1) Operator Interface Module N/A
</TABLE>
<PAGE>
Exhibit 10.5
MASTER LEASE AGREEMENT
LESSOR: BSFS Equipment Leasing
LESSEE: Conference Source International, Inc.
Address: 100 Hartfield Centre Parkway, Suite 300
Atlanta, Fulton County, GA 30354
Contact: Duane Dobler
Tele No.: (404) 209-1400
Fax No.: (800) 343-9332
Master Lease Agreement No.: 53716
TERMS AND CONDITIONS
--------------------
1. LEASE: Lessor shall purchase and lease to Lessee the equipment and
-----
associated items ("Equipment") described in any Equipment Schedule ("Schedule")
executed from time to time by Lessor and Lessee that makes reference to this
Master Lease Agreement ("Agreement"). This Agreement shall be incorporated into
each Schedule. When computer programs and related documentation are furnished
with the Equipment, and a non-exclusive license and/or sublicense (collectively,
"Software") is granted to Lessee in an agreement ("Supplier Agreement") with
the suppliers (collectively, "Supplier") identified on the Schedule, Lessor, to
the extent permitted, grants Lessee a similar non-exclusive sublicense to use
the Software only in conjunction with the Equipment for so long as the Equipment
is leased hereunder. The Equipment and Software include, but are not limited
to, all additions, attachments and accessions thereto and replacements therefore
(collectively, "System"). Any reference to "Lease" shall mean with respect to
each System, this Agreement, a Schedule, a Consent of Supplier, an Acceptance
Certificate, any riders, amendments and addenda thereto, any other documents as
may from time to time be made a part thereof.
As conditions precedent to Lessor's obligation to purchase any Equipment
and obtain any Software, not later than the Commitment Date set forth on the
applicable Schedule, (a) Lessee and Lessor shall execute this Agreement, a
Schedule, an Acceptance Certificate and other documentation contemplated herein,
and (b) there shall have been no material adverse change in Lessee's financial
condition. Upon Lessor's execution of a Schedule, Lessee assigns to Lessor its
rights to receive title to the Equipment and any non-exclusive sublicense to use
the Software described in the Supplier Agreement as of the day the System is
delivered to the Installation Site set forth in the applicable Schedule but no
other right or any warranty thereunder. In consideration of such an assignment
and subject to the terms and conditions herein, Lessor agrees to pay to the
Supplier the Price (as defined in Section 3 below) for the System pursuant to
the Supplier Agreement, but not to perform any other obligation thereunder.
Unless Lessee exercises its Purchase Option as set forth in the applicable
Schedule, Lessee hereby assigns to Lessor all of the Lessee's then-remaining
rights pursuant to the applicable Supplier Agreement
<PAGE>
effective upon the termination or expiration of the Term (as set forth in the
applicable Schedule) for any reason.
2. TERMS, RENEWAL AND EXTENSIONS: If all other conditions precedent to a
-----------------------------
Lease have been met, the Lease Term for the System described on each Schedule
shall commence on the date of Lessee's execution of an Acceptance Certificate
("Commencement Date"), and continue for the number of whole months or other
periods set forth in such Schedule ("Initial Term"), the first such full month
commencing on the first day of the month following the Commencement Date (or
commencing on the Commencement Date if such date is the first day of the month).
If Lessee selects Purchase Option B or C in the applicable Schedule, on the
expiration date of the Initial Term, the Lease shall be automatically renewed
for a six-month period ("Renewal Term") unless, by giving written notice to
Lessor six (6) months prior to the expiration date, the Lessee elects to
terminate the Lease. After the Renewal Term, at Lessor's option, the Lease
shall be automatically extended on a month-to-month basis until either party
gives the other not less than thirty (30) days prior written notice of its
intention to terminate the Lease. Any renewals and extensions shall be on the
same terms and conditions as during the Initial Term. "Term" shall mean the
applicable Initial Term, the Renewal Term, if any, and any extension thereof as
provided herein.
3. RENT AND PAYMENT: Lessee shall pay to Lessor all the rental payments
---------------
as shown in the applicable Schedule ("Rent") during the Term of the Lease,
except as such Rent may be adjusted pursuant to this Section and Sections 2 and
8 of a Schedule, plus such additional amounts as are due Lessor under the Lease.
Rent shall be paid as designated in the applicable Schedule in advance on the
first day of each Payment Period ("Rent Payment Date"). If the Commencement Date
is not the first day of a calendar month (or other Payment Period), Lessee shall
pay to Lessor, on demand, interim Rent prorated daily based on a 360-day year
for each day from and including the Commencement Date to and including the last
day of such month or other Payment Period.
The Rent is based upon the Price of the System and the acceptance of the
System by Lessee on or before the Commitment Date set forth in the applicable
Schedule. The "Price" of the System shall be as set forth in the Schedule, and
shall exclude all other costs, including sales or other taxes included in the
Supplier Agreement as part of the purchase price. If the Price is increased or
decreased as a result of a job change order ("JCO"), the Lessee authorizes
Lessor to adjust the Rent. If the Commencement Date occurs after the Commitment
Date, and Lessor waives the condition precedent that the Commencement Date occur
on or before the Commitment Date, Lessor's then-current Lease Rate Factor for
similar transactions shall apply and the Lessee authorizes Lessor to adjust the
Rent accordingly.
Whenever any payment of Rent or other amount is not made within ten (10)
days after the date when due, Lessee agrees to pay on demand (as a fee to offset
Lessor's collection and administrative expenses), the greater of twenty-five
dollars ($25.00) or ten (10%) of each such overdue amount, but not exceeding the
lawful maximum, if any. All payments shall be payable to Lessor in U.S. dollars
at Lessor's address set forth in Section 18 or such other place as Lessor
directs in writing. If Lessee requests changes or amendments to any Lease,
Lessor may charge
2
<PAGE>
Lessee Lessor's reasonable costs and expenses of negotiation and documentation,
including fees of legal staff or outside counsel.
4. DELIVERY: All transportation, delivery and installation costs (unless
--------
included in the Price) are the sole responsibility of Lessee. Lessee assumes
all risk of loss and damage if the Supplier fails to deliver or delays in the
delivery of any System, or if any System is unsatisfactory for any reason.
5. NET LEASE: Lessee's obligations under each Lease are absolute,
---------
unconditional and non-cancelable and shall not be subject to any delay,
reduction, setoff, defense, counterclaim or recoupment for any reason including
any failure of any System, or any misrepresentations of any supplier,
manufacturer, installer, vendor or distributor. Lessor is not responsible for
the delivery, installation, maintenance or operation of any System.
6. WARRANTIES: Lessor agrees that third-party warranties, if any, inure
----------
to the benefit of Lessee during the Term and on exercise of the Purchase Option.
Lessee agrees to pursue any warranty claim directly against such third party and
shall not pursue any such claim against Lessor. Lessee shall continue to pay
Lessor all amounts payable under any Lease under any and all circumstances.
7. QUIET ENJOYMENT: Lessor shall not interfere with Lessee's quiet
---------------
enjoyment and use of the System during the Term if no Event of Default has
occurred and is continuing.
8. TAXES AND FEES: Lessee shall promptly reimburse Lessor, upon demand,
--------------
as additional Rent, or shall pay directly, if so requested by Lessor, all
license and registration fees, sales, use, personal property taxes and all other
taxes and charges imposed by any federal, state, or local government or taxing
authority, relating to the purchase, ownership, leasing, or use of the System or
the Rent excluding, however, all taxes computed upon the net income of Lessor.
9. DISCLAIMER OF WARRANTIES AND DAMAGES: LESSEE ACKNOWLEDGES THAT (a) THE
------------------------------------
SIZE, DESIGN, CAPACITY OF EACH SYSTEM AND THE MANUFACTURER AND SUPPLIER HAVE
BEEN SELECTED BY LESSEE; (b) LESSOR IS NOT A MANUFACTURER, SUPPLIER, DEALER,
DISTRIBUTOR OR INSTALLER OF ANY SYSTEM; (c) NO MANUFACTURER OR SUPPLIER OR ANY
OF THEIR REPRESENTATIVES IS AN AGENT OF LESSOR OR AUTHORIZED TO WAIVE OR ALTER
ANY TERM OR CONDITION OF ANY LEASE; AND (d) EXCEPT FOR LESSOR'S WARRANTY OF
QUIET ENJOYMENT SET FORTH IN SECTION 7, LESSOR HAS NOT MADE, AND DOES NOT HEREBY
MAKE, ANY REPRESENTATION, WARRANTY OR COVENANT, WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER INCLUDING, WITHOUT LIMITATION
THE DESIGN, QUALITY, CAPACITY, MATERIAL, WORKMANSHIP, OPERATION, CONDITION,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, HIDDEN OR LATENT DEFECTS,
OR AS TO ANY PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT. LESSEE LEASES EACH
SYSTEM "AS IS, WHERE IS".
3
<PAGE>
LESSOR SHALL HAVE NO LIABILITY TO LESSEE OR ANY THIRD PARTY FOR ANY
SPECIAL, DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY SORT
INCLUDING, WITHOUT LIMITATION, DAMAGES FOR PERSONAL INJURY, LOSS OF PROFITS OR
SAVINGS, LOSS OF USE, OR ANY OTHER DAMAGES, WHETHER BASED ON STRICT LIABILITY OR
NEGLIGENCE, WHETHER RESULTING FROM USE OF A SYSTEM OR BREACH OF A LEASE OR
OTHERWISE, EXCEPT FOR DIRECT, SPECIFIC DAMAGES FOR PERSONAL INJURY OR PROPERTY
DAMAGE TO THE EXTENT CAUSED BY LESSOR'S ACTIVE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
LESSEE HAS ELECTED PURCHASE OPTION B OR C, ARTICLE 2A OF THE UCC MAY
APPLY TO THE LEASE AND LESSEE MAY HAVE CERTAIN RIGHTS THEREUNDER. IF SO, LESSEE
ACKNOWLEDGES THAT SUCH A LEASE IS A FINANCE LEASE AS DEFINED IN UCC (S)2A-103.
TO THE EXTENT PERMITTED BY LAW, LESSEE HEREBY WAIVES ANY RIGHTS OR REMEDIES
LESSEE MAY HAVE UNDER UCC (S)(S)2A-508-522 INCLUDING, WITHOUT LIMITATION, RIGHTS
OF REJECTION, REVOCATION, CANCELLATION, GRANTING OF SECURITY INTERESTS, AND
RECOVERY FOR BREACH OF WARRANTY.
10. INSURANCE: At its expense, Lessee shall keep each System insured
---------
against all risks of loss and damage for an amount equal to the installed
replacement cost of such System with Lessor named as a loss payee. Lessee shall
also maintain comprehensive general liability insurance with Lessor named as an
additional insured. All insurance policies shall be with an insurer having a
"Best Policy Holders" rating of "A-X" or better, and be in such form, amount and
deductibles as are satisfactory to Lessor. Each such policy must state by
endorsement that the insurer shall give Lessor not less than thirty (30) days
prior written notice of any amendment, renewal or cancellation. Lessee shall,
upon request, furnish to Lessor satisfactory evidence that such insurance
coverage is in effect. Lessee may self insure for such coverages only with
Lessor's prior written consent.
11. CASUALTY: If any System, in whole or in part, is lost, stolen, damaged
--------
or destroyed, or is taken in any condemnation or similar proceeding (an "Event
of Loss"), Lessee shall immediately notify Lessor. Lessee shall, at its option
(a) immediately place the affected Equipment and Software in good condition and
working order, (b) replace the affected item with like equipment or software in
good condition and transfer clear title and any sublicense to Lessor, or (c) pay
to Lessor, within thirty (30) days of the Event of Loss, an amount equal to the
Stipulated Loss Value ("SLV") as defined below, for such affected Equipment or
Software plus any other unpaid amounts then due under the Lease. If an Event of
Loss occurs as to part of a System for which the SLV is paid, a pro rata amount
of Rent shall abate from the date the SLV payment is received by Lessor. Upon
payment of the SLV, title to the applicable Equipment and the sublicense to the
applicable Software shall pass to Lessee with no warranties, subject to the
rights, if any, of the insurer.
The SLV shall be an amount equal to all future Rent from the last Rent
Payment Date for which Rent has been paid to the end of the Term with each such
payment discounted to present
4
<PAGE>
value at a simple interest rate equal to five percent (5%) per annum or, if such
rate is not permitted by law, then at the lowest permitted rate, plus (a) if
Lessee selects Purchase Option B, twenty percent of the product obtained by
multiplying the total number of Rent payments shown on the Schedule for the
applicable Term by the then periodic Rent, or (b) if Lessee selects Purchase
Option C, the percent set forth in the Purchase Option C election in the
Schedule times the Price as it may have been adjusted ("Percent Option Amount").
If Lessor receives any insurance proceeds, Lessor shall apply such proceeds to
Lessee's outstanding obligations with any remaining sums to be delivered to
Lessee.
12. INDEMNITY: Lessee shall indemnify Lessor against, and hold Lessor
---------
harmless from, and covenants to defend Lessor against, any and all losses,
claims, liens, encumbrances, suits, damages, and liabilities (and all costs and
expenses including, without limitation, reasonable attorneys' fees) related to
the Lease including, without limitation, the selection, purchase, delivery,
ownership, condition, use, operation of a System, or violation of a Software
sublicense, or arising by operation of law (excluding any of the foregoing to
the extent caused by the active gross negligence or willful misconduct of
Lessor). Lessee shall assume full responsibility for or, at Lessor's sole
option, reimburse Lessor for the defense thereof. This Section shall survive the
termination of the Lease but not longer than the applicable statute of
limitations.
13. TAX INDEMNITY: If Lessee selects Purchase Option B, the Lease is
-------------
entered into based upon the assumptions ("Assumptions") that for federal, state,
and local income tax purposes, Lessor shall be entitled to deduct, at the
highest marginal rate of tax imposed on corporations, the maximum depreciation
or cost recovery allowances provided in the Internal Revenue Code of 1986, as
amended, and under state and local law in effect on the date Lessee executes the
applicable Schedule. If, in its reasonable opinion, Lessor determines that its
net after-tax economic yield or after-tax cash flow ("Net Economic Return") has
been adversely affected as a result of a change in the Assumptions (a "Loss"),
Lessee agrees to pay to Lessor, on demand, an amount which will cause Lessor's
then Net Economic Return to equal the Net Economic Return that Lessor would have
received had such Loss not occurred. Lessee shall have no right to inspect the
tax returns of Lessor.
14. DEFAULT: Any of the following shall constitute an Event of Default:
-------
(a) Lessee fails to pay when due any Rent or other amount payable under a Lease
that is not paid within ten (10) days of Lessee's receipt of written notice of
nonpayment; (b) Lessee fails to perform any other material term in any Lease or
other agreement given in connection with any Lease that continues uncured for
twenty (20) days after Lessee's receipt of written notice thereof; (c) the
inaccuracy of any material representation or warranty made by Lessee or any
guarantor in connection with any Lease and the continuation thereof for thirty
(30) days or more; (d) Lessee attempts to make a Transfer (as defined in Section
16) without Lessor's prior written consent; (e) Lessee dissolves or ceases to do
business as a going concern; (f) Lessee sells all or substantially all of its
assets, merges or consolidates with or into or reorganizes with any entity; (g)
Lessee becomes insolvent, makes an assignment for the benefit of creditors,
files a voluntary petition or has an involuntary petition filed or action
commenced against it under the United States Bankruptcy Code or any similar
federal or state law; (h) Lessee fails to perform its obligations
5
<PAGE>
under any other Lease or agreement with Lessor; or (i) any partner of Lessee,
any guarantor takes any actions described in subsections (e), (f), or (g) above.
15. REMEDIES: If an Event of Default has occurred, Lessor shall have the
--------
right to exercise one or more of the following remedies set forth below. Lessor
may (a) terminate and/or declare an Event of Default under any Lease or other
agreement with Lessee; (b) recover from Lessee a Rent and any and all amounts
then due and unpaid, and (c) recover from Lessee a Rent and other amounts to
become due, by acceleration or otherwise (plus, if the System is not returned in
accordance with Section 9 of the applicable Schedule, an amount equal to (i)
Lessor's reasonable estimate of the fair market value of the System at the end
of the applicable Term if Lessee selects Purchase Option B in the Schedule, or
(ii) if Lessee selects Purchase Option C in the Schedule, Percent Option Amount.
The amounts described in subsection (c) shall be present valued using a five
percent (5%) simple interest rate per annum or, if such rate is not permitted by
law, then at the lowest permitted rate. The amounts set forth in subsections (b)
and (c) above shall be the agreed upon damages ("Lessor's Loss"). Lessor may
also charge Lessee interest on the Lessor's Loss from the date of the Event of
Default until paid at the rate of one and one-half percent (1 1/2%) per month,
but in no event more than the maximum rate permitted by law; demand the Lessee
return any System to Lessor in the manner provided in Section 9 of the Schedule;
and take possession of, render unusable, or disable any System wherever located,
with or without demand or notice or any court order or any process by law.
Upon repossession or return of a System, Lessor shall have the right to
sell, lease or otherwise dispose of the System, with or without notice and by
public or private bid, and shall apply the net proceeds thereof, if any, toward
Lessor's Loss but only after deducting (a) in the case of any reletting of the
System, the rent due for any period beyond the scheduled expiration of the
Lease; (b) in the case of sale, (i) if Lessee has elected Purchase Option B, the
estimated fair market value of the System as of the scheduled expiration of the
Term of the Lease, or (ii) if Lessee has elected Purchase Option C, an amount
equal to the Percent Option Amount, and (c) all expenses including, without
limitation, reasonable attorneys' fees incurred in enforcement of any remedy.
Lessee shall be liable for any deficiency if the net proceeds available after
the permitted deductions are less than Lessor's Loss. No right or remedy is
exclusive of any other provided herein or permitted by law or equity. All
rights and remedies shall be cumulative and may be enforced concurrently or
individually from time to time.
16. ASSIGNMENT: Lessor may, without notice to or the consent of Lessee,
----------
sell, assign, grant a security interest in, or pledge its interest in all or a
portion of a System and/or a Lease and any amounts payable hereunder to any
third party ("Assignee"). Lessee shall, if directed, pay all Rent and other
amounts due to Assignee free from any claim or counterclaim, defense or other
right which Lessee may have against Lessor. Lessor shall be relieved of its
future obligations under the Lease as a result of such assignment if Lessor
assigns to Assignee its interest in the System and Assignee assumes Lessor's
future obligations. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE SHALL NOT
ASSIGN, SUBLEASE, TRANSFER, PLEDGE, MORTGAGE OR OTHERWISE ENCUMBER ("TRANSFER")
ANY SYSTEM OR ANY LEASE OR ANY OF ITS RIGHTS THEREIN OR PERMIT ANY LEVY,
6
<PAGE>
LIEN OR ENCUMBRANCE THEREON. Any attempted non-consensual Transfer by Lessee
shall be void ab initio. No Transfer shall relieve Lessee of any of its
obligations under a Lease.
17. ORGANIZATION AND AUTHORITY: Lessee is duly organized, validly existing
--------------------------
and in good standing under the laws of its State of formation and in any
jurisdiction where a System is located. Lessee has the power and authority to
execute, deliver and perform each Lease. The person executing this Agreement and
any Schedules on behalf of Lessee has been given authority to bind the Lessee
and each Lease constitutes or will constitute a legally binding and enforceable
obligation of the Lessee. The execution, delivery and performance of each Lease
is not and will not be in contravention of, or will not result in a breach of,
any of terms of Lessee's organizational documents, and any agreements, contracts
or instruments to which Lessee is a party or under which it is bound.
18. NOTICES: Notices, demands and other communications shall be in writing
-------
and shall be sent by hand delivery, certified mail (return receipt requested),
or overnight courier service, or facsimile transmission (effective upon
transmission) with a copy sent by one of the foregoing methods, to Lessee at the
address or facsimile number stated above and to Lessor at 220 Athens Way,
Nashville, Tennessee 37228-1314, Attention: V.P. Finance, or facsimile no. (615)
734-5110. Notices shall be effective upon the earlier of actual receipt or four
days after the mailing date. Either party may substitute another address by such
written notice.
19. JURISDICTION AND GOVERNING LAW: EACH LEASE SHALL BE GOVERNED BY THE
------------------------------
LAWS OF THE STATE OF TENNESSEE AND THE LESSEE CONSENTS AND AGREES THAT, AT
LESSOR'S OPTION, PERSONAL JURISDICTION, SUBJECT MATTER JURISDICTION AND VENUE
SHALL BE WITH THE COURTS OF THE STATE OF TENNESSEE, OR THE FEDERAL COURT FOR THE
MIDDLE DISTRICT OF TENNESSEE.
20. MISCELLANEOUS: (a) Any failure of Lessor to require strict performance
-------------
by Lessee, or any waiver by Lessor of any provision of a Lease, shall not be
construed as a consent to or waiver of any other breach of the same or of any
other provisions. (b) If there is more than one Lessee, the obligations of each
Lessee are joint and several. (c) Lessee agrees to execute and deliver, upon
demand, any documents necessary, in Lessor's reasonable opinion, to evidence the
intent of a Lease, and/or to protect Lessor's interest in a System. Lessee
appoints Lessor as its attorney-in-fact for the sole purpose of executing and
delivering any UCC financing statements. Lessee agrees to pay Lessor's out-of-
pocket costs of filing and recording such documentation. (d) Lessee shall
deliver to Lessor such additional financial information as Lessor may reasonably
request. (e) If any provision shall be held to be invalid or unenforceable, the
validity and enforceability of the remaining provisions shall not in any way be
affected or impaired. (f) In the event Lessee fails to pay or perform any
obligations under a lease, Lessor may, at its option, pay or perform such
obligation, and any payment made or expense incurred by Lessor in connection
therewith shall be due and payable by Lessee upon Lessor's demand with interest
thereon accruing at the maximum rate permitted by law until paid. (g) Time is of
the essence in each Lease. (h) Lessee shall pay Lessor, on demand, all costs and
expenses, including reasonable attorneys' and collection fees, incurred by
Lessor in enforcing the terms and conditions of a
7
<PAGE>
Lease or in protecting Lessor's rights and interests in a Lease or a System. (i)
LESSOR INTENDS TO COMPLY WITH ALL APPLICABLE LAWS, INCLUDING THOSE CONCERNING
THE REGULATION OF INTEREST. Therefore, no lease charge, late charge, fee or
interest, if applicable, is intended to exceed the maximum amount permitted to
be charged or collected by applicable law. If one or more of such charges exceed
such maximum, then such charges will be reduced to the legally permitted maximum
charge and any excess charge will be reduced to the legally permitted maximum
charge and any excess charge will be used to reduce the future Rent and/or the
Price of the System or refunded. (j) Each Lease may be executed by one or more
of the parties on any number of separate counterparts (which may be originals or
copies sent by facsimile transmission), each of which counterparts shall be an
original. (k) Each Lease constitutes the entire agreement between Lessor and
Lessee with respect to the subject matter thereof and supersedes all previous
writings and understandings of any nature whatsoever. (l) No agent, employee, or
representative of Lessor has any authority to bind Lessor to any representation
or warranty concerning any System and, unless such representation or warranty is
specifically included in a Lease, if shall not be enforceable by Lessee against
Lessor.
Except as otherwise provided in Section 3 of this Agreement and Sections
2, 3 and 8 of a Schedule, any modifications, amendments or waivers to a Lease
shall be effective only if mutually agreed upon in writing, duly executed by
authorized representatives of the parties.
BSFS EQUIPMENT LEASING
Division of General Electric Capital
Corporation
By: /s/ Susan L. Hodges
-------------------------
Title: Ops, Team Leader
Date: April 11, 1996
CONFERENCE SOURCE INTERNATIONAL, INC.
By: /s/ Judy B. Crawford
-------------------------
Title: President
Date: April 8, 1996
8
<PAGE>
EQUIPMENT SCHEDULE
LESSOR: BSFS Equipment Leasing
LESSEE: Conference Source International, Inc.
Address: 100 Hartfield Centre Parkway, Suite 300
Atlanta, Fulton County, GA 30354
Attention: Duane Dobler
Installation Site: Same as above
Supplier Name: Multilink, Inc.
Agreement No./Schedule No. 53716/53716 Price: $411,827.00
Date of Schedule: 03/18/96 Initial Term (mons): 60
Commitment Date: 04/01/96 Payment Period: Monthly
Payment Nos.: 1-60 Lease Rate Factor: .021693
Rent: $8,933.76 Purchase Option: $1.00
Advance Payment: $8,933.76 The Advance Payment shall be applied
to the first
(1) and last (0) Rent payment(s)
TERMS AND CONDITIONS
--------------------
The terms and conditions of the Master Lease Agreement between Lessor and
Lessee referenced above are made a part of this Schedule. Lessor and Lessee
hereby agree to the terms defined above and further agree as set forth herein.
1. ADVANCE PAYMENT: Lessee shall pay to Lessor, upon the execution and
---------------
delivery of this Schedule, the advance payment set forth above ("Advance
Payment") in consideration of the Lessor holding funds available to purchase the
Equipment and obtain the Software and as compensation for Lessor's review of
Lessee's credit and document preparation. Upon Lessor's acceptance of the
Lease, the Advance Payment shall be applied to the payment of Rent as set forth
above. Any Advance Payment shall be non-refundable if Lessee fails to timely
provide all documentation or satisfy all conditions required by this Lease.
2. PURCHASE PRICE PAYMENTS: Lessee acknowledges that it has signed and
-----------------------
received a copy of the Supplier Agreement. If Lessee is required to make
payments to Supplier under the Supplier Agreement prior to the Commencement Date
("Purchase Price Payments"). Lessee requests Lessor to pay such payments subject
to the following terms and conditions. The Price will be increased by adding a
price adjustment for each Purchase Price Payment. Each such price adjustment
shall be computed by multiplying the Purchase Price Payment paid by Lessor to
Supplier by a rate equal to the "Base Lending Rate" from time to time designated
by Citibank N.A., NY, NY in effect on the date Lessor makes the first Purchase
Price Payment plus two and one-half percent, divided by 360, and multiplied by
the actual number of days elapsed
<PAGE>
from the date of the Purchase Price Payment to the Commencement Date or, if the
Lease does not commence, to the date Lessee refunds the Purchase Price Payments
to Lessor in accordance with Section 3. In no event will all or any price
adjustment(s) exceed any limits imposed by applicable law. The periodic Rent
shall be increased as a result of adding to the Price of the System an amount
equal to the total price adjustment(s).
3. ACCEPTANCE: Lessee agrees to accept the System for purposes of this
----------
Lease by signing the Acceptance Certificate within ten (10) days after the
System has met the acceptance criteria specified in the Supplier Agreement. If
Lessee fails or refuses to sign the Acceptance Certificate within such (10) ten
day period, Lessor may declare Lessee's assignments and Lessor's agreement to
pay the Price set forth in Section 1 of the Agreement and Section 2 of this
Schedule to be null and void ab initio and thereupon the Lease shall terminate.
Lessor shall then have no obligations under the Lease and Lessee shall, within
ten (10) days of a demand therefore, immediately pay to Lessor all Purchase
Price Payments and all price adjustment(s) under Section 2 herein as well as
Lessor's out-of-pocket expenses.
4. MAINTENANCE, USE AND OPERATION: At all times during the Term, at its
------------------------------
sole cost and expense, Lessee shall maintain the System in good repair,
condition and working order, ordinary wear and tear excepted. Lessee shall use
the System and all parts thereof for its designated purpose and in compliance
with all applicable laws, shall keep the System in its possession and control
and shall not permit the System to be moved from the Installation Site set forth
above without Lessor's prior written consent.
5. PERSONAL PROPERTY: The System is, and shall at all times remain,
-----------------
personal property even if the Equipment is affixed or attached to real property
or any improvements thereon. At Lessor's request, Lessee shall, at no charge,
promptly affix to the System any tags, decals, or plates furnished by Lessor
indicating Lessor's interest in the System and Lessee shall not permit their
removal or concealment. At Lessee's expense, Lessee shall (a) at all times keep
the System free and clear of all liens and encumbrances, except those described
in Section 6 and those arising through the actions of Lessor, and (b) otherwise
cooperate to defend Lessor's interest in the System and to maintain the status
of the System and all parts thereof as personal property. If requested by
Lessor, Lessee will, at Lessee's expense, furnish a waiver of any interest in
the System from any party having an interest in the real estate or building in
which the System is located. Lessor may inspect the System and any related
maintenance records at any time during Lessee's normal business hours.
6. TRUE LEASE AND SECURITY INTEREST: If Lessee has selected Purchase
--------------------------------
Option B, (a) Lessor holds title to the Equipment and the right to use the
Software and Lessor shall be entitled to all tax benefits resulting therefrom,
(b) Lessee shall have no right, title or interest therein, other than possession
and use as a lessee and non-exclusive sublicensee, and (c) Lessee and Lessor
intend the Lease to create a true lease and not a security interest, and the
provisions of this Section or the filing of any financing statements with
respect to the Lease shall not be deemed evidence of any contrary intent but of
an attempt to protect Lessor's rights and title. Regardless of the purchase
option selected, and without limiting or negating the foregoing sentence, to
secure the performance of Lessee's obligations under this Lease including,
without
2
<PAGE>
limitation, the repayment of any Purchase Price Payments, price adjustments and
out-of-pocket expenses under Section 3 above, Lessee hereby grants to Lessor a
first priority security interest in Lessee's existing and future right, title
and interest in, to and under (i) the System including all additions,
attachments, accessions, and leased Modifications and Additions (as defined in
Section 7 below) thereto, and replacements therefore, (ii) the applicable
Supplier Agreement, and (iii) all products and proceeds of the foregoing
including, without limitation, insurance proceeds, rents and all sums due or to
become due to Lessee with respect to any of the foregoing, and all monies
received in respect thereof.
7. MODIFICATIONS, ADDITIONS AND ALTERATIONS: After the Commencement Date
----------------------------------------
of this Lease and without notice to Lessor, Lessee may, at Lessee's expense,
alter or modify any item of Equipment with an upgrade, accessory or any other
equipment that meets the specifications of the System's manufacturer for use on
or in connection with the System ("Modification") or with Software or other
associated items or materials that meet the specifications of such manufacturer
and are to be used on or in connection with such System ("Addition"). Any other
modification or addition ("Alteration") shall be permitted only upon written
notice to Lessor and at Lessee's expense and risk, and any such Alteration shall
be removed and the System restored to its normal, unaltered condition at
Lessee's expense prior to its return to Lessor. If not removed upon return of
the System, any Modification or Addition shall become, without charge, the
property of Lessor free and clear of all encumbrances. Restoration will include
replacement of any parts removed in connection with the installation of an
Alteration, Modification or Addition. Any Equipment or Software installed in
connection with warranty or maintenance service or manufacturer's upgrades
provided at no charge to Lessee shall be the property of Lessor.
8. LEASES FOR MODIFICATIONS AND ADDITIONS: During the Term of this Lease,
--------------------------------------
at Lessee's request, Lessor may elect to lease to Lessee Modifications and
Additions ("CSO Equipment") subject to the terms of this Lease. While the CSO
Equipment shall be added to and become a part of this Lease as of the CSO
Commencement Date (as defined below), the CSO Lease Addendum shall be assigned a
separate Schedule number. The lease for CSO Equipment shall expire at the same
time as this Lease. The applicable Lease Rate Factor shall be Lessor's then-
current Lease Rate Factor for similar transactions based upon the remaining
length of the Term. The rent for CSO Equipment shall be determined by Lessor who
shall adjust the then-current Rent and notify Lessee in writing of such
adjustment(s), which shall be effective as of the first day of the month
following the date of the notice (or the date of the notice if it is the first
day of the month) ("CSO Commencement Date"). Any adjustment notice shall be
added to and become a part of this Lease.
CSO Equipment must be ordered by Lessee from the Supplier. On the date
any CSO Equipment is delivered to Lessee, Supplier shall pass title to such CSO
Equipment (other than any Software which shall be licensed and/or sublicensed)
directly to Lessor. Such title shall be good and marketable and free and clear
of any and all liens and encumbrances of any nature whatsoever. Lessor shall
promptly pay to Supplier the appropriate price of the CSO Equipment after the
later of (a) the date the CSO Equipment is installed and functioning, or (b)
Lessor's receipt of a full and complete listing of the CSO Equipment and the
Supplier's invoice. No
3
<PAGE>
interest shall be payable by Lessor to Supplier with respect to such payment.
Lessor's agreement to lease any CSO Equipment is subject to the condition that
the Price payable to Supplier with respect thereto shall not exceed $100,000.00
or be less than $1,000.00 and is subject to satisfactory credit review by Lessor
of Lessee's credit at the time of the CSO.
9. RETURN OF SYSTEM: (a) Upon any termination of this Lease pursuant to
----------------
the terms hereof prior to the end of the Term, (b) at Lessor's request upon the
occurrence of an Event of Default, or (c) if Lessee has not exercised its
Purchase Option set forth herein at the end of the applicable Term, Lessee
shall, at its own risk and sole expense, immediately return the System to Lessor
by properly removing, disassembling and packing it for shipment, loading it on
board a carrier acceptable to Lessor, and shipping the same to a destination in
the continental United States specified by Lessor, freight and insurance
prepaid. The returned System shall be in the same condition and operating order
as existed when received, ordinary wear and tear excepted. If the Lessee does
not immediately return the System to Lessor as required, Lessee shall pay to
Lessor, on demand, an amount equal to the then-current Rent prorated on a daily
basis for each day from and including the termination or expiration date of the
Lease through and including the day Lessee ships the System to Lessor in
accordance with this Section. Lessee shall pay to Lessor, upon written demand,
any amount necessary to place the System in good repair, condition and working
order, ordinary wear and tear excepted.
10. PURCHASE OPTION: At the expiration of the Initial Term or any Term, if
---------------
Lessee has performed all terms and conditions of the Lease, except the return of
the System pursuant to Section 9 herein, Lessee shall have the right to purchase
all, but not less than all, of the Equipment and all leased Modifications and to
receive an assignment of all, but not less than all, non-exclusive sublicenses
to use the Software and Additions, if any, for the purchase price described
below subject to the following terms and conditions:
If Lessee has elected Purchase Option B or C above, Lessee shall provide
written notice to Lessor at least six (6) months prior to such purchase that
Lessee has elected to exercise its Purchase Option. In any event, upon exercise
of its purchase option, Lessee shall purchase the Equipment and all leased
Modifications and obtain a non-exclusive sublicense to use the associated
Software and Additions AS-IS, WHERE-IS, WITH ALL FAULTS AND SUBJECT TO THE SAME
DISCLAIMERS OF WARRANTIES AND DAMAGES AS SET FORTH IN SECTION 9 OF THE
AGREEMENT. Lessee also shall be responsible for the payment of any sales tax or
other fees in connection with Lessee's exercise of this Purchase Option. The
purchase price shall be due and payable to Lessor by Lessee at the expiration of
the applicable Term.
Upon satisfaction by Lessee of the purchase conditions, Lessor's sole and
exclusive obligations under this Purchase Option shall be to deliver to Lessee
good title to such Equipment and leased Modifications such as Lessor received
from the Supplier, to assign to Lessee a non-exclusive sublicense, as described
in the Supplier Agreement, to use the associated Software and Additions, free
and clear of all liens, encumbrances and rights of others arising solely out of
or created by Lessor's actions. Lessor's assignment of the sublicense is
limited to such sublicense
4
<PAGE>
as Lessor can assign without incurring further cost and is subject to all
applicable terms and conditions of the license and/or sublicense set forth in
the Supplier Agreement.
The purchase price shall be as follows:
A. Purchase Option A. If Lessee has selected Purchase Option A above, the
purchase price shall be $1.00.
B. Purchase Option B. If Lessee has selected Purchase Option B above, the
purchase price shall be the installed fair market value thereof
assuming the System is in good repair, condition and working order,
ordinary wear and tear excepted ("FMV"). The FMV shall be determined by
Lessor and Lessee. If Lessor and Lessee are unable to agree, the FMV
shall be determined by an independent appraiser selected by Lessor and
approved by Lessee which approval shall not be unreasonably withheld or
delayed. Lessee shall bear the fees of the appraiser.
C. Purchase Option C. If Lessor has selected Purchase Option C, the
purchase price shall be the product obtained by multiplying the Price,
as it may have been adjusted, by the percent set forth in Option C
above.
A complete description of the System is set forth on the Equipment and
Software Listing attached hereto and made a part hereof.
BSFS EQUIPMENT LEASING
Division of General Electric Capital
Corporation
By: /s/ Susan L. Hodges
-------------------------
Title: Ops, Team Leader
Date: April 11, 1996
CONFERENCE SOURCE INTERNATIONAL, INC.
By: /s/ Judy B. Crawford
-------------------------
Title: President
Date: April 8, 1996
5
<PAGE>
EQUIPMENT AND SOFTWARE LISTING
Lessor: BSFS Equipment Leasing
Lessee: Conference Source International, Inc.
Agreement No./Schedule No. 53716
Lessor and Lessee agree that the following described Equipment and
Software are subject to the Master Lease Agreement and Schedule referenced
above.
TWO (2) ONE HUNDRED FORTY-FOUR (144) PORT SYSTEM 70 EQUIPPED WITH EIGHT (8)
OPERATOR WORKSTATIONS EACH:
BASIC SYSTEM 70 CONFIGURED WITH 144 PORTS AND EIGHT OPERATOR WORKSTATION:
QUANTITY DESCRIPTION
486 DX2 CPU CARD WITH 16MB RAM
340 MB HARD DISK DRIVE
5.25" AND 3.5" COMBINATION FLOPPY DISK DRIVE
1 INTERNAL MODEM
6 DIGITAL SIGNAL PROCESSOR (DSP) CONFERNCING
CARDS, EACH WITH (4) DSP'S
3 DUAL T1 INTERFACE CARDS
24 CHANNEL ANALOG INTERFACE CARD
8-PORT SERIAL I/O CARD
8 CHANNEL ANNUNCIATOR FEATURE
CURRENT RELEASE OF SYSTEM SOFTWARE
EACH OPERATOR WORKSTATION INCLUDES:
14" WYSE 60 OPERATOR DISPLAY SCREEN
ASCII KEYBOARD
AUDIO CONSOLE
BINAURAL HEADSET
1 COMPLETE SET OF MANUALS (EACH)
<PAGE>
Exhibit 10.6
WASCO FUNDING CORP. EQUIPMENT LEASE
150 East 58/th/ Street No. 16723
New York, NY 10155
TEL: (212) 751-3673
FAX: (212) 753-4784
LESSEE'S NAME AND ADDRESS: LOCATION OF EQUIPMENT IF OTHER
THAN AT LESSEE'S ADDRESS:
Teleconversant Ltd.
One Kendall Square Building 600
Cambridge, MA 02139
EQUIPMENT DESCRIPTION: (Describe fully.)
1 Multilink System 70-144 ports
5 Workstations
1 DNIS Software Package
System #10269
TERM: 48 months
RENTAL: $3,501.90 per month
USE TAX: $175.10 per month
TOTAL PAYMENT: $3,677.00
ADVANCE RENTALS: $7,354.00, payable at the time of signing this lease to be
applied to the first and the last one monthly Rental payments.
TERMS AND CONDITIONS OF LEASE
1. LEASE; LESSOR'S RIGHT TO TERMINATE. Lessor hereby leases to Lessee,
and Lessee hereby leases from Lessor, the equipment described above or on any
schedule attached hereto (the "Schedule(s)") (the equipment with all replacement
parts, repairs, additions and accessories is herein called the "Equipment") on
the terms and conditions as set forth in this lease and any Schedule(s)
(hereinafter such lease and any Schedule(s) referred to as the "Lease"). Lessee
hereby authorizes Lessor to order the Equipment from a supplier selected by
Lessee (the "Supplier") and arrange for delivery to Lessee at Lessee's expense.
In the event the Equipment is not delivered to Lessee within 90 days of the date
Lessor orders the Equipment, Lessor may cancel the Lease and any obligation to
Lessee hereunder. Lessee authorizes Lessor to insert in the Lease, when
determined by Lessor, the serial numbers and other identification data of the
Equipment, and other omitted factual matters.
<PAGE>
2. NO WARRANTIES BY LESSOR. LESSOR, NEITHER BEING THE MANUFACTURER OF,
NOR A DEALER IN, NOR SUPPLIER OF THE EQUIPMENT, MAKES NO WARRANTY TO ANYONE, AS
TO ANY MATTER WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE
FITNESS, MERCHANTABILITY, DESIGN, CONDITION, CAPACITY, PERFORMANCE OR ANY OTHER
ASPECT OF THE EQUIPMENT OR ITS MATERIAL OR WORKMANSHIP OR THE TAX OR ACCOUNTING
TREATMENT OF THE LEASE. LESSOR DISCLAIMS ANY LIABILITY FOR LOSS, DAMAGE OR
INJURY TO LESSEE OR THIRD PARTIES AS A RESULT OF ANY DEFECTS, LATENT OR
OTHERWISE, IN THE EQUIPMENT, LESSOR SHALL HAVE NO OBLIGATION TO MAINTAIN,
INSTALL, ERECT, TEST, ADJUST OR SERVICE THE EQUIPMENT. LESSOR SHALL NOT BE
LIABLE FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES HOWSOEVER ARISING. IF
THE EQUIPMENT IS UNSATISFACTORY FOR ANY REASON, LESSEE SHALL MAKE CLAIM ON
ACCOUNT THEREOF SOLELY AGAINST THE MANUFACTURER AND/OR THE SUPPLIER AND SHALL
NEVERTHELESS PAY LESSOR ALL RENT AND OTHER MONIES PAYABLE HEREUNDER.
Lessor hereby assigns to Lessee, solely for the purpose of prosecuting a
claim, all rights which Lessor may have against the manufacturer or Supplier for
breach of warranty or other representation respecting the Equipment.
3. NON-CANCELLABLE LEASE. THE LEASE CANNOT BE CANCELLED BY LESSEE DURING
THE TERM HEREOF. Lessee's obligations under the Lease including, without
limitation, the obligation to pay rent, are absolute and unconditional and shall
continue without any claim, defense, set-off counterclaim, reduction or
abatement of any kind whatsoever and regardless of any disability of Lessee to
use the Equipment or any part thereof because of any reason whatsoever.
4. TERM AND RENT. The Lease will be effective when accepted by Lessor and
shall continue for the term stated in the Lease and thereafter until all of the
obligations of the Lessee under the Lease are fully paid and performed. The
Rental payments shall commence on the first date that any of the Equipment is
delivered to Lessee or Lessee's agent or such later date as Lessor designates in
writing (the "Commencement Date"), and subsequent payments shall be due on the
same day of each successive month for the Term. Advance rentals shall not be
refundable if the Lease does not commence for any reason. Rentals shall be
payable monthly in advance as stated in the Lease. All payments shall be made to
Lessor at the address set forth herein or such other address as Lessor may in
writing designate. Time is of the essence with respect to all payments and other
obligations of Lessee under the Lease.
SEE REVERSE SIDE OF THIS FORM FOR ADDITIONAL TERMS OF THE LEASE
2
<PAGE>
LESSOR: WASCO FUNDING CORP. LESSEE: TELECONVERSANT LTD.
By:/s/ , Mgr. /s/ , Pres
----------------------------------- -------------------------------------
Authorized Signature Title Authorized Signature Title
Accepted: May 31,1996 Dated Executed by Lessee: May 21, 1996
5. ASSIGNMENT; WAIVER OF DEFENSES. LESSOR MAY, WITHOUT NOTICE TO OR
CONSENT BY LESSEE, ASSIGN THE LEASE, ANY RENTALS, OR ANY OTHER SUMS DUE OR TO
BECOME DUE UNDER THE LEASE, OR TRANSFER OR GRANT A SECURITY INTEREST IN ANY OF
THE EQUIPMENT, AND IN SUCH EVENT LESSOR'S ASSIGNEE OR SECURED PARTY SHALL HAVE
ALL OF THE RIGHTS, POWERS, PRIVILEGES AND REMEDIES OF LESSOR HEREUNDER, NO
ASSIGNEE SHALL BE BOUND TO PERFORM ANY DUTY, COVENANT, CONDITION OR WARRANTY OF
LESSOR. LESSEE AGREES NOT TO RAISE ANY CLAIM OR DEFENSE WHICH LESSEE MAY HAVE
AGAINST LESSOR ARISING OUT OF THE LEASE OR OTHERWISE AS A DEFENSE, COUNTERCLAIM
OR OFFSET TO ANY ACTION BY ASSIGNEE OR SECURED PARTY HEREUNDER, LESSEE AGREES
THAT AFTER RECEIPT BY LESSEE OF WRITTEN NOTICE OF AN ASSIGNMENT FROM LESSOR OR
FROM LESSOR'S ASSIGNEE, ALL RENT AND OTHER AMOUNTS WHICH ARE THEN AND THEREAFTER
DUE UNDER THE LEASE SHALL BE PAID TO SUCH ASSIGNEE AT THE PLACE OF PAYMENT
DESIGNATED IN SUCH NOTICE. LESSEE SHALL NOT ASSIGN THE LEASE OR ANY INTEREST IN
THE LEASE OR IN THE EQUIPMENT NOR ENTER INTO ANY SUBLEASE WITH RESPECT TO ANY OF
THE EQUIPMENT WITHOUT LESSOR'S PRIOR WRITTEN CONSENT. ANY PURPORTED ASSIGNMENT
OR SUBLEASE BY LESSEE WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR SHALL BE VOID.
6. TITLE; QUIET ENJOYMENT. Title to the Equipment shall at all times be
vested in Lessor. All documents of title and evidences of delivery shall be
delivered to Lessor. Lessee authorizes Lessor, at Lessee's expense, to cause
the Lease, or any statement or other instrument in respect of the Lease showing
the interest of Lessor in the Equipment, including Uniform Commercial Code
Financing Statements, to be filed or recorded, and grants Lessor the right to
sign Lessee's name thereto. Lessee agrees to execute or procure for Lessor such
estoppel certificates, landlord's or mortgagee's waivers or other documents as
Lessor may request to confirm or perfect Lessor's rights hereunder or to
otherwise effectuate the intents of the Lease. Lessee agrees to pay or
reimburse Lessor for any filing, recording or stamp fees or taxes arising from
the filing or recording of any such instrument or statement. Lessee shall, at
its expense, protect and defend Lessor's title against all persons claiming
against or through Lessee, keep the Equipment free from legal process or
encumbrance, give Lessor immediate notice thereof and
3
<PAGE>
shall indemnify Lessor from any loss caused thereby. So long as Lessee is not in
default under the Lease Lessee shall quietly use and enjoy the Equipment,
subject to the terms of the Lease.
7. CARE, USE AND LOCATION. Lessee shall maintain the Equipment in good
operating condition, repair and appearance, and protect it from deterioration
other than normal wear and tear; use the Equipment in the regular course of its
business, within its normal operating capacity, without abuse, comply with all
laws, ordinances, regulations, requirements and rules with respect to the use,
maintenance and operation of the Equipment; use the Equipment solely for
business purposes, not make any modification, alteration or addition to the
Equipment without the written consent of Lessor, which shall not be unreasonably
withheld; not affix the Equipment (which shall remain personal property at all
times regardless of how attached or installed) to realty so as to change its
nature to real property or a fixture; and keep the Equipment at the location
shown in the Lease, and not remove the Equipment without the written consent of
Lessor, which shall not be unreasonably withheld.
8. TAXES. Lessee intends the Rental payments to be net to Lessor, and
Lessee agrees to pay all sales, use, excise, personal property, stamp,
documentary and ad valorem taxes, license and registration fees, assessments,
lines, penalties and similar charges imposed on the ownership, possession or use
of the Equipment during the term of the Lease, and all taxes imposed on Lessor
or Lessee (except Lessor's Federal or State net income taxes) with respect to
the Rental payments or the Equipment, and shall reimburse Lessor upon demand for
any taxes paid or advanced by Lessor. Unless otherwise directed, in writing, by
Lessor, Lessee shall file all personal property tax returns with respect to the
Equipment and pay all taxes due thereon.
9. INDEMNITY. Lessee agrees to indemnify and save Lessor, its agents,
servants, successors, and assigns harmless from any and all liability, damage or
loss, including reasonable attorneys' fees, arising out of the ownership,
selection, possession, operation, control, use, condition, maintenance, delivery
and return of the Equipment. Lessee's indemnities and obligations shall
continue in full force and effect notwithstanding the termination of the Lease.
10. RISK OF LOSS. Lessee shall bear all risks of loss of and damage to the
Equipment from any cause. The occurrence of such loss or damage shall not
relieve Lessee of any obligation hereunder. In the event of loss or damage,
Lessee, at Lessor's option, shall: (a) place the damaged Equipment in good
repair, condition and working order; or (b) replace lost or damaged Equipment
with new Equipment of the same type and model and deliver to Lessor
documentation vesting clear title thereto in Lessor; or (c) pay to Lessor the
present value as of the date of loss of both the unpaid balance of the aggregate
rent reserved under the Lease and the value of the Lessor's residual interest in
the Equipment at the expiration of the Lease, computed at six percent (6%) per
annum.
11. INSURANCE. Lessee shall, at Lessee's sole cost and expense, keep the
Equipment insured against all risks of loss or damage from every cause
whatsoever for not less than the full replacement cost thereof. Lessee shall
also obtain and maintain in effect throughout the term, public liability
insurance, covering both personal injury and property damage arising out of or
in connection with the use or operation of the Equipment. All insurance shall
be
4
<PAGE>
in such form and for such amounts, and issued by such companies, as shall be
acceptable to Lessor and shall name Lessor and Lessor's assignee or secured
party as loss payees with respect to the casualty coverage and as additional
insured with respect to the public liability coverage, and shall provide that
the insurer will give Lessor or Lessor's assignee at least thirty (30) days'
prior written notice of the effective date of any alteration or cancellation of
such policy. Lessee shall, upon Lessor's request, deliver to Lessor satisfactory
evidence of the required insurance coverage. Insurance proceeds as a result of
loss or damage to any of the Equipment shall be applied to satisfy Lessee's
obligation set forth in paragraph 10 hereof. Lessee irrevocably appoints Lessor
as Lessee's attorney-in-fact to make a claim for, receive payment of and execute
and endorse all documents, checks or drafts received in payment for loss or
damage under any such insurance policy.
12. FINANCIAL STATEMENTS. If requested by Lessor, Lessee agrees to deliver
to Lessor annual and interim financial statements.
13. DEFAULT. Each of the following events is an "Event of Default":
(a) Lessee's failure to pay, when due, any Rental payments or any other payment
hereunder; or (b) Lessee's failure to pay, when due, any indebtedness of Lessee
to Lessor arising independently of the Lease and such failure shall continue for
five (5) days; or (c) Lessee's failure to perform any of the other terms,
covenants or conditions of the Lease and such failure shall continue for ten
(10) days after written notice; or (d) any representation, warranty or statement
made by Lessee or any guarantor of the Lease ("Guarantor"), whether contained in
the Lease or in any guaranty, application, financial statement or other document
delivered to Lessor in connection with the Lease shall be untrue in any material
respect; or (e) Lessee becomes insolvent or makes an assignment for the benefit
of creditors; or (f) a receiver, trustee, conservator or liquidator of Lessee of
all or a substantial part of Lessee's assets is appointed with or without the
application or consent of Lessee; or (g) a change of control of Lessee; (h) a
petition is filed by or against Lessee under the Bankruptcy Code or under any
other insolvency law or laws providing for the relief of debtors.
14. REMEDIES. If an Event of Default occurs, Lessor may exercise all
remedies available to Lessor under applicable law and without limiting the
foregoing (a) recover from Lessee all Rental payments and other payments which
are due and unpaid; (b) at any time, declare immediately due and payable the
aggregate of all Rental payments and other payments which are payable under the
Lease for the full term thereof and recover from Lessee the present value,
computed to the date of default, at the rate of six percent (6%) per annum, of
(i) such aggregate rent, plus (ii) the anticipated residual value of the
Equipment at the expiration of the term of the Lease; and (c) without notice of
any kind to Lessee, and to the fullest extent permitted by law, enter into the
premises where the Equipment is located and take possession of, and remove, the
Equipment, without liability to Lessee arising out of such entry, taking of
possession or removal, Lessor may, at its option, store, use, lease, sell or
otherwise dispose of the removed Equipment and shall credit Lessee with any sums
received from the disposition of the Equipment after deducting all expenses of
retaking and disposition. If Lessee fails to comply with any provision of the
Lease, Lessor shall have the right, but not the obligation, to affect compliance
on behalf of Lessee upon ten (10) days prior written notice to Lessee. In such
event
5
<PAGE>
all monies expended by Lessor, and all expenses of Lessor in effecting such
compliance, shall be deemed to be additional rent, and shall be paid by Lessee
to Lessor at the time of the next Rental payment.
Lessee shall also be liable for and shall pay to Lessor (a) all expenses
incurred by Lessor in connection with the enforcement of any of Lessor's
remedies, including Lessor's administrative and other collection expenses, (b)
Lessor's reasonable attorney's fees and expenses, and (c) interest on all sums
due Lessor from the date when the sums become due until paid, at the rate of one
and one half percent (1-1/2%) per month but only to the extent permitted by law.
When any payment is not made by Lessee within ten (10) days of the
date when due, Lessee agrees to pay to Lessor, not later than one month
thereafter, in addition to all amounts payable by Lessee as a result of the
exercise of any of the remedies provided in the Lease, an amount calculated at
the rate of ten cents ($.10) per one dollar of each such delayed payment, as an
administrative fee to offset Lessor's collection costs, but only to the extent
permitted by law.
All remedies of Lessor are cumulative, are in addition to any other
remedies provided for by law, and may, to the extent permitted by law, be
exercised concurrently. The exercise of any one remedy shall not be deemed an
election of such remedy or preclude the exercise of any other remedy. No
failure on the part of Lessor to exercise, and no delay in exercising, any right
or remedy shall operate as a waiver thereof or modify the terms of the Lease.
In no event shall Lessor's recovery exceed the maximum recovery permitted by
law.
15. REDELIVERY OF EQUIPMENT. Upon the expiration or earlier termination of
the Lease. Lessee shall return the Equipment, freight prepaid, to Lessor in good
repair, condition and working order, in a manner and to a location designated by
Lessor. If upon such expiration or termination, Lessee does not immediately
return the Equipment to Lessor, the Equipment shall continue to be held and
Leased hereunder, and the Lease shall thereupon be extended from month to month
at the same Rental, subject to the right of either Lessee or Lessor to terminate
the Lease upon thirty (30) days' written notice, whereupon Lessee shall
forthwith deliver the Equipment to Lessor as provided in this Paragraph.
16. ENTIRE AGREEMENT; CHANGES. The Lease contains the entire agreement
between the parties and may not be altered, amended, modified, terminated or
otherwise changed except in writing and signed by an executive officer of Lessor
and Lessee.
17. NOTICE. All notices under the Lease shall be sufficient if given
personally or mailed to the party intended at its respective address set forth
herein, or at such other address as said party may provide in writing from time
to time. Any such notice mailed to said address shall be effective when
deposited in the United States mail; duly addressed, postage prepaid.
18. BINDING EFFECT. The Lease shall inure to the benefit of, and be
binding upon, the parties and their respective personal representatives,
successors and assigns. Lessor and Lessee intend the Lease to be a valid and
subsisting legal instrument, and agree that no
6
<PAGE>
provision of the Lease which may be deemed unenforceable shall in any way
invalidate any other provision or provisions of the Lease, all of which shall
remain in full force and effect.
19. GOVERNING LAW; JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY
TRIAL. The Lease shall be governed by the laws of the State of New York.
Lessee hereby consents to the jurisdiction of any Federal or State Court,
located in New York County, New York with respect to any action commenced
hereunder. Nothing contained herein is intended to preclude Lessor from
commencing any action hereunder in any court having jurisdiction thereof.
Lessee agrees that service of process in any action shall be sufficient if made
by first class certified mail, return receipt requested to the address of Lessee
hereunder. TO THE EXTENT PERMITTED BY LAW, LESSEE WAIVES TRIAL BY JURY IN ANY
ACTION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LEASE, OR THE
TRANSACTIONS CONTEMPLATED HEREIN.
7
<PAGE>
Exhibit 10.7
WASCO FUNDING CORP. EQUIPMENT LEASE
150 East 58/th/ Street No. 15865
New York, NY 10155
TEL: (212) 751-3673
FAX: (212) 753-4784
LESSEE'S NAME AND ADDRESS: LOCATION OF EQUIPMENT IF OTHER
THAN AT LESSEE'S ADDRESS:
Teleconversant Ltd., Inc.
One Kendall Square
Bldg. 300, 2/nd/ Floor
Cambridge, MA 02139
EQUIPMENT DESCRIPTION: (Describe fully.)
(1) System 70 - 96 Ports
(4) Operator Workstations
(1) DNIS Software Package
Release 1.8 Software
TERM: 48 months
RENTAL: $3,550.16 per month
USE TAX: $177.51 per month
TOTAL PAYMENT: $3,727.67
ADVANCE RENTALS: $7,455.34, payable at the time of signing this lease to be
applied to the first and the last one monthly Rental payments.
TERMS AND CONDITIONS OF LEASE
1. LEASE; LESSOR'S RIGHT TO TERMINATE. Lessor hereby leases to Lessee,
and Lessee hereby leases from Lessor, the equipment described above or on any
schedule attached hereto (the "Schedule(s)") (the equipment with all replacement
parts, repairs, additions and accessories is herein called the "Equipment") on
the terms and conditions as set forth in this lease and any Schedule(s)
(hereinafter such lease and any Schedule(s) referred to as the "Lease"). Lessee
hereby authorizes Lessor to order the Equipment from a supplier selected by
Lessee (the "Supplier") and arrange for delivery to Lessee at Lessee's expense.
In the event the Equipment is not delivered to Lessee within 90 days of the date
Lessor orders the Equipment, Lessor may cancel the Lease and any obligation to
Lessee hereunder. Lessee authorizes Lessor to insert in the Lease, when
determined by Lessor, the serial numbers and other identification data of the
Equipment, and other omitted factual matters.
<PAGE>
2. NO WARRANTIES BY LESSOR. LESSOR, NEITHER BEING THE MANUFACTURER OF,
NOR A DEALER IN, NOR SUPPLIER OF THE EQUIPMENT, MAKES NO WARRANTY TO ANYONE, AS
TO ANY MATTER WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE
FITNESS, MERCHANTABILITY, DESIGN, CONDITION, CAPACITY, PERFORMANCE OR ANY OTHER
ASPECT OF THE EQUIPMENT OR ITS MATERIAL OR WORKMANSHIP OR THE TAX OR ACCOUNTING
TREATMENT OF THE LEASE. LESSOR DISCLAIMS ANY LIABILITY FOR LOSS, DAMAGE OR
INJURY TO LESSEE OR THIRD PARTIES AS A RESULT OF ANY DEFECTS, LATENT OR
OTHERWISE, IN THE EQUIPMENT, LESSOR SHALL HAVE NO OBLIGATION TO MAINTAIN,
INSTALL, ERECT, TEST, ADJUST OR SERVICE THE EQUIPMENT. LESSOR SHALL NOT BE
LIABLE FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES HOWSOEVER ARISING. IF
THE EQUIPMENT IS UNSATISFACTORY FOR ANY REASON, LESSEE SHALL MAKE CLAIM ON
ACCOUNT THEREOF SOLELY AGAINST THE MANUFACTURER AND/OR THE SUPPLIER AND SHALL
NEVERTHELESS PAY LESSOR ALL RENT AND OTHER MONIES PAYABLE HEREUNDER.
Lessor hereby assigns to Lessee, solely for the purpose of prosecuting a
claim, all rights which Lessor may have against the manufacturer or Supplier for
breach of warranty or other representation respecting the Equipment.
3. NON-CANCELLABLE LEASE. THE LEASE CANNOT BE CANCELLED BY LESSEE DURING
THE TERM HEREOF. Lessee's obligations under the Lease including, without
limitation, the obligation to pay rent, are absolute and unconditional and shall
continue without any claim, defense, set-off counterclaim, reduction or
abatement of any kind whatsoever and regardless of any disability of Lessee to
use the Equipment or any part thereof because of any reason whatsoever.
4. TERM AND RENT. The Lease will be effective when accepted by Lessor and
shall continue for the term stated in the Lease and thereafter until all of the
obligations of the Lessee under the Lease are fully paid and performed. The
Rental payments shall commence on the first date that any of the Equipment is
delivered to Lessee or Lessee's agent or such later date as Lessor designates in
writing (the "Commencement Date"), and subsequent payments shall be due on the
same day of each successive month for the Term. Advance rentals shall not be
refundable if the Lease does not commence for any reason. Rentals shall be
payable monthly in advance as stated in the Lease. All payments shall be made to
Lessor at the address set forth herein or such other address as Lessor may in
writing designate. Time is of the essence with respect to all payments and other
obligations of Lessee under the Lease.
SEE REVERSE SIDE OF THIS FORM FOR THE ADDITIONAL TERMS OF THE LEASE
2
<PAGE>
LESSOR: WASCO FUNDING CORP. LESSEE: TELECONVERSANT LTD.,INC.
By:/s/ , Mgr. /s/ , Pres
-------------------------------- ------------------------------------
Authorized Signature Title Authorized Signature Title
Accepted: September 20, 1995 Dated Executed by Lessee: July 20, 1995
5. ASSIGNMENT; WAIVER OF DEFENSES. LESSOR MAY, WITHOUT NOTICE TO OR
CONSENT BY LESSEE, ASSIGN THE LEASE, ANY RENTALS, OR ANY OTHER SUMS DUE OR TO
BECOME DUE UNDER THE LEASE, OR TRANSFER OR GRANT A SECURITY INTERST IN ANY OF
THE EQUIPMENT, AND IN SUCH EVENT LESSOR'S ASSIGNEE OR SECURED PARTY SHALL HAVE
ALL OF THE RIGHTS, POWERS, PRIVILEGES AND REMEDIES OF LESSOR HEREUNDER, NO
ASSIGNEE SHALL BE BOUND TO PERFORM ANY DUTY, COVENANT, CONDITION OR WARRANTY OF
LESSOR. LESSEE AGREES NOT TO RAISE ANY CLAIM OR DEFENSE WHICH LESSEE MAY HAVE
AGAINST LESSOR ARISING OUT OF THE LEASE OR OTHERWISE AS A DEFENSE, COUNTERCLAIM
OR OFFSET TO ANY ACTION BY ASSIGNEE OR SECURED PARTY HEREUNDER, LESSEE AGREES
THAT AFTER RECEIPT BY LESSEE OF WRITTEN NOTICE OF AN ASISGNMENT FROM LESSOR OR
FROM LESSOR'S ASSIGNEE, ALL RENT AND OTHER AMOUNTS WHICH ARE THEN AND THEREAFTER
DUE UNDER THE LEASE SHALL BE PAID TO SUCH ASSIGNEE AT THE PLACE OF PAYMENT
DESIGNATED IN SUCH NOTICE. LESSEE SHALL NOT ASSIGN THE LEASE OR ANY INTEREST IN
THE LEASE OR IN THE EQUIPMENT NOR ENTER INTO ANY SUBLEASE WITH RESPECT TO ANY OF
THE EQUIPMENT WITHOUT LESSOR'S PRIOR WRITTEN CONSENT. ANY PURPORTED ASSIGNMENT
OR SUBLEASE BY LESSEE WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR SHALL BE VOID.
6. TITLE; QUIET ENJOYMENT. Title to the Equipment shall at all times be
vested in Lessor. All documents of title and evidences of delivery shall be
delivered to Lessor. Lessee authorizes Lessor, at Lessee's expense, to cause
the Lease, or any statement or other instrument in respect of the Lease showing
the interest of Lessor in the Equipment, including Uniform Commercial Code
Financing Statements, to be filed or recorded, and grants Lessor the right to
sign Lessee's name thereto. Lessee agrees to execute or procure for Lessor such
estoppel certificates, landlord's or mortgagee's waivers or other documents as
Lessor may request to confirm or perfect Lessor's rights hereunder or to
otherwise effectuate the intents of the Lease. Lessee agrees to pay or
reimburse Lessor for any filing, recording or stamp fees or taxes arising from
the filing or recording of any such instrument or statement. Lessee shall, at
its expense, protect and defend Lessor's title against all persons claiming
against or through Lessee, keep the Equipment free from legal process or
encumbrance, give Lessor immediate notice thereof and
3
<PAGE>
shall indemnify Lessor from any loss caused thereby. So long as Lessee is not in
default under the Lease Lessee shall quietly use and enjoy the Equipment,
subject to the terms of the Lease.
7. CARE, USE AND LOCATION. Lessee shall maintain the Equipment in good
operating condition, repair and appearance, and protect it from deterioration
other than normal wear and tear; use the Equipment in the regular course of its
business, within its normal operating capacity, without abuse, comply with all
laws, ordinances, regulations, requirements and rules with respect to the use,
maintenance and operation of the Equipment; use the Equipment solely for
business purposes, not make any modification, alteration or addition to the
Equipment without the written consent of Lessor, which shall not be unreasonably
withheld; not affix the Equipment (which shall remain personal property at all
times regardless of how attached or installed) to realty so as to change its
nature to real property or a fixture; and keep the Equipment at the location
shown in the Lease, and not remove the Equipment without the written consent of
Lessor, which shall not be unreasonably withheld.
8. TAXES. Lessee intends the Rental payments to be net to Lessor, and
Lessee agrees to pay all sales, use, excise, personal property, stamp,
documentary and ad valorem taxes, license and registration fees, assessments,
lines, penalties and similar charges imposed on the ownership, possession or use
of the Equipment during the term of the Lease, and all taxes imposed on Lessor
or Lessee (except Lessor's Federal or State net income taxes) with respect to
the Rental payments or the Equipment, and shall reimburse Lessor upon demand for
any taxes paid or advanced by Lessor. Unless otherwise directed, in writing, by
Lessor, Lessee shall file all personal property tax returns with respect to the
Equipment and pay all taxes due thereon.
9. INDEMNITY. Lessee agrees to indemnify and save Lessor, its agents,
servants, successors, and assigns harmless from any and all liability, damage or
loss, including reasonable attorneys' fees, arising out of the ownership,
selection, possession, operation, control, use, condition, maintenance, delivery
and return of the Equipment. Lessee's indemnities and obligations shall
continue in full force and effect notwithstanding the termination of the Lease.
10. RISK OF LOSS. Lessee shall bear all risks of loss of and damage to
the Equipment from any cause. The occurrence of such loss or damage shall not
relieve Lessee of any obligation hereunder. In the event of loss or damage,
Lessee, at Lessor's option, shall: (a) place the damaged Equipment in good
repair, condition and working order; or (b) replace lost or damaged Equipment
with new Equipment of the same type and model and deliver to Lessor
documentation vesting clear title thereto in Lessor; or (c) pay to Lessor the
present value as of the date of loss of both the unpaid balance of the aggregate
rent reserved under the Lease and the value of the Lessor's residual interest in
the Equipment at the expiration of the Lease, computed at six percent (6%) per
annum.
11. INSURANCE. Lessee shall, at Lessee's sole cost and expense, keep the
Equipment insured against all risks of loss or damage from every cause
whatsoever for not less than the full replacement cost thereof. Lessee shall
also obtain and maintain in effect throughout the term, public liability
insurance, covering both personal injury and property damage arising out of or
in connection with the use or operation of the Equipment. All insurance shall
be in
4
<PAGE>
such form and for such amounts, and issued by such companies, as shall be
acceptable to Lessor and shall name Lessor and Lessor's assignee or secured
party as loss payees with respect to the casualty coverage and as additional
insured with respect to the public liability coverage, and shall provide that
the insurer will give Lessor or Lessor's assignee at least thirty (30) days'
prior written notice of the effective date of any alteration or cancellation of
such policy. Lessee shall, upon Lessor's request, deliver to Lessor
satisfactory evidence of the required insurance coverage. Insurance proceeds as
a result of loss or damage to any of the Equipment shall be applied to satisfy
Lessee's obligation set forth in paragraph 10 hereof. Lessee irrevocably
appoints Lessor as Lessee's attorney-in-fact to make a claim for, receive
payment of and execute and endorse all documents, checks or drafts received in
payment for loss or damage under any such insurance policy.
12. FINANCIAL STATEMENTS. If requested by Lessor, Lessee agrees to deliver
to Lessor annual and interim financial statements.
13. DEFAULT. Each of the following events is an "Event of Default": (a)
Lessee's failure to pay, when due, any Rental payments or any other payment
hereunder; or (b) Lessee's failure to pay, when due, any indebtedness of Lessee
to Lessor arising independently of the Lease and such failure shall continue for
five (5) days; or (c) Lessee's failure to perform any of the other terms,
covenants or conditions of the Lease and such failure shall continue for ten
(10) days after written notice; or (d) any representation, warranty or statement
made by Lessee or any guarantor of the Lease ("Guarantor"), whether contained in
the Lease or in any guaranty, application, financial statement or other document
delivered to Lessor in connection with the Lease shall be untrue in any material
respect; or (e) Lessee becomes insolvent or makes an assignment for the benefit
of creditors; or (f) a receiver, trustee, conservator or liquidator of Lessee of
all or a substantial part of Lessee's assets is appointed with or without the
application or consent of Lessee; or (g) a change of control of Lessee; (h) a
petition is filed by or against Lessee under the Bankruptcy Code or under any
other insolvency law or laws providing for the relief of debtors.
14. REMEDIES. If an Event of Default occurs, Lessor may exercise all
remedies available to Lessor under applicable law and without limiting the
foregoing (a) recover from Lessee all Rental payments and other payments which
are due and unpaid; (b) at any time, declare immediately due and payable the
aggregate of all Rental payments and other payments which are payable under the
Lease for the full term thereof and recover from Lessee the present value,
computed to the date of default, at the rate of six percent (6%) per annum, of
(i) such aggregate rent, plus (ii) the anticipated residual value of the
Equipment at the expiration of the term of the Lease; and (c) without notice of
any kind to Lessee, and to the fullest extent permitted by law, enter into the
premises where the Equipment is located and take possession of, and remove, the
Equipment, without liability to Lessee arising out of such entry, taking of
possession or removal, Lessor may, at its option, store, use, lease, sell or
otherwise dispose of the removed Equipment and shall credit Lessee with any sums
received from the disposition of the Equipment after deducting all expenses of
retaking and disposition. If Lessee fails to comply with any provision of the
Lease, Lessor shall have the right, but not the obligation, to affect compliance
on behalf of Lessee upon ten (10) days prior written notice to Lessee. In such
event
5
<PAGE>
all monies expended by Lessor, and all expenses of Lessor in effecting such
compliance, shall be deemed to be additional rent, and shall be paid by Lessee
to Lessor at the time of the next Rental payment.
Lessee shall also be liable for and shall pay to Lessor (a) all expenses
incurred by Lessor in connection with the enforcement of any of Lessor's
remedies, including Lessor's administrative and other collection expenses, (b)
Lessor's reasonable attorney's fees and expenses, and (c) interest on all sums
due Lessor from the date when the sums become due until paid, at the rate of one
and one half percent (1-1/2%) per month but only to the extent permitted by law.
When any payment is not made by Lessee within ten (10) days of the date
when due, Lessee agrees to pay to Lessor, not later than one month thereafter,
in addition to all amounts payable by Lessee as a result of the exercise of any
of the remedies provided in the Lease, an amount calculated at the rate of ten
cents ($.10) per one dollar of each such delayed payment, as an administrative
fee to offset Lessor's collection costs, but only to the extent permitted by
law.
All remedies of Lessor are cumulative, are in addition to any other
remedies provided for by law, and may, to the extent permitted by law, be
exercised concurrently. The exercise of any one remedy shall not be deemed an
election of such remedy or preclude the exercise of any other remedy. No failure
on the part of Lessor to exercise, and no delay in exercising, any right or
remedy shall operate as a waiver thereof or modify the terms of the Lease. In no
event shall Lessor's recovery exceed the maximum recovery permitted by law.
15. REDELIVERY OF EQUIPMENT. Upon the expiration or earlier termination of
the Lease, Lessee shall return the Equipment, freight prepaid, to Lessor in good
repair, condition and working order, in a manner and to a location designated by
Lessor. If upon such expiration or termination, Lessee does not immediately
return the Equipment to Lessor, the Equipment shall continue to be held and
Leased hereunder, and the Lease shall thereupon be extended from month to month
at the same Rental, subject to the right of either Lessee or Lessor to terminate
the Lease upon thirty (30) days' written notice, whereupon Lessee shall
forthwith deliver the Equipment to Lessor as provided in this Paragraph.
16. ENTIRE AGREEMENT; CHANGES. The Lease contains the entire agreement
between the parties and may not be altered, amended, modified, terminated or
otherwise changed except in writing and signed by an executive officer of Lessor
and Lessee.
17. NOTICE. All notices under the Lease shall be sufficient if given
personally or mailed to the party intended at its respective address set forth
herein, or at such other address as said party may provide in writing from time
to time. Any such notice mailed to said address shall be effective when
deposited in the United States mail; duly addressed, postage prepaid.
18. BINDING EFFECT. The Lease shall inure to the benefit of, and be
binding upon, the parties and their respective personal representatives,
successors and assigns. Lessor and Lessee intend the Lease to be a valid and
subsisting legal instrument, and agree that no
6
<PAGE>
provision of the Lease which may be deemed unenforceable shall in any way
invalidate any other provision or provisions of the Lease, all of which shall
remain in full force and effect.
19. GOVERNING LAW; JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY
TRIAL. The Lease shall be governed by the laws of the State of New York.
Lessee hereby consents to the jurisdiction of any Federal or State Court,
located in New York County, New York with respect to any action commenced
hereunder. Nothing contained herein is intended to preclude Lessor from
commencing any action hereunder in any court having jurisdiction thereof.
Lessee agrees that service of process in any action shall be sufficient if made
by first class certified mail, return receipt requested to the address of Lessee
hereunder. TO THE EXTENT PERMITTED BY LAW, LESSEE WAIVES TRIAL BY JURY IN ANY
ACTION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LEASE, OR THE
TRANSACTIONS CONTEMPLATED HEREIN.
7
<PAGE>
Exhibit 10.8
LEASE
by and between
AETNA LIFE INSURANCE COMPANY
and
TELEPHONE BUSINESS MEETINGS, INC.
dba ACCESS CONFERENCE CALL
RIDER
-----
The printed part of the Lease is hereby modified and supplemented as
follows. Wherever there is a conflict between this Rider and the printed part
of the Lease the provisions of this Rider are paramount and the Lease shall be
construed accordingly.
1. The following language is hereby added to the Lease:
Renewal Option.
--------------
1.1 Tenant is granted the right and option (the "Renewal Option") to
extend the term of this Lease for one (1) additional period of five (5) years,
and if such renewal is effectively exercised, such renewal term (the "Renewal
Term") shall commence upon the expiration of the previous term of this Lease,
provided that:
(a) Such option must be exercised, if at all, by notice from Tenant
to Landlord given at least one hundred eighty (180) days prior to the expiration
of the Lease Term; and
(b) At the time of exercising such option, this Lease shall be in
full force and effect and there shall exist no default by Tenant which remains
uncured beyond any applicable period of grace.
1.2 In the event the foregoing option is effectively exercised, all the
terms and conditions contained in this Lease shall continue to apply except
that:
(a) There shall be no further right of renewal beyond the period
referred to above;
(b) The Renewal Option shall apply to all (and not less than all) of
the Premises originally leased hereunder, plus any additional space leased by
the Tenant pursuant to any option contained herein or otherwise:
(c) In the event Tenant shall have assigned this Lease or sublet in
excess of twenty-five percent (25%) of the Premises, except to an affiliate as
permitted in the Lease, this
<PAGE>
Renewal Option shall automatically expire and be null and void with respect to
that portion of the Premises so assigned or sublet;
(d) The rental rate applicable to the Premises during any Renewal
Term, plus any additional space then leased pursuant to Tenant shall enter into
an amendment to this Lease to set forth the amount of initial Rent during such
Renewal Term.
(e) The Rent during each such Renewal Term shall be ninety-five
percent (95%) of the then current fair market rental rate for similar buildings
in the same geographic area including all applicable market concessions and
rental escalations. If Landlord and Tenant are unable to reach agreement on the
current fair market rental rate for the Premises within ten (10) business days
after Tenant's written notice to Landlord of such renewal, then such
determination shall be made using the three broker method as follows: within ten
(10) business days after expiration of the ten (10) business day period for
Landlord and Tenant to reach mutual agreement as contemplated above, Landlord
and Tenant shall each select a commercial real estate broker who is licensed and
in good standing in the Commonwealth of Virginia, who has at least five (5)
years experience, and who is knowledgeable about the Reston area and commercial
leasing therein. To determine the current fair market rental rate, the brokers
shall consider comparable office leases in the Reston area and shall compare all
relevant factors including (1) the age, quality, function, location and
condition of the Building; (2) the time period covered by the relevant Renewal
Term; (3) the amount of space being leased under the comparable leases as
compared to the amount of space within the Premises; and (4) market concession
such as, but not limited to, rental abatement and comparable tenant improvement
allowances for renewals and new leases (as the case may be). Such brokers shall
also make appropriate adjustments in their calculation to account for any costs
or expenses (or savings) which relate to the inclusion or exclusion of specific
operating costs items (i.e., cost of electricity, etc.) and different base years
which may be applicable to such full service lease(s), or which are unique to
the particular comparable office leases in those Reston office buildings used in
arriving at their calculation of the current fair market rental rate for the
Premises as set forth above. If Landlord's broker and tenant's broker are unable
to agree upon the current fair market rental rate for the Premises within thirty
(30) days of their selection, they shall mutually select a similarly qualified
third (3rd) broker, and the third (3rd) broker shall determine the current fair
market rental rate for the Premises. If the determination of the third broker
falls between the determination of Landlord's broker and Tenant's broker, the
Rent during the Renewal Term shall be ninety-five percent (95%) of the third
broker's determination of the current fair market rental rate for the Premises.
However, if the determination of the third broker does not fall between the
determinations of Landlord's broker and Tenant's broker, the Rent during the
Renewal Term shall be ninety-five percent (95%) of the average of the two
closest brokers' determinations.
1.3 In the event Tenant fails to exercise the foregoing option in the
manner and within the time period set forth herein, the Lease shall
automatically terminate at the end of the then current term, the applicable
Renewal Option shall lapse and Tenant shall have no further right or option to
extend the term of this Lease.
2. The following language is hereby added to the Lease:
2
<PAGE>
2.1 Early Termination Option #1. Tenant may terminate this Lease as of the
---------------------------
seventy-second (72nd) month of the term by: (1) providing Landlord with not less
than 180 days written notice of its intent to terminate, and (2) providing a
payment of $15.07 per square foot of the Premises, fifty percent (50%) of which
shall be due upon Tenant's delivery of its notice of termination, and fifty
percent (50%) of which shall be due on the date of termination. If the Lease is
terminated by Tenant as provided for under this paragraph, then the rights of
the parties with respect to said termination will be as provided for under the
Lease had the Lease Term expired on the Lease Expiration Date.
2.2 Early Termination Option #2. Tenant may terminate this Lease as of the
---------------------------
ninety-sixth (96th) month of the term by: (1) providing Landlord with not less
than 180 days written notice of its intent to terminate, and (2) providing a
payment of $8.25 per square foot of the Premises, fifty percent (50%) of which
shall be due upon Tenant's delivery of its notice of termination, and fifty
percent (50%) of which shall be due on the date of termination. If the Lease is
terminated by Tenant as provided for under this paragraph, then the rights of
the parties with respect to said termination will be as provided for under the
Lease had the Lease Term expired on the Lease Expiration Date.
