<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1998.
FILE NO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
VIALOG CORPORATION (ISSUER)
TELEPHONE BUSINESS MEETINGS, INC.
CONFERENCE SOURCE INTERNATIONAL, INC.
CALL POINTS, INC.
KENDALL SQUARE TELECONFERENCING, INC.
AMERICAN CONFERENCING COMPANY, INC.
AND
COMMUNICATION DEVELOPMENT CORPORATION (GUARANTORS)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
MASSACHUSETTS 04-3305282
DELAWARE 52-1555751
GEORGIA 58-1982276
DELAWARE 04-3346499
MASSACHUSETTS 04-2956637
DELAWARE 04-3345059
CONNECTICUT 4813 06-1327493
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
10 NEW ENGLAND BUSINESS CENTER, SUITE 302
ANDOVER, MA 01810
(978) 975-3700
(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
10 NEW ENGLAND BUSINESS CENTER, SUITE 302
ANDOVER, MA 01810
(978) 975-3700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
DAVID L. LOUGEE, ESQ. LAWRENCE A. LAROSE, ESQ.
JEFFREY L. DONALDSON, ESQ. CADWALADER, WICKERSHAM & TAFT
MIRICK, O'CONNELL, DEMALLIE & LOUGEE, 100 MAIDEN LANE
LLP NEW YORK, NEW YORK 10038
1700 BANKBOSTON TOWER (212) 504-6000
100 FRONT STREET
WORCESTER, MASSACHUSETTS 01608-1477
(508) 791-8500
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 3/4% Senior Notes due
2001.................. $75,000,000 100% $75,000,000 $22,728
- ---------------------------------------------------------------------------------------
Guarantees(1).......... -- -- -- --
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Guarantees by subsidiaries of the Registrant of the payment of the
principal and interest on the 12 3/4% Senior Notes due 2001. Pursuant to
Rule 457(n), no additional fee is required.
---------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 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 JANUARY 9, 1998
PROSPECTUS
[LOGO]
VIALOG CORPORATION
OFFER TO EXCHANGE
$75,000,000 12 3/4% SENIOR NOTES DUE 2001, SERIES B
FOR
$75,000,000 12 3/4% SENIOR NOTES DUE 2001, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED
THE 12 3/4% SENIOR NOTES DUE 2001, SERIES B WILL BE FULLY AND UNCONDITIONALLY
GUARANTEED ON A JOINT AND SEVERAL BASIS BY THE SUBSIDIARIES OF VIALOG
CORPORATION
-----------
VIALOG Corporation, a Massachusetts corporation (the "Company"), is hereby
offering (the "Offering"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the
"Letter of Transmittal," and together with this Prospectus, the "Exchange
Offer"), to exchange $1,000 principal amount of its 12 3/4% Senior Notes due
2001, Series B (the "Exchange Notes"), the offer and sale of which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (defined below) of which this Prospectus
constitutes a part, for each $1,000 principal amount of its outstanding 12 3/4%
Senior Notes due 2001, Series A (the "Old Notes"), of which $75,000,000 in
principal amount are outstanding. The form and terms of the Exchange Notes are
identical in all material respects to the form and terms of the Old Notes
except for certain transfer restrictions and registration rights relating to
the Old Notes. The Exchange Notes will evidence the same debt as the Old Notes
and will be issued under and be entitled to the benefits of the Indenture
(defined below). The Exchange Notes and the Old Notes are collectively referred
to as the "Notes."
(Cover continued on next page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-----------
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.
-----------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
----------------
VIALOG Group Communications is a service mark of VIALOG Corporation.
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>
The Notes will be senior unsecured obligations of the Company, ranking pari
passu in right of payment with all Senior Indebtedness (defined below) of the
Company and senior to all future Subordinated Indebtedness (defined below) of
the Company. The Notes will be unconditionally and fully guaranteed (the
"Subsidiary Guarantees") on a senior unsecured basis by the Company's
principal operating subsidiaries, which comprise all of the Company's direct
and indirect subsidiaries (the "Subsidiary Guarantors"), and the Subsidiary
Guarantees will rank pari passu in right of payment with all Senior
Indebtedness of the Subsidiary Guarantors and senior to all future
Subordinated Indebtedness of the Subsidiary Guarantors. The Subsidiary
Guarantees may be released only in the event of a sale or disposition (whether
by merger, stock purchase, asset sale or otherwise) of a particular Subsidiary
Guarantor to an entity which is not a subsidiary of the Company. The Notes and
Subsidiary Guarantees will be effectively subordinated to Secured Indebtedness
of the Company and the Subsidiary Guarantors, respectively, to the extent of
any security interest in assets of the Company and Subsidiary Guarantors,
including any Indebtedness under the Senior Credit Facility (defined below),
which is secured by liens on substantially all of the assets of the Company
and the Subsidiary Guarantors. At September 30, 1997, giving pro forma effect
to the Acquisitions (defined below) and the related financings (but not giving
effect to the financing under the Senior Credit Facility), the Notes and the
Subsidiary Guarantees would have been effectively subordinated to
approximately $1.3 million of Secured Indebtedness of the Company and the
Subsidiary Guarantors. The indenture governing the Notes (the "Indenture")
will permit the Company and its subsidiaries to incur additional Indebtedness
in the future, subject to certain limitations. In the event of a Change of
Control, the Company will be required, subject to certain conditions, to make
an offer to purchase all of the Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest thereon to the date of purchase. There can be
no assurance that in the event of a Change of Control the Company will have or
will have access to sufficient funds to repurchase the Notes. See "Description
of Notes--Ranking and Guarantees," "--Change of Control" and "--Certain
Definitions."
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be , 1998, unless the Exchange Offer
is extended. See "The Exchange Offer--Expiration Date; Extensions;
Amendments." Tenders of Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date
(defined below), unless previously accepted for exchange. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Company and to the terms and provisions
of the Registration Rights Agreement (defined below). Old Notes may be
tendered only in denominations of $1,000 principal amount and integral
multiples thereof. The Company has agreed to pay the expenses of the Exchange
Offer. See "The Exchange Offer."
The Exchange Notes will bear interest at the rate of 12 3/4% per annum,
payable semi-annually on May 15 and November 15 of each year, commencing May
15, 1998. Holders of Exchange Notes of record on May 1, 1998 will receive
interest on May 15, 1998 from the date of the exchange of the Exchange Notes
for the Old Notes, plus an amount equal to the accrued interest on the Old
Notes from the date of issuance of the Old Notes (November 12, 1997) to the
date of exchange thereof. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes.
The Old Notes were sold by the Company on November 12, 1997 to the Initial
Purchaser (defined below) in a transaction not registered under the Securities
Act in reliance upon Section 4(2) of the Securities Act. The Old Notes were
thereupon offered and sold by the Initial Purchaser only to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) and
to a limited number of institutional "accredited investors" (as defined in
Rule 501(a) (1), (2), (3) or (7) under the Securities Act), each of whom
agreed to comply with certain transfer restrictions and other conditions.
Accordingly, the Old Notes may not be offered, resold or otherwise transferred
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company under the Registration Rights Agreement entered into with the
i
<PAGE>
Initial Purchaser in connection with the offering of the Old Notes. See "The
Exchange Offer," "Description of Notes," and "Registration Rights; Additional
Interest."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available May 13,
1988), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5,
1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-
Action Letter (available June 5, 1991), the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the respective holders thereof (other than a
"Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder is not participating in, and has no arrangement with any
person to participate in, the distribution (within the meaning of the
Securities Act) of such Exchange Notes. Eligible holders wishing to accept the
Exchange Offer must represent to the Company that such conditions have been
met. Holders who tender Old Notes in the Exchange Offer with the intention to
participate in a distribution of the Exchange Notes may not rely upon the
Morgan Stanley Letter or similar no-action letters. See "The Exchange Offer--
General." Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. A broker-
dealer that delivers such a prospectus to purchasers in connection with such
resales will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations). This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Old Notes where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities.
The Company has agreed that it will make this Prospectus and any amendment or
supplement to this Prospectus available to any broker-dealer for use in
connection with any such resale for a period of up to 180 days after
consummation of the Exchange Offer. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity
of any markets that may develop for the Exchange Notes or as to the ability of
or price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on
many factors, including, among others, prevailing interest rates, the
Company's operating results and the market for similar securities. The Company
does not intend to apply for listing of the Exchange Notes on any securities
exchange. Jefferies & Company, Inc. (the "Initial Purchaser") has informed the
Company that it currently intends to make a market for the Exchange Notes.
However, it is not so obligated, and any such market making may be
discontinued at any time without notice. Accordingly, no assurance can be
given that an active public or other market will develop for the Exchange
Notes or as to the liquidity of or the trading market for the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND ONE TO
US.
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (which term shall encompass any amendment thereto) under the Securities
Act, for the registration of the Exchange Notes offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
certain items of which are contained in the financial statement schedules and
exhibits to the Registration Statement as permitted by the rules and
regulations of the Commission. For further information, reference is made to
the Registration Statement, including the financial statement schedules and
exhibits filed as a part thereof. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to the Registration Statement, reference is 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 such reference. The Registration
Statement and the exhibits thereto filed by the Company with the Commission
may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven 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 can be obtained by mail from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition the Commission maintains a site on the World
Wide Web that contains reports, proxy and information statements and other
information filed electronically by the Company with the Commission which can
be accessed over the Internet at http://www.sec.gov.
As a result of this Exchange Offer the Company will be subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith will file reports and other information with the Commission. As long
as the Company is subject to such periodic reporting and informational
requirements, it will furnish all reports and other information required
thereby to the Commission and pursuant to the Indenture will furnish copies of
such reports and other information to the Trustee (defined below) and the
holders of Notes.
The Company has agreed that, whether or not it is required to do so by the
rules and regulations of the SEC (and within 15 days of the date that is or
would be prescribed thereby), for so long as any of the Notes remain
outstanding, it will furnish to the holders of Notes (excluding exhibits which
will be available upon request) and file with the SEC (unless the SEC will not
accept such a filing) (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and
10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, and (ii) all reports that
would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. In addition, for so long as any of the Notes
remain outstanding, the Company has agreed to make available, upon request, to
any prospective purchaser of the Notes and beneficial owner of the Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act. Information may be obtained from the Company at 10
New England Business Center, Suite 302, Andover, Massachusetts 01810
(telephone number: (978) 975-3700), Attention: Corporate Treasurer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER,
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR
iii
<PAGE>
THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, 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 OFFER
OR SOLICITATION.
iv
<PAGE>
PROSPECTUS SUMMARY
On November 12, 1997, VIALOG Corporation acquired, in separate transactions
(the "Acquisitions"), six private conference service bureaus (each, an
"Acquired Company" and, collectively, the "Acquired Companies") in exchange for
cash and shares of its Common Stock. Unless otherwise indicated, (i) all
information in this Prospectus gives effect to the Acquisitions and the
transactions described under "Organization and Acquisition of the Acquired
Companies"; (ii) all references to "VIALOG Corporation" mean VIALOG Corporation
as a stand alone entity and (iii) all references to "VIALOG" or the "Company"
refer to VIALOG Corporation and include its consolidated subsidiaries. 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 has been
adjusted to give effect to the Acquisitions. Investors are urged to read this
Prospectus in its entirety, including, without limitation, the information set
forth under "Risk Factors."
THE COMPANY
VIALOG is a leading independent provider of electronic group communications
services, consisting primarily of operator-assisted audio teleconferencing, as
well as video, data and unattended audio teleconference services. The Company
has one of the largest and most geographically diverse networks of sales and
operations centers focused solely on the electronic group communications
market, and has approximately 6,500 ports of teleconferencing capability (one
"port" is required for each conference participant) and state-of-the-art
digital conferencing technology. The Company believes it differentiates itself
from its competitors by providing superior customer service and support, as
well as an extensive range of enhanced and customized communications solutions.
Combining these capabilities with targeted marketing and relationship selling
has allowed the Company to capitalize on the growth in the developing
teleconferencing services industry and to build a large, stable client base of
approximately 5,000 customers representing what the Company estimates to be
over 30,000 accounts. The Company's customer base is diverse, ranging from
Fortune 500 companies to medium and small businesses and institutions.
Customers also include certain major long distance telecommunications providers
which have outsourced their teleconferencing services to VIALOG.
The Company facilitates 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, auction formats, coaching and event rehearsal services. The Company
derived approximately 97% and 3% of its 1996 net revenues from audio
teleconference services and related customized and enhanced services,
respectively.
The Acquired Companies had a combined compound annual growth rate in net
revenues of 27.3% during the three-year period ended December 31, 1996 and pro
forma combined net revenues of $28.3 million in 1996. The Company believes that
the combination of the Acquired Companies offers a number of significant
synergies that will contribute to VIALOG's continued growth in net revenues and
cash flow. These synergies include operating efficiencies such as reduced costs
for long distance charges, equipment and employee benefits. The Company also
expects to benefit from significantly enhanced marketing power by creating the
critical mass necessary to develop a brand name effectively, implement a
national selling strategy and offer a wide range of teleconference services.
The Company intends to establish its brand, VIALOG, as synonymous with superior
electronic group communications services. The Company also intends to
capitalize on strong industry
1
<PAGE>
fundamentals by leveraging its service capabilities, targeted selling approach
and unique industry position to continue to increase penetration of its
existing customer base and to attract new customers, including those long
distance service providers that decide to outsource their teleconferencing
services. In addition to internal growth, the Company believes there is
substantial opportunity to consolidate the industry further through future
acquisitions.
The Company's executive offices are located at 10 New England Business
Center, Suite 302, Andover, Massachusetts 01810, and its telephone number is
(978) 975-3700.
INDUSTRY OVERVIEW
According to estimates from industry sources, the market for domestic audio
teleconferencing services was approximately $1.7 billion in 1996, having more
than doubled in size from $700 million in 1992. Prior to 1984, audio
teleconferencing was generally considered ineffective because only one person
could speak at a time. With the introduction of Multipoint Control Unit ("MCU"
or "bridge") technology in 1984, the industry then began to develop rapidly.
Demand for audio teleconferencing has continued to grow due to technological
advances that have increased the quality and number of available conferencing
features, the globalization of business operations and the increased acceptance
of audio teleconferencing as an effective business tool. Audio teleconferencing
remains the most effective method to facilitate multiparty communications with
participants in different locations, particularly since the only hardware
required of consumers is the telephone. According to estimates by industry
sources, the total market for domestic teleconferencing services (primarily
consisting of audio teleconferencing services) was approximately $1.9 billion
(inclusive of $200 million of equipment sales) in 1996.
A future driver of industry growth is expected to be video and data
teleconferencing. According to industry sources, total video and data
teleconferencing service revenues were $100 million and $150 million,
respectively, in 1996. The adoption of new international standards, rapid
deployment of new technology and hardware, increased availability of bandwidth
and introduction of new Internet applications are all expected to drive
significant growth in these markets.
Competitors in the teleconferencing services industry include (i) the inter-
exchange carriers ("IXCs"), or long distance telephone companies, which are the
largest service providers in the industry and do not generally market
teleconferencing services separately, but rather offer such services in
conjunction with long distance service sales, (ii) approximately 20 private
conference service bureaus ("PCSBs") (excluding the Acquired 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. The IXCs have generally been de-
emphasizing operator-assisted services and are increasingly implementing
automated systems. The Company believes this trend offers opportunity for those
companies which are focused solely on teleconferencing and which can obtain
lower labor costs and offer higher levels of customer service.