3. The following language is hereby added to the Lease Agreement.
Right of First Refusal. Subject to the rights, as of the date of the full
----------------------
execution of this Lease, of existing tenants, Landlord hereby grants to Tenant
an on-going right of first refusal ("Right of First Refusal") to lease any space
which becomes available for lease (the "Refusal Space") following the full
execution of this Lease (subject to the terms set forth below). If Landlord
receives a bona fide offer to lease all or any part of the Refusal Space, then
Landlord shall deliver written notice of such offer to Tenant (the "Refusal
Notice") outlining the material terms of the offer and Tenant shall have the
right to exercise the Right of First Refusal upon all of the material terms and
conditions set forth in such Refusal Notice, by written notice to Landlord,
delivered no later than ten (10) business days after Landlord's delivery to
Tenant of the Refusal Notice. Included with Tenant's written response to the
Refusal Notice (if positive) shall be current financial statements. After
reviewing these statements, Landlord reserves right to request such credit
enhancements as Landlord deems reasonable given the rent for the space to be
leased (and with no such enhancements to be required unless Tenant's financial
condition has materially deteriorated since the execution of this Lease). If
Tenant fails to exercise its Right of First Refusal, within such ten (10)
business day period (time being of the essence), Tenant shall be deemed to have
rejected the Refusal Space designated in the Refusal Notice and Landlord shall
have the right to lease the Refusal Space to the third party upon effectively
the same terms and conditions set forth in the Refusal Notice. In the event
Tenant accepts Landlord's offer, Tenant shall execute a new lease for the
Refusal Space using the legal terms set forth in this Lease, but modifying the
business terms as necessary to conform to the business terms and conditions set
forth in the bona fide offer, as reflected in the Refusal Notice.
Notwithstanding the foregoing, with respect to the remaining space on the
second floor, Tenant shall have, after full Lease execution, an additional two
(2) full Lease Year Right of First
3
<PAGE>
Refusal at the same terms and conditions of this Lease to include: (i) a Twenty
Dollar ($20.00) per square foot Tenant Improvement Allowance ("Improvement
Allowance") if Tenant leases the space in the first (1st) year of its term; (ii)
a Fifteen Dollar ($15.00) per square foot Improvement Allowance if Tenant leases
the space in the second year of its term; and (iii) a pro-rata share of the
rental abatement, provided for in Article 1. 4 of the Lease (determined by
comparing the Lease Term for the Premises to the lease term for the Expansion
Space).
4. The following language is hereby added to the Lease:
As security for its full and faithful performance of this Lease, Tenant shall
pay Landlord a total security deposit of One Hundred Thousand Dollars
($100,000.00) payable within thirty (30) days of the full execution of this
Lease. Tenant shall have the right to provide the security deposit to Landlord
either in the form of immediately available funds (i.e., cash, certified check,
money order) or an irrevocable and transferable letter of credit running in
favor of Landlord, with such letter of credit securing Tenant's obligation
hereunder subject to the terms and conditions set forth hereinbelow. The
security deposit shall not be considered an advance payment of rental or a
measure of Landlord's damages in case of default by Tenant. The letter of
credit shall be issued by a bank acceptable to Landlord in Landlord's sole but
reasonable discretion and under the supervision of the banking commission of the
Commonwealth of Virginia, FDIC or FSLIC. If the credit of the bank which
originally issues the letter of credit becomes unacceptable to Landlord in
Landlord's sole but reasonable discretion, Tenant shall substitute another
letter of credit from a bank which is acceptable to Landlord in Landlord's sole
reasonable discretion. The letter of credit shall be irrevocable for the period
ending no less than one (1) year after the date of issuance. Tenant shall renew
the letter of credit and maintain it for the period ending five (5) days after
the later of (i) the date of actual termination of this Lease or (ii) the date
Tenant shall have vacated and surrendered the entire Premises to Landlord in
accordance with the terms hereof and shall provide that it is automatically
renewable for said period hereby demised, unless released pursuant to the
provisions of this Section or unless the issuing bank delivers a notice of non-
renewal no later than thirty (30) days prior to expiration. If Tenant fails to
renew the letter of credit within ten (10) business days of its expiration,
Landlord may draw upon the letter and maintain the funds as an interest-bearing
deposit to be returned to Tenant upon receipt by Landlord of a substitute letter
of credit from Tenant.
The form and terms of the letter of credit shall be reasonably acceptable to
Landlord and shall provide, among other things, in effect that:
(a) Landlord ("Beneficiary") shall have the right to draw down an amount
up to the then current face amount of the letter of credit after a default by
Tenant under the Lease and expiration of the applicable notice and cure period
upon presentation to the issuing bank of Landlord's own declaration signed or
purportedly signed by or on its behalf reading as follows:
i. that the declarant is an officer (or general partner or sole
proprietor in the case of a general partnership or sole proprietorship,
respectively) of the Beneficiary on behalf of the Beneficiary;
4
<PAGE>
ii. that the declarant has authority to make the declaration on behalf
of the Beneficiary;
iii. that the declaration is made pursuant to the terms of the letter
of credit number ____________;
iv. that Tenant is in default after expiration of the applicable
notice and cure period under the terms of a lease made between Beneficiary
and Telephone Business Meetings, Inc., dba Access Conference Call Service;
v. that the amount of the default is $_________; and
vi. [or in lieu of iv. and v.] that Tenant under the terms of a lease
made between Beneficiary and Telephone Business Meetings, Inc., dba Access
Conference Call Service has failed to provide a substitute letter of
credit.
(b) The letter of credit will be honored by the issuing bank without
inquiry as to the accuracy thereof and regardless of whether the Tenant disputes
the content of such statement;
(c) In the event of a transfer of Landlord's interest in the Building,
Landlord shall have the right to transfer the letter of credit to the
transferee, and it is agreed that the provisions hereof shall apply to every
transfer or assignment of said letter of credit to a new Landlord. In the event
of such a transfer, the provider of the letter of credit must be ratified by
Landlord by return of a transfer agreement.
(d) If, as a result of any such application of all or any part of such
letter of credit, the amount secured by the letter of credit shall be less than
$100,000.00, Tenant shall forthwith provide Landlord with cash or other
immediately available funds, or an additional letter of credit which meets the
requirements of this Section, to cover the deficiency, or restore the amount
available to be drawn under the letter of credit to the amount required herein
upon written notice from Landlord to Tenant.
(e) Tenant further covenants that it will not assign or encumber said
letter of credit or any part thereof and that neither Landlord nor its
successors or assigns will be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
(f) Without limiting the generality of the foregoing, if the letter of
credit expires earlier than as provided for herein, or the issuing bank notifies
Landlord that it shall not renew the letter of credit, Landlord will accept a
renewal thereof or substitute letter of credit (such renewal or substitute
letter of credit to be in effect not later than thirty (30) days prior to the
expiration thereof), which renewal or substitute letter of credit shall be
irrevocable and automatically renewable, and issued by a bank meeting the
requirements of this Section, for the entire period provided for in this
Section, upon substantially the same terms as the expiring letter of credit or
such other terms as may be acceptable to Landlord. However, (i) if the letter
of credit is not timely renewed or a substitute letter of credit is not timely
received, or (ii) if Tenant fails to
5
<PAGE>
maintain the letter of credit in the amount and terms set forth in this Section,
then, at least thirty (30) days prior to the expiration of the letter of credit,
or immediately upon Tenant's failure to comply with each and every term of this
Section, Tenant shall deposit with Landlord cash security in the amounts
required by, and to be held subject to the terms of this Section, failing which
the Landlord may present such letter of credit to the bank, in accordance with
the terms of this Section, and the entire sum secured thereby shall be paid to
Landlord as a substitute security deposit, to be held by Landlord in the manner
provided for in this Section.
If Tenant provides the security deposit in the form of cash or other
immediately available funds, Landlord shall deposit such funds into an interest
bearing account chosen by Landlord in its reasonable discretion and, provided
Tenant is otherwise entitled to repayment of the security deposit hereunder,
Tenant shall be entitled to any and all interest accrued thereon.
Notwithstanding the foregoing, Tenant acknowledges and agrees that Landlord may
commingle the security deposit with other funds in Landlord's possession
provided Landlord otherwise complies with the terms hereof. All direct out-of-
pocket expenses to set up and maintain such account shall be deducted from any
interest earned on the amount of such cash security deposit. If Tenant defaults
with respect to any covenant or condition of this Lease, including but not
limited to the payment of Monthly Base Rent, additional rent or any other
payment due under this Lease, and the obligation of Tenant to maintain the
premises and deliver possession thereof back to Landlord at the expiration or
earlier termination of the Lease Term in the condition required herein, then
Landlord may (without any waiver of Tenant's default being deemed to have
occurred) apply all or any part of the security deposit to the payment of any
sum in default or any other sum which Landlord may be required or deem necessary
to spend or incur by reason of Tenant's default. In such event, Tenant shall,
upon demand, deposit with Landlord the amount so applied to replenish the
security deposit. If Tenant shall have fully complied with all of the covenants
and conditions of this Lease, but not otherwise, the amount of the security
deposit (including all interest accrued thereon if any) then held by Landlord
shall be repaid to Tenant within thirty (30) days after the expiration or sooner
termination of this Lease. In the event of a sale or transfer of Landlord's
estate or interest in the Building, Landlord shall have the right to transfer
the security deposit to the purchaser or transferee, and Landlord shall be
considered released by Tenant from all liability for the return of the security
deposit, so long as the transferee acknowledges receipt of the security deposit
and Landlord's obligations under this Lease.
Notwithstanding anything else herein to the contrary, and provided Tenant
is not then in default under the terms of this Lease and no event has occurred
which, with notice or the passage of time, or both, would constitute a default
under this Lease at the time the provisions of this paragraph are to take
effect, then after the end of the second (2nd) Lease Year, Tenant shall only be
required to maintain a security deposit of one month's Rent with Landlord. All
terms of this Section relating to the security deposit shall be modified to
reflect such reduction in the security deposit, mutatis mutandis, but shall
----------------
otherwise remain in full force and effect, and Landlord shall return the Letter
of Credit for substitution.
5. The following language is hereby added to the Lease Agreement:
6
<PAGE>
Landlord will work with Tenant's representatives and contractors to:
i) install secure conduit and riser capacity, minimum of 4 inch
diameter, to connect new telephone room to existing one and from existing
one in Tenant's suite.
ii) allow Bell Atlantic and/or MFS to place additional equipment in
both current and new telephone rooms.
iii) install an electrical generator sufficient to power Tenant's
equipment, in a mutually agreeable location in or near the Building, with
electrical lines running to the Premises (with the intention of placing the
generator in a location which minimizes Tenant's cost of installation and
operation while giving due consideration to the Landlord's interest in
maintaining an attractive building and site).
All of the above to be at Tenant's cost.
6. Landlord at Landlord's cost and expense shall provide conduit and sleeves
to Building and into Building for secondary fiber entrance as per Exhibit F
attached.
7. The following language is hereby added to the Lease Agreement.
Commencing on the Lease Commencement Date and continuing through the Lease
term, Landlord shall provide Tenant with two hundred fifty (250) square feet of
basement storage space in a mutually agreeable location at a rental rate of One
Hundred Twenty-Five Dollars ($125.00) per month.
8. Contingency. If Landlord does not deliver a fully executed original of
-----------
this Lease to Tenant within ten (10) days following execution of this Lease by
Tenant and delivery to Landlord's representatives in Washington, D.C. (Trammell
Crow Company), this Lease shall be null and void.
7
<PAGE>
EXHIBIT A
DESCRIPTION OF THE PROPERTY
Suite 200
8
<PAGE>
EXHIBIT B
TRUE COPY OF LEASE
9
<PAGE>
EXHIBIT C
SCHEDULE OF LEASE MODIFICATIONS
NONE, EXCEPT THOSE, IF ANY, LISTED BELOW:
10
<PAGE>
LEASE
BY AND BETWEEN
AETNA LIFE INSURANCE COMPANY
("Landlord")
AND
TELEPHONE BUSINESS MEETINGS, INC.
dba ACCESS CONFERENCE CALL SERVICE
("Tenant")
Multi-tenant Office Lease
11
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE
- -------
1 TERMS
2 COMMENCEMENT AND EXPIRATION DATES
3 PAYMENT OF RENT
4 SECURITY DEPOSIT
5 USES
6 LATE CHARGES
7 REPAIRS AND MAINTENANCE
8 UTILITIES AND SERVICE
9 COST OF SERVICES AND UTILITIES
10 PROPERTY TAXES
11 LIABILITY AND CASUALTY INSURANCE
12 FIRE INSURANCE - FIXTURES AND EQUIPMENT
13 DAMAGE OR DESTRUCTION
14 ALTERATIONS AND ADDITIONS: REMOVAL OF FIXTURES
15 ACCEPTANCE OF PREMISES
16 TENANT IMPROVEMENTS
17 ACCESS
18 WAIVER OF SUBROGATION
19 INDEMNIFICATION
20 ASSIGNMENT AND SUBLETTING
21 ADVERTISING
22 LIENS
23 DEFAULT
24 SUBORDINATION AND ATTORNMENT
25 SURRENDER OF POSSESSION
26 NON-WAIVER
27 HOLDOVER
28 CONDEMNATION
29 NOTICES
30 MORTGAGEE PROTECTION
31 COSTS AND ATTORNEYS' FEES
32 BROKERS
33 LANDLORD'S LIABILITY
34 ESTOPPEL CERTIFICATES
35 FINANCIAL STATEMENTS
36 TRANSFER OF LANDLORD'S INTEREST
37 RIGHT TO PERFORM
38 SUBSTITUTED PREMISES
39 SALES AND AUCTIONS
40 ROOFTOP EQUIPMENT
41 SECURITY
12
<PAGE>
42 AUTHORITY OF TENANT
43 NO ACCORD OR SATISFACTION
44 MODIFICATIONS FOR LENDER
45 PARKING
46 GENERAL PROVISIONS
47 RULES AND REGULATIONS
48 NO WARRANTIES OR REPRESENTATIONS BY LANDLORD
49 LANDLORD'S CONSENT OR APPROVAL
50 WAIVER OF TRIAL BY JURY
EXHIBIT A - LOCATION AND DIMENSIONS OF PREMISES
EXHIBIT B - RENT INCREASES
EXHIBIT C - TENANT WORK FUNDINGS
EXHIBIT D - HVAC SPECIFICATIONS
EXHIBIT E - CLEANING SPECIFICATIONS
EXHIBIT F - SECONDARY FIBER CONDUIT
RIDER
13
<PAGE>
LEASE
-----
THIS LEASE (the "Lease") is made this 6/th/ day of December, 1994, by and
between Aetna Life Insurance Company, a Connecticut corporation ("Landlord"),
c/o Trammell Crow Company, 1115 30th St., N.W., Washington, D.C. 20007, and
Telephone Business Meetings, Inc., dba Access Conference Call Service, a
Delaware corporation ("Tenant"), having an address of 1801 K Street, N.W., Suite
201, Washington, D.C. 20006 prior to the Lease Commencement Date (and the
Premises thereafter).
Landlord, for and in consideration of the rents and all other charges and
payments hereunder and of the covenants, agreements, terms, provisions and
conditions to be kept and performed hereunder by Tenant, demises and leases to
Tenant, and Tenant hereby hires and takes from Landlord, the premises described
below ("Premises"), subject to all matters hereinafter set forth and upon and
subject to the covenants, agreements, terms, provisions and conditions of this
Lease for the term hereinafter stated.
1. TERMS.
-----
1.1. Premises. The Premises demised by this Lease are approximately
--------
Nineteen Thousand Seven Hundred Sixty-five (19,765) square feet located on the
second (2nd) floor in 1861 Wiehle Avenue ("Building"), Reston, Va., 22090,
together with a nonexclusive right to use parking and other common areas. The
location and dimensions of the Premises are shown on EXHIBIT A, attached hereto
---------
and incorporated herein by reference. No easement for light or air is included
in this Lease. Landlord shall not intentionally block Tenant's view from the
Premises.
1.2. Building. Landlord represents that the total rentable area of
--------
the Building is approximately 73,685 sq. ft. and Tenant's percentage of the
Building is 26.82%.
1.3. Lease Term. The parties agree that the Lease Commencement Date
----------
and the Lease Expiration Date are as follows:
Installation Commencement Date: April 1, 1995
Operational Commencement Date: May 1, 1995
Lease Commencement Date: June 1, 1995
Lease Expiration Date: May 31, 2005
1.4. Base Rent. The basic rent ("Base Rent") is $23,306.23 per month,
---------
commencing on the Lease Commencement Date, and thereafter shall increase as set
forth in EXHIBIT B attached hereto and incorporated herein by reference. In
---------
addition to the Base Rent, Tenant shall pay all amounts designated as Additional
Rent ("Additional Rent") under this Lease, including but not limited to charges
for additional services under Section 8.2, increases in costs of services and
utilities under Article 9, and increases in Property Taxes under Article 10, all
of which shall be deemed rent ("Rent") due under this Lease.
14
<PAGE>
Notwithstanding the foregoing, Landlord hereby agrees to abate and forgive
the payment of fifty percent (50%) of the Base Rent during the first five (5)
full calendar months of the Lease term, for a total abatement of Fifty-Eight
Thousand Two Hundred Sixty-five and 57/100 Dollars ($58,265.57).
1.5. Initial Payment. See Rider, Paragraph #4.
---------------
2. DELIVERY OF POSSESSION. Landlord shall deliver possession of the
----------------------
computer room of the Premises to Tenant, with Landlord's Work (as hereinafter
defined) therein substantially complete ("Ready for Installation") , on or
before the Installation Commencement Date. Landlord shall deliver possession of
the operations/conference center and customer service area of the Premises to
Tenant, with Landlord's Work therein substantially complete ("Ready for Phase-
In"), on or before the Operational Commencement Date. Landlord shall deliver
possession of the entire Premises to Tenant, with Landlord's Work substantially
complete ("Ready for Occupancy"), on or before the Lease Commencement Date.
During the period from the Installation Commencement Date to the Operational
Commencement Date (the "Installation Period"), Tenant shall have the right to
install equipment in the computer room of the Premises and connect such
equipment to its cabling. During the period from the Operational Commencement
Date to the Lease Commencement Date (the "Phase-In Period"), Tenant shall have
the right to install, test, operate its equipment and phase-in its business
operations in the Premises. During the Installation Period and the Phase-In
Period, all provisions of this Lease, other than the payment of Rent, shall be
fully effective. If Landlord does not deliver possession of the Premises to
Tenant on the Lease Commencement Date this Lease shall not be void or voidable
(except as expressly set forth below) , nor shall Landlord be liable to Tenant
for any loss or damage resulting therefrom, nor shall the expiration date of the
term be extended, but in such event Tenant shall not be liable for any Rent or
other charges due under this Lease until such time as Landlord tenders delivery
of possession of the Premises to Tenant with Landlord's Work (as hereinafter
defined) substantially complete. Tenant's contractor (cabling) shall have access
to the Premises during the Landlord's construction, prior to closing walls,
ceilings and raised floorings (if any) to install cabling prior to April 1,
1995. Landlord and Tenant's contractors will work in harmony during this period.
Notwithstanding the foregoing, if Landlord fails to deliver the Premises
Ready for Occupancy on or before the Lease Commencement Date, then Tenant shall
have the right to offset against Rent the amount of Ten Thousand Seven Hundred
Ninety-five and 77/100 Dollars ($10,795.77) for each month or partial month of
such delay plus a daily penalty of $833.00 for each day of such delay, up to a
maximum daily penalty per month of Twelve Thousand One Hundred Ninety-seven and
98/100 ($12,197.98) (i.e., the combined monthly and daily penalties cannot
exceed more than Twenty-two Thousand Nine Hundred Ninety-three and 75/100
($22,993.75) or one month's Base Rent). If Landlord fails to deliver the
Premises Ready for Occupancy on or before August 1, 1995, then, in addition to
the offset rights set forth above in this paragraph, Tenant shall have the right
to complete Landlord's Work and offset the reasonable cost of such completion
against Rent. Landlord further agrees to include in the bid package prepared by
the construction manager (as set forth in Exhibit C) a requirement for the
general contractors to include in their bid a penalty equal to Ten Thousand
Seven Hundred Ninety-five
15
<PAGE>
Dollars and 77/100 ($10,795.77) for each month or partial month of delay plus a
daily penalty equal to $833.00 for each day of delay if the general contractor
fails to (i) deliver the computer room of the Premises substantially complete on
or before the Installation Commencement Date or (ii) deliver the
operations/conference center and customer service area of the Premises Ready for
Phase-In on or before the Operational Commencement Date. Notwithstanding the
foregoing, each of the deadlines specified above shall be extended one (1) day
for each day of delay attributable to "Tenant Delays", "Governmental Delays" and
"Force Majeure" as hereafter defined. "Tenant Delays" shall mean any delay in
Landlord's completion of the Tenant Improvements caused by (i) Tenant's failure
or refusal to meet its obligation to prepare the Tenant Plans and Working
Drawings within the time periods specified in Exhibit C, (ii) any change orders,
(iii) Tenant's selection of carpet and other finish items not in stock (so long
as Landlord has notified Tenant as soon as possible after Landlord learns of the
non-availability), or (iv) any delay caused by Tenant's failure (upon request
by Landlord) to cooperate with Landlord to expedite permit submissions or the
County's approval process. "Governmental Delays" shall mean any delay in
Landlord's completion of the Tenant Improvements caused by (i) processing delays
by the applicable governmental entity in the issuance of a building permit or
demolition permit, (ii) delays by the applicable governmental entity in
scheduling or performing required inspections of the Tenant Finish Work not
caused by Landlord's fault, and (iii) the action or inaction of applicable
governmental authorities (provided Landlord diligently pursues all required
governmental actions) not attributable to Landlord's fault. "Force Majeure"
shall mean delays beyond the reasonable control of a party and without its fault
or neglect, such as due to war, riot, civil unrest, shortages of labor or
materials despite due diligence, strikes and labor disputes, unusually inclement
weather and acts of God.
3. PAYMENT OF RENT. Except as otherwise provided in this Lease, Tenant
---------------
shall pay Landlord the Rent and any other payments due under this Lease without
demand, deduction or offset, in lawful money of the United States in advance on
or before the first day of each month, except that the first month's Base Rent
shall be paid upon the execution hereof, at the address noted in Section 29, or
to such other party or at such other place as Landlord may hereafter from time
to time designate in writing. Rent and other amounts due under this Lease for
any partial month at the beginning or end of the Lease term shall be prorated,
on a per diem basis.
4. SECURITY DEPOSIT. See Rider, Paragraph #4.
----------------
5. USES.
----
5.1. Permitted Uses. The Premises are to be used only for general
--------------
office purposes including without limitation the operation of a
telecommunications service business which includes audio, video, graphic and
data telecommunications ("Permitted Uses") and for no other business or purpose
without the prior written consent of Landlord. Tenant is a group communications
company serving the trade association, corporate, legal and government agency
market. Initially during the Lease term Tenant's sophisticated computer-based
switches will be connected to the public telephone network via fiber optic
cable. Approximately 1,000 telephone lines are currently in use, with
expectations that line capacity will double and re-double in the
16
<PAGE>
near term. No act shall be done in or about the Premises that is unlawful or
that will increase the existing rate of insurance on the Building. Landlord
represents that, to Landlord's knowledge, Tenant's permitted uses shall not
increase the existing rate of insurance in the Building. In the event of a
breach of this covenant, Tenant shall immediately cease the performance of such
unlawful act or such act that is increasing or has increased the existing rate
of insurance and shall pay to Landlord any and all increases in insurance
premiums resulting from such breach. Tenant shall not commit or allow to be
committed any waste upon the Premises, or any public or private nuisance or
other act or thing which produces noise or disturbance to the quiet enjoyment of
any other tenant in the Building. If any of the Tenant's office machines or
equipment produces noise or disturbance within the premises of any other tenant
in the Building, then Tenant shall provide adequate insulation, or take such
other action as may be necessary to eliminate the noise or disturbance at its
sole cost and expense. Subject to the provisions set forth in Section 14, Tenant
shall obtain and maintain any required permit for equipment, machine, device,
tank or vessel which is subject to any federal, state or local permitting
requirement. Tenant, at its expense, shall comply with all laws, statutes,
ordinances and governmental rules, regulations or requirements governing the
installation, operation and removal of any such equipment, machine, device, tank
or vessel. Tenant, at its expense, shall comply with all laws, statutes,
ordinances, governmental rules, regulations or requirements, and the provisions
of any recorded documents now existing or hereafter in effect relating to its
use, operation or occupancy of the Premises and shall observe such reasonable
rules and regulations as may be adopted and made available to Tenant by Landlord
from time to time for the safety, care and cleanliness of the Premises or the
Building and for the preservation of good order therein, provided, however, that
in no event shall Tenant be required to perform Alterations (as hereinafter
defined) outside of the Premises or with respect to the structural elements of
the Building within the Premises. Landlord represents that the provisions of any
recorded documents now existing or hereafter in effect relating to Tenant's use,
operation or occupancy of the Premises shall not limit Tenant's use of the
Premises for the permitted uses described in this Section 5.1. Landlord, at its
sole cost and expense, shall be responsible for ensuring all Building
Life/Safety Systems meet the applicable federal, state and local codes and
regulations. Landlord shall be solely responsible for compliance with the ADA
(Americans with Disabilities Act), legislation concerning CFC's and all other
legal requirements not relating exclusively to tenant's use and occupancy of the
Premises. Landlord shall not lease space in the Building to another tenant who
will, within the Building, operate a telecommunication conferencing business.
5.2. Hazardous Materials.
-------------------
5.2.1. As used herein, the term "Hazardous Material" shall mean
any substance or material which has been determined by any state, federal or
local governmental authority to be capable of posing a risk of injury to health,
safety or property, including all of those materials and substances designated
as hazardous or toxic by the city in which the Premises are located, the U.S.
Environmental Protection Agency (the "EPA"), or any federal agencies that have
overlapping jurisdiction with such state agencies, or any other governmental
agency now or hereafter authorized to regulate materials and substances in the
environment.
17
<PAGE>
5.2.2. Landlord represents to Tenant that, to Landlord's
knowledge, the Premises and the Building are free from hazardous substances as
of the date of execution of this Lease. In addition, Landlord agrees that should
any hazardous substances be found within the Premises or the Building which were
placed therein by Landlord, its agents, employees or contractors or which were
within the Premises prior to the Lease Commencement Date and were not introduced
by Tenant, its agents, employees and invitees, Landlord shall be responsible for
all costs associated with removing said hazardous substances from the Premises
and the Building and otherwise complying with the applicable federal, state or
local laws with regard thereto. During the term of this Lease, Landlord agrees
that it shall not introduce, dispose of, or store hazardous substances within
the Premises or the Building in violation of applicable law, and shall comply
with all valid orders issued by federal, state and local authorities relating
thereto.
5.2.3. Tenant hereby covenants not to cause or permit any
Hazardous Material to be placed, held, located or disposed of in, on or at the
Premises or any part thereof and hereby covenants that neither the Premises nor
any part thereof shall ever be used as a dump site or storage site (whether
permanent or temporary) for any Hazardous Material during the term of this Lease
(other than incidental office use in compliance with the law). Tenant hereby
agrees to indemnify Landlord and hold Landlord harmless from and against any and
all losses, liabilities, including strict liability, damages, injuries,
expenses, including reasonable attorneys' fees, costs of any settlement or
judgment and claims of any and every kind whatsoever paid, incurred or suffered
by, or asserted against, Landlord by any person or entity or governmental agency
for, with respect to, or as a direct or indirect result of, the presence on, or
the escape, seepage, leakage, spillage, discharge, emission, discharging or
release from, the Premises of any Hazardous Material (including, without
limitation, any losses, liabilities, including strict liability, damages,
injuries, expenses, including reasonable attorneys fees, costs of any settlement
or judgment or claims asserted or arising under the Comprehensive Environmental
Response, Compensation and Liability Act, any so-called federal, state or local
"Superfund" or "Superlien" laws, statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability,
including strict liability, substances or standards of conduct concerning any
Hazardous Material), provided, however, that the foregoing indemnity is limited
to matters arising solely from Tenant's violation of the covenant contained in
the first sentence of this Section 5.2.3. Tenant hereby agrees fully to
cooperate with Landlord and provide such documents, affidavits and information
as may be reasonably requested by Landlord (i) to comply with any environmental
law, (ii) to comply with the reasonable request of any lender, purchaser or
tenant, and/or (iii) for any other reason deemed necessary by Landlord in its
sole but reasonable discretion. Landlord shall have the right but not the
obligation, and without limitation of Landlord's rights under this Lease, to
enter onto the Premises or to take such other actions as it deems necessary or
advisable to cleanup, remove, resolve or minimize the impact of, or otherwise
deal with, any Hazardous Material following receipt of any notice from any
person or entity (including without limitation the EPA) asserting the existence
of any Hazardous Material in, on or at the Premises or any part thereof which,
if true, could result in an order, suit or other action against Tenant or
Landlord or both. All reasonable costs and expenses incurred by Landlord in the
exercise of any such rights, which costs and expenses result from Tenant's
violation of the covenant contained in the first sentence of this Section 5.2.3,
shall be deemed Additional Rent under this Lease and shall be payable by Tenant
upon Landlord's demand
18
<PAGE>
therefor. The provisions of this Section 5.2 shall survive the cancellation,
termination or expiration of this Lease.
6. LATE CHARGES. Tenant hereby acknowledges that late payment to Landlord
------------
of Rent or other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. If any Rent or other sum due from Tenant is not received
within five (5) business days of its due date , then Tenant shall pay to
Landlord immediately upon Landlord's demand therefor a late charge in an amount
equal to two percent (2%) of such overdue amount, plus any attorneys' fees and
costs incurred by Landlord by reason of Tenant's failure to pay Rent and other
charges when due hereunder. Notwithstanding the foregoing, once per calendar
year, Landlord shall agree to forego the late charge specified above provided
Tenant pay such Rent or other sums due hereunder within five (5) days of
Tenant's receipt of written notice from Landlord that such payment is due.
7. REPAIRS AND MAINTENANCE. Landlord shall maintain, or cause to be
-----------------------
maintained in first class working condition, the common areas of the Building
and the land upon which it is situated, including without limitation the
lobbies, elevators, stairs, and corridors, the roof, foundations, structural
elements, building systems, parking areas and exterior walls of the Building,
and the underground utility and sewer pipes outside the exterior walls of the
Building, if any, except any of such repairs rendered necessary by the
negligence or misconduct of Tenant, its agents, customers, employees,
independent contractors, guests or invitees (to the extent not released by
Landlord pursuant to Section 18.2), the repair of which shall be paid for by
Tenant within thirty (30) days of Landlord's written demand with backup
invoices. Landlord shall not alter the existing windows of the Premises
(whether by addition of film or otherwise). Subject to Landlord's right of
access pursuant to Article 17, Tenant shall be exclusively responsible for the
interior of the Premises (other than structural elements of the Building and
portions of the Building systems within the Premises), which shall be maintained
by Tenant in good order and repair, and Landlord shall be under no obligation to
inspect the Premises or, except as otherwise expressly provided in this Lease,
repair the Premises. Tenant shall promptly report in writing to Landlord any
defective condition known to it which Landlord is required to repair, and
failure to so report such defects shall make Tenant responsible to Landlord for
any liability incurred by Landlord by reason of such conditions. Tenant hereby
waives the right to make repairs at Landlord's expense under any law, statute or
ordinance now or hereafter in effect.
8. UTILITIES AND SERVICES.
----------------------
8.1. Service. From 8:00 a.m. to 6:00 p.m. on weekdays ("Normal
-------
Business Hours") and from 9:00 a.m. to 12:00 p.m. on Saturday ("Saturday
Mornings") (except for legal holidays), Landlord shall furnish to the Premises
electricity for lighting and operation of low-power usage office machines in an
amount no less than 6.0 watts per square foot, water, heat and air conditioning
in accordance with the HVAC specifications attached hereto as EXHIBIT D, and
---------
elevator service. During all other hours, Landlord shall furnish such service
except for heat and air conditioning. Elevator service shall be provided to the
Premises, twenty-four (24) hours per day, seven (7) days per week. Landlord
shall be responsible for maintaining the offsite monitoring fire suppression
system for the Building.
19
<PAGE>
8.2. Additional Services. If requested by Tenant, Landlord shall
-------------------
furnish heat and air conditioning at times other than Normal Business Hours and
Saturday Mornings and the cost of such services shall be Landlord's actual cost
(which as of the date of this Lease is $25.00 per hour) and shall be paid by
Tenant as Additional Rent, payable within thirty (30) days after receipt of
Landlord's Invoice. Landlord shall also provide toilet room supplies, window
washing at reasonable intervals, and customary Building janitorial service in
accordance with the cleaning specifications attached hereto as Exhibit E other
---------
types of services provided or caused to be provided by Landlord to Tenant which
are in addition to the services ordinarily provided Building tenants shall be
payable as provided in Section 9.1.1.2 of this Lease. Landlord shall not be
liable for any loss, injury or damage to property caused by or resulting from
any variation, interruption, or failure of such services due to any cause
whatsoever, or from failure to make any repairs or perform any maintenance. In
no event shall Landlord be liable to Tenant for any damage to the Premises or
for any loss, damage or injury to any property therein or thereon occasioned by
bursting, rupture, leakage or overflow of any plumbing or other pipes or other
similar cause in, above, upon or about the Premises or the Building. If
restoration of any service is within Landlord's control, Landlord shall use
diligent efforts to restore such service. If HVAC or electrical services to the
Premises are interrupted for more than three (3) business days and Tenant cannot
reasonably conduct its business, then until such service is restored, the Rent
and the Additional Rent shall be abated in the same proportion as the
untenantable portion of the Premises bears to the whole thereof, and this Lease
shall continue in full force and effect, subject however to Tenant's rights at
law or in equity to make a claim for constructive eviction or otherwise.
9. COST OF SERVICES AND UTILITIES.
------------------------------
9.1. Definitions. In addition to the Base Rent and other Additional
-----------
Rent as set forth in this Lease, Tenant shall pay to Landlord as Additional Rent
increases under this Article 9. Said increases shall be made as provided herein,
using the following definitions:
9.1.1. "Operating Costs" shall include Costs of Utilities and
---------------
Other Operating Costs.
9.1.1.1. "Costs of Utilities" shall mean all expenses
------------------
paid and incurred by Landlord for electricity, water, gas, sewers, oil and
utility services for the Building, land and parking and other common areas.
9.1.1.2. "Other Operating Costs" shall mean all other
---------------------
expenses paid and incurred by Landlord for maintaining, operating, replacing,
repairing, and managing (i) the Building, (ii) the personal property used in
conjunction therewith, (iii) the Building roof, or (iv) the land upon which the
Building is situated, including all curbs and sidewalks adjacent to the same.
Such costs shall include, without limitation, supplies, cleaning services,
garbage and trash collection, personal property taxes, replacement lighting,
maintenance and service contracts, wall and window washing, towel service,
machinery, equipment, a commercially reasonable management fee consistent with
market rates, window glass replacement and repair,
20
<PAGE>
landscaping services of independent contractors (including, without limitation,
ice and snow removal), compensation (including employment taxes and fringe
benefits) of all persons who perform regular and recurring duties in connection
with the management excluding: (a) Costs of any special services rendered to
individual tenants (including Tenant), for which a special, separate charge
shall be made; (b) Property Taxes (as defined in Section 10.1.1); (c)
depreciation or amortization of costs required to be capitalized in accordance
with generally accepted accounting practices (except for proper depreciation of
the costs of energy savings devices to the extent in any year of the documented
annual energy savings realized therefrom); (d) the costs of all repairs and
replacements of the Premises and the remainder of the Building or portions
thereof or fixtures, equipment and facilities comprising or serving the Premises
and building made necessary as a result of defects in workmanship or materials
of initial construction of the Building; (e) the cost to prepare space for
occupancy by any tenants of the Building and for renovating, painting,
repainting, decorating, redecorating, planning and designing space for any
tenants (including the Tenant); (f) the cost of overtime or other expenses to
the Landlord in curing its default or performing work expressly provided for in
this Lease to be borne at the Landlord's expense (including such work for other
tenants in the Building); (g) other expenses incurred in leasing or for
procuring tenants; (h) debt service payments on any mortgage or on any
amortization of debts, points, commissions and legal fees associated with
financing; (i) the cost of materials, work or utilities separately charged to
individual tenants of the Building; (j) legal fees paid or incurred in
connection with litigation with tenants for any defaults under their leases and
any legal fees incurred in leasing space to tenants; (k) income, net profits,
estate, inheritance, gift, franchise, business, professional, occupational or
succession taxes and any similar tax or assessment imposed upon or measured by
the Landlord's income from the Building; (1) credits, allowances, permits,
licenses, inspections, or other payments or rent waivers or concessions granted
to any tenant (including Tenant) or incurred in completing, fixturing,
renovating or otherwise improving, decorating or redecorating tenant space in
the Building; (m) any costs paid to induce tenants to move into or maintain
their tenancy at the Building, such as moving expenses or rental or other
concessions to tenants (including specified cleaning or other services not
provided to other tenants of the Building on a regular basis), including any
such costs incurred with respect to the Tenant; (n) all costs incurred in
connection with parking operations of the Building (if any); (o) the costs of
any capital improvement or the cost of leasing any equipment, fixtures, or trade
fixtures where purchase would be considered a capital cost under generally
accepted accounting principles, but including any capital improvements expressly
permitted to be included in Operating Costs pursuant to the terms of this
Section, (p) compensation paid to officers of Landlord or officers of the
management agent; (q) costs directly resulting from the gross negligence or
willful misconduct of Landlord, its employees, agents, contractors or employees;
(r) costs for which Landlord is reimbursed by any insurance required to be
carried hereunder or actually carried by Landlord or the cost for which Landlord
would have been reimbursed by insurance required to be carried hereunder in the
event Landlord fails to diligently pursue the insurance proceeds; (s) costs for
any structural maintenance, replacement or redesign; (t) costs or expense
associated with the enforcement of any leases by Landlord; (u) costs or fees
relating to the defense of Landlord's title or interest in the real estate
containing the Building, or any part thereof; (v) any costs or expenses relating
to Landlord's obligations under any workletter to construct tenant improvements;
(w) expenses in connection with services or other benefits of a type which are
not made available to Tenant but which are provided to another
21
<PAGE>
tenant or occupant; (x) renovation of the Building made necessary by the
exercise of eminent domain; (y) any cost attributable to income received by
Landlord or an affiliate of Landlord for the provision of any goods or services,
to the extent such cost exceeds the cost for such goods and services in the
prevailing market place; (z) ground rent; (aa) legal fees which are not related
to the operation, maintenance and management of the Property or other
professional or consulting fees which are not directly related to the
maintenance, operation and management of the Building, except for any legal fees
incurred by Landlord which are attributed solely to Tenant in accordance with
the terms of this Lease; intentionally deleted; (cc) increased insurance
premiums caused by Landlord's or any tenants' hazardous acts only to the extent
of such increase, except for an increase attributed solely to Tenant's hazardous
acts; (dd) costs arising from the presence of hazardous materials or substances
in or about or below the Building or the land upon which it is situated,
including without limitation, hazardous substances in the groundwater or soil,
except to the extent Tenant is responsible for the presence of such hazardous
materials; (ee) costs incurred for any items to the extent of Landlord's
recovery under a manufacturer's, materialmen's vendors or contractor's warranty;
(ff) wages, salaries or other compensation or benefits for off site employees
applicable to the time spent working at other buildings, other than the Building
manager (provided that with respect to each employee that services the Building
and other buildings, a pro rata portion of such employee's salary shall be
included in operating expenses, as applicable); (gg) excessive and unreasonable
costs of acquisition of sculpture, paintings, or other objects of art; (hh) the
rent or expenses in lieu of rent for any on-site leasing office of Landlord in
the Building, or of any other space (except the management office serving the
Building) in the Building set aside for storage or other facilities for the
benefit of Landlord; (ii) management fees in excess of management fees
specifically allowed above; and (jj) any special assessments caused by other
tenants of the Building. In the event that Landlord receives proceeds from
insurance that reimburse Landlord for items previously included in Landlord's
Operating Costs (even if for a prior year), the Actual Costs for the year in
which such charge was made shall be recalculated to reflect the receipt of the
insurance proceeds (less any reasonable expense incurred by Landlord to obtain
such proceeds) and Tenant's proportionate share of any overpayment made for
Operating Costs for such year, as recalculated, shall be refunded to Tenant in
thirty (30) days.
9.1.2. "Lease Year" shall mean the twelve-month period
----------
commencing January 1 and ending December 31.
9.1.3. "Base Services Year" shall mean calendar year 1995.
------------------
9.1.4. Intentionally Deleted.
9.1.5. "Actual Costs" shall mean the actual expenses paid and
------------
incurred by Landlord for Operating Costs during any Lease Year of the term
hereof.
9.1.6. "Actual Costs Allocable to the Premises" shall mean the
--------------------------------------
Tenant's share of the Actual Costs determined by multiplying Tenant's percentage
of the Building described in Section 1.2 by the Actual Costs.
22
<PAGE>
9.1.7. "Estimated Costs Allocable to the Premises" shall mean
-----------------------------------------
Landlord's reasonable estimate of Actual Costs Allocable to the Premises for the
following Lease Year to be given by Landlord to Tenant pursuant to Section 9.3.
9.2. Base Amount. Operating Costs allocable to the Premises for the
-----------
Base Services Year shall be deemed the "Base Amount".
9.3. Additional Rent. Prior to the commencement of each Lease Year
---------------
(except the Base Services Year) during the term hereof, Landlord shall furnish
Tenant a written statement of the Estimated Costs Allocable to the Premises for
such Lease Year and a calculation of the portion of Estimated Costs Allocable to
the Premises payable by Tenant as Additional Rent in accordance with this
Section. In advance of or before the first day of each month during the term
hereof commencing on the first day of the first Lease Year following the Base
Services Year, Tenant shall pay as Additional Rent for each month during each
such Lease Year: one-twelfth (1/12th) of the amount, if any, by which the
Estimated Costs Allocable to the Premises exceed the Base Amount. If at any time
or times during any such Lease Year, it appears to Landlord that the Estimated
Costs Allocable to the Premises will vary from Landlord's estimate by more than
five percent (5%) on an annualized basis, Landlord may, by written notice to
Tenant, reasonably revise its estimate for such Lease Year and the portion of
the Estimated Costs Allocable to the Premises payable by Tenant as Additional
Rent as provided herein for such Lease Year shall be accordingly adjusted based
on such revised estimate. Notwithstanding the foregoing, Landlord hereby abates
and forgives the payment of Additional Rent pursuant to this ARTICLE 9 during
the first twelve (12) months of the Lease Term.
9.4. Actual Costs. Within ninety (90) days after the close of each
------------
Lease Year during the term hereof, Landlord shall deliver to Tenant a written
statement of the Actual Costs, with a line item breakdown, and the Actual Costs
Allocable to the Premises, during the preceding Lease Year. The first such
statement shall be for the Base Services Year, although no Rent shall be due
from Tenant on account thereof. If such costs for any Lease Year less the Base
Amount exceed the amounts paid by Tenant to Landlord pursuant to Section 9.3,
Tenant shall pay the amount of such excess to Landlord as Additional Rent within
thirty (30) days after receipt of such statement by Tenant. If such statement
shows such costs to be less than the amount paid by Tenant to Landlord pursuant
to Section 9.3, then the amount of such overpayment by Tenant shall be credited
by Landlord to the next Rent payable by Tenant. In the event such overpayment
cannot be fully credited by Landlord to the next Rent payable by Tenant due to
the expiration of the term of this Lease, any remaining overpayment shall be
credited by Landlord to any other charges due under this Lease and, to the
extent no such charges are due, shall be refunded to Tenant by Landlord within
thirty (30) days of the Lease Expiration Date.
9.5. End of Term. If this Lease terminates on a day other than the
-----------
last day of a Lease Year, the amount of any adjustment to Estimated Costs
Allocable to the Premises with respect to the Lease Year in which such
termination occurs shall be prorated on the basis which the number of days from
the commencement of such Lease Year to and including such termination date bears
to 365; and any amount payable by Landlord to Tenant or Tenant to Landlord with
respect to such adjustment shall be payable within thirty (30) days after
delivery
23
<PAGE>
by Landlord to Tenant of the statement of Actual Costs Allocable to the Premises
with respect to such Lease Year.
9.6. Further Adjustment. In the event the average occupancy level of
------------------
the Building for the Base Services Year and/or any subsequent Lease Year was not
ninety-five percent (95%) or more of full occupancy, then the Actual Costs for
such year shall be adjusted and apportioned among the tenants by the Landlord to
reflect those costs which would have occurred had the Building been ninety-five
percent (95%) occupied during such year.
9.7. Tenant's Audit Rights. Tenant shall have the right, with fifteen
---------------------
(15) days' written notice to Landlord and at Tenant's sole cost and expense, to
audit Landlord's books and records pertaining to the Actual Costs for the
preceding year and for the Base Services Year one time per year within one
hundred eighty (180) days of Tenant's receipt of Landlord's reconciliation at
Landlord's or Landlord's property manager's place of business. If a discrepancy
in Tenant's favor is discovered, then Landlord must reimburse Tenant immediately
for any overpayment and must pay for such audit if the discrepancy results in
any overpayment of more than five percent (5%).
10. PROPERTY TAXES.
--------------
10.1. Contribution to Taxes. In addition to the Base Rent and other
---------------------
Additional Rent, Tenant shall pay to Landlord, as Additional Rent, its share of
the increase in Property Taxes under this Article 10. Tenant's share of the
increase of such taxes shall be determined as provided herein, utilizing the
following definitions:
10.1.1. "Property Taxes" shall mean any form of assessment,
--------------
license, fee, rent tax, excise, imposition, charge, levy, penalty (if a result
of Tenant's delinquency), or tax (other than net income, profit, business,
professional, estate, succession inheritance, transfer or franchise taxes),
including, without limitation, all ad valorem, sales and use, value added, gross
receipts, sewer, privilege, or similar taxes, imposed by any authority having
the direct or indirect power to tax, or by any city, county, state or federal
government or any improvement or other district or division thereof, on the
Building or any part thereof, the land upon which the Building is situated, the
parking area serving the Building, or any other legal or equitable interest of
Landlord in the same.
10.1.2. The Term "Lease Year" shall mean the period defined in
----------
Section 9.1.2.
10.1.3. The term "Base Tax Year" shall mean calendar year 1995.
-------------
10.1.4. The term "Tenant's Share of Property Taxes" shall mean
--------------------------------
the amount of Property Taxes payable during any Lease Year by Landlord
multiplied by Tenant's percentage of the Building described in Section 1.2.
24
<PAGE>
10.2. Additional Rent for Estimated Increases in Tenant's Share of
------------------------------------------------------------
Property Taxes. Prior to the commencement of each Lease Year (except the Base
- --------------
Tax Year), Landlord shall furnish Tenant with a written statement setting forth
Landlord's reasonable estimate of Tenant's Share of Property Taxes for such
Lease Year. One-twelfth (1/12th) of the amount, if any, by which such estimated
Tenant's Share of Property Taxes exceeds the Tenant's Share of Property Taxes
for the Base Tax Year shall be Additional Rent payable by Tenant as provided in
Article 3.
10.3. Actual Property Taxes. Within ninety (90) days after the close
---------------------
of each Lease Year during the term hereof, Landlord shall deliver to Tenant a
written statement (to include all relevant tax bills and paid receipts) setting
forth the Tenant's Share of Property Taxes during the preceding Lease Year. If
such amount less Tenant's Share of Property Taxes for the Base Tax Year
("Tenant's Actual Share") exceeds the amount of Property Taxes actually paid by
Tenant to Landlord pursuant to Section 10.2 hereof, Tenant shall pay the amount
of such excess to Landlord as Additional Rent within thirty (30) days after
receipt of such statement by Tenant. If such statement shows Tenant's Actual
Share to be less than the amounts paid by Tenant to Landlord pursuant to Section
10.2, then the amount of such overpayment shall be credited by Landlord to the
next Rent payable by Tenant. In the event such overpayment can not be fully
credited by Landlord to the next monthly Rent or subsequent monthly Rent payable
by Tenant due to the expiration of the term of this Lease, any remaining
overpayment shall be credited by Landlord, until such credit is used up, to any
other charges due under this Lease and, to the extent no such charges are due,
shall be refunded to Tenant by Landlord within thirty (30) days of the Lease
Expiration Date.
10.4. Taxes on Personal Property Paid for by Tenant and Not
-----------------------------------------------------
Reimbursed by Landlord. Tenant shall pay, prior to delinquency, all personal
- ----------------------
property taxes payable with respect to all property of Tenant located on the
Premises or the Building and shall provide promptly, upon request of Landlord,
written proof of such payment.
10.5. End of Term. If this Lease terminates on a day other than the
-----------
last day of a Lease Year, the amount of any adjustment between the estimated and
actual Tenant's Share of Property Taxes with respect to the Lease Year in which
such termination occurs shall be prorated on the basis of a 365-day year; and
any amount payable by Landlord to Tenant or Tenant to Landlord with respect to
such adjustment shall be payable within thirty (30) days after delivery by
Landlord to Tenant of the statement of Tenant's Share of Property Taxes with
respect to such Lease Year.
10.6. Further Adjustment. In the event the average occupancy level of
------------------
the Building for the Base Services Year and/or any subsequent Lease Year was not
ninety-five percent (95%) or more of full occupancy, then the Property Taxes for
such year shall be proportionately adjusted among the tenants by Landlord to
reflect those costs which would have occurred had the Building been ninety-five
percent (95%) occupied during such year.
11. LIABILITY AND CASUALTY INSURANCE. Tenant shall, at Tenant's expense,
--------------------------------
obtain and keep in force during the term of this Lease a policy of comprehensive
25
<PAGE>
general liability insurance, including personal injury liability, contractual
liability, and completed operations liability (if applicable), insuring Landlord
and Tenant against any liability arising out of the use, occupancy or
maintenance of the Premises. Such insurance shall be in the amount of not less
than One Million and no/100ths Dollars ($1,000,000.00) for bodily injury and
property damage for any one accident or occurrence. Fire and casualty insurance
with extended coverage in an amount of not less than Fifty Thousand and
no/100ths Dollars ($50,000.00) covering Tenant's personal property and equipment
shall also be obtained and kept in force during the term of this Lease at
Tenant's expense. The limit of any of such insurance shall not limit the
liability of Tenant hereunder. If Tenant fails to procure and maintain such
insurance Landlord may, after ten (10) days notice and opportunity to cure, but
shall not be required to, procure and maintain the same, at Tenant's expense to
be reimbursed by Tenant as Additional Rent within ten (10) days of written
demand. All insurance required to be obtained by Tenant hereunder shall be
issued by companies reasonably acceptable to Landlord. Thirty (30) days prior
to the Lease Commencement Date, Tenant shall deliver to Landlord certificates of
liability insurance required herein with loss payable clauses satisfactory to
Landlord. Any deductible under such insurance policy in excess of Ten Thousand
and no/100ths Dollars ($10,000.00) must be approved by Landlord in writing prior
to issuance of such policy. No policy shall be cancelable, allowed to lapse
and/or expire and/or be subject to reduction of coverage except upon thirty (30)
days' prior written notice to Landlord. All such policies shall name Landlord
as named insureds and Tenant's casualty policies shall be written as primary
policies not contributing with and not in excess of coverage which Landlord may
carry. The policy limits set forth herein shall be subject to periodic review,
and Landlord reserves the right to require that Tenant increase the liability
coverage limits if, in the reasonable opinion of Landlord, the coverage becomes
inadequate and is less than commonly maintained by tenants making similar uses
of similar buildings in the vicinity of the Building. Tenant shall obtain any
revised or increased coverage required by Landlord within sixty (60) days of any
such notification from Landlord.
12. FIRE INSURANCE - FIXTURES AND EQUIPMENT.
---------------------------------------
12.1. During the term, Landlord shall carry and maintain all risk
property insurance covering the Building and Landlord's property therein, with
full replacement cost coverage (exclusive of footings and foundations) and in an
amount required by its insurance company to avoid the application of any
coinsurance provision. Landlord's insurance shall be issued by a company that is
licensed to do business in the Commonwealth of Virginia and that has a rating
equal to or exceeding A- from Best's Insurance Guide, and shall be primary and
not contributing.
12.2. Tenant shall maintain in full force and effect on all Tenant's
trade fixtures, equipment and personal property on the Premises, a policy of all
risk property insurance covering the full replacement value of such property.
During the term of this Lease, the proceeds from any such policy of insurance
shall be used for the repair or replacement of the fixtures and equipment so
insured. Landlord shall have no interest in the insurance upon Tenant's
equipment and fixtures and will sign all documents reasonably necessary or
proper in connection with the settlement of any claim or loss by Tenant.
Landlord will not carry insurance on Tenant's possessions. Tenant shall furnish
Landlord with a certificate of insurance evidencing that the
26
<PAGE>
requirements set forth herein are in full force and effect. Any deductible in
excess of Ten Thousand and no/100ths Dollars ($10,000.00) under such insurance
must be approved in writing by Landlord prior to issuance of such policy. The
policy limits set forth herein shall be subject to periodic review, and Landlord
reserves the right to require that Tenant increase the limits if, in the
reasonable opinion of Landlord, the coverage becomes inadequate and is less than
commonly maintained by tenants making similar uses of similar buildings in the
vicinity of the Building. Tenant shall provide Landlord with notice of loss or
damage to property promptly after such loss or damage occurs. Tenant shall
provide and keep in force with companies satisfactory to Landlord, business
interruption and/or loss of rental insurance in an amount equivalent to six (6)
months Rent and Additional Rent which shall not contain a deductible greater
than Ten Thousand Dollars ($10,000.00). Tenant shall furnish Landlord with
certificates of insurance naming Landlord as an additional insured. No policy
shall be cancelable, allowed to lapse and/or expire and/or be subject to
reduction of coverage except upon thirty (30) days' prior written notice to
Landlord.
13. DAMAGE OR DESTRUCTION.
---------------------
13.1. Casualty Damage - Insured. If the Building or Premises is
-------------------------
damaged by fire or other perils covered by extended coverage insurance the
following provisions shall apply:
13.1.1. Total Destruction. In the event of total destruction
-----------------
of the Building such that the Premises reasonably cannot be rebuilt within one
hundred and eighty (180) days ("Total Destruction"), then, (i) Landlord shall
elect either promptly to commence repair and restoration of the Building and
prosecute the same diligently to completion, in which event this Lease shall
remain in full force and effect (unless Tenant exercises its right to
terminate), or not to repair or restore the Building, in which event this Lease
shall terminate, and (ii) Tenant may elect to terminate this Lease. In either
case, each party shall give the other party written notice of its intention
within sixty (60) days after the occurrence of such destruction. If Landlord
elects not to restore the Building, this Lease shall be deemed to have
terminated as of the date of such total destruction.
13.1.2. Partial Destruction. In the event of a partial
-------------------
destruction of the Building to an extent not exceeding twenty-five percent (25%)
of the value thereof and if the damage thereto is such that the Building may be
repaired or restored within one hundred eighty (180) days from the date of such
destruction and Landlord will receive insurance proceeds sufficient to cover the
cost of such repairs (or would have, had Landlord carried the insurance required
in Section 12.1 of the Lease), Landlord shall commence and proceed diligently
with the work of repair and restoration, in which event this Lease shall
continue in full force and effect. If such repair and restoration requires
longer than one hundred eighty (180) days or the cost thereof exceeds twenty-
five percent (25%) of the value thereof or if the insurance proceeds payable to
Landlord will not be sufficient to cover such cost (and would not have been,
even if Landlord had carried the insurance required in Section 12.1 of the
Lease), (i) Landlord may elect either to so repair and restore, in which event
this Lease shall continue in full force and effect (unless Tenant exercises its
right to terminate), or not to repair or restore, in which event this Lease
shall terminate, and (ii) Tenant may elect to terminate this Lease. In either
case, each party shall give
27
<PAGE>
written notice to the other party of its intention within sixty (60) days after
the destruction occurs. If Landlord elects not to repair or restore the
Building, this Lease shall be deemed to have terminated as of the date of such
partial destruction.
13.2. Termination. Upon any termination of this Lease under any of
-----------
the provisions of this Article, Tenant shall surrender the Premises in
accordance with the provisions of Article 25.
13.3. Rent Abatement. In the event of repair and restoration as
--------------
herein provided, the monthly installments of Rent shall be equitably abated
based on the amount of the Tenant's loss of use of the Premises occasioned
thereby; provided, however, if the damage is due, directly or indirectly, to the
fault or neglect of Tenant, its officers, contractors, licensees, agents,
servants, employees, guests, invitees or visitors, there shall be no abatement
of Rent, except to the extent Landlord receives proceeds from any applicable
insurance policy of Tenant to compensate Landlord for loss of Rent. Tenant shall
not be entitled to any compensation or damages for loss of use of the whole or
any part of said Premises and/or any inconvenience or annoyance occasioned by
such damage, repair or restoration.
13.4. Delay. Tenant shall not be released from any of its obligations
-----
under this Lease except to the extent and upon the conditions expressly stated
in this Article. Notwithstanding anything to the contrary contained in this
Article, if Landlord has elected to repair or restore and is thereafter delayed
or prevented from repairing or restoring within one (1) year after the
occurrence of such damage or destruction by reason of acts of God, war,
governmental restrictions, inability to procure the necessary labor or
materials, or other causes beyond the control of Landlord, Landlord shall, at
the option of Landlord or Tenant, be relieved of its obligation to make such
repairs or restoration and, in the event Landlord or Tenant exercises such
option, Tenant shall be released from its obligations under this Lease as of the
end of such one (1) year period.
13.5. Uninsured Damage. Notwithstanding anything to the contrary
----------------
contained in this Article, if damage to the Building or the Premises is due to
any cause other than fire or other peril covered by extended coverage insurance,
Landlord may elect to terminate this Lease.
13.6. Repair Obligation. If Landlord is obligated to or elects to
-----------------
repair or restore as herein provided, Landlord shall repair or restore only
those portions of the Building and Premises which were originally provided at
Landlord's expense; and the repair and restoration of areas or items not
provided at Landlord's expense shall be the obligation of Tenant.
13.7. End of Term. Notwithstanding anything to the contrary contained
-----------
in this Article, Landlord or Tenant may elect to terminate this Lease in the
event of damage to the Building or the Premises occurring during the last (12)
months of the term of the Lease or any extension thereof; and Landlord shall not
have any obligation to repair or restore the Premises or the Building during the
last twelve (12) months of the term of this Lease or any extension thereof.
28
<PAGE>
14. ALTERATIONS AND ADDITIONS: REMOVAL OF FIXTURES.
-----------------------------------------------
14.1 Consent Required. Tenant shall not make or allow to be made any
----------------
alterations, additions or improvements (collectively "Alterations") to or on the
Premises without first obtaining the written consent of Landlord, not to be
unreasonably withheld, conditioned or delayed.
14.2 Request for Alterations. Any request for Alterations to be made
-----------------------
to the Premises by Tenant shall be made in writing, which shall include detailed
plans and specifications of the proposed Alterations prepared by an architect
approved by Landlord and licensed in the jurisdiction in which the Premises is
located, together with the names and addresses of the proposed contractors and
subcontractors, all of whom shall be approved and licensed as aforesaid. Tenant
shall upon demand reimburse Landlord as Additional Rent for all reasonable cost
and expense actually incurred in reviewing the plans and specifications and
inspecting the work on behalf of Landlord (by persons other than employees of
Landlord) including without limitation, the cost of any engineers and/or
architects retained by Landlord to review same and inspect the work on behalf of
Landlord.
14.3 Nature of Alterations. Any Alterations, including, but not
---------------------
limited to, wall covering, paneling and built in cabinet work (but excepting
moveable furniture and trade fixtures), shall be made at Tenant's sole expense,
according to plans and specifications approved in writing by Landlord, in
compliance with all applicable laws, by a licensed contractor, and in a good and
workmanlike manner conforming in quality and design with the Premises existing
as of the Lease Commencement Date, shall not diminish the value of the Building
or the Premises and (excluding all telecommunications equipment, computer
equipment and cabling, supplemental HVAC equipment and Tenant's generator(s) and
related equipment, which shall be removed by Tenant in accordance with Section
14.5 below, at Tenant's sole cost and expense at the expiration of the Lease
term) shall at once become a part of the realty and shall be surrendered with
the Premises (unless otherwise required by Landlord as set forth in Section 14.5
below).
14.4 Repairs. Tenant shall be responsible for making any and all
-------
repairs and replacements to the Alterations during the term of this Lease (as
same may be extended) and maintaining the same in good order and condition.
Notwithstanding anything to the contrary contained in this Lease, should there
be a fire or other casualty to the Premises, it is agreed by the parties that
the Landlord shall not be responsible to restore any Alterations made by Tenant
regardless of whether such Alterations were approved by Landlord and the Tenant
shall be responsible to restore the same at its sole cost and expense.
14.5 Expiration/Termination of Lease. Upon the expiration or sooner
-------------------------------
termination of the term hereof, Tenant shall, upon written demand by Landlord,
at Tenant's sole expense, with due diligence, remove any Alterations made by
Tenant, which at the time of Landlord's approval of such Alterations were
designated by Landlord to be removed, and repair any damage to the Premises
caused by such removal. In no event shall Tenant be required to remove the
Tenant work performed pursuant to Exhibit C and C-1. Notwithstanding the
--------- ---
foregoing, Tenant shall be required to remove Tenant's telecommunications
equipment, computer
29
<PAGE>
equipment and cabling, supplemental HVAC equipment and generator at the
termination of this Lease and repair any damage to the Premises caused by such
removal. Tenant shall remove all of Tenant's moveable property and trade
fixtures which can be removed without damage to the Premises at the termination
of this Lease, either by expiration of the term or other cause, and shall pay
Landlord any damages for injury to the Premises or Building resulting from such
removal. If Tenant shall fail to remove any of its property at the time Tenant
vacates the Premises, such property shall be deemed to have been abandoned by
Tenant and Landlord may, in accordance with the provisions of applicable
statutes governing commercial landlord and tenant matters, without liability for
the loss thereof or damage thereto, either remove and store such property, such
storage to be for the account and at the expense of Tenant, or otherwise dispose
of such property in Landlord's sole and absolute discretion, all at the expense
of Tenant. If Landlord elects to store such property and Tenant fails to pay the
cost of storing any such property within thirty (30) days of demand therefor,
Landlord may sell any or all such property at public or private sale, without
notice to Tenant, and shall apply the proceeds of such sale to the following
costs in the following order: (i) the cost and expense of such sale, including
reasonable attorneys' fees, (ii) the payment of the costs or charges for storing
any such property, and (iii) the payment of any other sums which may then be or
thereafter become due Landlord from Tenant under any of the terms of this Lease.
The balance, if any, shall be paid to Tenant.
15. ACCEPTANCE OF PREMISES. Landlord has expressly agreed in this
----------------------
Lease to perform certain tenant improvement work in the Premises as set forth in
Exhibit C. The acceptance of the Premises by Tenant shall be deemed to have
occurred five (5) days after substantial completion in accordance with Exhibit
C; at such time, Tenant shall be deemed to have accepted the Premises in their
then condition except for any "punch list" items (as that term is used in the
construction industry) noted by Tenant in writing to Landlord within such five
(5) day period pursuant to any inspection of the Premises made by Tenant within
such five (5) day period. Landlord shall complete the punch list items within
thirty (30) days. If the completion of the punch list is not possible within
said thirty (30) day period due to reasons beyond Landlord's control, Landlord
shall diligently pursue completion of the punch list. The existence of such
punch list items shall not postpone the Lease Commencement Date of this Lease
nor the obligation of Tenant to pay Rent or any other charges due under this
Lease.
16. TENANT IMPROVEMENTS. The provisions governing the planning,
-------------------
construction, scope of work and terms of payment are set forth in EXHIBIT C,
---------
which is attached hereto and incorporated herein by this reference.
17. ACCESS. Tenant shall permit Landlord to enter the Premises at all
------
reasonable times with reasonable prior notice (except in case of emergencies) to
inspect the same; to show the Premises to prospective Tenants (within twelve
months of the expiration of the term of this Lease), prospective lenders,
purchasers and investors; to exercise its rights under this Lease; to clean,
repair, alter or improve the Premises or the Building; to discharge Tenant's
obligations when Tenant has failed to do so within the time required under this
Lease or within a reasonable time after written notice from Landlord, whichever
is earlier; to post notices of nonresponsibility and similar notices and "For
Sale" signs at any time and to place "For Lease" signs upon or adjacent to the
Building at any time within twelve (12) months of the expiration of the term of
30
<PAGE>
this Lease. Tenant shall permit Landlord and its agents to enter the Premises
at any time in the event of an emergency. When reasonably necessary, Landlord
may temporarily close entrances, doors, corridors, elevators or other facilities
without liability to Tenant by reason of such closure so long as Landlord
provides reasonable access to the Building and the Premises.
If any entry or work by Landlord would materially adversely affect
Tenant's ability to operate its business in the Premises, Landlord shall
undertake such entry or work (except in the event of an emergency) after Normal
Business Hours.
18. WAIVER OF SUBROGATION.
---------------------
18.1 Tenant's Waiver. Whether due to the negligence of Landlord or
---------------
Landlord's agents or employees, or any other cause and notwithstanding any other
provision of this Lease, Tenant hereby releases Landlord and Landlord's agents
and employees from responsibility for and waives its entire claim of recovery
for (i) any loss or damage to the real or personal property of Tenant located in
the Building, including the Building itself, arising out of any of the perils
which are (or could have been) covered by Tenant's property insurance policy,
with extended coverage endorsements, or (ii) loss resulting from business
interruption or loss of rental income, at the Premises, arising out of any of
the perils which are (or could have been) covered by the business interruption
or by the loss of rental income insurance policy held by Tenant. Tenant shall
cause its insurance carrier(s) to consent to such waiver of all rights of
subrogation against Landlord.
18.2 Landlord's Waiver. Whether due to the negligence of Tenant or
-----------------
Tenant's agents or employees, or any other cause and notwithstanding any other
provision of this Lease, Landlord hereby releases Tenant and Tenant's agents and
employees from responsibility for and waives its entire claim of recovery for
(i) any loss or damage to the real or personal property of Landlord located in
the Building, including the Building itself, arising out of any of the perils
which are (or could have been) covered by Landlord's property insurance policy,
with extended coverage endorsements, or (ii) loss resulting from business
interruption or loss of rental income, at the Premises, arising out of any of
the perils which are (or could have been) covered by the business interruption
or by the loss of rental income insurance policy held by Landlord. Landlord
shall cause its insurance carrier(s) to consent to such waiver of all rights of
subrogation against Tenant.
19.0 INDEMNIFICATION. Tenant shall defend, indemnify and hold harmless
---------------
Landlord, its agents, employees, officers, directors, partners and shareholders
from and against any and all third party liabilities, judgments, demands, causes
of action, claims, losses, damages, costs and expenses, including reasonable
attorneys' fees and costs, arising out of the negligence or willful misconduct
or negligence of, Tenant, its officers, contractors, licensees, agents,
servants, employees, guests, invitees, or visitors in or about the Building or
Premises or arising from any breach or default under this Lease by Tenant, or
arising from any accident, injury, or damage caused by the willful misconduct or
negligence of Tenant, occurring in or about the Building or Premises. This
indemnification shall survive termination of this Lease. This provision shall
not be construed to make Tenant responsible for loss, damage, liability or
31
<PAGE>
expense resulting from injuries to third parties caused by the sole negligence
or willful misconduct of Landlord, or its officers, contractors, licensees,
agents, employees, or invitees.
Landlord shall defend, indemnify and hold harmless Tenant, its agents,
employees, officers, directors, partners and shareholders from and against any
and all third party liabilities, judgments, demands, causes of action, claims,
losses, damages, costs and expenses, including reasonable attorneys' fees and
costs, arising out of the negligence or willful misconduct of, Landlord, its
officers, contractors, licensees, agents, servants, employees, guests, invitees,
or visitors in or about the Building or the Premises or arising from any breach
or default under this Lease by Landlord, or arising from any accident, injury,
or damage caused by willful misconduct or negligence of Landlord, occurring in
or about the Building or Premises. This indemnification shall survive
termination of this Lease. This provision shall not be construed to make
Landlord responsible for loss, damage, liability or expense resulting from
injuries to third parties caused by the negligence or willful misconduct of
Tenant, or its officers, contractors, licensees, agents, employees, or invitees.
20. ASSIGNMENT AND SUBLETTING.
-------------------------
20.1 Landlord's Consent. Tenant shall not assign this Lease, or
------------------
sublease all or any part of the Premises, or permit the use of the Premises by
any party other than Tenant, without the prior written consent of Landlord, such
consent not to be unreasonably withheld, conditioned or delayed. When Tenant
requests Landlord's consent to such assignment or sublease, it shall notify
Landlord in writing of (i) the name and address of the proposed assignee or
subtenant; (ii) the nature and character of the business of the proposed
assignee or subtenant; (iii) financial information including financial
statements of the proposed assignee or subtenant; and (iv) a copy of the
proposed sublet or assignment agreement. Tenant shall thereafter immediately
provide to Landlord any and all other information and documents reasonably
requested by Landlord in order to assist Landlord with its consideration of
Tenant's request hereunder. Without limitation, it shall not be unreasonable if
Landlord denies its consent to a proposed assignment or sublease to an assignee
or subtenant (i) which in Landlord's reasonable opinion does not have sufficient
financial strength to meet its financial obligations under the assignment or
sublease; (ii) which Landlord can demonstrate has a history of committing lease
defaults or otherwise failing to meet its contractual obligations either with
Landlord, its affiliates, or other landlords; or (iii) to any assignee or
sublessee who proposes to use the Premises other than for the uses specifically
permitted under Section 5, above. If the proposed sublet or assignment is for
more than twenty-five percent (25%) of the rentable area of the Premises,
Landlord shall have the option (to be exercised within ten (10) business days
from the submission of Tenant's request and receipt of all other information
requested hereunder) to cancel this Lease with respect to the portion of the
Premises to be subleased or assigned as of the commencement date stated in the
proposed sublease or assignment. If Landlord shall not exercise its option
within the time set forth above, Landlord's consent to any proposed assignment
or sublease shall not be unreasonably withheld.
20.2 Approved Subleases and Assignments. If Landlord approves an
----------------------------------
assignment or sublease as herein provided, Tenant shall pay to Landlord, as
Additional Rent due
32
<PAGE>
under this Lease, as applicable (i) in the case of a sublease, an overage amount
equal to fifty percent (50%) of the difference, if any, between the Rent
allocable to that part of the Premises affected by such sublease pursuant to
this Lease, and the rent paid by the subtenant to Tenant, less any reasonable
and customary expenses incurred by the Tenant in connection with the sublease
(including without limitation tenant improvement costs, free rent, brokerage
fees, legal costs, moving allowance), and (ii) in the case of an assignment, an
overage amount equal to fifty percent (50%) of the premium, if any, received by
Tenant for such assignment. Such overage amounts shall be due and payable by
Tenant to Landlord within thirty (30) days of Tenant's receipt of payment from
the subtenant or assignee. No consent to any assignment or sublease shall
constitute a further waiver of the provisions of this Section, and all
subsequent assignments or subleases may be made only with the prior written
consent of Landlord. An assignee of Tenant, at the option of Landlord, shall
become directly liable to Landlord for all obligations of Tenant hereunder and
shall assume all such obligations in writing in a form reasonably satisfactory
to Landlord, but no sublease or assignment by Tenant shall relieve Tenant of any
liability hereunder. Any assignment or sublease without Landlord's consent shall
be void, and shall, at the option of the Landlord, constitute a default under
this Lease. In the event that Tenant requests that Landlord consider a sublease
or assignment hereunder (except with respect to the exercise by Landlord of its
option to cancel as set forth in Section 20.1), Tenant shall pay (i) Landlord's
reasonable fees, not to exceed Five Hundred and 00/100 Dollars ($500.00) per
transaction, incurred in connection with the consideration of such request, and
(ii) all reasonable attorneys' fees not to exceed $1,000.00 per transaction and
costs incurred by Landlord in connection with the consideration of such request
or such sublease or assignment.
21. ADVERTISING. Tenant shall not display any sign, graphics, notice,
-----------
picture, or poster, or any advertising matter whatsoever, anywhere in or about
the Premises or the Building at places visible from anywhere outside or at the
entrance to the Premises without first obtaining Landlord's written consent
thereto, such consent to be at Landlord's sole discretion. Tenant shall be
responsible to maintain any permitted signs and remove the same at Lease
termination. If Tenant shall fail to do so, Landlord may do so at Tenant's
expense and Tenant's reimbursement to Landlord for such amount shall be deemed
Additional Rent and shall be due within ten (10) days of Landlord's demand
therefor. Tenant shall be responsible to Landlord for any damage caused by the
installation, use, maintenance or removal of any such signs.
Tenant shall have signage rights to install a monument style sign in
front of the Building, subject to any applicable governmental laws, ordinances,
regulations, and other requirements at Tenant's expense. The size, design and
placement of such shall require approval of Landlord, which shall not be
unreasonably withheld or delayed, and all applicable zoning, government
regulations, ordinances and licenses.
22. LIENS. Tenant shall keep the Premises and the Building free from any
-----
liens, including but not limited to liens filed against the Premises by any
governmental agency, authority or organization, arising out of any work
performed, materials ordered or obligations incurred by or on behalf of Tenant,
and Tenant hereby agrees to indemnify and hold Landlord, its agents, employees,
independent contractors, officers, directors, partners, and shareholders
harmless from any liability, cost or expense for such liens. Tenant shall cause
any such lien
33
<PAGE>
imposed to be released of record by payment or posting of the proper bond within
ten (10) business days after Tenant learns of same. Tenant shall give Landlord
written notice of Tenant's intention to perform work on the Premises which might
result in any claim of lien, at least ten (10) days prior to the commencement of
such work to enable Landlord to post and record a notice of nonresponsibility or
other notice deemed proper before commencement of any such work. If Tenant fails
to remove any lien within the prescribed ten (10) day period, then Landlord may
do so at Tenant's expense and Tenant's reimbursement to Landlord for such
amount, including reasonable attorneys' fees and costs, shall be deemed
Additional Rent. Tenant shall have no power to do any act or make any contract
which may create or be the foundation for any lien, mortgage or other
encumbrance upon the reversion or other estate of Landlord, or of any interest
of Landlord in the Premises.
23. DEFAULT.
-------
23.1 Tenant's Default. A default under this Lease by Tenant shall
----------------
exist if any of the following occurs:
23.1.1. If Tenant fails to pay Rent or any other sum required to
be paid hereunder within five (5) business days after written notice from
Landlord, except as provided in Section 23.1.5 of this Lease; or
23.1.2. If Tenant fails to perform any term, covenant or
condition of this Lease except those requiring the payment of money, and Tenant
fails to cure such breach within fifteen (15) days after written notice from
Landlord where such breach could reasonably be cured within such fifteen (15)
day period, provided, however, that where such failure could not reasonably be
cured within the fifteen (15) day period, that Tenant shall not be in default if
it commences such performance within the fifteen (15) day period and diligently
thereafter prosecutes the same to completion; or
23.1.3. If, to the extent permitted by applicable law, there
shall be filed by or against Tenant, in any court pursuant to any statute either
of the United States or any state, a petition in bankruptcy or insolvency or for
the reorganization of or for the appointment of a receiver, trustee or
liquidator for all or any portion of the assets of Tenant, and, within thirty
(30) days thereafter, Tenant fails to secure a discharge thereof, or if the
Tenant makes an assignment for the benefit of creditors, or if the Tenant admits
in writing its or their inability to pay its or their debts; or
23.1.4. If Tenant shall fail to take possession of and/or occupy
the Premises within the thirty (30) days following the Lease Commencement Date
or if Tenant shall vacate the Premises for a period of fifteen (15) days or more
(without giving Landlord notice of such vacancy) at any time following the Lease
Commencement Date; or
23.1.5 The chronic delinquency by Tenant in the payment of
monthly Rent, or any other periodic payments required to be paid by Tenant under
this Lease, shall constitute a default. "Chronic delinquency" shall mean failure
by Tenant to pay Rent, or any
34
<PAGE>
other periodic payments required to be paid by Tenant under this Lease within
three (3) days after written notice thereof for any three (3) months
(consecutive or nonconsecutive) during any twelve (12) month period. In the
event of a chronic delinquency, at Landlords' option, Landlord shall have the
additional right to require that Rent be paid by Tenant quarter-annually, in
advance.
23.2 Remedies. Upon a default, Landlord shall have the following
--------
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively or
in the alternative:
23.2.1. Landlord may continue this Lease in full force and
effect, and this Lease shall continue in full force and effect as long as
Landlord does not terminate this Lease, and Landlord shall have the right to
collect Rent and other charges when due.
23.2.2. Landlord may terminate Tenant's right to possession of
the Premises at any time by giving written notice to that effect, and relet the
Premises or any part thereof. On the giving of the notice, all of Tenant's
rights in the Premises, shall terminate. Upon such termination, Tenant shall
surrender and vacate the Premises in the condition required by Article 25, and
Landlord may re-enter and take possession of the Premises and all the remaining
improvements or property and eject Tenant or any of the Tenant's subtenants,
assignees or other person or persons claiming any right under or through Tenant
or eject some and not others or eject none. This Lease may also be terminated by
a judgment specifically providing for termination. Any termination under this
Section shall not release Tenant from the payment of any sum then due Landlord
or from any claim for damages or Rent or other sum previously accrued or then
accruing against Tenant. Upon such termination Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises
or any part thereof, including, without limitation, broker's commissions,
expenses of cleaning and redecorating the Premises required by the reletting and
like costs. Reletting may be for a period shorter or longer than the remaining
term of this Lease. No act by Landlord other than giving written notice to
Tenant or executing a judgment for possession shall terminate this Lease. Acts
of maintenance, efforts to relet the Premises or the appointment of a receiver
on Landlord's initiative to protect Landlord's interest under this Lease shall
not constitute a termination of Tenant's right to possession. When Tenant is
evicted or otherwise vacates the Premises, Landlord has the right, at Tenant's
cost and without liability for the loss thereof or damage thereto, to remove all
Tenant's personal property, which shall be deemed to have been abandoned by
Tenant, and either store same or otherwise dispose of same in Landlord's sole
and absolute discretion. Landlord and Tenant hereby acknowledge that in the
event of such a termination, actual damages to Landlord may be difficult to
ascertain and, accordingly, hereby agree that in such event, the net present
value of the Base Rent due from the date of such termination to the Lease
Expiration Date, discounted at eight percent (8%) per annum, less the fair
rental value of the Premises from the date of such termination or reentry of the
Landlord until the Lease Expiration Date, discounted at eight percent (8%) per
annum, shall thereupon be immediately due and payable to Landlord to compensate
Landlord for Tenant's default and such termination. Tenant waives redemption or
relief from forfeiture under any other present or future law, in the
35
<PAGE>
event Tenant is evicted or Landlord takes possession of the Premises pursuant to
judicial process by reason of any default of Tenant hereunder.