In addition, it is expected that certain or all of the Regional Bell
Operating Companies ("RBOCs") will be allowed to provide long distance services
under the Telecommunications Act of 1996. The Company believes that the entry
of the RBOCs represents a significant opportunity for VIALOG's outsourcing
business as these companies may choose to outsource their teleconferencing
requirements in order to gain rapid market entry and to avoid development of
internal teleconferencing capabilities. The Company has received requests for
proposals from four of the five RBOCs and believes that it is well-positioned
to be competitive in obtaining outsourced teleconferencing business since it
(i) is not a competitor with IXCs or LECs in the long distance markets or with
the RBOCs, (ii) has the capacity and resources to handle significant
teleconferencing volume, and (iii) already has experience in providing services
on an outsourced basis.
2
<PAGE>
COMPETITIVE STRENGTHS
The Company believes that several characteristics differentiate it from many
of its competitors, including:
Diverse and stable customer base. The Company has a diverse base of customers
that numbered approximately 5,000 in 1996, with only one customer (at less than
11%) representing greater than 10% of net revenues and the Company's top ten
customers representing less than 28% of net revenues. The Company believes that
it has created strong customer loyalty for its services through its emphasis on
superior customer service and the importance of such service to its clients.
This loyalty is demonstrated by VIALOG's record of attracting and retaining
significant clients, with low customer turnover. The Company estimates that it
experienced a "churn" rate of less than 3% during 1995 and 1996 and that
approximately 65% of its revenue growth in 1996 came from existing customers.
Unique industry position. VIALOG believes that it is positioned as one of the
largest and most geographically diverse companies in the industry which focuses
solely on electronic group communications. The Company's largest competitors
are long distance service providers for whom teleconferencing represents only a
small fraction of their total revenues. Therefore, VIALOG can focus its
capabilities and resources solely on teleconferencing, including its
information systems, capital equipment, hiring practices, training and
marketing. The Company believes this focus offers significant flexibility and
competitive advantages in responding to the needs of customers. VIALOG is also
well situated to obtain future outsourcing contracts from long distance service
providers which the Company believes are reluctant to outsource to a long
distance service competitor, and would prefer to outsource to a larger,
independent group communications company with experience in managing the
outsourcing process.
Superior customer service capabilities. The Company believes that it has a
core competency in its customer service capabilities, which stress operator
training, personalized service and anticipation of customer needs. VIALOG has
developed and refined the technological capabilities, procedures and management
information systems necessary to provide superior customer service, a factor
that is critical to both customer retention and new business. An example of
these capabilities is the Company's proprietary billing system for outsourced
services. The Company believes that no competitor can currently match the
flexibility of this system in meeting customer needs.
Broad range of services. The Company believes that it offers the most
comprehensive selection of audio, video and data teleconferencing services in
its industry, providing it with significant marketing advantages. VIALOG offers
the features and pricing options to meet a wide variety of 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.
Experienced management team. VIALOG has one of the most experienced
management teams in the teleconferencing industry. The top nine managers of the
Company have on average 13 years of experience within the
teleconferencing/telecommunications industry. This experience is critical to
the Company's ability to implement its business strategy, respond to industry
trends and to identify and consummate acquisition opportunities.
STRATEGY
The Company's objective is to build upon its position as a leading
independent provider of electronic group communications services. Management
plans to achieve this goal by implementing the following initiatives:
Create a national 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
3
<PAGE>
from those of the IXCs and other competitors through the Company's responsive
customer service, focused service offerings and selling strategy.
Establish a national sales network. VIALOG's regional salesforce and targeted
selling approach have been very successful and the Company believes that
substantial opportunity exists to develop new accounts and increase usage at
existing accounts through expanded coverage and establishment of a new national
accounts group. The Company intends to expand its current salesforce to
establish a national sales network of approximately 40 salespeople to be
deployed throughout the United States. The Company also intends to leverage
this salesforce to market its services vertically within select industries,
such as pharmaceutical, finance, and technology, in order to capitalize on its
industry-specific knowledge.
Capitalize on opportunities to provide outsourced services. The Company
intends to expand its customer base for outsourced services to include
additional IXCs and independent LECs. VIALOG currently provides outsourcing
services for several long distance providers and believes the broad trend among
long distance providers generally 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 due to their relatively high labor
costs. Additionally, management intends to capitalize on its outsourcing
experience, service capabilities and position as an independent service
provider to obtain outsourcing contracts from the RBOCs should they become long
distance providers.
Expand 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.
The Company believes its acquisition experience and its knowledge of the
industry will be instrumental in identifying and successfully negotiating
additional acquisitions.
Capitalize on consolidation benefits. The Company expects to capitalize on
the benefits of its increased size, the combined experience of the Acquired
Companies and its diverse customer base. The Company believes the combination
will offer significant marketing benefits by creating a critical mass that will
enhance the Company's capacity and appeal to customers. The Company believes
that its increased size will also result in stronger bargaining power in areas
such as long distance telecommunications, equipment, employee benefits and
marketing. The Company intends to improve allocation of personnel and equipment
and to streamline internal practices through coordination among the Acquired
Companies. Management also intends to cross-market, maximize capacity
utilization and integrate pricing strategies.
There can be no assurance that the Company will achieve its objective or be
successful in integrating the operations of the Acquired Companies. See "Risk
Factors."
4
<PAGE>
THE ACQUISITIONS
On November 12, 1997, VIALOG acquired (i) by merger, all of the issued and
outstanding stock of five Acquired Companies, and (ii) by purchase, the assets
of one Acquired Company. The aggregate consideration paid by VIALOG Corporation
for the Acquisitions was 559,330 shares of Common Stock, approximately
$53.0 million in cash and approximately $925,000 in cash related to tax
reimbursements.
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Company on November 12, 1997 to the Initial
Purchaser (the "Private Placement") and were thereupon offered and sold by the
Initial Purchaser only to certain qualified buyers. The $72.0 million net
proceeds received by the Company in connection with the sale of the Old Notes
and warrants (the "Warrants") to purchase an aggregate of 756,645 shares of the
Company's common stock, $.01 par value ("Common Stock") were used to finance
the cash portion of the purchase price for the Acquisitions and certain related
expenses, to repay outstanding indebtedness, make capital expenditures and
provide working capital for the Company. The Warrants have an exercise price of
$.01 per share, and are exercisable at any time prior to the maturity date of
the Notes. The Warrants are not being registered in the Exchange Offer, but are
subject to a registration rights agreement. See "Private Placement,"
"Capitalization" and "Description of Capital Stock and Warrants." The Company
has accepted a proposal for a commitment for senior bank financing consisting
of a revolving credit, term loan and capital expenditures facility in the
aggregate principal amount of $15.0 million (the "Senior Credit Facility"), the
terms of which are presently under negotiation. The Senior Credit Facility will
be used to provide liquidity and fund future working capital requirements of
the Company. See "Description of Senior Credit Facility."
5
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $75.0 million principal
amount of Exchange Notes for up to $75.0 million principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and hence are not entitled to registration rights. The Exchange
Notes will evidence the same debt as the Old Notes and will be issued under and
be entitled to the benefits of the Indenture governing the Old Notes. See
"Description of Notes."
The Exchange Offer.......... Pursuant to a registration rights agreement (the
"Registration Rights Agreement") by and among the
Company, the Subsidiary Guarantors and the Ini-
tial Purchaser, the Company agreed to (i) file a
registration statement with the Commission (the
"Exchange Offer Registration Statement") with re-
spect to an offer to exchange the Old Notes (the
"Exchange Offer") for senior debt securities of
the Company with terms substantially identical to
the Old Notes (the "Exchange Notes") (except that
the Exchange Notes generally will not contain
terms with respect to transfer restrictions)
within 60 days after the date of original issu-
ance of the Old Notes and (ii) use its best ef-
forts to cause such registration statement to be-
come effective under the Securities Act within
120 days after such issue date. The Registration
Statement of which this Prospectus is a part con-
stitutes such Exchange Offer Registration State-
ment. If applicable law or interpretations of the
staff of the Commission do not permit the Company
to consummate the Exchange Offer, or if certain
holders of the Old Notes notify the Company that
they are not permitted to participate in, or
would not receive freely tradable Notes pursuant
to, the Exchange Offer, the Company will use its
best efforts to cause to become effective a reg-
istration statement (the "Shelf Registration
Statement") with respect to the resale of the Old
Notes and to keep the Shelf Registration State-
ment effective until three years after the date
of original issuance of the Old Notes. The inter-
est rate on the Old Notes is subject to increase
under certain circumstances if the Company is not
in compliance with its obligations under the Reg-
istration Rights Agreement. See "Registration
Rights; Additional Interest."
Each $1,000 principal amount of Exchange Notes
will be issued in exchange for each $1,000 prin-
cipal amount of outstanding Old Notes. As of the
date hereof, $75.0 million principal amount of
Old Notes are issued and outstanding. The Company
will issue the Exchange Notes to tendering hold-
ers of Old Notes on or promptly after the Expira-
tion Date.
Resale...................... The Company believes that the Exchange Notes is-
sued pursuant to the Exchange Offer generally
will be freely transferable by the holders
thereof without registration or any prospectus
delivery requirement under the Securities Act.
See "The Exchange Offer--General" and "Plan of
Distribution."
The Old Notes were not registered under the Secu-
rities Act and unless so registered many not be
offered or sold except pursuant to
6
<PAGE>
an exemption from, or in a transaction not sub-
ject to, the registration requirements of the Se-
curities Act. See "Transfer Restrictions on the
Old Notes".
Expiration Date............. 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date to which the Exchange Offer is extended. See
"The Exchange Offer--Expiration Date; Extensions;
Amendments."
Procedures for Tendering Each holder of Old Notes wishing to accept the
Old Notes.................. Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, to-
gether with the Old Notes to be exchanged and any
other required documentation to the Exchange
Agent at the address set forth herein and there-
in. Certain brokers, dealers, commercial banks,
trust companies and other nominees may effect
tenders by book-entry transfer, including an
Agent's Message (defined below) in lieu of a Let-
ter of Transmittal. See "The Exchange Offer--Pro-
cedures for Tendering."
Special Procedures for
Beneficial Holders......... Any beneficial holder whose Old Notes are regis-
tered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender in the Exchange Offer should
contact such registered holder promptly and in-
struct such registered holder to tender on bene-
ficial holder's behalf. If such beneficial holder
wishes to tender directly, such beneficial holder
must, prior to completing and executing the Let-
ter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such holder's name
or obtain a properly completed bond power from
the registered holder. The transfer of record
ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Holders of Old Notes who wish to tender their Old
Procedures................. Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes
and a properly completed Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, or who cannot complete the pro-
cedure for book-entry transfer on a timely basis,
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Ex-
change Offer--Withdrawal of Tenders."
Termination of the Exchange The Company may terminate the Exchange Offer if
Offer...................... it determines that the Exchange Offer violates
any applicable law or interpretation of the staff
of the SEC. Holders of Old Notes will have cer-
tain rights
7
<PAGE>
against the Company under the Registration Rights
Agreement should the Company fail to consummate
the Exchange Offer. See "The Exchange Offer--Ter-
mination" and "Registration Rights; Additional
Interest."
Acceptance of Old Notes and
Delivery of Exchange Subject to certain conditions (as summarized
Notes...................... above in "Termination of the Exchange Offer" and
described more fully in "The Exchange Offer--Ter-
mination"), the Company will accept for exchange
any and all Old Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The Ex-
change Notes issued pursuant to the Exchange Of-
fer will be delivered promptly following the Ex-
piration Date. See "The Exchange Offer--General."
Exchange Agent.............. State Street Bank and Trust Company is serving as
exchange agent (the "Exchange Agent") in connec-
tion with the Exchange Offer. The mailing and
hand delivery address of the Exchange Agent is:
State Street Bank and Trust Company, Corporate
Trust Department, Two International Place, Boston
Massachusetts 02110 Attention: Sandy Wong. For
information with respect to the Exchange Offer,
the telephone number for the Exchange Agent is
(617) 664-5665 and the facsimile number for the
Exchange Agent is (617) 664-5150. See "The
Exchange Offer--Exchange Agent."
Use of Proceeds............. There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. See "Use of Pro-
ceeds." For a discussion of the use of the net
proceeds received by the Company from the sale of
the Old Notes, see "Private Placement."
THE NOTES:
Maturity Date............... November 15, 2001
Interest Rate and Payment The Notes will bear interest at the rate of 12
Dates...................... 3/4% per annum. Interest will accrue from the Is-
sue Date and will be payable semi-annually in
cash on May 15 and November 15 of each year, com-
mencing on May 15, 1998.
Holders of Exchange Notes of record on May 1,
1998 will receive interest on May 15, 1998 from
the date of the exchange of the Exchange Notes
for the Old Notes, plus an amount equal to the
accrued interest on the Old Notes from the date
of issuance of the Old Notes (November 12, 1997)
to the date of exchange thereof. Consequently,
assuming the Exchange Offer is consummated prior
to the record date in respect of the May 15, 1998
interest payment for the Old Notes, holders who
exchange their Old Notes for Exchange Notes will
receive the same interest payment on May 15, 1998
that they would have received had they not ac-
cepted the Ex-
8
<PAGE>
change Offer. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance
of the Exchange Notes. See "The Exchange Offer--
Interest on the Exchange Notes."
Optional Redemption......... The Notes will be redeemable, in whole or in
part, at the option of the Company at any time on
or after November 15, 1999 at the redemption
prices set forth herein, plus accrued and unpaid
interest thereon, if any, to the redemption date.
Prior to November 15, 1999, the Company may re-
deem up to 35% of the aggregate principal amount
of Notes originally issued, in whole or in part,
from time to time, at 112.75% of the principal
amount thereof, plus accrued and unpaid interest
thereon to the redemption date, with the net pro-
ceeds of a Public Equity Offering; provided that
at least 65% in aggregate principal amount of
Notes originally issued remains outstanding imme-
diately after such redemption. In addition, at
any time prior to November 15, 1999, the Company
may, at its option, redeem the Notes, in whole or
in part, at a redemption price equal to 100% of
the principal amount of the Notes plus the appli-
cable premium. See "Description of Notes--Op-
tional Redemption."
Change of Control........... In the event of a Change of Control, each Holder
of the Notes will have the right to require the
Company, subject to certain conditions, to make
an offer to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of the
Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest thereon to the
date of repurchase. See "Description of Notes--
Change of Control."
Ranking and Guarantees...... The Notes will be senior unsecured obligations of
the Company that will rank senior in right of
payment to all Subordinated Indebtedness (defined
below) of the Company. The Notes will rank pari
passu in right of payment to all existing and fu-
ture Senior Indebtedness (defined below) of the
Company. The Notes are unsecured, and holders of
secured Indebtedness of the Company or its Sub-
sidiaries will effectively rank prior to Holders
of the Notes with respect to the assets securing
such Indebtedness. The Notes will be uncondition-
ally guaranteed on a senior basis by each of the
Company's Subsidiary Guarantors. The guarantee of
each such Subsidiary Guarantor will rank pari
passu in right of payment to all existing and fu-
ture Senior Indebtedness of such Subsidiary Guar-
antor. The Indenture will permit the Company and
its subsidiaries to incur additional indebtedness
under certain circumstances. See "Description of
Notes--Ranking and Guarantees" and "Description
of Senior Credit Facility."
The Subsidiary Guarantees may be released under
the following circumstances: A Subsidiary Guaran-
tee may be terminated upon the sale or disposi-
tion (whether by merger, stock purchase, asset
sale or otherwise) of a Subsidiary Guarantor to
an entity which is not a subsidiary of the Compa-
ny, provided that (i) such transaction complies
with the Indenture (including, without limita-
tion, provi-
9
<PAGE>
sions relating to asset sales, and sale leaseback
transactions, and additional subsidiary guaran-
tees) and (ii) such termination shall occur only
to the extent that all obligations of such Sub-
sidiary Guarantor under all of its guarantees of,
and under all of its pledges of assets or other
security interests which secure, any other in-
debtedness of the Company shall also terminate
upon such release, sale or transfer. See "De-
scription of Notes--Ranking and Guarantees" and
"--Certain Definitions."