23.2.3. Landlord may, except as may otherwise have been agreed
to between the parties pursuant to landlord lien waivers, with or without
terminating this Lease, re-enter the Premises by judicial process and remove all
persons and property from the Premises; such property shall be deemed to have
been abandoned by Tenant and may either be removed and stored in a public
warehouse or elsewhere or otherwise disposed of in the Landlord's sole and
absolute discretion, all at the cost of the Tenant. The parties hereby agree
that Landlord shall not be liable for the loss of such property or any damages
thereto. No re-entry or taking possession of the Premises by Landlord pursuant
to this Section shall be construed as an election to terminate this Lease unless
(i) a written notice of such intention is given to Tenant, or (ii) Tenant is
evicted from the Premises.
23.2.4. Landlord's rights pursuant to this Article, including
without limitation, Landlord's rights to collect Base Rent, Additional Rent and
other charges due under this Lease, shall survive any termination of the Lease,
whether such termination is effected pursuant to this Article or otherwise.
Notwithstanding anything to the contrary contained herein, Landlord, prior to
termination of the Lease or re-entry of the Premises, shall have no obligation
or duty to mitigate or attempt to offset any damages which are or may be
suffered by Landlord as a result of any default of Tenant under the Lease. From
and after termination of the Lease or re-entry of the Premises, Landlord shall
use commercially reasonable efforts to mitigate its damages. Any payment by
Tenant of a sum of money less than the entire amount due Landlord at the time of
such payment shall be applied to the obligations of Tenant then furthest in
arrears. No endorsement or statement on any check or accompanying any payment
shall be deemed an accord and satisfaction and any payment accepted by Landlord
shall be without prejudice to Landlord's right to obtain the balance due or
pursue any other remedy available to Landlord both in law and in equity.
23.2.5. Landlord agrees to use good faith, commercially
reasonable efforts to relet the Premises and otherwise to mitigate its damages
in the event of a default by Tenant. The foregoing notwithstanding (i) Landlord
shall not be obligated to show any preference between the Premises and any other
vacant space in the Building with regard to any such reletting; (ii) Landlord
may make such leasing concession (including but not limited to rental
abatement/free rent, tenant improvement allowances, and the like) as Landlord
deems appropriate in its sole but reasonable judgment; (iii) Landlord shall have
the right to attempt to relet the Premises in whole or in any subdivided part,
or in combination with other vacant space in the Building, and to apportion the
rentals and concessions thereunder in any fashion Landlord deems appropriate, in
its sole but reasonable judgment; and (iv) Landlord's inability to relet the
Premises or any part thereof, or to collect rent after any such reletting,
despite its good faith efforts, shall not constitute a violation of Landlord's
duty to mitigate under this Section 23.2.5.
24. SUBORDINATION. Landlord represents and warrants that as of the date
-------------
hereof there are no existing deeds of trust or other liens against the Building.
Upon request of Landlord, Tenant will, in writing, subordinate its rights
hereunder to any holder of the lien of any mortgage,
36
<PAGE>
deed of trust, ground lease or underlying lease hereafter in force against the
Premises (the "Landlord's Mortgage"), and to all advances made or hereafter to
be made upon the security thereof; provided, however, that Tenant shall grant
such subordination only if Tenant simultaneously receives in a form reasonably
acceptable to Tenant and Landlord, a non-disturbance agreement from and executed
by Landlord's Mortgagee for the benefit of Tenant. Tenant shall execute and
return to Landlord any such subordination documents within twenty (20) business
days of Landlord's written request. Such non-disturbance agreement shall provide
in the event any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by the
Landlord covering the Premises, that Tenant shall attorn to the purchaser at any
such foreclosure, or to the grantee of a deed in lieu of foreclosure, and
recognize such purchaser or grantee as the Landlord under this Lease, provided
such purchaser or grantee assumes in writing Landlord's obligations under this
Lease.
25. SURRENDER OF POSSESSION. Upon expiration of the term of this Lease
-----------------------
or as otherwise provided hereunder, Tenant shall promptly and peacefully
surrender the Premises to Landlord in as good condition as when received by
Tenant from Landlord or as thereafter improved, reasonable use and wear and tear
(to the reasonable satisfaction of Landlord) and damage by storm, fire,
lightning, earthquake or other casualty excepted. If the Premises are not
surrendered in accordance with the terms of this Lease, Tenant shall indemnify
Landlord and its agents, employees, independent contractors, officers,
directors, partners, and shareholders against any loss or liability including
reasonable attorneys' fees and costs, and including liability to succeeding
tenants, resulting from delay by Tenant in so surrendering the Premises. This
indemnification shall survive termination of this Lease.
26. NON-WAIVER. Waiver by Landlord of any breach of any term, covenant or
----------
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition(s); or any subsequent breach of the same or any other
term, covenant or condition of this Lease, other than the failure of Tenant to
pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such Rent. No provision of
this Lease shall be deemed to have been waived or modified by Landlord or Tenant
unless such waiver or modification shall be in writing and signed by the party
against whom such waiver or modification is sought to be enforced.
27. HOLDOVER. If Tenant shall, without the written consent of Landlord,
--------
hold over after the expiration of the term of this Lease such tenancy shall be
deemed a month-to-month tenancy, which tenancy may be terminated by either party
upon thirty (30) days written notice to the other party. During such tenancy,
Tenant agrees to pay to Landlord, each month, the greater of the fair market
rental value for the Premises or one hundred fifty percent (150%) of the Rent
payable by Tenant for the last month of the term of this Lease.
28. CONDEMNATION. If twenty (20) percent or more of the Premises or of
------------
such portions of the Building as may be required for the reasonable use of the
Premises, are taken by eminent domain or sale under threat of condemnation by
eminent domain, this Lease shall automatically terminate as of the date title
vests in the condemning authority, and all Rent and other payments shall be paid
to that date. Landlord reserves all rights to damages to the Premises
37
<PAGE>
for any partial or entire taking by eminent domain, and Tenant hereby assigns to
Landlord any right Tenant may have to such damages or award, and Tenant shall
make no claim against Landlord or the condemning authority for damages for
termination of the leasehold interest or interference with Tenant's business.
Tenant shall have the right to claim and recover from the condemning authority
compensation for any loss which Tenant may incur for Tenant's moving expenses,
business interruption or taking of Tenant's personal property (not including
Tenant's leasehold interest).
29. NOTICES. All notices and demands which may be required or permitted
-------
to be given to either party hereunder shall be in writing, and shall be sent by
overnight courier or United States mail, postage prepaid, certified or
registered with return receipt requested, to the addresses set forth below, or
to such other person or place as each party may from time to time designate in a
notice to the other. Notice shall be deemed received upon delivery, if sent by
overnight courier, or upon the earlier of, if sent by mail, actual receipt or
the third day after deposit in the United States mail, postage prepaid. Notices
shall be addressed as follows:
If to Landlord: If to Tenant:
Aetna Life Insurance Company 1801 K Street, N.W.
c/o Trammell Crow Company Suite 201
1115 30th Street, NW Washington, D.C. 20006
Washington, DC 20007 Attn.: Mr. C. Raymond Marvin
with a copy to:
Philip M. Horowitz, Esq.
Arter & Hadden
1801 K Street, N.W.
Suite 400K
Washington, D.C. 20006
30. MORTGAGEE PROTECTION. Tenant agrees to give any mortgagee(s) and/or
--------------------
trust deed holder(s), by overnight courier or certified or registered mail,
return receipt requested, a copy of any notice of default served upon the
Landlord, provided that prior to such notice Tenant has been notified in writing
(by way of notice of assignment of rents and leases, or otherwise) of the
addresses of such mortgagee(s) and/or trust deed holder(s). Tenant further
agrees that if Landlord shall have failed to cure such default within the time
provided for in this Lease, then the mortgagee(s) and/or trust deed holder(s)
shall have an additional thirty (30) days within which to cure such default or
if such default cannot be cured within that time, then such additional time as
may be necessary if within such thirty (30) days any mortgagee and/or trust deed
holder(s) has commenced and is diligently pursuing the remedies necessary to
cure such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued.
38
<PAGE>
31. COSTS AND ATTORNEYS' FEES. If Tenant or Landlord shall employ an
-------------------------
attorney with regard to any act, omission or activity of the other with regard
to this Lease, including any suit by Landlord for the recovery of Rent or other
payments due hereunder or possession of the Premises, the losing party shall pay
the prevailing party a reasonable sum for attorneys' fees and costs, including
without limitation those incurred in connection with any litigation, at trial,
and on appeal, and such attorneys' fees and costs shall be deemed to have
accrued on the commencement of such action.
32. BROKERS. Tenant represents and warrants to Landlord that neither it
-------
nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate broker other than Murrey and Associates in the negotiating or making
of this Lease, and Tenant agrees to indemnify and hold Landlord, its agents,
employees, partners, directors, shareholders and independent contractors
harmless from all liabilities, costs, demands, judgments, settlements, claims,
and losses, including reasonable attorneys' fees and costs, incurred by Landlord
in conjunction with any such claim or claims of any other broker or brokers
claiming to have interested Tenant in the Building or Premises or claiming to
have caused Tenant to enter into this Lease.
33. LANDLORD'S LIABILITY.
--------------------
33.1 Anything in this Lease to the contrary notwithstanding,
covenants, undertakings and agreements herein made on the part of Landlord are
made and intended not for the purpose of binding Landlord personally or the
assets of Landlord but are made and intended to bind only the Landlord's
interest in the Premises and Building (including the rent account, insurance
proceeds and any condemnation award) , as the same may, from time to time, be
encumbered and no personal liability shall at any time be asserted or
enforceable against Landlord or its stockholders, officers or partners or their
respective heirs, legal representatives, successors and assigns on account of
the Lease or on account of any covenant, undertaking or agreement of Landlord in
this Lease.
33.2 Landlord shall not be liable for any damage or injury which may
be sustained by Tenant or any other person from water by reason of the breakage,
leakage or obstruction of the roof, roof drains, sprinkler systems, water or
soil pipes or any other leakage in or about the Premises, or resulting from the
sole negligence or willful misconduct on the part of any of Landlord's other
tenants, their agents or employees. Landlord shall not be liable for any loss of
property from any cause whatsoever, including not by way of limitation, theft,
vandalism or burglary from the Premises, and Tenant covenants and agrees to make
no claim for any such loss at any time.
34. ESTOPPEL CERTIFICATES. Tenant shall, from time to time, within ten
---------------------
(10) days of Landlord's written request, execute, acknowledge and deliver to
Landlord or its designee a written statement stating: the date the Lease was
executed and the date it expires; the date Tenant entered occupancy of the
Premises; the amount of Base Rent, Additional Rent and other charges due
hereunder and the date to which such amounts have been paid; that this Lease is
in
39
<PAGE>
full force and effect has not been assigned, modified, supplemented or amended
in any way (or specifying the date and terms of any agreement so affecting this
Lease) ; that this Lease represents the entire agreement between the parties as
to this leasing; that all conditions under this Lease to be performed by the
Landlord have been satisfied (or specifying any such conditions that have not
been satisfied); that all required contributions by Landlord to Tenant on
account of Tenant's improvements have been received (or specifying contributions
that have not been received) that on the date of such statement there are no
existing defenses or offset which the Tenant has against the enforcement of this
Lease by the Landlord (or if so, specifying the same); that no Rent has been
paid more than one (1) month in advance; that no security has been deposited
with Landlord (or, if so, the amount thereof) ; or any other matters evidencing
the status of the Lease, as may be reasonably required either by a lender making
a loan to Landlord to be secured by a deed of trust or mortgage against the
Building, or a purchaser of the Building. It is intended that any such statement
delivered pursuant to this Article may be relied upon by a prospective purchaser
of Landlord's interest or a mortgagee of Landlord's interest or assignee of any
mortgage upon Landlord's interest in the Building. If Tenant fails to respond
within ten (10) days of receipt by Tenant of a written request by Landlord as
herein provided, Tenant shall be deemed to have given such certificate as above
provided without modification and shall be deemed to have admitted the accuracy
of any information supplied by Landlord to a prospective purchaser or mortgagee.
35. FINANCIAL STATEMENTS. Within ten (10) days after Landlord's request
--------------------
but no more than once per year, Tenant shall deliver to Landlord the current
financial statements of Tenant, and financial statements of each of the two (2)
years prior to the current financial statements year, with an opinion of a
certified public accountant, including a balance sheet and profit and loss
statement for the most recent prior year, all prepared in accordance with
generally accepted accounting principles consistently applied. Tenant also
agrees, within five (5) days of Landlord's request, to provide such further
financial information (such as quarterly statements) as Landlord may request.
Landlord shall keep confidential all financial information received from Tenant,
and shall not disclose any such financial information to any third party
individual or entity other than current or prospective lenders, current or
prospective investors or partners, and any licensed commercial real estate
appraiser so long as such parties agree to keep Tenant's financial information
confidential.
36. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer(s) of
-------------------------------
Landlord's interest in the Premises or the Building, other than a transfer for
security purposes only, the transferor shall be automatically relieved of any
and all obligations and liabilities on the part of Landlord accruing from and
after the date of such transfer so long as the transferee assures in writing
Landlord's obligation under this Lease, and Tenant agrees to attorn to the
transferee.
37. RIGHT TO PERFORM. If Tenant shall fail to pay any sum of money,
----------------
other than Rent, required to be paid by it hereunder, or if Tenant shall fail to
perform any other act on its part to be performed hereunder which such failure
shall continue for fifteen (15) days, then, in addition to a default if provided
by Section 23.1, Landlord may, but shall not be obligated so to do, and without
waiving or releasing Tenant from any obligations of Tenant, make any such
40
<PAGE>
payment or perform any such other act on Tenant's part to be made or performed
as provided in this Lease. Notwithstanding the foregoing, in the event of an
emergency, if Tenant shall fail to pay any sum of money, other than Rent,
required to be paid by it hereunder or shall fail to perform any other act on
its part to be performed hereunder, Landlord may, but shall not be obligated so
to do, and without waiving or releasing Tenant from any obligations of Tenant,
immediately make any such payment or perform any such other act on Tenant's part
to be made or performed as provided in this Lease. Landlord shall have (in
addition to any other right or remedy of Landlord) the same rights and remedies
in the event of the nonpayment of sums due under this Article as in the case of
default by Tenant in the payment of Rent. All sums paid by Landlord and all
penalties, interest and costs in connection therewith, shall be due and payable
by Tenant as Additional Rent on the next day after such payment by Landlord,
together with interest thereon equal to the prime rate of interest as published
in The Wall Street Journal (or any successor publication thereto) from time to
-----------------------
time, plus two percent (2%).
38. SUBSTITUTED PREMISES. INTENTIONALLY DELETED.
--------------------
39. SALES AND AUCTIONS. No retail sales may be conducted at, upon or in
------------------
the Premises. Tenant may not use the exterior walls and doorways of the
Premises for storage. Tenant agrees not to install any exterior lighting,
amplifiers or similar devices in or about the Premises. Tenant shall not conduct
or permit to be conducted any sale by auction in, upon or from the Premises
whether said auction be voluntary, involuntary, pursuant to any assignment for
the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.
40. ROOFTOP EQUIPMENT. Tenant may install, at its sole cost,
-----------------
telecommunications equipment (the "Rooftop Equipment") on the roof of the
Building, subject to Landlord's prior written approval, not to be unreasonably
withheld, conditioned or delayed, of plans and specifications for the Rooftop
Equipment and the type and placement of all cabling and wiring ancillary
thereto. Tenant shall be responsible for paying all reasonable out-of-pocket,
third party costs associated with Landlord's review of such plans and
specifications for the Rooftop Equipment (if any) . Landlord shall not charge
Tenant additional rent for the use of space on the roof for the Rooftop
Equipment. Tenant shall be responsible for obtaining and maintaining all
approvals, permits and licenses required by Fairfax County, Reston or any
federal, state or local government for installation and operation of the Rooftop
Equipment and shall pay all fees attendant thereto. If the Rooftop Equipment is
installed, Tenant shall have sole responsibility for the maintenance, repair and
replacement thereof and of all cabling and wiring ancillary thereto and Tenant
will be responsible for bearing the costs to repair any damage caused to the
roof or Building by the installation of the Rooftop Equipment. At the
expiration or earlier termination of this Lease, Tenant shall remove the Rooftop
Equipment and all cabling and wiring ancillary thereto and shall be responsible
to repair any damage caused to the roof or Building in connection with such
removal.
Notwithstanding the foregoing, Tenant covenants and agrees that:
(a) The Rooftop Equipment shall not unreasonably interfere with the standard
use of the building by other tenants;
41
<PAGE>
(b) Tenant shall pay any increase in Landlord's insurance rates occasioned by
the installation or operation of the Rooftop Equipment;
(c) Tenant shall fully insure against damage occasioned by the installation
and/or operation of the Rooftop Equipment (subject to the provisions of
Sections 12.1 and 18.2 of the Lease);
(d) Landlord shall retain the right to designate the placement of the Rooftop
Equipment and to require such reasonable "screening" type improvements to the
building as may be required to maintain its cosmetic appearance; and
(e) If Tenant accesses the roof without a designated representative of
Landlord, the burden of proof for any damages subsequent to such access shall be
upon Tenant.
41. SECURITY. Tenant hereby agrees to the exercise by Landlord and its
--------
agents and employees, within their sole discretion, of such security measures as
it deems necessary for the Building so long as such measures do not adversely
affect Tenant's use of the Premises or the Building for its business operations.
The Building shall be open during Normal Business Hours and Landlord shall
provide Tenant with access to the Building during other than Normal Business
Hours through a card-key (or equivalent) system.
42. AUTHORITY OF TENANT. Tenant warrants to Landlord that Tenant, if
-------------------
other than an individual, is a validly existing legal entity under the laws of
the state of its formation, that it is duly qualified to do business in the
State in which the Premises are located, that its entry into and performance of
this Lease has been duly authorized, that, if Tenant is not an individual, the
officers(s), partner (s) or trustee (s), as applicable, executing this Lease
on Tenant's behalf are duly authorized to do so, and that this Lease is binding
upon Tenant.
43. NO ACCORD OR SATISFACTION. No payment by Tenant or receipt by
-------------------------
Landlord of a lesser amount than the Rent and other sums due hereunder shall be
deemed to be other than on account of the earliest Rent or other sums due, nor
shall any endorsement or statement on any check or accompanying any check or
payment be deemed an accord and satisfaction; and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
Rent or other sum and to pursue any other remedy provided in this Lease.
44. MODIFICATIONS FOR LENDER. If in connection with obtaining financing
------------------------
for the Building or any portion thereof, Landlord's lender shall request
reasonable modifications to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay, or defer its consent to such
modification provided such modifications do not increase the Rent or Tenant's
obligations under this Lease or adversely affect Tenant's rights hereunder.
45. PARKING. Tenant's occupancy of the Premises shall include the use of
-------
eighty-six (86) parking spaces at no cost or expense to Tenant, of which two (2)
shall be reserved to Tenant, and the remaining eighty-four (84) of which shall
be used in common with other tenants,
42
<PAGE>
invitees and visitors of the Building. Tenant shall have the right to park in
the Building parking facilities in common with other tenants of the Building.
Tenant agrees not to overburden the parking facilities and agrees to cooperate
with Landlord and other tenants in use of the parking facilities. Landlord
reserves the right in its reasonable discretion to determine whether the parking
facilities are becoming overburdened and to allocate and assign parking spaces
among Tenant and other tenants, and to reconfigure the parking area and modify
the existing ingress to and egress from the parking area as Landlord shall deem
appropriate.
46. GENERAL PROVISIONS.
------------------
46.1. Acceptance. The submission of this Lease by Landlord does not
----------
constitute an offer by Landlord or other option for, or restriction of, the
Premises, and this Lease shall only become effective and binding upon Landlord,
upon full execution hereof by Landlord and delivery of a signed copy to Tenant.
46.2. Joint Obligation. If there be more than one Tenant, the
----------------
obligations hereunder imposed shall be joint and several.
46.3. Marginal Headings, Etc. The marginal headings, Table of
-----------------------
Contents, lease summary sheet and titles to the articles and sections of this
Lease are not a part of the Lease and shall have no effect upon the construction
or interpretation of any part hereof.
46.4. Choice of Law. This Lease shall be governed by and construed
-------------
in accordance with the laws of the State in which the Premises are located.
46.5. Successors and Assigns. The covenants and conditions herein
----------------------
contained, subject to the provisions as to assignment, inure to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
46.6. Recordation. Neither Landlord nor Tenant shall record this
-----------
Lease, but a short-form memorandum hereof may be recorded at the request of
Landlord or Tenant.
46.7. Quiet Possession. Upon Tenant's paying the Rent and other
----------------
charges due hereunder and observing and performing all of the covenants,
conditions and provisions on Tenant's part to be observed and performed
hereunder, Tenant shall have quiet possession of the Premises for the term
hereof, subject to all the provisions of this Lease.
46.8. Partial Invalidity. Any provision of this Lease which shall
------------------
prove to be invalid, void, or illegal shall in no way affect, impair or
invalidate any other provision hereof and such other provision(s) shall remain
in full force and effect.
46.9. Cumulative Remedies. No remedy or election hereunder shall be
-------------------
deemed exclusive but shall, whenever possible, be cumulative with all other
remedies at law or in equity.
43
<PAGE>
46.10. Entire Agreement. This Lease contains the entire agreement of
----------------
the parties hereto and no representations, inducements, promises or agreements,
oral or otherwise, between the parties, not embodied herein, shall be of any
force or effect.
46.11. Labor Disputes. Tenant agrees that it will not at any time,
--------------
either directly or indirectly, employ or permit the employment of any
contractor, mechanic or laborer, or permit any materials in the Premises, in
connection with any services, provisions, alterations or maintenance, if the use
of such contractor, mechanic or laborer or such materials creates any
difficulty, strike or jurisdictional dispute with other contractors, mechanics
or laborers engaged by Landlord or others, or disturbs the construction,
maintenance, cleaning, janitorial services, repair, management, security or
operation of the Building or any part thereof. In the event of any interference
or conflict, Tenant, upon demand of Landlord, shall cause all contractors,
mechanics or laborers, or all materials causing such interference, difficulty or
conflict, to leave or be removed from the Building immediately.
46.12. Waiver of Counterclaim. Tenant hereby waives the right to
----------------------
interpose any counterclaim (other than a compulsory counterclaim) of whatever
description in any summary proceeding.
46.13. Time Is of the Essence. Time is of the essence of this Lease.
----------------------
Unless specifically provided otherwise, all references to terms of days or
months shall be construed as references to calendar days or calendar months,
respectively.
46.14. Execution. This Lease may be executed in any number of
---------
counterparts, each of which shall be deemed an original and any of which shall
be deemed to be complete in itself and may be introduced into evidence or used
for any purpose without the production of the other counterparts.
46.15. Force Majeure. A party to this Lease shall be excused from
the performance of its duties and obligations under this Lease, except
obligations for the payment of money such as Base Rent, for the period of delay,
but in no event longer than ninety (90) days, caused by labor disputes,
governmental regulations, riots, war, insurrection, acts of God or other causes
beyond the control of the party whose performance is being excused (but such
causes shall not include insufficiency of funds).
46.16. No Joint Venture. This Lease does not and shall not be
----------------
construed to create a partnership, joint venture or any other relationship other
than that of landlord and tenant.
47. RULES AND REGULATIONS. Tenant agrees to comply with such reasonable
---------------------
rules and regulations as Landlord may adopt from time to time for the orderly
and proper operation of the Building and parking and other common areas. Such
rules may include but shall not be limited to the following: (i) restricting of
employee parking to a limited, designated area or areas; and (ii) regulation of
the removal, storage and disposal of Tenant's refuse and other rubbish at the
sole cost and expense of Tenant. The rules and regulations shall be binding upon
Tenant upon delivery of a copy of them to Tenant. Landlord shall not be
responsible to Tenant
44
<PAGE>
for the nonperformance of any of said rules and regulations by any other tenants
or occupants of the Building. Landlord shall not discriminate against Tenant in
the enforcement of any rule or regulation.
48. NO WARRANTIES OR REPRESENTATIONS BY LANDLORD. Tenant acknowledges
--------------------------------------------
and agrees that, except as expressly set forth in this Lease, neither Landlord
nor any agent or representatives of Landlord have made, and Landlord is not
liable or responsible for or bound in any manner by any express or implied
representations, warranties, covenants, agreements, obligations, guarantees,
statements, information or inducements pertaining to the Premises or any part
hereof, the title and physical condition thereof, the quantity, character,
fitness and quality thereof, merchantability, fitness for particular purpose,
the income, expenses or operation thereof, the value and profitability thereof,
the uses which can be made thereof or any other matter or thing whatsoever with
respect thereto. Tenant acknowledges, agrees, represents and warrants that it
has had the opportunity and has in fact inspected the Premises, and that it has
had access to information and data relating to all of same as Tenant has
considered necessary, prudent, appropriate or desirable for the purposes of this
transaction and, without limiting the foregoing, that Tenant and its agents and
representatives have independently inspected, examined, analyzed and appraised
all of same, including the condition, value and profitability thereof. Without
limiting the foregoing, Tenant acknowledges and agrees that, except as expressly
set forth in this Lease, Landlord is not liable or responsible for or bound in
any manner by (and Tenant has no relief upon) any oral or written or supplied
guarantees, statements, information or inducements pertaining to the Premises or
any part hereof, such condition and such operation and any other information
respecting same furnished by or obtained from Landlord or any agent or
representative of Landlord.
49. LANDLORD'S CONSENT OR APPROVAL.
------------------------------
49.1. With respect to any provision of this Lease which provides
that Tenant shall obtain Landlord's prior consent or approval, Landlord may
withhold such consent or approval for any reason at its sole discretion, unless
the provision specifically states that the consent or approval will not be
unreasonably withheld.
50. WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT WAIVE THE RIGHT TO A
-----------------------
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THIS LEASE. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY
MADE BY TENANT AND TENANT ACKNOWLEDGES THAT NEITHER LANDLORD NOR ANY PERSON
ACTING ON BEHALF OF LANDLORD HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. TENANT
FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO
BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. TENANT FURTHER ACKNOWLEDGES
THAT IT HAS READ AND UNDERSTANDS THE MEANING AND
45
<PAGE>
RAMIFICATIONS OF THIS WAIVER PROVISION AND AS EVIDENCE OF SAME HAS EXECUTED THIS
LEASE.
Initials:
Landlord: /s/ Tenant: /s/
---------------------------- --------------------------
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease, in triplicate,
on the day and year first above written.
TENANT: LANDLORD:
- ------ --------
Telephone Business Meetings, Inc. Aetna Life Insurance Company
By: /s/ By: /s/
--------------------------------------- --------------------------------
Printed Name: C. Raymond Marvin Printed Name: Thomas G.[illegible]
Its: President Its: Assistant Vice President
-------------------------------------- -------------------------------
Date: 12/6/94 Date: 12/8/94
------------------------------------- ------------------------------
46
<PAGE>
EXHIBIT "A"
-----------
LOCATION AND DESCRIPTION OF PREMISES
Description of Premises pursuant to a lease dated December 6, 1994, by and
between Aetna Life Insurance Company ("Landlord") and Telephone Business
Meetings, Inc., dba Access Conference Call Service ("Tenant"): Nineteen
Thousand Seven Hundred Sixty-five (19,765) square feet on the second (2nd) floor
of 1861 Wiehle Avenue, the 73,685 square foot building located at 1861 Wiehle
Avenue, Reston, Virginia 22090.
Note: Landlord and Tenant shall mutually agree on the exact location
of the 19,765 square foot Premises on the approximately 25,141
square foot second floor.
[Diagram Inserted]
47
<PAGE>
EXHIBIT "B"
-----------
RENT INCREASES
Rent during the third and subsequent years of the initial term shall be
increased by three percent (3%) over the preceding year's Rent.
48
<PAGE>
AGREEMENT OF LEASE
by and between
AETNA LIFE INSURANCE COMPANY
and
TELEPHONE BUSINESS MEETINGS, INC. dba ACCESS CONFERENCE CALL
EXHIBIT C
Plans and Specifications for the Premises
The following are the Standard Improvement Items, the Standard Allowance of each
of which the Landlord shall provide at its expenses as part of the improvements
to be made to the premises.
1. PARTITIONING
1.1. Standard interior partitions shall be constructed of one-half inch
(1/2") gypsum drywall on each side of three and five-eighths inch (3-5/8") steel
studs, from slab to ceiling. Such drywall shall be taped, spackeled, finished
and painted.
1.2. All corridor and demising partitions shall be sound-insulated with 3-
1/2" of batt insulation, finished gypsum drywall, and shall be constructed
according to applicable building code provisions.
1.3. The Standard Allowance shall be eighty-three lineal feet of interior
partition and N/A lineal feet of demising partition for each one thousand (1000)
square feet of floor area. All interior standard partitions and one-half of the
demising partitions between the Premises and other leasable space shall be
charged against such Standard Allowance.
2. DOORS
2.1. Standard interior doors shall be solid-core, paint grade, shall be
painted to match the partitioning, and shall include building standard hardware.
The Standard Allowance shall be one door for each three hundred fifty square
feet of floor area.
2.2. Standard suite entrance doors shall be made of solid core wood, and
shall include a building standard lockset.
49
<PAGE>
3. ELECTRICAL SERVICE
3.1. Electric lights shall be three bulb, flush-mounted, energy miser,
fluorescent fixtures having dimensions of two feet (2') by four feet (4'), and
capable of providing seventy (70') foot candles at desk height. One light
fixture shall be provided for each eighty-five square feet of floor.
3.2. The Standard Allowance shall be one interior wall-mounted duplex,
110-volt receptacle for each one hundred fifty square feet of floor area, and
one light switch for each three hundred fifty square feet of floor area.
3.3. The Standard Allowance shall not include any special outlet, any
outlet not located on a drywall partition, or any separate circuit, all of which
shall be provided at the Tenant's expense.
4. FLOOR COVERING
4.1. The Landlord shall provide and install carpeting throughout the
Premises using the Landlord's building standard, type and grade (Wunda Weve-
Centurion Decathlon-Antron III nylon, or equal) of such color as is selected by
the Tenant from the Landlord's standard selections.
4.2. The Landlord shall provide a dark brown or black four-inch (4") high
base for each partition covered by the Standard Allowance.
5. WINDOW COVERING
The Landlord shall provide for each exterior window architectural narrow
slat venetian blinds of a standard color.
6. WALL FINISHES
The Landlord shall provide two (2) coats of paint on all partitions, doors
and columns covered by the Standard Allowance using such paint color as is
selected by the Tenant from the selections provided by the Landlord.
7. GRAPHICS
The Landlord shall provide the suite number for the Premises, using the
Landlord's standard type for the Building. Any additional lettering requested
by the Tenant shall conform to such standard type and shall be provided at the
Tenant's expense.
8. CEILING
50
<PAGE>
8.1. The Landlord shall provide throughout the Premises an acoustical tile
ceiling comprised of two-foot (2') by four-foot (4') panels, having an exposed
grid system.
8.2. The ceiling shall have a minimum height of eight feet, two inches
(8'2").
9. HEATING, VENTILATING AND AIR-CONDITIONING SYSTEM
Tenant will be responsible for all construction costs associated with
changes to existing building heating, ventilation, air conditioning and
electrical systems due to Tenant requirements which exceed or differ from
building standards.
10. FLOOR LOAD
Floor load capabilities are designed for normal office space use. The
Tenant shall notify the Landlord before the preparation of working drawings for
the Premises of any concentration of floor loads which the Tenant may desire,
and shall bear any additional cost incurred by the Landlord in accommodating the
same.
11. LANDLORD'S CONSTRUCTION OF TENANT'S SPACE
Landlord and Tenant agree that Landlord shall cause the construction of the
improvements to the Premises in accordance with the plans, design and
specifications prepared by Tenant ("Tenant's Plans"), and the working drawings
prepared by Tenant (i.e., mechanical, electrical and plumbing drawings, the
"Working Drawings"). The Tenant's Plans and Working Drawings shall be prepared
by Tenant and presented to Landlord for approval and review within forty-five
(45) days of the full execution of the Lease. Notwithstanding the foregoing,
Tenant shall prepare and present to Landlord within thirty (30) days of the full
execution of the Lease, the Tenant Plans and Working Drawings for the computer
room area.
Following the preparation and approval of Tenant's Plans and the Working
Drawings, Landlord agrees to build-out the Premises as per Tenant's Plans and
the Working Drawings. All construction for the Premises shall be awarded
following a competitive bid format, with Trammell Crow Real Estate Services,
Inc. serving as construction manager ("Construction Manager"). The Construction
Manager shall: (1) prepare a bid package approved by Landlord and Tenant; (2)
solicit bids from a minimum of three qualified general contractors approved by
Landlord and Tenant; (3) prepare a bid analysis for review by Landlord and
Tenant; and (4) award the bid to the lowest qualified general contractor (as
approved by Tenant). On behalf of Landlord and Tenant, the Construction Manager
shall supervise the construction for the Premises, ensuring that: (1) all
construction is performed in a workmanlike manner; (2) all construction is in
compliance with all applicable governmental regulations; and (3) all
construction materials are free of defect (inherent or otherwise).
(i) Tenant Allowance. As a material part of this leasing transaction, Landlord
----------------
agrees to provide to Tenant an allowance ("Tenant Improvement Allowance") of
$20.00 per square foot (i.e., a total of 19,500 sf x $20.00 psf = $39,000.00.
Such Tenant Improvement Allowance
51
<PAGE>
shall be usable for, but shall not be limited to, the cost of all construction
documents/drawings, permits, actual construction costs (materials and labor),
general contractor fees, reasonable (and documented) moving related expenses
(not to exceed $2.00 per square foot of the total Tenant Improvement Allowance),
and a five percent (5%) construction management fee (such total costs
hereinafter referred to as "Tenant Improvement Costs"). To the extent that the
Tenant Improvement Costs exceed the Tenant Improvement Allowance (a
"Shortfall"), Landlord will bill to Tenant the Shortfall in two (2) equal
installments, due as follows: the first installment of fifty percent (50%) of
the shortfall to be made at the commencement of construction, and the second
installment of fifty percent (50%) upon substantial completion of construction.
To the extent that the Tenant Improvement Costs are less than the Tenant
Improvement Allowance, Landlord shall credit the unused portion of the Tenant
Improvement Allowance against the first rental payment(s) when due or, at
--
Tenant's sole option, Landlord shall place the unused portion of the Tenant
Improvement Allowance in an interest-bearing account, and Tenant may use said
unused portion of the Tenant Improvement Allowance for future Tenant
Improvements within the premises. In all events, ten percent (10%) of the total
cost of the job will be held back from the general contractor until all punch
list items are complete, to the reasonable satisfaction of Tenant's architect.
(ii) Delay in Preparation of Tenant's Plans. If the Tenant does not complete
--------------------------------------
preparation of the Tenant's Plans and Working Drawings within the time periods
specified above, and such delay causes the Landlord to postpone substantial
completion of the space or delays the Lease Commencement Date, then Tenant shall
pay to Landlord on the date rent would have commenced hereunder in the absence
of such delay, a sum of money equivalent to the Rent for the Premises for the
period during which Tenant would have been obligated to pay rent to the Landlord
had not the Lease Commencement Date been so delayed.
(iii) Changes to the Tenant Plans. If changes are made by Tenant to the
---------------------------
Tenant's Plans after Landlord's approval, and should these changes to the
Tenant's Plans cause the Landlord to postpone substantial completion of the
space or delay the Lease Commencement Date, then Landlord shall have the right
to refuse to permit the making of such changes unless and until Tenant shall
have committed in writing, in a manner reasonably satisfactory to Landlord, to
pay to Landlord on the date rent would have commenced hereunder in the absence
of such delay, a sum of money equivalent to the Rent for the Premises for the
period during which Tenant would have been obligated to pay rent to the Landlord
had not the Lease Commencement Date been so delayed.
(iv) Notice. Tenant shall, by notice to Landlord in writing, designate a
------
single individual who Tenant agrees shall be available to meet and consult with
Landlord at the Premises as Tenant's representative respecting the matters which
are the subject of this Exhibit and who, as between Landlord and Tenant, shall
have the power to legally bind Tenant, in making requests for changes, giving
approval of plans or work, giving directions to the Landlord or the like, under
this Exhibit.
Landlord shall, by notice to Tenant in writing, designate a single
individual who Landlord agrees shall be available to meet and consult with
Tenant at the Premises as Landlord's
52
<PAGE>
representative respecting the matters which are the subject of this Exhibit and
who, as between Landlord and Tenant, shall have the power to legally bind
Landlord, in making requests for changes, giving approval of plans or work,
giving directions to the Tenant or the like, under this Exhibit.
(v) Substantial Completion. For purposes of the Lease, "substantially
----------------------
complete" means full completion, except for minor or insubstantial details of
construction, decoration or installation.
(vi) Payment. Any invoice from Landlord not paid by Tenant within 30 days of
-------
receipt thereof will be subject to an interest charge at an annual rate equal to
the average prime interest rate published in The Wall Street Journal during the
-----------------------
period of any such delay in payment. Said interest and invoice payments are to
be treated by Landlord and Tenant as rent due hereunder.
53
<PAGE>
EXHIBIT D
---------
HVAC SPECIFICATIONS
-------------------
Landlord shall maintain the HVAC system at the following performance
capabilities:
Summer - Outdoor: 95(degrees) dry bulb/78(degrees) wet bulb
Summer - Indoor Tolerance (maximum): 76(degrees) dry bulb
Winter - Outdoor: 14(degrees)F, dry bulb
Winter - Indoor Tolerance (minimum): 74(degrees) dry bulb
Relative humidity shall not exceed Fifty Percent (50%), and shall be in a
range to provide reasonable comfort throughout the Premises.
54
<PAGE>
EXHIBIT "E"
CLEANING SPECIFICATIONS
-----------------------
Cleaning services provided five (5) days per week unless otherwise specified.
Cleaning hours Monday through Friday between 6:00 PM and before 8:00 AM of the
following day.
On the last day of the week the work will be done after 6:00 PM, Friday, but
before 8:00 AM, Monday.
No cleaning on holidays.
Lavatories
- ----------
All lavatory floors to be swept and washed with disinfectant nightly.
Tile walls and dividing petition to be washed and disinfected weekly.
Basins, bowls, urinals to be washed and disinfected daily.
Mirrors, shelves, plumbing work, bright work, and enamel surfaces cleaned
nightly.
Waste receptacles will be emptied and cleaned and wash dispensaries to be filled
with appropriate tissues, towels, soap nightly.
Main Lobby, Elevators, Building Exterior and Corridors
- ------------------------------------------------------
Wipe and wash all floors in Main Lobby nightly.
Wipe and/or vacuum elevator floors nightly.
Office Area
- -----------
Furniture and fixtures within reach will be dusted and desk tops will be wiped
clean. However, desks with loose papers on the top will not be cleaned.
Ash trays to be emptied and cleaned.
Windows sills and baseboards to be dusted and washed when necessary.
Office wastepaper baskets will be emptied nightly.
55
<PAGE>
Cartons or refuse in excess of that which can be placed in wastebaskets will not
be removed. Tenants are required to place such unusual refuse in trash cans.
Cleaner will not remove or clean tea or coffee cups or similar containers; also,
if such liquids are spilled in wastebaskets, the wastebaskets will be emptied
but not otherwise cleaned.
Hard floors will be swept daily and washed and waxed monthly.
Carpet will be vacuumed nightly. Wipe clean all glass, brass and other bright
work weekly.
Dust all pictures, charts, wall hangings monthly that are not reached in nightly
cleaning.
56
<PAGE>
EXHIBIT "F"
-----------
DIAGRAM
57
<PAGE>
AMENDMENT TO LEASE AGREEMENT
This Amendment to Lease Agreement (the "Agreement") is made as of the 28/th/
day of March, 1995, by and between Aetna Life Insurance Company (Landlord), and
Telephone Business Meetings, Inc. dba Access Conference Call Service (Tenant).
WHEREAS, by a lease dated December 6, 1994 (hereinafter referred to as the
"Lease"), Landlord leased to Tenant and Tenant leased from Landlord
approximately 19,765 square feet (the "Original Premises") situated in the
building located at 1861 Wiehle Avenue, Reston, Virginia 22090 (the "Building").
WHEREAS, subject to the terms and conditions hereinafter set forth, Tenant
wishes, and Landlord hereby agrees to allow Tenant to expand its operations to
new premises within the Building consisting of approximately 5,376 square feet
located on the second floor of the building, which is contiguous to the Original
Premises and is more particularly described on Exhibit "A-1" attached hereto and
made a part hereof, all as hereinafter set forth.
WHEREAS, Landlord and Tenant desire to amend the lease to reflect the terms
of such expansion, and to clarify which terms and provisions are applicable to
the New Premises and the Original Premises, pursuant to the Lease as amended
hereby, all as hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants, promises, and
agreements contained herein and other good and valuable considerations, the
receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant
agree to modify the Lease as follows:
1. Expansion.
---------
Landlord shall deliver to Tenant possession of the New Premises, on
September 1, 1995, (the "Effective Date"). Landlord does hereby lease to
Tenant, and Tenant does hereby lease from Landlord the New Premises, for the
term and upon the conditions hereinafter provided. The Lease is hereby deemed
amended to incorporate the grant by Landlord to Tenant of a leasehold interest
in and to the New Premises (as and to the extent set forth herein).
2. Amendments.
----------
Effective on and after the Effective Date, the Lease shall be amended
and modified as follows:
a. The Premises, as set forth in Section 1.1 of the Lease, shall also
------------------------
include the New Premises and all references to the Premises shall refer to the
New Premises and Original Premises, collectively, unless otherwise specifically
set forth to the contrary. The size of the Premises as set froth in Section 1.1
of the Lease of "19,765 square feet" shall be deleted and in its place shall be
inserted "25,141 square feet".
58
<PAGE>
b. Tenant's percentage of the Building as defined in Section 1.2 of the
------------------
Lease of "26.82%" shall be deleted and in its place shall be inserted "34.12%".
- -----
c. The Base Rent of Twenty-three Thousand Three Hundred Six and 23/100
Dollars ($23,306.23) per month as defined in Section 1.4 of the Lease shall be
------------------------
deleted and in its place shall be inserted Twenty-nine Thousand Six Hundred
Forty-five and 43/100 Dollars ($29,645.43) per month with annual increases as
set forth in Exhibit B of the Lease. Tenant shall be given an additional rental
abatement equal to Fifteen Thousand Four Hundred Fifty-one and 80/100 Dollars
($15,451.80).
d. The provisions governing the construction of the tenant improvements
for the New Premises ("Landlord's Work") shall be the same as those set forth in
Exhibit B to this Agreement attached hereto. Tenant's obligation to pay Rent
for the New Premises shall commence on the Effective Date of this Agreement.
3. Modification.
------------
Except as, and to the extent, modified by this Agreement, the Lease
shall continue in full force and effect, unmodified. This Agreement and the
Lease may be further amended only in writing signed by both Landlord and Tenant.
4. Severability.
------------
If any term, covenant or condition of this Agreement or its application
to any person or circumstance shall be invalid or unenforceable, then the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those to which it is held invalid or
unenforceable shall not be affected, and each term and provision shall be valid
and enforceable to the fullest extent permitted by law.
59
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the day and year first written above.
TENANT: LANDLORD:
TELEPHONE BUSINESS MEETINGS, INC. AETNA LIFE INSURANCE COMPANY
dba ACCESS CONFERENCE CALL SERVICE
By: /s/ By: /s/
----------------------------- -----------------------------------
Printed Name: C. Raymond Marvin Printed Name: Robert J. Weisel
------------------- ---------------------
Its: President Its: Asst. Vice President
---------------------------- ----------------------------------
Date: 3/28/95 Date: 4/11/95
--------------------------- ---------------------------------
Attest: /s/ Attest: /s/
------------------------- ---------------------------
Printed Name: Patrick S. Reid Printed Name: William C.[illegible]
------------------- ----------------------
Its: Controller Its: Asst. Secretary
---------------------------- ----------------------------------
Date: 3/28/95 Date: 4/11/95
--------------------------- ---------------------------------
60
<PAGE>
EXPANSION AGREEMENT AND AMENDMENT TO LEASE
by and between
AETNA LIFE INSURANCE COMPANY
and
TELEPHONE BUSINESS MEETINGS, INC.
dba ACCESS CONFERENCE CALL SERVICE
EXHIBIT A-1
-----------
Description of New Premises pursuant to an Amendment to Lease Agreement
dated the ____ day of March, 1995, by and between Aetna Life Insurance Company
and Telephone Business Meetings, Inc. dba Access Conference Call Service: Five
Thousand Three Hundred Seventy-six (5,376) square feet on the second floor,
located in the 73,685 square-foot building at 1861 Wiehle Avenue, Reston,
Virginia 22090.
[Diagram]
61
<PAGE>
EXHIBIT B
Plans and Specifications for the New Premises
The following are the Standard Improvement Items, the Standard Allowance of each
of which the Landlord shall provide at its expenses as part of the improvements
to be made to the New Premises.
1. PARTITIONING
1.1. Standard interior partitions shall be constructed of one-half inch
(1/2") gypsum drywall on each side of the three and five-eighths inch (3-5/8")
steel studs, from slab to ceiling. Such drywall shall be taped, spackeled,
finished and painted.
1.2. All corridor and demising partitions shall be sound-insulated with 3-
1/2" of batt insulation, finished gypsum drywall, and shall be constructed
according to applicable building code provisions.
1.3. The Standard Allowance shall be eighty-three lineal feet of interior
partition and N/A lineal feet of demising partition for each one thousand (1000)
---
square feet of floor area. All interior standard partitions and one-half of the
demising partitions between the New Premises and other leasable space shall be
charged against such Standard Allowance.
2. DOORS
2.1. Standard interior doors shall be solid-core, paint grade, shall be
painted to match the partitioning, and shall include building standard hardware.
The Standard Allowance shall be one door for each three hundred fifty square
feet of floor area.
2.2. Standard suite entrance doors shall be made of solid core wood, and
shall include a building standard lockset.
3. ELECTRICAL SERVICE
3.1. Electric lights shall be three bulb, flush-mounted, energy miser,
fluorescent fixtures having dimensions of two feet (2') by four feet (4'), and
capable of providing seventy (70') foot-candles at desk height. One light
fixture shall be provided for each eighty-five square feet of floor.
3.2. The Standard Allowance shall be one interior wall-mounted duplex, 110-
volt receptacle for each one hundred fifty square feet of floor area, and one
light switch for each three hundred fifty square feet of floor area.
62
<PAGE>
3.3. The Standard Allowance shall not include any special outlet, any
outlet not located on a drywall partition, or any separate circuit, all of which
shall be provided at the Tenant's expense.
4. FLOOR COVERING
4.1. The Landlord shall provide and install carpeting throughout the New
Premises using the Landlord's building standard, type and grade (Wunda Weve-
Centurion Decathlon-Antron III nylon, or equal) of such color as is selected by
the Tenant from the Landlord's standard selections.
4.2. The Landlord shall provide a dark brown or black four-inch (4") high
base for each partition covered by the Standard Allowance.
5. WINDOW COVERING
The Landlord shall provide for each exterior window architectural narrow
slat venetian blinds of a standard color.
6. WALL FINISHES
The Landlord shall provide two (2) coats of paint on all partitions, doors
and columns covered by the Standard Allowance using such paint color as is
selected by the Tenant from the selections provided by the Landlord.
7. GRAPHICS
The Landlord shall provide the suite number for the New Premises, using the
Landlord's standard type for the Building. Any additional lettering requested
by the Tenant shall conform to such standard type and shall be provided at the
Tenant's expense.
8. CEILING
8.1. The Landlord shall provide throughout the New Premises an acoustical
tile ceiling comprised of two-foot (2') by four-foot (4') panels, having an
exposed grid system.
8.2. The ceiling shall have a minimum height of eight feet, two inches
(8'2").
9. HEATING, VENTILATING AND AIR-CONDITIONING SYSTEM
Tenant will be responsible for all construction costs associated with
changes to existing building heating, ventilation, air conditioning and
electrical systems due to Tenant requirements which exceed or differ from
building standards.
63
<PAGE>
10. FLOOR LOAD
Floor load capabilities are designed for normal office space use. The
Tenant shall notify the Landlord before the preparation of working drawings for
the New Premises of any concentration of floor loads which the Tenant may
desire, and shall bear any additional cost incurred by the Landlord in
accommodating the same.
11. LANDLORD'S CONSTRUCTION OF TENANTS SPACE
Landlord and Tenant agree that Landlord shall cause the construction of the
improvements to the New Premises in accordance with the plans, design and
specifications prepared by Tenant ("Tenant's Plans"), and the working drawings
prepared by Tenant (i.e., mechanical, electrical and plumbing drawings, the
"Working Drawings"). The Tenant's Plans and Working Drawings shall be prepared
by Tenant and presented to Landlord for approval and review within forty-five
(45) days of the full execution of the Agreement.
Following the preparation and approval of Tenant's Plans and the Working
Drawings, Landlord agrees to build-out the New Premises as per Tenant's Plans
and the Working Drawings. All construction for the New Premises shall be
awarded following a competitive bid format, with Trammell Crow Real Estate
Services, Inc. serving as construction manager ("Construction Manager"). The
Construction Manager shall: (1) prepare a bid package approved by Landlord and
Tenant; (2) solicit bids from a minimum of three qualified general contractors
approved by Landlord and Tenant; (3) prepare a bid analysis for review by
Landlord and Tenant; and (4) award the bid to the lowest qualified general
contractor (as approved by Tenant). On behalf of Landlord and Tenant, the
Construction Manager shall supervise the construction for the New Premises,
ensuring that: (1) all construction is performed in a workmanlike manner; (2)
all construction is in compliance with all applicable governmental regulations;
and (3) all construction materials are free of defect (inherent or otherwise).
(i) Tenant Allowance. As a material part of this leasing transaction,
----------------
Landlord agrees to provide to Tenant an allowance ("Tenant Improvement
Allowance") of $20.00 per square foot (i.e., a total of 5,376 sf x $20.00
psf = $107,520.00). Such Tenant Improvement Allowance shall be usable for,
but shall not be limited to, the cost of all construction
documents/drawings, permits, actual construction costs (materials and
labor), general contractor fees, reasonable (and documented) moving related
expenses (not to exceed $2.00 per square foot of the total Tenant
Improvement Allowance), and a five percent (5%) construction management fee
(such total costs hereinafter referred to as "Tenant Improvement Costs").
To the extent that the Tenant Improvement Costs exceed the Tenant
Improvement Allowance (a "Shortfall"), Landlord will bill to Tenant the
Shortfall in two (2) equal installments, due as follows: the first
installment of fifty percent (50%) of the shortfall to be made at the
commencement of construction, and the second installment of fifty percent
(50%) upon substantial completion of construction. To the extent that the
Tenant Improvement Costs are less than the Tenant Improvement Allowance,
Landlord shall credit the unused portion of the Tenant Improvement
Allowance against the first rental payment(s) when due or, at Tenant's sole
--
option,
64
<PAGE>
Landlord shall place the unused portion of the Tenant Improvement
Allowance in an interest-bearing account, and Tenant may use said unused
portion of the Tenant Improvement Allowance for future Tenant Improvements
within the New Premises. In all events, ten percent (10%) of the total
cost of the job will be held back from the general contractor until all
punch list items are complete, to the reasonable satisfaction of Tenant's
architect.
(ii) Delay in Preparation of Tenant's Plans. If the Tenant does not
--------------------------------------
complete preparation of the Tenant's Plans and Working Drawings within the
time periods specified above, and such delay causes the Landlord to
postpone substantial completion of the space or delays the Effective Date,
then Tenant shall pay to Landlord on the date rent would have commenced
hereunder in the absence of such delay, a sum of money equivalent to the
Rent for the New Premises for the period during which Tenant would have
been obligated to pay rent to the Landlord had not the Effective Date been
so delayed.
(iii) Changes to the Tenant Plans. If changes are made by Tenant to the
---------------------------
Tenant's Plans after Landlord's approval, and should these changes to the
Tenant's Plans cause the Landlord to postpone substantial completion of the
space or delay the Effective Date, then Landlord shall have the right to
refuse to permit the making of such changes unless and until Tenant shall
have committed in writing, in a manner reasonably satisfactory to Landlord,
to pay to Landlord on the date rent would have been commenced hereunder in
the absence of such delay, a sum of money equivalent to the Rent for the
New Premises for the period during which Tenant would have been obligated
to pay rent to the Landlord had not the Effective Date been so delayed.
(iv) Notice. Tenant shall, by notice to Landlord in writing, designate a
------
single individual who Tenant agrees shall be available to meet and consult
with Landlord at the New Premises as Tenant's representative respecting the
matters which are the subject of this Exhibit and who, as between Landlord
and Tenant, shall have the power to legally bind Tenant, in making requests
for changes, giving approval of plans or work, giving directions to the
Landlord or the like, under this Exhibit.
Landlord shall, by notice to Tenant in writing, designate a single
individual who Landlord agrees shall be available to meet and consult with
Tenant at the New Premises as Landlord's representative respecting the
matters which are the subject of this Exhibit and who, as between Landlord
and Tenant, shall have the power to legally bind Landlord, in making
requests for changes, giving approval of plans or work, giving directions
to the Tenant or the like, under this Exhibit.
(v) Substantial Completion. For purposes of the Lease, "substantially
----------------------
complete" means full completion, except for minor or insubstantial details
of construction, decoration or installation.
65
<PAGE>
(vi) Payment. Any invoice from Landlord not paid by Tenant within 30
-------
days of receipt thereof will be subject to an interest charge at an annual
rate equal to the average prime interest rate published in The Wall Street
---------------
Journal during the period of any such delay in payment. Said interest and
-------
invoice payments are to be treated by Landlord and Tenant as rent due
hereunder.
66
<PAGE>
Exhibit 10.9
MASTER LEASE AGREEMENT
This agreement is made the 26/th/ day of October 1994 between MARKET FINANCIAL
CORPORATION with its principal office at 90 W. Broadway #14 NYC 10007 (the
"Lessor"), and Resource Objectives, Inc. with its principal office at 67 East
Ridgewood Ave. Ridgewood, NJ 07450 (the "Lessee").
1. LEASE; TERM; RENTAL. Lessor hereby leases to Lessee and Lessee hereby
rents from Lessor the equipment described on any attached schedule (hereafter,
with all replacement parts, repairs, additions and accessories incorporated
therein and/or affixed thereto, referred to as the "Equipment"), on terms and
conditions set forth in this lease and on any such schedule (hereinafter such
lease and any schedule referred to as the "lease") commencing (the "Commencement
Date") on the first day of the month following the date that the equipment is
delivered to and installed at Lessee's premises (the "Installation Date") and
continuing thereafter for the full term indicated on such schedule. Each
monthly payment of rent shall be payable on the first day of each month
commencing with the Commencement Date provided, however, if the Installation
Date does not fall on the first day of a month, the first payment shall be a pro
rata portion of the monthly rental, calculated on a 30-day basis, and payable on
the Installation Date. All payments of rent shall be made to the Lessor at its
address or at such other place as Lessor may designate in writing. Lessee
hereby authorizes Lessor to insert in this lease the serial numbers and other
identification data of the Equipment, and dates or other omitted factual matters
when determined by Lessor.
2. PURCHASE AND ACCEPTANCE: NO WARRANTIES BY LESSOR. Lessee requests
Lessor to purchase the Equipment from a seller (the "Seller") and arrange for
delivery, to Lessee at Lessee's expense, which shall be deemed complete upon the
Installation Date. Lessor shall have no responsibility for delay or failure of
Seller to fill the order for the Equipment. LESSOR, NEITHER BEING THE
MANUFACTURER OF, NOR A DEALER IN, NOR SUPPLIER OF THE EQUIPMENT, MAKES NO
WARRANTY TO ANYONE, AS TO ANY MATTER WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION, THE FITNESS, MERCHANTABILITY, DESIGN, CONDITION, CAPACITY,
PERFORMANCE OR ANY OTHER ASPECT OF THE EQUIPMENT OR ITS MATERIAL OR WORKMANSHIP
OR THE TAX OR ACCOUNTING TREATMENT OF THE LEASE. LESSOR DISCLAIMS ANY LIABILITY
FOR LOSS, DAMAGE OR INJURY TO LESSEE OR THIRD PARTIES AS A RESULT OF ANY
DEFECTS, LATENT OR OTHERWISE, IN THE EQUIPMENT. LESSOR SHALL HAVE NO OBLIGATION
TO MAINTAIN, INSTALL, ERECT, TEST, ADJUST OR SERVICE THE EQUIPMENT. LESSOR SHALL
NOT BE LIABLE FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES HOWSOEVER
ARISING. IF THE EQUIPMENT IS UNSATISFACTORY FOR ANY
<PAGE>
REASON, LESSEE SHALL MAKE CLAIM ON ACCOUNT SOLELY AGAINST THE MANUFACTURER
AND/OR THE SUPPLIER AND SHALL NEVERTHELESS PAY LESSOR ALL RENT AND OTHER MONIES
PAYABLE HEREUNDER. Lessor agrees to assign to Lessee, solely for the purpose of
making and prosecuting any such claim, any rights it may have against the Seller
for breach of warranty or representation respecting the Equipment.
Notwithstanding any fees that may be paid to Seller or any agent of Seller,
Lessee understands and agrees that neither the Seller nor any agent of the
Seller is an agent of Lessor and that neither the Seller nor his agent is
authorized to waive or alter any term or condition of this lease.
3. TITLE. Lessor shall at all times retain title to the Equipment. All
documents of title and evidences of delivery shall be delivered to Lessor.
Lessee shall not change or remove any insignia or lettering which is on the
equipment at the time of delivery thereof, or which is thereafter placed
thereon, indicating Lessor's ownership thereof; and at any time during the lease
term, upon request of Lessor, Lessee shall affix to the Equipment, in a
prominent place, labels, plates or other markings supplied by Lessor stating
that the Equipment is owned by Lessor. Lessor is hereby authorized by Lessee to
cause this lease, or any statement or other instrument in respect of this lease
showing the interest of Lessor in the Equipment, including Uniform Commercial
Code Financing Statements, to be filed or recorded and refiled and re-recorded,
and grants Lessor the right to execute Lessee's name thereto. Lessee agrees to
execute and deliver any statement or instrument requested by lessor for such
purpose. Lessee shall at its expense protect and defend Lessor's title against
all persons claiming against or through Lessee, at all times keeping the
Equipment free from any legal process or encumbrance whatsoever, including but
not limited to liens, attachments, levies and executions, and shall give Lessor
immediate written notice thereof and shall inemnify Lessor from any loss caused
thereby. Lessee shall execute and deliver to Lessor, upon Lessor's request,
such further instruments and assurances as Lessor deems necessary or advisable
for the confirmation or perfection of Lessor's rights hereunder.
4. CARE AND USE OF EQUIPMENT. Lessee shall maintain the Equipment in good
operating condition, repair, and appearance, and protect the same from
deterioration, other than normal wear and tear; shall use the Equipment in the
regular course of business only, within its normal capacity, without abuse, and
in a manner contemplated by the Seller; shall comply with all laws, ordinances,
regulations, requirements and rules with respect to the use, maintenance and
operation of the equipment; shall not make any modification, alteration or
addition to the Equipment (other than normal operating accessories or controls
which shall, when added to the Equipment, become the property of the Lessor)
without the prior written consent of Lessor, which shall not be unreasonably
withheld; shall not so affix the Equipment to realty as to change its nature to
real property or fixture, and agrees that the Equipment shall remain personal
property at all times regardless of how attached or installed; shall keep the
Equipment at the location shown on the schedule, and shall not remove the
Equipment without the consent of Lessor, which shall not be unreasonably. Lessor
shall have the right during normal hours, upon reasonable prior notice to the
Lessee and subject to applicable laws and regulations, to enter upon the
premises where the Equipment is located in order to inspect, observe or remove
the Equipment, or otherwise protect Lessor's interest. For the purpose of
assuring Lessor that the Equipment will be properly serviced, Lessee agrees, in
the event that Lessor so requests, to cause
<PAGE>
the Equipment to be maintained by the Seller pursuant to the Seller's standard
preventative maintenance contract or a comparable maintenance contract.
5. NET LEASE: TAXES. Lessee intends the rental payments hereunder to be
net to Lessor, and Lessee shall pay all sales, use, excise, personal property,
stamp, documentary and ad valorem taxes, license and registration fees,
assessments, fines, penalties and similar charges imposed on the ownership,
possession or use of the Equipment during the term of this lease; shall pay all
taxes (except Federal or State net income taxes) imposed on Lessor or Lessee
with respect to the rental payments hereunder, and shall reimburse Lessor upon
demand for any taxes paid by or advanced by Lessor with interest from date of
Lessor's payment. Lessee shall file all returns required therefor and furnish
copies to Lessor.
6. INDEMNITY. Lessee shall and does hereby agree to indemnify and save
Lessor, its agents, servants, successors, and assigns harmless from any and all
liability, damages or loss, including reasonable counsel fees, arising out of
the ownership, selection, possession, leasing, renting, operating (regardless of
where, how and by whom operated) control, use, condition (including but not
limited to latent and other defects, whether or not discoverable by Lessee),
maintenance, delivery and return of the Equipment, or in the event that the
Lessee shall be in default hereunder, arising out of the condition of any item
of Equipment sold or disposed of after use by the Lessee. Lessor disclaims and
shall not be responsible for any loss, damage or injury to persons or property
caused by the Equipment, whether arising through the negligence of the Lessor or
imposed by law. The indemnities and obligations herein provided shall continue
in full force and effect notwithstanding the termination of this Agreement.
7. INSURANCE. Lessee shall keep the Equipment insured against all risks
of loss or damage from every cause whatsoever for not less than the replacement
cost of the Equipment or the total unpaid rentals, whichever sum is greater. The
amount of such insurance shall be sufficient so that neither Lessor nor Lessee
will be considered a co-insurer. Lessee shall also carry public liability
insurance, both personal injury and property damage, covering the Equipment. All
such insurance shall be in form and with companies satisfactory to Lessor and
shall provide that losses, if any shall be payable to Lessor or its assignee.
All liability insurance shall include Lessor and/or assignee as named insured
and all casualty insurance shall name Lessor and/or assignee as loss payee.
Lessee shall pay the premiums for such insurance and deliver to Lessor
satisfactory evidence of the insurance coverage required hereunder. Each insurer
shall agree, by endorsement upon the policy or policies issued by it or by
independent instrument furnished to Lessor, that it will give Lessor 30 days'
prior written notice of the effective date of any alteration or cancellation of
such policy. The proceeds of such insurance payable as a result of loss or of
damage to any item of the Equipment shall be applied to satisfy Lessee's
obligations as set forth in Paragraph 8 below. Lessee hereby irrevocably
appoints Lessor as Lessee's attorney-in-fact to make claim for, receive payment
of and execute and endorse all documents, checks or drafts received in payment
for loss or damage under any such insurance policy.
8. RISK OF LOSS. Lessee hereby assumes the entire risk of loss, damage or
destruction of the Equipment from any and every cause whatsoever during the term
of this lease
<PAGE>
and thereafter until redelivery to Lessor. In the event of loss, damage or
destruction of any item of equipment, Lessee at its expense (except to the
extent of any proceeds of insurance provided by Lessee which shall have been
received by Lessor as a result of such loss, damage or destruction), and at
Lessor's option, shall either (a) repair such item, returning it to its previous
condition, unless damaged beyond repair, or (b) pay Lessor all unpaid rentals as
may be allocated to such item, or (c) replace such item with a like item
acceptable to Lessor, in good condition and of equivalent value, which shall
become property of Lessor, included within the term "Equipment" as used herein,
and leased from Lessor herewith for the balance of the full term of this lease.
9. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATION. In the event Lessee
fails to comply with any provision of this lease, Lessor shall have the right,
but shall not be obligated, to effect such compliance on behalf of Lessee upon
ten (10) days prior written notice to Lessee. In such event, all moneys expended
by, and all expenses of, Lessor in effecting such compliance shall be deemed to
be additional rental, and shall be paid by Lessee to Lessor at the time of the
next monthly payment of rent.
10. LEASE IRREVOCABILITY AND OTHE COVENANTS AND WARRANTIES OF LESSEE.
Lessee agrees that this lease is irrevocable for the full term thereof; that
Lessee's obligations under this lease are absolute and shall continue without
abatement and regardless of any disability of Lessee to use the Equipment or any
part thereof because of any reason including, but not limited to war, act of
God, governmental regulations, strike, loss, damage, destruction, obsolescence,
failure of or delay in delivery, failure of the Equipment properly to operate,
termination by operation of law, or any other cause. Lessee warrants that the
application, statements and financial reports submitted by it to Lessor are
material inducements to the execution by Lessor of this lease. Lessee warrants
that such applications, statements and reports are, and all information
hereafter furnished by Lessee to Lessor will be, true and correct in all
material respects as of the date submitted and that no such application,
statement or report omits any material fact necessary to maske such application,
statement or report not misleading. Lessee agrees to procure for Lessor such
estoppel certificates, landlord's and mortgagee's waivers or other similar
documents as Lessor may reasonably request. Lessee warrants that this lease has
been duly authorized, and that no provisionn of this lease is inconsistent with
Lessee's charter, by-laws, or any loan or credit agreement or other instrument
to which Lessee is a party or by which Lessee or its property may be bound or
affected.
11. DEFAULT. Each of the following events is an "Event of Default": (a)
Lessee's failure to pay, when due, any Rental payments or any other payment
hereunder; or (b) Lessee's failure to pay, when due, any indebtedness of Lessee
to Lessor arising independently of the Lease and such failure shall continue for
five (5) days; or (c) Lessee's failure to perform any of the other terms,
covenants or conditions of the Lease and such failure shall continue for ten
(10) days after written notice; or (d) any representation, warranty or statement
made by Lessee or any guarantor of the Lease ("Guarantor"), whether contained in
the Lease or in any guaranty, application, financial statement or other document
delivered to Lessor in connection with the Lease, shall be untrue in any
material respect; or (e) Lessee becomes insolvent or makes an assignment for the
benefit of creditors; or (f) a receiver, trustee, conservator or liquidator of
<PAGE>
Lessee of all or a substantial part of Lessee's assets is appointed with or
without the application or consent of Lessee; or (g) a petition is filed by or
against Lessee under the Bankruptcy Code or under any other insolvency law or
laws providing for the relief of debtors.
12. REMEDIES. If an Event of Default occurs, Lessor may exercise all
remedies available to Lessor under applicable law and without limiting the
foregoing, (a) recover from Lessee all Rental payments and other payments which
are due and unpaid; (b) at any time, declare immediately due and payable the
aggregate of all Rental payments and other payments which are payable under the
Lease for the full term thereof and recover from Lessee the present value,
computed to the day of default, at the rate of six percent (6%) per annum, of
(i) such aggregate rent, plus (ii) the anticipated residual value of the
Equipment at the expiration of the term of the Lease; and (c) without notice of
any kind to Lessee, and to the fullest extent permitted by law, enter into the
premises where the Equipment is located and take possession of, and remove the
Equipment, without liability to Lessee arising out of such entry, taking of
possession or removal. Lessor may, at its option, store, use, lease, sell, or
otherwise dispose of the removed Equipment and shall credit Lessee with any sums
received from the disposition of the Equipment after deducting all expenses of
retaking and disposition.
If Lessee fails to comply with any provision of the Lease, Lessor shall
have the right, but not the obligation, to affect compliance on behalf of Lessee
upon ten (10) days prior written notice to Lessee. In such event, all monies
expended by Lessor, and all expenses of Lessor in effecting such compliance,
shall be deemed to be additional rent, and shall be paid by Lessee to Lessor at
the time of the next Rental payment.
Lessee shall also be liable for and shall pay to Lessor all (a) all
expenses incurred by Lessor in connection with the enforcement of any of
Lessor's remedies, (b) Lessor's reasonable attorney's fees and expenses, and (c)
interest on all sums due Lessor from the date when the sums became due until
paid, at the rate of one and one half percent (1 1/2%) per month but only to the
extent permitted by law.
When any payment is not made by Lessee within ten (10) days of the date
when due, Lessee agrees to pay to Lessor, not later than one month thereafter,
in addition to all amounts payable by Lessee as a result of the exercise of any
of the remedies provided in the Lease, an amount calculated at the rate of ten
cents ($.10) per one dollar of each such delayed payment, as an administrative
fee to offset Lessor's collection costs, but only to the extent permitted by
law.
All remedies of Lessor are cumulative, are in addition to any other
remedies provided for by law, and may, to the extent permitted by law, be
exercised concurrently. The exercise of any one remedy shall not be deemed an
election of such remedy or preclude the exercise of any other remedy. No
failure on the part of the Lessor to exercise, and no delay in exercising, any
right or remedy shall operate as a waiver thereof or modify the terms of the
Lease. In no event shall Lessor's recovery exceed the maximum recovery
permitted by law.
13. ASSIGNMENT. Lessor may, without Lessee's consent, assign or transfer
this lease or any Equipment, any rent, or any other sums due or to become due
hereunder, and in such event Lessor's assignee shall have all the rights,
powers, privileges and remedies of Lessor hereunder. Lessor hereby agrees that
upon such assignment Lessee shall not assert, as against such assignee, any
defense, setoff, recoupment, claim or counterclaim, whether arising under this
lease transaction or otherwise as a defense to the enforcement of this lease or
recovery of the
<PAGE>
Equipment by assignee. Lessee shall not assign this lease or any interests
hereunder and shall not enter into any sublease with respect to the Equipment
covered hereby without Lessor's prior written consent.
14. RETURN OF PROPERTY. Upon the termination or expiration of this lease
or any attached schedule, or any extension thereof, the Lessee shall forthwith
deliver, freight prepaid, the Equipment to the Lessor, at an address designated
by Lessor, complete and in good order and condition, reasonable wear and tear
alone excepted. The Lessee shall also pay to the Lessor such sums as may be
necessary to cover replacement for all damaged, broken or missing parts of the
Equipment. If upon such expiration or termination the Lessee does not
immediately return the Equipment to the Lessor, the Equipment shall continue to
be held and leased hereunder, and this lease shall thereupon be extended
indefinitely as to term at the same monthly rental, subject to the right of
either the Lessee or the Lessor to terminate the Lease upon thirty (30) days'
written notice, whereupon the Lessee shall forthwith deliver the Equipment to
the Lessor as set forth in this Paragraph.
15. ENTIRE AGREEMENT; CHANGES. This lease and any attached schedule
contains the entire agreement between the parties and may not be altered,
amended, modified, terminated or otherwise changed except in writing and signed
by an officer of the Lessor and Lessee.
16. NOTICE. All notices under the Lease shall be sufficient if given
personally or mailed to the party intended at its respective address set forth
herein, or at such other address as said party may provide in writing from time
to time. Any such notice mailed to said address shall be effective when
deposited in the United States mail, duly addressed, postage prepaid.
17. BINDING EFFECT. The Lease shall inure to the benefit of, and be
binding upon, the parties and their respective personal representatives,
successors and assigns. Lessor and Lessee intend the Lease to be a valid and
subsisting legal instrument, and agree that no provision of the Lease which may
be deemed unenforceable shall in any way invalidate any other provision or
provisions of the Lease, all of which shall remain in full force and effect.
<PAGE>
18. GOVERNING LAW; JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY
TRIAL. The Lease shall be governed by the laws of the State of New York.
Lessee hereby consents to the jurisdiction of any Federal or State Court,
located in New York County, New York with respect to any action commenced
hereunder. Nothing contained herein is intended to preclude Lessor from
commencing any action hereunder in any court having jurisdiction thereof.
Lessee agrees that service of process in any action shall be sufficient if made
by first class certified mail, return receipt requested to the address of Lessee
hereunder. TO THE EXTENT PERMITTED BY LAW, LESSEE WAIVES TRIAL BY JURY IN ANY
ACTION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LEASE, OR THE
TRANSACTIONS CONTEMPLATED HEREIN.
LESSOR; LESSEE:
MARKET FINANCIAL CORPORATION Resource Objectives, Inc.
By /s/ By /s/
-------------------------- ------------------------
Pres. President
-------------------------- ------------------------
Title Title
<PAGE>
MASTER LEASE AGREEMENT SCHEDULE 1
Forming a part of the Master Lease Agreement between Resource Objectives, Inc.,
Lessee and Market Financial Corporation, Lessor, dated October 26, 1994. This
schedule incorporates the terms and conditions of said Master Lease Agreement.
EQUIPMENT: Compunetix 96-Port Mini-Contex System
(5) Additional Analog Ports
(2) 24 Port Expansion Cards
EQUIPMENT LOCATION: 67 East Ridgewood Avenue Ridgewood, NJ 07450
INSTALLATION DATE: 12/1/94
COMMENCEMENT DATE: 12/1/94
INITIAL TERM OF LEASE: 48 MONTHS
MONTHLY RENTAL: $3,750.00 and no tax. The first and last two payments
($11,250.00) are due upon the signing of this schedule. A stub payment of __ for
the period to __ is also due upon the signing of this schedule.
ADDITIONAL PROVISIONS: At the expiration of the initial lease term, Lessee
shall have the option to (a) Return the equipment to Lessor, (b) Purchase the
equipment for its then Fair Market Value, or (c) Renew the lease for a rental
amount based on the Fair Market Value. (d) Fair Market Value shall not exceed
$6,250.00.
Lessee must give Lessor at least 90 days written notice regarding its intention
to acquire the equipment at lease expiration. The lease will remain in effect
and payments will be due and payable until such notice is given.
Agreed to:
Lessee: Lessor:
RESOURCE OBJECTIVES, INC. MARKET FINANCIAL CORPORATION
By /s/ By /s/
------------------------- ----------------------------
President Pres
------------------------- ----------------------------
Dated October 26, 1994 Dated Accepted 12/1/94
<PAGE>
GUARANTY
1. Recitals.
(a) This guaranty is made by the undersigned (hereinafter each
called a "Guarantor"), in favor of MARKET FINANCIAL CORPORATION (hereinafter
called "Market").
(b) Market intends to enter into one or more equipment leases, loans
or other financial transactions (collectively "Transactions") with Resource
Objectives, Inc. (hereinafter called "Debtor") evidenced by certain equipment
leases and schedules, notes, security agreements or other instruments
("Agreements").
(c) Guarantor has a financial or other interest in Debtor and/or the
Transactions, and expects to obtain a financial or other benefit if Market
enters into the Transactions.
2. Guaranty.
In order to induce Market to enter into the Transactions and the Agreements
with Debtor, and in consideration thereof,
(a) Guarantor, unconditionally guarantees to Market the prompt
payment, when due, of all now existing or hereafter arising indebtedness or
obligations of Debtor to Market of every kind or nature, however arising
(hereinafter called the "indebtedness");
(b) Guarantor unconditionally guarantees to Market the prompt, full
and faithful performance and discharge by Debtor of each and every term,
condition, agreement, representation, warranty and provision on the part of
Debtor made in connection with the Transactions and Agreements or in any
modification, amendment or substitution thereof.
(c) Guarantor shall, on demand, reimburse Market for all expenses,
collection charges, court costs and reasonable attorneys' fees incurred by
Market in endeavoring to collect or enforce any of Market's rights and remedies
against Debtor and/or Guarantor or any other person or concern liable thereto.
(d) Guarantor shall pay all of the foregoing amounts and perform all
of the foregoing terms, covenants and conditions notwithstanding that any part
or all of the Transactions or Agreements shall be void or voidable as against
Debtor or any of Debtor's creditors, including a trustee in bankruptcy of
Debtor, by reason of any fact or circumstances including, without limitation,
failure by any person to file any document or to take any other action to make
any of the Transactions or Agreements enorceable in accordance with their
respective terms. Guarantor also agrees that the obligations of Guarantor
hereunder shall not be relieved in the event Market fails to protect or
otherwise impairs any collateral.
3. Primary Nature of Guaranty.
The liability of Guarantor hereunder is primary, absolute, unconditional,
direct and independent of the obligations of Debtor. Nothing shall discharge or
satisfy Guarantor's liability hereunder except the full performance and payment
of all of Debtor's obligations to Market, with interest. Guarantor shall have no
right of subrogation, reimbursement or indemnity whatsoever and no right of
recourse to or with respect to any assets or property of Debtor, unless and
until all of said obligations have been paid or performed in full.
<PAGE>
4. Waivers by Guarantor.
(a) Guarantor waives notice of acceptance hereof and of all notices
and demands of any kind to which Guarantor may be entitled including, without
limitation, all demands of payment and notice of nonpayment, protest and
dishonor to Guarantor, or Debtor, or the makers or endorsers of any notices or
other instruments for which Guarantor is or may be liable hereunder. Guarantor
further waives notice of and hereby consents to any agreement or arrangement for
subordination, composition, arrangement, discharge or release of the whole or
any part of Debtor's obligations under any of the Transactions or Agreements or
release of other guarantors, or for compromise of any sums due in any way
whatsoever, and the same shall in no way impair Guarantor's liability hereunder.
(b) Guarantor waives any right to require Market to: (i) proceed
against Debtor; (ii) proceed against or exhaust any security held by Market of
Debtor or others; or (iii) pursue any other remedy which Market may have,
including against any other guarantor of Debtor's obligations to Market.
(c) Guarantor waives any and all right to a trial by jury in any
action or proceeding based hereon. Guarantor also waives the benefit of any
statue of limitations affecting Guarantor's liability hereunder or the
enforcement thereof.
5. Guarantor's Property as Security for Guaranty.
All sums at any time to Guarantor's credit and any of Guarantor's property
at any time in Market's possession shall be deemed held by Market as security
for any and all of Guarantor's obligations to Market hereunder.
6. Subordination
Any and all present and future indebtedness and obligations of Debtor to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future obligations of Debtor to Market.
7. Events of Default.
If Guarantor or Debtor should at any time become insolvent, or make a
general assignment for the benefit of creditors, or if a proceeding shall be
commenced by, against or in respect of Guarantor or Debtor under the Federal
Bankruptcy Code or any state insolvency law, or if any individual Guarantor
dies, any and all of Guarantor's obligations under this Guaranty shall, at
Market's option, forthwith become due and payable without notice.
8. Continuing Nature of Guaranty.
This is a continuing Guaranty. This instrument shall continue in full force
and effect until terminated by the actual receipt by Market of written notice of
termination from Guarantor. Such termination shall be applicable only to
Agreements or Transactions having their inception thereafter, and rights and
obligations arising out of Agreements or Transactions having their inception
prior to such termination shall not be affected.
9. No Waiver by Market
No failure, omission or delay on the part of Market in exercising any
rights hereunder or in taking any action to collect or enforce payment or
performance of any of the Agreements or
<PAGE>
any Transactions, either against Debtor or any other person liable therefore,
shall operate as a waiver of any such right or shall, in any manner, prejudice
the rights of Market against Guarantor.
10. Cumulative Remedies
All of Markets' rights, remedies and recourse under the Agreements or
Transactions or this Guaranty, are separate and cumulative and may be pursued
separately, successively or concurrently, are non-exclusive and the exercise of
any one or more of them, shall in no way limit or prejudice any other legal or
equitable right, remedy or recourse to which Market may be entitled.
11. Modifications.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by Guarantor and Market.
12. Merger.
This writing is intended by the parties as a final expression of this
agreement of guaranty and is intended also as a complete and exclusive statement
of the terms of this agreement of guaranty. No course of prior dealings between
the parties, no usage of the trade, and no parole or extrinsic evidence of any
nature shall be used or be relevant to supplement or explain or modify any term
used in this agreement of guaranty.
13. Severability.
In case any one or more of the provisions contained in this Guaranty shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Guaranty shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. Notices.