Certain Covenants...........
The Indenture contains certain covenants that,
among other things, limit the ability of the Com-
pany and its Subsidiaries to pay dividends or
make distributions with respect to the Company's
capital stock or make certain other restricted
payments, to incur Indebtedness, to create liens,
to issue and sell capital stock of Subsidiaries,
to sell assets, to permit restrictions on divi-
dends and other payments by subsidiaries to the
Company, to consolidate, merge or sell all or
substantially all of its assets, to engage in
transactions with affiliates, or to engage in
certain businesses. See "Description of Notes--
Certain Covenants."
Original Issue Discount..... The Notes will be issued with original issue dis-
count for federal income tax purposes. See "Cer-
tain Federal Income Tax Consequences."
RISK FACTORS
An investment in the Notes involves certain risks that should be considered
by a potential investor. See "Risk Factors."
10
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
On November 12, 1997, VIALOG Corporation consummated agreements to acquire
the six Acquired Companies simultaneously with and as a condition to the
consummation of the Private Placement. 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)
the consummation of the Private Placement. 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 September 30, 1997, 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. 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
----------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA (UNAU-
DITED) (1):
Net revenues......................... $ 28,298 $26,351
Gross profit (2)..................... 13,487 12,655
Selling, general and administrative
expenses (3)........................ 9,425 10,635
Amortization of intangible assets
(4)................................. 2,809 2,107
-------- -------
Operating income (loss).............. 1,253 (87)
Interest expense, net................ (12,637) (9,596)
-------- -------
Loss before income taxes............. (11,384) (9,683)
Income tax benefit................... (540) --
-------- -------
Net loss............................. $(10,844) $(9,683)
======== =======
OTHER FINANCIAL DATA (UNAUDITED):
EBITDA(5)............................ $ 6,036 $ 3,825
Ratio of earnings to fixed charges
(6)................................. 0.10x N/A
<CAPTION>
PRO FORMA
SEPTEMBER 30, 1997 (7)
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (UNAUDITED):
Cash and cash equivalents.............................. $11,829
Working capital........................................ 10,641
Total assets........................................... 84,016
Total debt, including current portion (8).............. 71,906
Stockholders' equity (8)............................... 5,674
</TABLE>
- --------
(1) Computed on the basis described in Notes 4 and 5 to the Unaudited Pro Forma
Combined Financial Statements. The pro forma statement of operations data
does not include a one-time charge of approximately $8.0 million for in-
process research and development expense.
(2) Reflects a reduction of approximately $1.0 million and $1.1 million for the
year ended December 31, 1996 and the nine months ended September 30, 1997,
respectively, in long distance charges as a result of
(footnotes continued on following page)
11
<PAGE>
contracts currently available or recently entered into by certain of the
Acquired Companies as if such contracts had been in effect as of January 1,
1996.
(3) Reflects certain reductions of approximately $586,000 and $247,000 for the
year ended December 31, 1996 and the nine months ended September 30, 1997
in compensation for the owners and certain key employees and consultants
of the Acquired Companies to specified amounts that the individuals agreed
to accept subsequent to the Acquisitions. Additionally, the nine month
period ended September 30, 1997 includes a non-recurring charge of
approximately $2.2 million related to an offering of Common Stock which
was terminated in early 1997.
(4) Reflects amortization of intangible assets to be recorded as a result of
the Acquisitions over periods ranging from 6 to 20 years and computed on
the basis described in Notes 3, 4(b) and 5(f) to the Unaudited Pro Forma
Combined Financial Statements.
(5) EBITDA represents income from continuing operations before income taxes,
depreciation and amortization. EBITDA is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. EBITDA is not a measurement presented in accordance
with generally accepted accounting principles and should not be considered
as an alternative to net income as a measure of operating results or as an
alternative to cash flows as a better measure of liquidity.
(6) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings from continuing operations before income
taxes and fixed charges. Fixed charges consist of interest expense.
Earnings were not sufficient on a pro forma basis for the year ended
December 31, 1996 and the nine months ended September 30, 1997 to cover
fixed charges. The deficiencies were $11.4 million and $9.7 million for
the year ended December 31, 1996 and the nine months ended September 30,
1997, respectively.
(7) Computed on the basis described in Notes 3 and 4 to the Unaudited Pro
Forma Combined Financial Statements.
(8) Under generally accepted accounting principles, approximately $4.4 million
of the proceeds from the Private Placement has been allocated to the fair
value of the Warrants and approximately $70.6 million has been allocated
to the Notes. In addition, $1.7 million of the total estimated fair value
of certain warrants issued in connection with the Private Placement have
been allocated to debt issuance costs.
12
<PAGE>
SUMMARY HISTORICAL INDIVIDUAL COMPANY FINANCIAL DATA
The following table presents summary statement of financial data for VIALOG
Corporation and each of the Acquired Companies (see "The Company" for the
complete names of each).
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
VIALOG CORPORATION
Net revenues.............................. $ N/A $ N/A $ -- $ -- $ --
Gross profit.............................. N/A N/A -- -- --
Selling, general and administrative ex-
penses................................... N/A N/A 1,308 703 3,898
ACCESS
Net revenues.............................. $5,114 $6,508 $9,073 $6,606 $9,261
Gross profit.............................. 2,291 3,089 5,002 3,629 4,679
Selling, general and administrative ex-
penses................................... 1,745 2,582 3,455 2,255 2,990
CSI
Net revenues.............................. $2,331 $3,808 $5,868 $4,483 $4,790
Gross profit.............................. 868 1,934 3,088 2,456 2,780
Selling, general and administrative ex-
penses................................... 735 940 1,049 888 686
CALL POINTS
Net revenues.............................. $8,537 $6,852 $7,509 $5,606 $6,230
Gross profit.............................. 2,397 1,521 1,611 1,214 1,467
Selling, general and administrative ex-
penses................................... 2,035 1,820 1,873 1,377 1,160
TCC
Net revenues.............................. $1,515 $2,329 $3,396 $2,501 $3,003
Gross profit.............................. 699 1,200 1,583 1,150 1,353
Selling, general and administrative ex-
penses................................... 510 889 1,329 969 1,015
AMERICO
Net revenues.............................. $ 772 $1,227 $1,679 $1,210 $1,581
Gross profit.............................. 437 602 825 579 530
Selling, general and administrative ex-
penses................................... 345 514 889 593 840
CDC
Net revenues.............................. $1,121 $1,131 $1,480 $1,080 $1,486
Gross profit.............................. 412 366 594 465 720
Selling, general and administrative ex-
penses................................... 337 377 655 411 442
</TABLE>
13
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking" statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors
that could cause the actual results, performance or achievements of the
Company to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty. Such risks, uncertainties and other important factors include,
among others, general economic and business conditions; industry trends;
competition; costs, ability to develop markets, changes in business strategy
or development plans, availability of qualified personnel, changes in
government regulations and other factors referenced in this Prospectus. Such
forward-looking statements are only as of the date of this Prospectus.
Discussions containing such forward-looking statements may be found in the
material set forth under "Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Business," and "Description of Notes", as well as
elsewhere in this Prospectus. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there
can be no assurance that the forward-looking statements included in this
Prospectus will prove to be accurate. Important factors that could cause
actual results to differ materially from the Company's expectations are
disclosed in this Prospectus. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be
achieved. Moreover, the Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking
statement contained in this Prospectus to reflect any change in the Company's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based. The reader should note
that initial public offerings are excluded from Section 27A of the Securities
Act and Section 21E of the Exchange Act.
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.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company is highly leveraged, with substantial debt service in addition
to operating expenses and planned capital expenditures. At September 30, 1997,
after giving pro forma effect to the Acquisitions and the sale of the Notes,
the total non-subordinated Indebtedness of the Company would have been
approximately $1.3 million. In addition, the Company has accepted a proposal
for a commitment for the Senior Credit Facility (a revolving credit, term loan
and capital expenditures facility in the aggregate principal amount of $15.0
million). See "--Senior Credit Facility; Effective Subordination,"
"Description of Senior Credit Facility," and "Description of Notes--Certain
Covenants."
The Acquired Companies have historically operated at substantially lower
levels of debt than that at which the Company currently operates. The
Company's level of indebtedness will have several important effects on its
future operations, including, without limitation, (i) a substantial portion of
the Company's cash flow from operations must be dedicated to the payment of
interest and principal on its indebtedness, (ii) covenants contained in the
Company's Indenture or the Senior Credit Facility will require the Company to
meet certain financial tests, and other restrictions will limit its ability to
borrow additional funds or to dispose of assets, and may affect the Company's
flexibility in planning for, and reacting to, changes in its business,
including possible acquisition activities, (iii) the Company's leveraged
position will substantially increase its vulnerability to adverse changes
14
<PAGE>
in general economic, industry and competitive conditions, and (iv) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate and other purposes may be
limited. The Company's ability to meet its debt service obligations and to
reduce its total indebtedness will be dependent upon the Company's future
performance, which will be subject to general economic, industry and
competitive conditions. There can be no assurance that the Company's business
will continue to generate cash flow at or above current levels. If the Company
is unable to generate sufficient cash flow from operations in the future to
service its debt, it may be required, among other things, to seek additional
financing in the debt or equity markets, to refinance or restructure all or a
portion of its indebtedness, including the Notes, to sell selected assets, or
to reduce or delay planned capital expenditures. There can be no assurance
that any such measures would be sufficient to enable the Company to service
its debt, or that any of these measures could be effected on satisfactory
terms, if at all.
SENIOR CREDIT FACILITY; EFFECTIVE SUBORDINATION
Following completion of the Offering, the Company anticipates entering into
the Senior Credit Facility to provide additional liquidity. The Company has
accepted a proposal for a commitment for the Senior Credit Facility (a
revolving credit, term loan and capital expenditures facility in the aggregate
principal amount of $15.0 million). However, the Company has not yet entered
into a binding agreement and, accordingly, there can be no assurance that the
Company will be able to obtain the Senior Credit Facility described in this
Prospectus, or any similar credit facility. As of the date of this Prospectus
the Company is negotiating the terms of such agreement. If the Company is
unable to obtain the Senior Credit Facility, it may be required to postpone
and/or change significant elements of its business strategy. The terms of the
proposed commitment for the Senior Credit Facility require a pledge of
substantially all of the assets of the Company and the Subsidiary Guarantors.
Accordingly, the Notes and Subsidiary Guarantees will be effectively
subordinated to the extent of the collateral used to secure such bank
indebtedness. In the event of a default on the Notes, or a bankruptcy,
liquidation or reorganization of the Company, such assets will be available to
satisfy obligations with respect to the indebtedness secured thereby before
any payment therefrom could be made on the Notes. See "Description of Senior
Credit Facility."
ABSENCE OF CONSOLIDATED OPERATING HISTORY; DIFFICULTY OF INTEGRATING THE
ACQUIRED COMPANIES
VIALOG Corporation was founded on January 1, 1996 and has only conducted
operations and generated revenues since November 12, 1997, the date of the
Acquisitions. The Acquired Companies operated as separate, independent
businesses prior to the closing of the Acquisitions. Additionally, the Company
has used the purchase method of accounting to record the Acquisitions.
Consequently, the pro forma 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 Acquired Companies is critical to the Company's future financial
performance. To date, the Acquired 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 Acquired Companies. The Company has only
very recently established systems and controls at the parent company level
and, prior to the Private Placement, had not attempted to prepare financial
statements that consolidated the operations of the six Acquired Companies.
The integration of the operations of the Acquired 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'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 employees of the
Acquired Companies. The Company also proposes to adopt certain new business
strategies, such as placing greater emphasis on face-to-face sales as opposed
to telephone sales, that may be ineffective or more costly than the Company
anticipates. There can be no assurance that the Company will be successful in
integrating any of the operations of the Acquired Companies or, if integrated,
that such combined operations will not demonstrate significant operating
inefficiencies. The
15
<PAGE>
failure of the Company to integrate the operations of the Acquired Companies
successfully could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Billing and
Management Information Systems".
RESTRICTIONS ON ABILITY TO MAKE FUNDAMENTAL CHANGES
The Acquisition agreements place limitations for a two-year period following
the closing of the Private Placement on the Company's ability to change the
location of the Acquired Company's facilities, physically merge the Acquired
Company's operations with another operation, change the position of those
employees who are to receive employment agreements pursuant to the Acquisition
agreement, 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 Acquired Company. Such limitations could restrict the Company's
ability to integrate the operations of the Acquired Companies successfully and
could limit the Company's ability to respond to competitive pressures on its
labor costs. See "Organization and Acquisition of the Acquired Companies."
PRETAX LOSSES
One of the Acquired Companies, Americo (defined below), incurred a pretax
loss of approximately $323,000 for the nine months ended September 30, 1997.
Three of the Acquired Companies, Call Points, Americo and CDC (all defined
below), incurred aggregate pretax losses in 1996 of approximately $456,000.
Call Points and CDC incurred aggregate pretax losses in 1995 of approximately
$399,000. There can be no assurance that such Acquired Companies will achieve
profitability in 1997 or thereafter. The failure of such Acquired Companies to
achieve profitability will 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."
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 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
16
<PAGE>
improved services offered by its competitors. 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.
The Company currently derives approximately 14% 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 such event to occur could have a material adverse
effect on the Company's business, financial condition and results of
operations.
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 could 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. The Company currently has no binding
agreements to effect any acquisitions, although the Company is currently in
discussions with several acquisition candidates. During the course of
negotiating and planning the Acquisitions, VIALOG Corporation entered into
discussions with a number of PCSBs, including the Acquired Companies,
regarding their possible participation in the combination of the Acquired
Companies. Discussions with any company which did not participate in the
Acquisitions could resume at any time and one or more acquisitions could occur
within a short period of time thereafter. However, there can be no assurance
that any discussions will in fact resume or that there will be any additional
acquisitions. Except for the Acquisitions, the Company's management has
limited experience in identifying appropriate acquisitions and has yet to
attempt to integrate 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."
17
<PAGE>
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 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."
RESTRICTIONS IMPOSED BY LENDERS
The Indenture contains, and the Senior Credit Facility will contain, a
number of covenants that will restrict the ability of the Company to dispose
of assets, merge or consolidate with another entity, incur additional
indebtedness, create liens, make capital expenditures or other investments or
acquisitions and otherwise restrict corporate activities. The ability of the
Company to comply with such provisions may be affected by events that are
beyond the Company's control. The breach of any of these covenants could
result in a default under the Indenture or the Senior Credit Facility, and the
terms of the Company's Indebtedness would permit the holders of the Notes
and/or the lenders under the Senior Credit Facility, as the case may be, to
declare all amounts borrowed thereunder to be due and payable, together with
accrued and unpaid interest. If the Company were unable to repay its
indebtedness to its lender under the Senior Credit Facility, such lender could
proceed against any and all collateral securing such indebtedness. In
addition, as a result of these covenants, the ability of the Company to
respond to changing business and economic conditions and to secure additional
financing, if needed, may be significantly restricted, and the Company may be
prevented from engaging in transactions that might otherwise be considered
beneficial to the Company. See "Description of Notes" and "Description of
Senior Credit Facility."
FRAUDULENT CONVEYANCE CONSIDERATIONS
If a court, in a lawsuit brought by an unpaid creditor of the Company or a
representative of creditors, such as a trustee in bankruptcy, or the Company
as a debtor-in-possession, were to find under relevant federal or state
18
<PAGE>
fraudulent conveyance statutes that the Company did not receive fair
consideration or reasonably equivalent value for incurring debt, including the
Notes, and that, at the time of such incurrence, the Company: (i) was
insolvent; (ii) was rendered insolvent by reason of such incurrence; (iii) was
engaged in a business or transaction for which the assets remaining with the
Company constituted unreasonably small capital; or (iv) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as
they matured, such court could void the Company's obligations under the Notes,
subordinate the Notes to other indebtedness of the Company or take other
action detrimental to the holders of the Notes.