Guarantor agrees that any notice or demand upon Guarantor shall be deemed
to be sufficiently given or served if it is in writing and is personally served,
or in lieu of personal service is mailed by first class certified mail, postage
prepaid, or by private courier such as Federal Express, addressed to Guarantor
at the addresses set forth below. Any notice or demand so mailed shall be deemed
received on the date of actual receipt or the first business day following
mailing, whichever first occurs.
15. Governing Law.
This instrument shall for all purposes be governed by and interpreted in
accordance with the laws of the State of New York. Guarantor consents to the
personal jurisdiction of any Federal Court in the State of New York or any State
Court located in New York County, New York with respect to any legal action
commenced hereunder and to the fullest extent allowed by law Guarantor hereby
waives any objection Guarantor may have to the venue of such Courts or the
convenience of this forum. Nothing contained herein is intended to preclude
Market from commencing any action hereunder in any court having jurisdiction
thereof.
<PAGE>
16. Successors and Assigns.
This Guaranty shall inure to the benefit of Market, its successors and
assigns and shall be binding on Guarantor and its successors and assigns or if
Guarantor is an individual his or her executors, administrators and/or heirs.
IN WITNESS WHEREOF, the undersigned Guarantor has duly executed this Guaranty
this 26/th/ day of Oct 1994.
INDIVIDUAL GUARANTORS
WITNESS: /s/ /s/
----------------------------- -------------------------------------
Signature of Guarantor
465 Prospect St. Glen Rock NJ 07452
-------------------------------------
Home Address and Social Security
Number ###-##-####
WITNESS:
----------------------------- -------------------------------------
Signature of Guarantor
-------------------------------------
Home Address and Social Security
Number
Home Tel # (201) 612-5007
<PAGE>
GUARANTY
1. Recitals.
(a) This guaranty is made by the undersigned (hereinafter each called
a "Guarantor"), in favor of MARKET FINANCIAL CORPORATION (hereinafter called
"Market").
(b) Market intends to enter into one or more equipment leases, loans
or other financial transactions (collectively "Transactions") with Resource
Objectives, Inc. (hereinafter called "Debtor") evidenced by certain equipment
leases and schedules, notes, security agreements or other instruments
("Agreements").
(c) Guarantor has a financial or other interest in Debtor and/or the
Transactions, and expects to obtain a financial or other benefit if Market
enters into the Transactions.
2. Guaranty.
In order to induce Market to enter into the Transactions and the Agreements
with Debtor, and in consideration thereof,
(a) Guarantor, unconditionally guarantees to Market the prompt
payment, when due, of all now existing or hereafter arising indebtedness or
obligations of Debtor to Market of every kind or nature, however arising
(hereinafter called the "indebtedness");
(b) Guarantor unconditionally guarantees to Market the prompt, full
and faithful performance and discharge by Debtor of each and every term,
condition, agreement, representation, warranty and provision of the part of
Debtor made in connection with the Transactions and Agreements or in any
modification, amendment or substitution thereof.
(c) Guarantor shall, on demand, reimburse Market for all expenses,
collection charges, court costs and reasonable attorneys' fees incurred by
Market in endeavoring to collect or enforce any of Market's rights and remedies
against Debtor and/or Guarantor or any other person or concern liable thereto.
(d) Guarantor shall pay all of the foregoing amounts and perform all
of the foregoing terms, covenants and conditions notwithstanding that any part
or all of the Transactions or Agreements shall be void or voidable as against
Debtor or any of Debtor's creditors, including a trustee in bankruptcy of
Debtor, by reason of any fact or circumstances including, without limitation,
failure by any person to file any document or to take any other action to make
any of the Transactions or Agreements enorceable in accordance with their
respective terms. Guarantor also agrees that the obligations of Guarantor
hereunder shall not be relieved in the event Market fails to protect or
otherwise impairs any collateral.
3. Primary Nature of Guaranty.
The liability of Guarantor hereunder is primary, absolute, unconditional,
direct and independent of the obligations of Debtor. Nothing shall discharge or
satisfy Guarantor's liability hereunder except the full performance and payment
of all of Debtor's obligations to Market, with interest. Guarantor shall have no
right of subrogation, reimbursement or indemnity whatsoever and no right of
recourse to or with respect to any assets or property of Debtor, unless and
until all of said obligations have been paid or performed in full.
<PAGE>
4. Waivers by Guarantor.
(a) Guarantor waives notice of acceptance hereof and of all notices
and demands of any kind to which Guarantor may be entitled including, without
limitation, all demands of payment and notice of nonpayment, protest and
dishonor to Guarantor, or Debtor, or the makers or endorsers of any notices or
other instruments for which Guarantor is or may be liable hereunder. Guarantor
further waives notice of and hereby consents to any agreement or arrangement for
subordination, composition, arrangement, discharge or release of the whole or
any part of Debtor's obligations under any of the Transactions or Agreements or
release of other guarantors, or for compromise of any sums due in any way
whatsoever, and the same shall in no way impair Guarantor's liability hereunder.
(b) Guarantor waives any right to require Market to: (i) proceed
against Debtor; (ii) proceed against or exhaust any security held by Market of
Debtor or others; or (iii) pursue any other remedy which Market may have,
including against any other guarantor of Debtor's obligations to Market.
(c) Guarantor waives any and all right to a trial by jury in any
action or proceeding based hereon. Guarantor also waives the benefit of any
statue of limitations affecting Guarantor's liability hereunder or the
enforcement thereof.
5. Guarantor's Property as Security for Guaranty.
All sums at any time to Guarantor's credit and any of Guarantor's property
at any time in Market's possession shall be deemed held by Market as security
for any and all of Guarantor's obligations to Market hereunder.
6. Subordination
Any and all present and future indebtedness and obligations of Debtor to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future obligations of Debtor to Market.
7. Events of Default.
If Guarantor or Debtor should at any time become insolvent, or make a
general assignment for the benefit of creditors, or if a proceeding shall be
commenced by, against or in respect of Guarantor or Debtor under the Federal
Bankruptcy Code or any state insolvency law, or if any individual Guarantor
dies, any and all of Guarantor's obligations under this Guaranty shall, at
Market's option, forthwith become due and payable without notice.
8. Continuing Nature of Guaranty.
This is a continuing Guaranty. This instrument shall continue in full force
and effect until terminated by the actual receipt by Market of written notice of
termination from Guarantor. Such termination shall be applicable only to
Agreements or Transactions having their inception thereafter, and rights and
obligations arising out of Agreements or Transactions having their inception
prior to such termination shall not be affected.
9. No Waiver by Market
No failure, omission or delay on the part of Market in exercising any
rights hereunder or in taking any action to collect or enforce payment or
performance of any of the Agreements or
<PAGE>
any Transactions, either against Debtor or any other person liable therefore,
shall operate as a waiver of any such right or shall, in any manner, prejudice
the rights of Market against Guarantor.
10. Cumulative Remedies
All of Markets' rights, remedies and recourse under the Agreements or
Transactions or this Guaranty, are separate and cumulative and may be pursued
separately, successively or concurrently, are non-exclusive and the exercise of
any one or more of them, shall in no way limit or prejudice any other legal or
equitable right, remedy or recourse to which Market may be entitled.
11. Modifications.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by Guarantor and Market.
12. Merger.
This writing is intended by the parties as a final expression of this
agreement of guaranty and is intended also as a complete and exclusive statement
of the terms of this agreement of guaranty. No course of prior dealings between
the parties, no usage of the trade, and no parole or extrinsic evidence of any
nature shall be used or be relevant to supplement or explain or modify any term
used in this agreement of guaranty.
13. Severability.
In case any one or more of the provisions contained in this Guaranty shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Guaranty shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. Notices.
Guarantor agrees that any notice or demand upon Guarantor shall be deemed
to be sufficiently given or served if it is in writing and is personally served,
or in lieu of personal service is mailed by first class certified mail, postage
prepaid, or by private courier such as Federal Express, addressed to Guarantor
at the addresses set forth below. Any notice or demand so mailed shall be deemed
received on the date of actual receipt or the first business day following
mailing, whichever first occurs.
15. Governing Law.
This instrument shall for all purposes be governed by and interpreted in
accordance with the laws of the State of New York. Guarantor consents to the
personal jurisdiction of any Federal Court in the State of New York or any State
Court located in New York County, New York with respect to any legal action
commenced hereunder and to the fullest extent allowed by law Guarantor hereby
waives any objection Guarantor may have to the venue of such Courts or the
convenience of this forum. Nothing contained herein is intended to preclude
Market from commencing any action hereunder in any court having jurisdiction
thereof.
<PAGE>
16. Successors and Assigns.
This Guaranty shall inure to the benefit of Market, its successors and
assigns and shall be binding on Guarantor and its successors and assigns or if
Guarantor is an individual his or her executors, administrators and/or heirs.
IN WITNESS WHEREOF, the undersigned Guarantor has duly executed this Guaranty
this 26/th/ day of Oct., 1994.
CORPORATE GUARANTOR
WITNESS: /s/ American Conferencing Company, Inc.
--------------------------- -------------------------------------
(Name of Guarantor)
By: /s/ Pres.
----------------------------------
(Title)
SECRETARY'S CERTIFICATE
I, _____________________ certify that I am the (assistant) secretary of American
Conferencing Company, Inc., a _________ corporation; that at a meeting of the
Board of Directors held on the ____ day of ___________, 19__, the foregoing
Guaranty and the terms thereof was regularly introduced and it was resolved that
the officers of this corporation were duly authorized to sign and deliver the
same and a resolution to such effect appears in the minute book and is in full
force and effect.
WITNESS OUR HANDS AND SEAL THIS _____ day of __________ ,
19__.
/s/
-------------------------------
(Assistant) Secretary
[SEAL HERE]
<PAGE>
COLLATERAL SECURITY AGREEMENT
-----------------------------
As security for the payment and performance by Resource Objectives, Inc.
("Lessee") to Market Financial Corporation its successors and assigns
(hereinafter collectively referred to as "Lessor") of (a) equipment lease
agreement executed by Lessee and Lessor dated October 26, 1994, in the amount of
One Hundred Twenty Five Thousand Dollars ($125,000.00), together with renewals
or extensions thereof ("Lease"); (b) any and all obligations of any Lessee
hereunder to Lessor, direct, indirect or contingent, joint or several, whether
or not otherwise secured, and whether now existing or hereafter incurred; and
(c) any and all amounts advanced or expended by Lessor for the maintenance or
preservation of the personal property described below; Lessee hereby pledges,
assigns and grants to Lessor a security interest in the following (hereinafter
collectively referred to as the "Collateral"):
All of the personal property, fixtures, trade fixtures, furniture and
furnishings of the Lessee and of the Guarantor, American Conferencing
Company, Inc., wherever located and whether now owned or in existence or
hereafter acquired or created, of every kind and description, tangible or
intangible, including, without limitation, all inventory, equipment,
documents, instruments, chattel paper, accounts, contract rights and
general intangibles.
The Lessor and the Lessee agree to the following Terms and Conditions:
TERMS AND CONDITIONS
1. Lessee hereby warrants that he is the sole owner and in possession of
all of said specifically described Collateral except such items as are
specifically stated herein as not yet having been acquired by Lessee and as to
such property, if any Lessee agrees, in order to effectuate the purposes of this
agreement, forthwith to acquire and install in the herein described premises
each and every item thereof, or its equivalent in quantity and quality; that the
Collateral is, or when acquired will be, free and clear of all liens,
encumbrances and adverse claims, with the exception of the security interest
herein created. Lessee agrees to execute and deliver to Lessor at any time and
from time to time such other security agreement or mortgages of chattels as
Lessor may request, covering the Collateral or property the ownership of which
is contemplated hereunder. Lessee agrees, at his own expense, to appear in and
defend any and all actions and proceedings affecting title to the Collateral or
any part thereof, or affecting the security interest of Lessor therein.
2. Lessee hereby agrees: to do all acts which may be necessary to
maintain, preserve and protect the Collateral and to keep the Collateral in good
condition and repair; not to cause or permit any waste or unusual or
unreasonable depreciation thereof or any act for which the Collateral might be
confiscated; to pay before delinquency all taxes, assessments and liens now or
hereafter imposed upon the Collateral; not to sell, lease, encumber or dispose
of all or any part of the Collateral; at any time upon demand of Lessor to
exhibit to and allow inspection by Lessor of the Collateral; not to remove or
permit the removal of the Collateral, other than motor vehicles, from the
premises where it is now located, nor of any motor vehicle from the Lessee's
<PAGE>
state, nor to change the address where any motor vehicle is regularly garaged,
without the prior written consent of Lessor; to provide, maintain and deliver to
Lessor policies insuring the Collateral against loss or damage by such risks and
in such amounts, forms and companies as Lessor requires and with loss payable
solely to Lessor. If Lessor takes possession of the Collateral, the insurance
policy or policies and any unearned or returned premium thereon shall, at the
option of Lessor, become the sole property of Lessor, upon Lessor crediting the
amount of any unearned premium upon the obligations secured hereby, such
policies being hereby pledged and assigned to Lessor.
3. If Lessee fails to make any payment or do any act as herein required,
then Lessor, but without obligation so to do, and without notice to or demand
upon Lessee, may make such payments and do such acts as Lessor may deem
necessary to protect its security interest in the Collateral, Lessor being
hereby authorized (without limiting the general nature of the authority
hereinabove conferred) to take possession of the Collateral, to pay, purchase,
contest, and compromise any encumbrance, charge or lien which in the judgment of
Lessor appears to be prior or superior to its security interest, and in
exercising any such powers and authority to pay necessary expenses, employ
counsel and pay reasonable fees therefor. Lessee hereby agrees to repay
immediately, and without demand, all sums so expended by Lessor, with interest
from date of expenditure at the rate of 1 1/2 percent per month or the maximum
legal rate, whichever is less.
4. Any officer of Lessor is hereby irrevocably appointed the attorney in
fact of Lessee, with full power of substitution, to sign any certificate of
ownership, registration card, application therefor, affidavits or documents
necessary to transfer title to any of the Collateral, to receive and receipt for
all licenses, registration cards and certificates of ownership and to do all
acts necessary or incident to the powers granted to Lessor herein, as fully as
Lessee might.
5. Lessee hereby assigns to Lessor all rents, issues, income and profits
of or from the Collateral. Any moneys received by Lessor under the provisions
hereof may at its option be applied upon any indebtedness secured hereby, or
released.
6. It is specifically understood and agreed that Lessor may from time to
time and without notice release or otherwise deal with any person now or
hereafter liable for the payment or performance of any obligation hereunder or
secured hereby, and renew, extend or alter the time or terms of payment of any
such obligation, and release, surrender, or substitute any Collateral or other
security for any such obligation, or accept any type of further security
therefor, without in any way affecting the obligation hereunder of any Lessee,
and consent is hereby given to delay or indulgence in enforcing payment or
performance of any such obligation, and diligence, presentment, protest and
demand and notice of every kind, as well as the right to require Lessor to
proceed against any person liable for the payment of any such obligation or to
foreclose upon, sell, or otherwise realize upon or collect or apply any other
property, real or personal, securing any such obligation, as a condition or
prior to proceeding hereunder, are hereby waived.
7. Should: (1) default be made in the payment of any obligation, or
breach be made of any warranty, statement, promise, term or condition, contained
herein or hereby secured;
2
<PAGE>
(2) any statement or representation made for the purpose of obtaining credit
hereunder prove false; or (3) Lessor deems the Collateral inadequate or unsafe
or in danger of misuse; then in any such event Lessor may, at its option and
without demand first made and without notice to Lessee (if given, notice by
ordinary mail to Lessee's address shown herein being sufficient), do any one or
more of the following: (a) declare all sums secured hereby immediately due and
payable; (b) immediately take possession of the Collateral wherever it may be
found, using all necessary force to do so, or require Lessee to assemble the
Collateral and make it available to Lessor at a place designated by Lessor which
is reasonably convenient to Lessee and Lessor, and Lessee waives all claims for
damages due to or arising from or connected with any such taking; (c) proceed in
the foreclosure of Lessor's security interest and sale of the Collateral in any
manner permitted by law, or provided for herein; (d) sell, lease or otherwise
dispose of the Collateral at public or private sale, with or without having the
Collateral at the place of sale, and upon terms and in such manner as Lessor may
determine, and Lessor may purchase same at any such sale; (e) retain the
Collateral in full satisfaction of the obligations secured thereby; (f) exercise
any remedies of a secured party under the Uniform Commercial Code. Prior to any
such disposition, Lessor may, at its option, cause any of the Collateral to be
repaired or reconditioned in such manner and to such extent as to Lessor may
seem advisable; and any sums expended therefor by Lessor shall be repaid by
Lessee and secured hereby; Lessor shall have the right to enforce one or more
remedies hereunder successively or concurrently, and any such action shall not
stop or prevent Lessor from pursuing any further remedy which it may have
hereunder or by law. If a sufficient sum is not realized from any such
disposition of Collateral to pay all obligations secured by this security
agreement, Lessee hereby promises and agrees to pay Lessor any deficiency.
8. In any action of foreclosure plaintiff shall be entitled to the
appointment of a receiver, without notice, to take possession of all or any part
of the Collateral and to exercise such powers as the Court shall confer upon
him.
9. Should a receiver for the real property hereinbefore described be
appointed under any deed of trust or other security held by Lessor, Lessee
consents and agrees that said receiver (with the consent of Lessor) may, without
compensation to Lessee, use the Collateral in operating said real property, and
may take possession of the Collateral independent of the operation of said real
property.
10. The right to plead the statute of limitations as a defense to any and
all obligations secured hereby is hereby waived, to the full extent permissible
by law.
11. Time and exactitude of each of the terms, obligations, covenants and
conditions are hereby declared to be the essence hereof. No waiver by Lessor of
any breach or default shall be deemed a waiver of any breach or default
thereafter occurring and the taking of any action by Lessor shall not be deemed
to be an election of that action but rather the rights and privileges and
options granted to Lessor under the terms hereof shall be deemed cumulative, the
one with the other and not alternative.
3
<PAGE>
12. Should the Collateral be sold, with or without the consent of the
Lessor, then it is expressly agreed that the proceeds from said sale are hereby
assigned to the Lessor, NOT TO EXCEED THE PAYOFF OF THE LEASE AT THAT TIME.
13. Lessee agrees to execute any additional documents deemed necessary by
Lessor to assure the perfection of the security interest created hereunder and
to pay any fees or charges paid by Lessor in connection with the perfection of
or continue the perfection of the security interest created hereunder.
Dated: Oct. 26, 1994
Market Financial Corporation Resource Objectives, Inc.
Lessor Lessee
By: /s/ By: /s/
----------------------------- -----------------------------
Title: Pres Title: President
-------------------------- --------------------------
4
<PAGE>
MARKET FINANCIAL
CORPORATION
October 26, 1994
David Lipsky
Resource Objectives, Inc.
67 East Ridgewood Avenue
Ridgewood, NJ 07450
RE: Lease with Resource Objectives, Inc.
American Conferencing Company, Inc. as Guarantor
Dear David:
It is a condition of our Lease that Resource Objectives, Inc. agrees to
subordinate any and all liens and security interests that you may have, whether
now in existence or hereafter arising to Market Financial Corporation's lien on
all of the assets of American Conferencing Company, Inc.
Market Financial Corporation will have a priority interest in all of the assets
of American Conferencing Company, Inc. irrespective of time or order of
attachment or perfection of the security interests or the time or order of the
filings of Uniform Commercial Code financing statements or amendments.
This agreement will be binding between Resource Objectives, Inc. and Market
Financial Corporation and their respective successors and assigns.
Sincerely,
/s/
Steve Robbins
President
SR/ish
Accepted and Agreed:
Resource Objectives, Inc.
By: /s/
-----------------------------
90 West Broadway #14 New York, New York 10007 (212) 385-9503 tel (212)
385-9502 fax
<PAGE>
Exhibit 10.10
HARTSFIELD CENTRE
OFFICE LEASE AGREEMENT
DATE OF LEASE EXECUTION: NOVEMBER 1, 1996
ARTICLE 1
REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1:
LANDLORD: SPP Real Estate (Georgia II) Inc.
MANAGING AGENT: Brannen/Goddard Company
LANDLORD'S MANAGING
AGENT'S ADDRESS: 100 Hartsfield Centre Parkway
Suite 160
Atlanta, Georgia 30354
COPY TO: SPP Investment Management
10 Glenville Street
Greenwich, Connecticut 06831
Attn: Ms. Robin Nack
TENANT: Conference Source International, Inc., a Georgia
corporation
TENANT'S ADDRESS (FOR
NOTICE AND BILLLNG): 100 Hartsfield Centre Parkway
Suite 300
Atlanta, GA 30354
BUILDING: Building - Hartsfield Centre, located on the land
described on Exhibit A attached hereto and made a
part hereof.
BUILDING ADDRESS: Hartsfield Centre
100 Hartsfield Centre Parkway
Atlanta, GA 30354
<PAGE>
PREMISES: Portion of the third floor designated Suite 300 and
located as shown on Exhibit B attached hereto and more
particularly described in Section 2.1 below.
RENTABLE FLOOR AREA
OF PREMISES: 8,219 square feet
TENANT'S INITIAL PRORATA
SHARE OF OPERATING
EXPENSES: 5.59%
TOTAL RENTABLE FLOOR
AREA OF THE BUILDING: 147,045 square feet
SCHEDULED TERM
COMMENCEMENT DATE: November 1, 1996
TERM EXPIRATION DATE: October 31, 2002
TERM: 6 Years
ANNUAL BASE RENT: The Annual Base Rent for the Premises shall be determined by
multiplying the amounts, for each Lease Year during the Term set forth in the
Schedule below, by the number of square feet contained in the Rentable Floor
Area of the Premises during such Lease Year. The term "Lease Year," as used
herein, shall mean each consecutive one-year period beginning on the
Commencement Date and each anniversary thereof and ending one day prior to the
next succeeding anniversary on the Commencement Date.
SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
Lease Year 1 $18.00
Lease Year 2 $18.00
Lease Year 3 $18.00
Lease Year 4 $18.50
Lease Year 5 $19.00
Lease Year 6 $19.50
</TABLE>
The Base Rent for the first month of the initial term of this Lease shall be
paid to Landlord upon Tenant's execution of this Lease.
ADDITIONAL RENT: Any payments owned by Tenant to Landlord other than Annual
Base Rent
ANNUAL RENT: Annual Base Rent plus any Additional Rent
2
<PAGE>
SECURITY DEPOSIT: None GUARANTORS: None
PERMITTED USES: General office use consistent with a first-class office
building
COMMERCIAL GENERAL LIABILITY INSURANCE:
COMBINED SINGLE LIMITS: $3,000,000 per occurrence
1.2 EXHIBITS.
The exhibits listed below in this Section 1.2 are incorporated in this
Lease by reference and are to be construed as part of this Lease:
EXHIBIT A Legal Description of Land.
EXHIBIT B Plan showing Premises.
EXHIBIT C [NOT USED]
EXHIBIT D Landlord's Services.
EXHIBIT E Rules and Regulations.
EXHIBIT F [NOT USED]
3
<PAGE>
1.3. TABLE OF CONTENTS
CONTENTS
ARTICLE II PREMISES AND TERM
2.1. Premises
2.2 Term
ARTICLE III CONSTRUCTION
3.1 No Initial Construction
3.2 Tenant's Construction Obligation; Improvement Allowance
3.3 General Provisions Applicable to Construction
3.4 Representatives
ARTICLE IV RENT
4.1 Rent
4.2 Operating Expenses
4.2.1 Operating Expenses Increase
4.2.2 Tenant's Estimated Operating Expense Payments
4.2.3 Change to Fiscal Year
4.3 Electrical Standards and Charges
4.3.1 Electricity Furnished
4.3.2. Tenant's use
4.3.3 Excess Use
4.3.4 Discounting Service
4.4 Payments
ARTICLE V LANDLORD'S COVENANTS
5.1 Landlord's Covenants During the Term
5.1.1 Building Services
5.1.2 Additional Building Services
5.1.3 Repairs
5.1.4 Quiet Enjoyment
5.2 Interruptions
ARTICLE VI TENANT'S COVENANTS
6.1 Tenant's Covenants During the Term
6.1.1 Tenant's Payments
6.1.2 Repairs and Surrender of Premises
6.1.3 Occupancy and Use
6.1.4 Rules and Regulations
6.1.5 Safety Appliances
6.1.6 Compliance with Laws
6.1.7 Assignment and Subletting
6.1.8 Indemnity
6.1.9 Tenant's Liability Insurance
6.1.10 Tenant's Worker's Compensation Insurance
6.1.11 Landlord's Right of Entry
6.1.12 Loading
4
<PAGE>
6.1.13 Landlord's Costs
6.1.14 Tenant's Property
6.1.15 Labor or Materialmen's Liens
6.1.16 Changes or Additions
6.1.17 Holdover
ARTICLE VII CASUALTY AND TAKING
7.1 Casualty and Taking
7.1 Reservation of Award
ARTICLE VIII RIGHTS OF MORTGAGEE
8.1 Priority of Lease
8.2 Rights of Mortgage Holders; Limitation of Mortgagee's Liability
8.3 Mortgagee's Election
8.4 No Prepayment or Modification
8.5 No Release or Termination
8.6 Continuing Offer
8.7 Mortgagee's Approval
ARTICLE IX GROUND LEASES AND EASEMENTS
9.1 Priority of Lease
9.2 Easements
ARTICLE X DEFAULT
10.1 Events of Default
10.2 Tenant's Obligations After Termination
ARTICLE XI MISCELLANEOUS
11.1 Recording
11.2 Relocation
11.3 Notices from One Party To The Other
11.4 Bind and Inure
11.5 No Surrender
11.6 No Waiver, ETC.
11.7 No Accord and Satisfaction
11.8 Cumulative Remedies
11.9 Landlord's Right to Cure
11.10 Estoppel Certificate
11.11 Waiver of Subrogation
11.12 Acts of God
11.13 Brokerage Commission, Indemnity
11.14 Submission Not an Offer
11.15 Applicable Law and Construction
11.16 Guaranty
11.16 Guaranty
ARTICLE XII SECURITY DEPOSIT
5
<PAGE>
ARTICLE II
PREMISES AND TERM
2.1. PREMISES.
Subject to and with the benefit of the provisions of this Lease and any
ground lease for the parcel on which the Building is located (the "Land"),
Landlord hereby leases to Tenant, and Tenant leases from Landlord, that certain
portion of the third floor of the Building, excluding exterior faces of exterior
walls, the common facilities area and building service fixtures and equipment
serving exclusively or in common other parts of the Building. Such portion of
the Building, with such exclusions, is referred to herein as the "Premises".
"Rentable Floor Area" shall mean the size of a space in the Building as
measured from the inner surface of the outer glass enclosing the space in
question if the exterior wall consists of 50% or more glass or from the midpoint
of tile exterior wall if such wall consists of less than 50% glass, to the
midpoint of walls separating that space from other tenant areas or the common
facilities of the Building. The term "Rentable Floor Area of Premises" shall
mean the square footage amount measured as set forth in the immediately
preceding sentence plus a pro rata allocation of the common facilities on the
floor on which the Premises are located (based on the ratio of the Rentable
Floor Area of the Premises, excluding common facilities, to the total Rentable
Floor Area, excluding common facilities of the floor on which the Premises are
located) and plus a pro rata allocation of the common facilities of the Building
(based on the ratio of the Rentable Floor Area of the Premises, excluding common
facilities, to the Rentable Floor Area, excluding common facilities, of the
Building). Landlord and Tenant conclusively agree that the Rentable Floor Area
of the Premises, as set forth in Section 1.1 of this Lease, is final and correct
and is not subject to remeasurement or adjustment by either party.
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) the common facilities included in the
Building or on the Land, (b) the Building service fixtures and equipment serving
the Premises, and (c) the parking facility, if any, designated by Landlord to be
used by tenants of the Building, but not in excess of four (4) parking spaces
per one thousand (1,000) square feet of Rentable Floor Area of tile Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenants use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises and to other parts of the Building or
either, Building service fixtures and equipment wherever located in the Building
and (b)to alter or relocate any other common facilities, it being understood
that if any parking facilities are provided, the same may be relocated on or off
the Land from time to time by Landlord, provided that in all events
substitutions are substantially equivalent.
6
<PAGE>
2.2 TERM.
To have and to hold for a period (the "Term") commencing on the earlier of
(a) the date on which the Premises are deemed ready for occupancy as provided in
Section 3.2, or (b)the date on which Tenant occupies all or any part of the
Premises (whichever of said dates is appropriate being hereafter referred to as
the "Commencement Date"), and continuing until the Term Expiration Date, unless
sooner terminated as provided in Section 3.2, 6.1.6, 7.1 or 10.2 or in ARTICLE
IX.
ARTICLE III
CONSTRUCTION
3.1 NO INITIAL CONSTRUCTION.
Tenant acknowledges that the Premises are being delivered by Landlord to
Tenant "as-is", in their current condition. Except for Landlord's agreement to
provide the Improvement Allowance described in Section 3.2 below, Landlord shall
have no obligation whatsoever to construct any improvements in the Premises nor
to provide Tenant any improvement allowance. Tenant acknowledges that it has
inspected the Premises, is fully aware of the condition of the Premises and
agrees to accept the Premises "as-is."
3.2 TENANT'S CONSTRUCTION OBLIGATION; IMPROVEMENT ALLOWANCE.
On or before December 31, 1996, Tenant shall, at Tenant's sole cost and
expense, install on the roof of the Building, a "package" supplemental HVAC unit
which will provide HVAC services to the Premises during all times other than the
Building's normal operating hours (which as described in Exhibit D to this
Lease), without any chilled water being supplied from the Building HVAC system.
The electricity for such HVAC system shall be separately metered, at Tenant's
sole cost and expense, and Tenant shall pay all electrical charges necessary to
operate such system. The installation of the HVAC system by Tenant shall be
subject to Landlord's prior approval and to all other provisions of this Lease
including, without limitation, Sections 3.3 and 6.1.16. In particular, the exact
location of the HVAC system on the roof, the method of screening the system, any
necessary roof penetrations and the running of pipes shall all be subject to the
prior approval of Landlord. The HVAC system to be installed by Tenant shall be
considered a fixture and, upon the expiration or any earlier termination of this
Lease, shall become the property of Landlord and may not be removed by Tenant.
If Tenant fails to complete the installation of the HVAC system on or before
December 31, 1996, Landlord shall have the right, but not the obligation to
complete such installation. All costs incurred by Landlord to complete such
installation shall be considered Additional Rent due and payable by Tenant
within five (5) business days following Landlord's demand. As a result of the
installation of the HVAC unit described herein, Landlord shall have no
obligation whatsoever to provide HVAC service to Tenant outside of normal
business hours.
7
<PAGE>
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by Tenant under this Lease
shall be done in a good and workmanlike manner and in compliance with all
applicable laws and all lawful ordinances, regulations and orders of
governmental authority and insurers of the Building. Either party may inspect
the work of the other at reasonable times and promptly shall give notice of
observed defects.
3.4 REPRESENTATIVES.
Each party authorizes the other to rely, in connection with their
respective rights and obligations under this Article III, upon approval and
other actions on the party's behalf by a representative to be named by each
party upon execution hereof or by any person designated in substitution or
addition by notice to the party relying.
ARTICLE IV
RENT
4.1 RENT.
Tenant agrees to pay rent to Landlord, without any offset or reduction
whatever (except as made in accordance with the express provisions of this
Lease), equal to 1/12th of the Annual Rent in equal installments in advance on
the first day of each calendar month included in the Term; and for any portion
of a calendar month at the beginning or end of the Term, at the proportionate
rate payable for such portion in advance. Tenant acknowledges that Landlord has
already provided Tenant a credit of $8,219.00 against the November, 1996 Annual
Rent Installment. This credit was in lieu of any improvement allowance. Tenant
acknowledges that Tenant shall be responsible for any and all costs of
improvements which Tenant desires to construct in or for the Premises,
including, without limitation, all costs associated with the "package"
supplemental HVAC system required pursuant to Section 3.2 of this Lease.
4.2 OPERATING EXPENSES.
4.2.1 Operating Expenses Increase - In the event Landlord's Operating
Expenses, as defined below, shall in any calendar year exceed Landlord's
Operating Expenses for calendar year 1997 ("Base Year Amount"), Tenant shall,
and hereby agrees to, pay as Additional Rent, Tenant's pro rata share of such
excess ("Tenant's Operating Expense Payment"). Tenant's pro rata share be
determined by multiplying such excess by a fraction the numerator of which is
the Rentable Floor Area of the Premises (as such Rentable Floor Area may be
adjusted for any expansion set forth in this Lease or hereinafter agreed to by
Landlord and Tenant) and the denominator of which is the Rentable Floor Area of
the Building.
Landlord and Tenant hereby acknowledge and agree that the payment of
Tenant's operating Expense Payment, pursuant to the provisions of this Lease, is
based on a fully occupied Building. Accordingly, Landlord and Tenant hereby
agree that if, during any calendar year, the Building is
8
<PAGE>
not at least ninety-five percent (95%) occupied, on average, throughout the
year, the actual Landlord's Operating Expenses shall be increased for such year
to the amount which Landlord reasonably estimates would have been incurred had
the Building been ninety-five percent (95%) occupied, on average, throughout
such year. In such event, Landlord's Statement given to Tenant shall indicate
the occupancy percentage of the Building by month. If Landlord's Operating
Expenses are increased in any calendar year pursuant to the provisions of this
paragraph, Tenant's Operating Expenses Payment shall be determined by increasing
the Base Year Amount to reflect the amount of Landlord's Operating Expenses
which Landlord reasonably estimates would have been incurred during the year
1994 had the Building been ninety-five percent (95%) occupied, on average,
throughout the year.
As soon as practicable after the end of each calendar year during the Term
and after Lease termination, Landlord shall render a statement ("Landlord's
Statement") in reasonable detail and according to usual accounting practices
certified by Landlord and showing for the preceding calendar year or fraction
thereof, as the case may be, Landlord's Operating Expenses, including a
statement of the amount by which Landlord's Operating Expenses exceed the Base
Year Amount. The term "Landlord's Operating Expenses" as used in this Lease
shall not include interest and amortization on mortgages for the Building and
Land or leasehold interests therein and the cost of special services rendered to
tenants (including Tenant) for which a special charge is made, but shall mean
any and all reasonable and necessary expenses incurred by Landlord to operate
the Building and the Land, including, without limitation: real estate taxes on
the Building and Land; Installments and interest on assessments for public
betterments or public improvements; expenses of any proceedings for abatement of
taxes and assessments with respect to any fiscal year or fraction of a fiscal
year; premiums for insurance; compensation and all fringe benefits, worker's
compensation insurance premiums and payroll taxes paid by Landlord to, for or
with respect to all persons engaged in the operating, maintaining, or cleaning
of the Building and Land; all utility charges not billed directly to tenants by
Landlord or the utility, including electricity, steam, natural gas and water
(including sewer charges) and any taxes on such utilities; payments to
independent contractors under service contracts for cleaning, operating,
managing, maintaining and repairing the Building and Land (which payments may be
to affiliates of Landlord provided the same are at reasonable rates consistent
with the type of occupancy and the services rendered); rent paid by the managing
agent or imputed cost equal to the loss of rent by Landlord for making available
to the managing agent space for a Building office on the ground floor or above;
interest on working capital borrowed by Landlord in anticipation of receipts
from tenants; if the Building shares common areas or facilities with another
building or buildings, the Building's pro rata share (as reasonably determined
by Landlord) of the cost of cleaning, operating, managing (including the cost of
the management office for such buildings and facilities), maintaining and
repairing such common areas and facilities; fixed and Additional Rent payable
under any ground lease of the Land; and all other reasonable and necessary
expenses paid in connection with the cleaning, operating, managing, maintaining
and repairing of the Building and Land, or either, and any equipment therein,
properly chargeable against income, it being agreed that if Landlord installs a
new or replacement capital item for the purpose of reducing Landlord's Operating
Expenses, the cost thereof as reasonably amortized by Landlord, with interest at
the prime commercial rate in effect from time to time at NationsBank in Atlanta,
Georgia on the unamortized amount, shall be included in Landlord's Operating
Expenses
9
<PAGE>
Landlord's Statement shall also show the average number of square feet
of the Building which were occupied for the preceding fiscal year or fraction
thereof.
The term "real estate taxes" as used above shall mean taxes of every kind
and nature assessed by any governmental authority on the Land, the Building and
improvements, or both, which the Landlord shall become obligated to pay because
of or in connection with the ownership, leasing and operation of the Land, the
Building and improvements, or both, subject to the following: There shall be
excluded from such taxes all income taxes, excess profits taxes, excise taxes,
franchise taxes, and estate, succession, inheritance and transfer taxes,
provided, however, that if at any time during the Term the present system of ad
valorem taxation of real property shall be changed so that in lieu of the whole
or any part of the ad valorem tax on real property, there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with respect to
the Land, Building and improvements, or both, or a federal, state, county,
municipal, or other local income, franchise, excise or similar tax, assessment,
levy or charge (distinct from any now in effect) measured by or based, in whole
or in part, upon any such gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate taxes."
Notwithstanding any other provision of this Section 4.2, if the Term
commences on a date other than the first day of a calendar year or expires or is
terminated as of a date other than the last day of a calendar year, then for
such fraction of a calendar year at the beginning or end of the Term, Tenant's
payment to Landlord under this Section 4.2 shall be made on the basis of
Landlord's best estimate of the items otherwise includable in Landlord's
Statement and, in the case of the year in which the Term expires or is
terminated, shall be made on or before the later of (a) ten (10) days after
Landlord delivers such estimate to Tenant or (b) the last day of the Term, with
an appropriate payment or refund upon submission of Landlord's Statement.
4.2.2 Tenant's Estimated Operating Expense Payments - If, with respect to
any calendar year or fraction thereof during the Term, Landlord estimates that
Tenant shall be obligated to pay Tenant's Operating Expense Payment, then Tenant
shall pay, as Additional Rent, on the first day of each month of such calendar
year and each ensuing year thereafter, estimated monthly payments equal to
1/12th of the estimated Tenant's Operating Expense Payment for the respective
calendar year, with an appropriate additional payment or refund to be made
within thirty (30) days after Landlord's Statement is delivered to tenant
Landlord may adjust such estimated monthly payment from time to time and at any
time during a year, and Tenant shall pay, as Additional Rent, on the first day
of each month following receipt of Landlord's notice, thereof, the adjusted
estimated monthly payment.
4.2.3 Change to Fiscal Year - Landlord shall have the right from time to
time to change the periods of accounting under Section 4.2 to any annual period
other than a calendar year, and upon any such change all items referred to in
this Section 4.2 shall be appropriately apportioned. In all Landlord's
Statements rendered under this Section 4.2, amounts for periods partially within
and partially without the accounting periods shall be appropriately apportioned,
and any items which are not determinable at the time of a Landlord's Statement
shall be included therein on the basis of Landlord's estimate, and with respect
thereto Landlord shall render promptly after
10
<PAGE>
determination a supplemental Landlord's Statement, and appropriate adjustment
shall be made according thereto. All Landlord's Statements shall be prepared on
an accrual basis of accounting.
4.3 ELECTRICAL STANDARDS AND CHARGES.
4.3.1 Electricity Furnished - Landlord shall furnish electrical energy
required for lighting, electrical facilities, equipment, machinery, fixtures and
appliances used in or for the benefit of Premises. Tenant shall pay a pro rata
share of any increase in the cost of providing such service as a part of
Tenant's Operating Expenses Payment.
4.3.2 Tenant's Use - Tenant shall not, without prior written notice to
Landlord in each instance, connect to the Building electric distribution system
any fixtures, appliances or equipment other than normal office machines such as
desk-top calculators and typewriters, or any fixtures, appliances or equipment
which Tenant on a regular basis operates beyond normal building operating hours.
In the event of any such connection, Tenant agrees to pay upon demand an amount
which will reflect the cost to Landlord of the additional electrical service to
be furnished by Landlord, such increase to be effective as of the date of any
such installation. If Landlord and Tenant cannot agree thereon, such amount
shall be conclusively determined by a reputable independent electrical engineer
or consulting firm to be selected by Landlord and paid equally by both parties,
and the cost to Landlord will be included in Landlord's Operating Expenses
provided in Section 4.2 hereof.
4.3.3 Excess Use - Tenant's use of electrical energy in the Premises shall
not at any time exceed the capacity of any of the electrical conductors or
equipment in or otherwise serving the Premises nor shall it exceed the standard
per square foot consumption for the Building. In order to insure that such
capacity is not exceeded and to avert possible adverse effect upon the Building
electric service, Tenant shall not, without prior written notice to Landlord in
each instance, connect to the Building electric distribution system any
fixtures, appliances or equipment which operate on a voltage in excess of
120 volts nominal or make any alteration or addition to the electric system of
the Premises. Unless Landlord shall reasonably object to the connection of any
such fixtures, appliances or equipment, all additional risers or other equipment
required therefor shall be provided by Landlord, and the cost thereof shall be
paid by Tenant upon Landlord's demand. In the event of any such connection,
Tenant agrees to pay as Additional Rent an amount which will reflect the cost to
Landlord of the additional service to be furnished by Landlord, such increase to
be effective as of the date of any such connection. In addition, Tenant shall
pay as Additional Rent Landlord's cost to provide electricity to Tenant in
excess of the standard per square foot consumption amount for the Building. If
Landlord and Tenant cannot agree thereon, such amounts shall be conclusively
determined by a reputable independent electrical engineer or consulting firm to
be selected by Landlord and paid equally - by both parties, and the cost to
Landlord will be included in Landlord's Operating Expenses provided in
Section 4.2 hereof.
4.3.4 Discontinuing Service - Landlord may, at any time, elect to
discontinue the furnishing of electrical energy. In the event of any such
election by Landlord: (1) Landlord agrees to give reasonable advance notice of
any such discontinuance to Tenant; (2) Landlord
11
<PAGE>
agrees to permit Tenant to receive electrical service directly from the public
utility supplying service to the building and to permit the existing feeders,
risers, wiring and other electrical facilities serving Premises Space to be used
by Tenant and/or such public utility for such purpose to the extent they are
suitable and safely capable; (3) Landlord agrees to pay such charges and costs,
if any, as such public utility may impose in connection with the installation of
Tenant's meters and to make or, at such public utility's election, to pay for
such other installations as such public utility may require, as a condition of
providing comparable electrical service to Tenant; (4) the Operating Expenses
shall no longer include the cost to furnish electricity; and (5) Tenant shall
thereafter pay, directly to the utility furnishing the same, all charges for
electrical services to the Premises.
4.4 PAYMENTS.
All payments of Annual Rent and Additional Rent shall be made to Managing
Agent, or to such other person as Landlord may from time to time designate. If
any installment of Annual Rent or any other amounts or payments due by Tenant to
Landlord hereunder is paid more than five (5) days after the due date thereof,
it shall, at Landlord's election, bear interest at a rate equal to the prime
commercial rate from time to time established by NationsBank of Atlanta, Georgia
plus 4% per annum from such due date, which interest shall be immediately due
and payable as further Additional Rent.
ARTICLE V
LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM.
Landlord covenants during the Term:
5.1.1 Building Services - To furnish, through Landlord's employees or
independent contractors, electrical service to the extent set forth in Section
4.3 above and the services listed in Exhibit D;
5.1.2 Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional Building operation
services, if available, upon reasonable advance request of Tenant at equitable
rates from time to time established by Landlord to be paid promptly by Tenant;
5.1.3 Repairs - Except as otherwise provided in ARTICLE VII of this Lease,
to make such repairs to the roof, exterior walls, floor slabs, other structural,
components, and common facilities of the Building as may be necessary to keep
them in serviceable condition; and
5.1.4 Quiet Enjoyment - That Landlord has the right to make this Lease and
that Tenant on paying the rent and performing its obligations hereunder shall
peacefully and quietly have, hold and enjoy the Premises throughout the Term
without any manner of hindrance or
12
<PAGE>
molestation from Landlord or anyone claiming under Landlord, subject however to
all the terms and provisions hereof.
5.2 INTERRUPTIONS.
Landlord shall not be liable to Tenant for any damages compensation or
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from power losses or shortages or from the necessity of
Landlord's entering the Premises for any of the purposes authorized in this
Lease or for repairing the Premises or any portion of the Building or Land. In
case Landlord is prevented or delayed from making any repairs, alterations or
improvements, or furnishing any service or perform any other covenant or duty to
be performed on Landlord's part, by reason of any cause beyond Landlord's
reasonable control, Landlord shall not be liable to Tenant therefor, nor, except
as expressly otherwise provided in ARTICLE VII, shall Tenant be entitled to any
abatement or reduction of rent by reason thereof, nor shall the same give rise
to a claim in Tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the Premises.
ARTICLE VI
TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such further time as Tenant occupies
all or any part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and
Additional Rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures and
equipment) regardless of whether such taxes are assessed to Landlord or Tenant,
(c) all charges by public utilities for telephone and other utility services
(including service inspections therefor) rendered to the Premises not otherwise
required hereunder to be furnished by Landlord without charge or not consumed in
connection with any services required to be furnished by Landlord without charge
and (d) as Additional Rent, all charges of Landlord for services rendered
pursuant to Section 5.1.2 hereof;
6.1.2 Repairs and Surrender of Premises - Except as otherwise provided in
ARTICLE VII, Section 3.2 and Section 5.1.3, to keep the Premises in good order,
repair and condition, reasonable wear and tear only excepted; and at the
expiration or termination of this Lease peaceably to surrender the Premises in
good order and repair and in the condition existing as of the Commencement Date,
reasonable wear and tear only excepted and Tenant shall be obligated to remove
all goods and effects of Tenant and any items, the removal of which is required
by agreement or specified herein to be removed at Tenant's election and which
Tenant elects to remove, and to repair all damage caused by such removal and to
restore the Premises and leave them broom clean and neat;
13
<PAGE>
6.1.3 Occupancy and Use - To use and occupy the Premises only for the
Permitted Uses; not to injure or deface the Premises, Building, or Land; and not
to permit in the Premises any use thereof which is improper, offensive, contrary
to law or ordinance, or which creates or is liable to create a nuisance or which
may invalidate or increase the premiums for any insurance on the Building or its
contents or liable to render necessary any alteration or addition to the
Building;
6.1.4 Rules and Regulations - To comply with the Rules and Regulations set
forth in Exhibit E and all other reasonable Rules and Regulations hereafter made
by Landlord, of which Tenant has been given notice, for the care and use of the
building and Land and their facilities and approaches, it being understood that
Landlord shall not be liable to Tenant for the failure of other tenants of the
Building to conform to such Rules and Regulations;
6.1.5 Safety Appliances - To keep the Premises equipped with all safety
equipment or appliances required by law or ordinance or any other regulation of
any public authority because any use made by Tenant and to procure and licenses
and permits as required because of such use and, if requested by Landlord, to do
any work so required because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's Permitted Uses;
6.1.6 Compliance with Laws - To comply, at Tenant's sole cost and expense
with all laws, orders, ordinances and regulations of federal, state, county, and
municipal authorities having jurisdiction over the Premises, and to comply with
all directions or orders of any governmental official made pursuant to such
laws, orders, ordinances and regulations and to comply with all insurance
requirements applicable to the Premises.
6.1.7 Assignment and Subletting - Not without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, to assign this
Lease, to make any sublease, or to permit occupancy of the Premises or any part
thereof by anyone other than Tenant, voluntarily or by operation of law; as
Additional Rent, to reimburse Landlord promptly for reasonable legal and other
expenses incurred by Landlord in connection with any request by Tenant for
consent as assignment or subletting; no assignment or subletting shall affect
the continuing primary liability of Tenant (which, following such assignment or
subletting, shall be joint and several with the assignee or sublessee); no
consent to any of the foregoing in a specific instance shall operate as a waiver
in any subsequent instance. In the event that any assignee or subtenant pays to
Tenant any amounts in excess of the Annual Rent and Additional Rent then payable
hereunder, or pro rata portion thereof on a square footage basis for any portion
of the Premises, Tenant shall promptly pay said excess to Landlord as and when
received by Tenant.
6.1.8 Indemnity - To defend, with attorney(s) reasonably acceptable to
Landlord, save harmless and indemnify Landlord from any liability for injury,
loss, accident or damage to any person or property and from any claims, actions,
proceedings and expenses and costs in connection therewith (including, without
implied limitation, reasonable attorneys' fees): (i) arising from the omission,
fault, willful act, negligence or other misconduct of Tenant or from any use
made or thing done or occurring on the Premises not due to the gross negligence
or
14
<PAGE>
willful misconduct of Landlord or (ii) resulting from the failure of Tenant to
perform and discharge its covenants and obligations under this Lease;
6.1.9 Tenant's Liability Insurance - To maintain commercial general
liability insurance on the Premises in amounts which shall, at the beginning of
the Term, be at least equal to the limits set-forth in Section 1.1 of this
Lease, and from time to time during the Term shall be for such higher limits, if
any, as are customarily carried in the area in which the Premises are located,
on property similar to the Premises and used for similar purposes, and to
furnish Landlord with certificates thereof;
6.1.10 Tenant's Worker's Compensation Insurance -To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance in
amounts and form required by all applicable laws and to furnish Landlord with
certificates thereof;
6.1.11 Landlord's Right of Entry - To permit Landlord and Landlord's
agents entry: to examine the Premises at reasonable times and, if Landlord shall
so elect, to make repairs or replacements; to remove, at Tenant's expense, any
changes, additions, signs, curtains, blinds, shades, awnings, aerials, flagpoles
or the like to which Landlord has not consented in writing; and to show the
Premises to prospective tenants during the twelve (12) months preceding
expiration of the Term and to prospective purchasers and mortgagees at all
reasonable times;
6.1.12 Loading - Not to place a load upon the Premises exceeding an
average rate of fifty (50) pounds of live load per square foot or floor area,
and not to move any safe, vault or other heavy equipment in, about or out of the
Premises except in such manner and at such times as Landlord shall in each
instance approve; Tenant's business machines and mechanical equipment which
cause vibration or noise that may be transmitted to the Building structure or to
any other leased space in the Building shall be placed and maintained by Tenant
in settings of cork, rubber, spring or other types of vibration eliminators
sufficient to eliminate such vibration or noise;
6.1.13 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any parties in
possession of the Premises or any part thereof claiming under Tenant, to pay, as
Additional Rent, all costs including, without implied limitation, reasonable
attorneys' fees incurred by or imposed upon Landlord in connection with such
litigation and, as Additional Rent, also to pay all such costs and fees incurred
by Landlord in connection with the successful enforcement by Landlord of any
obligations of Tenant under this Lease;
6.1.14 Tenant's Property - All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere in the Building or on the Land shall
be at the sole risk and hazard of Tenant and, if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes or other pipes, by theft, or from any other
cause, no part of said loss or damage is to
15
<PAGE>
be charged to or to be borne by Landlord unless due to the gross negligence or
willful misconduct of Landlord;
6.1.15 Labor or Materialmen's Liens - To pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents, employees or
independent contractors; not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises; and
immediately to discharge any such liens which may so attach;
6.1.16 Changes or Additions - Not to make any changes, alterations or
additions to the Premises or to construct or take out any improvements therein
without Landlord's prior written consent, provided that Tenant shall reimburse
Landlord, as Additional Rent for all costs incurred by Landlord in reviewing
Tenant's proposed changes or additions, and provided further that, in order to
protect the functional integrity of the Building, all such changes and additions
shall be performed by contractors selected from a list of approved contractors
prepared by Landlord from time to time; and
6.1.17 Holdover - To pay to Landlord the greater of twice the then fair
market rent as conclusively determined by Landlord or twice the total of the
Annual Rent and Additional Rent then applicable for each month or portion
thereof during which Tenant shall retain possession of the Premises or any part
thereof after the termination or expiration of this Lease, whether by lapse of
time or otherwise, and also to pay all damages sustained by Landlord on account
thereof, the provisions of this subsection shall not operate as a waiver by
Landlord of the right of re-entry provided in this Lease; at the option of the
Landlord exercised by a written notice given to Tenant while such holding over
continues, such holding over shall constitute an extension of this Lease for a
period of one year.
ARTICLE VII
CASUALTY AND TAKING
7.1 CASUALTY AND TAKING.
In case during the Term all or any substantial part of the Premises,
Building or Land, or any one or more of them, are damaged materially by fire or
any other casualty or by action of public or other authority in consequence
thereof or are taken by eminent domain or Landlord receives compensable damage
by reason of anything lawfully done in pursuance of public or other authority,
this Lease shall terminate at Landlord's election, which may be made,
notwithstanding Landlord's entire interest may have been divested, by notice to
Tenant within thirty (30) days after the occurrence of the event giving rise to
the election to terminate, which notice shall specify the effective date of
termination which shall be not less than thirty (30) nor more than sixty (60)
days after the date of notice of such termination. If in any such case the
Premises are rendered unfit for use and occupation and the Lease is not so
terminated, Landlord shall use due diligence to put the Premises, or, in case of
a taking, what may remain thereof (excluding any items installed or paid for by
Tenant which Tenant may be required or permitted to remove) into proper
condition for use and occupation to the extent permitted by tile net award
16
<PAGE>
of insurance or damages available to Landlord, and a just proportion of the
Annual Rent and Additional Rent according to the nature and extent of the injury
shall be abated until the Premises or such remainder shall have been put by
Landlord in such condition; and in case of a taking which permanently reduces
the area of the Premises, a just proportion of the Annual Rent and Additional
Rent shall be abated for the remainder of the Term and an appropriate adjustment
shall be made to the Tenant's Operating Expense Base Year Amount.
7.2 RESERVATION OF AWARD.
Landlord reserves to itself any and all rights to receive awards made for
damages to the Premises, Building or Land and the leasehold hereby created, or
any one or more of them, accruing by reason of exercise of eminent domain or by
reason of anything lawfully done in pursuance of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request and hereby irrevocably designates and
appoints Landlord as its attorney-in-fact to execute and deliver in Tenant's
name and behalf all such further assignments thereof It is agreed and
understood, however, that Landlord does not reserve to itself, and Tenant does
not assign to Landlord, any damages payable for (i) movable trade fixtures
installed by Tenant, or anybody claiming under Tenant, at its own expense, (ii)
relocation expenses recoverable by Tenant from such authority in a separate
action, or (iii) any other item for which Tenant is entitled to any award so
long as recovery for such item does not reduce the award to which Landlord is
otherwise entitled.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
This Lease is and shall continue to be subject and subordinate to any
mortgage or deed to secure debt of record covering the Land or Building or both
(the "mortgaged premises") whether now or hereafter in existence. The holder of
any such mortgage or deed to secure debt shall have the election to subordinate
the same to the rights and interests of Tenant under this Lease exercisable by
filing with the appropriate recording office a notice of such election,
whereupon the Tenant's rights and interests hereunder shall have priority over
such mortgage or deed of trust. Tenant hereby agrees to execute, with ten (10)
days of demand therefore, any reasonable documentation evidencing such
subordination.
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY.
The word "mortgage" as used herein includes mortgages, deeds to secure debt
or other similar instruments evidencing other voluntary liens or encumbrances
and modifications, consolidations, extensions, renewals, replacements and
substitutes thereof. The word "holder" shall mean a mortgagee and any
subsequent holder or holders of a mortgage. Upon entry and
17
<PAGE>
taking possession of the Premises for the purpose of foreclosure, such holder
shall have all the rights of Landlord. Notwithstanding any other provision of
this Lease to the contrary no such holder of a mortgage shall be liable, either
as mortgagee or as assignee, to perform, or be liable in damages for failure to
perform any of the obligations of Landlord unless and until such holder shall
enter and take possession of the Premises for the purpose of foreclosure, and
such holder shall not in any event be liable to perform or liable in damages for
failure to perform the obligations of Landlord under Section 3.1. Upon entry for
the purpose of foreclosure, such holder shall be liable to perform all of the
obligations of Landlord (except for the obligations under section 3.1), provided
that a discontinuance of any foreclosure proceeding shall be deemed a conveyance
under said provisions to the owner of the equity of the Premises.
8.3 MORTGAGEE'S ELECTION.
Notwithstanding any other provision to the contrary contained in this
Lease, if prior to substantial completion of Landlord's obligations under
Article III, any holder of a first priority mortgage on the mortgaged premises
enters and takes possession thereof for the purpose of foreclosing the mortgage,
such holder may elect, by written notice given to Tenant and Landlord at any
time within ninety (90) days after such entry and taking of possession, not to
perform Landlord's obligations under Article III, and in such event such holder
and all persons claiming under it shall be relieved of all obligations to
perform, and all liability for failure to perform, said Landlord's obligations
under Article III, and Tenant may terminate this Lease and all its obligations
hereunder by written notice to Landlord and such holder given within thirty (30)
days after the day on which such holder shall have given its notice as
aforesaid.
8.4 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Rent, Additional Rent or any other charge more
than ten (10) days prior to the due dates thereof. No prepayment of Annual
Rent, Additional Rent or other charge, no assignment of this Lease and no
agreement to modify so as to reduce the rent, change the Term or otherwise
materially change the rights of Landlord under this Lease, or to relieve Tenant
of any obligations or liability under this Lease, shall be valid unless
consented to in writing by Landlord's mortgagees of record, if any.
8.5 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle Tenant
under the terms of this Lease, or by law, to be relieved of Tenant's obligations
hereunder or to terminate this Lease, shall result in a release or termination
of such obligations or a termination of this Lease unless (i) Tenant shall have
first given written notice of Landlord's act or failure to act to Landlord's
mortgagees of record, if any, specifying the act or failure to act on the part
of Landlord which could or would give basis to Tenant's rights and (ii) such
mortgagees, after receipt of such notice, have failed or refused to correct or
cure the condition complained of within a reasonable time thereafter, but
nothing contained in this Section 8.5 shall be deemed to impose any obligation
on any such mortgagee to correct or cure any such condition. "Reasonable time"
as used above means and includes a reasonable time to obtain possession of
18
<PAGE>
the mortgaged premises, if the mortgagee elects to do so, and a reasonable time
to correct or cure the condition if such condition is determined to exist.
8.6 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants end agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written herein as such; and such
mortgagee shall be entitled to enforce such provisions in its own name. Tenant
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII.
8.7 MORTGAGEE'S APPROVAL.
Landlord's obligation to perform its covenants and agreements hereunder is
subject to the condition precedent that this Lease be approved by the holder of
any mortgage of which the Premises are a part and by the issuer of any
commitment to make a mortgage loan which is in effect on the date hereof.
Unless Landlord gives Tenant written notice within thirty (30) business days
after the date hereof that such holder or issuer, or both, disapprove this
Lease, then this condition shall be deemed to have been satisfied or waived and
the provisions of this Section 8.7 shall be of no further force or effect.
ARTICLE IX
GROUND LEASES AND EASEMENTS
9.1 PRIORITY OF LEASE.
This Lease is and shall continue to be subject and subordinate to any
presently existing underlying lease (including any amendments, modifications and
extensions thereof) covering all or any part of the Land or the Building,
including but not limited to, that certain Lease Agreement for Office Building,
Hartsfield International Airport Old Terminal Redevelopment Area, between City
of Atlanta and Trident Partners dated October 31, 1989. This provision shall be
self-operative and no further instrument shall be required to effect such
subordination of this Lease. Upon demand, however, Tenant shall execute any
reasonable documentation required by Landlord to evidence such subordination.
9.2 EASEMENTS.
This Lease and all rights of Tenant hereunder shall be subject and
subordinate to any easements, rights-of-way and agreements, whether now existing
or hereafter placed on the Land
19
<PAGE>
or the Building, in connection with the ground lease referred to in Section 9.1
above or in connection with the development of the Land, the Building or the
project of which either the Land or the Building is a part; provided, however,
that this Lease shall not be subordinate to any future easement, right-of-way or
agreement which would prevent Tenant from gaining access to and using the
Premises for Tenant's Permitted Uses.
ARTICLE X
DEFAULT
10.1 EVENTS OF DEFAULT.
If any default by Tenant continues after notice, in case of Annual Rent,
Additional Rent, Tenant Improvement Reimbursement or any other monetary
obligation of Tenant to Landlord hereunder, for more than ten (10) days or, in
any other case, for more than thirty (30) days and such additional time, if any,
as is reasonably necessary to cure the default, if the default is of such a
nature that it cannot reasonably be cured in thirty (30) days, and Tenant
diligently endeavors to cure such default and thereafter completes such cure as
promptly as reasonably possible; or if Tenant becomes insolvent, fails to pay
its debts as they become due, files a petition under any chapter of the U.S.
Bankruptcy Code, 11 U.S.C. 101 et seq., as it may be amended (or any similar
petition under any insolvency law of any jurisdiction), or if such petition is
filed against Tenant; or if Tenant proposes any dissolution, liquidation,
composition, financial reorganization or recapitalization with creditors, makes
an assignment or trust mortgage or pledges its interest under this Lease as
security for any obligations of Tenant, or if a receiver, trustee, custodian or
similar agent is appointed or takes possession with respect to any property of
Tenant; or if the leasehold hereby created is taken on execution or other
process of law in any action against Tenant; then, and in any such case,
Landlord and the agents and servants of Landlord may, in addition to and not in
derogation of any remedies for any preceding breach of covenant, immediately or
at any time thereafter while such default continues and without further notice,
at Landlord's election, do any one or more of the following: (1) give Tenant
written notice stating that the Lease is terminated, effective upon the giving
of such notice or upon a date stated in such notice, as Landlord may elect, in
which event the Lease shall be irrevocably extinguished and terminated as stated
in such notice without any further action, or (2) with or without process of
law, and with or without terminating this Lease, in a lawful manner, enter and
repossess the Premises as of Landlord's former estate, and expel Tenant and
those claiming through or under Tenant, and remove its and their effects,
without being guilty of trespass, or (3) pursue any other rights or remedies
permitted by law. Any such termination of the Lease shall be without prejudice
to any remedies which might otherwise be used for arrears of rent or prior
breach of covenant, and in the event of such termination Tenant shall remain
liable under this Lease as hereinafter provided. Tenant hereby waives all
statutory rights (including, without limitation, rights of redemption, if any)
to the extent such rights may be lawfully waived, and Landlord, without notice
to Tenant, may store Tenant's effects and those of any person claiming through
or under Tenant at the expense and risk of Tenant and, if Landlord so elects,
may sell such effects at public auction or private sale and apply the net
proceeds to the payment of all sums due to Landlord from Tenant, if any, and pay
over the balance, if any, to Tenant. In addition, Landlord
20
<PAGE>
shall have the right, but in no event shall Landlord be obligated, in its own
name but as agent for Tenant to enter into and rent all or any portion of the
Premises on behalf of Tenant, upon such terms and conditions as Landlord may
deem advisable.
10.2 TENANT'S OBLIGATIONS AFTER TERMINATION.
In the event that this Lease is terminated under any of the provisions
contained in Section 10.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the then present values of the excess of the total rent reserved
for the residue of the Term over the rental value of the Premises for said
residue of the Term. In calculating the rent reserved, there shall be included,
in addition to the Annual Rent and all Additional Rent, the value of all other
consideration agreed to be paid or performed by Tenant for said residue. Tenant
further covenants as an additional and cumulative obligation after any such
termination to pay punctually to Landlord all the sums and perform all the
obligations which Tenant covenants in this Lease to pay and to perform in the
same manner and to the same extent and at the same time as if this Lease had not
been terminated. In calculating the amounts to be paid by Tenant under the next
foregoing covenant, Tenant shall be credited with any amount paid to Landlord as
compensation as provided in the first sentence of this Section 10.2 and also
with the net proceeds of any rents obtained by Landlord by reletting the
Premises, after deducting all Landlord's expenses in connection with such:
reletting, including, without implied limitation, all repossession costs,
brokerage commissions, fees for legal services and expenses of preparing the
Premises for such reletting, it being agreed by Tenant that Landlord may (i)
relet the Premises or any part or parts thereof for a term or terms which may at
Landlord's option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the Term and may grant such
concessions and free rent as Landlord in its sole judgment considers advisable
or necessary to relet the same and (ii) make such alterations, repairs and
decorations in the Premises as Landlord in its sole judgment considers advisable
or necessary to relet the same, and no action of Landlord in accordance with the
foregoing or failure to relet or to collect rent under reletting shall operate
or be construed to release or reduce Tenant's liability as aforesaid.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amount of the loss or damages
referred to above.
21
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.1 RECORDING.
Neither party shall record this Lease or any of its provisions in any
public records.
11.2 RELOCATION.
Landlord reserves the right to relocate the Premises to comparable space
within the Building or another office building in the development of which the
Building is a part by giving Tenant ninety (90) days prior written notice of
such intention to relocate. On or before the effective date of such relocation,
this Lease shall be amended by deleting the description of the original Premises
and substituting therefor a description of such comparable space. Landlord
agrees to pay the reasonable costs of moving Tenant to such other space within
the Building or the park.
11.3 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in writing to Tenant. Any notice shall be deemed duly
given three (3) days following the date the notice is mailed to such address
postage prepaid, registered or certified mail, return receipt requested, or when
delivered to such address by hand.
11.4 BIND AND INURE.
The obligations of this Lease shall run with the Land and this Lease shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. The obligations of Landlord shall
be binding upon the assets of Landlord which comprise the Premises but not upon
other assets of Landlord. No individual partner, trustee, stockholder, officer,
director, employee or beneficiary of Landlord shall be personally liable under
this Lease and Tenant shall look solely to Landlord's interest in the Premises
in pursuit of its remedies upon an event of default hereunder, and the general
assets of the individual partners, trustees, stockholders, officers, employees
or beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
22
<PAGE>
11.5 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
11.6 NO WAIVER, ETC.
The failure of Landlord or of Tenant to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease or, with respect to such failure of Landlord, any of the Rules and
Regulations referred to in Section 6.1.4, whether heretofore or hereafter
adopted by Landlord, shall not be deemed a waiver of such violation nor prevent
a subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation, nor shall the failure
of Landlord to enforce any of said Rules and Regulations against any other
tenant in the Building be deemed a waiver of any such Rules or Regulations. The
receipt by Landlord of Annual Rent or Additional Rent with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver of such breach
by Landlord, unless such waiver be in writing and signed by Landlord. No consent
or waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
11.7 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Rent and
Additional Rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
11.8 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any breach
or threatened breach by Tenant of any provisions of this Lease. In addition to
the other remedies provided in this Lease, Landlord shall be entitled to the
restraint by injunction of the violation or attempted or threatened violation of
any of the covenants, conditions or provisions of this Lease or to a decree
compelling specific performance of any such covenants, conditions or provisions.
11.9 LANDLORD'S RIGHT TO CURE.
If Tenant shall at any time default in the performance of any obligation
under this Lease, Landlord shall have the right, but shall not be obligated, to
enter upon the Premises and to perform such-obligation, notwithstanding the fact
that no specific provision for such substituted
23
<PAGE>
performance by Landlord is made in this Lease with respect to such default. In
performing such obligation, Landlord may make any payment of money or perform
any other act. All sums so paid by Landlord together with interest at the rate
of 4% per annum in excess of the then prime commercial rate of interest being
charged by NationsBank of Atlanta, Georgia, and all necessary, incidental costs
and expenses in connection with the performance of any such act by Landlord,
shall be deemed to be Additional Rent under this Lease and shall be payable to
Landlord immediately on demand. Landlord may exercise the foregoing rights
without waiving any other of its rights or releasing Tenant from any of its
obligations under this Lease.
11.10 ESTOPPEL CERTIFICATE.
Tenant agrees, from time to time, upon not less than fifteen (15) days'
prior written request by Landlord, to execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect; that Tenant has no defenses, offsets or counterclaims
against its obligations to pay the Annual Rent and Additional Rent and to
perform its other covenants under this Lease; that there are no uncured defaults
of Landlord or Tenant under this Lease (or, if there have been modifications,
that this Lease is in full force and effect as modified and stating the
modifications and, if there are any defenses, offsets, counterclaims, or
defaults, setting them forth in reasonable detail); and the dates to which the
Annual Rent, Additional Rent and other charges have been paid. Any such
statement delivered pursuant to this Section 11.10 shall be in a form reasonably
acceptable to and may be relied upon by any prospective purchaser or mortgagee
of premises which include the Premises or any prospective assignee of any such
mortgagee.
11.11 WAIVER OF SUBROGATION.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
11.12 ACTS OF GOD.
In any case where either party hereto is required to do any act (other
than the payment of Annual Rent and Additional Rent), delays caused by or
resulting from Acts of God, war, civil commotion, fire, flood or other casualty,
labor difficulties, shortages of labor, materials or equipment, government
regulations, unusually severe weather or other causes beyond such party's
reasonable control shall not be counted in determining the time during which
work shall be completed, whether such time be designated by a fixed date, a
fixed time or a "reasonable time," and such time shall be deemed to be extended
by the period of such delay.
24
<PAGE>
11.13 BROKERAGE COMMISSION; INDEMNITY.
Landlord and Tenant agree that Brannen Goddard Company has acted as broker
for Landlord in this transaction ("Broker") and that Tenant has not been
represented by a broker. Broker is to be paid a commission by Landlord pursuant
to the terms and conditions of a separate Commission Agreement between Landlord
and Broker. Tenant warrants that there are no claims for broker's commissions
or finder's fees claimed by any other party other than Broker claiming to have
dealt with Tenant in connection with its execution of this Lease. Tenant hereby
indemnifies Landlord and holds Landlord harmless from and against all loss,
cost, damage or expense, including, but not limited to, attorney(s) fees and
court costs, incurred by Landlord as a result of or in conjunction with a claim
of any real estate agent or broker, due to any party claiming to have dealt with
Tenant, other than Broker. Landlord hereby indemnifies Tenant and holds Tenant
harmless from and against loss, cost, damage or expense, including, but not
limited to, attorney(s) fees and court costs, incurred by Tenant as a result of
or in conjunction with a claim of any real estate agent or broker, if made by,
through or under Landlord. Landlord warrants that there are no claims other
than that of Broker for broker's commissions or finder's fees due to any party
claiming to have dealt with Landlord in connection with its execution of this
Lease.
11.14 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of its
provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
11.15 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the laws of
the state in which the Premises are located. If any term, covenant, condition
or provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant affecting
this Lease. This Lease may be amended, and the provisions hereof may be waived
or modified, only by instruments in writing executed by Landlord and Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
25
<PAGE>
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
claiming through or under them respectively. If there be more than one tenant,
the obligations imposed by this Lease upon Tenant shall be Joint and several.
11.16 GUARANTY.
Not Applicable.
11.17 RENEWAL OPTION.
Provided Tenant is not in default under this Lease either as of the date
of exercise or of the commencement date thereof, Tenant shall have the right and
option to extend the Term of this Lease for one additional period of five (5)
years ("Extended Term") commencing immediately following the expiration of the
original Term of this Lease. Tenant may only exercise this option by providing
written notice to Landlord at least two hundred seventy (270) days prior to the
expiration of the Term of the Lease. The Base Rent for the Extended Term shall
be the greater of (i) $19.50 per annum, per square foot of Rentable Floor Area
of Premises or the first year of the option period, or (ii) ninety-five percent
(95%) of the market rate, as of the commencement date of the Extended Term, for
space of similar size in the Building, as reasonably determined by Landlord.
Landlord will notify Tenant, in writing, at least thirty (30) days prior to the
commencement of the Extended Term of Landlord's reasonable determination of
ninety-five (95%) of the then current market rate.
ARTICLE XII
SECURITY DEPOSIT
Landlord and Tenant acknowledge that no Security Deposit is required as part of
this Lease.
EXECUTED as a sealed instrument on the day and year first above written.
LANDLORD:
BY: SPP REAL ESTATE (GEORGIA TWO), INC.,
By: /s/
-----------------------------
Name: Laura Sundquist Brom
---------------------------
Title: Chief Financial Officer
-------------------------
(Signatures Continued on Following Page)
26
<PAGE>
TENANT:
CONFERENCE SOURCE INTERNATIONAL,
INC., a Georgia corporation
By: /s/
----------------------------
Name: Judy B. Crawford
----------------------------
Title: Owner
---------------------------
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
[CORPORATE SEAL]
27
<PAGE>
EXHIBIT "A"
ALL THAT TRACT OR PARCEL OF LAND situated, lying and being in Land Lots 128 and
129 of the 14th District, Fulton County, Georgia, being more particularly
described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at an iron pin set located at the
intersection of the easterly right-of-way line of Tobbie Terrace (a variable-
width right-of-way) and the southern right-of-way line of Loop Road; and running
thence along the said easterly right-of-way line the following courses and
distances: South 00 42' 32" West 31.44 feet to an iron pin set, along the arc
of a 775.97-foot radius curve to the left an arc distance of 192.46 feet (said
arc being subtended by a chord lying to the East having a bearing of South 06
23' 48" East and being 191.97 feet in length) to an iron pin set, South 13 30'
8" East 48.81 feet to a point located at the intersection of said easterly
right-of-way line and the land lot line common to Land Lots 129 and 130 (said
common land lot line being the current city limits line of the City of College
Park), South 13 30' 08" East 81.65 feet to an iron pin set, along the arc of a
1478.14-foot radius curve to the right an arc distance of 105.77 feet (said arc
being subtended by a chord lying to the West having a bearing of South 11 27'
09" East and being 105.75 feet in length) to an iron bin set and THE TRUE POINT
OF BEGINNING FROM THE TRUE POINT OF BEGINNING AS THUS ESTABLISHED, run thence
North 90 00' 00" East 481.39 feet to a nail set; thence South 00 00' 00" East
474.14 feet to a nail set; thence South 90 00' 00" West 427.00 feet to a point
located on the easterly right-of-way line of Frontage Road (a variable width
right-of-way); thence along said easterly right-of-way line the following
courses and distances: along the arc of a 797.14-foot radius curve to the right
an arc distance of 83.69 feet (said arc being subtended by a chord lying to the
East having a bearing of North 08 38' 29" West and being 83.66 feet in length)
to an iron pin set; North 05 38' 03" West 296.52 feet to an iron pin set; along
the arc of a 1478.14-foot radius curve to the left an arc distance of 97.21 feet
(said arc being subtended by a chord lying to the West having a bearing of North
07 30' 57" East and being 97..19 feet in length) to an iron pin set and THE TRUE
POINT OF BEGINNING.
Said property being more particularly shown as Parcel 1, containing 4.950
acres, on that certain plat of survey entitled "Trident Partners, Phase 1,
Hartsfield Centre Office Building,, dated October 5, 1988, last revised March
30, 1989, prepared by Franklin T. Simon & Associates, bearing the seal and
certification of Franklin T. Simon, G.R.L.S. No. 2372. Said survey being
incorporated herein by this reference.
28
<PAGE>
[Hartsfield Centre Letterhead]
EXHIBIT B
---------
PREMISES
--------
[third floor diagram inserted]
29
<PAGE>
EXHIBIT C
[NOT USED]
30
<PAGE>
EXHIBIT D
LANDLORD'S SERVICES
ONE HARTSFIELD CENTRE
Office Areas, Common Areas, etc.
- --------------------------------
Nightly:
- -------
1. Vacuum all carpeted areas.
2. Clean all tile floors with a treated dust mop; damp mop with a
disinfectant.
3. Dust all horizontal surfaces, i.e. tops of desks, filing cabinets,
chairs, tables, etc.
4. Damp wipe entrance doors moldings and spot clean entrance glass.
5. - Empty ashtrays; damp wipe and polish.
6. Remove all trash from receptacles; remove trash to collection area;
replace all liners.
7. Disinfect and polish drinking fountain(s).
Nightly - Restrooms:
- -------------------
1. Damp mop and disinfect tile floors.
2. Remove trash from receptacles; replace liners.
3. Replenish paper products and soap.
4. Clean and disinfect all toilets and sinks.
5. Polish all bright work.
6. Spot clean partitions as needed.
Weekly - All Areas
- ------------------
1. Thoroughly damp mop all tile floors taking care to get into comers,
along edges, etc.
2. Remove fingerprints from telephones; clean with disinfectant.
3. Vacuum all upholstered furniture.
31
<PAGE>
4. Dust all vertical surfaces, i.e. sides of desks, filing cabinets,
chairs, tables, etc.
5. Accomplish all high dusting, i.e. over exit signs, doors, etc.
Heating, Ventilating, and Air Conditioning
- ------------------------------------------
1. Heating, ventilating, and air conditioning as required to provide
reasonably comfortable temperatures for normal business day occupancy (excepting
holidays); Monday through Friday from 8:00 am. to 6:00 pm. and Saturday from
8:00 a.m. to 1:00 pm.
2. Maintenance of any additional or special air conditioning equipment and
the associated operating cost will be at Tenant's expense.
Water
- -----
Hot water for lavatory purposes and cold water for drinking, lavatory
and toilet purposes.
Floor's
Vinyl composition tile floors will be stripped and waxed one (1) time
per year.
Window Washing
- --------------
Exterior windows will be washed two (2) times per year. Interior
windows will be washed one (1.) time per year.
Elevators
- ---------
Elevators for the use of all tenants and the general public for access
to and from all floors of the Building. Programming of elevators
(including, but not limited to, service elevators) shall be as Landlord
from time to time determines best for the Building as a whole. Tenant
shall have 24 hours/day, seven days/week access to at least one
passenger elevator.
Relamping of Light Fixtures
- ---------------------------
Lamps, ballasts, and starters shall be replaced or repaired by Landlord
at Landlord's expense.
Cafeteria and Vending Installations
- -----------------------------------
1. Any space to be used primarily for lunchroom or cafeteria
operation shall be Tenant's responsibility to keep clean and
sanitary, it being understood that Landlord's approval of such use
must be first obtained in writing.
32
<PAGE>
2. Vending machines or refreshment service installations by Tenant
must be approved by Landlord in writing and shall be restricted in
use to employees and business callers. All cleaning necessitated
by such installations shall be at Tenant's expense.
33
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
1. The entrance, lobbies, passages, corridors, elevators and stairways shall
not be encumbered or obstructed by Tenant, Tenant's agents, servants,
employees, licensees or visitors or be used by them for any purpose other
than for ingress or egress to and from the Premises. The moving in or out
of all freight, furniture or bulky matter of any description must take
place during the hours which Landlord may determine from time to time.
Notwithstanding the foregoing, Tenant shall have use of the loading dock
and freight elevator at all reasonable times. Landlord reserves the right
to inspect all freight and bulky matter to be brought into the Building and
to exclude from the Building all freight and bulky matter which violates
any of these Rules and Regulations or the Lease of which these Rules and
Regulations are a part.
2. No curtains, blinds, shades, screens or signs, other than those furnished
by Landlord shall be attached to, hung in or used in connection with any
window or door of the Premises without the prior written consent of
Landlord. Interior signs on doors shall be painted or - affixed for Tenant
by Landlord or by sign painters first approved by Landlord at the expense
of Landlord and shall be of a size, color and style acceptable to Landlord.
3. Subject to the foregoing term of the Lease no additional locks or bolts of
any kind shall be placed upon any of the doors or windows by Tenant, nor
shall any changes be made in existing locks or the mechanism thereof
without the prior written consent of Landlord which consent shall not be
unreasonably delayed or withheld. Tenant must, upon the termination of its
tenancy, restore to Landlord all keys of stores, shops, booths, stands,
office and toilet rooms, either furnished or otherwise procured by Tenant,
and in the event of the loss of any keys so furnished, Tenant shall pay to
Landlord the cost thereof.
4. Canvassing, soliciting and peddling in the Building are prohibited and
Tenant shall cooperate to prevent the same.
5. Tenant may request heating and/or air conditioning during other periods in
addition to normal working hours pursuant to the foregoing terms of the
Lease.
6. Tenant shall comply with all security measures from time to time
established by Landlord for the Building. Notwithstanding anything to the
contrary contained herein, Tenant and its permitted assignees, subtenants,
and their employees, licensees and guests, shall have access to the
Building, the Premises and the Common Areas, including all parking areas,
at all times, 24 hours per day, every day of the year during the term of
this Lease provided such employee has a security access card in his
possession (for any hours other than 7:00 a.m. to 6:00 p.m. on weekdays)
and, upon request, produces reasonable identification.
34
<PAGE>
7. Non Smoking Building - For the health and safety of your employees and
visitors, One Hartsfield Centre is designated as a non-smoking building.
Smoking will not be permitted in the common areas, lobby, restrooms,
stairwells, mailroom, dock area, building entrances, etc. Please have your
employees limit smoking to areas designated within your office areas.
35
<PAGE>
EXHIBIT F
---------
[NOT USED]
36
<PAGE>
Exhibit 10.11
STANDARD OFFICE LEASE
ARTICLE 1.00 BASIC LEASE TERMS
1.01 Parties. This lease agreement ("Lease") is entered into by and
between the following Lessor and Lessee:
2221 Bijou Limited Liability Company ("Lessor")
a Colorado Limited Liability Company
American Teleconferencing Service, Ltd. ("Lessee")
1.02 Leased Premises. In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the
following described premises ("leased premises"):
50,000 Square Feet (Approximate sq. ft.
"phased-in as per Rent Schedule -
Addendum A
The Chidlaw Building (Name of building or project)
2221 East Bijou Street (Street address/suite number)
Colo Spgs, CO 80909 (City, State, and Zip code)
1.03 Leased Premises. Subject to and upon the conditions set forth herein,
including Article 11.05, the term of this lease shall commence on 120 days after
Lessee's acceptance of plans and specifications or Lessor's notice as set forth
in Article 6.01 and shall terminate 120 months thereafter.
1.04 Base Rent and Security Deposit. Base rent is shown on Addendum A.
Security deposit is $12,500.00.
1.05 Addresses.
Lessor's Lessee's
2221 Bijou Limited Liability Co. American Teleconferencing Services, Ltd.
c/o Fieldhill Properties 2221 East Bijou Street
P.O. Box 158 Colorado Springs, CO 80909
Chaska, MN 55318
1.06 Permitted Use. Office and related uses. Tenant shall have access and
use availability on a 24-hour per day basis during the Lease term.
<PAGE>
ARTICLE 2.00 RENT
2.01 Base Rent. Lessee agrees to pay monthly as base rent during the term
of this Lease the sum of money set forth in Section 1.04 of this Lease, which
amount shall be payable to Lessor at the address shown above. One monthly
installment of rent shall be due and payable on the date of occupancy by Lessee
for the first month's rent and a like monthly installment shall be due and
payable on or before the first day of each calendar month, succeeding the
commencement date or completion date during the term of this Lease; provided, if
the commencement date or the completion date should be a date other than the
first day of a calendar month, the monthly rental set forth above shall be
prorated to the end of that calendar month, and all succeeding installments of
rent shall be payable on or before the first day of each succeeding calendar
month during the term of this Lease. Lessee shall pay, as additional rent, all
other sums due under this Lease.
2.02 Operating Expenses. In the event, Lessor's operating expenses for the
building and/or project of which the leased premises are a part shall, in any
calendar year during the term of this Lease, exceed the sum of $1.18 per square
foot, Lessee agrees to pay as additional rent Lessee's pro rata share of such
excess operating expenses. Lessor may invoice Lessee monthly for Lessee's pro
rata share of the estimated operating expenses for each calendar year, which
amount shall be adjusted each year based upon anticipated operating expenses.
Within ninety days following the close of each calendar year, Lessor shall
provide Lessee an accounting showing in reasonable detail all computations of
additional rent due under this section. In the event the accounting shows that
the total of the monthly payments made by Lessee exceeds the amount of
additional rent due by Lessee under this section, the accounting shall be
accompanied by a refund. In the event the accounting shows that the total of
the monthly payments made by Lessee is less than the amount of additional rent
due by Lessee under this section, the accounting shall be accompanied by an
invoice for the additional rent. Notwithstanding any other provision in this
Lease, during the year in which the Lease terminates, Lessor, prior to the
termination date, shall have the option to invoice Lessee for Lessee's pro rata
share of the excess operating expenses based upon the previous year's accounting
expenses. If this Lease shall terminate on a day other than the last day of a
calendar year, the amount of any additional rent payable by Lessee applicable to
the year in which such termination shall occur shall be pro rated on the ratio
that the number of days from the commencement of the calendar year to and
including the termination date bears to 365. Lessee shall have the right, at
its own expenses and within a reasonable time, to audit Lessor's books relevant
to the additional rent payable under this section. Lessee agrees to pay any
additional rent due under this section within twenty (20) days following receipt
of the invoice or accounting showing additional rent due.
2.03 Definition of Operating Expenses. The term "operating expenses"
includes all expenses incurred by Lessor with respect to the maintenance and
operation of the building of which the leased premises are a part, including,
but not limited to, the following: maintenance, repair and replacement costs:
electricity, fuel water, sewer, gas and common area utility charges; window
washing; trash removal; landscaping and pest control; management fees, wages and
benefits payable to employees of Lessor whose duties are directly connected with
the operation and maintenance of the building; all services, supplies, repairs,
replacements, or other expenses
<PAGE>
for maintaining and operating the building or project including parking and
common areas; the cost, including interest, amortized over its useful life, of
any capital improvement made to the building by Lessor after the date of this
Lease which is required under any governmental law or regulation that was not
applicable to the building at the time it was constructed; the cost, including
interest, amortized over its useful life, of installation of any device or other
equipment which improves the operating efficiency of any system within the
leased premises and thereby reduces operating expenses; all other expenses which
would generally be regarded as operating and maintenance expenses which would
reasonably be amortized over a period not to exceed five years; all real
property taxes and installments of special assessments, including dues and
assessments by means of deed restrictions and/or owners' associations which
accrue against the building of which the leased premises are a part during the
term of this Lease and all insurance premiums Lessor is required to pay or deems
necessary to pay, including public liability insurance, with respect to the
building. The term operating expenses does not include the following: repairs,
restoration or other work occasioned by fire, wind, the elements or other
casualty; income and franchise taxes of Lessor; expenses incurred in leased to
or procuring of lessees, leasing commissions, advertising expenses and expenses
for the renovating of space for new lessees; interest or principal payments on
any mortgage or other indebtedness of Lessor; compensation paid to any employee
of Lessor above the grade of property manager; any depreciation allowance or
expense; or operating expenses which are the responsibility of Lessee.
2.04 Late Payment Charge. Other remedies for nonpayment of rent
notwithstanding, if the monthly rental payment is not received by Lessor on or
before the fifteenth (15th) day of the month for which the rent is due, of if
any other payment due Lessor by Lessee is not received by Lessor on or before
the tenth day of the month next following the month in which Lessee was
invoiced, a late payment charge of five percent of such past due amount shall
become due and payable in addition to such amounts owed under this lease.
2.05 Increase in Insurance Premiums. If an increase in any insurance
premiums paid by Lessor for the building is caused by Lessee's use of the leased
premises in a manner other than as set forth in Section 1.06, or if Lessee
vacates the leased premises and causes an increase in such premiums, then Lessee
shall pay as additional rent the amount of such increase to Lessor.
2.06 Security Deposit. The security deposit set forth above shall be held
by Lessor for the performance of Lessee's covenants and obligations under this
Lease, it being expressly understood that the security deposit shall not be
considered an advance payment of rental or a measure of Lessor's damage in case
of default by Lessee. Upon the occurrence of any event of default by Lessee,
Lessor may, from time to time, and after the giving of notice as provided herein
and should Lessee fail to cure, without prejudice to any other remedy, use the
security deposit tot he extent necessary to make good any arrears of rent, or to
repair any damage or injury, or pay any expense or liability incurred by Lessor
as a result of the event of default or breach of covenant, and any remaining
balance of the security deposit shall be returned by Lessor to Lessee upon
termination of this Lease. If any portion of the security deposit is so used or
applied, Lessee shall upon twenty days written notice from Lessor, deposit with
Lessor by cash or cashier's check an amount sufficient to restore the security
deposit to its original amount.
<PAGE>
2.07 Holding Over. In the event that Lessee does not vacate the leased
premises upon the expiration or termination of this Lease, Lessee shall be a
tenant at will for the holdover period of all of the terms and provisions of
this Lease shall be applicable during that period, except that Lessee shall pay
Lessor as base rental for the period of such holdover an amount equal to two
times the base rent which would have been payable by Lessee had the holdover
period been a part of the original term of this Lease. In the event of
holdover, Lessee agrees to vacate and deliver the leased premises to Lessor upon
Lessee's receipt of notice from Lessor to vacate. The rental payable during the
holdover period shall be payable to Lessor on demand. No holding over by
Lessee, whether with or without the consent of Lessor, shall operate to extend
the term of this Lease.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 Use. Lessee warrants and represents to Lessor that the leased
premises shall be used and occupied only for the purpose as set forth in Section
1.06. Lessee shall occupy the leased premises, conduct its business and use
reasonable efforts to control its agents, employees, invitees and visitors in
such a manner as is lawful, reputable and will not create a nuisance. Lessee
shall use reasonable efforts to not permit any operation which emits any odor or
matter which intrudes into other portions of the building, use any apparatus or
machine which makes undue noise or causes vibration in any portion of the
building or otherwise interfere with, annoy or disturb any other lessee in its
normal business operations or Lessor in its management of the building. Lessee
shall neither permit any waste on the leased premises nor allow the leased
premises to be used in any way which would, in the reasonable opinion of Lessor,
be extra hazardous on account of fire or which would in any way increase or
render void the fire insurance on the building. It is expressly agreed that the
leased premises do not include land beneath nor any space above the finished
ceiling level of the premises, provided that Lessee shall have the non-exclusive
right to use a portion of such space for the location of Lessee's construction
and equipment serving the leased premises subject to reasonable approval of
Lessor as to location and installation.
3.02 Signs. No sign of any type or description shall be erected, placed or
painted in or about the leased premises or project except those signs submitted
to Lessor in writing and reasonably approved by Lessor in writing, and which
signs are in conformance with Lessor's reasonable sign criteria established for
the project. All interior and exterior signs for tenant's use shall be at
tenant's sole cost and expense but shall be included in the tenant improvement
allowance provided by Landlord as set forth in Addendum B.
3.03 Compliance with Laws, Rules and Regulations. Lessee, at Lessee's sole
cost and expense, shall comply with all laws, ordinances, orders, rules and
regulations or state, federal, municipal or other agencies or bodies having
jurisdiction over the use, condition or occupancy of the leased premises. Lessee
will comply with the rules and regulations of the building adopted by Lessor
which are set forth on a schedule attached to this Lease. Lessor shall have the
right at all times to change and amend the rules and regulations in any
reasonable manner as may be deemed advisable for the safety, care, cleanliness,
preservation of good order and operation or
<PAGE>
use of the building or the leased premises. All changes and amendments to the
rules and regulations of the building will be sent by Lessor to Lessee in
writing and shall thereafter be carried out and observed by Lessee.
3.04 Warranty of Possession. Lessor warrants that it has the right and
authority to execute this Lease, and Lessee, upon payment of the required rents
and subject to the terms, conditions, covenants and agreements contained in this
Lease, shall have possession of the leased premises during the full term of this
Lease as well as any extension or renewal thereof. Lessor shall not be
responsible for the accts or omissions of any other lessee or third party that
may interfere with Lessee's use and enjoyment of the leased premises.
3.05 Inspection. Lessor or its authorized agents shall at any and all
reasonable times and upon reasonable notice to Lessee have the right to enter
the leased premises to inspect the same, to supply janitorial service or any
other service to be provided by Lessor, to show the leased premises to
prospective purchasers or lessees, and to alter, improve or repair the leased
premises or any other portion of the building at reasonable times and upon
reasonable notice. Lessee hereby waives any claim for damages for injury or
inconvenience to or interference with Lessee's business, any loss or occupancy
or use of the leased premises, and any other loss occasioned thereby. Lessor
shall at all times have and retain a key with which to unlock all doors in upon
and about the leased premises at reasonable times and upon reasonable notice.
Lessee shall not change Lessor's lock system or in any other manner prohibit
Lessor from entering the leased premises at reasonable times and upon reasonable
notice. Lessor shall have the right to use any and all reasonable means which
Lessor may deem proper to open any door in an emergency without liability
therefor.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 Building Services. Lessor shall provide water and electricity for
Lessee during the term of this Lease. Lessee shall pay all telephone charges.
Lessor shall furnish Lessee hot and cold water at those points of supply
provided for general use of other lessees in the building, central heating and
air conditioning in season (at times Lessor normally provides these services to
other lessees in the building, and at temperatures an in amounts as are
considered by Lessor to be standard or in compliance with any governmental
regulations). Electric service shall be separately metered to the leased
premises to assist in billing Lessee for its electrical consumption. Lessor
shall also provide routine maintenance, painting and electric lighting service
for all public areas and special service areas of the building in the manner and
to the extent deemed by Lessor to be reasonably standard. Should any of the
equipment or machinery break down, or for any cause cease to function properly,
Lessor shall use reasonable diligence to repair the same promptly, but Lessee
shall have no claim for rebate of rent on account of any interruption in service
occasioned from the repairs. Lessor reserves the right from time to time to
make changes in the utilities and services provided by Lessor to the building.
<PAGE>
4.02 Theft or Burglary. Lessor shall not be liable to Lessee for losses to
Lessee's property or personal injury caused by criminal acts or entry by
unauthorized persons into the leased premises or the building.
4.03 Janitorial Service. Lessor shall furnish janitorial services to the
public areas of the building three to five times per week during the term of
this Lease, excluding holidays. Lessee shall contract and pay for janitorial
services to its leased premises.
4.04 Excessive Utility Consumption. Lessee shall pay all utility costs
occasioned by high electrical consumption electrodata processing machines,
telephone equipment, computers and other equipment of high electrical
consumption, including without limitation, the cost of installing, servicing and
maintaining any special or additional inside or outside wiring or lines, meters
or submeters, transformers, poles, air conditioning costs, or the cost of any
other equipment necessary to increase the amount or type of electricity or power
available to the leased premises. Notwithstanding the foregoing, standard P.C.,
telephone equipment and other similar standard office equipment shall not be
deemed high electrical consumption equipment.
4.05 Window Covering. Lessor shall furnish and install window coverings on
all exterior windows to maintain a uniform exterior appearance. Lessee shall not
remove or replace these window coverings or install any other window covering
which would affect the exterior appearance of the building. Lessee may install
lined or unlined over draperies in the interior sides of he Lessor furnished
window coverings for interior appearance or to reduce light transmission,
provided such over draperies do not affect the exterior appearance of the
building or affect the operation of the building's heating, ventilating and air
conditioning systems.
4.06 Charge for Service. All costs of Lessor for providing the services
set forth in Article 4.00 (except those charges paid by Lessee pursuant to
Section 4.04) shall be subject to the additional rent provisions in Section
2.02.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 Lessor Repairs. Lessor shall not be required to make any improvements
(except the initial Lessor's improvements required in Article 6.01 and Addendum
B), replacements or repairs of any kind or character to the leased premises or
the project during the term of this Lease except as are set forth in this
section. Lessor shall maintain only the roof, foundation, parking and common
areas, the structural soundness of the exterior walls, doors, corridors, windows
and other structures or equipment serving the leased premises. Lessor's cost of
maintaining and repairing the items set forth in this section are subject to the
additional rent provisions in Section 2.02. Lessor shall not be liable to
Lessee, except as expressly provided in this Lease, for any damage or
inconvenience, and Lessee shall not be entitled to any abatement or reduction of
rent by reason of any repairs, alterations or additions made by Lessor under
this Lease.
5.02 Lessee Repairs. Lessee shall, at its own cost and expense, repair and
replace any damage to injury to all or any part of the leased premises caused by
any act or omission of Lessee or Lessee's agents, employees, invitees, licensees
or visitors; provided, however, if
<PAGE>
Lessee fails to make the repairs or replacements promptly, Lessor may, at its
option, after giving notice to Lessee, and after Lessee having failed to make
such repairs or replacements within twenty (20) days of the date of such notice,
make reasonable repairs or replacements, and the cost of such repairs or
replacements shall be charged to Lessee as additional rent and shall become
payable by Lessee with the payment of the rent next due hereunder. Lessor may
make emergency repairs without prior notice to Lessee.
5.03 Request for Repairs. All request for repairs or maintenance to the
leased premises that are the responsibility of Lessor pursuant to any provision
of this Lease must be made in writing to Lessor at the address in Section 1.05.
5.04 Lessee Damages. Lessee shall not damage any portion of the leased
premises or building, and at the termination of this Lease, by lapse of time or
otherwise, Lessee shall deliver the leased premises to Lessor in as good
condition as existed a the commencement date of this Lease, ordinary wear and
tear excepted. The cost and expense of any repairs necessary to restore the
condition of the leased premises shall be borne by Lessee.
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01 Lessor Improvements. Lessor will complete the construction of the
improvements to the leased premises in accordance with plans and specifications
agreed to by Lessor and Lessee, which plans and specifications are made a part
of this Lease by reference. Any changes or modifications to the approved plans
and specifications shall be made and accepted by written change order or
agreement signed by Lessor and Lessee and shall constitute an amendment to this
Lease. Either party may declare this Lease null and void if the plans and
specifications are not mutually approved, despite the best efforts of the
parties on or before forty-five (45 days after the execution date of this Lease.
Lessor shall bear the expense of its architect for the Lessor improvements and
Lessee shall bear the expenses of its space planning consultant.
6.02 Lessee Improvements. Lessee shall not make or allow to be made any
alterations or physical additions in or to the leased premises without first
obtaining the written consent of Lessor, which consent shall not be unreasonably
withheld. Any alterations, physical additions or improvements to the leased
premises made by Lessee shall at once become the property of Lessor and shall be
surrendered to Lessor upon the termination of this Lease provided that Lessee
shall be entitled to retain the property listed on Exhibit A attached hereto,
and provided further that, Lessor, at its option, may require Lessee to remove
any physical additions and/or repair any alterations in order to restore the
leased premises to the condition existing at the time Lessee took possession,
reasonable wear and tear excepted, all costs of removal and/or alterations to be
borne by Lessee. This clause shall not apply to moveable equipment of furniture
owned by Lessee, which may be removed by Lessee at the end of the term of this
Lease if Lessee is not then in default and if such equipment and furniture are
not then subject to any other rights, liens and interests of Lessor.
<PAGE>
ARTICLE 7.00 CASUALTY AND INSURANCE
7.01 Substantial Destruction. If the leased premises should be totally
destroyed by fire or other casualty, or if the leased premises should be damaged
so that rebuilding cannot reasonably be completed within ninety working days
after the date for written notification by Lessee to Lessor of the destruction,
this Lease shall terminate and the rent shall be abated for the unexpired
portion of the Lease, effective as of the date of the written notification.
7.02 Partial Destruction. If the leased premises should be partially
damaged by fire or other casualty, and rebuilding or repairs can reasonably be
completed within ninety working days from the date of written notification by
Lessee to Lessor of the destruction, this Lease shall not terminate, and Lessor
shall at its sole risk and expense proceed with reasonable diligence to rebuild
or repair the building or other improvements substantially the same condition in
which they existed prior to the damage. If the leased premises are to be
rebuilt or repaired and are untenantable in whole or in part following the
damage, and the damage or destruction was not caused or contributed to by act or
negligence of Lessee, its agents, employees, invitees or those for whom Lessee
is responsible, the rent payable under this Lease during the period for which
the leased premises are untenantable shall be adjusted to such an extent as may
be fair and reasonable under the circumstances. In the event that Lessor fails
to complete the necessary repairs or rebuilding within ninety working days from
the date of written notification by Lessee to Lessor of the destruction, Lessee
may at its option terminate this Lease by delivering written notice of
termination to Lessor, whereupon all rights and obligations under this Lease
shall cease to exist.
7.03 Lessee's Insurance. Lessee shall, at its sole expense, maintain in
effect at all times during the Term insurance coverage with limits not less than
those set forth below with insurers licensed to do business in the State of
Colorado: a) Workers Compensation Insurance - minimum limit as defined by
Statute and as same may be amended from time to time; b) Employer's Liability
Insurance-minimum limit $100,000; c) and Commercial General, Liability and
Bodily Injury/Property Damage Insurance, on a combined single limit basis, with
limits of not less than $500,000 per occurrence and with annual aggregate limits
of not less than $1,000,000. These policies shall be on a form acceptable to
Lessor, endorsed to include Lessor as an additional insured, state that the
insurance is primary over any insurance carried by Lessor, and the commercial
general liability policy shall include the following coverages: a)
premises/operations; b) independent contractors; c) broad form contractual in
support of the indemnity section of this lease; and, d) personal injury
liability.
If Lessee does not procure insurance as required, Lessor may, upon
reasonable advance written notice to Lessee, cause this insurance to be issued,
and Lessee shall pay to Lessor the
<PAGE>
premium for this insurance within twenty (20) days of Lessor's demand, plus
interest at the highest lawful rate for a loan of like amount from the date of
payment by Lessor until repaid by Lessee.
7.03.01 Lessor's Insurance. Lessor shall maintain at all times during the
term of this Lease form and after substantial completion: a) standard all-risk
fire and casualty insurance, covering the building in amounts at lease equal to
the full replacement cost of the building at the time in question, but in no
event less than such coverage as is required to avoid co-insurance provisions;
b) comprehensive public liability insurance; c) employer's liability insurance;
d) excess liability insurance over the insurance required by subsection C of
this section; e) worker's compensation insurance in statutory limits; and, f)
such other insurance coverage as is customarily carried in respect of comparable
buildings. The limits shall be increased by Landlord from time to time during
the term of this lease to at least such minimum limits as shall then be
customary in respect of comparable buildings.
7.03.02 General Requirements. All policies of insurance required under
this article shall provide that they will not be canceled upon less than thirty
(30) days prior written notice to Lessor and Lessee. Each party shall furnish to
the other a certificate or certificates of insurance certifying that the
insurance coverage required is in force, if requested by the other party. The
coverage shall be issued by companies licensed to do business in the State of
Colorado and otherwise reasonably satisfactory to the parties. Not less than
thirty (30) days prior to expiration of the coverage, renewal policies or
certificates of insurance evidencing renewal shall be provided. Any insurance
required by the terms of this Lease may be under a blanket policy (or policies)
covering other properties of Lessor or Lessee and/or their related or affiliated
corporations. If such insurance is maintained under a blanket policy, the
respective party shall procure and deliver to the other party a statement from
the insurer or general agent of the insurer setting forth the coverage
maintained and the amount thereof allocated to the risk intended to be insured
hereunder.
7.04 Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all right of recover, claim, action or cause of action, against
each other, their agents, offices and employees, for any loss or damage that may
occur to the leased premises, improvements to the building which the leased
premises are a part, or personal property within the building, by reason of fire
or the elements, regardless of cause or origin, including negligence of Lessor
or Lessee and their agents, officers and employees. Lessor and Lessee agree
immediately to give their respective insurance companies which have issued
policies of insurance covering all risk of direct physical loss, written notice
of the terms of the mutual waivers contained in this section, and to have the
insurance policies properly endorsed, if necessary, to prevent the invalidation
of the insurance coverages by reason of the mutual waivers.
<PAGE>
7.05 Hold Harmless. Lessor shall not be liable to Lessee's employees,
agents, invitees, licensees or visitors, or to any other person, for an injury
to person or damage to property on or about the leased premises caused by any
act or omission of Lessee, its agents, servants or employees, or of any other
person entering upon the leased premises under express or implied invitation by
Lessee, or caused by the improvements located on the leased premises becoming
out of repair, the failure or cessation of any service provided by Lessor
(including security service and devices), or caused by leakage of gas, oil,
water or steam or by electricity emanating from the leased premises. Lessee
agrees to indemnify and hold harmless Lessor of and from any loss, attorney's
fees, expenses or claims arising out of any such damage or injury.
Lessee shall not be liable to Lessor's employees, agents, invitees, licensees or
visitors, or to any other person, for any injury to person or damage to property
on or about the leased premises and caused solely by an act or omission of
Lessor, its agents, servants or employees. Lessor agrees to indemnify and hold
harmless Lessee of and from any loss, attorney's fees, expenses or claims
arising out of any such damage or injury.
ARTICLE 8.00 CONDEMNATION
8.01 Substantial Taking. If all or a substantial part of the leased
premises are taken for any public or quasi-public use under any government law,
ordinance or regulation, or by right of eminent domain or by purchase in lieu
thereof, and the taking would prevent or materially interfere with the use of
the leased premises for the purpose for which it was then being used, this Lease
shall terminate and the rent shall be abated during the unexpired portion of
this Lease effective on the date physical possession is taken by the condemning
authority. Lessee shall have no claim to the condemnation award or proceeds in
lieu thereof.
8.02 Partial Taking. If a portion of the leased premises shall be taken
for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in Section 8.01 above, Lessor shall at
Lessor's sole risk and expense, restore and reconstruct the building and other
improvements on the leased premises to the extent necessary to make it
reasonably tenantable. The rent payable under this Lease during the unexpired
portion of the term shall be adjusted to such an extent as may be fair and
reasonable under the circumstances. Lessee shall have no claim to the
condemnation award or proceeds in lieu thereof.
<PAGE>
ARTICLE 9.00 ASSIGNMENT OR SUBLEASE
9.01 Lessor Assignment. Lessor shall have the right to sell, transfer or
assign, in whole or in part, its rights and obligations under this Lease and in
the building. Any such sale transfer or assignment shall operate to release
Lessor from any and all liabilities under this Lease arising after the date of
such sale, assignment or transfer.
9.02 Lessee Assignment. Lessee shall not assign, in whole or in part, this
Lease, or allow it to be assigned, in whole or in part, by operation of law or
otherwise (including without limitation by transfer of a majority interest of
stock, merger or dissolution, which transfer of majority interest of stock,
merger or dissolution shall be deemed an assignment) or mortgage or pledge the
same, or sublet the leased premises, in whole or in part, without the prior
written consent of Lessor, which consent shall not be unreasonable withheld or
delayed, and in no event shall any such assignment or sublease ever release
Lessee or any guarantor from any obligation or liability hereunder. No assignee
or sublessee of the leased premises or any portion thereof may assign or sublet
the leased premises or any portion thereof without the written consent of
Lessor, which consent shall not be unreasonably withheld.
9.03 Conditions of Assignment. If Lessee desires to assign or sublet all
or any part of the leased premises, it shall so notify Lessor at least thirty
days in advance of the date on which Lessee desires to make such assignment or
sublease. Lessee shall provide Lessor with a copy of the proposed assignment or
sublease and such information as Lessor might reasonably request concerning the
proposed sublessee or assignee to allow Lessor to make informed judgments as to
the financial condition, reputation, operations and general desirability of the
proposed sublessee or assignee. Within fifteen days after Lessor's receipt of
Lessee's proposed assignment or sublease and all required information concerning
the proposed sublessee or assignee, Lessor shall have the following options: (1)
consent to the proposed assignment of sublease, or (2) refuse, in its reasonable
determination to consent to the proposed assignment or sublease, which refusal
shall be deemed to have been exercised unless Lessor gives Lessee written notice
providing otherwise. Upon the occurrence of an event of default, if all or any
party of the leased premises are then assigned or sublet, Lessor, in addition to
any other remedies provided by this lease or provided by law may, at its option,
collect directly from the assignee or sublessee all rents becoming due to Lessee
by reason of the assignment of sublease, and Lessor shall have a security
interest in all properties on the leased premises to secure payment of such
sums. Any collection directly by Lessor from the assignee or sublessee shall not
be construed to constitute a novation or a release of Lessee or any guarantor
from the further performance of its obligations under this Lease.
9.04 Rights of Mortgagee. If the interests of Lessor under this Lease
shall be transferred by reason of foreclosure of other proceedings for
enforcement of any first mortgage or deed of trust on the leased premises,
Lessee shall be bound to the transferee (sometimes called the "Purchaser") under
the terms, covenants and conditions of this Lease for the balance of the term
remaining, including any extensions or renewals, with the same force and effect
as were Lessor
<PAGE>
under this Lease, and Lessee agrees to attorn to the Purchaser, including the
first mortgagee under any such mortgage if it be the Purchaser, as its Lessor.
The Lease shall remain in effect upon any foreclosure of, or purchase of, the
building, so long as the Lessee is not then in default thereunder. Lessor shall
use its best efforts to obtain an Attornment and Subordination Agreement, in a
form acceptable to Lessee, between the parties and the existing mortgagee within
ten (10) days after the execution hereof. Should the Agreement not be timely
obtained, either party may declare this Lease null and void upon written notice
to the other party posted within ten (10) days after the execution of the ten
(10) day period to provide the Agreement.
9.05 Estoppel Certificates. Lessee agrees to furnish, at reasonable
times, within twenty days after receipt of a request from Lessor or Lessor's
mortgage, a statement certifying, if applicable, the following: Lessee is in
possession of the leased premises; the leased premises are acceptable; the Lease
is in full force and effect; the Lease is unmodified; Lessee claims no present
charge, lien, or claim of offset against rent; the rent is paid for the current
month, but is not prepaid for more than one month and will not be prepaid for
more than one month in advance; there is no known existing default by reason of
some act or omission by Lessor; and such other matters as may be reasonably
required by Lessor or Lessor's mortgagee. Lessee's failure to deliver such
statement, in addition to being a default under this Lease, shall be deemed to
establish conclusively that this Lease is in full force and effect except as
declared by Lessor, that Lessor is not in default of any of its obligations
under this Lease, and that Lessor has not received more than one month's rent in
advance.
ARTICLE 10.00 DEFAULT AND REMEDIES
10.01 Default by Lessee. The following shall be deemed to be events of
default by Lessee under this Lease: (1) Lessee shall fail to pay when due any
installment of rent or any other payment required pursuant to this Lease. Lessee
shall be in default if rent is not paid by the first day of each month. However,
Lessee shall have the right to cure said default until any eviction order be
issued by a court of competent jurisdiction; (2) Lessee shall abandon any
substantial portion of the leased premise; (3) Lessee shall fail to comply with
any term, provision or covenant of this Lease, other than the payment of rent,
and the failure is not cured within twenty days after written notice to Lessee
unless the ability to timely cure is not within the control of Lessee; (4)
Lessee shall file a petition or be adjudged bankrupt or insolvent under any
applicable federal or state bankruptcy or insolvency law or admit that it cannot
meet its financial obligations as they become due; or a receiver or trustee
shall be appointed for all or substantially all of the assets of Lessee; or
Lessee shall make transfer in fraud of creditors or shall make an assignment for
the benefit of creditors; or (5) Lessee shall do or permit to be done any act
which results in a lien being filed against the leased premises or the building
and/or project of which the leased premises are a part unless Lessee provides
reasonable protection therefor.
10.02 Remedies for Lessee's Default. Upon the occurrence of any event
of default set forth in this Lease, Lessor shall have the option to pursue any
one or more of the remedies set forth herein without any notice or demand. (1)
Lessor may enter upon and take possession of the leased premises, by picking or
changing locks if necessary, and lock out, expel or remove Lessee and any other
person who may be occupying all or any part of the leased premises without being
<PAGE>
liable for any claim for damages, and relet the leased premises on behalf of
Lessee and receive the rent directly by reason of the reletting. Lessee agrees
to pay Lessor on demand any deficiency that may arise by reason of any reletting
of the leased premises; further, Lessee agrees to reimburse Lessor for any
expenditures made by it in order to relet the leased premises, including, but
not limited to, remodeling and repair costs. (2) Lessor may enter upon the
leased premises, by picking or changing the locks if necessary, without being
liable for any claim for damages, and, acting reasonable, do whatever Lessee is
obligated to do under the terms of this Lease. Lessee agrees to reimburse
Lessor on demand for any expenses which Lessor may incur in effecting compliance
with Lessee's obligations under this Lease, (3) Lessee may terminate this Lease
in which event Lessee shall immediately surrender the leased premises to Lessor,
and if Lessee fails to surrender the leased premises, Lessor may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent, enter upon and take possession of the leased premises by picking or
changing locks if necessary and lock out, expel or remove Lessee and any other
person who may be occupying all or any part of the leased premises without being
liable for any claim for damages. Lessee agrees to pay on demand the amount of
all loss and damage which Lessor may suffer by reason of the termination of this
Lease under this section, whether through inability to relet the leased premises
on satisfactory terms or otherwise. A rent concession or waiver of the base
rent shall not relieve Lessee of any obligation to pay any other charge due and
payable under this Lease including without limitation any sum due under Section
2.02. Notwithstanding anything contained in this Lease to the contrary, this
Lease may be terminated by Lessor only by mailing or delivering written notice
of such termination to Lessee, as provided herein and no other act or omission
of Lessor shall be construed as a termination of this Lease.
ARTICLE 11.00 DEFINITIONS
11.01 Abandon. "Abandon" means the vacating of all or a substantial
portion of the leased premises by Lessee, whether or not Lessee is in default of
the rental payments due under this Lease.
11.02 Act of God or Force Majeure. An "act of God" or "force majeure" is
defined for purposes of this Lease as strikes, lockouts, sitdowns, material or
labor restrictions by any governmental authority, unusual transportation delays,
riots, floods, washouts, explosions, earthquakes, fire storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of the public enemy, wars, insurrections and any other cause not reasonably
within the control of Lessor and which by the exercise of due diligence Lessor
is unable, wholly or in part, to prevent or overcome.
11.03 Building or Project. "Building" or "project" as used in this
Lease means the building and/or project described in Section 1.02, including the
leased premises and the land upon which the building or project is situated.
11.04 Commencement Date. "Commencement date" shall be the date set
forth in Section 1.03. The commencement date shall constitute the commencement
of the term of this Lease for all purposes, whether or not Lessee has actually
taken possession.
<PAGE>
11.05 Completion Date. "Completion date" shall be the date on which
improvements erected and to be erected upon the leased premises shall have been
completed in accordance with the plans and specifications described in Article
6.00. The completion date shall constitute the commencement of the term of this
Lease for all purposes, whether or not Lessee has actually taken possession.
Lessor shall use its best efforts to establish the completion date as the date
set forth in Section 1.03. In the event that the improvements have not in fact
been completed as of that date, Lessee shall notify Lessor in writing of its
objections. Lessor shall have a reasonable time after delivery of the notice in
which to take such corrective action as may be necessary and shall notify Lessee
in writing as soon as it deems such corrective action has been completed and the
improvements are ready for occupancy. Upon completion of construction, Lessee
shall deliver to Lessor a letter accepting the leased premises as suitable for
the purposes for which they are let and the date of such letter shall constitute
the commencement of the term of this Lease. Whether or not Lessee has executed
such letter of acceptance, taking possession of the leased premises by Lessee
shall be deemed to establish conclusively that the improvements have been
completed in accordance with the plans and specifications, are suitable for the
purposes for which the leased premises are let, and that the leased premises are
in good and satisfactory condition as of the date possession was so taken by
Lessee, except for latent defects, if any. The reasonable time to complete
after notice shall not exceed 60 days unless the delays are caused by Lessee.
11.06 Square Feet. "Square feet" or "square foot" as used in this Lease
includes the area contained within the leased premises together with a common
area percentage factor of the leased premises proportionate to the total
rentable building area. Lessee's actual percentage for computation of its share
of operating expenses shall be agreed upon by the parties at the same time as
agreement on the plans and specifications as required in Article 6.02.
ARTICLE 12.00 MISCELLANEOUS
12.01 Waiver. Failure of Lessor to declare an event of default
immediately upon its occurrence, or delay in taking any action in connection
with an event of default, shall not constitute a waiver of the default, but
Lessor shall have the right to declare the default at any time and take such
action as is lawful or authorized under this Lease so long as the event of
default continues. Pursuit of any one or more of the remedies set forth in
Article 10.00 above shall not preclude pursuit of any one or more of the other
remedies provided elsewhere in this Lease or provided by law, nor shall pursuit
of any remedy constitute forfeiture or waiver of any rent or damages accruing to
Lessor by reason of the violation of any of the terms, provisions or covenants
of this Lease. Failure by Lessor to enforce one or more of the remedies provided
upon an event of default shall not be deemed or construed to constitute a waiver
of the default or of any other violation or breach of any of the terms,
provisions and covenants contained in this Lease.
12.02 Act of God. Lessor shall not be required to perform any covenant
or obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of
<PAGE>
the covenant or obligation is delayed, caused or prevented by an act of God,
force Majeure or by Lessee.
12.03 Attorney's Fees. In the event either party defaults in the
performance of any of the terms, covenants agreements or conditions contained in
this Lease and the non-defaulting party places in the hands of an attorney the
enforcement of all or any part of this Lease, including an action for recovery
of the possession of the leased premises, the defaulting party agrees to pay the
non-defaulting party's costs of collection, including reasonable attorney's fees
for the services of the attorney whether suit is actually filed or not.
12.04 Successors. This Lease shall be binding upon and inure to the
benefit of Lessor and Lessee and their respective heirs, personal
representatives, successors and assigns. It is hereby covenanted and agreed that
should Lessor's interest in the leased premises cease to exist for any reason
during the term of this Lease, then notwithstanding the happening of such event
this Lease nevertheless shall remain unimpaired and in full force and effect,
and Lessee hereunder agrees to attorn to the then owner of the leased premises.
12.05 Rent Tax. If applicable in the jurisdiction where the leased
premises are situated, Lessee shall pay and be liable for all rental, sales and
use taxes or other similar taxes, if any levied or imposed by any city, state,
county or other governmental body having authority, such payments to be in
addition to all other payments required to be paid to Lessor by Lessee under the
terms of this Lease. Any such payment shall be paid concurrently with the
payment of the rent, additional rent, operating expenses or other charge upon
which the tax is based as set forth above.
12.06 Captions. The captions appearing in this Lease are inserted only
as a matter of convenience and in no way define, limit, construe or describe the
scope or intent of any section.
12.07 Notice. All rent and other payments required to be made by Lessee
shall be payable to Lessor at the address set forth in section 1.05. All
payments required to be made by Lessor to Lessee shall be payable to Lessee at
the address set forth in Section 1.05, or at any other address within the United
States as Lessee may specify from time to time by written notice. Any notice or
document required or permitted to be delivered by the terms of this Lease shall
be deemed to be delivered (whether or not actually received) when deposited in
the United States Mail, postage prepaid, certified mail, return receipt
requested, addressed to the parties at their respective addresses set forth in
Section 1.05.
12.08 Submission of Lease. Submission of this Lease to Lessee for
signature does not constitute a reservation of space or an option to lease.
This Lease is not effective until execution by and delivery to both Lessor and
Lessee.
12.09 Corporate Authority. If Lessee executes this Lease as a
corporation, each of the persons executing this Lease on behalf of the Lessee
does hereby personally represent and warrant that Lessee is a duly authorized
and existing corporation, that Lessee is qualified to do business in the state
in which the leased premises are located, that the corporation has full right
<PAGE>
and authority to enter into this Lese, and that each person signing on behalf of
the corporation is authorized to do so. In the event any representation or
warranty is false, all persons who execute this Lease shall be liable,
individually, as Lessee.
If Lessor executes this Lease as a limited liability company, each of the
persons executing this Lease on behalf of Lessor does hereby personally
represent and warrant that Lessor is a duly authorized and existing limited
liability company, that Lessor is qualified to do business in the state in which
the leased premises are located, that the limited liability company has full
right and authority to enter into this Lease, and that each person signing on
behalf of the limited liability company is authorized to do so. In the event
any representation or warranty is false, all persons who execute this Lease
shall be liable, individually, as Lessor.
12.10 Severability. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application for such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
12.11 Lessor's Liability. If Lessor shall be in default under this
Lease and, if as a consequence of such default, Lessee shall recover a money
judgment against Lessor, such judgment shall be satisfied only out of the assets
of Lessor as a Limited Liability Company.
12.12 Indemnity. Lessor agrees to indemnify and hold harmless Lessee
from and against any liability or claim, whether meritorious or not, arising
with respect to any broker whose claim arises by, through or on behalf of
Lessor. Lessee agrees to indemnify and hold harmless Lessor from and against
any liability or claim, whether meritorious or not, arising with respect to any
broker whose claim arises by, through or on behalf of Lessee.
12.13 Governing Law. Any interpretation of this Lease or any other
determination of the rights or liabilities of the parties hereto, shall be
governed by the laws of the State of Colorado.
12.14 Brokers. See attached Addendum C(5) for Broker's Commission
Provisions.
12.15 Time of Essence. Time is of the essence for all provision of this
Lease.
12.16 Rules and Regulations. The attached Rules and Regulations do
hereby become a part of this Lease and Agreement.
ARTICLE 13.00 OTHER PROVISIONS
Addendum. Incorporated into this lease by reference.
Addendum A - Rent Schedule
Addendum B - Lessee's Improvements and Space Plan
Addendum C - Additional Provisions
<PAGE>
ARTICLE 14.00 AMENDMENT AND LIMITATION OF WARRANTIES
Entire Agreement. IT IS EXPRESSLY AGREED BY LESSEE, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR
TO THE EXPRESSLY MENTIONED EXTRINSIC DOCUMENTS NOT INCORPORATED IN WRITING IN
THIS LEASE.
Amendment. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.
Limitation of Warranties. LESSOR AND LESSEE EXPRESSLY AGREE THAT THERE
ARE AND SHALL BE NO IMPLIED WARRANTIES OR MERCHANTABILITY, HABITABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE, AND
THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN THIS
LEASE.
ARTICLE 14.00 SIGNATURES
SIGNED at Colorado Springs, Co. this 23/rd/ day of May, 1996
LESSOR: LESSEE:
2221 Bijou Limited Liability Company, American Teleconferencing Services, Ltd.
A Colorado Limited Liability Company
/s/
- ------------------------------------ -----------------------------------------
BY: /s/
-------------------------------- -----------------------------------------
Its: Managing Partner Its: President
-------------------------------- ------------------------------------
WITNESSES: WITNESSES:
/s/ /s/
- ------------------------------------ -----------------------------------------
/s/ /s/
- ------------------------------------ -----------------------------------------
<PAGE>
RULES AND REGULATIONS
1. Lessor agrees to furnish Lessee two keys without charge. Additional keys
will be furnished at a nominal charge. Lessee shall not change locks or install
additional locks on doors without prior written consent of Lessor. Lessee shall
not make or cause to be made duplicates of keys procured from Lessor without
prior approval of Lessor. All keys to leased premises shall be surrendered to
Lessor upon termination of this Lease.
2. Lessee will refer all contractors, contractor's representatives and
installation technicians rendering any service on or to the leased premises for
Lessee to Lessor for Lessor's approval before performance of any contractual
service. Lessee's contractors and installation technicians shall comply with
Lessor's rules and regulations pertaining to construction and installation.
This provision shall apply to all work performed on or about the leased premises
or project, including installation of telephone, telegraph equipment or any
other physical portion of the leased premises or project.
3. Lessee shall not at any time occupy any part of the leased premises or
project as sleeping or lodging quarters.
4. Lessee shall not place, install or operate on the leased premises or in any
part of the building any engine, stove or machinery, or conduct mechanical
operations or cook thereon or therein, or place or use in or about the leased
premises or project any explosives, gasoline, kerosene, oil, acids, caustics, or
any flammable, explosive or hazardous material without written consent of
Lessor.
5. Lessor will not be responsible for lost or stolen personal property,
equipment, money or jewelry from the leased premises or the project regardless
of whether such loss occurs when the area is locked against entry or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in or
about the leased premises or project except for animals assisting handicapped
person. Bicycles shall not be brought into the building.
7. Employees of Lessor shall not receive or carry messages for or to any Lessee
or other person or contract with or render free or paid services to any Lessee
or to any of Lessee's agents, employees or invitees.
8. None of the parking, plaza, recreation or lawn areas, entries, atrium,
passages, doors, elevators, hallways or stairways shall be blocked or obstructed
or any rubbish, litter, trash, or material of any nature placed, emptied or
thrown into these areas or such area used by Lessee's agents, employees or
invitees at any time for purposes inconsistent with their designation by Lessor.
9. The water closets and other water fixtures shall not be used for any purpose
other than those for which they were constructed, and any damage resulting to
them from misuse or by the
<PAGE>
defacing or injury of any part of the building shall be borne by the person who
shall occasion it. No person shall waste water by interfering with the faucets
or otherwise.
10. No person shall disturb occupants of the building by the use of any radios,
VCR's computerized entertainment systems, tape recorders, or musical
instruments, or make any unreasonable noises.
11. Nothing shall be thrown over railings and/or into the atrium of the
building or down the stairways or other passages.
12. Lessee and its employees, agents and invitees shall park their vehicles
only in those parking areas designated by Lessor. Oversized recreational
vehicles and trailers shall not be parked on the property. Lessee shall not
leave any vehicle in a state is disrepair (including without limitation, flat
tires, out of date inspection stickers or license plates) on the property. If
Lessee or its employees, agents or invitees park their vehicles in other than
the designated parking areas or leave any vehicle in a state of disrepair,
Lessor, after giving written notice to Lessee of such violation, shall have the
right to remove such vehicles at Lessee's expense.
13. Parking on site shall be in compliance with all parking rules and
regulations including any sticker or other identification system established by
Lessor. Failure to observe the rules and regulations hall terminate user's
right to on site parking and subject the vehicle in violation of the parking
rules and regulations to removal or impoundment without any liability on Lessor.
Vehicles must be parked entirely within the stall lines and all directional
signs, arrows and posted speed limits must be observed. Parking is prohibited
in areas not striped for parking, in aisles, where "No Parking" signs are
posted, in cross hatched areas, and in other areas as may be designated by
Lessor. Parking stickers or other forms of identification, if supplied by
Lessor, shall remain the property of Lessor and not the property of Lessee and
are not transferable. All responsibility for damage to vehicles or persons is
assumed by the owner of the vehicle or its driver.
14. Movement in or out of the building of furniture or bulk office supplies and
equipment, or dispatch or receipt by Lessee of any merchandise or materials
which requires special use or dedication of elevators or stairways, or movement
through the building entrances or atrium, shall be restricted to hours
designated by Lessor. All such movement shall be under supervision of Lessor
and carries out in the manner agreed between Lessee and Lessor by prearrangement
before performance. Such prearrangement will include determination by Lessor of
time, method, and routing of movement an limitations imposed by safety or other
concerns which may prohibit any article, equipment or any other item from being
brought into the building. Lessee assumes and shall indemnify Lessor against
all risks and claims of damage to persons and properties arising in connection
with any said movement.
15. Lessor shall not be liable for any damages from the stoppage of elevators
for necessary or desirable repairs or improvements or delays of any sort or
duration in connection with the elevator service.
<PAGE>
16. Lessee shall not lay floor covering within the leased premises without
written approval of the Lessor. The use of cement or other similar adhesive
materials not easily removed with water is expressly prohibited.
17. Lessee agrees to cooperate and assist Lessor in the prevention of
canvassing, soliciting and peddling within the building or project.
18. Lessor reserves the right to exclude from the building or project, between
the hours of 6:00 p.m. and 7:00 a.m. on weekdays and at all hours on Saturday,
Sunday and legal holidays, all persons who are not known to the building or
project security personnel and who do not present a pass to the building signed
by the Lessee. Each Lessee shall be responsible to all persons for whom he
supplies a pass.
19. It is Lessor's desire to maintain in the building or project, the highest
standard of dignity and good taste consistent with comfort and convenience for
Lessee. Any action or condition not meeting this high standard should b ereport
directly to Lessor. Your cooperation will be mutually beneficial and sincerely
appreciated. Lessor reserves the right to make such other and further
reasonable rules and regulations as In its judgement may from tie to time be
necessary, for the safety, care and cleanliness of the leased premises and for
the preservation of good order therein.
<PAGE>
Addendum A
Rent Schedule
1.04 Base Rent
a) Lessee agrees to pay the rent as set forth under the following
Base Rent Schedule as Base Rent each month throughout the 120 month term of this
lease. In addition to the Base Rent, Lessee agrees to pay all expenses relating
to the leased premises as required herein and to pay its pro rata share of
operating expenses relating to the building. Lessor's estimate of the operating
expenses it will incur for the building and leased premises is $1.18 per square
foot during the first calendar year of the lease term exclusive of tenant
utilities and tenant janitorial. Lessee agrees to pay as additional rent monthly
along with payments of base rent $4,916.67 as its pro rata of operating expenses
as provided in Paragraph 2.02 of this Lease.
Base Rent Schedule
<TABLE>
<CAPTION>
Year Base NNN Rent Square Feet Monthly NNN Annual NNN
Leased Rent Rent
<S> <C> <C> <C> <C>
1 (months 1-6) $6.00 25,000 $12,500.00
1 (months 7-12) $6.00 35,000 $17,500.00 $180,000.00
2 (months 13-18) $6.25 45,000 $23,437.50
2 (months 19-24) $6.25 50,000 $26,041.67 $296,875.00
3 $6.50 50,000 $27,083.33 $325,000.00
4 $6.75 50,000 $28,125.00 $337,500.00
5 $7.00 50,000 $29,166.67 $350,000.00
6 $7.25 50,000 $30,208.33 $362,500.00
7 $7.50 50,000 $31,250.00 $375,000.00
8 $7.75 50,000 $32,291.67 $387,500.00
9 $8.00 50,000 33,333.33 $400,000.00
10 $8.50 50,000 $35,416.67 $425,000.00
</TABLE>
b) Triple Net Intent. It is the purpose and intent of Lessor and
Lessee that the rent provided in Article 1.04 and 2.01 shall be absolutely net
to Lessor, and that Lessee shall pay, without notice or demand, and without
abatement, deduction or setoff and save Lessor harmless from and against, all
costs, taxes, insurance (including the cost of the insurance set forth in
section 7.03), expenses of maintenance, repair and replacement, and other
charges and expenses and obligations of every kind and nature whatsoever
relating to the leased premises which may arise or become due during the term of
this Lease. If Lessee is required to make any payment or incur any expense as
provided in this Lease and fails to do so, then Lessor, at its option, may make
the payment or incur the expense on Lessee's behalf, and the cost thereof shall
be charged to Lessee as additional rent and shall be due and payable by Lessee
within twenty days from receipt of Lessor's invoice.
<PAGE>
ADDENDUM B
Lease Improvements & Space Plan
Lessor shall provide a tenant improvement allowance of up to $14.00
per rentable square foot or $700,000.00 to building out leased premises in
accordance with plans and specifications as provided in the Lease mutually
acceptable to both parties and Lessor shall pay said sum directly to the
Contractor as payments become due. The level of tenant finish shall be in
accordance with reasonable building standards, and any costs which exceed the
tenant improvement allowance will be paid for by Lessee in cash one-half upon
approval of working drawings and the remaining half upon substantial completion
of the improvements. Lessor and Lessee shall cooperate in the development of
the plans and specifications during and after this lease is fully executed by
both parties. The tenant improvement allowance also includes the expenses for
the architect and general contractor to perform the design and construction of
the tenant improvements. If the leased premises are not ready for occupancy on
or before the Completion Date due to delays attributable to Lessee (such as
delays in approving drawings or furnishings), then the lease term shall begin on
the Completion Date even though the leased premises are not able to be occupied
on that date. If the leased premises are not ready due to delays attributable
to Lessor, then the lease shall not commence until the leased premises are
completed.
Lessor will, at is own expense, provide the HVAC ducting to the perimeter of
tenant's space and provide the outside walls of the space as well as any common
corridors and common restrooms for the building. These expenses shall not be
included in the tenant improvement allowance.
<PAGE>
ADDENDUM C
Additional Provisions
1. Right of First Refusal. During the term of this Lease, Lessee shall have a
one time right to lease approximately 25,000 square feet adjacent to Lessee's
space. When Lessor first desires to lease any of the space to a third party,
Lessor shall notify Lessee in writing of its intention to lease the space with
the general business terms defined for Lessee's review. Lessee shall have ten
(10) business days from receipt of such notice to notify Lessor in writing of
Lessee's intent to exercise its Right of First Refusal and accept the terms and
conditions under the third party offer and reject the third party offer. If
Lessee does not exercise its Right of First Refusal, then the Right of First
Refusal shall terminate and the Lessor may lease the space to the third party.
2. Parking. Lessor shall make available to Lessee at all times during the
Lease term not less than 5.5 parking spaces per 1,000 square feet on the office
space then leased by Tenant. Tenant parking shall be in proximity to Tenant's
entrance and premises.
3. Telephone Lines/Service Level. Tenant's proposed use of the premises
requires extraordinary telephone access and lines. Tenant shall be responsible
for all costs associated with the provision of increased service levels to the
building required for tenant's extraordinary use. The utility provider shall
determine what extraordinary service levels are necessary solely because of
tenant's sue. Tenant's extraordinary use shall not adversely impact the
building's ability to provide future tenants with normal telephone service
without being responsible to pay for additional service levels to the building.
4. Americans with Disabilities Act Representation. Lessor will be responsible
for making the exterior of the leased premises and the interior common areas
compliant with the provisions of the Americans with Disabilities Act as the
interior becomes occupied. Lessee shall be responsible for compliance with said
act for all interior portions of its leased premises.
5. Brokers. Lessor represents that it has been represented by Broker Michael
Palmer, Highland Commercial Group, L.L.C., (hereinafter "Highland") and no other
broker. Lessee represents that it has been represented by Hermann J. Spielkamp,
Banc Commercial, (hereinafter "Banc Commercial") and by no other broker. Lessor
shall compensate Broker Highland. Broker Highland shall divide its commission
with Borker Banc Commercial according to the March 22, 1996 correspondence
between the parties. Neither Lessor or Lessee shall be responsible for any
commission except as set forth herein. Each shall indemnify and hold the other
harmless from liability to any Borker whose claim arises on their behalf.
6. Environmental Liability. Lessee shall not responsible for any environmental
problems on the leased premises except for those which are directly created or
proximately caused by Lessee, its employees, agents, or invitees.
<PAGE>
7. Memorandum of Lease. The parties hereto agree to execute a Memorandum of
Lease in recordable form within ten (10) days after the reasonable request of
either party; which Memorandum of Lease shall be in any form reasonably
requested by said party.
8. Exercise Facility. Landlord agrees to provide an exercise facility for
building tenants' use once building occupancy reaches fifty percent (50%).
<PAGE>
ADDENDUM D TO STANDARD OFFICE LEASE -
ACCEPTANCE OF PLANS AND SPECIFICATIONS
AND
SQUARE FOOTAGE AGREEMENT
THIS ADDENDUM D is entered this 18/th/ day of July, 1996, by and
between 2221 Bijou Limited Liability Company ("Lessor") and American
Teleconferencing Service, Ltd. ("Lessee").
WITNESSETH, THE FOLLOWING RECITALS,
WHEREAS, on May 23, 1996 the parties entered into that certain
Standard Office Lease concerning a portion of "The Chidlaw Building" located at
2221 Bijou Street, Colorado Springs, Colorado, and
WHEREAS, Article 1.03 thereof specifies that the Lease "shall commence
120 days after Lessee's acceptance of the plans and specifications as set forth
in Article 6.01 ...", and
WHEREAS, Article 6.01 allows either party to "declare this Lease null
and void if the plans and specifications are not mutually approved ... on or
before forty-five (45) days after execution of this Lease", and
WHEREAS, Article 11.06 obligates the parties to agree on Lessee's
actual percentage for computation of its share of operating expenses
concurrently with the agreement on the plans and specifications, and
WHEREAS, the parties desire to reach the agreements required in the
foregoing recitals and to waive any related contingencies or rights to void the
Lease.
NOW, THEREFORE, in consideration of the foregoing recitals, and the
mutual covenants hereafter, the parties agree as follows:
1. Acceptance of Plans and Specifications. The parties hereby agree
--------------------------------------
that the plans and specifications attached hereto as Exhibit A and executed by
the parties are acceptable in all respects and shall govern the leasehold
improvement obligations of the parties unless hereafter modified in a subsequent
written change order executed by both parties. The right of either party to
declare this Lease null and void pursuant to Article 6.01 is hereafter waived by
each party.
2. Completion/Lease Commencement Date. The "completion date" for
----------------------------------
Lessor's leasehold improvements set forth in Article 6 and the Lease
commencement date shall hereafter be deemed to be 43 days from and after the
date of the execution of this Addendum; such date remaining subject to the
conditions of Article 11.05 of the Lease Agreement.
<PAGE>
3. Square Feet. Pursuant to Article 11.06, Lessee's share of the
-----------
operating expenses shall be determined by multiplying the total operating
expenses shall be determined by multiplying the total operating expenses as
defined in the Lease times the following fraction:
the # of sq. feet actually occupied by Lessee from time
to time as "phased-in" as per Rent Schedule -Addendum A
-------------------------------------------------------
________ square feet; the total rentable building area
50,000 square feet = 7% of 296,380
The "total rentable building area" in square feet as above indicated
was computed according to the Building Owners and Managers Association's
Standards ("BOMA"). Should Lessor hereafter determine that the actual "total
rentable building area" has decreased because of final build-out of tenant's
spaces, Lessor shall notify Lessee of the building's new "total rentable
building area" in square feet and as a result thereof, the new percentage for
Lessor's share of the operating expenses; which new percentage shall be
effective immediately upon the posting of said notice.
4. Ratification. It is not the intent of the parties hereto to
------------
modify the terms of the original Standard Office Lease but to supplement and
reach the agreements required therein. The parties hereby ratify and confirm
all terms, conditions and covenants of the original Standard Office Lease, not
supplemented hereby.
IN WITNESS WHEREOF, the parties have signed this Addendum D on the
date above set forth.
LESSOR: LESSEE:
2221 Bijou Limited Liability Co. American Teleconferencing Services, Ltd.
By: /s/ Lars E. Akerberg By: /s/
------------------------- ------------------------
Lars E. Akerberg
Its: Managing Partner Its: President
------------------------ -----------------------
<PAGE>
ADDENDUM E TO LEASE AGREEMENT
THIS ADDENDUM is entered this 4/th/ day of October, 1996, by and
between 2221 Bijou Limited Liability Company ("Lessor") and American
Teleconferencing Service, Ltd. ("Lessee").
WITNESSETH, THE FOLLOWING RECITALS:
WHEREAS, on May 23, 1996 the parties entered into that certain
Standard Office Lease concerning a portion of "The Chidlaw Building" located at
2221 Bijou Street, Colorado Springs, Colorado, and
WHEREAS, on July 18, 1996, the parties agreed on the plans and
specifications for the build-out of the Tenant's space, which agreement
(identified as Addendum D to Standard Office Lease) was a condition precedent to
the validity of the Lease, and
WHEREAS, said agreement on the plans and specifications resulted in
the parties' agreement to modify additional terms.
NOW, THEREFORE, in consideration of the foregoing recitals, and the
mutual covenants hereafter, the parties agree to the following amended terms:
1. Leased Premises. Article 1.2 of the original Lease estimated the
---------------
amount of square feet to be rented to be 50,000 square feet. Pursuant to the
agreed upon plans and specifications, the actual area to be occupied by Lessee
is agreed to be 50,470 square feet. The square feet upon which the "Base Rent"
shall be paid shall be phased in as per the Amended Rent Schedule attached as
Amended Addendum A.
2. Base Rental Rate. The initial Base Rental Rate as set forth in
----------------
Addendum A to the original Lease Agreement shall increase from $6/sq. ft. to
$6.80/sq. ft. Periodic increases thereafter shall remain at the $0.25 or $0.50
increments as set forth in the Lease. An Amended Rent Schedule is attached as
Amended Addendum A.
3. Lessor's Build-Out Obligations.
------------------------------
(a) Amended Amount of Lessor's Build-Out Obligation. In consideration
of the rental rate increase and the adjusted square feet rented of 50,470 square
feet, Lessor's buildout expenses shall be increased from the original amount
computed pursuant to Addendum B of the original Lease Agreement to the sum of
$956,580.00 computed as follows:
<TABLE>
<CAPTION>
<S> <C>
50,470 SF x $14/SF = $ 706,580
plus "additional amount" = $ 250,000*
---------
TOTAL $ 956,580
</TABLE>
<PAGE>
* The consideration for the "additional amount" in the Lessor's obligation is
the increase in the Base Rental Rate set forth in No. 2 of this Addendum E.
(b) Excess Improvement Expenses/Lessee's Payment Obligations. Lessee
shall pay the excess build out expenses over and above the sum of $956,580
except those expenses specifically allocated to the Lessor in the original Lease
Agreement. Pursuant to Addendum B of the original Lease, Lessee's obligation is
to pay one-half (1/2) of its share upon the completion of the plans and
specifications drawings and one-half (1/2) on substantial completion. By the
execution hereof, Lessor agrees to modify the initial payment obligation to the
sum of $100,000.00 with the balance due upon substantial completion and
computation of final costs.
4. Amended Lease Commencement-Occupancy-Completion Dates.
-----------------------------------------------------
The "completion date" and the "Lease Commencement Date" originally set
forth in Article 6 of the Lease Agreement were amended by the parties in
Addendum D and are hereby further amended so that Lessor's obligation is to
complete the construction of Phase I to allow occupancy thereof on or before
Sept. 1/st/, 1996 and to further cause the completion of construction of Phase
II by September 30, 1996. Phase I includes the Telephony, LAN, computer rooms,
bathrooms, and OPS/RES open room, with mid-east entrance. Phase II shall
include the general offices, executive rooms, reception and the remainder of the
premises. The construction phases were determined in accordance with the
requirements of J. Roth Hyland, consulting program manager and ATS
representative for sites relocation, in his June 27, 1996 correspondence to
Lessor's architect, David Weesner.
The definition of "completion date" as set forth in Article 11.05 of
the original Lease shall remain in effect including the reasonable time to
complete after notice provided to Landlord not to exceed sixty (60) days unless
the delays are caused by Lessee.
5. Ratification. The parties hereby ratify and confirm all remaining
------------
terms, conditions and covenants of the original Standard Office Lease, not
supplemented hereby.
IN WITNESS WHEREOF, the parties have signed this Addendum to Lease
Agreement on the date above set forth.
LESSOR: LESSEE:
2221 Bijou Limited Liability Co. American Teleconferencing Services, Ltd.
By: Lars E. Akerberg /s/ By: /s/
Its: Managing Partner Its:
---------------- ----------------------
<PAGE>
AMENDED ADDENDUM A
BASE RENT SCHEDULE
1.04 Base Rent
(a) Lessee agrees to pay the rent as set forth under the following
Base Rent Schedule as Base Rent each month through the 120 month term of this
Lease. The Base Rent shall be paid on the square feet actually occupied
according to the schedule and shall not include any pro-rata portion of the non-
rentable building area. In addition to the Base Rent, Lessee agrees to pay all
expenses relating to the leased premises as required herein and to pay its pro
rata share of operating expense relating to the building. Lessor's estimate of
the operating expenses it will incur for the building and leases premises is
$1.18 per square foot during the first calendar year of the lease term exclusive
of tenant utilities and tenant janitorial.
<TABLE>
<CAPTION>
YEAR BASE NNN SQ/FT MONTHLY NNN ANNUAL NNN
---- RENT LEASED RENT RENT
<S> <C> <C> <C> <C>
1 (mo. 1-est) $6.80 27,109 $15,361.77
1 (mo. 2-12, est) $6.80 36,974 $20,951.93 $245,833.03
2 (mo. 13-18 est) $7.05 45,000 $26,437.50
2 (mo. 19-24 est) $7.05 50,470 $29,651.12 $336,531.72
3 $7.30 50,470 $30,702.58 $368,430.96
4 $7.55 50,470 $31,754.04 $381,048.48
5 $7.80 50,470 $32,805.50 $393,666.00
6 $8.05 50,470 $33,856.96 $406,283.52
7 $8.30 50,470 $34,908.42 $418,901.04
8 $8.55 50,470 $35,959.88 $431,518.56
9 $8.80 50,470 $37,011.34 $444,136.08
10 $9.30 50,470 $39,113.96 $469,367.52
</TABLE>
(b) Triple Net Intent. It is the purpose and intent of Lessor and
Lessee that the rent provided in Article 1.04 and 2.01 shall be absolutely net
to Lessor, and that Lessee shall pay, without notice or demand, and without
abatement, deduction or setoff and save Lessor harmless from and against, all
costs, taxes, insurance (including the cost of the insurance set forth in
Section 7.03), expenses of maintenance, repair and replacement, and other
charges and expenses and obligations of every kind and nature whatsoever
relating to the leased premises which may arise or become due during the term of
this Lease. If Lessee is required to make any payment or incur any expense as
provided in this Lease and fails to do so, then Lessor, at its option, may make
the payment or incur the expense on Lessee's behalf, and the cost thereof shall
be charged to Lessee as additional rent and shall be due and payable by Lessee
within twenty days from receipt of Lessor's notice.
To accomplish a true Triple Net Lease, Lessee's share of operating
expenses shall be computed on the Lessee's share of the "rentable" square feet
rather than the "useable" square feet
<PAGE>
of the building. Until the building is 50% occupied or build out, Lessee's share
of operating expenses shall be 17.93%.
WHERE:
1. TOTAL BLDG USABLE SF = 296,380 SF
2. TOTAL BLDG RENTABLE SF = 95% of the TOTAL BLDG
USEABLE SF (296,380 x 95% = 281,561 SF).
3. Lessee's operating expense percentage is:
50,470 SF divided by 281,561 Rentable SF = 17.93%
Notwithstanding the foregoing, during the first eighteen (18) months
of the Lease (unless Lessee's square feet is increased by actual occupancy from
the above Base Rent Schedule), Lessee shall pay its share of operating expenses
on its share of the Rentable SF according to the above formula computed only on
the actual square feet leased. However, when computing Lessee's share of the
building utilities, Lessee's share shall be computed as if Lessee occupied
50,470 SF during the first 18 months even though actual occupancy may be less
than 50,470 SF.
At such time as 100% of the building layout is built out or planned
space according to plans and specifications, the actual building Rental SF shall
be computed and shall replace the estimate of 95% of Useable SF utilized in the
above formula. Lessor shall provide written notice to Lessee of the actual
Rentable SF at such time and Lessee shall thereafter pay its share of operating
expenses on its share of the actual Rentable SF commencing with the next due
montly rental installment. At such time as 50% occupancy or build out of the
building is attained, Lessor shall have the right to adjust the total building
Rentable SF to actual using the 5% non-rentable estimate for the 50% portion of
the building not built out. Provided, however, the total building Rentable SF
shall never be less than 90% of total building Useable SF until the entire
building is build out or planned space according to plans and specifications.
LESSOR: LESSEE:
2221 Bijou Limited Liability Co. American Teleconferencing Services, Ltd.
By: Lars E. Akerberg /s/ By: /s/
Its: Managing Partner Its:
---------------- ----------------------------
<PAGE>
SUBORDINATION, NON-DISTURBANCE,
AND ATTORNMENT AGREEMENT
THIS AGREEMENT, dated the 30/th/ day of May, 1996, among Unitco,
------ ---
a California general partnership (hereinafter referred to as "Mortgagee"), 2221
Bijou Limited Liability Company, a Colorado limited liability company
(hereinafter referred to as "Landlord"), and American Teleconferencing Services,
Ltd., a Missouri corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H :
WHEREAS, Tenant has entered into a certain Standard Office Lease dated
as of May 23, 1996 with Landlord (hereinafter referred to as the "Lease")
covering a portion of a certain building known as The Chidlaw Building, located
at 2221 East Bijou Street, Colorado Springs, Colorado (hereinafter referred to
as the "Premises"); and
WHEREAS, Mortgagee is the beneficiary under that certain Deed of
Trust, Security Agreement and Financing Statement, dated August 31, 1993,
between Landlord, as grantor, the Public Trustee, as trustee, and recorded
September 1, 1993 in Book 6249, page 1467, in the office of the County Clerk of
El Paso County, Colorado, (hereinafter referred to as the "Mortgage")
encumbering the Premises, which Mortgage secures a Note (hereinafter referred to
as the "Note") evidencing an aggregate indebtedness in the original principal
amount of $1,600,000; and
WHEREAS, the parties desire to set forth their agreement as to their
response in the event of a default by the Landlord under the Mortgage or the
Lease.
NOW, THEREFORE, in consideration of the premises and of the sum of One
Dollars ($1.00) by each party in hand paid to the others, the receipt of which
is hereby acknowledged, it is hereby agreed as follows:
Section 1. The Mortgage is and shall at all times be subject and
subordinate to the Lease and to all renewals, modifications, consolidations,
replacements and extensions thereof.
Section 2. Tenant agrees that it shall attorn to and recognize any
purchaser at a foreclosure sale under the Mortgage or any renewals,
modifications, consolidations, replacements, and extensions thereof, any
transferee who acquires the Premises by deed in lieu of foreclosure, and the
successors and assigns of such purchasers, as its Landlord for the unexpired
balance (and any extensions, if exercised) of the term of said Lease upon the
same terms and conditions set forth in said Lease.
Section 3. In the event that it should become necessary to foreclose
the Mortgage or any renewals, modifications, consolidations, replacements, and
extensions thereof, Mortgagee
<PAGE>
thereunder shall not terminate said Lease nor join Tenant in summary or
foreclosure proceedings so long as Tenant is not in default under any of the
terms, covenants, or conditions of said Lease.
Section 4. In the event that the Mortgagee shall succeed to the
interest of Landlord under such lease, Mortgagee shall not be:
(a) liable for any act or omission of any prior landlord
(including Landlord); or
(b) liable for the return of any security deposit; or
(c) subject to any offsets or defenses which Tenant might have
against any prior landlord (including Landlord); or
(d) bound by any rent or additional rent which Tenant might
have paid for more than the current month to any prior landlord
(including Landlord); or
(e) bound by any amendment or modification of the Lease made
without its consent.
Section 5. Tenant agrees to give the Mortgagee or its successor or
assigns, by registered mail, a copy of any notice of default served upon the
Landlord, provided that prior to such notice Tenant has been notified in writing
(by way of Notice of assignment of Lease, or otherwise) of the address of such
Mortgagee. Tenant further agrees that if Landlord shall have failed to cure
such default within the time provided for in this Lease, then the Mortgagee
shall have an additional thirty (30) days to cure such default or it such
default cannot be cured within that time, then such additional time as may be
necessary if within such thirty (30) days any Mortgagee has commenced and is
diligently pursuing the remedies necessary to cure such default (including but
not limited to commencement of foreclosure proceedings if necessary to effect
such cure), in which event the Lease shall not be terminated while such remedies
are being so diligently pursued.
Section 6. Each of Mortgagee, Landlord and Tenant hereby warrants and
represents that the persons signing this document on their respective behalfs
have all requisite authority to do so, and to bind their respective entities
herein.
IN WITNESS WHEREOF, the parties hereto have executed these presents
the day and year first above written.
UNITCO, a California general partnership
By Ralph W. Kiewit, Jr. Family Revocable Trust of
1991
By: /s/
--------------------------------------
Print Name: Ralph W. Kiewit, Jr., Trustee
--------------------------------
General Partner
<PAGE>
By: Howard Family Trust
By: /s/
----------------------------------------
Print Name: Bradley D. Howard, Co-Trustee
--------------------------------
General Partner
STATE OF California )
----------
) ss
COUNTY OF Los Angeles )
----------
On this 30th date of May , 1996, before me, a Notary
---------- -------------
Public in and for said state, personally appeared RALPH W. KIEWIT, JR.,
------------------------------
Trustee and BRADLEY D. HOWARD, Co-Trustee, general partners of UNITCO, a
- -----------------------------------------
California general partnership, known to me to be the persons who executed the
within instrument on behalf of said partnership and acknowledged to me that they
executed the same for the purposes therein stated.
V. M. Holmes /s/
------------------
Notary Public
My Commission Expires;
May 4, 1999 [notary seal]
-----------
2221 BIJOU LIMITED LIABILITY COMPANY
By: /s/
--------------------------------
Print Name: Lars E. Akerberg
------------------------
Title: Managing Partner
--------------------------
By:
--------------------------------
Print Name:
------------------------
Title:
--------------------------
By:
--------------------------------
Print Name:
------------------------
Title:
--------------------------
<PAGE>
STATE OF Minnesota )
---------
) ss
COUNTY OF Carver )
---------
On this 3rd day of June , 1996, before me, a Notary Public
-------- ----------
in and for said state, personally appeared Lars E. Akerberg , managing
--------------------- ---------------
general partner, of 2221 Bijou Limited Liability Company, a Colorado limited
- ---------------
liability company, known to me to be the person who executed the within
instrument on behalf of said limited liability company, and acknowledge to me
that he executed the same for the purposes therein stated.
William J. Platto/s/
---------------------------------------
Notary Public
My Commission Expires:
January 31, 2000 [notary seal]
- --------------------------
AMERICAN TELECONFERENCING SERVICES,
LTD.
By: /s/
-----------------------------------
Print Name: Stephen L. Mock
---------------------------
Title: CFO
--------------------------------
STATE OF Kansas )
------
) ss
COUNTY OF Johnson )
--------
On this 7th day of June , 1996, before me, a Notary Public
-------- ----------
in and for said state, personally appeared Stephen L. Mock , of American
-------------------
Teleconferencing Services, Ltd., a Missouri corporation, known to me to be the
person who executed the within instrument on behalf of said corporation and
acknowledge to me that he executed the same for the purposes therein stated.
<PAGE>
Teresa J. Jones /s/
------------------------------------
Notary Public
My Commission Expires:
December 8, 1996
- ---------------------------
[notary seal]
<PAGE>
Book 6908 Page 1476
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE is made and entered into as of the 7/th/ day of
June, 1996, by and between 2221 Bijou Limited Liability Company, a Colorado
limited liability company, having an office at c/o Fieldhill Properties, P.O.
Box 158, Chaska, Minnesota 55318 (hereinafter called "Lessor"), and American
Teleconferencing Services, Ltd., having a current office at 101 N. Tejon, Suite
200, Colorado Springs, Colorado 80903 (hereinafter called "Lessee"),
W I T N E S S E T H :
1. This is a memorandum of that certain Standard Office Lease entered
into as of May 23, 1996 between Lessor and Lessee (hereinafter called the
"Lease"), pursuant to which, and subject to the terms of which, Lessee has the
right to occupy a portion of the following described real estate in Colorado
Springs, El Paso County, Colorado, to wit: Lot 1 in Unitco subdivision in the
City of Colorado Springs, El Paso County, Colorado, together with all
improvements located thereon and rights appertaining thereto (hereinafter called
the "Premises"), for a one hundred twenty (120) month term beginning at the time
period provided for in the Lease.
2. The Lease and Lessee's right, title and interest therein and in the
Premises, shall be completely prior to each and every mortgage, and each and
every mortgage, whether heretofore, now, or hereafter in existence, shall in all
respects be subject and subordinate to the Lease and Lessee's right, title and
interest therein and in the Premises.
3. Lessee, if not in default under the Lease, upon prior written consent
of the Lessor, may sublet the Premises or any portion thereof and may assign the
Lease, provided that each assignee undertakes and agrees in writing for the
benefit of Lessor to keep and perform all the terms, conditions and covenants of
the Lease by Lessee to be kept and performed.
IN WITNESS WEHREOF, the parties hererto have caused this Memorandum of
Lease to be executed and their respective seals hereto affixed the day and year
first above written.
2221 BIJOU LIMITED LIABILTY COMPANY
By: /s/
--------------------------------
Print Name: /s/ Lars E. Akerberg
------------------------
Title: Managing Partner
----------------------------
<PAGE>
Book 6908 Page 1477
By:
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
By:
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
STATE OF MINNESOTA )
---------
) ss
COUNTY OF CARVER )
------
On this 30/th/ day of May, 1996, before me, a Notary Public in and for said
state, personally appeared Lars E. Akerberg, managing partner, of 2221 Bijou
Limited Liability Company, a Colorado limited liability company, known to me to
be the person who executed the within Memorandum of Lease on behalf of said
limited liability company and acknowledged to me that he executed the same for
the purposes therein stated.
/s/ William J. Platto
----------------------------------------
Notary Public
My Commission Expires:
January 31, 2000
- ---------------------------------
Notary Seal
<PAGE>
Book 6908 Page 1478
AMERICAN TELECONFERENCING SERVICES, LTD.
By: /s/ Stephen L. Mock
--------------------------------------------
Print Name: /s/ Stephen L. Mock
---------------------------------------
Title: CFO
-------------------------------------------
STATE OF KANSAS )
------
) ss
COUNTY OF JOHNSON )
-------
On this 7/th/ day of June, 1996, before me, a Notary Public in and for said
state, personally appeared Stephen L. Mock, CFO, of American Teleconferencing
Services, Ltd., a Missouri corporation, known to me to be the person who
executed the within Memorandum of Lease on behalf of said corporation and
acknowledged to me that he executed the same for the purposes therein stated.
/s/ Teresa J. Jone
----------------------------------------------
Notary Public
My Commission Expires:
December 8, 1996
- -------------------------------
Notary Seal
<PAGE>
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
----------------------------------------
THIS AGREEMENT, made and entered into as of the 11/th/ day of October,
1996, by and between AMERICAN TELECONFERENCING SERVICES, LTD. ("Tenant"), 2221
BIJOU LIMITED LIABILITY COMPANY, a Colorado limited liability company
("Grantor"), and MILLER & SCHROEDER INVESTMENTS CORPORATION, a Minnesota
corporation ("Beneficiary").
PRELIMINARY STATEMENT OF FACTS:
-------------------------------
A. Beneficiary is making a loan to Grantor ("Loan") repayment of which is
to be secured by a Deed of Trust and Security Agreement and Fixture Filing and
Financing Statement executed by the Grantor to the Public Trustee of El Paso
County, Colorado, a trustee, for the benefit of Beneficiary ("Deed of Trust")
granting and conveying in trust the real estate (the "Premises") more fully
described in Exhibit "A" attached hereto.
B. The Tenant is the present lessee under a lease dated May 23, 1996,
made by Grantor, as landlord, demising a portion of the Premises (said lease and
all amendments thereto being referred to as the "Lease").
C. As a condition precedent to Beneficiary's disbursement of Loan
proceeds Beneficiary has required that Tenant attorn to the Beneficiary under
the Deed of Trust.
D. In return the Beneficiary is agreeable to not disturbing the Tenant's
possession of the Premises.
E. The Beneficiary is disbursing the Loan proceeds in reliance upon the
agreements contained in this instrument which but for it would not disburse the
Loan.
NOW, THEREFORE, in consideration of the sum of $1.00 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged it is hereby agreed as follows:
1. Tenant To Attorn To Beneficiary. If the interests of Grantor shall be
-------------------------------
transferred to and owned by Beneficiary by reason of foreclosure or other
proceedings brought by it in lieu of or pursuant to a foreclosure, or by any
other manner, and Beneficiary succeeds to the interest of the Grantor under the
Lease, Tenant shall be bound to Beneficiary under all of the terms, covenants
and conditions of the Lease for the balance of the term thereof remaining, with
the same force and effect as if Beneficiary were the landlord under the Lease,
and Tenant does hereby attorn to Beneficiary as its landlord, said attornment to
be effective and self-operative immediately upon Beneficiary succeeding to the
interest of the Grantor under the Lease without the execution of any further
instruments on the part of any of the parties hereto; provided, however, that
Tenant shall be under no obligation to pay rent to Beneficiary until Tenant
receives written notice and such other confirming information as Tenant
reasonably requests from
<PAGE>
Beneficiary that it has succeeded to the interest of the Grantor under the
Lease. The respective rights and obligations of Tenant and Beneficiary upon such
attornment, to the extent of the then remaining balance of the term of the Lease
shall be and are the same as now set forth therein; subject, however, to any
Amendment thereto agreed upon by the parties and consented to by Beneficiary, it
being the intention of the parties hereto for this purpose to incorporate the
Lease in this Agreement by reference with the same force and effect as if set
forth at length herein.