The measure of insolvency for these purposes would vary depending upon the
law of the jurisdiction being applied. Generally, however, a company would be
considered insolvent for these purposes if the sum of such company's
liabilities (including a fair estimate of the likely amount payable in respect
of contingent liabilities) were greater than the fair saleable value of all
such company's property, or if the present fair saleable value of such
company's assets were less than the amount that would be required to pay its
probable liability on its existing debts as they become absolute and matured.
Moreover, regardless of solvency or the adequacy of consideration, a court
could void the Company's obligations under the Notes, subordinate the Notes to
other indebtedness of the Company or take other action detrimental to the
holders of the Notes if such court determined that the incurrence of debt,
including the Notes, was made with the actual intent to hinder, delay or
defraud creditors.
Various fraudulent conveyance laws enacted for the protection of creditors
may also apply to the Subsidiary Guarantors' issuance of the Subsidiary
Guarantees. To the extent that a court were to find that (x) a Subsidiary
Guarantee was incurred by a Subsidiary Guarantor with intent to hinder, delay
or defraud any present or future creditor or the Subsidiary Guarantor
contemplated insolvency with a design to prefer one or more creditors to the
exclusion in whole or in part of others or (y) a Subsidiary Guarantor did not
receive fair consideration or reasonably equivalent value for issuing its
Subsidiary Guarantee and such Subsidiary Guarantor (i) was insolvent, (ii) was
rendered insolvent by reason of the issuance of such Subsidiary Guarantee,
(iii) was engaged or about to engage in a business or transaction for which
the remaining assets of such Subsidiary Guarantor constituted unreasonably
small capital to carry on its business, or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they
matured, the court could avoid or subordinate such Subsidiary Guarantee in
favor of the Subsidiary Guarantor's creditors. Among other things, a legal
challenge of a Subsidiary Guarantee on fraudulent conveyance grounds may focus
on the benefits, if any, realized by the Subsidiary Guarantor as a result of
the Company's issuance of the Notes. The Indenture contains a savings clause,
which generally will limit the obligations of each Subsidiary Guarantor under
its Subsidiary Guarantee to the maximum amount as will, after giving effect to
all of the liabilities of such Subsidiary Guarantor, result in such
obligations not constituting a fraudulent conveyance. To the extent a
Subsidiary Guarantee of any Subsidiary Guarantor was avoided or limited as a
fraudulent conveyance or held unenforceable for any other reason, holders of
the Notes would cease to have any claim against such Subsidiary Guarantor and
would be creditors solely of the Company and any Subsidiary Guarantor whose
Subsidiary Guarantee was not avoided or held unenforceable. In such event, the
claims of the holders of the Notes against the issuer of an invalid Subsidiary
Guarantee would be subject to the prior payment of all liabilities (including
trade payables) of such Subsidiary Guarantor. There can be no assurance that,
after providing for all prior claims, there would be sufficient assets to
satisfy the claims of the holders of the Notes relating to any avoided
portions of any of the Subsidiary Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally,
however, a Subsidiary Guarantor may be considered insolvent either (i) if the
sum of its debts, including contingent liabilities, was greater than the fair
market value or fair saleable value of all of its assets at a fair valuation
or if the present fair market value or fair saleable value of its assets was
less than the amount that would be required to pay its total outstanding debts
and liabilities including its probable liability on its existing debts,
including contingent liabilities, as they become absolute and mature, or (ii)
if it is incurring debts beyond its ability to pay as such debts mature. Based
upon financial and other information, the Company and the Subsidiary
Guarantors believe that the Subsidiary Guarantees are being incurred for
proper purposes and in good faith and that the Company and each Subsidiary
Guarantor is solvent
19
<PAGE>
and will continue to be solvent after issuing its Subsidiary Guarantee, will
have sufficient capital for carrying on its business after such issuance and
will be able to pay its debts as they mature. There can be no assurance,
however, that a court passing on such standards would agree with the Company.
See "Description of Notes--Ranking and Guarantees."
PREFERENTIAL TRANSFER
The Indenture requires the Subsidiaries created or acquired after the issue
date of the Notes to guarantee the Notes. If bankruptcy or insolvency
proceedings were initiated by or against the Company or any Subsidiary
Guarantor within 90 days (or, in certain cases, one year) after any such
guarantee, or if any such guarantee were made in contemplation of insolvency,
such guarantee would be vulnerable to avoidance as a preferential transfer. In
addition, a court could require holders of the Notes to return any payments
made during the 90-day (or one-year) period.
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 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."
LACK OF PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY OF NOTE PRICE
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to apply for listing
of the Exchange Notes on any securities exchange or to seek approval for
quotation through any automated quotation system.
There can be no assurance as to the development or liquidity of any market
for the Exchange Notes. If an active market does not develop, the market price
and liquidity of the Exchange Notes will be adversely affected. If such a
market were to develop, the Notes could trade at prices that may be higher or
lower than their initial offering price depending upon many factors, including
prevailing interest rates, the Company's operating results and the markets for
similar securities. Although the Initial Purchaser has informed the Company
that it currently intends to make a market in the Exchange Notes, the Initial
Purchaser is not obligated to do so and any such market-making activity may be
discontinued at any time without notice. Historically, the market for non-
investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of
20
<PAGE>
securities similar to the Notes. In addition, such market-making activity will
be subject to the limits imposed by the Securities Act and the Exchange Act
and may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statement. See "Registration Rights; Additional Interest."
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain subject to the existing restrictions upon transfer
of such Old Notes. See "Transfer Restrictions on Old Notes." Because the
Company anticipates that most holders of Old Notes will elect to exchange such
Old Notes for Exchange Notes, the Company anticipates that the liquidity of
the market for any Old Notes remaining after the consummation of the Exchange
Offer may be substantially limited. Additionally, holders (other than
Restricted Holders) of any Old Notes not tendered in the Exchange Offer prior
to the Expiration Date will not be entitled to require the Company to file the
Shelf Registration Statement and the stated interest rate on such Old Notes
will remain at its initial level of 12 3/4%.
CHANGE OF CONTROL
In the event of a Change of Control (as defined in the Indenture), the
Company may be required to repurchase all of the outstanding Notes at 101% of
the principal amount, as the case may be, of the Notes plus any accrued and
unpaid interest thereon, and Additional Interest, if any, to the date of
repurchase. The exercise by the holders of the Notes of their rights to
require the Company to offer to purchase Notes upon a Change of Control could
also cause a default under other indebtedness of the Company, even if the
Change of Control itself does not, because of the financial effect of such
repurchase on the Company. The Company's ability to pay cash to any of the
holders of Notes upon a repurchase may be limited by the Company's then
existing capital resources. There can be no assurance that in the event of a
Change of Control, the Company will have, or will have access to, sufficient
funds, or will be contractually permitted under the terms of outstanding
indebtedness, to pay the required purchase price for any Notes. See
"Description of Notes--Change of Control."
ORIGINAL ISSUE DISCOUNT; POSSIBLE TAX AND OTHER LEGAL CONSEQUENCES FOR HOLDERS
OF NOTES AND THE COMPANY
The Notes were issued at a discount from their principal amount at maturity.
Original issue discount (i.e., the difference between the principal amount of
the Notes and the "issue price" of the Notes) will accrue from the issue date
of the Notes and will be included periodically in a holder's gross income for
federal income tax purposes in advance of receipts of the cash payments to
which the income is attributable. See "Certain Federal Income Tax
Consequences--Taxation of the Notes--Original Issue Discount." Similar results
may apply under state tax laws.