2. Beneficiary Not Bound By Certain Acts of Grantor. If Beneficiary
------------------------------------------------
shall succeed to the interest of Grantor under the Lease, Beneficiary shall not
be liable for any act or omission of any prior landlord (including Grantor); nor
subject to any offsets or defenses which Tenant might have against any prior
landlord (including Grantor); nor bound by any rent which Tenant might have
prepaid nor for more than the then current installment; nor bound by any
amendment or modification of the Lease made without its consent. In the event
of a default by the Grantor under the Lease or an occurrence that would give
rise to an offset against rent or claim against the Grantor under the Lease,
Tenant will use its best efforts to set off such defaults against rents
currently due Grantor and will give Beneficiary notice of such defaults or
occurrence at the address of Beneficiary as set forth above. In the event the
Tenant has paid a security deposit to Grantor under the Lease, Beneficiary shall
not have any liability to the Tenant unless the same has actually been paid over
to Beneficiary and Beneficiary holds the same.
3. Assignment of Lease. Grantor will by a separate Assignment of Rents
-------------------
or Assignment of Lease ("Assignment") assign its interest in the rents and
payments due under the Lease to Beneficiary as security for repayment of the
Loan. If in the future there is a default by the Grantor in the performance and
observance of the terms of the Deed of Trust, the Beneficiary may, at its option
under the Assignment, require that all rents and other payments due under the
Lease be paid directly to it. Upon notification to that effect by the
Beneficiary, the Grantor hereby authorizes and directs Tenant and the Tenant
agrees to pay the rent and any payments due under the terms of the Lease to
Beneficiary. The Assignment does not diminish any obligations of the Grantor
under the Lease nor impose any such obligations on the Beneficiary.
4. Successors and Assigns. This Agreement and each and every covenant,
----------------------
agreement and other provisions hereof shall be binding upon the parties hereto
and their successors any assigns, including without limitation each and every
from time to time holder of the Lease or any other person having an interest
therein and shall inure to the benefit of the Beneficiary and its successors and
assigns. As used herein, the words "successors and assigns" shall include the
heirs, administrators and representatives of any natural person who is a party
to this Agreement.
5. Choice of Law. This Agreement is made and executed under and in all
-------------
respects is to be governed and construed by the laws of the State of Colorado.
6. Captions and Headings. The captions and headings of the various
---------------------
sections of this Agreement are for convenience only and are not to be construed
as confining or limiting in any way the scope or intent of the provisions
hereof. Whenever the context requires or permits, the
<PAGE>
singular shall include the plural, the plural shall include the singular and the
masculine, feminine and neuter shall be freely interchangeable.
7. Notices. Any notices and other communications permitted or required
-------
by the provisions of this Agreement (except for telephonic notices expressly
permitted) shall be in writing and shall be deemed to have been properly given
or served by depositing the same with the United States Postal Service, or any
official successor thereto, designated as Registered or Certified Mail, Return
Receipt Requested, bearing adequate postage, or delivery by reputable private
carrier such as Federal Express, Airborne, DHL or similar overnight delivery
service, and addressed as hereinafter provided. Each such notice shall be
effective upon being deposited as aforesaid. The time period within which a
response to any such notice must be given, however, shall commence to run from
the date of receipt of the notice by the addressee thereof. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to be receipt of the notice sent. By
giving to the other party hereto at least ten 10 days' notice thereof, either
party hereto shall have the right from time to time and at any time during the
term of this Agreement to change its address and shall have the right to specify
as its address any other address within the United States of America.
Each notice to Beneficiary shall be addressed as follows:
Miller & Schroeder Investments Corporation
300 Pillsbury Center
220 South Sixth Street
Minneapolis, MN 55402
Attn: Vice President - Mortgage Department
Each notice to Grantor shall be addressed as follows:
2221 Bijou Limited Liability Company
c/o Lars Akerberg, Chief Executive Officer
Fieldhill Properties
PO Box 158
123 West 3/rd/ Street
Chaska, Minnesota 55318
Each notice to Tenant shall be addressed as follows:
American Teleconferencing Services, Ltd.
2221 East Bijou Street
Colorado Springs, Colorado 80909
8. Certification of Tenant. Tenant certifies to Beneficiary as follows:
-----------------------
a. Tenant has accepted delivery of its leased portion of the Premises
described in the Lease and has entered into occupancy thereof;
<PAGE>
b. Tenant has not entered into any agreement providing for the
discounting, advance payment, abatement or offsetting of rents, other
than as may be permitted under the Lease itself, and no rent has been
paid for more than one installment in advance;
c. The Lease, including Addendums A through E and the Memorandum of
Lease, represents the entire agreement between the parties as to the
leasing, is in full force and effect, and has not been modified,
supplemented or amended in any way;
d. Tenant has fully inspected its leased portion of the Premises and
found the same to be as required by the Lease, in good order and
repair, and all conditions under the Lease to be performed by the
landlord to date have been satisfied; including but not limited to
payment to Tenant of any landlord contributions for Tenant
improvements and completion by landlord of the construction of any
leasehold improvements to be constructed by the landlord as of the
date hereof;
e. The primary term of the Lease commenced on September 1, 1996 and
continues to August 31, 2006; and contains no renewal option(s);
f. Minimum annual rent payable (exclusive of tenant's share of operating
expenses and tenant's share of taxes, if any) is as set forth in
Addendum A to the Lease and is paid to October 1, 1996;
g. As of this date, the landlord is not in default under any of the
terms, conditions, provisions or agreements of the Lease and Tenant
has no offsets, claims or defenses against the landlord with respect
to the Lease;
h. Tenant has not assigned or sublet its interest under the Lease;
i. Tenant has paid a security deposit of $12,500 to Grantor which
security deposit is held in an interest bearing, IOLTA Trust Account
by William J. Platto, attorney at law, for the benefit of Grantor,
Tenant and Beneficiary according to their respective interests;
j. Tenant has not prepaid any installments of rent more than one month in
advance;
k. The Undersigned does not and has not used its leased portion of the
Premises for the storage, treatment, manufacturing, generation,
disposal or release into the environment of any petroleum product or
substance which is classified as a "hazardous substance, pollutant or
contaminant under the Federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or other applicable federal,
state and local laws and regulations.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be executed as of the date first above written.
AMERICAN TELECONFERENCING SERVICES,
LTD.
By: /s/ Stephen L. Mock
-------------------------------------
Its: CFO
------------------------------------
STATE OF KANSAS )
)ss.
COUNTY OF JOHNSON )
-------
The foregoing instrument was acknowledge before me this 10/th/ day of
October, 1996, by Stephen L. Mock, the CFO of American Teleconferencing
Services, Ltd., a Missouri corporation, on behalf of the Corporation.
Witness my hand and official seal.
/s/ Teresa J. Jones
-----------------------------------------
[Notary Seal] Notary Public
-----------------------------------------
Title
My Commission Expires:
12-8-96
- ---------------------------
Signature Page to American NDA
<PAGE>
MILLER & SCHROEDER
INVESTMENTS CORPORATION
By: /s/ Gregory Miller
-------------------------------------
Its: V.P.
-------------------------------------
STATE OF MINNESOTA )
)ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledge before me this 11/th/ day of
October, 1996, by Gregory Miller, the V.P. of Miller & Schroeder Investments
Corporation, a Minnesota corporation, on behalf of the corporation.
Witness my hand and official seal.
/s/ Sharon M. Ruane
-----------------------------------------
[Notary Seal] Notary Public
Title
-----------------------------------------
My Commission Expires:
- ------------------------------
Signature Page to American NDA
<PAGE>
2221 BIJOU LIMITED LIABILITY
COMPANY, a Colorado limited liability
company
By: FLENINGE PARTNERSHIP, a
Minnesota General Partnership, its
Manager
By: /s/ Lars E. Akerberg
-------------------------------------
Lars E. Akerberg, Partner
STATE OF MINNESOTA )
)ss.
COUNTY OF HENNEPIN )
The foregoing was instrument was acknowledge before me this 11/th/ day of
October, 1996, by Lars E. Akerberg, a Partner of Fleninge Partnership, a
Minnesota General Partnership, the Manger of 2221 Bijou Limited Liability
Company, a Colorado limited liability company, on behalf of the Company.
Witness my hand and official seal.
/s/ Sharon M. Ruane
-----------------------------------------
[Notary Seal] Notary Public
-----------------------------------------
Title
My Commission Expires:
- ------------------------------
THIS DOCUMENT WAS DRAFTED BY:
OPPENHEIMER WOLFF & DONNELLY (DPN)
Plaza VII, Suite 3400
45 South Seventh Street
Minneapolis, MN 55402
Signature Page to American NDA
<PAGE>
EXHIBIT "A"
-----------
Legal Description
-----------------
Lot I, Unitco Subdivision, County of El Paso, State of Colorado
<PAGE>
Exhibit 10.12
OFFICE BUILDING LEASE
THIS LEASE, dated November 25, 1987, is made by and between the Aetna
Life Insurance Company ("Landlord") and American Teleconferencing Services LTD.
("Tenant").
WITNESSETH:
Landlord, in consideration of the rent to be paid and the covenants and
agreements to be performed by Tenant, as hereinafter set forth, does hereby
lease to Tenant and Tenant hereby leases from Landlord that certain office space
(the "Premises") indicated on Exhibit "A" attached hereto and made a part hereof
which contains 5,126 square feet of space, together with the pro rata share of
common floor area allowable thereto, 0 sq. Ft., for a total of 5,126 net
rentable sq. Ft. of space. Said space shall be designated Suite 600 on the
6/th/ floor of that certain Building known as Building #20 located at 10955
Lowell Overland Park, Kansas 66212 (the "Building").
TO HAVE AND TO HOLD unto Leasee for a term of 6 years, commencing on the
15/th/ day of December, 1987 and ending at midnight on the 14/th/ day of
December, 1993.
In consideration of the Premises and the mutual terms, covenants and
conditions herein contained, the parties further agree as follows:
1. POSSESSION. If the Landlord, for any reason whatsoever, cannot deliver
possession of the Premises to the Tenant at the commencement of the term hereof,
this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant
for any loss or damage resulting therefrom, nor, at the option of the Landlord,
shall the expiration date of the term be in any way extended, but in that event,
all rent shall be abated during the period between the commencement of said term
and the time when Landlord delivers possession.
In the event that Landlord shall permit Tenant to occupy the Premises
prior to the commencement date of the term, such occupancy shall be at the base
rental rate hereinafter provided, and such occupancy shall be subject to all
other terms and provisions of this Lease. Said early possession shall not
advance the termination date hereinabove provided. See Paragraph 37.
2. BASE RENT. Tenant shall pay to Landlord as base rent for the Premises the
sum of Four Hundred Forty Five Thousand One Hundred Seven and 93/100
($445,107.93) Dollars, which shall be payable in monthly installments of see
paragraph 28 each in advance on the first day of each calendar month during the
term hereof, provided, however, that See Paragraph 28 shall be due and payable
on the execution of this Lease for the first calendar month or part thereof and
See Paragraph 28 shall be due and payable on the first day of the last full or
partial calendar month during the term of this Lease for said last calendar
month or part thereof. Said base rent and all other sums (whether designated
additional rent or otherwise) shall be paid to Landlord at 4435 Main Street,
Suite 1000, Kansas City, Missouri 64111 or to such other person or at such other
place as Landlord may from time to time designate in writing. All rent payable
under this
1
<PAGE>
Lease shall be paid by Tenant without setoff for any cause whatsoever except for
such abatement as is hereinafter expressly provided for and without notice or
demand, both of which are expressly waived by Tenant. Rent and other monies due
Landlord under this Lease not paid when due shall bear interest at the rate of
prime plus one (1) percent per annum from the date the same is due until paid.
The parties agree that such late charges represent a fair and reasonable
estimate of the cost that Landlord will incur by reason of Tenant's late payment
and constitute the only damages to which Landlord is entitled for the period of
such nonpayment for Tenant's delay in making payments required (illegible)
Lease. (Base Rental Figure is subject to change based upon final approved
-----
plans and specifications.)
3. ADDITIONAL RENT.*
(a) Tenant shall pay to Landlord, at the times hereinafter set
forth, as additional rent an amount equal to the Tenant's percentage of any
increase in direct Expenses above the Base Direct Expenses. On or after January
1 of each calendar year subsequent to the calendar year in which this Lease
commences, Landlord will notify Tenant of (i) Landlord's estimate of the
increase, if any, in Direct Expenses over Base Direct Expenses payable by Tenant
for the current calendar year and (ii) the amount of any additional rent due
from Tenant, on account of the difference between the additional rent paid by
Tenant for the preceding calendar year and the actual additional rent for the
preceding calendar year. Tenant shall, upon receipt of such notice, pay to
Landlord with thirty (30) days of receipt of such notice, (i) a sum equal to
one-twelfth (1/12) of the amount of such estimate of the increase in Direct
Expenses for such current calendar year for each full or partial month elapsed
from January 1 of said current calendar year to the date of receipt by Tenant of
such notice and (ii) the balance of the additional rent due from Tenant for the
preceding calendar year. Following receipt of such notice Tenant shall pay to
Landlord, on the first day of each succeeding calendar month during said
calendar year, one-twelfth (1/12) of the amount of such estimate of the increase
in Direct Expenses for said calendar year. If Landlord's estimate of additional
rent is more than the actual additional rent for any calendar year the amount of
such excess paid by Tenant shall be credited against the next installments of
additional and base rent as they become due but not credit shall be due for any
decrease in Direct Expenses below the Base Direct Expenses. In the event the
term of this Lease or any extension or renewal hereof ends on a day other than
the last day of a month, the amount of additional rent payable by Tenant for
such partial month shall be prorated on the basis of a thirty-day month.
Notwithstanding that the Lease has terminated, the amount of any additional rent
due hereunder shall be payable promptly upon receipt of a statement from
Landlord, and conversely any credit due Tenant for any excess of said additional
rent shall be promptly refunded after Landlord's calculation thereof.
"Base Direct Expenses" are $4.50 per usable square feet of Building
(b) "Direct Expenses" shall be defined as the sum of any and all
costs, expenses, and disbursements of every kind and character which Landlord
shall incur, pay, or become obligated to pay in any calendar year in connection
with the ownership, operation,
__________________
* The provisions set forth in this paragraph shall not take effect until
January 1, 1989 and any additional rent due above building "Base Direct
Expenses", shall not reflect any increases prior to January 1, 1989.
2
<PAGE>
maintenance, repair, and security of, the Building and land upon which the
Building is located and all related improvements and appurtenances thereto,
which shall include but not be limited to the following: real estate taxes and
assessments; rent taxes; gross receipts taxes; water and sewer charges;
insurance premiums; license, permit and inspection charges; utilities; service
contracts; labor; management of the Building; air conditioning and heating;
elevator maintenance; supplies; materials; equipment; tools; security; garbage
service; maintenance and upkeep costs of all parking areas, drives, lawns,
trees, shrubbery and common proceedings increases in real estate taxes and
assessments and the applicability to, or the validity of, any statute,
ordinance, rule or regulation affecting the Building or land which might
increase direct expenses.
"Direct Expenses" shall not include: the cost of capital improvements or
replacements; expenses for repairs, replacements, and general maintenance paid
by proceeds from insurance or by Tenant or other third parties; alterations
attributable solely to Tenants of the building other than Tenant; principal and
interest payments made by Landlord on mortgages on the Building; depreciation;
leasing commissions, and any state of federal income franchise, estate or
inheritance taxes.
(c) "Tenant's Percentage" shall be 4.91%.
4. SECURITY DEPOSIT. See Paragraph 36.
5. USE. Tenant shall use the Premises for general office purposes and
conducting its telecommunication business and shall not use or permit the
Premises to be used for any other purpose without the prior written consent of
Landlord.
Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will in any way increase the existing
premium for or affect or cause cancellation of any fire or other insurance
policy upon the Building or any part thereof or any of its contents. Tenant
shall not do or permit anything to be done in or about the Premises which will
in any way obstruct or interfere with the rights of other Tenants or occupants
of the Building or injure or annoy them or use or allow the Premises to be used
for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises. Tenant
shall not commit or suffer to be committed any waste in or upon the Premises.
6. COMPLIANCE WITH LAW. Tenant shall not use or permit anything to be done in
or about the Premises which will in any way conflict with any law, statute,
ordinance or governmental rule, regulation or requirement now in force or which
may hereafter be enacted or promulgated. Tenant shall, at its sole cost and
expense, promptly comply with all laws, statutes, ordinances and governmental
rules, regulations or requirements of any board of fire insurance underwriters
or other similar bodies now or hereafter constituted relating to, or affecting
the condition, use or occupancy of the Premises, excluding structural changes
not related to or affected by Tenant's improvements or acts. The judgment of any
court of competent jurisdiction or the admission of Tenant in any action against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated any
law, statute, ordinance or governmental rule, regulation or requirement, shall
be conclusive of that fact between the Landlord and Tenant.
3
<PAGE>
7. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of the Premises or any part thereof
without the written consent of the Landlord. Any alterations, additions or
improvements to or of the Premises, including, but not limited to, wallcovering,
paneling and built-in cabinet work, shall become a part of the realty and belong
to the Landlord upon their installation and shall be surrendered with the
Premises. Any moveable furniture and trade fixtures shall remain the property of
Tenant. Any alterations, additions or improvements shall be made by Tenant, at
Tenant's sole cost and expense, and Landlord shall have no liability therefor.
Any contractor or person selected by Tenant to make the same must first be
approved in writing by the Landlord. Upon the written demand by Landlord, given
at least thirty (30) days prior to the expiration of the term hereof or any
renewal or extension thereof, Tenant shall, at Tenant's sole cost and expense,
forthwith and with all due diligence (i) remove any alterations, additions, or
improvements made by Tenant, designated by Landlord to be removed, and (ii)
repair any damage to the Premises caused by such removal. Tenant shall have the
right to remove, upon lease termination, any additional air conditioning units
which it may have had installed per Section 14. Landlord shall not unreasonably
demand Tenant to remove said equipment.
8. REPAIRS.
(a) By taking possession of the Premises, Tenant shall be deemed to
have accepted the Premises as being in good, sanitary order, condition and
repair.* Tenant shall, at Tenant's sole cost and expense, keep the Premises
and every part thereof in good condition and repair, damage thereto from causes
beyond the reasonable control of Tenant and ordinary war and tear excepted.
Tenant shall, upon the expiration of earlier termination of the term hereof or
any renewal or extension thereof, surrender the Premises to the Landlord in good
condition, ordinary wear and tear and damage from causes beyond the reasonable
control of Tenant excepted. Except as may be specifically provided in an
addendum hereto, Landlord shall have no obligation whatsoever to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof and the
parties hereto affirm that Landlord has made no representations to Tenant
respecting the condition of the Premises or the Building except as specifically
set forth herein or in any addendum hereto.
(b) Notwithstanding the provisions of Article 8(a) Landlord shall
repair and maintain the structural portion of the Building, including the basic
plumbing, air conditioning, heating, and electrical systems, installed or
furnished by Landlord, unless such maintenance and repairs are caused in part or
in whole by the act, neglect, fault or omission of the Tenant, its agents,
servants, employees or invitees, in which case Tenant shall pay to Landlord the
reasonable cost of such maintenance and repairs. Except as provided in Article
19 hereof, there shall be no abatement of rent and no liability of Landlord (i)
for any failure to make any repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant, or (ii) by reason
or any injury to or interference with Tenant's business arising from the making
of any
__________________
* Upon occupancy, Tenant and Building Manager shall inspect the Premises to
determine if the tenant finish is substantially complete per the attached
floor plan and establish a list of items, if any, remaining to be finished.
4
<PAGE>
repairs, alterations or improvements in or to any portion of the Building or the
Premises or in or to fixtures, appurtenances and equipment therein. Tenant
waives the right, under any law, statue, or ordinance now or hereafter in
effect, to make repairs at Landlord's expense.
9. LIENS. Tenant shall keep the Premises and the property in which the
Premises are situated free from any lien arising out of any work performed,
materials furnished or obligations incurred by Tenant. Landlord may require, at
landlord's sole option, that Tenant provide Landlord, at Tenant's sole cost and
expense, a payment and performance bond in the amount equal to one and one-half
(1-1/2) times the estimated cost of any improvements, additions, or alterations
to be made by Tenant with respect to the Premises, to insure Landlord against
any liability for mechanics' and materialmen's liens and to insure completion of
the work.
10. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, transfer, mortgage,
pledge, hypothecate or encumber this Lease or any interest herein and shall not
permit or suffer the same to occur by reason of the operation of law, and shall
not sublet the Premises or any part thereof, or any right or privilege
appurtenant thereto, or permit or suffer any other person (the employees,
agents, servants and invitees of Tenant excepted) to occupy or use the Premises,
or any portion thereof, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld. A consent to any such assignment,
subletting, occupation or use by any other person shall not be deemed to be a
consent to any subsequent assignment, subletting, occupation or use by another
person. Any such assignment or subletting without such consent shall be void,
and shall, at the option of the Landlord, constitute a default under the Lease.
11. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against
and from (i) any and all claims arising from Tenant's use of the Premises for
the conduct of its business or from any activity, work or other things done
permitted or suffered by the Tenant in or about the Premises, the Building and
the property upon which the Building is located, (ii) any and all claims arising
from any breach of default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, and (iii) all cost, attorney's fees, expenses and
liabilities incurred in connection with any such claim or any action or
proceeding brought thereon. In the event any case, action or proceeding be
brought against Landlord by reason of any such claim, Tenant shall, upon written
notice from Landlord, defend the same, at Tenant's sole cost and expense, by
counsel reasonably satisfactory to Landlord. Tenant as a material part of the
consideration to Landlord hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises, the Building and the property
upon which the Building is located from any cause occasioned by Tenant or any
officer, agent, employee, licensee or invitee of Tenant other than Landlord's
negligence, and Tenant hereby waives all claims in respect thereof against
Landlord.
Landlord or its agents shall not be liable to Tenant or to Tenant's
officers, employees, agents, licensees, or invitees, or to any other person
whomsoever, for any damage to property entrusted to employees of the Building,
nor for any loss or damage to any property or any injury to or damage to persons
resulting from any part of the Building or the land upon which the Building is
located or related improvements or appurtenances thereto becoming out of repair,
any defect in or failure of pipes or wiring, the backing up of any drains or the
bursting or leaking of
5
<PAGE>
any pipes, faucets and plumbing fixtures, any gas, water, steam, electricity,
oil or rain leaking, escaping or flowing into the Premises from any part of the
Building, or from the pipes, appliances, or plumbing works therein or from the
roof, street, or subsurface or from any other place resulting from dampness or
any other cause whatsoever, theft, fire, explosion, act of God, riot, war,
insurrection, court order or order of governmental authority or any other matter
beyond the control of the Landlord, unless caused by or due to the negligence of
Landlord, its agents, servants or employees. Landlord or its agents shall not be
liable for interference with the light or other incorporeal hereditaments, loss
of business by Tenant, nor shall Landlord be liable for any latent defect in the
Premises or in the Building. Tenant shall give prompt written notice to Landlord
in case of fire or accidents in the Premises or in the Building or of defects
therein or in the fixtures or equipment located therein.
12. SUBROGATION. Each party hereby waives its respective right of recovery
against the other for any loss or damage covered by fire, extended coverage and
other property insurance policies to the extent that such party's loss or damage
is covered under its insurance policies. Each party shall immediately give
notice to its insurance carriers and obtain any endorsements required to give
effect to the foregoing waiver.
13. INSURANCE. With respect to the Premises, Tenant shall, at Tenant's sole
cost and expense, obtain and keep in force at all times during the term of this
Lease, comprehensive general liability insurance, including property damage, in
the amount of at least One Million Dollars ($1,000,000) combined single limit,
insuring Landlord and Tenant against any liability arising out of the ownership,
use occupancy or maintenance of the Premises and all areas appurtenant thereto.
The limit of said insurance by Tenant shall have a Landlord's protective
liability endorsement attached thereto. Insurance required hereunder shall be in
companies licensed in the state in which the Premises are located and shall have
a rating of A or better in "Best's Insurance Guide" and a financial rating of
Class XII or better.
Mutual insurance companies may be used only if they are non-assessable.
No Policy shall be cancelable or subject to reduction of coverage except after
thirty (30) days written notice to the Landlord. Landlord shall receive
evidence of insurance upon request.
14. SERVICES AND UTILITIES. Provided that Tenant is not in default hereunder,
Landlord agrees to furnish to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord at its sole discretion,
and subject to the rules and regulations of the Building, electricity for normal
lighting and fractional horsepower office machines, heat and air conditioning
required in the Landlord's judgment for the comfortable use and occupation of
the Premises, and janitorial service.* Landlord shall also maintain and keep
lighted the common stairs, common entries and toilet rooms in the Building.
Landlord shall not be liable for, and Tenant shall not be entitled to, any
reduction in the rent due hereunder by reason of Landlord's failure to furnish
any of the foregoing when such failure is caused by
__________________
* Building operating hours are 7:00 a.m. to 6:00 p.m., Monday through Friday,
and 8:00 a.m. to 12:00 p.m. on Saturday. Operating services provided to
Tenant after building operating hours are subject to Landlord's rights to
charge Tenant for additional operating services contained in this Paragraph.
6
<PAGE>
accident, breakage, repairs, strikes, lockouts or other labor disturbances or
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord. Landlord shall not be liable under any
circumstances for any loss of or injury to property, however occurring, through
or in connection with or incidental to failure to furnish any of the foregoing.
Wherever machines or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, or if it is
desired by Tenant to have additional air conditioning installed, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation,* and the
cost of operation and maintenance thereof, shall be paid by Tenant and Landlord
upon demand by Landlord.
Tenant shall not, without the prior written consent by Landlord, use any
apparatus or device in the Premises, including by way of illustration and not
limitation, electronic data processing machines, punch card machines, and
machines using in excess of 120 volts, which will in any way increase the amount
of electricity used above that usually furnished or supplied for the use of the
Premises as general office space; nor connect any apparatus or device with
electric current lines except through existing electrical outlets in the
Premises. If Tenant desires to use water or electric current in excess of that
usually furnished or supplied for the use of the Premises as general office
space, Tenant shall request the same from landlord in writing. Landlord may
refuse such request, but such refusal shall not be unreasonable. If such
request is granted, Landlord shall cause a water meter or electrical current
meter to be installed in the Premises to measure the amount of water or electric
current consumed. The Tenant agrees to pay promptly upon demand therefor from
Landlord, the cost of any such meters and of the installation, maintenance and
repair thereof, and the charges of all water and electric current consumed as
shown by said meters in excess of the amount consumed in connection with the use
of the Premises as general office space, at the rates charged for such services
by the utility furnishing the same, plus any additional expenses incurred in
keeping account of the water and electric current so consumed. If a separate
meter is not installed, the Tenant agrees to pay the cost for such excess water
and electric current as established by an estimate of the amount of such excess
use made by a utility company or electrical engineer.
15. PROPERTY TAXES. Tenant shall pay or cause to be paid, before delinquency,
any and all taxes levied or assessed during the term hereof or any extension or
renewal thereof, upon any or all Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property located in the Premises. In the event
any or all of Tenant's leasehold improvements, equipment, furniture, fixtures
and personal property located in the Premises, shall be assessed and taxed with
the Building, Tenant shall pay to Landlord its share of such taxes within ten
(10) days after delivery to Tenant of a written statement by Landlord setting
forth the amount of such taxes applicable to Tenant's property.
16. RULES AND REGULATIONS. Tenant shall faithfully comply with the rules and
regulations attached to and made part of this Office Building Lease. Landlord
reserves the right
__________________
* Which Landlord agrees to amortize over the then remaining lease term at 1%
over the then current prime interest rate established by Boatmen's First
National Bank of Kansas City.
7
<PAGE>
from time to time to make all reasonable modifications to said rules. The
addition to and modification of those rules shall be binding upon Tenant upon
delivery of a copy of them to Tenant. Landlord shall not be responsible to
Tenant for the nonperformance of any of said rules by any other Tenants or
occupants.
17. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof or any extension or renewal
thereof, with the express written consent of Landlord, such occupancy shall be a
tenancy from month to month at a rental rate to be determined by Landlord
subject to increase and decrease in the additional rent as provided in Article 3
hereof, plus all other charges payable hereunder, and upon all the terms and
conditions hereof applicable to a month to month tenancy.
18. ENTRY BY LANDLORD. Landlord reserves and shall have the right to enter the
Premises at any and all times, to inspect the same, to supply any service to be
provided by Landlord to Tenant hereunder, including janitorial service, to show
the Premises to prospective purchasers or tenants, to post notices of
nonresponsibility, and to alter, improve or repair the Premises and any portion
of the Building that Landlord may deem necessary or desirable, all without
reduction of rent. For the purpose of alterations, improvements or repairs,
Landlord may erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, always providing that the
entrance to the Premises hall not be blocked thereby and further providing that
the business of the Tenant shall not be interfered with unreasonably. Tenant
hereby waives any claim for damages or for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises, and any other loss occasioned thereby. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key with which to unlock
all of the doors in, upon and about the Premises, including Tenant's vaults,
safes and files, and Landlord shall have the right to use any and all means
which Landlord may deem proper to open said doors in an emergency in order to
obtain entry to the Premises without liability to Tenant except for any failure
to exercise due care for Tenant's property. Any entry to the Premises obtained
by landlord by any of said means, or otherwise, shall not under any
circumstances be construed or deemed to be a forceable or unlawful entry into,
or a detainer of the Premises, or an eviction of Tenant from the Premises or any
portion thereof.
19. RECONSTRUCTION. In the event the Building is damaged by Fire or other
perils covered by extended coverage insurance, Landlord agrees to make the
repairs forthwith and this Lease shall remain in full force and effect, except
that Tenant shall be entitled to a proportionate reduction in the rent based on
the extent to which the damages and the repair work shall materially interfere
with the business carried on by the Tenant in the Premises. If the damage is due
to the fault or neglect of Tenant or its employees, there shall be no reduction
in rent.
In the event the Building is damaged as a result of any cause other than
the perils covered by fire and extended coverage insurance, then Landlord shall
make the repairs forthwith, provided the extent of the damage is less than ten
percent (10%) of the then full replacement cost of the Building. In the event
the damage is greater than ten percent (10%) of the full replacement cost of the
Building, Landlord shall have the option to repair such damage or terminate this
8
<PAGE>
Lease. Written notice of such election shall be given to Tenant within Sixty
(60) days of the date of the damage. If the damage is to be repaired, Landlord
agrees to make the repairs forthwith and this lease shall continue in full force
and effect but the rent shall be proportionately reduced as provided above in
this Article. If this Lease is to be terminated, the termination date shall be
stated in said notice which shall be no less than thirty (30) days and no more
than sixty (60) days following the date of such notice. This Lease shall expire
and all interest of the Tenant in the Premises shall terminate on the date
stated in such notice and the rent shall be proportionately reduced as provided
above in this Article up to date of such termination.
Notwithstanding anything to the contrary contained in this Article,
Landlord shall have no obligation to repair, reconstruct or restore the Building
when the damage resulting from any casualty occurs during the last twelve (12)
months of the term hereof or any extension or renewal thereof.
Landlord shall have no obligation to repair any damage to, or to make
any repairs or replacements of, any panels, decorations, office fixtures,
railings, floor coverings, partitions, or any other property installed in the
Premises by Tenant.
The Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the Premises or
Tenant's personal property or any inconvenience or annoyance occasioned by such
damage, repair, reconstruction or restoration.
20. DEFAULT. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant.
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof by Landlord to Tenant.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Tenant, other than described in Article 20(b) above, where such failure shall
continue for a period of sixty (60) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default is
such that more than sixty (60) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure within
said sixty (60) day period and thereafter diligently prosecutes such cure to
completion.
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt or a petition for reorganization
or arrangement under any law relating to bankruptcy unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days; or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where
9
<PAGE>
possession is not restored to Tenant within thirty (30) days; or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged in thirty (30) days.
20.A. A Landlord shall in no event be charged with default in the performance of
any of its obligations hereunder unless and until Landlord has failed to perform
such obligations within 60 days (or such additional time as is reasonably
required to correct any such default) after notice to Landlord by Tenant
properly specifying wherein Landlord has failed to perform any such obligations.
If the holder of record of any mortgage covering the Premises has given
prior written notice to Tenant that it is the holder of a mortgage and that such
notice includes the address at which notices to such holder are to be sent, then
Tenant agrees to give the holder of record of such mortgage notice
simultaneously with any notice given under this paragraph 20(a) to Landlord to
correct any default of Landlord and agrees that the holder of record of such
mortgage shall have the right, with 60 days (or such additional time as is
reasonably required to correct any default) after receipt of said notice, to
correct or remedy such default before Tenant may take any action under this
Lease by reason of such default. Any notice of default given Lessor shall be
null and void unless simultaneous notice has been given to said mortgagee.
21. REMEDIES IN DEFAULT. No such default or breach shall relieve Tenant or
Tenant's liabilities and obligations under this Lease whether or not the
Premises shall be relet. In any such event Tenant shall pay Landlord the base
and additional rent and all of other sums required to be paid by Tenant up to
the time of such event. In the event of any default or breach by Tenant,
Landlord may at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any other right or remedy which
Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages it may incur by
reason of Tenant's default including, but not limited to, the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, any real
estate commission actually paid, the difference between the base rent and
additional rent reserved in this Lease from the date of such default or breach
to the date of the expiration of the term hereof as renewed and extended and the
then fair and reasonable rental value of the Premises for the same period, and
that portion of the leasing commission paid by Landlord and applicable to the
unexpired term of this Lease, all of which amount shall be immediately due and
payable from Tenant to Landlord. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of twelve percent (12%) per annum.
(b) Landlord, as agent for Tenant, may immediately re-enter the
Premises and take possession thereof and all permanent improvements thereon and
remove or put out Tenant or any other persons who may be thereon by force,
summary action or otherwise together with all
10
<PAGE>
personal property found therein and such property may be stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant, all without
service or notice and make such alterations and repairs as may be necessary in
order to relet the Premises, and relet the Premises or any part thereof, or said
Premises with additional Premises, for such term or terms (which may be greater
or less than the period which would otherwise have constituted the balance of
the term of this Lease) and at such rental or rentals and upon such other terms
and conditions as Landlord in its sole discretion may deem advisable; upon each
such reletting all rentals received by Landlord from such reletting shall be
applied, first to the payment of any indebtedness other than rent due hereunder
from Tenant to Landlord, second, to the payment of any costs and expenses of
such reletting, including brokerage fees and attorneys' fees and of costs of
such alterations and repairs, third, to the payment of rent due and unpaid
hereunder, and the residue, if any, shall be held by Landlord and applied in
payment of future rent or damage as the same may become due and payable
hereunder. If such rentals received from such reletting during any month be less
than that to be paid during that month by Tenant hereunder, Tenant shall pay any
such deficiency to landlord, the same to be calculated and paid monthly. No such
re-entry or taking possession of the Premises by Landlord shall be construed as
an election of its part to terminate this Lease unless a written notice of such
intention be given to Tenant or unless the termination thereof be decreed by a
court of competent jurisdiction. If Tenant shall after default voluntarily give
up possession to Landlord, deliver to Landlord the keys to the Premises, or
both, such actions shall be deemed to be in compliance with Landlord's rights
and the acceptance thereof by Landlord shall not be deemed to constitute a
surrender of the leased Premises. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for such previous breach. Should Landlord at any time terminate this Lease for
any breach, in addition to any other remedies it may have, it may recover from
Tenant all damages it may incur by reason of Tenant's default, as provided in
subparagraph (a) hereof.
In case suit shall be brought for recovery of possession of the Premises,
for the recovery of rent, damages or other amount due under the provisions of
this Lease, or because of the breach of any other covenant herein contained on
the part of Tenant to be kept or performed, and a breach shall be established,
Tenant shall pay to Landlord all expenses incurred therefor, including
reasonable attorneys' fees. Landlord shall not be obligated to notify Tenant of
the due date of rent nor demand payment thereof on its due date, the same being
expressly waived by Tenant. The acceptance of any sums of money from Tenant
after the expiration of any three (3) day or thirty (30) day notice as above
provided shall be taken to be a payment on account by Tenant and shall not
constitute a waiver by Landlord or any rights, nor shall it reinstate the Lease
or cure a default on the part of Tenant.
22. EMINENT DOMAIN. If all or any part of the Premises or the Building of which
it is a part is taken or condemned (both and either of which terms includes
within their meaning a conveyance in lieu of condemnation upon the threat
thereof by competent authority for any public use of purpose, then Landlord
shall have the option for thirty (30) days following such taking to terminate
this Lease if Landlord, in its sole discretion, deems repair or restoration
commercially unfeasible or not in its best interest. If a part of the Premises
is taken or condemned and the remaining portions of the Premises are unsuitable
for the purposes of
11
<PAGE>
Tenant's original occupancy, then Tenant shall have the option for
thirty (30) days following such taking to terminate this Lease. Any such
termination is to be effective as of the date of the taking. In the event this
Lease is not so terminated, then this Lease shall remain in full force and
effect but Landlord shall promptly restore the Premises to a condition
comparable to its condition immediately prior to such taking (less the portion
lost in the taking). Rents payable hereunder shall be reduced during the period
of restoration and after such taking in proportion to the reduction in the
number of square feet of net rentable floor area of the Premises occasioned by
such restoration and taking. Except as herein otherwise specifically provided,
Landlord shall be entitled to all awards and process payable by reason of such
taking, whether whole or partial, as damages or otherwise. Tenant hereby
expressly waives any right or claim to any part thereof and assigned to Landlord
its interest therein, provided, however, that where such taking results in a
termination of this Lease pursuant to this paragraph, then Tenant shall be
entitled to that portion, if any, of an award made to or for the benefit of
Tenant specifically for the loss of Tenant's business, or depreciation to and
cost of removal of trade fixtures, exclusive of leasehold improvements, owned by
Tenant which Tenant is entitled to remove. Tenant shall have no claim against
Landlord condemning authority or award for the value of the unexpired term of
this Lease.
23. OFFSET STATEMENT. Tenant shall at any time and from time to time upon not
less than ten (10) days' prior written notice from Landlord execute, acknowledge
and deliver to Landlord a statement in writing, (a) certifying that this Lease
is unmodified and in full force and effect (or, if modified, stating the nature
of such modification and certifying that this Lease as so modified, is in full
force and effect), and the date to which the rental and other charges are paid
in advance, if any, and (b) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of the Landlord hereunder, or
specifying such defaults if any are claimed. Any such statement may be relied
upon by any prospective purchaser or encumbrancer of all or any portion of the
real property of which the Premises are a part.
24. PARKING. Tenant shall have the right to use in common with other tenants
or occupants of the Building free of charge the parking facilities of the
Building, if any, subject to rules and regulations, and any other charges of
Landlord for such parking facilities which may be established or altered by
Landlord at any time or from time to time during the term hereof. Landlord shall
provide 5 covered parking spaces free of charge during the term of this Lease.
25. RIGHT TO RELOCATE. Notwithstanding anything herein to the contrary,
Landlord shall in all cases retain the right and power to relocate Tenant with
within the Building in space which is comparable in size and location and suited
to Tenant's use, such right and power to be exercised reasonably and such
relocation to be made at Landlord's sole cost and expense. Landlord shall not be
liable or responsible for any claims, damages or liabilities in connection with
or occasioned by such relocation. Landlord's reasonable exercise of such right
and power shall include, but shall in no way be limited to, a relocation to
consolidate the rentable area occupied in order to provide Landlord services
more efficiently, or a relocation to provide contiguous vacant space for a
prospective Tenant.
12
<PAGE>
26. AUTHORITY FOR EXECUTION.
(a) Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
(b) Partnership Authority. If Tenant is a general or limited
partnership, each individual executing this Lease on behalf of said partnership
represents and warrants that he is a general partner of said partnership and
that he has authority to execute and deliver this Lease on behalf of said
partnership in accordance with the Partnership Agreement, and that this Lease is
binding upon said partnership in accordance with its terms and enforceable
against the assets of the partnership and the general partners, individually.
27. GENERAL PROVISIONS.
(a) Plats and Riders. Clauses, plats and riders, if any, signed by
the Landlord and the Tenant and endorsed on or affixed to this Lease are a part
hereof.
(b) Waiver. The waiver by Landlord of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition on any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease.
(c) Notices. All notices and demands which may or are to be required
or permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States mail, postage prepaid, addressed to the Tenant at the Premises, or
to such other place as Tenant may from time to time designate in a notice to
Landlord. All notices and demands by the Tenant to the Landlord shall be sent by
United States Mail, postage prepaid, addressed to Landlord at the place where
rent is payable, or to such other person or place as the Landlord may from time
to time designate in a notice to the Tenant.
(d) Joint Obligation. If there be more than one Tenant, the
obligations hereunder imposed upon Tenants shall be joint and several.
(e) Marginal Headings. The marginal headings and Article titles to
the Articles of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
(f) Time. Time is of the essence of this Lease and each and all of
its provisions in which performance is a factor.
13
<PAGE>
(g) Recordation. Neither Landlord nor Tenant shall record this Lease
or a short form memorandum hereof without the prior written consent of the other
party.
(h) Quiet Possession. Upon Tenant paying the rent reserved hereunder
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder. Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all provisions
of this Lease.
(i) Prior Agreements. This Lease contains all of the agreements of
the parties hereto with respect to any matter in connection with the Lease of
the Premises and Tenant's use of the Premises, the Building and the property
upon which the building is located and no prior agreements or understandings
pertaining to any such matters shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors in interest. This
Lease shall not be effective or binding on any party until fully executed by
both parties hereto.
(j) Inability to Perform. This Lease and the obligations of the
Tenant hereunder shall not be affected or impaired because the Landlord is
unable to fulfill any of its obligations hereunder or is delayed in doing so, if
such inability or delay is caused by reason or strike, labor troubles, acts of
God, or any other cause beyond the reasonable control of the Landlord.
(k) Attorneys' Fees. In the event of any action or proceeding brought
by either party against the other under this Lease the prevailing party shall be
entitled to recover all costs and expenses including the fees of its attorneys
in such action or proceeding in such amount as the court may adjudge reasonable.
(l) Vesting of Landlord's Title to Another. In the event title to the
Building and the property upon which the Building is located becomes vested in a
party other than Landlord, whether by sale, exchange or otherwise, Landlord's
duties, obligations and liabilities to Tenant under this Lease shall terminate
as of the date title vested in such other party.
(m) Subordination and Attornment. Tenant hereby subordinates all of
Tenant's rights, title and interest under this Lease to the lien of any existing
and all future mortgages and deeds of trust on the Building and the property
upon which it is located. Tenant agrees to execute and deliver promptly such
agreements and other documents as Landlord may request from time to time to
confirm and acknowledge the foregoing subordination agreement. /*/ Tenant
hereby appoints Landlord as Tenant's agent to execute and deliver all such
agreements and other documents for and in behalf of Tenant. In the event the
lien of any such mortgage or deed of trust is foreclosed or title to said
property is conveyed in lieu of foreclosure, Tenant hereby agrees to attorn to
the purchaser of the property at any foreclosure sale and the grantee of any
such deed and to confirm this Lease and recognize such purchaser or grantee as
the Landlord hereunder. The provisions of this Article to the contrary
notwithstanding, and so long as Tenant is not in default hereunder, this Lease
shall remain in full force and effect for the full term hereof.
- -----------------------
* If Tenant has failed to do so within five days of such written request by
Landlord, then
14
<PAGE>
(n) Name. Tenant shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.
(o) Severability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
(p) Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
(q) Choice of Law. This Lease shall be governed by the laws of the
state in which the Premises are located.
(r) Signs and Auctions. Tenant shall not place any sign upon the
Premises or Building or conduct any auction thereon without Landlord's prior
written consent.
28. [illegible]
29. TENANT FINISH. Landlord agrees to build out the Premises in accordance
with attached Exhibit "A" at Landlord's expense. Landlord has a firm contract to
build out the premises in accordance with Exhibit "A" at a cost of $49,000.00.
This includes all work and materials. Any increase in Tenant Finish costs over
$49,000.00 due to changes made to Exhibit "A" by Tenant shall be paid by Tenant.
30. MOVING ALLOWANCE. Landlord shall provide Tenant with a moving allowance of
$21,000.00 which shall be due upon occupancy and payable upon Tenant submitting
an invoice to Landlord's managing agent.
31. OPTION TO RENEW. Provided Tenant is in compliance with all terms and
conditions of this Lease, Landlord grants Tenant two (2) five (5) year options
to renew this Lease at a rate comparable to those lease rates on leases made in
the building over the then previous 6 months for space on floors 2-8. If Tenant
exercises the first 5 year renewal option, the first $10,252 of rent due for the
renewal period shall be fully abated and forgiven by Landlord.
32. EXPANSION. Landlord agrees to make his best efforts to accommodate
Tenant's expansion needs provided Tenant communicates his expansion needs to
Landlord in a timely fashion. Landlord agrees to grant Tenant an option on space
on the fifth, sixth and seventh floors of the Building, subject to existing
lease commitments, when leases on those floors come due. Tenant shall have five
(5) days in which to respond in writing to landlord's written notification to
Tenant. Absent a written response from Tenant, Landlord may then lease and
space(s) to another party. The terms and conditions on any additional space
leased by Tenant shall be the same as this Lease, except that the Base Rental
rate shall be a rate comparable to those lease rates on leases made in the
building over the then previous 6 months for space of floors 2-8. This option
shall run through the initial term of this Lease.
33. ACCESS. Landlord agrees that Tenant, its employees, designees, agents,
licensees or invitees shall have 24 hour per day, 7 day per week access to
Tenant's suite.
15
<PAGE>
34. SATELLITE DISH AND BACK UP GENERATOR. Understanding the nature of Tenant's
business, Landlord grants Tenant the right to install, at Tenant's expense, one
(1) satellite dish (not to exceed 10 feet in diameter) on the roof of the
Building provided the dish is attached to the penthouse on the roof itself. In
addition, Landlord grants Tenant the right to install, at Tenant's expense, one
(1) back up generator not to exceed 20 kilowatts in the Building's penthouse.
Installation of said dish and generator are subject to local governmental
codes and subject to Landlord's final approval/*/, should Tenant install either
or both , Tenant agrees that he is responsible for maintaining said equipment be
damaged or cause damage to the Building, and removing said equipment if Tenant
moves out of the Building.
35. ADDITIONAL PHONE LINE. Due to the nature of Tenant's business, Landlord
understands that Tenant will use more cable-pair of phone lines than an average
tenant. Landlord agrees to allow Tenant the use of phone lines currently
available in the Building with the understanding that Southwestern Bell will, on
Tenant's behalf and at Southwestern Bell's expense, be adding additional phone
line capacity to the Building within the next 90-120 days. Upon completion of
the installation of additional phone lines by Southwestern Bell, Tenant will
have adequate capacity and the Building shall have adequate capacity for
additional Tenant's use.
36. SECURITY DEPOSIT. In lieu of a security deposit, Tenant is prepaying the
rental for months 8 and 9 of this lease in the amount of $6,834.66 and has
deposited herewith a check for said amount.
37. Landlord agrees to have the Premises substantially complete for Tenant's
occupancy thirty (30) days after the execution of this Lease. In the event
Tenant is unable to occupy the Premises at that time, Landlord agrees to pay
Tenant $250.00 for each and every day thereafter until Tenant is able to occupy
substantially completed Premises. Both Landlord and Tenant acknowledge Tenant
cannot occupy the Premises until the Bridge Room shown on the attached floor
plan is fully complete.
IN WITNESS WHEREOF the parties hereto have executed this Lease as of the
date first appearing above.
- -----------------------
/*/ which may not be unreasonably withheld.
16
<PAGE>
LANDLORD: TENANT:
By: /s/ By: /s/
-------------------------- --------------------------
Name: Robert J. Weisel Name: Robert Cowan
Title: Assistant Vice President Title: President
[Jurat appears here]
17
<PAGE>
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building without the written consent of Landlord first had and
obtained and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant.
All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved by Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition, or wall which may appear unsightly from
outside the Premises, provided, however, that Landlord may furnish and install a
Building standard window covering at all exterior windows. Tenant shall not
without prior written consent of Landlord cause or otherwise sunscreen any
window.
2. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by any of the Tenants or used by them for any purpose
other than for ingress and egress from their respective Premises.
3. Tenant shall not alter any lock or install any new or additional locks or
any bolts on any doors or windows of the Premises.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and the expense
of any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Tenant who, or whose employees or invitees shall have
caused such breakage, stoppage or damage.
5. Tenant shall not overload the floor of the Premises or in any way deface
the Premises or any part thereof.
6. No furniture, freight or equipment of any kind shall be brought into the
Building without the prior notice to Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. Landlord shall have the right to prescribe the weight, size
and position of all safes and other heavy equipment brought into the Building
and also the times and manner of moving the same in and out of the Building.
Safes or other heavy objects shall, if considered necessary by Landlord, stand
on supports of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss or damage to any such safe or property
from any cause and all damage done to the Building by moving or maintaining any
such safe or other property shall be repaired at the expense of Tenant.
18
<PAGE>
7. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein; nor
shall any animals or birds be brought in or kept in or about the Premises of the
Building.
8. No cooking/*/ shall be done or permitted by any Tenant on the Premises,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging, or for any improper, objectionable or immoral purposes.
Tenant shall be allowed to use a microwave oven in the Premises.
9. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by the Landlord.
10. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Landlord. The location of telephones, call
boxes and other office equipment affixed to the Premises shall be subject to the
approval of Landlord.
11. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 p.m. and 8:00 a.m., the following day, access to the Building, or
to the halls, corridors, elevators or stairways in the Building or to the
Premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge and has a pass or is properly identified.
The Landlord shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Landlord
reserves the right to prevent access to the Building during the continuance of
the same by closing of the doors or otherwise, for the safety of the tenants and
protection of property in the Building and the Building.
12. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
13. No vending machine or machines of any description shall be installed,
maintained operated upon the Premises without the written consent of the
Landlord.
14. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the premises use a port and shall cooperate to prevent same.
15. Tenant shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate to prevent same.
- -------------------------
/*/ Tenant shall be allowed to use a microwave oven in the Premises.
19
<PAGE>
16. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
17. Landlord shall have the right to control and operate the public portion
of the Building, and the public facilities, and heating and air conditioning ,
as well as facilities furnished for the common use of the tenants, in such
manner as it deems best for the benefit of the tenants generally.
18. All entrance doors in the Premises shall be left locked when the Premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress from the Premises.
20
<PAGE>
AMENDMENT TO OFFICE BUILDING LEASE
----------------------------------
THAT CERTAIN LEASE AGREEMENT dated November 25, 1987, by and between
Aetna Life Insurance Company, "Landlord", and American Teleconferencing
Services, Ltd., "Tenant", is hereby amended and modified as follows:
1. This Amendment increases the square footage area of the Premises from
5,126 square feet to 11,305 square feet or 6,179 additional square feet.
2. This increase will be added at an additional monthly amount based on
Tenant's base rent payment schedule per Paragraph 28 of the Lease. Paragraph 28
of the Lease shall be amended as follows:
Through October 31, 1990 $7,112.33/month
November 1, 1990 - November 30, 1992 $15,685.69/month
December 15, 1992 - December 31, 1992 $7,960.60
January 1, 1993 - November 30, 1993 $15,921.21/month 16.90/sq.ft.
December 1, 1993 - December 14, 1993 $7,960.60
3. Tenant's percentage of the building shall be increased from 4.91% to
11.0%.
4. In accordance with the attached Exhibit "2-A", Landlord shall build-out
the space as shown on said exhibit at Landlord's expense. Any design changes to
Exhibit "2-A" made by Tenant which increase the cost of the build-out, said
increase shall be paid by Tenant to Landlord on occupancy of the space.
5. The terms of this Amendment shall go into effect June 1, 1990. This
Amendment shall coterminate with the expiration date of the Lease which is
December 14, 1993.
6. Tenant has the right to an additional six (6) covered parking spaces to
be provided to Tenant at no charge through the term of the Lease. Tenant shall
inform Landlord's agent if it wishes to take any or all of the additional six
covered parking spaces.
7. Pursuant to paragraph 14 of the Lease, Tenant agrees to pay for the
installation of equipment to monitor the consumption of electricity during
non-standard building operating hours (6:01 p.m. to 6:55 a.m.). Said equipment
will record the kilowatt hours used on Tenant's floor (on which Tenant is the
only occupant) during non-standard building operating hours. Tenant shall pay to
Landlord on a monthly basis as reimbursement for such excessive electricity
usage the product of the kilowatt hours recorded x (times) the rate per kilowatt
hour billed by Kansas City Power and Light for the most recent monthly
statement. The kilowatt hour rate will be determined by dividing the amount due
on the most recent monthly statement by the kilowatt hours used.
21
<PAGE>
In addition, heating and air-conditioning during non-standard business
hours shall be made available to Tenant via override switches located at
Tenant's suite. When Tenant chooses to override the temperature setback system
during non-standard business hours, a record of the hours will be made by the
Building energy management system. Tenant shall then reimburse Landlord on a
monthly basis at the rate of $.71 per hour for air conditioning only. Said rate
shall be adjusted each January 1 by the same percentage change of cost per
kilowatt hour from the prior January rate.
8. All other terms and conditions of the Lease shall remain in full force and
effect through the period December 14, 1993.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
this 4/th/ day of May, 1990.
LANDLORD: AETNA LIFE TENANT: AMERICAN
INSURANCE COMPANY TELECONFERENCING
SERVICES, LTD.
By: /s/ By: /s/
----------------------------- ------------------------------
Its: Assistant-Vice President Its:_____________________________
------------------------
22
<PAGE>
SECOND AMENDMENT TO LEASE
THIS AMENDMENT, by and between Aetna Life Insurance Company, (hereinafter
referred to as "Landlord") and American Teleconferencing Services, Ltd.
(hereinafter referred to as "Tenant");
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a certain Office Building Lease
dated November 25, 1987, whereby Tenant agreed to lease Suite 600 consisting of
5,126 usable square feet (the "Premises") of Building 20, (the "Building"),
located at 10955 Lowell, Overland Park, Kansas, 66210, for the period December
15, 1987 through December 14, 1993; and,
WHEREAS, Tenant amended this Office Lease on the 4/th/ day of May, 1990
to expand the ("Premises") to 11,305 usable square feet and;
WHEREAS, Tenant desires to lease from Landlord and Landlord desires to
lease to Tenant Suite 600 for an additional five (5) year period in accordance
with paragraph 31 of the original Office Building Lease; and,
WHEREAS, Landlord and Tenant desire to memorialize their understanding
and modify the lease consistent therewith;
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration set forth herein, the receipt and sufficiency of
which is hereby acknowledged, parties herein agree as follows:
1. a.) Effective December 15, 1993, Tenant does hereby lease Suite 600,
consisting of 11,305 usable square feet, and 12,350 rentable square feet located
on the sixth floor, as noted on Exhibit 1-A attached hereto and incorporated
herewith by this reference. Landlord hereby leases the Premises to Tenant for an
Additional Term of sixty-two months.
b.) The Premises square footage is 12,350 rentable square feet.
2. a.) The base rental schedule for the Additional Term shall be as follows:
<TABLE>
<CAPTION>
Period $/SF $/MO
------ ------ -------
<S> <C> <C>
Months 1-2: $ 0.00 $ 0.00
Months 3-14: $14.00 $ 14,408.33
Months 15-26: $15.00 $ 15,437.50
Months 27-38: $15.50 $ 15,952.08
Months 39-50: $16.00 $ 16,466.67
Months 51-62 $16.50 $ 16,981.25
</TABLE>
b.) The total base rent for the Premises for the Additional Term shall
be as follows:
23
<PAGE>
Period Base Rent Amount
------ ----------------
12/15/93-02/14/99 $951,381.96
3. Tenant Finish: The Landlord shall provide the updating of the electrical
-------------
service per the preliminary plan design by American Teleconferencing to be
attached herewith as Exhibit "2-A", at a cost not to exceed $5,000.00. In
addition, Landlord will clean all carpet within Suite 600, paint walls indicated
and replace the carpet in common areas of the sixth floor.
4. Additional Rent: For purposes of paragraph 3 of the Lease, Tenant's
---------------
proportionate share of the building shall be 11.2%. Base Direct Expenses shall
be changed to equal the 1993 calendar year Operating Expenses and Real Estate
Taxes. Tenant will not have an "additional expense" until the actual expenses
of 1994 are calculated to compare 1993. The first additional expense charge
will not be until early 1995. Thereafter, Landlord reserves the right to charge
additional expense on a charged monthly basis.
5. Renewal Option: The Landlord hereby grants Tenant the option to renew this
--------------
Lease for two (2) additional five (5) year terms under the same terms and
conditions provided herein except the annual base rental rate shall be at the
prevailing market rate and except the Base Direct Expenses will change to equal
the actual Base Direct Expenses for the calendar year immediately preceding the
renewal period. Tenant shall give Landlord written notice of its intent to
renew this Lease not less than nine (9) months prior to the expiration of the
original term. In the event that the Tenant is in default of any of the
provision of this Lease (beyond any applicable cure period) at the expiration of
the original term hereof, then Tenant's right to extend this Lease shall be null
and void.
The "prevailing market rate" shall be determined as follows. At such
time as tenant exercises it option, tenant shall notify Landlord of Tenant's
determination of the market rate. Within ten (10) days thereafter, Landlord
shall notify Tenant whether Landlord accepts or rejects Tenant's definition of
market rates, and if Landlord rejects, landlord shall notify Tenant of
Landlord's determination of market rate. If the rates differ by ten percent
(10%) or less, the two rates shall be averaged, and such averages shall
constitute the base rate for the renewal term. If the rate differ by more than
ten percent (10%), Landlord and Tenant shall select a mutually acceptable
arbitrator, the cost of which shall evenly be shared by Landlord and Tenant.
This arbitrator shall have the option of choosing either the rate requested by
Landlord, or the rate requested by Tenant and such rate shall constitute the
base rate for the renewal term.
In the event landlord and Tenant cannot agree upon an arbitrator, Tenant
and Landlord shall each select an independent third party, who will select a
third party arbitrator to make the final decision.
24
<PAGE>
Notwithstanding anything contained in this paragraph, the determination
of an independent arbitrator anything else contained in this Lease to the
contrary, in no event will the net rental rate (which is the base rental rate
minus the per square foot amount of Base Direct Expenses) to Landlord for the
renewal period be less than the net rental rate Landlord is receiving under the
Lease during the initial term.
6. Compliance With Disability Discrimination Acts. Landlord believes, but does
----------------------------------------------
not warrant, that access to the Building, Leased Premises and the common areas
complies with the requirements of any federal and local disability
discrimination laws and regulations. Landlord agrees that if access to the
Building, the Leased Premises, or the common areas does not comply with the
requirements of such laws, Landlord will, after receiving written notice, take
the necessary action to rectify such noncompliance at its sole expense. However,
such expenses are considered normal operating costs of the building. Tenant
shall be responsible for any changes required to the interior of the Leased
Premises necessary to comply with such laws and regulations, and any
requirements which may impose any duty upon Landlord or Tenant applicable to the
Tenant's use or occupancy of the Leased Premises. Except for Landlord's gross
negligence or willful misconduct, (which liability shall be limited pursuant to
Article 11), Landlord shall not be liable or indemnify Tenant for any ports,
monetary damages incurred by Tenant as a result of any third party actions
against Tenant by reason of Landlord's failure to comply with the requirements
of applicable disability discrimination laws.
7. Covered Parking: The Landlord will grant the Tenant 12 reserved covered
---------------
parking spaces in the building's covered parking garage. This will be at no
additional cost to the Tenants during the additional term.
8. Disclosure. Pursuant to K.S.A. 1989 Supp. 58-3062(15) (Senate Bill 45),
----------
Cohen-Esrey Real Estate Services Inc. is the agent of the Landlord with duty to
represent Landlord's interest and will not be the subagent of the Tenant or
Tenant's agent. Information given to Cohen-Esrey Real Estate Services Inc. will
be disclosed to the Landlord.
9. Validity of Leases. The parties acknowledge that the lease is a valid and
------------------
enforceable agreement and that the Tenant holds no claims against Landlord or
its agents which might serve as the basis of any setoff against accruing rent
and other charges or any other remedy in law or in equity. Except as modified
and amended hereby, the Lease shall remain in full force and effect, it being
understood and agreed that this Addendum, upon execution, constitutes a part of
the total Lease.
25
<PAGE>
IN WITNESS WHEREOF, this Amendment to Lease has been duly executed by the
parties hereto as of the day and year first above written.
LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY AMERICAN TELECONFERENCING
SERVICES, LTD.
By: /s/ By: /s/
-------------------------- ----------------------------
Its: AVP Its: President
Date: 12/13/93 Time: 3:45 p.m Date: 12/7/93 Time: 10:15 a.m
26
<PAGE>
THIRD AMENDMENT TO LEASE
THIS AMENDMENT, by and between Aetna Life Insurance Company, (hereinafter
referred to as "Landlord") and American Teleconferencing Services, Ltd.
(hereinafter referred to as "Tenant");
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a certain Office Building Lease
dated November 25, 1987, whereby Tenant agreed to lease Suite 600 consisting of
5,126 usable square feet (the "Premises") of Building 20, (the "Building"),
located at 10955 Lowell, Overland Park, Kansas, 66210, for the period December
15, 1987 through December 14, 1993; and,
WHEREAS, Landlord and Tenant amended this Lease by way of a second
amendment to lease on the 13/th/ day of December, 1993;
WHEREAS, Landlord and Tenant desire to amended this lease by a Third
Amendment to Lease to be memorialized with the understanding and modify this
lease consistent therewith;
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration set forth herein, the receipt and sufficiency of
which is hereby acknowledged, parties hereto agree as follows:
1. a.) Effective September 1, 1995, Tenant does hereby lease Suite 1020,
consisting of 1,223 unusable square feet, and 1,353 rentable square feet located
on the tenth floor, as noted on Exhibit 1-A attached hereto and incorporated
herewith by this reference. Landlord hereby leases the Premises to Tenant for
an Additional Term of sixty-two months.
b.) The Premises for Suite 1020 is 1,353 rentable square feet.
2. a.) The base rental schedule for Suite 1020 shall be as follows:
<TABLE>
<CAPTION>
Period $/SF $/MO
------ ------- ------
<S> <C> <C>
Months 1-2: $ 0.00 $ 0.00
Months 3-62; $17.25 $ 1,944.94
</TABLE>
b.) The total base rent for the Premises for the Additional Suite shall
be as follows:
Period Base Rent Amount
------ ----------------
9/1/95 - 10/31/2000 $116,696.25
3. Tenant Finish: The Landlord shall provide the space per the attached
-------------
floorplan utilizing building standard materials on a turn-key basis, all cost
shall be paid for by Landlord. Any
27
<PAGE>
changes to the floorplan that increase said costs shall be paid for by Tenant
upon substantial completion of the premises.
4. Additional Rent: For purposes of paragraph 3 of the Lease for specifically
---------------
Suite 1020, Tenant's proportionate share of the building shall be 1.0%. Base
Direct Expenses shall be changed specifically Suite 1020 to equal the 1995
calendar year Operating Expenses and Real Estate Taxes. (1,353 sf divided by
109,883 sf)
5. Covered Parking: The Landlord will grant the Tenant 1 additional reserved
---------------
covered parking space in the building's covered parking garage. This will be at
no additional cost to the Tenants during the additional term.
6. Disclosure. Pursuant to K.S.A. 1989 Supp. 58-3062(15) (Senate Bill 45),
----------
Cohen-Esrey Real Estate Services Inc. is the agent of the Landlord with duty to
represent Landlord's interest and will not be the subagent of the Tenant or
Tenant's agent. Information given to Cohen-Esrey Real Estate Services Inc. will
be disclosed to the Landlord.
7. Validity of Leases. The parties acknowledge that the lease is a valid and
------------------
enforceable agreement and that the Tenant holds no claims against Landlord or
its agents which might serve as the basis of any setoff against accruing rent
and other charges or any other remedy in law or in equity. Except as modified
and amended hereby, the Lease shall remain in full force and effect, it being
understood and agreed that this Addendum, upon execution, constitutes a part of
the total Lease.
8. Confidentiality. This lease addendum and the terms herein provided will
---------------
remain confidential between American Teleconferencing Services Limited and Aetna
Life Insurance Company.
IN WITNESS WHEREOF, this Amendment to Lease has been duly executed by the
parties hereto as of the day and year first above written.
LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY AMERICAN TELECONFERENCING
SERVICES, LTD.
By: /s/ By: /s/
------------------------- ---------------------------
Its: Director Its: President
Date: 3/13/95 Time: ____ Date: 3/10/95 Time: 10:00 a.m
28
<PAGE>
FOURTH AMENDMENT TO LEASE
THIS AMENDMENT, by and between Aetna Life Insurance Company, (hereinafter
referred to as "Landlord") and American Teleconferencing Services, Ltd.
(hereinafter referred to as "Tenant");
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a certain Office Building Lease
dated November 25, 1987, whereby Tenant agreed to lease Suite 600 consisting of
5,126 usable square feet (the "Premises") of Building 20, (the "Building"),
located at 10955 Lowell, Overland Park, Kansas, 66210, for the period December
15, 1987 through December 14, 1993; and,
WHEREAS, Landlord and Tenant amended this Lease by way of a second
amendment to lease on the 13/th/ day of December, 1993;
WHEREAS, Landlord and Tenant again amended this lease by way of a Third
Amendment to Lease on the 13/th/ day of March, 1995;
WHEREAS, Landlord and Tenant desire to amend this lease by a Fourth
Amendment to Lease to be memorialized with the understanding and modify this
Lease consistent therewith;
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration set forth herein, the receipt and sufficiency of
which is hereby acknowledged, parties hereto agree as follows:
1. Effective November 15, 1995, Tenant does hereby lease Suite 425,
consisting of 1,527 rentable square feet (including a 10.6% rentable factor), as
noted on Exhibit 1-A attached hereto and incorporated herewith by this
reference. Landlord hereby leases the Premises to Tenant up until February 14,
1999.
2. The base rental schedule for the Suite 425 shall be as follows:
Period $/Mo
------ ------
Months 1 - 39 $2,099.63
The total base rent for the Suite 425 shall be as follows:
Period Base Rent Amount
------ ----------------
11/15/95 to 2/14/99 $81,885.57
3. Tenant Finish: The Landlord shall provide the space in "as is" condition.
-------------
29
<PAGE>
4. Additional Rent: For purposes of paragraph 3 of the Lease for specifically
---------------
Suite 425, the Tenant's proportionate share of the building shall be 1.4%. Base
Direct Expenses shall be equal to the actual Operating Expenses and Real Estate
Taxes for the 1993 calendar year.
5. Disclosure. Pursuant to K.S.A. 1989 Supp. 58-3062 (15) (Senate Bill 45),
----------
Cohen-Esrey Real Estate Services Inc. is the agent of the Landlord with duty to
represent Landlord's interest and will not be the subagent of the Tenant or
Tenant's agent. Information given to Cohen-Esrey Real Estate Services Inc. will
be disclosed to the Landlord.
6. Validity of Lease. The parties acknowledge that the lease is a valid and
-----------------
enforceable agreement and that the Tenant holds no claims against Landlord or
its agents which might serve as the basis of any setoff against accruing rent
and other charges or any other remedy in law or in equity. Except as modified
and amended hereby, the Lease shall remain in full force and effect, it being
understood and agreed that this Addendum, upon execution, constitutes a part of
the total Lease.
8. Confidentiality. This lease addendum and the terms herein provided will
---------------
remain confidential between American Teleconferencing Services Limited and Aetna
Life Insurance Company.
IN WITNESS WHEREOF, this Amendment to Lease has been duly executed by the
parties hereto as of the day and year first above written.
LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY AMERICAN TELECONFERENCING
SERVICES, LTD.
By: AETNA REALTY INVESTORS, INC. By: /s/
----------------------------
By: /s/ Its: President
---------------------------- ---------------------------
Director
Date: 11/27/95 Time: Date: 11/14/95 Time: 1:45 p.m.
-------- -------- -------- ----------
[diagram appears here]
30
<PAGE>
FIFTH AMENDMENT TO LEASE
THIS AMENDMENT, dated 19th day of April, 1996 by and between Aetna Life
Insurance Company, (hereinafter referred to as "Landlord") and American
Teleconferencing Services, Ltd. (hereinafter referred to as "Tenant");
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a certain Office Building Lease
dated November 25, 1987, whereby Tenant agreed to lease Suite 600 consisting of
5,126 usable square feet (the "Premises") of Building 20, (the "Building"),
located at 10955 Lowell, Overland Park, Kansas, 66210, for the period December
15, 1987 through December 14, 1993; and,
WHEREAS, Landlord and Tenant amended this Lease by way of a second
amendment to lease on the 13/th/ day of December, 1993;
WHEREAS, Landlord and Tenant again amended this lease by way of a Third
Amendment to Lease on the 13/th/ day of March, 1995;
WHEREAS, Landlord and Tenant amended this lease by a Fourth Amendment to
Lease on the 27/th/ day of November, 1995;
WHEREAS, Landlord and Tenant desire to amend this lease by a Fifth
Amendment to Lease to be memorialized and modified consistent therewith as set
forth below;
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration set forth herein, the receipt and sufficiency of which is
hereby acknowledged, parties hereto agree as follows:
1. Effective June 1, 1996, This Amendment to Lease will expire February 14,
2000. The Premises will be a total of 21,658 rentable square feet. The
Premises are consisting of the following Suites;
<TABLE>
<CAPTION>
<S> <C> <C>
Suite 600 Exhibit "A" 12,350 rentable square feet
Suite 510 Exhibit "B" 6,428 rentable square feet
Suite 425 Exhibit "C" 1,527 rentable square feet
Suite 1020 Exhibit "D" 1,353 rentable square feet
-----
Total 21,658 rentable square feet
</TABLE>
2. Base Rental Schedule
<TABLE>
<CAPTION>
Suites Period $/Mo
<S> <C> <C>
600, 510, 425 6/1/96 to 2/28/97 $26,227.30
3/1/97 to 2/28/98 $27,073.34
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C>
3/1/98 to 2/28/2000 $27,919.38
1020 6/1/96 to 10/31/2000 $ 1,944.94
(Same as Third Amendment
to Lease)
</TABLE>
3. Tenant Finish: The Landlord will provide $40,630.00 in tenant improvement
-------------
allowance.
4. Additional Rent: Tenant will have 18.44% of the building. The base direct
---------------
expenses are equal to 1993 actual operating expenses. Suite 1020 is calculated
using a 1995 base year and consists of 1% of the Building.
5. The Third Amendment to Lease by and between Landlord and Tenant will remain
in full force and effect and not change as a part of this Fifth Amendment to
Lease.
6. Disclosure. Pursuant to K.S.A. 1989 Supp. 58-3062 (15) (Senate Bill 45),
----------
Cohen-Esrey Real Estate Services Inc. is the agent of the Landlord with duty to
represent Landlord's interest and will not be the subagent of the Tenant or
Tenant's agent. Information given to Cohen-Esrey Real Estate Services Inc. will
be disclosed to the Landlord.
6. Validity of Lease. The parties acknowledge that the lease is a valid and
-----------------
enforceable agreement and that the Tenant holds no claims against Landlord or
its agents which might serve as the basis of any setoff against accruing rent
and other charges or any other remedy in law or in equity. Except as modified
and amended hereby, the Lease shall remain in full force and effect, it being
understood and agreed that this Addendum, upon execution, constitutes a part of
the total Lease.
8. Confidentiality. This lease addendum and the terms herein provided will
---------------
remain confidential between American Teleconferencing Services Limited and Aetna
Life Insurance Company.
IN WITNESS WHEREOF, this Amendment to Lease has been duly executed by the
parties hereto as of the day and year first above written.
LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY AMERICAN TELECONFERENCING
SERVICES, LTD.
By: AETNA REALTY INVESTORS, INC. By: /s/
-------------------------
By: /s/ Its: CEO
------------------------- ------------------------
Director
Exhibit "A"
[diagram]
Exhibit "B"
[diagram]
Exhibit "C"
[diagram]
Exhibit "D"
[diagram]
32
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of September 19, 1996 by and between
InterPlay Corporation, a Massachusetts corporation (the "Company") and Glenn D.
Bolduc ("Executive").
FACTS
The Company desires to employ Executive as a senior executive with the
duties, responsibilities, rights and obligations set forth below, and Executive
desires to be so employed.
In Executive's capacity as a senior executive of the Company, Executive will
obtain access to, and be in a position to adversely affect, the confidential
information and good will of InterPlay and its subsidiaries (InterPlay and the
subsidiaries collectively and each individually referred to as the "InterPlay
Group").
AGREEMENT
In consideration of the foregoing and of the covenants and agreements set
forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on September 19, 1996
----
(the "Effective Date"), and will continue until terminated in accordance with
the provisions of Section 6 of this Agreement (the "Term").
2. Duties and Responsibilities. The Company agrees to employ Executive, and
---------------------------
Executive agrees to be employed, as President and Chief Executive Officer, and
Executive will perform all of the duties and responsibilities of said office,
subject to direction by the Board of Directors of the Company. In addition,
Executive will perform such other specific tasks and responsibilities,
consistent with Executive's position as President and Chief Executive Officer,
as may be assigned to Executive from time to time by the Board of Directors of
the Company. The Company will have the right to reassign Executive to such
other positions in the Company or within the InterPlay Group as the Company may
determine so long as such other positions involved a substantially similar level
of compensation, authority and responsibility as the position of President and
Chief Executive Officer. However, Executive will not be required to locate
outside the Greater Boston metropolitan area without Executive's consent.
Executive will devote substantially all of Executive's business time, labor,
skill and best efforts to carrying out Executive's duties and responsibilities
under this Agreement. Executive may engage in side business activities so long
as (i) Executive does not otherwise violate any other provision of this
Agreement, and (ii) such side business activities do not interfere with
Executive's ability to carry out Executive's duties and responsibilities under
this Agreement. Executive will travel
<PAGE>
to whatever extent may be reasonably necessary in the conduct of the InterPlay
Group's business and Executive's duties and responsibilities under this
Agreement.
3. Compensation. Subject to Executive's adherence to Executive's
------------
responsibilities and obligations under this Agreement, the Company agrees to pay
Executive a base compensation at the annual rate of $1.00 until the earlier of
(a) the completion by the Company of its Initial Public Offering ("IPO") or (b)
the completion of a merger of the Company with any other entity or the sale of
substantially all of the assets of the Company to another entity or the sale of
more than fifty percent of the common stock of the Company to an unrelated party
in one or a series of transactions (any such event, a "Change in Control") and
thereafter at the annual rate of $220,000 and such additional compensation as
may be mutually agreed upon from time to time by the Company and Executive.
Within thirty (30) days following the closing of the IPO or a Change in Control
(the "Closing Date") the Executive will receive a cash bonus equal to the number
of days from the Effective Date to the Closing Date multiplied by the
Executive's "daily rate" ($220,000 divided by 365). Executive will be eligible
for such increases (but not decreases) in base compensation, and to participate
in such bonus and/or incentive compensation plans, as shall be made available
from time to time to similarly situated senior executives of the Company.
4. Benefits and Vacation; Accelerated Vesting of ISO. Executive will be
-------------------------------------------------
eligible to participate in and/or receive such group insurance plans, other
fringe benefit plans and vacation as the Company makes available to similarly
situated senior executives. Executive will also receive a monthly car allowance
of $1,000. If the Executive is granted an incentive stock option ("ISO") prior
to the Closing Date, then effective on the Closing Date all of the shares
subject to the ISO will be immediately vested.
5. Expense Reimbursement. Executive will be entitled to reimbursement for
---------------------
business expenses incurred by Executive connection with the performance of
Executive's duties and responsibilities under this Agreement upon submission of
documentation in accordance with such procedures as the Company may establish
from time to time.
6. Termination. The Company may terminate Executive's employment at any
-----------
time during the Term for any reason as follows:
(a) By the Company for Cause. The Company has the right to terminate
------------------------
Executive's employment immediately for "Cause" if Executive shall not have cured
such breach within thirty (30) days of receipt of a written notice from the
Company detailing such breach (if such breach could in fact be cured). For
purposes of this Agreement only, the term "Cause" means material breach of any
provision of this Agreement; material willful misconduct in the performance of
Executive's duties or responsibilities; material willful nonperformance of
Executive's duties or responsibilities other than by reason of disability;
conviction of, or written admission to, a felony or other crime involving moral
turpitude; imprisonment for any crime constituting a felony; any act involving
theft, embezzlement or fraud; or a material violation of any written policy of
the Company. If Executive's employment is terminated for Cause, the Company
will only be obligated to pay Executive's base compensation through the date of
such termination, together with such other benefits or payments to which
Executive may be entitled (in the event of a Cause termination) by law or
pursuant to benefit plans of the
2
<PAGE>
Company then in effect. Executive will remain bound by Executive's obligations
under Sections 7, 8 and 9 of this Agreement.
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident, disability or any
other physical or mental condition, from substantially performing Executive's
duties and responsibilities under this Agreement for one or more periods
totaling one hundred fifty (150) days in any (12) month period. If Executive's
employment is terminated pursuant to this section, Executive will be entitled to
receive such base compensation and group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to the greater of (i) one (1) year, or (ii) the remainder of the
Term had Executive remained employed by the Company, which amount will be
reduced by only the amount actually received by Executive under any disability
plans maintained by the Company. Executive will also be entitled to receive at
the Company's expense such payments or benefits to which Executive may be
entitled by law or pursuant to benefit plans of the Company then in effect.
Executive will remain bound by Executive's obligations under Sections 7, 8 and 9
of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will pay
-----
to Executive's estate, designated beneficiary, or legal representative such base
compensation and group insurance benefits as Executive would have received (at
such times as Executive would have received them) during a period equal to the
greater of (i) one (1) year, or (ii) the remainder of the Term, together with
such other benefits or payments to which Executive may be entitled by law or
pursuant to benefit plans of the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability or Death. The Company and Executive each have the right to terminate
- -------------------
Executive's employment upon thirty (30) days' prior written notice. Executive
will in any event remain bound by Executive's obligations under Sections 7, 8
and 9 of this Agreement. If Executive's employment is terminated by the
Executive, then the Executive will not be entitled to any severance payments.
If Executive's employment is terminated by the Company pursuant to this Section
6(d) before the Closing Date, then the Executive will not be entitled to any
severance payments. If Executive's employment is terminated by the Company
pursuant to this Section 6(d) after the Closing Date, Executive will be entitled
to receive (i) a severance payment of one year's then current salary, such
severance payment to be paid in twelve equal month installments commencing on
the first day of the first month following such termination and (ii)
continuation, at the Company's sole expense, of all fringe benefits until the
earlier of (A) twelve months from the date of the termination (the "Severance
Period") or (B) such time as the Executive obtains other employment.
7. Confidentiality. Executive will not at any time, without the Company's
---------------
prior written consent, reveal or disclose to any person outside of the InterPlay
Group, or use for Executive's own benefit or the benefit of any other person or
entity, any confidential information concerning the business or affairs of the
InterPlay Group, or concerning the customers, clients or employees of the
InterPlay Group ("Confidential Information"). For purposes of this Agreement,
Confidential Information includes, but is not limited to, financial information
or plans; sales and marketing information or plans; business or strategic plans;
salary, bonus or other personnel information of any type; information concerning
methods of operation; proprietary systems or software; legal or
3
<PAGE>
regulatory information; cost and pricing information or policies; information
concerning new or potential products or markets; models, practices, procedures,
strategies or related information; research and/or analysis; and information
concerning new or potential investors, customers, or clients. Confidential
Information does not include Confidential Information already available to the
public through no act of Executive's, nor does it include salary, bonus or other
personnel information specific to Executive.
Executive further understands and agrees that all Confidential Information,
however or whenever produced, will be the InterPlay Group's sole property. Upon
the termination of Executive's employment, Executive will promptly deliver to
the Company all copies of all documents, equipment, property or materials of any
type in Executive's possession, custody or control, that belong to the InterPlay
Group, and/or that contain, in whole or in part, any Confidential Information.
8. Inventions. During the Term of this Agreement, Executive will promptly
----------
disclose to the Company or any successor or assign, and grant to the Company and
its successors and assigns (without any separate remuneration or compensation
other than that received by Executive in the course of employment), Executive's
entire right, title and interest in and to any and all inventions, developments,
discoveries, models, or any other intellectual property of any type or nature
whatsoever ("Intellectual Property") developed during the Term of this
Agreement, whether developed by Executive during or after business hours, or
alone or in connection with others, reasonably related to the business of the
Company, the Subsidiaries and their respective successors or assigns, determined
as such business is constituted at the time of the invention. Executive agrees,
at the Company's expense, to take all steps necessary or proper to vest title to
all such Intellectual Property in the Company, its affiliates, successors,
assigns, nominees or designees, and to cooperate fully and assist the InterPlay
Group in any litigation or other proceedings involving any such Intellectual
Property.
9. Restrictive Covenants. During the Restricted Period (defined below),
---------------------
Executive will not, directly or indirectly, for Executive's own account or for
or on behalf of any other person or entity, whether as an officer, director,
employee, partner, principal, joint venturer, consultant, investor, shareholder,
independent contractor or otherwise:
(a) engage in any business in competition with the then business of the
InterPlay Group, or in competition with any business that the InterPlay Group,
to the Executive's knowledge, actively was planning to enter at the time of the
termination of Executive's employment;
(b) solicit or accept business in competition with the InterPlay Group
from any (i) clients of the InterPlay Group who were clients of the InterPlay
Group at the time of the termination of Executive's employment, or who were
clients during the one (1) year period preceding such termination, or (ii) any
prospective clients of the InterPlay Group who, within two (2) years prior to
such termination, had been solicited directly by Executive or where Executive
supervised or participated in such solicitation activities;
(c) hire or employ, or attempt to hire or employ, in any fashion (whether
as an employee, independent contractor or otherwise), any employee or
independent contractor of the InterPlay Group, or solicit or induce, or attempt
to solicit or induce, any of the InterPlay Group's
4
<PAGE>
employees, consultants, clients, customers, vendors, suppliers, or independent
contractors to terminate their relationship with the InterPlay Group; or
(d) speak or act in any manner that is intended to, or does in fact,
damage the goodwill or the business or reputation of the InterPlay Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Effective Date and ending on the later of (i) two years after
the Closing Date or (ii) the first anniversary of the last day of the Severance
Period.
Executive may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the InterPlay Group so long as Executive
does not otherwise (i) participate in the management or operation of any such
business, or (ii) violate any other provision of this Agreement.
Executive understands and agrees that, by virtue of Executive's position
with the Company, Executive will have substantial access to and impact on the
good will, confidential information and other legitimate business interests of
the InterPlay Group, and therefore will be in a position to have a substantial
adverse impact on the InterPlay Group's business interests should Executive
engage in business in competition with the InterPlay Group. Executive
acknowledges that Executive's adherence to the restrictive covenants set forth
in this Section is an important and substantial part of the consideration that
the Company is receiving under this Agreement, and agrees that the restrictive
covenants in this Section are enforceable in all respects. Executive consents
to the entry of injunctive relief to enforce such covenants, in addition to such
other relief to which the Company may be entitled by law.
10. Specific Performance. Executive acknowledges that the InterPlay
--------------------
Group's remedy at law for breach of Sections 7, 8 and 9 of this Agreement would
be inadequate, and agrees that, for breach of such provisions, the InterPlay
Group is entitled to injunctive relief and to enforce its rights by an action
for specific performance.
11. Choice of Law. This Agreement, and all disputes arising under or
-------------
related to it, will be governed by the law of the Commonwealth of Massachusetts.
12. Choice of Forum. All disputes arising under or out of this Agreement
---------------
will be brought in courts of competent jurisdiction located within the
Commonwealth of Massachusetts.
5
<PAGE>
13. Assignment. This Agreement, and the rights and obligations of
----------
Executive and the Company, inures to the benefit of and is binding upon,
Executive, Executive's heirs and representatives, and upon the Company, the
Subsidiaries and their respective successors and assigns. This Agreement may
not be assigned by Executive. This Agreement may be assigned to any member of
the InterPlay Group.
14. Notices. All notices required by this Agreement will be in writing and
-------
will be deemed to have been duly delivered when delivered in person or when
mailed by certified mail, return receipt requested, or nationally recognized
next day delivery service, as follows:
(a) If to Executive, to the address which appears below Executive's
signature to this Agreement, and
(b) If to the Company, at:
46 Manning Road
Billerica, MA 01821
or to such other address as a party specifies in writing given in accordance
with this Section.
15. Severability. If any one or more of the provisions of this Agreement
------------
is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired. Moreover, if any one or more of the provisions contained in this
Agreement is held to be excessively broad as to duration, activity or subject,
such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
16. Consultation with Counsel; No Representations. Executive acknowledges
---------------------------------------------
that Executive has had a full and complete opportunity to consult with counsel
of Executive's own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has made no representations
or warranties to Executive concerning the terms, enforceability or implications
of this Agreement other than are as reflected in this Agreement.
6
<PAGE>
Executed under seal as of September 19, 1996.
InterPlay Corporation
/s/ By: /s/
- -------------------------- --------------------------
Name: Glenn D. Bolduc Name: John J. Hassett
7 Springvale Street Title: President
Hollis, NH 03049
7
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of ________, 1997 by and between
American Teleconferencing Services, Ltd., a Delaware corporation with its
principal place of business at 101 N. Tejon, Suite 200, Colorado Springs,
Colorado 80903 (the "Company") and Robert A. Cowan, an individual residing at
580 Sunny Glen Ct., Woodland Park, Colorado 80863 ("Executive").
FACTS
The Company and various other business entities have become
wholly-owned subsidiaries (the "Subsidiaries") of VIALOG Corporation, a
Massachusetts corporation ("VIALOG"), in connection with the acquisition of the
Subsidiaries by VIALOG (the "Acquisitions") pursuant to various Agreements and
Plans of Reorganization and Stock or Asset Purchase Agreements (the "Acquisition
Agreements).
Executive, the Company and VIALOG have realized, and will continue to
realize, substantial value as a result of the Acquisitions and a subsequent
public offering of shares of VIALOG.
The Company desires to employ Executive as a senior executive with the
duties, responsibilities, rights and obligations set forth below, and Executive
desires to be so employed.
In Executive's capacity as a senior executive of the Company,
Executive will obtain access to, and be in a position to adversely affect, the
confidential information and good will of VIALOG and its Subsidiaries (VIALOG
and the Subsidiaries collectively and each individually referred to as the
"VIALOG Group").
<PAGE>
AGREEMENT
In consideration of the foregoing and of the covenants and agreements
set forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on the Closing
----
Date, as that term is defined in the Merger Agreements (the "Effective Date"),
and will continue for two (2) years from the Effective Date unless terminated in
accordance with the provisions of Section 7 of this Agreement (the "Term").
2. Duties and Responsibilities. The Company agrees to employ
---------------------------
Executive, and Executive agrees to be employed, as President and Chief Executive
Officer ("C.E.O.") and Executive will perform all of the duties and
responsibilities of said office, subject to direction by the Board of Directors
of the Company. In addition, Executive will perform such other specific tasks
and responsibilities, consistent with Executive's position as President and
C.E.O. as may be agreed to be Executive from time to time with the Board of
Directors of the Company. It is understood between the Company and Executive
that Executive will have contemporaneous significant duties and responsibilities
to perform as Chairman of the Board of VIALOG and as a member of VIALOG's
management committee such that his business time will be required for his
responsibilities to both companies. Executive will be the sole determiner as to
his time and efforts in the performing of his duties and responsibilities to
both companies. It is further agreed that the Company will hire and employ upon
Executive's reasonable determination and approval with reasonable compensation
to be approved by Executive, such top level executives that will work directly
with and be responsible to Executive. Executive will not be required to locate
outside the Colorado Springs, Colorado area without Executive's consent.
Executive may engage in other business activities so long as Executive does not
otherwise violate any provision
2
<PAGE>
of this Agreement. Executive will travel to whatever extent he deems it to be
reasonably necessary in the conduct of his duties and responsibilities under
this Agreement.
3. Compensation. The Company agrees to pay Executive such
------------
compensation as is hereafter provided. Executive will also be eligible for such
increases (but not decreases) in base compensation, and the hereafter stated
annual bonus and to participate in such additional bonus and/or incentive
compensation plans, as shall be made available from time to time to similarly
situated senior executives of the Company and VIALOG.
(a) $250,000.00 annual base compensation to be paid monthly in advance
in twelve equal monthly installments.
(b) $200,000.00 annual bonus to be paid at the end of each year of
Executive's employment for the Term for Executive's services as
C.O.B. of VIALOG.
(c) The amount of $10,000 per annum for each year of the term to be
paid annually in advance for Executive's agreement not to compete
as provided in Section 9(a), (b) and (c) hereof.
4. Benefits and Vacation. Executive will be eligible to participate
---------------------
in and/or receive such group insurance plans, other fringe benefit plans and
vacation as the Company and VIALOG make available to similarly situated senior
executives.
5. Expense Reimbursement. Executive will be entitled to reimburse for
---------------------
business expenses incurred by Executive in connection with the performance of
Executive's duties and responsibilities under this Agreement upon submission of
documentation in accordance with such procedures as the Company may establish
from time to time.
3
<PAGE>
6. Office and Support. The Company agrees to provide Executive with
------------------
an office and the same level of support staff and equipment as Executive has had
with American Teleconferencing Services, Ltd. at such location and as he may
reasonably direct.
7. Termination. The Company may terminate Executive's employment
-----------
during the Term as follows:
(a) By the Company for Cause. The Company has the right to terminate
------------------------
Executive's employment immediately for "Cause". For purposes of
this Agreement only, the term "Cause" means conviction of, or
written admission to, a felony or other crime involving moral
turpitude; imprisonment for any crime constituting a felony; any
act involving theft, embezzlement or fraud. If Executive's
employment is terminated for Cause, the Company will only be
obligated to pay Executive his compensation as provided above in
Sections 3(a) and (b) through the date of such termination, and all
of the yet unpaid compensation under Section 3(c), together with
such other benefits or payments to which Executive may be entitled
(in the event of a Cause termination) by law or pursuant to benefit
plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 8 and 9 of this Agreement.
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident,
disability or any other physical or mental condition, from
substantially performing Executive's duties and responsibilities
under this Agreement for one or more periods totaling one hundred
fifty (150) days in any (12) month period. If Executive's
4
<PAGE>
employment is terminated pursuant to this section, Executive will
be entitled to all compensation earned under Section 3 and
Consultant will also be entitled to receive such compensation under
Section 3(a), (b) and (c) and group insurance benefits as Executive
would have received during a period equal to the greater of (i) one
(1) year, or (ii) the remainder of the Term had Executive remained
employed by the Company, which amount will be reduced by only the
amount actually received by Executive under any disability plans
maintained by the Company. Executive will also be entitled to
receive such payments or benefits to which Executive may be
entitled by law or pursuant to benefit plans of the Company then in
effect. Executive will remain bound by Executive's obligations
under Sections 8 and 9 of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will
-----
pay to Executive's estate, designated beneficiary, or legal
representative all compensation earned under Section 3 and such
additional compensation under Section 3 and group insurance
benefits as Executive would have received them during a period
equal to the greater of (i) one (1) year, or (ii) the remainder of
the Term, together with such other benefits or payments to which
Executive may be entitled by law or pursuant to benefit plans of
the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability of Death. The Company and Executive each have the right
-------------------
to terminate Executive's employment upon thirty (30) days' prior
written
5
<PAGE>
notice. If Executive's employment is terminated pursuant to this
Section 7(d) during the Term, Executive will be entitled to receive
all compensation earned under Section 3 and if terminated by the
Company such compensation under Section 3 and group insurance
benefits as Executive would have received them during a period
equal to the greater of (i) one (1) year or (ii) the remainder of
the Term had Executive remained employed by the Company (the
"Severance Period"), together in any event with such other payments
and benefits to which Executive may be entitled by law or pursuant
to benefit plans of the Company then in effect. Executive will
remain bound by Executive's obligations under Sections 8 and 9 of
this Agreement.
8. Confidentiality. Executive will at no time, without the Company's
---------------
prior written consent, reveal or disclose to any person outside of the VIALOG
Group, or use for his own benefit or the benefit of any other person or entity,
any confidential information concerning the business or affairs of the VIALOG
Group, or concerning the customers, clients or employees of the VIALOG Group
("Confidential Information"). For purposes of this Agreement, Confidential
Information includes, but is not limited to, financial information or plans;
sales and marketing information or plans; business or strategic plans; salary,
bonus or other personnel information of any type; information concerning methods
of operation; proprietary systems or software; legal or regulatory information;
cost and pricing information or policies; information concerning new or
potential products or markets; models, practices, procedures, strategies or
related information; research and/or analysis; and information concerning new or
potential investors, customers or clients. Confidential Information does not
include Confidential Information already available to the public through no act
of Executive, nor does it include salary, bonus or other personnel
6
<PAGE>
information specific to Executive nor does it include items or areas not within
the scope of the provisions of Sections 9(a), (b) and (c) so that Confidential
Information does not include research and development or Executive's employment
by American Voice Systems, other similar companies or the book titled
__________, authored by Executive, or any invention conceived or developed by
Executive.
Executive further understands and agrees that all Confidential Information,
however or whenever produced, will be the VIALOG Group's sole property, and will
not be removed by Executive (or anyone acting at Executive's direction or on
Executive's behalf) from the VIALOG Group's custody or premises without the
Company's prior written consent. Upon the termination of Executive's employment,
Executive will promptly deliver to the Company all copies of all documents,
equipment, property or materials of any type in Executive's possession, custody
or control, that belong to the VIALOG Group, and/or that contain, in whole or in
part, any Confidential Information.
9. Restrictive Covenants. During the Restricted Period (defined
---------------------
below), Executive will not, directly or indirectly, for Executive's own account
or for or on behalf of any other person or entity, whether as an officer,
director, employee, partner, principal, joint venturer, consultant, investor,
shareholder, independent contractor or otherwise:
(a) Engage in any business in competition with the teleconferencing
services business of the VIALOG Group;
(b) Solicit or accept business in competition with the teleconferencing
service business of VIALOG Group from any (i) clients of the VIALOG
Group who were clients of the VIALOG Group at the time of the
termination of Executive's employment, or who were clients during
the one (1) year period
7
<PAGE>
preceding such termination, or (ii) any prospective clients of the
VIALOG Group who, within two (2) years prior to such termination,
had been solicited directly by Executive or where Executive
supervised or participated in such solicitation activities; or
(c) Hire or employ, or attempt to hire or employ, in any fashion
(whether as an employee, independent contractor or otherwise), any
employee or independent contractor of the VIALOG Group, or solicit
or induce, or attempt to solicit or induce, any of the VIALOG
Group's employees, consultants, clients, customers, vendors,
suppliers, or independent contractors to terminate their
relationship with the VIALOG Group but this restrictive
subparagraph shall only apply to employees within the Company's and
VIALOG Group's teleconferencing service business.
(d) Speak or act in any manner that is intended to, or does in fact,
damage the good will or the business or reputation of the VIALOG
Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Closing Date, as that term is defined in the Merger Agreements,
and ending three (3) years after the Closing Date.
Executive may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the VIALOG Group so long as Executive
does not otherwise (i) participate in the management or operation of any such
business, or (ii) violate any other provision of this Agreement.
8
<PAGE>
Executive understands and agrees that, by virtue of Executive's position
with the Company, Executive will have substantial access to and impact on the
good will, confidential information and other legitimate business interests of
the VIALOG Group, and therefore will be in a position to have a substantial
adverse impact on the VIALOG Group's business interests should Executive engage
in business in competition with the VIALOG Group contrary to the restrictive
covenants of this Section 9. Executive acknowledges that Executive's adherence
to the restrictive covenants set forth in this Section is an important and
substantial part of the consideration that the Company is receiving under this
Agreement, and agrees that the restrictive covenants in this Section are
enforceable in all respects. Executive consents to the entry of injunctive
relief to enforce such covenants, in addition to such other relief to which the
Company may be entitled by law.
10. The provisions of paragraphs 8 and 9 shall not include nor shall
they prohibit Executive from being employed by or consulting with American Voice
Systems or other companies engaged in research and development nor shall they
prohibit Executive from engaging in any research, development or inventions of
any kind.
11. Specific Performance. Executive acknowledges that the VIALOG
--------------------
Group's remedy at law for breach of Sections 8 and 9 of this Agreement would be
inadequate, and agrees that, for breach of such provisions, the VIALOG Group is
entitled to injunctive relief and to enforce its rights by an action for
specific performance.
12. Choice of Law. This Agreement, and all disputes arising under or
-------------
related to it, will be governed by the law of the State of Missouri.
13. Assignment. This Agreement, and the rights and obligations of
----------
Executive and the Company, inure to the benefit of and is binding upon,
Executive, Executive's heirs and
9
<PAGE>
representatives, and upon the Company, the Subsidiaries and their respective
successors and assigns. This Agreement may not be assigned by Executive. This
Agreement may be assigned to any member of the VIALOG Group.
14. Notices. All notices required by this Agreement will be in
-------
writing and will be deemed to have been duly delivered when delivered in person
or when mailed by certified mail, return receipt requested, as follows:
(a) If to Executive to the address which appears below Executive's
signature to this Agreement
(b) If to Company
VIALOG Corporation
46 Manning Road
Billerica, MA 01821
or to such other address as a party specifies in writing given in accordance
with this Section.
15. Severability. If any one or more of the provisions of this
------------
Agreement is held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions will not in any way be
affected or impaired. Moreover, if any one or more of the provisions contained
in this Agreement is held to be excessively broad as to duration, activity or
subject, such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
16. Consultation with Counsel; No Representations. Executive
---------------------------------------------
acknowledges that Executive has had a full and complete opportunity to consult
with counsel of Executive's own choosing concerning the terms, enforceability
and implications of this Agreement, and that the Company has made no
representations or warranties to Executive concerning the terms, enforceability
or implications of this Agreement other than are as reflected in this
Agreement.
Executed under seal as of ______________________, 1997.
10
<PAGE>
EXECUTIVE AMERICAN TELECONFERENCING SERVICES, LTD.
By:
- ---------------------------- ---------------------------------
Robert A. Cowan Name:
580 Sunny Glen Ct. Title:
Woodland Park, CO 80863
11
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of ____________, 1997 by and between
__________, a ______________ corporation with its principal place of business at
______________(the "Company") and C. Raymond Marvin, an individual residing at
________________("Executive").
FACTS
The Company and various other business entities have become wholly-owned
subsidiaries (the "Subsidiaries") of VIALOG Corporation, a Massachusetts
corporation ("VIALOG"), in connection with the acquisition of the Subsidiaries
by VIALOG (the "Acquisitions") pursuant to various Agreements and Plans of
Reorganization or Stock or Asset Purchase Agreements (the "Acquisition
Agreements").
Executive has realized, and will continue to realize, substantial value as a
result of the Acquisitions and a subsequent public offering of shares of VIALOG.
The Company desires to employ Executive as a senior executive with the duties,
responsibilities, rights and obligations set forth below, and Executive desires
to be so employed.
In Executive's capacity as a senior executive of the Company, Executive will
obtain access to, and be in a position to adversely affect, the confidential
information and good will of VIALOG and its Subsidiaries (VIALOG and the
Subsidiaries collectively and each individually referred to as the "VIALOG
Group").
AGREEMENT
In consideration of the foregoing and of the covenants and agreements set
forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on the Merger Closing, as
----
that term is defined in the Acquisition Agreements (the "Effective Date"), and
will continue for two years from the Effective Date unless terminated in
accordance with the provisions of Section 6 of this Agreement (the "Term").
2. Duties and Responsibilities. The Company agrees to employ Executive, and
---------------------------
Executive agrees to be employed, as [TITLE], and Executive will perform all of
the duties and responsibilities of said office, subject to direction by the
Chief Executive Officer and the Board of Directors of the Company. In addition,
Executive will perform such other specific tasks and responsibilities,
consistent with Executive's position as [TITLE], as may be assigned to him from
time to time by Chief Executive Officer and the Board of Directors of the
Company. The Company will have the right to reassign Executive to such other
positions in the Company or within the VIALOG Group as the Company may determine
so long as such other positions
<PAGE>
involved a substantially similar level of compensation, authority and
responsibility as the position of [TITLE]. However, Executive will not be
required to locate outside the _________ area without Executive's consent.
Executive will devote substantially all of Executive's business time, labor,
skill and best efforts to carrying out Executive's duties and responsibilities
under this Agreement. Executive may engage in side business activities so long
as (i) Executive does not otherwise violate any other provision of this
Agreement, and (ii) such side business activities do not interfere with
Executive's ability to carry out Executive's duties and responsibilities under
this Agreement. Executive will travel to whatever extent may be reasonably
necessary in the conduct of the VIALOG Group's business and Executive's
duties and responsibilities under this Agreement.
3. Compensation. Subject to Executive's adherence to Executive's
------------
responsibilities and obligations under this Agreement, the Company agrees to pay
Executive a base compensation at the annual rate of $__________________ and such
additional compensation as may be mutually agreed upon from time to time by the
Company and Executive. Executive will be eligible for such increases (but not
decreases) in base compensation, and to participate in such bonus and/or
incentive compensation plans, as shall be made available from time to time to
similarly situated senior executives of the Company.
4. Benefits and Vacation. Executive will be eligible to participate in
---------------------
and/or receive such group insurance plans, other fringe benefit plans and
vacation as the Company makes available to similarly situated senior executives.
5. Expense Reimbursement. Executive will be entitled to reimbursement for
---------------------
business expenses incurred by Executive connection with the performance of
Executive's duties and responsibilities under this Agreement upon submission of
documentation in accordance with such procedures as the Company may establish
from time to time.
6. Termination. The Company may terminate Executive's employment at any
-----------
time during the Term for any reason as follows:
(a) By the Company for Cause. The Company has the right to terminate
------------------------
Executive's employment immediately for "Cause". For purposes of this Agreement
only, the term "Cause" means material breach of any provision of this Agreement;
material willful misconduct in the performance of Executive's duties or
responsibilities; material willful nonperformance of Executive's duties or
responsibilities other than by reason of disability; conviction of, or written
admission to, a felony or other crime involving moral turpitude; imprisonment
for any crime constituting a felony; any act involving theft, embezzlement or
fraud; or a material violation of any written policy of the Company. If
Executive's employment is terminated for Cause, the Company will only be
obligated to pay Executive his base compensation through the date of such
termination, together with such other benefits or payments to which Executive
may be entitled (in the event of a Cause termination) by law or pursuant to
benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7 and 8 of this Agreement.
2
<PAGE>
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident, disability or any
other physical or mental condition, from substantially performing Executive's
duties and responsibilities under this Agreement for one or more periods
totaling one hundred fifty (150) days in any (12) month period. If Executive's
employment is terminated pursuant to this section, Executive will be entitled to
receive such base compensation and group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to the greater of (i) one (1) year, or (ii) the remainder of the
Term had Executive remained employed by the Company, which amount will be
reduced by only the amount actually received by Executive under any disability
plans maintained by the Company. Executive will also be entitled to receive
such payments or benefits to which Executive may be entitled by law or pursuant
to benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7 and 8 of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will pay
-----
to Executive's estate, designated beneficiary, or legal representative such base
compensation and group insurance benefits as Executive would have received (at
such times as Executive would have received them) during a period equal to the
greater of (i) one (1) year, or (ii) the remainder of the Term, together with
such other benefits or payments to which Executive may be entitled by law or
pursuant to benefit plans of the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability or Death. The Company and Executive each have the right to terminate
- -------------------
Executive's employment upon thirty (30) days' prior written notice. If
Executive's employment is terminated pursuant to this Section 6 (d) during the
Term by the Company, Executive will be entitled to receive such base
compensation and group insurance benefits as Executive would have received (at
such times as Executive would have received them) during a period equal to the
greater of (i) one (1) year or (ii) the remainder of the Term had Executive
remained employed by the Company (the "Severance Period"), together with such
other payments and benefits to which Executive may be entitled by law or
pursuant to benefit plans of the Company then in effect. Executive will remain
bound by Executive's obligations under Sections 7 and 8 of this Agreement.
7. Confidentiality. Executive will not at any time, without the Company's
---------------
prior written consent, reveal or disclose to any person outside of the VIALOG
Group, or use for his own benefit or the benefit of any other person or entity,
any confidential information concerning the business or affairs of the VIALOG
Group, or concerning the customers, clients or employees of the VIALOG Group
("Confidential Information"). For purposes of this Agreement, Confidential
Information includes, but is not limited to, financial information or plans;
sales and marketing information or plans; business or strategic plans; salary,
bonus or other personnel information of any type; information concerning methods
of operation; proprietary systems or software; legal or regulatory information;
cost and pricing information or policies; information concerning new or
potential products or markets; models, practices, procedures, strategies or
related information; research and/or analysis; and information concerning new or
potential investors, customers, or clients. Confidential Information does not
include Confidential
3
<PAGE>
Information already available to the public through no act of Executive's, nor
does it include salary, bonus or other personnel information specific to
Executive.
Executive further understands and agrees that all Confidential Information,
however or whenever produced, will be the VIALOG Group's sole property, and
will not be removed by Executive (or anyone acting at Executive's direction or
on Executive's behalf) from the VIALOG Group's custody or premises without
the Company's prior written consent. Upon the termination of Executive's
employment, Executive will promptly deliver to the Company all copies of all
documents, equipment, property or materials of any type in Executive's
possession, custody or control, that belong to the VIALOG Group, and/or that
contain, in whole or in part, any Confidential Information.
8. Restrictive Covenants. During the Restricted Period (defined below),
---------------------
Executive will not, directly or indirectly, for Executive's own account or for
or on behalf of any other person or entity, whether as an officer, director,
employee, partner, principal, joint venturer, consultant, investor, shareholder,
independent contractor or otherwise:
(a) engage in any business in competition with the teleconferencing
service business (defined as audio, data, and video multi-point conferencing) of
the VIALOG Group;
(b) solicit or accept business in such competition with the VIALOG
Group from any (i) clients of the VIALOG Group who were clients of the
VIALOG Group at the time of the termination of Executive's employment, or who
were clients during the one (1) year period preceding such termination, or (ii)
any prospective clients of the VIALOG Group who, within two (2) years prior
to such termination, had been solicited directly by Executive or where Executive
supervised or participated in such solicitation activities; or
(c) attempt to hire or employ, in any fashion (whether as an employee,
independent contractor or otherwise), any employee or independent contractor of
the VIALOG Group, or solicit or induce, or attempt to solicity or induce, any
of the VIALOG Group's employees, consultants, clients, customers, vendors,
suppliers, or independent contractors to terminate their relationship with the
VIALOG Group; or
(d) speak or act in any manner that is intended to, or does in fact,
damage the goodwill or the business or reputation of the VIALOG Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Merger Closing, as that term is defined in the Acquisition
Agreements, and ending on the later of (i) three (3) years after the Merger
Closing or (ii) the first anniversary of the last day of the Severance Period.
Executive may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the VIALOG Group so long as Executive
does not otherwise (i) participate in the
4
<PAGE>
management or operation of any such business, or (ii) violate any other
provision of this Agreement.
Executive understands and agrees that, by virtue of Executive's position with
the Company, Executive will have substantial access to and impact on the good
will, confidential information and other legitimate business interests of the
VIALOG Group, and therefore will be in a position to have a substantial
adverse impact on the VIALOG Group's business interests should Executive
engage in business in such competition with the VIALOG Group. Executive
acknowledges that Executive's adherence to the restrictive covenants set forth
in this Section is an important and substantial part of the consideration that
the Company is receiving under this Agreement, and agrees that the restrictive
covenants in this Section are enforceable in all respects. Executive consents to
the entry of injunctive relief to enforce such covenants, in addition to such
other relief to which the Company may be entitled by law.
9. Specific Performance. Executive acknowledges that the VIALOG Group's
--------------------
remedy at law for breach of Sections 7 and 8 of this Agreement would be
inadequate, and agrees that, for breach of such provisions, the VIALOG Group
is entitled to injunctive relief and to enforce its rights by an action for
specific performance.
10. Choice of Law. This Agreement, and all disputes arising under or related
-------------
to it, will be governed by the law of the ______ of ________.
11. Choice of Forum. All disputes arising under or out of this Agreement
---------------
will be brought in courts of competent jurisdiction located within the ____ of
____________.
12. Assignment. This Agreement, and the rights and obligations of Executive
----------
and the Company, inures to the benefit of and is binding upon, Executive,
Executive's heirs and representatives, and upon the Company, the Subsidiaries
and their respective successors and assigns. This Agreement may not be assigned
by Executive. This Agreement may be assigned to any member of the VIALOG Group.
13. Notices. All notices required by this Agreement will be in writing and
-------
will be deemed to have been duly delivered when delivered in person or when
mailed by certified mail, return receipt requested, or nationally recognized
next day delivery service, as follows:
(a) If to Executive, to the address which appears below Executive's
signature to this Agreement
(b) If to the Company
[INSERT COMPANY ADDRESS]
or to such other address as a party specifies in writing given in accordance
with this Section.
5
<PAGE>
14. Severability. If any one or more of the provisions of this Agreement
------------
is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired. Moreover, if any one or more of the provisions contained in this
Agreement is held to be excessively broad as to duration, activity or subject,
such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
15. Consultation with Counsel; No Representations. Executive acknowledges
---------------------------------------------
that Executive has had a full and complete opportunity to consult with counsel
of Executive's own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has made no representations
or warranties to Executive concerning the terms, enforceability or implications
of this Agreement other than are as reflected in this Agreement.
Executed under seal as of ________________, 1997.
[EXECUTIVE] [COMPANY]
- --------------------------- ------------------------------
Name:
By:
- --------------------------- ---------------------------
Address: Name:
Title:
- ---------------------------
6
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of __________________, 1997 by and
between ___________________, a _________ corporation with its principal place of
business at ________________ (the "Company") and _____________ Judy B. Crawford,
an individual residing at ______________________ ("Executive").
FACTS
The Company and various other business entities have become wholly-owned
subsidiaries (the "Subsidiaries") of VIALOG Corporation, a Massachusetts
corporation ("VIALOG"), in connection with the acquisition of the Subsidiaries
by VIALOG (the "Acquisitions") pursuant to various Agreements and Plans of
Reorganization or Stock or Asset Purchase Agreements (the "Acquisition
Agreements").
Executive has realized, and will continue to realize, substantial value as
a result of the Acquisitions and a subsequent public offering of shares of
VIALOG.
The Company desires to employ Executive as a senior executive with the
duties, responsibilities, rights and obligations set forth below, and Executive
desires to be so employed.
In Executive's capacity as a senior executive of the Company, Executive
will obtain access to, and be in a position to adversely affect, the
confidential information and good will of VIALOG and its Subsidiaries (VIALOG
and the Subsidiaries collectively and each individually referred to as the
"VIALOG Group").
AGREEMENT
In consideration of the foregoing and of the covenants and agreements set
forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on the Merger Closing,
----
as that term is defined in the Acquisition Agreements (the "Effective Date"),
and will continue for three years from the Effective Date unless terminated in
accordance with the provisions of Section 6 of this Agreement (the "Term").
2. Duties and Responsibilities. The Company agrees to employ Executive,
---------------------------
and Executive agrees to be employed, as [TITLE], and Executive will perform all
of the duties and responsibilities of said office, subject to direction by the
Chief Executive Officer and the Board of Directors of the Company. In addition,
Executive will perform such other specific tasks and responsibilities,
consistent with Executive's position as [TITLE], as may be assigned to her from
time to time by the Chief Executive Officer and the Board of Directors of the
Company. The Company will have the right to reassign Executive to such other
positions in the Company or within the VIALOG Group as the Company may
determine so long as such other positions involved a substantially similar level
of compensation, authority and responsibility as the
<PAGE>
position of [TITLE]. However, Executive will not be required to locate outside
the Atlanta, Georgia area without Executive's consent. Executive will devote
substantially all of Executive's business time, labor, skill and best efforts to
carrying out Executive's duties and responsibilities under this Agreement.
Executive may engage in side business activities so long as (i) Executive does
not otherwise violate any other provision of this Agreement, and (ii) such side
business activities do not interfere with Executive's ability to carry out
Executive's duties and responsibilities under this Agreement. Executive will
travel to whatever extent may be reasonably necessary in the conduct of the
VIALOG Group's business and Executive's duties and responsibilities under this
Agreement.
3. Compensation. Subject to Executive's adherence to Executive's
------------
responsibilities and obligations under this Agreement, the Company agrees to pay
Executive a base compensation at the annual rate of $255,000 and such additional
compensation as may be mutually agreed upon from time to time by the Company and
Executive. Executive will be eligible for such increases (but not decreases) in
base compensation, and to participate in such bonus and/or incentive
compensation plans, as shall be made available from time to time to similarly
situated senior executives of the Company.
4. Benefits and Vacation. Executive will be eligible to participate in
---------------------
and/or receive such group insurance plans, other fringe benefit plans and
vacation as the Company makes available to similarly situated senior executives.
Executive is entitled to the same level of health and dental benefits as the
health and dental benefits provided to the Executive by Conference Source
International, Inc. immediately prior to the Merger Closing. The Company will
maintain a life insurance policy on the Executive's life in the minimum amount
of $1,000,000, and payable to a beneficiary designated by the Executive. During
the term hereof a Company vehicle will be provided to Executive on the same
terms as provided to the Executive by Conference Source International, Inc.
immediately prior to the Merger Closing.
5. Expense Reimbursement. Executive will be entitled to reimbursement
---------------------
for business expenses incurred by Executive connection with the performance of
Executive's duties and responsibilities under this Agreement upon submission of
documentation in accordance with such procedures as the Company may establish
from time to time.
6. Termination. The Company may terminate Executive's employment at any
-----------
time during the Term for any reason as follows:
(a) By the Company for Cause. The Company has the right to terminate
------------------------
Executive's employment immediately for "Cause". For purposes of this Agreement
only, the term "Cause" means material breach of any provision of this Agreement;
material willful misconduct in the performance of Executive's duties or
responsibilities; material willful nonperformance of Executive's duties or
responsibilities other than by reason of disability; conviction of, or written
admission to, a felony or other crime involving moral turpitude; imprisonment
for any crime constituting a felony; any act involving theft, embezzlement or
fraud; or a material violation of any written policy of the Company. If
Executive's employment is terminated for Cause, the Company will only be
obligated to pay Executive his base compensation through the date of such
termination, together with such other benefits or
2
<PAGE>
payments to which Executive may be entitled (in the event of a Cause
termination) by law or pursuant to benefit plans of the Company then in effect.
Executive will remain bound by Executive's obligations under Sections 7, 8 and 9
of this Agreement.
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident, disability or any
other physical or mental condition, from substantially performing Executive's
duties and responsibilities under this Agreement for one or more periods
totaling one hundred fifty (150) days in any (12) month period. If Executive's
employment is terminated pursuant to this section, Executive will be entitled to
receive such base compensation and group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to the greater of (i) one (1) year, or (ii) the remainder of the
Term had Executive remained employed by the Company, which amount will be
reduced by only the amount actually received by Executive under any disability
plans maintained by the Company. Executive will also be entitled to receive such
payments or benefits to which Executive may be entitled by law or pursuant to
benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7, 8 and 9 of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will
-----
pay to Executive's estate, designated beneficiary, or legal representative such
base compensation and group insurance benefits as Executive would have received
(at such times as Executive would have received them) during a period equal to
the greater of (i) one (1) year, or (ii) the remainder of the Term, together
with such other benefits or payments to which Executive may be entitled by law
or pursuant to benefit plans of the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability or Death. The Company and Executive each have the right to terminate
- -------------------
Executive's employment upon thirty (30) days' prior written notice. If
Executive's employment is terminated pursuant to this Section 6 (d) during the
Term by the Company, Executive will be entitled to receive such base
compensation and group insurance benefits as Executive would have received (at
such times as Executive would have received them) during a period equal to the
greater of (i) one (1) year or (ii) the remainder of the Term had Executive
remained employed by the Company (the "Severance Period"), together with such
other payments and benefits to which Executive may be entitled by law or
pursuant to benefit plans of the Company then in effect. Executive will remain
bound by Executive's obligations under Sections 7, 8 and 9 of this Agreement.
7. Confidentiality. Executive will not at any time, without the
---------------
Company's prior written consent, reveal or disclose to any person outside of the
VIALOG Group, or use for his own benefit or the benefit of any other person or
entity, any confidential information concerning the business or affairs of the
VIALOG Group, or concerning the customers, clients or employees of the VIALOG
Group ("Confidential Information"). For purposes of this Agreement Confidential
Information includes, but is not limited to, financial information or plans;
sales and marketing information or plans; business or strategic plans; salary,
bonus or other personnel information of any type; information concerning methods
of operation; proprietary systems or software; legal or regulatory information;
cost and pricing information or policies; information
3
<PAGE>
concerning new or potential products or markets; models, practices, procedures,
strategies or related information; research and/or analysis; and information
concerning new or potential investors, customers, or clients. Confidential
Information does not include Confidential Information already available to the
public through no act of Executive's, nor does it include salary, bonus or other
personnel information specific to Executive.
Executive further understands and agrees that all Confidential Information,
however or whenever produced, will be the VIALOG Group's sole property, and
will not be removed by Executive (or anyone acting at Executive's direction or
on Executive's behalf) from the VIALOG Group's custody or premises without
the Company's prior written consent. Upon the termination of Executive's
employment, Executive will promptly deliver to the Company all copies of all
documents, equipment, property or materials of any type in Executive's
possession, custody or control, that belong to the VIALOG Group, and/or that
contain, in whole or in part, any Confidential Information.
8. Inventions. During the Term of this Agreement, Executive will
----------
promptly disclose to the Company or any successor or assign, and grant to the
Company and its successors and assigns (without any separate remuneration or
compensation other than that received by Executive in the course of employment),
Executive's entire right, title and interest in and to any and all inventions,
developments, discoveries, models, or any other intellectual property of any
type or nature whatsoever ("Intellectual Property") developed during the Term of
this Agreement, whether developed by Executive during or after business hours,
or alone or in connection with others, reasonably related to the business of the
Company, the Subsidiaries and their respective successors or assigns, determined
as such business is constituted at the time of the invention. Executive agrees,
at the Company's expense, to take all steps necessary or proper to vest title to
all such Intellectual Property in the Company, its affiliates, successors,
assigns, nominees or designees, and to cooperate fully and assist the VIALOG
Group in any litigation or other proceedings involving any such Intellectual
Property.
9. Restrictive Covenants. During the Restricted Period (defined below),
---------------------
Executive will not, directly or indirectly, for Executive's own account or for
or on behalf of any other person or entity, whether as an officer, director,
employee, partner, principal, joint venturer, consultant, investor, shareholder,
independent contractor or otherwise:
(a) engage in any business in competition with the then
teleconferencing business of the VIALOG Group;
(b) solicit or accept business in competition with the VIALOG
Group from any (i) clients of the VIALOG Group who were clients of the
VIALOG Group at the time of the termination of Executive's employment, or who
were clients during the one (1) year period preceding such termination, or (ii)
any prospective clients of the VIALOG Group who, within two (2) years prior
to such termination, had been solicited directly by Executive or where Executive
supervised or participated in such solicitation activities; or
(c) hire or employ, or attempt to hire or employ, in any fashion
(whether as an employee, independent contractor or otherwise), any employee or
independent contractor of the
4
<PAGE>
VIALOG Group, or solicit or induce, or attempt to solicity or induce, any of
the VIALOG Group's employees, consultants, clients, customers, vendors,
suppliers, or independent contractors to terminate their relationship with the
VIALOG Group; or
(d) speak or act in any manner that is intended to, or does in fact,
damage the goodwill or the business or reputation of the VIALOG Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Merger Closing, as that term is defined in the Acquisition
Agreements, and ending on the later of (i) three (3) years after the Merger
Closing or (ii) the first anniversary of the last day of the Severance Period.
Executive may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the VIALOG Group so long as Executive
does not otherwise (i) participate in the management or operation of any such
business, or (ii) violate any other provision of this Agreement.
Executive understands and agrees that, by virtue of Executive's position
with the Company, Executive will have substantial access to and impact on the
good will, confidential information and other legitimate business interests of
the VIALOG Group, and therefore will be in a position to have a substantial
adverse impact on the VIALOG Group's business interests should Executive
engage in business in competition with the VIALOG Group. Executive
acknowledges that Executive's adherence to the restrictive covenants set forth
in this Section is an important and substantial part of the consideration that
the Company is receiving under this Agreement, and agrees that the restrictive
covenants in this Section are enforceable in all respects. Executive consents to
the entry of injunctive relief to enforce such covenants, in addition to such
other relief to which the Company may be entitled by law.
10. Specific Performance. Executive acknowledges that the VIALOG
--------------------
Group's remedy at law for breach of Sections 7, 8 and 9 of this Agreement would
be inadequate, and agrees that, for breach of such provisions, the VIALOG
Group is entitled to injunctive relief and to enforce its rights by an action
for specific performance.
11. Choice of Law. This Agreement, and all disputes arising under or
-------------
related to it, will be governed by the law of the___________of________________.
12. Choice of Forum. All disputes arising under or out of this Agreement
---------------
will be brought in courts of competent jurisdiction located within the__________
of________________.
13. Assignment. This Agreement, and the rights and obligations of
----------
Executive and the Company, inures to the benefit of and is binding upon,
Executive, Executive's heirs and representatives, and upon the Company, the
Subsidiaries and their respective successors and assigns. This Agreement may not
be assigned by Executive. This Agreement may be assigned to any member of the
VIALOG Group.
5
<PAGE>
14. Notices. All notices required by this Agreement will be in writing
-------
and will be deemed to have been duly delivered when delivered in person or when
mailed by certified mail, return receipt requested, or nationally recognized
next day delivery service, as follows:
(a) If to Executive, to the address which appears below Executive's
signature to this Agreement
(b) [INSERT COMPANY ADDRESS]
or to such other address as a party specifies in writing given in accordance
with this Section.
15. Severability. If any one or more of the provisions of this Agreement
------------
is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired. Moreover, if any one or more of the provisions contained in this
Agreement is held to be excessively broad as to duration, activity or subject,
such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
16. Consultation with Counsel; No Representations. Executive acknowledges
---------------------------------------------
that Executive has had a full and complete opportunity to consult with counsel
of Executive's own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has made no representations
or warranties to Executive concerning the terms, enforceability or implications
of this Agreement other than are as reflected in this Agreement.
Executed under seal as of ______________, 1997.
[EXECUTIVE] [COMPANY]
____________________________ ___________________________________
Name:
____________________________ By:________________________________
Address: Name:
Title:
____________________________
6
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of __________ , 1997 by and between
_______________, a ________ corporation with its principal place of business at
_______________ (the "Company") and Courtney Snyder, an individual residing at
_______________ ("Executive").
FACTS
The Company and various other business entities have become wholly-owned
subsidiaries (the "Subsidiaries") of VIALOG Corporation, a Massachusetts
Corporation ("VIALOG"), in connection with the acquisition of the subsidiaries
by VIALOG (the "Acquisitions") pursuant to various Agreements and Plans of
Reorganization or Stock or Asset Purchase Agreements (the "Acquisition
Agreements").
Executive has realized, and will continue to realize, substantial value
as a result of the Acquisitions and a subsequent public offering of shares of
VIALOG.
The Company desires to employ Executive as a senior executive with the
duties, responsibilities, rights and obligations set forth below, and Executive
desires to be so employed.
In Executive's capacity as a senior executive of the Company, Executive
will obtain access to, and be in a position to adversely affect, the
confidential information and good will of VIALOG and its Subsidiaries
(VIALOG and the Subsidiaries collectively and each individually referred to
as the "VIALOG Group").
AGREEMENT
In consideration of the foregoing and of the covenants and agreements set
forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on the Merger
----
Closing, as that term is defined in the Acquisition Agreements (the "Effective
Date"), and will continue for three years from the Effective Date unless
terminated in accordance with the provisions of Section 6 of this Agreement (the
"Term").
2. Duties and Responsibilities. The Company agrees to employ Executive,
---------------------------
and Executive agrees to be employed, as [TITLE], and Executive will
perform all of the duties and responsibilities of said office, subject to
direction by the Chief Executive Officer and the Board of Directors of the
Company. In addition, Executive will perform such other specific tasks and
responsibilities, consistent with Executive's position as [TITLE], as may be
assigned to him from time to time by the Chief Executive Officer and the Board
of Directors of the Company. The Company will have the right to reassign
Executive to such other positions in the Company or within the VIALOG Group
as the Company may determine so long as such other positions
<PAGE>
involved a substantially similar level of compensation, authority and
responsibility as the position of [TITLE]. However, Executive will not be
required to locate outside the Boston, Massachusetts area without Executive's
consent. Executive will devote substantially all of Executive's business time,
labor, skill and best efforts to carrying out Executive's duties and
responsibilities under this Agreement. Executive may engage in side business
activities so long as (i) Executive does not otherwise violate any other
provision of this Agreement, and (ii) such side business activities do not
interfere with Executive's ability to carry out Executive's duties and
responsibilities under this Agreement. Executive will travel to whatever extent
may be reasonably necessary in the conduct of the VIALOG Group's business and
Executive's duties and responsibilities under this Agreement.
3. Compensation. Subject to Executive's adherence to Executive's
------------
responsibilities and obligations under this Agreement, the Company agrees to pay
Executive a base compensation at the annual rate of $142,000 and such additional
compensation as may be mutually agreed upon from time to time by the Company and
Executive. Executive will be eligible for such increases (but not decreases) in
base compensation, and to participate in such bonus and/or incentive
compensation plans, as shall be made available from time to time to similarly
situated senior executives of the Company.
4. Benefits and Vacation. Executive will be eligible to participate in
---------------------
and/or receive such group insurance plans, other fringe benefit plans and
vacation as the Company makes available to similarly situated senior executives.
Executive will receive a car allowance of $400 per month during the period he is
employed hereunder. The Company will provide and pay for $750,000 of term
insurance payable to such beneficiary as Executive shall designate.
5. Expense Reimbursement. Executive will be entitled to reimbursement
---------------------
for business expenses incurred by Executive connection with the performance of
Executive's duties and responsibilities under this Agreement upon submission of
documentation in accordance with such procedures as the Company may establish
from time to time.
6. Termination. The Company may terminate Executive's employment at
-----------
any time during the Term for any reason as follows:
(a) By the Company for Cause. The Company has the right to terminate
------------------------
Executive's employment immediately for "Cause". For purposes of this Agreement
only, the term "Cause" means material breach of any provision of this Agreement;
material willful misconduct in the performance of Executive's duties or
responsibilities; material willful nonperformance of Executive's duties or
responsibilities other than by reason of disability; conviction of, or written
admission to, a felony or other crime involving moral turpitude; imprisonment
for any crime constituting a felony; any act involving theft, embezzlement or
fraud; or a material violation of any written policy of the Company. If
Executive's employment is terminated for Cause, the Company will only be
obligated to pay Executive his base compensation through the date of such
termination, together with such other benefits or payments to which Executive
may be entitled (in the event of a Cause termination) by law or
2
<PAGE>
pursuant to benefit plans of the Company then in effect. Executive will remain
bound by Executive's obligations under Sections 7, 8 and 9 of this Agreement.
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident, disability or any
other physical or mental condition, from substantially performing Executive's
duties and responsibilities under this Agreement for one or more periods
totaling one hundred fifty (150) days in any (12) month period. If Executive's
employment is terminated pursuant to this section, Executive will be entitled to
receive such base compensation and group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to the greater of (i) one (1) year, or (ii) the remainder of the
Term had Executive remained employed by the Company, which amount will be
reduced by only the amount actually received by Executive under any disability
plans maintained by the Company. Executive will also be entitled to receive
such payments or benefits to which Executive may be entitled by law or pursuant
to benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7, 8 and 9 of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will
-----
pay to Executive's estate, designated beneficiary, or legal representative such
base compensation and group insurance benefits as Executive would have received
(at such times as Executive would have received them) during a period equal to
the greater of (i) one (1) year, or (ii) the remainder of the Term, together
with such other benefits or payments to which Executive may be entitled by law
or pursuant to benefit plans of the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability or Death. The Company and Executive each have the right to terminate
- -------------------
Executive's employment upon thirty (30) days' prior written notice. If
Executive's employment is terminated pursuant to this Section 6 (d) during the
Term by the Company, Executive will be entitled to receive such base
compensation and group insurance benefits as Executive would have received (at
such times as Executive would have received them) during a period equal to the
greater of (i) one (1) year or (ii) the remainder of the Term had Executive
remained employed by the Company (the "Severance Period"), together with such
other payments and benefits to which Executive may be entitled by law or
pursuant to benefit plans of the Company then in effect. Executive will remain
bound by Executive's obligations under Sections 7, 8 and 9 of this Agreement.
7. Confidentiality. Executive will not at any time, without the
---------------
Company's prior written consent, reveal or disclose to any person outside of the
VIALOG Group, or use for his own benefit or the benefit of any other person
or entity, any confidential information concerning the business or affairs of
the VIALOG Group, or concerning the customers, clients or employees of the
VIALOG Group ("Confidential Information"). For purposes of this Agreement,
Confidential Information includes, but is not limited to, financial information
or plans; sales and marketing information or plans; business or strategic plans;
salary, bonus or other personnel information of any type; information concerning
methods of operation; proprietary systems or software; legal or regulatory
information; cost and pricing information or policies; information
3
<PAGE>
concerning new or potential products or markets; models, practices, procedures,
strategies or related information; research and/or analysis; and information
concerning new or potential investors, customers, or clients. Confidential
Information does not include Confidential Information already available to the
public through no act of Executive's, nor does it include salary, bonus or other
personnel information specific to Executive.
Executive further understands and agrees that all Confidential
Information, however or whenever produced, will be the VIALOG Group's sole
property, and will not be removed by Executive (or anyone acting at Executive's
direction or on Executive's behalf) from the VIALOG Group's custody or
premises without the Company's prior written consent. Upon the termination of
Executive's employment, Executive will promptly deliver to the Company all
copies of all documents, equipment, property or materials of any type in
Executive's possession, custody or control, that belong to the VIALOG Group,
and/or that contain, in whole or in part, any Confidential Information.
8. Inventions. During the Term of this Agreement, Executive will
----------
promptly disclose to the Company or any successor or assign, and grant to the
Company and its successors and assigns (without any separate remuneration or
compensation other than that received by Executive in the course of employment),
Executive's entire right, title and interest in and to any and all inventions,
developments, discoveries, models, or any other intellectual property of any
type or nature whatsoever ("Intellectual Property") developed during the Term of
this Agreement, whether developed by Executive during or after business hours,
or alone or in connection with others, reasonably related to the business of the
Company, the Subsidiaries and their respective successors or assigns, determined
as such business is constituted at the time of the invention. Executive agrees,
at the Company's expense, to take all steps necessary or proper to vest title to
all such Intellectual Property in the Company, its affiliates, successors,
assigns, nominees or designees, and to cooperate fully and assist the VIALOG
Group in any litigation or other proceedings involving any such Intellectual
Property.
9. Restrictive Covenants. During the Restricted Period (defined
---------------------
below), Executive will not, directly or indirectly, for Executive's own account
or for or on behalf of any other person or entity, whether as an officer,
director, employee, partner, principal, joint venturer, consultant, investor,
shareholder, independent contractor or otherwise:
(a) engage in any business in competition with the then business of
the VIALOG Group, or in competition with any business that the VIALOG
Group, to the Executive's knowledge, actively was planning to enter at the time
of the termination of Executive's employment;
(b) solicit or accept business in competition with the VIALOG Group
from any (i) clients of the VIALOG Group who were clients of the VIALOG
Group at the time of the termination of Executive's employment, or who were
clients during the one (1) year period preceding such termination, or (ii) any
prospective clients of the VIALOG Group who, within two (2) years prior to
such termination, had been solicited directly by Executive or where Executive
supervised or participated in such solicitation activities; or
4
<PAGE>
(c) hire or employ, or attempt to hire or employ, in any fashion
(whether as an employee, independent contractor or otherwise), any employee or
independent contractor of the VIALOG Group, or solicit or induce, or attempt
to solicity or induce, any of the VIALOG Group's employees, consultants,
clients, customers, vendors, suppliers, or independent contractors to terminate
their relationship with the VIALOG Group; or
(d) speak or act in any manner that is intended to, or does in fact,
damage the goodwill or the business or reputation of the VIALOG Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Merger Closing, as that term is defined in the Acquisition
Agreements, and ending on the later of (i) three (3) years after the Merger
Closing or (ii) the first anniversary of the last day of the Severance Period.
Executive may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the VIALOG Group so long as Executive
does not otherwise (i) participate in the management or operation of any such
business, or (ii) violate any other provision of this Agreement.
Executive understands and agrees that, by virtue of Executive's position
with the Company, Executive will have substantial access to and impact on the
good will, confidential information and other legitimate business interests of
the VIALOG Group, and therefore will be in a position to have a substantial
adverse impact on the VIALOG Group's business interests should Executive
engage in business in competition with the VIALOG Group. Executive
acknowledges that Executive's adherence to the restrictive covenants set forth
in this Section is an important and substantial part of the consideration that
the Company is receiving under this Agreement, and agrees that the restrictive
covenants in this Section are enforceable in all respects. Executive consents
to the entry of injunctive relief to enforce such covenants, in addition to such
other relief to which the Company may be entitled by law.
10. Specific Performance. Executive acknowledges that the VIALOG
--------------------
Group's remedy at law for breach of Sections 7, 8 and 9 of this Agreement would
be inadequate, and agrees that, for breach of such provisions, the VIALOG
Group is entitled to injunctive relief and to enforce its rights by an action
for specific performance.
11. Choice of Law. This Agreement, and all disputes arising under or
-------------
related to it, will be governed by the law of the _______ of ________.
12. Choice of Forum. All disputes arising under or out of this
---------------
Agreement will be brought in courts of competent jurisdiction located within the
________ of ______________.
5
<PAGE>
13. Assignment. This Agreement, and the rights and obligations of
----------
Executive and the Company, inures to the benefit of and is binding upon,
Executive, Executive's heirs and representatives, and upon the Company, the
Subsidiaries and their respective successors and assigns. This Agreement may
not be assigned by Executive. This Agreement may be assigned to any member of
the VIALOG Group.
14. Notices. All notices required by this Agreement will be in writing
-------
and will be deemed to have been duly delivered when delivered in person or when
mailed by certified mail, return receipt requested, or nationally recognized
next day delivery service, as follows:
(a) If to Executive, to the address which appears below Executive's
signature to this Agreement
(b) If to the Company
[INSERT COMPANY ADDRESS]
or to such other address as a party specifies in writing given in accordance
with this Section.
15. Severability. If any one or more of the provisions of this Agreement
------------
is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired. Moreover, if any one or more of the provisions contained in this
Agreement is held to be excessively broad as to duration, activity or subject,
such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
16. Consultation with Counsel; No Representations. Executive acknowledges
---------------------------------------------
that Executive has had a full and complete opportunity to consult with counsel
of Executive's own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has made no representations
or warranties to Executive concerning the terms, enforceability or implications
of this Agreement other than are as reflected in this Agreement.
Executed under seal as of __________, 1997.
[EXECUTIVE] [COMPANY]
- ----------------------------- --------------------------------
Name:
By:
- ----------------------------- -----------------------------
Address: Name:
Title:
- -----------------------------
6
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of ________, 1997 by and between
_____________, a __________ corporation with its principal place of business at
_______________ (the "Company") and David Lipsky, an individual residing at
________________ ("Executive").
FACTS
The Company and various other business entities have become wholly-owned
subsidiaries (the "Subsidiaries") of VIALOG Corporation, a Massachusetts
Corporation ("VIALOG"), in connection with the acquisition of the Subsidiaries
by VIALOG (the "Acquisitions") pursuant to various Agreements and Plans of
Reorganization or Stock or Asset Purchase Agreements (the "Acquisition
Agreements").
Executive has realized, and will continue to realize, substantial value
as a result of the Acquisitions and a subsequent public offering of shares of
VIALOG.
The Company desires to employ Executive as a senior executive with the
duties, responsibilities, rights and obligations set forth below, and Executive
desires to be so employed.
In Executive's capacity as a senior executive of the Company, Executive
will obtain access to, and be in a position to adversely affect, the
confidential information and good will of VIALOG and its Subsidiaries
(VIALOG and the Subsidiaries collectively and each individually referred to
as the "VIALOG Group").
AGREEMENT
In consideration of the foregoing and of the covenants and agreements set
forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on the Merger
----
Closing, as that term is defined in the Acquisition Agreements (the "Effective
Date"), and will continue for two years from the Effective Date unless
terminated in accordance with the provisions of Section 6 of this Agreement (the
"Term").
2. Duties and Responsibilities. The Company agrees to employ
---------------------------
Executive, and Executive agrees to be employed, as [TITLE], and Executive will
perform all of the duties and responsibilities of said office, subject to
direction by the Chief Executive Officer and the Board of Directors of the
Company. In addition, Executive will perform such other specific tasks and
responsibilities, consistent with Executive's position as [TITLE], as may be
assigned to him from time to time by the Chief Executive Officer and the Board
of Directors of the Company. The Company will have the right to reassign
Executive to such other positions in the Company or within the VIALOG Group
as the Company may determine so long as such other positions
<PAGE>
involved a substantially similar level of compensation, authority and
responsibility as the position of [TITLE]. However, Executive will not be
required to locate outside the ________ area without Executive's consent.
Executive will devote substantially all of Executive's business time, labor,
skill and best efforts to carrying out Executive's duties and responsibilities
under this Agreement. Executive may engage in side business activities so long
as (i) Executive does not otherwise violate any other provision of this
Agreement, and (ii) such side business activities do not interfere with
Executive's ability to carry out Executive's duties and responsibilities under
this Agreement. Executive will travel to whatever extent may be reasonably
necessary in the conduct of the VIALOG Group's business and Executive's
duties and responsibilities under this Agreement.
3. Compensation. Subject to Executive's adherence to Executive's
------------
responsibilities and obligations under this Agreement, the Company agrees to pay
Executive a base compensation at the annual rate of $225,000 and such additional
compensation as may be mutually agreed upon from time to time by the Company and
Executive. Executive will be eligible for such increases (but not decreases) in
base compensation, and to participate in such bonus and/or incentive
compensation plans, as shall be made available from time to time to similarly
situated senior executives of the Company.
4. Benefits and Vacation. Executive will be eligible to participate in
---------------------
and/or receive such group insurance plans, other fringe benefit plans and
vacation as the Company makes available to similarly situated senior executives.
During the term of this Agreement, Executive will receive an automobile
allowance in the amount of $750 per month.
5. Expense Reimbursement. Executive will be entitled to reimbursement
---------------------
for business expenses incurred by Executive connection with the performance of
Executive's duties and responsibilities under this Agreement upon submission of
documentation in accordance with such procedures as the Company may establish
from time to time.
6. Termination. The Company may terminate Executive's employment at
-----------
any time during the Term for any reason as follows:
(a) By the Company for Cause. The Company has the right to
------------------------
terminate Executive's employment immediately for "Cause". For purposes of this
Agreement only, the term "Cause" means material breach of any provision of this
Agreement; material willful misconduct in the performance of Executive's duties
or responsibilities; material willful nonperformance of Executive's duties or
responsibilities other than by reason of disability; conviction of, or written
admission to, a felony or other crime involving moral turpitude; imprisonment
for any crime constituting a felony; any act involving theft, embezzlement or
fraud; or a material violation of any written policy of the Company. If
Executive's employment is terminated for Cause, the Company will only be
obligated to pay Executive his base compensation through the date of such
termination, together with such other benefits or payments to which Executive
may be entitled (in the event of a Cause termination) by law or pursuant to
benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7, 8 and 9 of this Agreement.
2
<PAGE>
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident, disability or any
other physical or mental condition, from substantially performing Executive's
duties and responsibilities under this Agreement for one or more periods
totaling one hundred fifty (150) days in any (12) month period. If Executive's
employment is terminated pursuant to this section, Executive will be entitled to
receive such base compensation and group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to the greater of (i) one (1) year, or (ii) the remainder of the
Term had Executive remained employed by the Company, which amount will be
reduced by only the amount actually received by Executive under any disability
plans maintained by the Company. Executive will also be entitled to receive
such payments or benefits to which Executive may be entitled by law or pursuant
to benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7, 8 and 9 of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will
-----
pay to Executive's estate, designated beneficiary, or legal representative such
base compensation and group insurance benefits as Executive would have received
(at such times as Executive would have received them) during a period equal to
the greater of (i) one (1) year, or (ii) the remainder of the Term, together
with such other benefits or payments to which Executive may be entitled by law
or pursuant to benefit plans of the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability or Death. The Company and Executive each have the right to terminate
- -------------------
Executive's employment upon thirty (30) days' prior written notice. If
Executive's employment is terminated pursuant to this Section 6(d) during the
Term by the Company, Executive will be entitled to receive such base
compensation and group insurance benefits as Executive would have received (at
such times as Executive would have received them) during a period equal to the
greater of (i) one (1) year or (ii) the remainder of the Term had Executive
remained employed by the Company (the "Severance Period"), together with such
other payments and benefits to which Executive may be entitled by law or
pursuant to benefit plans of the Company then in effect. Executive will remain
bound by Executive's obligations under Sections 7, 8 and 9 of this Agreement.
7. Confidentiality. Executive will not at any time, without the
---------------
Company's prior written consent, reveal or disclose to any person outside of the
VIALOG Group, or use for his own benefit or the benefit of any other person
or entity, any confidential information concerning the business or affairs of
the VIALOG Group, or concerning the customers, clients or employees of the
VIALOG Group ("Confidential Information"). For purposes of this Agreement,
Confidential Information includes, but is not limited to, financial information
or plans; sales and marketing information or plans; business or strategic plans;
salary, bonus or other personnel information of any type; information concerning
methods of operation; proprietary systems or software; legal or regulatory
information; cost and pricing information or policies; information concerning
new or potential products or markets; models, practices, procedures, strategies
or related information; research and/or analysis; and information concerning new
or potential
3
<PAGE>
investors, customers, or clients. Confidential Information does not include
Confidential Information already available to the public through no act of
Executive's, nor does it include salary, bonus or other personnel information
specific to Executive.
Executive further understands and agrees that all Confidential
Information, however or whenever produced, will be the VIALOG Group's sole
property, and will not be removed by Executive (or anyone acting at Executive's
direction or on Executive's behalf) from the VIALOG Group's custody or
premises without the Company's prior written consent. Upon the termination of
Executive's employment, Executive will promptly deliver to the Company all
copies of all documents, equipment, property or materials of any type in
Executive's possession, custody or control, that belong to the VIALOG Group,
and/or that contain, in whole or in part, any Confidential Information.
8. Inventions. During the Term of this Agreement, Executive will
----------
promptly disclose to the Company or any successor or assign, and grant to the
Company and its successors and assigns (without any separate remuneration or
compensation other than that received by Executive in the course of employment),
Executive's entire right, title and interest in and to any and all inventions,
developments, discoveries, models, or any other intellectual property of any
type or nature whatsoever ("Intellectual Property") developed during the Term of
this Agreement, whether developed by Executive during or after business hours,
or alone or in connection with others, reasonably related to the business of the
Company, the Subsidiaries and their respective successors or assigns, determined
as such business is constituted at the time of the invention. Executive agrees,
at the Company's expense, to take all steps necessary or proper to vest title to
all such Intellectual Property in the Company, its affiliates, successors,
assigns, nominees or designees, and to cooperate fully and assist the VIALOG
Group in any litigation or other proceedings involving any such Intellectual
Property.
9. Restrictive Covenants. During the Restricted Period (defined
---------------------
below), Executive will not, directly or indirectly, for Executive's own account
or for or on behalf of any other person or entity, whether as an officer,
director, employee, partner, principal, joint venturer, consultant, investor,
shareholder, independent contractor or otherwise:
(a) engage in any business in competition with the then business of
the VIALOG Group, or in competition with any business that the VIALOG
Group, to the Executive's knowledge, actively was planning to enter at the time
of the termination of Executive's employment;
(b) solicit or accept business in competition with the VIALOG
Group from any (i) clients of the VIALOG Group who were clients of the
VIALOG Group at the time of the termination of Executive's employment, or who
were clients during the one (1) year period preceding such termination, or (ii)
any prospective clients of the VIALOG Group who, within two (2) years prior
to such termination, had been solicited directly by Executive or where Executive
supervised or participated in such solicitation activities; or
4
<PAGE>
(c) hire or employ, or attempt to hire or employ, in any fashion
(whether as an employee, independent contractor or otherwise), any employee or
independent contractor of the VIALOG Group, or solicit or induce, or attempt
to solicit or induce, any of the VIALOG Group's employees, consultants,
clients, customers, vendors, suppliers, or independent contractors to terminate
their relationship with the VIALOG Group; or
(d) speak or act in any manner that is intended to, or does in fact,
damage the goodwill or the business or reputation of the VIALOG Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Merger Closing, as that term is defined in the Acquisition
Agreements, and ending on the later of (i) three (3) years after the Merger
Closing or (ii) the first anniversary of the last day of the Severance Period.
Executive may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the VIALOG Group so long as Executive
does not otherwise (i) participate in the management or operation of any such
business, or (ii) violate any other provision of this Agreement.
Executive understands and agrees that, by virtue of Executive's position
with the Company, Executive will have substantial access to and impact on the
good will, confidential information and other legitimate business interests of
the VIALOG Group, and therefore will be in a position to have a substantial
adverse impact on the VIALOG Group's business interests should Executive
engage in business in competition with the VIALOG Group. Executive
acknowledges that Executive's adherence to the restrictive covenants set forth
in this Section is an important and substantial part of the consideration that
the Company is receiving under this Agreement, and agrees that the restrictive
covenants in this Section are enforceable in all respects. Executive consents
to the entry of injunctive relief to enforce such covenants, in addition to such
other relief to which the Company may be entitled by law.
10. Specific Performance. Executive acknowledges that the VIALOG
--------------------
Group's remedy at law for breach of Sections 7, 8 and 9 of this Agreement would
be inadequate, and agrees that, for breach of such provisions, the VIALOG
Group is entitled to injunctive relief and to enforce its rights by an action
for specific performance.
11. Choice of Law. This Agreement, and all disputes arising under or
-------------
related to it, will be governed by the law of the ______ of ________.
12. Choice of Forum. All disputes arising under or out of this
---------------
Agreement will be brought in courts of competent jurisdiction located within the
___________ of __________.
13. Assignment. This Agreement, and the rights and obligations of
----------
Executive and the Company, inures to the benefit of and is binding upon,
Executive, Executive's heirs and
5
<PAGE>
representatives, and upon the Company, the Subsidiaries and their respective
successors and assigns. This Agreement may not be assigned by Executive. This
Agreement may be assigned to any member of the VIALOG Group.
14. Notices. All notices required by this Agreement will be in writing
-------
and will be deemed to have been duly delivered when delivered in person or when
mailed by certified mail, return receipt requested, or nationally recognized
next day delivery service, as follows:
(a) If to Executive, to the address which appears below Executive's
signature to this Agreement
(b) If to the Company
[INSERT COMPANY ADDRESS]
or to such other address as a party specifies in writing given in accordance
with this Section.
15. Severability. If any one or more of the provisions of this Agreement
------------
is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired. Moreover, if any one or more of the provisions contained in this
Agreement is held to be excessively broad as to duration, activity or subject,
such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
16. Consultation with Counsel; No Representations. Executive
---------------------------------------------
acknowledges that Executive has had a full and complete opportunity to consult
with counsel of Executive's own choosing concerning the terms, enforceability
and implications of this Agreement, and that the Company has made no
representations or warranties to Executive concerning the terms, enforceability
or implications of this Agreement other than are as reflected in this Agreement.
Executed under seal as of ___________, 1997.
[EXECUTIVE] [COMPANY]
- ------------------------------ ---------------------------
Name:
By:
- ------------------------------ ------------------------
Address: Name:
Title:
- ------------------------------
6
<PAGE>
Exhibit 10.19
COMMUNICATION DEVELOPMENT CORPORATION
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of _______, 1997 by and between
_________, a ________ corporation with its principal place of business at
________________ (the "Company") and Patti R. Bisbano, an individual residing at
__________________ ("Executive").
FACTS
The Company and various other business entities have become wholly-owned
subsidiaries (the "Subsidiaries") of VIALOG Corporation, a Massachusetts
Corporation ("VIALOG"), in connection with the acquisition of the Subsidiaries
by VIALOG (the "Acquisition") pursuant to various Agreements and Plans of
Reorganization or Stock or Asset Purchase Agreements (the "Acquisition
Agreements").
Executive has realized, and will continue to realize, substantial value
as a result of the Acquisitions and a subsequent public offering of shares of
VIALOG.
The Company desires to employ Executive as a senior executive with the
duties, responsibilities, rights and obligations set forth below, and Executive
desires to be so employed.
In Executive's capacity as a senior executive of the Company, Executive
will obtain access to, and be in a position to adversely affect, the
confidential information and good will of VIALOG and its Subsidiaries
(VIALOG and the Subsidiaries collectively and each individually referred to
as the "VIALOG Group").
AGREEMENT
In consideration of the foregoing and of the covenants and agreements set
forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on the Merger
----
Closing, as that term is defined in the Acquisition Agreements (the "Effective
Date"), and will continue for three years from the Effective Date unless
terminated in accordance with the provisions of Section 6 of this Agreement (the
"Term").
2. Duties and Responsibilities. The Company agrees to employ
---------------------------
Executive, and Executive agrees to be employed, as [TITLE], and Executive will
perform all of the duties and responsibilities of said office, subject to
direction by the Chief Executive Officer [Chief Executive Officer of VIALOG]
and the Board of Directors of the Company. In addition, Executive will perform
such other specific tasks and responsibilities, consistent with Executive's
position as [TITLE], as may be assigned to him from time to time by the Chief
Executive
<PAGE>
Officer [Chief Executive Officer of VIALOG] and the Board of Directors of the
Company. The Company will have the right to reassign Executive to such other
positions in the Company or within the VIALOG Group as the Company may
determine so long as such other positions involved a substantially similar level
of compensation, authority and responsibility as the position of [TITLE].
However, Executive will not be required to locate outside the Danbury,
Connecticut area without Executive's consent. Executive will devote
substantially all of Executive's business time, labor, skill and best efforts to
carrying out Executive's duties and responsibilities under this Agreement.
Executive may engage in side business activities so long as (i) Executive does
not otherwise violate any other provision of this Agreement, and (ii) such side
business activities do not interfere with Executive's ability to carry out
Executive's duties and responsibilities under this Agreement. Executive will
travel to whatever extent may be reasonably necessary in the conduct of the
VIALOG Group's business and Executive's duties and responsibilities under
this Agreement.
3. Compensation. Subject to Executive's adherence to Executive's
------------
responsibilities and obligations under this Agreement, the Company agrees to pay
Executive a base compensation at the annual rate of $110,000 and such additional
compensation as may be mutually agreed upon from time to time by the Company and
Executive. Executive will be eligible for such increases (but not decreases) in
base compensation which shall be not less than 10% per annum, and to participate
in such bonus and/or incentive compensation plans, as shall be made available
from time to time to similarly situated senior executives of the Company.
4. Benefits and Vacation. Executive will be eligible to participate in
---------------------
and/or receive such group insurance plans, other fringe benefit plans and
vacation as the Company makes available to similarly situated senior executives.
5. Expense Reimbursement. Executive will be entitled to reimbursement
---------------------
for business expenses incurred by Executive connection with the performance of
Executive's duties and responsibilities under this Agreement upon submission of
documentation in accordance with such procedures as the Company may establish
from time to time.
6. Termination. The Company may terminate Executive's employment at
-----------
any time during the Term for any reason as follows:
(a) By the Company for Cause. The Company has the right to terminate
------------------------
Executive's employment immediately for "Cause". For purposes of this Agreement
only, the term "Cause" means material breach of any provision of this Agreement;
material willful misconduct in the performance of Executive's duties or
responsibilities; material willful nonperformance of Executive's duties or
responsibilities other than by reason of disability; conviction of, or written
admission to, a felony or other crime involving moral turpitude; imprisonment
for any crime constituting a felony; any act involving theft, embezzlement or
fraud; or a material violation of any written policy of the Company. If
Executive's employment is terminated for Cause, the Company will only be
obligated to pay Executive his base compensation through the date of such
termination, together with such other benefits or payments to which Executive
may be entitled (in the event of a Cause termination) by law or
2
<PAGE>
pursuant to benefit plans of the Company then in effect. Executive will remain
bound by Executive's obligations under Sections 7, 8 and 9 of this Agreement.
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident, disability or any
other physical or mental condition, from substantially performing Executive's
duties and responsibilities under this Agreement for one or more periods
totaling one hundred fifty (150) days in any (12) month period. If Executive's
employment is terminated pursuant to this section, Executive will be entitled to
receive such base compensation and group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to the greater of (i) one (1) year, or (ii) the remainder of the
Term had Executive remained employed by the Company, which amount will be
reduced by only the amount actually received by Executive under any disability
plans maintained by the Company. Executive will also be entitled to receive
such payments or benefits to which Executive may be entitled by law or pursuant
to benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7, 8 and 9 of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will
-----
pay to Executive's estate, designated beneficiary, or legal representative such
base compensation and group insurance benefits as Executive would have received
(at such times as Executive would have received them) during a period equal to
the greater of (i) one (1) year, or (ii) the remainder of the Term, together
with such other benefits or payments to which Executive may be entitled by law
or pursuant to benefit plans of the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability or Death. The Company and Executive each have the right to terminate
- -------------------
Executive's employment upon thirty (30) days' prior written notice. If
Executive's employment is terminated pursuant to this Section 6 (d) during the
Term by the Company, Executive will be entitled to receive such base
compensation and group insurance benefits as Executive would have received (at
such times as Executive would have received them) during a period equal to the
greater of (i) one year or (ii) the remainder of the Term had Executive remained
employed by the Company (the "Severance Period"), together with such other
payments and benefits to which Executive may be entitled by law or pursuant to
benefit plans of the Company then in effect. Executive will remain bound by
Executive's obligations under Sections 7, 8 and 9 of this Agreement.
7. Confidentiality. Executive will not at any time, without the
---------------
Company's prior written consent, reveal or disclose to any person outside of the
VIALOG Group, or use for his own benefit or the benefit of any other person
or entity, any confidential information concerning the business or affairs of
the VIALOG Group, or concerning the customers, clients or employees of the
VIALOG Group ("Confidential Information"). For purposes of this Agreement,
Confidential Information includes, but is not limited to, financial information
or plans; sales and marketing information or plans; business or strategic plans;
salary, bonus or other personnel information of any type; information concerning
methods of operation; proprietary systems or software; legal or regulatory
information; cost and pricing information or policies; information concerning
new or potential products or markets; models, practices, procedures, strategies
or
3
<PAGE>
related information; research and/or analysis; and information concerning new or
potential investors, customers, or clients. Confidential Information does not
include Confidential Information already available to the public through no act
of Executive's, nor does it include salary, bonus or other personnel information
specific to Executive nor does it include information Executives must disclose
as a result of judicial rules or court order.
Executive further understands and agrees that all Confidential
Information, however or whenever produced, will be the VIALOG Group's sole
property, and will not be removed by Executive (or anyone acting at Executive's
direction or on Executive's behalf) from the VIALOG Group's custody or
premises without the Company's prior written consent. Upon the termination of
Executive's employment, Executive will promptly deliver to the Company all
copies of all documents, equipment, property or materials of any type in
Executive's possession, custody or control, that belong to the VIALOG Group,
and/or that contain, in whole or in part, any Confidential Information.
8. Inventions. During the Term of this Agreement, Executive will
----------
promptly disclose to the Company or any successor or assign, and grant to the
Company and its successors and assigns (without any separate remuneration or
compensation other than that received by Executive in the course of employment),
Executive's entire right, title and interest in and to any and all inventions,
developments, discoveries, models, or any other intellectual property of any
type or nature whatsoever ("Intellectual Property") developed during the Term of
this Agreement, whether developed by Executive during or after business hours,
or alone or in connection with others, reasonably related to the business of the
Company, the Subsidiaries and their respective successors or assigns, determined
as such business is constituted at the time of the invention. Executive agrees,
at the Company's expense, to take all steps necessary or proper to vest title to
all such Intellectual Property in the Company, its affiliates, successors,
assigns, nominees or designees, and to cooperate fully and assist the VIALOG
Group in any litigation or other proceedings involving any such Intellectual
Property.
9. Restrictive Covenants. During the Restricted Period (defined
---------------------
below), Executive will not, directly or indirectly, for Executive's own account
or for or on behalf of any other person or entity, whether as an officer,
director, employee, partner, principal, joint venturer, consultant, investor,
shareholder, independent contractor or otherwise:
(a) engage in any business in competition with the then business of
the VIALOG Group at the time of the termination of Executive's employment;
(b) solicit business in competition with the VIALOG Group from
any (i) clients of the VIALOG Group who were clients of the VIALOG Group
at the time of the termination of Executive's employment;
(c) hire or employ, or attempt to hire or employ, in any fashion
(whether as an employee, independent contractor or otherwise), any employee or
independent contractor of the VIALOG Group, or solicit or induce, or attempt
to solicit or induce, any of the VIALOG Group's
4
<PAGE>
employees, consultants, clients, customers, vendors, suppliers, or independent
contractors to terminate their relationship with the VIALOG Group; or
(d) speak or act in any manner that is intended to, or does in fact,
damage the goodwill or the business or reputation of the VIALOG Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Merger Closing, as that term is defined in the Acquisition
Agreements, and ending on the later of (i) one (1) year from the termination
date of this Agreement or (ii) two (2) years after the last day of the Severance
Period.
Executive understands and agrees that, by virtue of Executive's position
with the Company, Executive will have substantial access to and impact on the
good will, confidential information and other legitimate business interests of
the VIALOG Group, and therefore will be in a position to have a substantial
adverse impact on the VIALOG Group's business interests should Executive
engage in business in competition with the VIALOG Group. Executive
acknowledges that Executive's adherence to the restrictive covenants set forth
in this Section is an important and substantial part of the consideration that
the Company is receiving under this Agreement, and agrees that the restrictive
covenants in this Section are enforceable in all respects. Executive consents
to the entry of injunctive relief to enforce such covenants, in addition to such
other relief to which the Company may be entitled by law.
10. Specific Performance. Executive acknowledges that the VIALOG
--------------------
Group's remedy at law for breach of Sections 7, 8 and 9 of this Agreement would
be inadequate, and agrees that, for breach of such provisions, the VIALOG
Group is entitled to injunctive relief and to enforce its rights by an action
for specific performance.
11. Choice of Law. This Agreement, and all disputes arising under or
-------------
related to it, will be governed by the law of the State of Connecticut.
12. Choice of Forum. All disputes arising under or out of this
---------------
Agreement will be brought in courts of competent jurisdiction located within the
State of Connecticut.
5
<PAGE>
13. Assignment. This Agreement, and the rights and obligations of
----------
Executive and the Company, inures to the benefit of and is binding upon,
Executive, Executive's heirs and representatives, and upon the Company, the
Subsidiaries and their respective successors and assigns. This Agreement may
not be assigned by Executive. This Agreement may be assigned to any member of
the VIALOG Group.
14. Notices. All notices required by this Agreement will be in writing
-------
and will be deemed to have been duly delivered when delivered in person or when
mailed by certified mail, return receipt requested, or nationally recognized
next day delivery service, as follows:
(a) If to Executive, to the address which appears below Executive's
signature to this Agreement
(b) If to the Company
[INSERT COMPANY ADDRESS]
or to such other address as a party specifies in writing given in accordance
with this Section.
15. Severability. If any one or more of the provisions of this Agreement
------------
is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired. Moreover, if any one or more of the provisions contained in this
Agreement is held to be excessively broad as to duration, activity or subject,
such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
16. Consultation with Counsel; No Representations. Executive acknowledges
---------------------------------------------
that Executive has had a full and complete opportunity to consult with counsel
of Executive's own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has made no representations
or warranties to Executive concerning the terms, enforceability or implications
of this Agreement other than are as reflected in this Agreement.
Executed under seal as of _________, 1997.
[EXECUTIVE]
__________________________ __________________________________
Name:
By:
__________________________ __________________________________
Address: Name:
Title:
__________________________
6
<PAGE>
Exhibit 10.20
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of February 7, 1997 by and between
InterPlay Corporation, a Massachusetts corporation (the "Company") and Bruce T.
Guzowski ("Executive").
FACTS
The Company desires to employ Executive as a senior executive with the
duties, responsibilities, rights and obligations set forth below, and Executive
desires to be so employed.
In Executive's capacity as a senior executive of the Company, Executive
will obtain access to, and be in a position to adversely affect, the
confidential information and good will of InterPlay and its subsidiaries
(InterPlay and the subsidiaries collectively and each individually referred to
as the "InterPlay Group").
AGREEMENT
In consideration of the foregoing and of the covenants and agreements
set forth in this Agreement, the Company and the Executive agree as follows:
1. Term. The term of this Agreement will commence on February 7,
----
1997 (the "Effective Date"), and will continue until terminated in accordance
with the provisions of Section 6 of this Agreement (the "Term").
2. Duties and Responsibilities. The Company agrees to employ
---------------------------
Executive, and Executive agrees to be employed, as Chief Financial Officer and
Senior Vice President of Finance, and Executive will perform all of the duties
and responsibilities of said office, subject to direction by the Chief Executive
Officer and the Board of Directors of the Company. In addition, Executive will
perform such other specific tasks and responsibilities, consistent with
Executive's position as Chief Financial Officer and Senior Vice President of
Finance, as may be assigned to Executive from time to time by the Chief
Executive Officer and the Board of Directors of the Company. The Company will
have the right to reassign Executive to such other positions in the Company or
within the InterPlay Group as the Company may determine so long as such other
positions involved a substantially similar level of compensation, authority and
responsibility as the position of Chief Financial Officer and Senior Vice
President of Finance. However, Executive will not be required to locate outside
the Greater Boston metropolitan area without Executive's consent. Executive
will devote substantially all of Executive's business time, labor, skill and
best efforts to carrying out Executive's duties and responsibilities under this
Agreement. Executive may engage in side business activities so long as (i)
Executive does not otherwise violate any other provision of this Agreement, and
(ii) such side business activities do not interfere with Executive's ability to
carry out Executive's duties and responsibilities under this
<PAGE>
Agreement. Executive will travel to whatever extent may be reasonably necessary
in the conduct of the InterPlay Group's business and Executive's duties and
responsibilities under this Agreement.
3. Compensation. Subject to Executive's adherence to Executive's
------------
responsibilities and obligations under this Agreement, the Company agrees to pay
Executive a base compensation at the annual rate of $1.00 until the earlier of
(a) the completion by the Company of its Initial Public Offering ("IPO") or (b)
the completion of a merger of the Company with any other entity or the sale of
substantially all of the assets of the Company to another entity or the sale of
more than fifty percent of the common stock of the Company to an unrelated party
in one or a series of transactions (any such event, a "Change in Control") and
thereafter at the annual rate of $150,000 and such additional compensation as
may be mutually agreed upon from time to time by the Company and Executive.
Within thirty (30) days following the closing of the IPO or a Change in Control
(the "Closing Date") the Executive will receive a cash bonus equal to the number
of days from the Effective Date to the Closing Date multiplied by the
Executive's "daily rate" ($150,000 divided by 365). The Executive will receive
a cash bonus in the amount of $25,000, subject only to both the completion of
the IPO and the satisfaction of the criteria set forth on Schedule 1 to this
----------
Agreement. Executive will be eligible for such increases (but not decreases) in
base compensation, and to participate in such bonus and/or incentive
compensation plans, as shall be made available from time to time to similarly
situated senior executives of the Company.
4. Benefits and Vacation; Accelerated Vesting of ISO. Executive will
-------------------------------------------------
be eligible to participate in and/or receive such group insurance plans, other
fringe benefit plans and vacation as the Company makes available to similarly
situated senior executives. If the Executive is granted an incentive stock
option ("ISO") prior to the Closing Date, then following the Closing Date the
ISO will be subject to the following accelerated vesting schedule after the
Closing Date:
a. one-third of the shares subject to the ISO, less any
shares previously vested, will be deemed vested at such time as the average
market capitalization of the Common Stock exceeds $125,000,000 in a 90-day
period;
b. two-thirds of the shares subject to the ISO, less any
shares previously vested, will be deemed vested at such time as the average
market capitalization of the Common Stock exceeds $200,000,000 in a 90-day
period; and
c. all of the shares subject to the ISO will be deemed
vested at such time as the average market capitalization of the Common Stock
exceeds $300,000,000 in a 90-day period.
5. Expense Reimbursement. Executive will be entitled to
---------------------
reimbursement for business expenses incurred by Executive connection with the
performance of Executive's duties and responsibilities under this Agreement upon
submission of documentation in accordance with such procedures as the Company
may establish from time to time.
6. Termination. The Company may terminate Executive's employment at
-----------
any time during the Term for any reason as follows:
2
<PAGE>
(a) By the Company for Cause. The Company has the right to terminate
------------------------
Executive's employment immediately for "Cause" if Executive shall not have cured
such breach within thirty (30) days of receipt of a written notice from the
Company detailing such breach (if such breach could in fact be cured). For
purposes of this Agreement only, the term "Cause" means material breach of any
provision of this Agreement; material willful misconduct in the performance of
Executive's duties or responsibilities; material willful nonperformance of
Executive's duties or responsibilities other than by reason of disability;
conviction of, or written admission to, a felony or other crime involving moral
turpitude; imprisonment for any crime constituting a felony; any act involving
theft, embezzlement or fraud; or a material violation of any written policy of
the Company. If Executive's employment is terminated for Cause, the Company
will only be obligated to pay Executive's base compensation through the date of
such termination, together with such other benefits or payments to which
Executive may be entitled (in the event of a Cause termination) by law or
pursuant to benefit plans of the Company then in effect. Executive will remain
bound by Executive's obligations under Sections 7, 8 and 9 of this Agreement.
(b) Disability. The Company has the right to terminate Executive's
----------
employment if Executive is prevented, by illness, accident, disability or any
other physical or mental condition, from substantially performing Executive's
duties and responsibilities under this Agreement for one or more periods
totaling one hundred fifty (150) days in any (12) month period. If Executive's
employment is terminated pursuant to this section, Executive will be entitled to
receive such base compensation and group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to the greater of (i) one (1) year, or (ii) the remainder of the
Term had Executive remained employed by the Company, which amount will be
reduced by only the amount actually received by Executive under any disability
plans maintained by the Company. Executive will also be entitled to receive at
the Company's expense such payments or benefits to which Executive may be
entitled by law or pursuant to benefit plans of the Company then in effect.
Executive will remain bound by Executive's obligations under Sections 7, 8 and 9
of this Agreement.
(c) Death. If Executive dies during the Term, then the Company will
-----
pay to Executive's estate, designated beneficiary, or legal representative such
base compensation and group insurance benefits as Executive would have received
(at such times as Executive would have received them) during a period equal to
the greater of (i) one (1) year, or (ii) the remainder of the Term, together
with such other benefits or payments to which Executive may be entitled by law
or pursuant to benefit plans of the Company then in effect.
(d) Resignation and Termination by the Company Other than for Cause,
----------------------------------------------------------------
Disability or Death. The Company and Executive each have the right to terminate
- -------------------
Executive's employment upon thirty (30) days' prior written notice. Executive
will in any event remain bound by Executive's obligations under Sections 7, 8
and 9 of this Agreement. If Executive's employment is terminated by the
Executive, then the Executive will not be entitled to any severance payments.
If Executive's employment is terminated by the Company pursuant to this Section
6(d) before the Closing Date, then the Executive will not be entitled to any
severance payments. If Executive's employment is terminated by the Company
pursuant to this Section 6(d) after the Closing Date, Executive will be entitled
to receive (i) a severance payment of six months' then current salary, such
severance payment to be paid in six equal monthly installments commencing on the
first day of the first month following such
3
<PAGE>
termination; and (ii) continuation, at the Company's sole expense, of all fringe
benefits until the earlier of (A) six months from the date of the termination
(the "Severance Period") or (B) such time as the Executive obtains other
employment.
7. Confidentiality. Executive will not at any time, without the
---------------
Company's prior written consent, reveal or disclose to any person outside of the
InterPlay Group, or use for Executive's own benefit or the benefit of any other
person or entity, any confidential information concerning the business or
affairs of the InterPlay Group, or concerning the customers, clients or
employees of the InterPlay Group ("Confidential Information"). For purposes of
this Agreement, Confidential Information includes, but is not limited to,
financial information or plans; sales and marketing information or plans;
business or strategic plans; salary, bonus or other personnel information of any
type; information concerning methods of operation; proprietary systems or
software; legal or regulatory information; cost and pricing information or
policies; information concerning new or potential products or markets; models,
practices, procedures, strategies or related information; research and/or
analysis; and information concerning new or potential investors, customers, or
clients. Confidential Information does not include Confidential Information
already available to the public through no act of Executive's, nor does it
include salary, bonus or other personnel information specific to Executive.
Executive further understands and agrees that all Confidential
Information, however or whenever produced, will be the InterPlay Group's sole
property. Upon the termination of Executive's employment, Executive will
promptly deliver to the Company all copies of all documents, equipment, property
or materials of any type in Executive's possession, custody or control, that
belong to the InterPlay Group, and/or that contain, in whole or in part, any
Confidential Information.
8. Inventions. During the Term of this Agreement, Executive will
----------
promptly disclose to the Company or any successor or assign, and grant to the
Company and its successors and assigns (without any separate remuneration or
compensation other than that received by Executive in the course of employment),
Executive's entire right, title and interest in and to any and all inventions,
developments, discoveries, models, or any other intellectual property of any
type or nature whatsoever ("Intellectual Property") developed during the Term of
this Agreement, whether developed by Executive during or after business hours,
or alone or in connection with others, reasonably related to the business of the
Company, the Subsidiaries and their respective successors or assigns, determined
as such business is constituted at the time of the invention. Executive agrees,
at the Company's expense, to take all steps necessary or proper to vest title to
all such Intellectual Property in the Company, its affiliates, successors,
assigns, nominees or designees, and to cooperate fully and assist the InterPlay
Group in any litigation or other proceedings involving any such Intellectual
Property.
9. Restrictive Covenants. During the Restricted Period (defined
---------------------
below), Executive will not, directly or indirectly, for Executive's own account
or for or on behalf of any other person or entity, whether as an officer,
director, employee, partner, principal, joint venturer, consultant, investor,
shareholder, independent contractor or otherwise:
4
<PAGE>
(a) engage in any business in competition with the then business
of the InterPlay Group, or in competition with any business that the InterPlay
Group, to the Executive's knowledge, actively was planning to enter at the time
of the termination of Executive's employment;
(b) solicit or accept business in competition with the InterPlay
Group from any (i) clients of the InterPlay Group who were clients of the
InterPlay Group at the time of the termination of Executive's employment, or who
were clients during the one (1) year period preceding such termination, or (ii)
any prospective clients of the InterPlay Group who, within two (2) years prior
to such termination, had been solicited directly by Executive or where Executive
supervised or participated in such solicitation activities;
(c) hire or employ, or attempt to hire or employ, in any fashion
(whether as an employee, independent contractor or otherwise), any employee or
independent contractor of the InterPlay Group, or solicit or induce, or attempt
to solicit or induce, any of the InterPlay Group's employees, consultants,
clients, customers, vendors, suppliers, or independent contractors to terminate
their relationship with the InterPlay Group; or
(d) speak or act in any manner that is intended to, or does in
fact, damage the goodwill or the business or reputation of the InterPlay Group.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Effective Date and ending on the later of (i) two years after
the Closing Date or (ii) the first anniversary of the last day of the Severance
Period.
Executive may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the InterPlay Group so long as Executive
does not otherwise (i) participate in the management or operation of any such
business, or (ii) violate any other provision of this Agreement.
Executive understands and agrees that, by virtue of Executive's
position with the Company, Executive will have substantial access to and impact
on the good will, confidential information and other legitimate business
interests of the InterPlay Group, and therefore will be in a position to have a
substantial adverse impact on the InterPlay Group's business interests should
Executive engage in business in competition with the InterPlay Group. Executive
acknowledges that Executive's adherence to the restrictive covenants set forth
in this Section is an important and substantial part of the consideration that
the Company is receiving under this Agreement, and agrees that the restrictive
covenants in this Section are enforceable in all respects. Executive consents
to the entry of injunctive relief to enforce such covenants, in addition to such
other relief to which the Company may be entitled by law.
10. Specific Performance. Executive acknowledges that the InterPlay
--------------------
Group's remedy at law for breach of Sections 7, 8 and 9 of this Agreement would
be inadequate, and agrees that, for breach of such provisions, the InterPlay
Group is entitled to injunctive relief and to enforce its rights by an action
for specific performance.
5
<PAGE>
11. Choice of Law. This Agreement, and all disputes arising under or
-------------
related to it, will be governed by the law of the Commonwealth of Massachusetts.
12. Choice of Forum. All disputes arising under or out of this
---------------
Agreement will be brought in courts of competent jurisdiction located within the
Commonwealth of Massachusetts.
13. Assignment. This Agreement, and the rights and obligations of
----------
Executive and the Company, inures to the benefit of and is binding upon,
Executive, Executive's heirs and representatives, and upon the Company, the
Subsidiaries and their respective successors and assigns. This Agreement may
not be assigned by Executive. This Agreement may be assigned to any member of
the InterPlay Group.
14. Notices. All notices required by this Agreement will be in
-------
writing and will be deemed to have been duly delivered when delivered in person
or when mailed by certified mail, return receipt requested, or nationally
recognized next day delivery service, as follows:
(a) If to Executive, to the address which appears below
Executive's signature to this Agreement, and
(b) If to the Company, at:
46 Manning Road
Billerica, MA 01821
or to such other address as a party specifies in writing given in accordance
with this Section.
15. Severability. If any one or more of the provisions of this
------------
Agreement is held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions will not in any way be
affected or impaired. Moreover, if any one or more of the provisions contained
in this Agreement is held to be excessively broad as to duration, activity or
subject, such provision will be construed by limiting or reducing it so as to be
enforceable to the maximum extent compatible with applicable law.
16. Consultation with Counsel; No Representations. Executive
---------------------------------------------
acknowledges that Executive has had a full and complete opportunity to consult
with counsel of Executive's own choosing concerning the terms, enforceability
and implications of this Agreement, and that the Company has made no
representations or warranties to Executive concerning the terms, enforceability
or implications of this Agreement other than are as reflected in this Agreement.
6
<PAGE>
17. Termination of Consulting Agreement. The Consulting Agreement
-----------------------------------
dated as of March 18, 1996 between Executive and the Company will be terminated
upon execution of this Agreement.
Executed under seal as of February 7, 1997.
InterPlay Corporation
/s/ By: /s/
- --------------------------- ---------------------------
Bruce T. Guzowski Name: Glenn D. Bolduc
437 Puritan Road Title: President
Swampscott, MA 01907
7
<PAGE>
Schedule 1
To Employment Agreement
-----------------------
1. Work with Company's professionals to generate pro forma financial statement
for inclusion in InterPlay's S-1 Registration Statement on a timely basis.
Filing is projected to be before 2/28/97.
2. Work with Company's professionals to complete all other financial sections
of the aforementioned S-1 Registration Statement.
3. Design, implement and demonstrate internal controls to the satisfaction of
the underwriter group associated with InterPlay's S-1 Registration
Statement filing.
<PAGE>
Exhibit 10.21
VIALOG CORPORATION
CONSULTING AGREEMENT
--------------------
This Consulting Agreement is made as of the ________ day of ___________,
1997 (the "Effective Date") by and between VIALOG CORPORATION (the "Company")
and JOHN J. HASSETT, an individual residing in the Commonwealth of Massachusetts
("Consultant").
WHEREAS, the Company has been organized for the purpose of acquiring a
number of rapidly growing businesses in the teleconferencing market known as
Teleconferencing Service Bureaus ("TCSBs") and will finance the acquisition of
TCSBs by a simultaneous Initial Public Offering ("IPO"); and
WHEREAS, the Consultant has expertise in the telecommunications industry;
In consideration of the mutual promises contained in this Agreement, the
Company and Consultant agree as follows:
1. CONSULTING SERVICES.
-------------------
1.1 Description of Services. During the term of this Agreement,
-----------------------
Consultant agrees to perform the following consulting and advisory services (the
"Services"):
(a) Assist in the identification of TCSBs for acquisition and
negotiate the terms of such acquisitions;
(b) Consultation with the Company's officers, employees and agents, as
may be reasonably requested by the Company, with respect to the
telecommunications industry; and
(c) Such other services as shall be mutually agreed upon by the
Company and Consultant.
1.2 Commitment. Consultant agrees to be available to render the Services
----------
at such times and locations as may be mutually agreed from time to time as
requested by the Company. It is anticipated that the Consultant will devote
approximately five hours per week to the Services. It will be assumed that this
time is being devoted.
1.3 Status as Independent Contractor. The Company and Consultant agree
--------------------------------
that Consultant will be an independent contractor for all purposes and that
Consultant will not in any way represent that Consultant is an employee or
officer of the Company. Consultant is not a partner, joint venturer or agent of
the Company, nor does Consultant have any right or authority to incur, assume or
create, in writing or otherwise, any warranty, liability, or other obligation of
any kind, express or implied, in the name of or on behalf of the Company.
<PAGE>
2. TERM.
----
This Agreement will be for a term of three years commencing on the
Effective Date and will be automatically renewed on a month-to-month basis
thereafter unless terminated by either party by written notice to the other
party delivered thirty days before the effective date of such termination.
3. COMPENSATION AND EXPENSES.
-------------------------
3.1 Compensation. The Company will pay Consultant a consulting fee for
------------
the Services during the term of this Agreement (including any month-to-month
extensions) as follows:
(a) $95,000 per year payable in monthly installments of $7,916 on the
first day of each month;
(b) a car allowance in the amount of $500 per month payable on the
first day of each month; and
(c) an allowance for insurance benefits in the amount of $500 per
month payable on the first day of each month.
3.2 Expenses. Consultant will be entitled to reimbursement for reasonable
--------
travel and other out-of-pocket expenses incurred by Consultant in the
performance of Consultant's duties under this Agreement, following submission of
written expense statements and other supporting documentation as the Company may
from time to time request.
3.3 Independent Contractor; Taxes. As an independent contractor,
-----------------------------
Consultant will not be entitled to participate in, or receive any benefit or
right as an employee under, any employee benefit or welfare plan of the Company.
Consultant will have sole responsibility for payment of all federal, state and
local taxes or contributions imposed or required under unemployment insurance,
social security and income tax laws and for filing all required tax forms with
respect to any amounts paid by the Company to Consultant pursuant to this
Agreement. Consultant will indemnify and hold the Company harmless against any
claim or liability (including penalties) resulting from failure of Consultant to
pay such taxes or contributions or file any such tax forms.
4. CONFIDENTIALITY. Consultant will not at any time, without the Company's
---------------
prior consent, reveal or disclose to any person outside of the Company (for
purposes of this Agreement, the Company shall include its majority owned
subsidiaries), or use for Consultant's own benefit or the benefit of any other
person or entity outside of the Company, any confidential information concerning
the business or affairs of the Company, or concerning the customers, clients or
employees of the Company ("Confidential Information"). For purposes of this
Agreement, Confidential Information includes, but is not limited to, financial
information or plans; sales and marketing information or plans; business or
strategic plans; salary, bonus or
2
<PAGE>
other personnel information of any type; information concerning methods of
operation; proprietary systems or software; legal or regulatory information;
cost and pricing information or policies; information concerning new or
potential products or markets; models, practices, procedures, strategies or
related information; research and/or analysis; and information concerning new or
potential investors, customers, or clients. Confidential Information does not
include Confidential Information already available to the public through no act
of Consultant's, nor does it include salary, bonus or other personnel
information specific to Consultant.
Consultant further understands and agrees that all Confidential
Information, however or whenever produced, will be the Company's sole property.
Upon the termination of this Agreement, Consultant will promptly deliver to the
Company all copies of all documents, equipment, property or materials of any
type in Consultant's possession, custody or control, that belong to the Company,
and/or that contain, in whole or in part, any Confidential Information.
5. RESTRICTIVE COVENANTS. During the Restricted Period (defined below),
---------------------
Consultant will not, directly or indirectly, for Consultant's own account or for
or on behalf of any other person or entity, whether as an officer, director,
employee, partner, principal, joint venturer, consultant, investor, shareholder,
independent contractor or otherwise:
(a) engage in any business in competition with the then business of
the Company, or in competition with any business that the Company, to the
Consultant's knowledge, actively was planning to enter at the time of the
termination of this Agreement;
(b) solicit or accept business in competition with the Company from
any clients of the Company who were clients of the Company at the time of the
termination of this Agreement, or who were clients during the one (1) year
period preceding such termination; or
(c) speak or act in any manner that is intended to, or does in fact,
damage the goodwill or the business or reputation of the Company.
For purposes of this Agreement, the Restricted Period will be a period
beginning on the Effective Date and ending on the first anniversary of the
termination of this Agreement.
Consultant may own not more than 5 percent of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the Company so long as Consultant does
not otherwise (i) participate in the management or operation of any such
business, or (ii) violate any other provision of this Agreement.
Consultant understands and agrees that, by virtue of Consultant's
relationship with the Company, Consultant will have substantial access to and
impact on the good will, confidential information and other legitimate business
interests of the Company, and therefore will be in a position to have a
substantial adverse impact on the Company's business interests should Consultant
engage in business in competition with the Company. Consultant acknowledges
that Consultant's adherence to the restrictive covenants set forth in this
Section is an important and substantial part of the consideration that the
Company is receiving under this Agreement, and
3
<PAGE>
agrees that the restrictive covenants in this Section are enforceable in all
respects. Consultant consents to the entry of injunctive relief to enforce such
covenants, in addition to such other relief to which the Company may be entitled
by law.
6. SPECIFIC PERFORMANCE. Consultant acknowledges that the Company's remedy at
--------------------
law for breach of Sections 4 and 5 of this Agreement would be inadequate, and
agrees that, for breach of such provisions, the Company is entitled to
injunctive relief and to enforce its rights by an action for specific
performance.
7. OTHER PROVISIONS.
----------------
7.1 Arbitration. Any dispute arising out of this Agreement will be
-----------
settled by a single arbitrator pursuant to the rules of the American Arbitration
Association sited at Boston, Massachusetts, or such other means and location as
the parties mutually agree.
7.2 Assignment. This Agreement, and the rights and obligations under this
----------
Agreement, may not be assigned or transferred by either party without the prior
written consent of the other party, except the Company may assign this Agreement
in connection with the merger, consolidation, or sale of all or substantially
all assets of the Company. Subject to the foregoing, this Agreement is binding
upon Consultant and the Consultant's heirs, executors, administrators,
successors, representatives and assigns and will inure to the benefit of the
Company and any successor or assign of the Company.
7.3 Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties with regard to the subject matter of this Agreement, and supersedes
all previous written or oral representations, agreements and understandings
between the Company and the Consultant, whether expressed or implied. This
Agreement may be executed in one or more counterparts.
7.4 Amendment. Any amendment or modification of this Agreement or the
---------
waiver of any right, in whole or in part, will be effective only if it is in
writing and signed by the parties to this Agreement.
7.5 Applicable Law and Severability. This Agreement will be governed by
-------------------------------
the laws of the Commonwealth of Massachusetts. If a court of competent
jurisdiction determines that any provision of this Agreement is invalid or
unenforceable to any degree or in any application, then that provision shall be
enforced only to the maximum extent consistent with applicable law and the
validity or unenforceability of that provision will not affect the validity or
enforceability of any other provision of the Agreement, and all other provisions
will remain in full force and effect.
4
<PAGE>
Consultant and the Company have executed and delivered this Agreement as a
document under seal as of the Effective Date.
VIALOG CORPORATION
By:
-----------------------------------
Name:
Title:
CONSULTANT:
--------------------------------------
John J. Hassett
Home Address:
-------------------------
--------------------------------------
Social Security No.:
-----------------
5
<PAGE>
Exhibit 10.22
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER NAMED
HEREON FOR ITS OWN ACCOUNT FOR INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING
TO BE MADE ANY PUBLIC DISTRIBUTION OF ALL OR ANY PORTION THEREOF; AND SUCH
SECURITIES MAY NOT BE PLEDGED, SOLD OR IN ANY OTHER WAY TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS IN EFFECT AT THAT TIME OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT.
PROMISSORY NOTE AND WARRANT
Billerica, MA
$____________ ______________ ____, 1997
FOR VALUE RECEIVED, the undersigned VIALOG Corporation, a Massachusetts
corporation (the "Borrower"), promises to pay to the order of
____________________________ at Billerica, Massachusetts or at such other place
as the holder of this Promissory Note and Warrant (this "Note") may from time to
time designate, in lawful money of the United States, the principal sum of
___________________________ Dollars ($______________) together with interest at
the rate set forth below on the outstanding principal balance of this Note from
the date hereof until such outstanding principal is paid in full. The
outstanding principal balance of this Note, together with any unpaid interest
thereon and any other sums due and payable hereunder, shall be due and payable
in full on the Due Date (as hereinafter defined), unless payment is due earlier
or extended in accordance with other provisions of this Note.
Interest will be payable upon maturity of this Note at a rate per annum of
eight percent (8.00%). Interest will be computed on the basis of a year of 365
days for the number of days actually elapsed. Overdue principal and, to the
extent permitted by applicable law, interest will bear interest at the rate
specified above plus two percent (2%) per annum.
If any payment on this Note becomes due and payable on a Saturday, Sunday
or legal holiday in Massachusetts, the maturity thereof shall be extended to the
next succeeding business day.
"Due Date" shall mean the earlier to occur of (i) ten (10) days after the
closing of a transaction pursuant to which the Borrower, issues and sells, in a
public offering, equity securities of the Borrower for an aggregate purchase
price of $40,000,000 or more and (ii) one (1) year after the date hereof.
Upon the consent in writing of the holder of this Note, the maturity date
for the payment in full of the then-outstanding principal balance of this Note,
together with any unpaid interest thereon and any other sums due and payable
hereunder, may be extended to such date as may be specified in the written
consent.
<PAGE>
The entire principal balance of this Note, together with any unpaid
interest thereon and any other sums due and payable hereunder, shall become
immediately due and payable without notice or demand upon the occurrence of any
of the following events of default: (1) a sale of all or substantially all of
the Borrower's assets to another entity or entities in a single transaction or a
series of transactions; (2) the liquidation, termination or dissolution of the
Borrower or its ceasing to carry on actively its present business or the
appointment of a receiver for its property; (3) the adjudication of bankruptcy
or the insolvency of, or the making of an assignment or trust mortgage for the
benefit of creditors by, the Borrower; or (4) the institution of bankruptcy,
reorganization, arrangement, liquidation, receivership, moratorium or similar
proceedings by or against the Borrower, and, if so instituted, its consent
thereto or the pendency thereof for 60 days.
No delay or omission on the part of the holder of this Note in exercising
any right hereunder shall operate as a waiver of such right or of any other
right of such holder, nor shall any delay, omission, or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. To the extent permitted by applicable law, the Borrower,
regardless of the time, order or place of signing, waives presentment, demand,
protest and notices of every kind.
The Borrower shall pay on demand all costs of collection, including court
costs and reasonable attorneys' fees, suffered or incurred by the holder in
enforcing this Note.
WARRANT PROVISIONS
Grant of Warrant. For value received, the holder of this Note is entitled
----------------
to purchase, on the terms and conditions hereinafter set forth, from the
Borrower, at any time from and after November 1, 1997 and on or before 5:00
p.m., Massachusetts time, on February 28, 1999, for an aggregate purchase price
equal to the Warrant Price (as hereinafter defined) in effect at the time of the
exercise of the warrant provisions of this Note per share (the "Exercise
Price"), that number of shares of Common Stock of the Borrower, par value $.01
per share ("Common Stock"), as shall equal the quotient of the original
principal amount of this Note divided by the Warrant Price in effect at the time
of the exercise of the warrant provisions of this Note, rounded up to the
nearest whole share (such shares of Common Stock being hereinafter referred to
as the "Warrant Stock"). The "Warrant Price" shall initially mean Nine Dollars
($9.00) and is subject to adjustment pursuant to the provisions hereinafter set
forth.
Exercise of Warrant. The warrant provisions of this Note may be exercised
-------------------
in whole at any time by presentation and surrender to the Borrower at its
principal office of the Subscription Form attached to this Note as Exhibit A
completed for purchase of all of the Warrant Stock and duly executed and
accompanied by payment of the Exercise Price due in connection with such
exercise. Upon receipt by the Company of the Subscription Form in proper form
for exercise, and upon payment of the Exercise Price, the holder shall, on the
exercise date specified on the Subscription Form, be deemed to be the holder of
record of the shares of Warrant Stock issuable upon such exercise,
notwithstanding that certificates representing such shares of Warrant Stock
shall not yet have been issued and delivered to the holder.
-2-
<PAGE>
Reservation of Warrant Shares; Stock Fully Paid. The Borrower agrees that
-----------------------------------------------
at all times there shall be authorized and reserved for issuance upon exercise
of the warrant provisions of this Note such number of shares of Common Stock as
shall be required for issuance upon exercise of the warrant provisions of this
Note. All shares that may be issued upon exercise hereof will, upon issuance
and payment therefor, be fully paid, validly issued and nonassessable.
Issue Tax. The issuance of certificates for shares of Warrant Stock shall
---------
be made without charge to the holder for any issuance tax in respect thereof,
all such taxes to be paid by the Borrower.
Closing of Books. The Borrower will at no time close its transfer books
----------------
against the transfer of this Note or the issuance of any shares of Warrant Stock
in any manner that interferes with the timely exercise of the warrant provisions
of this Note.
Rights of the Holder. The holder shall not, merely by virtue of this Note,
--------------------
be entitled to any rights as a shareholder in the Borrower, either at law or in
equity.
Registration Rights. As set forth herein, the holder shall be entitled to
-------------------
have the Warrant Stock (but not this Note or the warrant provisions hereof)
registered, or to cause the Borrower to register the Warrant Stock (but not this
Note or the warrant provisions hereof), under the Securities Act of 1933, as
amended, in accordance with the terms of the Registration Rights Agreement
substantially in the form of Exhibit B hereto which the Borrower and the holder
shall execute simultaneously with the delivery of this Note. The Borrower shall
not be required to register the Warrant Shares until after November 1, 1997, and
then only in accordance with the Registration Rights Agreement and if and to the
extent that the holder furnishes the Borrower with a written statement of its
intention to exercise the warrant provisions of this Note (if the same have not
been exercised) and to sell the Warrant Shares covered by the desired
registration and such other information as the Borrower may reasonably request.
Limitations on Transfer of this Note and of Warrant Stock. This Note and
---------------------------------------------------------
the Warrant Stock issuable pursuant hereto have not been registered under the
Securities Act of 1933, as amended, or registered or qualified under the
securities laws of any state. This Note may not be offered, sold or otherwise
transferred unless an opinion of counsel satisfactory to the Borrower is
obtained to the effect that registration of the securities represented hereby is
not required under the Securities Act of 1933, as amended. There shall appear
on the certificate or certificates evidencing any Warrant Stock issued pursuant
hereto legends substantially as follows:
"The shares represented hereby have been acquired by the holder named
hereon for his own account for investment with no intention of making or
causing to be made any public distribution of all or any portion thereof;
and such securities may not be pledged, sold or in any other way
transferred in the absence of an effective registration statement for such
securities under the Securities Act of 1933, as in effect at that time, or
an opinion of counsel reasonably satisfactory to the issuer that
registration is not required under said Act."
-3-
<PAGE>
Protection against Dilution. The Warrant Price and, as a result, the
---------------------------
number of shares of Warrant Stock deliverable hereunder shall be adjusted as
hereinafter set forth:
A. Stock Dividends, Subdivisions and Combinations. In case after
----------------------------------------------
the date hereof, the Borrower shall
(i) declare a dividend payable in, or make any other
distribution to its stockholders of, Common Stock, or
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then the Warrant Price shall be adjusted to that price determined by
multiplying the Warrant Price in effect immediately prior to such event by
a fraction (i) the numerator of which shall be the total number of
outstanding shares of Common Stock of the Borrower immediately prior to
such event, and (ii) the denominator of which shall be the total number of
outstanding shares of Common Stock of the Borrower immediately after such
event.
B. Issuance of Additional Shares of Common Stock.
---------------------------------------------
(i) In case after the date hereof the Borrower shall (except
as hereinafter provided) issue or sell any additional shares of Common
Stock (including any treasury shares) for a consideration per share of
Common Stock less than the Warrant Price in effect immediately prior
to each such issuance or sale or without consideration, then and
thereafter successively upon each such issuance or sale the Warrant
Price in effect immediately prior to each such event shall be adjusted
to that price determined by multiplying the Warrant Price in effect
immediately prior to such event by a fraction,
(a) the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance or
sale of such additional shares of Common Stock plus the number of
shares of Common Stock which the aggregate consideration for the
total number of such additional shares of Common Stock so issued
or sold would purchase at the Warrant Price in effect immediately
prior to such issuance or sale, and
(b) the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock plus the number of such
additional shares of Common Stock so issued.
-4-
<PAGE>
(ii) For purposes of this subparagraph B, an issuance or sale
shall be deemed to have occurred on the earlier of (a) the date on
which the Borrower shall enter into a firm contract for the issuance
of such additional shares of Common Stock or (b) the date of actual
issuance of such additional shares of Common Stock.
(ii) The provisions of this subparagraph B shall not apply to
any additional shares of Common Stock which are distributed to holders
of Common Stock as a result of a stock dividend or subdivision for
which an adjustment is provided under subparagraph A above. No
adjustment of the Warrant Price shall be made under this subparagraph
B upon the issuance of any additional shares of Common Stock which are
issued pursuant to the exercise of any warrants or other subscription
or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any Convertible Securities (as hereinafter
defined), if any such adjustment shall previously have been made upon
the issuance of such warrants or other rights or upon the issuance of
such Convertible Securities (or upon the issuance of any warrants or
other rights therefor) pursuant to subparagraph C or D below.
C. Issuance of Warrants or Other Rights. In case the Borrower shall
------------------------------------
issue any warrants or other rights to subscribe for or purchase any
additional shares of Common Stock or any Convertible Securities and the
consideration per share for which additional shares of Common Stock may at
any time thereafter be issuable pursuant to such warrants or other rights
or pursuant to the terms of such Convertible Securities shall be less than
the Warrant Price then in effect, then the Warrant Price shall be adjusted
as provided in subparagraph B above on the basis that (i) the maximum
number of additional shares of Common Stock issuable pursuant to all such
warrants or other rights or necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued as
of the date for the determination of the Warrant Price then in effect as
hereinafter provided, and (ii) the aggregate consideration for such maximum
number of additional shares of Common Stock shall be deemed to be the
minimum consideration received and receivable by the Borrower for the
issuance of such additional shares of Common Stock pursuant to such
warrants or other rights or such Convertible Securities. For purposes of
this subparagraph C, the Warrant Price then in effect shall be determined
as of the earlier of (a) the date on which the Borrower shall enter into a
firm contract for the issuance of such warrants or other rights or such
Convertible Securities or (b) the date of actual issuance of such warrants
or other rights or such Convertible Securities.
D. Issuance of Convertible Securities. In case the Borrower shall
----------------------------------
issue any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for additional shares of Common
Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event ("Convertible Securities"), and the
consideration per share for which additional shares of Common Stock may at
any time thereafter be issuable pursuant to the terms of such Convertible
-5-
<PAGE>
Securities shall be less than the Warrant Price then in effect, then the
Warrant Price shall be adjusted as provided in subparagraph B above on the
basis that (i) the maximum number of additional shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date for the
determination of the Warrant Price then in effect as hereinafter provided,
and (ii) the aggregate consideration for such maximum number of additional
shares of Common Stock shall be deemed to be the minimum consideration
received and receivable by the Borrower for the issuance of such additional
shares of Common Stock pursuant to the terms of such Convertible
Securities. For purposes of this subparagraph D, the Warrant Price then in
effect shall be determined as of the earlier of (a) the date on which the
Borrower shall enter into a firm contract for the issuance of such
Convertible Securities or (b) the date of actual issuance of such
Convertible Securities. No adjustment of the Warrant Price shall be made
under this subparagraph D upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other
rights pursuant to subparagraph C above.
E. Other Provisions Applicable to Adjustments Under this Paragraph.
---------------------------------------------------------------
The following provisions shall be applicable to the making of adjustments
in the Warrant Price hereinbefore provided in this paragraph:
(i) Computation of Consideration. To the extent that any
----------------------------
additional shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any additional
shares of Common Stock or any Convertible Securities shall be issued
for a cash consideration, the consideration received by the Borrower
therefor shall be deemed to be the amount of the cash received by the
Borrower therefor, or, if such additional shares of Common Stock or
Convertible Securities are offered by the Borrower for subscription,
the subscription price, or, if such additional shares of Common Stock
or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and before
deduction of any compensation, discounts or expenses paid or incurred
by the Borrower for and in the underwriting of, or otherwise in
connection with, the issue thereof. To the extent that such issuance
shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall
be deemed to be the fair value of such consideration at the time of
such issuance as determined in good faith by the Board of Directors of
the Borrower. The consideration for any additional shares of Common
Stock issuable pursuant to any warrants or other rights to subscribe
for or purchase the same shall be the consideration received by the
Borrower for issuing such warrants or other rights, plus the
additional consideration payable to the Borrower upon the exercise of
such warrants or other rights; provided, however, that if such
warrants or other rights are issued in connection with the issuance of
evidences of indebtedness or
-6-
<PAGE>
preferred stock, the aggregate consideration received by the Borrower
for the issuance of such warrants or other rights shall be deemed to
be an amount equal to the difference, if any, between (a) the
aggregate consideration received by the Borrower for such evidences of
indebtedness or preferred stock and such warrants or other rights and
(b) the aggregate original principal amount of such evidences of
indebtedness or the aggregate prior rights to payment of such
preferred stock on the dissolution, liquidation or winding of the
Borrower. The consideration for any additional shares of Common Stock
issuable pursuant to the terms of any Convertible Securities shall be
deemed to be the consideration received by the Borrower for issuing
any warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Borrower in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Borrower upon the exercise of the right of conversion
or exchange in such Convertible Securities. In case of the issuance at
any time of any additional shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividend upon any class
of stock other than Common Stock, the Borrower shall be deemed to have
received for such additional shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(ii) Readjustment of Warrant Price. Upon the expiration of the
-----------------------------
right to convert or exchange any Convertible Securities or upon the
expiration of any warrants or other rights, if any such Convertible
Securities shall not have been converted or exchanged or if any such
warrants or other rights shall not have been exercised, the number of
shares of Common Stock deemed to be issued and outstanding by reason
of the fact that they were issuable upon conversion or exchange of any
such Convertible Securities or upon exercise of any such warrants or
other rights shall no longer be computed as set forth above, and the
Warrant Price shall forthwith be readjusted and thereafter be the
price which it would have been (but reflecting any other adjustments
in the Warrant Price made pursuant to the provisions of this paragraph
after the issuance of such Convertible Securities, warrants or other
rights) had the adjustment of the Warrant Price made upon the issuance
or sale of such Convertible Securities or issuance of such warrants or
other rights been made on the basis of the issuance only of the number
of additional shares of Common Stock actually issued upon conversion
or exchange of such Convertible Securities or upon the exercise of
such warrants or other rights (provided that such readjustment shall
in no event be greater than the adjustment made upon the issuance of
such Convertible Securities, warrants or other rights), and thereupon
only the number of additional shares of Common Stock actually so
issued shall be deemed to have been issued and only the consideration
actually received by the Borrower (computed as in subparagraph E(i)
above) shall be deemed to have been received by the Borrower.
F. Extraordinary Dividends. In case the Borrower shall declare a
-----------------------
dividend upon the Common Stock (except a dividend payable in Common Stock
referred to in
-7-
<PAGE>
subparagraph A(i) above) payable otherwise than out of retained earnings,
the Warrant Price in effect immediately prior to the declaration of such
dividend shall be reduced by an amount equal, in the case of a dividend in
cash, to the amount thereof payable per share of the Common Stock or, in
the case of any other dividend, to the fair value thereof per share of the
Common Stock as determined in good faith by the Board of Directors of the
Borrower. For the purposes of the foregoing, a dividend payable other than
in cash shall be considered payable otherwise than out of retained earnings
notwithstanding the fact that earnings or surplus are charged an amount
equal to the fair value of such dividend as determined by the Board of
Directors of the Borrower. Such reductions shall take effect as of the date
on which a record is taken for the purpose of such dividend, or, if a
record is not taken, the date as of which the holders of Common Stock of
record entitled to such dividend are to be determined. Appropriate
readjustment of the Warrant Price shall be made in the event that any
dividend referred to in this subparagraph F shall be lawfully abandoned.
G. Minimum Adjustment. Except as hereinafter provided, no
------------------
adjustment of the Warrant Price hereunder shall be made if such adjustment
results in a change in the Warrant Price then in effect of less than one
cent ($.01). Any adjustment of less than one cent ($.01) of the Warrant
Price shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, together with adjustment or
adjustments so carried forward, amounts to one cent ($.01) or more.
However, upon the exercise of the warrant provisions of this Note, the
Borrower shall make all necessary adjustments (to the nearest cent) not
theretofore made to the Warrant Price up to and including the date upon
which the warrant provisions of this Note are exercised.
H. Notice of Adjustments. Whenever the Warrant Price or number of
---------------------
shares deliverable shall be adjusted pursuant to the provisions hereof, the
Borrower shall promptly make a certificate signed by the President or a
Vice President of the Borrower and by the chief financial officer of the
Borrower, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which
the Board of Directors made any determination hereunder), and the Warrant
Price after giving effect to such adjustment, and shall promptly cause
copies of such certificate to be mailed (by first class mail postage
prepaid) to the holder of this Note.
GENERAL PROVISIONS
This Note shall be governed by and construed according to the internal laws
of the Commonwealth of Massachusetts.
-8-
<PAGE>
Executed as a sealed instrument as of the day and year first written above.
VIALOG Corporation
By:______________________________
Name:
Title:
-9-
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
The undersigned, ______________, pursuant to the provisions of that certain
Promissory Note and Warrant, dated __________ ___, 1997 (the "Note"), from
VIALOG Corporation in favor of the undersigned, hereby elects to purchase all of
the Warrant Stock (as defined in the Note) covered by the Note, and herewith
makes payment of the Exercise Price (as defined in the Note) of $_____ therefor.
The undersigned hereby makes and reaffirms, as of the date hereof, each of
the representations, warranties and covenants made by the undersigned in the
Investor Agreement, dated as of __________ ____ 1997, from the undersigned to
VIALOG Corporation.
Dated: ___________ ___, 199__ Signature:_______________________
Witness:_________________________
-10-
<PAGE>
Exhibit 10.23
STATE OF ALABAMA
MONTGOMERY COUNTY
THIS LEASE AND CONTRACT, made by and between, Union Springs Telephone
Company, a subsidiary of Ropir Industries, Inc. hereinafter called LESSOR and
Call Points, Inc. hereinafter called LESSEE.
W I T N E S S E T H:
1. The Lessor hereby rents and leases to the Lessee one (1) Dist 21300
Enhance Conference System to be used by the lessee as conference bridges and for
no other use or purpose whatsoever, for and during the term dated from the 1st
day of September 1996 to be renewed every year unless written notice is
received 30 days prior to renewal and covenants to keep the Lessee in
possession of the leased premises during said term, provided the Lessee complies
with the terms and provisions contained herein.
2. The Lessee agrees to pay to the Lessor at its office at 301 Interstate
Park Dr., Montgomery, Alabama 36109 or such place as lessor may notify Lessee in
writing as rent for the leased premises Three thousand One Hundred Twenty-Five
and No/100 ($3125.00) Dollars on the first day of each month in advance during
said term, being at the rate of Thirty-Seven Thousand Five Hundred and No/100
($37500.00) Dollars per annum.
3. The Lessee hereby acknowledges that said leased equipment is received
in good condition, and to further maintain such leased equipment in such
condition, order and repair as the same are in at the commencement of said term
or may be put in during the term except reasonable wear and tear and damages by
fire or other casualty not caused by or growing out of negligence, default or
wrongful act of Lessee or the agents or employees of lessee and to permit no
waste of the leased equipment or to allow the same to be done, but to take good
care of the same; and Lessee agrees on the termination of this Lease to
surrender to lessor the quiet and peaceable possession of said leased equipment
in like good order as at the commencement of said term, normal wear and tear
excepted.
4. It is agreed that Lessee shall not have the right or power to sublease
said leased equipment or any part thereof or to transfer or assign this Lease or
permit the use of any part of said leased equipment by others without the
written consent of the Lessor hereon endorsed, the Lessee shall not use or
permit to be used the leased equipment for any other purpose than as herein
leased equipment without the written consent of Lessor.
5. It is mutually agreed that if Lessee should fail to pay any one of the
above described installments of rent at maturity, then at the election of the
Lessor all the remaining installments shall at once become due and payable and
the Lessor may treat them as due and payable, without further notice to Lessee,
this Lease being sufficient notice, an if in order to
<PAGE>
entitle the Lessor to do so, it shall not be necessary to give any notice of
the rent or any installment being due and unpaid, or to make any demand for the
same, or to give any notice of the violation of this Lease by the Lessee, the
execution of this Lease, signed by the said Lessor and the Lessee, which
execution is hereby acknowledged being sufficient notice of the rent being due,
and of the demand for the same, and shall be so construed between the parties
hereto, any law, usage or custom to the contrary notwithstanding.
6. This Lease together with any and all addendum or amendments hereto
shall inure to the benefit of the respective parties hereto, their successors,
heirs, personal representatives or assigns (provided that any assignment by the
Lessee shall be effective only if made in strict accordance with the terms of
this Lease).
IN WITNESS WHEREOF, the Lessor and Lessee have hereunto executed this Lease
on the day and year first above written.
LESSOR:
Union Springs Telephone Co., a
subsidiary of Ropir Industries,
Inc.
/s/
-----------------------------------
Billie Pirnie, President
LESSEE:
Call Points, Inc.
/s/
-----------------------------------
Larry C. Grogan, Executive Vice
President
2
<PAGE>
RIDER NO. 1
DATED AS OF SEPTEMBER 1, 1996
TO LEASE AGREEMENT
DATED AS OF SEPTEMBER 1, 1996
BETWEEN
UNION SPRINGS TELEPHONE CO.
A SUBSIDIARY OF ROPIR INDUSTRIES, INC.
AND
CALL POINTS, INC.
Lessor and Lessee hereby agree to add the sections described below to the
above referenced Lease. Unless otherwise provided, all terms used herein have
the meanings ascribed to them in the Lease.
1. Notwithstanding any provisions either or implied to the contrary and
provided Lessee is not in default or breach of the Lease or any other present or
future obligation to Lessor, its successors or assigns, Lessee shall have the
option at the expiration or termination (other than by breach or default) of the
Lease term, by giving written notice to Lessor at least one hundred twenty (120)
days prior thereto, to purchase all of Lessor's rights, title and interest, if
any, in and to all, but not less than all, the Equipment, for the amount set
forth below ("Purchase Price"), plus all sales, transfer or other taxes,
including but not limited to, title and transfer fees, if any, arising by reason
of the sale and purchase of the Equipment together with any and all rentals or
other amounts remaining unpaid under the pursuant to the Lease ("Aggregate
Purchase Price").
PURCHASE PRICE: ONE DOLLAR ($1.00)
Lessee shall pay the Aggregate Purchase Price to Lessor not later than the
last day of the Lease term, by certified funds or immediately available funds
payable to the order of Lessor and shall remit to Lessor at Lessor's address set
forth in the Lease or as Lessor may advise from time to time.
Until all amounts hereunder are paid by Lessee and all performance by
Lessee is complete, Lessee hereby grants to Lessor and Lessor hereby accepts a
first priority security interest in the Equipment and the proceeds thereof
(including insurance proceeds).
Lessee agrees that any sale, conveyance or transfer to Lessor pursuant
hereto shall be of Lessor's right, title and interest, if any, in and to the
Equipment, AS IS, WHERE IS, WITHOUT WARRANTIES OF ANY KIND, EXPRESS OR IMPLIES,
INCLUDING WARRANTY OF MERCHANTIBILITY AND FITNESS FOR PURPOSE, and Lessee shall
hold harmless and indemnify lessor from and against all claims for property
damage, personal injury or death to Lessee and/or third parties growing out of
or resulting from the ownership, use or possession of the Equipment, or imposed
upon, incurred or directed against lessor, whatsoever levied on, on account of
or as a consequence of the sale and purchase of the Equipment.
<PAGE>
Except as herein specifically provided, the Lease remains unmodified and in
full force and effect.
IN WITNESS WHEREOF, the parties to the Lease have caused this Rider No. 1
to be executed by their authorized representatives as of the date set forth
above.
LESSOR: LESSEE:
Union Springs Telephone Co., a Call Points, Inc.
subsidiary of Ropir Industries, Inc.
/s/ /s/
- -------------------------------------- ----------------------------------
Billie Pirnie, President Larry C. Grogan, Executive Vice
President
Date:_________________________________ Date:_____________________________
<PAGE>
Exhibit 10.24
STATE OF ALABAMA
MONTGOMERY COUNTY
THIS LEASE AND CONTRACT, made by and between, Union Springs Telephone
Company, a subsidiary of Ropir Industries, Inc. hereinafter called LESSOR and
Call Points, Inc. hereinafter called LESSEE.
W I T N E S S E T H:
1. The Lessor hereby rents and leases to the Lessee two (2) Axis 12800
Enhance Conference System to be used by the lessee as conference bridges and for
no other use or purpose whatsoever, for and during the term dated from the 1st
day of June, 1996 to be renewed every year unless written notice is received 30
days prior to renewal and covenants to keep the Lessee in possession of the
leased premises during said term, provided the Lessee complies with the terms
and provisions contained herein.
2. The Lessee agrees to pay to the Lessor at its office at 301 Interstate
Park Dr., Montgomery, Alabama 36109 or such place as lessor may notify Lessee in
writing as rent for the leased premises Three thousand Seven hundred Fifty and
No/100 ($3750.00) Dollars on the first day of each month in advance during said
term, being at the rate of Forty-five Thousand and No/100 ($45000.00) Dollars
per annum.
3. The Lessee hereby acknowledges that said leased equipment is received in
good condition, and to further maintain such leased equipment in such condition,
order and repair as the same are in at the commencement of said term or may be
put in during the term except reasonable wear and tear and damages by fire or
other casualty not caused by or growing out of negligence, default or wrongful
act of Lessee or the agents or employees of lessee and to permit no waste of the
leased equipment or to allow the same to be done, but to take good care of the
same; and Lessee agrees on the termination of this Lease to surrender to lessor
the quiet and peaceable possession of said leased equipment in like good order
as at the commencement of said term, normal wear and tear excepted.
4. It is agreed that Lessee shall not have the right or power to sublease
said leased equipment or any part thereof or to transfer or assign this Lease or
permit the use of any part of said leased equipment by others without the
written consent of the Lessor hereon endorsed, the Lessee shall not use or
permit to be used the leased equipment for any other purpose than as herein
leased equipment without the written consent of Lessor.
5. It is mutually agreed that if Lessee should fail to pay any one of the
above described installments of rent at maturity, then at the election of the
Lessor all the remaining installments shall at once become due and payable and
the Lessor may treat them as due and payable, without further notice to Lessee,
this Lease being sufficient notice, and if in order to
<PAGE>
entitle the Lessor to do so, it shall not be necessary to give any notice of the
rent or any installment being due and unpaid, or to make any demand for the
same, or to give any notice of the violation of this Lease by the Lessee, the
execution of this Lease, signed by the said Lessor and the Lessee, which
execution is hereby acknowledged being sufficient notice of the rent being due,
and of the demand for the same, and shall be so construed between the parties
hereto, any law, usage or custom to the contrary notwithstanding.
6. This Lease together with any and all addendum or amendments hereto
shall inure to the benefit of the respective parties hereto, their successors,
heirs, personal representatives or assigns (provided that any assignment by the
Lessee shall be effective only if made in strict accordance with the terms of
this Lease).
IN WITNESS WHEREOF, the Lessor and Lessee have hereunto executed this Lease
on the day and year first above written.
LESSOR:
Union Springs Telephone Co., a subsidiary
of Ropir Industries, Inc.
/s/
-----------------------------------------
Billie Pirnie, President
LESSEE:
Call Points, Inc.
/s/
-----------------------------------------
Larry C. Grogan, Executive Vice President
2
<PAGE>
RIDER NO. 1
DATED AS OF JUNE 1, 1996
TO LEASE AGREEMENT
DATED AS OF JUNE 1, 1996
BETWEEN
UNION SPRINGS TELEPHONE CO.
A SUBSIDIARY OF ROPIR INDUSTRIES, INC.
AND
CALL POINTS, INC.
Lessor and Lessee hereby agree to add the sections described below to the
above referenced Lease. Unless otherwise provided, all terms used herein have
the meanings ascribed to them in the Lease.
1. Notwithstanding any provisions either or implied to the contrary and
provided Lessee is not in default or breach of the Lease or any other present or
future obligation to Lessor, its successors or assigns, Lessee shall have the
option at the expiration or termination (other than by breach or default) of the
Lease term, by giving written notice to Lessor at least one hundred twenty (120)
days prior thereto, to purchase all of Lessor's rights, title and interest, if
any, in and to all, but not less than all, the Equipment, for the amount set
forth below ("Purchase Price"), plus all sales, transfer or other taxes,
including but not limited to, title and transfer fees, if any, arising by reason
of the sale and purchase of the Equipment together with any and all rentals or
other amounts remaining unpaid under the pursuant to the Lease ("Aggregate
Purchase Price").
PURCHASE PRICE: ONE DOLLAR ($1.00)
Lessee shall pay the Aggregate Purchase Price to Lessor not later than the
last day of the Lease term, by certified funds or immediately available funds
payable to the order of Lessor and shall remit to Lessor at Lessor's address set
forth in the Lease or as Lessor may advise from time to time.
Until all amounts hereunder are paid by Lessee and all performance by
Lessee is complete, Lessee hereby grants to Lessor and Lessor hereby accepts a
first priority security interest in the Equipment and the proceeds thereof
(including insurance proceeds).
Lessee agrees that nay sale, conveyance or transfer to Lessor pursuant
hereto shall be of Lessor's right, title and interest, if any, in and to the
Equipment, AS IS, WHERE IS, WITHOUT WARRANTIES OF ANY KIND, EXPRESS OR IMPLIES,
INCLUDING WARRANTY OF MERCHANTIBILITY AND FITNESS FOR PURPOSE, and Lessee shall
hold harmless and indemnify lessor from and against all claims for property
damage, personal injury or death to Lessee and/or third parties growing out of
or resulting from the ownership, use or possession of the Equipment, or
imposed upon, incurred or directed against lessor, whatsoever levied on, on
account of or as a consequence of the sale and purchase of the Equipment.
<PAGE>
Except as herein specifically provided, the Lease remains unmodified and in
full force and effect.
IN WITNESS WHEREOF, the parties to the Lease have caused this Rider No.1 to
be executed by their authorized representatives as of the date set forth above.
LESSOR: LESSEE:
Union Springs Telephone Co., a Call Points, Inc.
subsidiary of Ropir Industries, Inc.
/s/ /s/
- ------------------------------------- -------------------------------
Billie Pirnie, President Larry C. Grogan, Executive
Vice President
Date:________________________________ Date:__________________________
<PAGE>
Exhibit 10.25
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated as of _____________, 1997 among VIALOG
CORPORATION, a Massachusetts corporation ("VIALOG"), the securityholders of
VIALOG listed on Schedule I to this Agreement (the "Securityholders") and the
----------
stockholders of the Participating Companies (defined below) listed on Schedule
--------
II to this Agreement (the "Participating Securityholders").
- --
FACTS
1. VIALOG, acting through wholly-owned subsidiaries, has entered into
Agreements and Plans of Reorganization (the "Merger Agreements") with
companies (the "Participating Companies") pursuant to which each of the
Participating Companies is merging with a subsidiary of VIALOG (the
"Mergers"). The Participating Securityholders will exchange their
respective equity interests in the Participating Companies for shares of
Common Stock, $.01 par value of VIALOG ("VIALOG Stock") and cash pursuant
to their respective Merger Agreements.
2. Contemporaneously with the Mergers, VIALOG will issue and sell VIALOG Stock
in a public offering (the "Public Offering") registered on Form S-1 in
accordance with the requirements of the Securities Act of 1933, as amended
(the "Act").
3. VIALOG, the Securityholders and the Participating Securityholders have
agreed to provide for the registration of shares of VIALOG Stock owned by
the Securityholders and the Participating Securityholders (collectively,
the "Shares").
AGREEMENT
In consideration of the foregoing, the Mergers and the respective covenants
and agreements contained in this Agreement, the parties agree as follows:
SECTION 1 Restrictions on Transferability. The Shares will not be
-------------------------------
transferable, except upon the conditions specified in Sections 3 and 4, which
conditions are intended to ensure compliance with the provisions of the Act or,
in the case of Section 15, to assist in an orderly distribution. Each Holder
will cause any proposed transferee of Shares held by that Holder to agree to
take and hold those securities subject to the provisions and upon the conditions
specified in this Agreement.
SECTION 2 Certain Definitions. As used in this Section 2, the following
-------------------
terms will have the following meanings in this Agreement:
<PAGE>
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Act.
"Holder" means any Securityholder or Participating Securityholder, or
any assignee thereof under Section 14, who is the holder of outstanding shares
of Registrable Securities which have not been sold to the public.
"Initiating Holders" means Holders in the aggregate of twenty percent
(20%) or more of the Shares.
"Other Shareholders" means any holders of securities of the Company
who are entitled, by agreement with the Company, to have securities included in
a requested registration of securities of the Company pursuant to Section 5 or
6.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and applicable rules and regulations thereunder and the
declaration of ordering of the effectiveness of such registration statement.
"Registrable Securities" means (i) the Shares and (ii) any VIALOG
Stock issued in respect of the Shares upon any stock split, stock dividend,
recapitalization or similar event.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 5 and 6, including without limitation all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, fees and disbursements of a single counsel
for all the selling Holders and other security holders, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which will be paid in any
event by the Company).
"Restricted Securities" means the securities of the Company required
to bear or bearing the legend set forth in Section 3.
SECTION 3 Restrictive Legends. Each certificate representing (a) the
-------------------
Shares, or (b) any other securities issued in respect of the Shares, upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, will (unless otherwise permitted or unless the securities evidenced by
such certificate will have been registered under the Act) be stamped or
otherwise imprinted with legends in substantially the following form (in
addition to
2
<PAGE>
any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER NAMED
HEREON FOR HIS OWN ACCOUNT FOR INVESTMENT WITH NO INTENTION OF MAKING
OR CAUSING TO BE MADE ANY PUBLIC DISTRIBUTION OF ALL OR ANY PORTION
THEREOF. SUCH SECURITIES MAY NOT BE PLEDGED, SOLD OR IN ANY OTHER WAY
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS IN EFFECT AT THAT
TIME, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Upon request of a holder of such a certificate, the Company will remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if, with such request, the Company will
have received either the opinion referred to in Section 4(a) or the "no-action"
letter referred to in Section 4(b) to the effect that any transfer by such
holder or the securities evidenced by such certificate will not violate the Act.
SECTION 4 Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 5, 6 and 8), the holder thereof will give written notice to the Company
of such holder's intention to effect such transfer. Each such notice will
describe the manner and circumstances of the proposed transfer in sufficient
detail, and will be accompanied (except in transactions in compliance with Rule
144) by either (a) a written opinion of legal counsel reasonably satisfactory to
the Company, addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the Act or
(b) a "no-action" letter from the Commission to the effect that the distribution
of such securities without registration will not result in a recommendation by
the staff of the Commission that action be taken with respect thereto, whereupon
the holder of such Restricted Securities will be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Each certificate evidencing the Restricted Securities
transferred as provided above will bear the appropriate restrictive legend set
forth in Section 3, except that such certificate need not bear such restrictive
legend if the opinion of counsel or "no-action" letter referred to above is to
the further effect that such legend is not required in order to establish
compliance with any provisions of the Act.
3
<PAGE>
SECTION 5 Demand Registration.
(a) Request for Registration. If the Company receives from
------------------------
Initiating Holders, at any time or times on or after one year following the
closing date of the Company's initial offering of securities to the public
pursuant to a registration statement declared effective by the Securities and
Exchange Commission, a written request that the Company effect registration with
respect to all or a part of the Registrable Securities, the Company will:
(i) within ten days of receipt thereof, give written notice of the
proposed registration to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws
and appropriate compliance with applicable regulations issued under
the Act) as may be so requested and which would permit or facilitate
the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request given within 30
days after receipt of such written notice from the Company; provided
that the Company will not be obligated to effect, or to take any
action to effect, any such registration pursuant to this Section 5:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Act or applicable rules or regulations thereunder; or
(B) After the Company has effected two such registrations pursuant to
this Section 5(a) and such registrations have been declared or ordered
effective by the Commission and the sales of such Registrable Securities
have closed.
Subject to the foregoing clauses (A) and (B), the Company will file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders. However, if (i) in the good faith judgment of the Board
of Directors of the Company, such registration would be detrimental to the
Company and the Board of Directors of the Company concludes, as a result, that
it is essential to defer the filing of such registration statement at such time
and (ii) the Company furnishes to such Initiating Holders a certificate signed
by the President of the Company stating the foregoing, then the Company will
have the right to defer such filing for a period of not more than 180 days after
the receipt of the request of the Initiating Holders. The Company may not defer
its obligation in this manner more than once in any twelve-month period. The
registration statement filed pursuant to the request of the Initiating Holders
may, subject to the provisions of
4
<PAGE>
Section 5(b), include securities of the Company for its own account, or other
securities of the Company which are held by officers or directors of the Company
or which are held by persons who, by virtue of agreements with the Company, are
entitled to include their securities in any such registration.
(b) Underwriting. If the Initiating Holders intend to distribute the
------------
Registrable Securities covered by their request by means of an underwriting,
they will so advise the Company as a part of their request made pursuant to this
Section 5 and the Company will include such information in the written notice
referred to in Section 5(a)(i). The underwriter will be selected by the Company
and will be reasonably acceptable to a majority in interest of the Initiating
Holders. The right of any Holder to registration pursuant to this Section 5 will
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder with respect to such participation and inclusion) to the extent
provided in this Section. A Holder may elect to include in such underwriting all
or a part of the Registrable Securities it holds.
If officers or directors of the Company holding other securities of the
Company request inclusion in any registration pursuant to this Section 5, or if
Other Shareholders request such inclusion, the Initiating Holders will, on
behalf of all Holders, offer to include the securities of such officers,
directors and Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. If the representative of the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation on the number of
shares to be underwritten, then the securities of the Company (other than
Registrable Securities) held by officers or directors of the Company will be
excluded from such registration to the extent so required by such limitation,
and if a limitation of the number of shares is still required, the Initiating
Holders will so advise all Holders of Registrable Securities and Other
Shareholders whose securities would otherwise be underwritten pursuant to the
request described in this Section, and the number of shares of Registrable
Securities and other securities that may be included in the registration and
underwriting will be allocated among all such Holders and Other Shareholders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and other securities which they had requested to be included in such
registration at the time of filing the registration statement. No Registrable
Securities or any other securities excluded from the underwriting by reason of
the underwriter's marketing limitation will be included in such registration.
If any Holder of Registrable Securities, officer, director or Other
Shareholder who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holders. The securities held by such person will then be withdrawn from
registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include its
securities for its own account in such registration if the underwriter so agrees
and if the number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting has not
thereby been limited.
5
<PAGE>
SECTION 6 Company Registration.
---------------------
(a) If the Company determines to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to a Commission Rule 145 transaction, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, the Company will:
(i) promptly give to each Holder written notice thereof which
will include a list of the jurisdictions in which the Company intends
to attempt to qualify such securities under the applicable blue sky or
other state securities laws; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder within 15 days after
receipt of the written notice from the Company described in clause (i)
above, except as set forth in Section 6(b). Such written request may
specify that all or a part of a Holder's Registrable Securities be
included in the Company's registration.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company will so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event the right of any Holder to
registration pursuant to this Section 6 will be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided in this
Agreement. All Holders proposing to distribute their securities through such
underwriting will (together with the Company and the Other Shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or representative
of the underwriters selected for such underwriting by the Company. If the
representative of the underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, and (i) if such
registration is the first registered offering of the Company's securities to the
public, then the underwriter may (subject to the allocation priority set forth
below) exclude from such registration and underwriting some or all of the
Registrable Securities which would otherwise be underwritten pursuant to the
notice described in this Section, and (ii) if such registration is other than
the first registered offering of the sale of the Company's securities to the
public, then the underwriter may (subject to the allocation priority set forth
below) limit the number of Registrable Securities to be included in the
registration and underwriting to not less than twenty-five percent (25%) of the
securities included therein (based on aggregate market values). The Company will
advise all holders of securities requesting registration promptly after such
determination by the underwriter, and the number of shares of securities that
are entitled to be
6
<PAGE>
included in the registration and underwriting will be allocated in the following
manner: The securities of the Company (other than Registrable Securities) held
by officers and directors of the Company will be excluded from such registration
and underwriting to the extent required by such limitation, and if a limitation
of the number of shares is still required, the number of shares that may be
included in the registration and underwriting will be allocated among all such
Holders and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement, except that Registrable Securities will be the last to
be limited. Any Holder of Registrable Securities or any officer, director or
Other Shareholder disapproving of the terms of any such underwriting may elect
to withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting will be withdrawn from such registration.
SECTION 7 Expenses of Registration. All Registration Expenses incurred
------------------------
in connection with any registration, qualification or compliance pursuant to
this Agreement will be borne by the Company, and all selling expenses, including
underwriting discounts, selling commissions and the fees and expenses of the
selling Holder's own counsel (other than the counsel selected to represent all
selling Holders) will be borne by the holders of the securities so registered
pro rata on the basis of the number of their shares so registered. However, the
Company will not be required to pay any Registration Expenses if, as a result of
the withdrawal of a request for registration by Initiating Holders, the
registration statement does not become effective, in which case the Holders and
Other Shareholders requesting registration will bear such Registration Expenses
pro-rata on the basis of the number of their shares so included in the
registration request. Such registration will not be counted as a requested
registration pursuant to Section 5(a)(ii)(B).
SECTION 8 Registration on Form S-3. Following the effective date of the
------------------------
first registration of any securities of the Company on Form S-1 or any
comparable or successor form or forms, the Company will use its best efforts to
file all reports necessary to qualify for registration of its securities on Form
S-3 or any comparable or successor form or forms, and the Company will register
(whether or not required by law to do so) the Common Stock under the Exchange
Act in accordance with the provisions thereof. After the Company has qualified
for the use of Form S-3, in addition to the rights contained in the foregoing
provisions of this Agreement, the Holders of Registrable Securities will have
the right to request registration on Form S-3. However, the Company will not be
obligated to effect any such registration if (i) such Holders, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) on Form S-3 at an aggregate offering price to the public of less than
$1,000,000, (ii) in the event that the Company furnishes the certificate
described in Section 5(a), or (iii) if the Company has effected two
registrations on Form S-3 within the past twelve months. Such requests will be
in writing and will state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by such
Holder or Holder. If at the time of any request to register Registrable Shares
pursuant to this Section 8, the Company is engaged or has firm plans
7
<PAGE>
to engage within 90 days of the time of the request in a registered public
offering as to which the Initiating Holders may include Registrable Shares
pursuant to Section 6 or is engaged in any other activity which, in the good
faith determination of the Company's Board of Directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company may at its option direct that such request be delayed for a
period not in excess of one hundred twenty (120) days from the effective date of
such offering or the date of commencement of such other material activity, as
the case may be, such right to delay a request to be exercised by the Company
not more than once during any period of twelve consecutive months.
SECTION 9 Registration Procedures. In the case of each registration
------------------------
effected by the Company pursuant to this Agreement, the Company will keep each
participating Holder advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of four months;
provided, however, that (i) such four-month period will be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration in accordance with the provisions of Section 15,
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such
four-month period will be extended for up to an additional four months, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold or such extension period expires; provided that
Rule 415, or any successor rule under the Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules under
the Act governing the obligation to file a post-effective amendment permit, in
lieu of filing a post-effective amendment which (A) includes any prospectus
required by Section 10(a)(3) of the Act or (B) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (A) and (B) above to be contained in periodic reports
filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5, the Company will enter into
an underwriting agreement reasonably necessary to effect the offer and sale of
the Registrable Securities requested to be included in such registration;
provided, however, that such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so requests
the underwriting agreement will contain customary contribution provisions.
8
<PAGE>
SECTION 10 Indemnification.
----------------
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person who controls such Holder, on whose
behalf registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter (within the meaning of the Act and the rules and regulations
thereunder) against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
such Holder, each of its officers, directors and partners, and each person who
controls such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action; provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises from or is based on any untrue statement or omission or alleged untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter and intended for use therein.
(b) Each Holder will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, and each Other Shareholder who has the right to
register its securities pursuant to this Agreement will be required by the
Company to, indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter (within the
meaning of the Act and the rules and regulations thereunder) each other such
Holder and Other Shareholder and each of their officers, directors and partners,
and each person who controls such Holder or Other Shareholder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holders, Other Shareholders, directors, officers, partners, persons,
underwriters or controlling persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder or
Other Shareholder and intended for use therein; provided, however, that the
9
<PAGE>
obligations of such Holders and Other Shareholders hereunder will be limited to
an amount equal to the proceeds to each such Holder or Other Shareholder of
securities sold as contemplated in this Agreement.
(c) Each party entitled to indemnification under this Section 10 (the
"Indemnified Party") will give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and will
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who will conduct the defense of such claim or any litigation resulting
therefrom, will be approved by the Indemnified Party (whose approval will not be
unreasonably withheld or delayed), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to give notice as provided in this Section will not
relieve the Indemnifying Party of its obligations unless the failure to give
such notice is prejudicial to the Indemnifying Party's ability to defend such
claim. No Indemnifying Party, in the defense of any such claim or litigation,
will, except with the consent of each Indemnified Party (which consent will not
unreasonably be withheld or delayed), consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified Party
will furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as will be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
SECTION 11 Information by Holder. Each Holder of Registrable Securities,
---------------------
and each Other Shareholder holding securities included in any registration, will
furnish to the Company such information regarding such Holder or Other
Shareholder and the distribution proposed by such Holder or Other Shareholder as
the Company may reasonably request in writing and as will be reasonably required
in connection with any registration, qualification or compliance referred to in
this Agreement.
SECTION 12 Limitation on Registration of Issues of Securities. This
--------------------------------------------------
Agreement will not be construed to limit the right of the Company to enter any
agreements with any holder or prospective holder of any securities of the
Company giving such holder or prospective holder the right to require the
Company, upon any registration of any of its securities, to include, among the
securities which the Company is then registering, securities owned by such
holder. However, any right given by the Company to any holder or prospective
holder of the Company's securities in connection with the registration of
securities will be conditioned such that it will be consistent with the rights
of the Holders provided in this Agreement.
SECTION 13 Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
10
<PAGE>
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Act (and any successor rule to Rule
144) at all times from and after 90 days following the effective date of the
first registration statement under the Act filed by the Company for an offering
of its securities to the public;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act at any time
after it has become subject to such reporting requirements;
(c) So long as a Holder owns any Restricted Securities, furnish to
the Holder as promptly as possible upon its request a written statement by the
Company confirming its compliance with the reporting requirements of Rule 144
(at any time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the public), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as a Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration.
SECTION 14 Transfer or Assignment of Registration Rights. The rights to
---------------------------------------------
cause the Company to register the Registrable Securities granted by the Company
under Sections 5, 6 and 8 may be transferred or assigned by a Holder to a
transferee or assignee of any of the Holder's Registrable Securities; provided
that the Company is given written notice by a Holder at the time of or within a
reasonable time after said transfer or assignment, stating the name and address
of said transferee or assignee and identifying the securities with respect to
which such registration rights are being transferred or assigned and provided
further that the transferee or assignee of such rights assumes the obligations
of such Holder under this Agreement evidenced by an agreement in writing
delivered to the Company.
SECTION 15 "Market Stand-off" Agreement. Each Securityholder and
----------------------------
Participating Securityholder agrees, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by it during the 180-day period following the effective date of a
registration statement of the Company filed under the Act, provided that all
Other Shareholders and officers and directors of the Company enter into similar
agreements. Such agreement will be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of the 180-day period.
SECTION 16 Governing Law. This Agreement will be governed by, and
-------------
construed in accordance with, the substantive laws of the Commonwealth of
Massachusetts governing contracts made and to be performed in such jurisdiction,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
11
<PAGE>
SECTION 17 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties to this Agreement in separate
counterparts, each of which when executed will be deemed to be an original but
all of which taken together will constitute one and the same agreement.
IN WITNESS WHEREOF, VIALOG, the Securityholders and the Participating
Securityholders have caused this Agreement to be executed as of the date first
written above.
VIALOG CORPORATION
By:________________________________________
Title:
SECURITYHOLDER/PARTICIPATING
SECURITYHOLDER:
____________________________________________
____________________________________________
(Name Typed or Printed)
12
<PAGE>
Exhibit 21
Subsidiaries of the Company
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name State of d/b/a Name
Incorporation
- --------------------------------------------------------------------------------
<S> <C> <C>
+ ATS Acquisition Corporation Delaware None
+ KST Acquisition Corporation Delaware None
+ TBMA Acquisition Corporation Delaware None
+ CDC Acquisition Corporation Delaware None
+ CSII Acquisition Corporation Delaware None
+ AMCS Acquisition Corporation Delaware None
* American Teleconferencing Missouri None
Services, Ltd.
* Telephone Business Meetings, Inc. Delaware Access Teleconferencing
International
* Conference Source International, Georgia None
Inc.
* Communication Development Connecticut None
Corporation
* Kendall Square Teleconferencing, Massachusetts The Conference Center
Inc. f/k/a Teleconversant
* American Conferencing Company, New Jersey a/k/a Americo
Inc.
* Call Points Acquisition Delaware None
** Corporation
- --------------------------------------------------------------------------------
</TABLE>
+ A Subsidiary of the Company which will merge into one of the Founding
Companies effective upon the Closing of the Public Offering.
* Will be a Subsidiary of the Company effective upon the Closing of the Public
Offering.
** A Subsidiary of the Company which will acquire substantially all the assets
of Call Points, Inc. effective upon the Closing of the Public Offering.
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
VIALOG Corporation:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 28, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF PERSON NAMED TO
BECOME A DIRECTOR
Pursuant to Rule 428 of the Securities Act of 1933, as amended (the "Act"),
I hereby consent to the use of my name and any references to me as a person
nominated to become a director of VIALOG Corporation ("VIALOG") in the
Prospectus constituting a part of VIALOG's Registration Statement on Form S-1
to be filed with the Securities and Exchange Commission pursuant to the Act.
2/26/97
Dated: ______________________________
/s/ Robert A. Cowan
_____________________________________
Name: Robert A. Cowan
<PAGE>
EXHIBIT 23.4
CONSENT OF PERSON NAMED TO
BECOME A DIRECTOR
Pursuant to Rule 428 of the Securities Act of 1933, as amended (the "Act"),
I hereby consent to the use of my name and any references to me as a person
nominated to become a director of VIALOG Corporation ("VIALOG") in the
Prospectus constituting a part of VIALOG's Registration Statement on Form S-1
to be filed with the Securities and Exchange Commission pursuant to the Act.
2/25/97
Dated: ______________________________
/s/ Robert Eckenrode
_____________________________________
Name: Robert Eckenrode
<PAGE>
EXHIBIT 23.5
CONSENT OF PERSON NAMED TO
BECOME A DIRECTOR
Pursuant to Rule 428 of the Securities Act of 1933, as amended (the "Act"),
I hereby consent to the use of my name and any references to me as a person
nominated to become a director of VIALOG Corporation ("VIALOG") in the
Prospectus constituting a part of VIALOG's Registration Statement on Form S-1
to be filed with the Securities and Exchange Commission pursuant to the Act.
2/28/97
Dated: ______________________________
/s/ Joanna M. Jacobson
_____________________________________
Name: Joanna M. Jacobson
<PAGE>
EXHIBIT 23.6
CONSENT OF PERSON NAMED TO
BECOME A DIRECTOR
Pursuant to Rule 428 of the Securities Act of 1933, as amended (the "Act"),
I hereby consent to the use of my name and any references to me as a person
nominated to become a director of VIALOG Corporation ("VIALOG") in the
Prospectus constituting a part of VIALOG's Registration Statement on Form S-1
to be filed with the Securities and Exchange Commission pursuant to the Act.
2/27/97
Dated: ______________________________
/s/ Richard J. Valentine
_____________________________________
Name: Richard J. Valentine
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 337
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 727
<PP&E> 7
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,263
<CURRENT-LIABILITIES> 976
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 273
<TOTAL-LIABILITY-AND-EQUITY> 1,263
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,308
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1)
<INCOME-PRETAX> 1,307
<INCOME-TAX> (522)
<INCOME-CONTINUING> 785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 785
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