If a Registration Default occurs prior to the Expiration Date of the
Exchange Offer, the offer to exchange the Old Notes for the Exchange Notes
pursuant to the Exchange Offer may constitute a material modification of the
terms of the Old Notes, thereby causing the holders of the Old Notes to
recognize gain or loss on the exchange for federal income tax purposes. The
amount of the gain would equal the difference between the holder's basis in
the Old Notes prior to the exchange and the issue price of the Exchange Notes
received in the exchange. See "Certain Federal Income Tax Consequences--
Exchange Offer."
If a bankruptcy case were commenced by or against the Company under the
United States Bankruptcy Code after the issuance of the Notes, the claim of a
holder of the Notes with respect to the principal amount thereof may be
limited to an amount equal to the sum of (i) the initial offering price and
(ii) that portion of the original issue discount that is not deemed to
constitute "unmatured interest" for purposes of the United States Bankruptcy
Code. Any original issue discount that had not amortized as of the date of any
such bankruptcy filing could constitute "unmatured interest" for purposes of
the United States Bankruptcy Code.
21
<PAGE>
THE COMPANY
VIALOG Corporation 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. On
November 12, 1997, VIALOG Corporation consummated agreements to acquire the
six Acquired Companies, all of which became wholly-owned subsidiaries of
VIALOG Corporation. See "Organization and Acquisition of the Acquired
Companies." A brief description of each of the Acquired Companies is set forth
below.
TELEPHONE BUSINESS MEETINGS, INC. D/B/A ACCESS CONFERENCE CALL SERVICE
("ACCESS"): Access is headquartered and maintains its operations center in
Reston, Virginia. Founded in 1987, Access had net revenues of approximately
$9.1 million in 1996 and of approximately $9.3 million for the nine months
ended September 30, 1997. 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 Acquired Companies in the development
of video teleconferencing services. As of June 30, 1997, Access had
approximately 95 employees and approximately 1,188 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 $5.9 million in 1996 and of approximately $4.8
million for the nine months ended September 30, 1997. CSI specializes in
providing electronic group communications services to certain facilities-based
carriers and non-facilities-based telecommunications providers. As of June 30,
1997, CSI had approximately 60 employees and approximately 1,440 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 $7.5 million in 1996 and of
approximately $6.2 million for the nine months ended September 30, 1997. Call
Points specializes in providing electronic group communications services to
the retail industry. As of June 30, 1997, Call Points had approximately 85
employees and approximately 2,432 ports of teleconferencing capability.
KENDALL SQUARE TELECONFERENCING, INC. D/B/A THE CONFERENCE CENTER
("TCC"): TCC is headquartered and maintains its operations center in
Cambridge, Massachusetts. Founded in 1987, TCC had net revenues of
approximately $3.4 million in 1996 and of approximately $3.0 million for the
nine months ended September 30, 1997. TCC services a general business
clientele. TCC is also a beta test site for a data teleconferencing system
which will allow remote sequential modification of shared data or documents
during a teleconference. As of June 30, 1997, TCC had approximately 40
employees and approximately 432 ports of teleconferencing capability.
AMERICAN CONFERENCING COMPANY, INC. D/B/A AMERICO ("AMERICO"): Americo is
headquartered and maintains its operations center in Oradell, New Jersey.
Founded in 1987, Americo had net revenues of approximately $1.7 million in
1996 and of approximately $1.6 million for the nine months ended September 30,
1997. Americo services a general business clientele. As of June 30, 1997,
Americo had approximately 35 employees and approximately 506 ports of
teleconferencing capability.
COMMUNICATION DEVELOPMENT CORPORATION ("CDC"): CDC is headquartered and
maintains its operations center in Danbury, Connecticut. Founded in 1990, CDC
had net revenues of approximately $1.5 million in 1996 and of approximately
$1.5 million for the nine months ended September 30, 1997. CDC specializes in
providing a range of electronic group communications services and customized
communications solutions to its clients, the majority of whom are in the
pharmaceutical industry. As of June 30, 1997, CDC had approximately 20
employees and approximately 248 ports of teleconferencing capability.
22
<PAGE>
PRIVATE PLACEMENT
On November 12, 1997, the Company completed the private sale to the Initial
Purchaser of units consisting of $75.0 million principal amount of the Old
Notes and the Warrants at a price of 96% of the principal amount of the Old
Notes in a transaction not registered under the Securities Act in reliance
upon Section 4(2) of the Securities Act. The Initial Purchaser thereupon
offered and resold such units only to qualified institutional buyers and a
limited number of institutional accredited investors at an initial price to
such purchasers of 100% of the principal amount of the Old Notes. The $72.0
million net proceeds received by the Company in connection with the sale of
the Old Notes and the Warrants were used to finance the cash portion of the
purchase price for the Acquisitions and certain related expenses, repay
outstanding indebtedness, make capital expenditures and provide working
capital for the Company.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange a
like principal amount of Old Notes, the terms of which are identical in all
material respects to the Exchange Notes. The Old Notes surrendered in exchange
for the Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any change in
capitalization of the Company.
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.
23
<PAGE>
CAPITALIZATION
The following table sets forth at September 30, 1997, the cash, short-term
debt and capitalization of VIALOG Corporation and the Acquired Companies on a
pro forma combined basis to give effect to (i) the sale of the Old Notes and
the Warrants and the application of the net proceeds therefrom and (ii) the
issuance of $3.2 million of Common Stock in connection with the Acquisitions.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Unaudited Pro
Forma Combined Financial Statements" and the individual companies' Financial
Statements, including the notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, 1997(1)
----------------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C>
Cash and cash equivalents................................ $11,829(2)
=======
Current maturities of long-term debt..................... $ 423
=======
LONG-TERM DEBT:
Senior Credit Facility(3).............................. $ --
Senior Notes due 2001(4)............................... 70,649
Other indebtedness(5).................................. 834
-------
Total long-term debt................................. $71,483
-------
STOCKHOLDERS' EQUITY:
Common stock........................................... $ 34
Additional paid-in capital(4).......................... 10,476
Accumulated deficit(6)................................. (4,836)
-------
Total stockholders' equity........................... 5,674
-------
Total capitalization................................. $77,157
=======
</TABLE>
- --------
(1) Computed on a basis described in Notes 3 and 4 to the Unaudited Pro Forma
Combined Financial Statements.
(2) Does not reflect S corporation distributions of approximately $751,000
made prior to or upon the consummation of the Acquisitions.
(3) The Company intends to obtain the Senior Credit Facility with availability
of $15.0 million following completion of the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Description of Senior Credit
Facility."
(4) In accordance with generally accepted accounting principles, approximately
$4.4 million of the proceeds of the Private Placement has been allocated
to the Warrants and approximately $70.6 million has been allocated to the
Notes. In addition, $1.7 million of the total estimated fair value of
certain warrants issued in connection with the Private Placement have been
allocated to debt issuance costs.
(5) Reflects existing indebtedness of the Acquired Companies consisting
primarily of capitalized lease obligations with varying terms and
conditions. See "Organization and Acquisition of the Acquired Companies."
(6) Changes to accumulated deficit do not include a write-off of in-process
research and development costs which is expected to occur during the first
quarter subsequent to the closing of the Acquisitions and, based on an
independent valuation, is expected to be $8.0 million. The pro forma
combined amounts include a valuation allowance of $1.6 million against
deferred tax assets.
24
<PAGE>
SELECTED FINANCIAL DATA
On November 12, 1997, VIALOG Corporation consummated agreements to acquire
the Acquired Companies simultaneously with and as a condition to the
consummation of the Private Placement. The following selected historical
financial data of VIALOG Corporation as of December 31, 1996 and September 30,
1997 and for the year ended December 31, 1996 and the nine months ended
September 30, 1997 have been derived from the audited financial statements of
VIALOG Corporation included elsewhere in this Prospectus. The following
selected unaudited pro forma combined financial data presents certain data for
the Company as of September 30, 1997 and for the year ended December 31, 1996,
and for the nine months ended September 30, 1997 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) the consummation of the Private Placement. See the Unaudited Pro Forma
Combined Financial Statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -------------------------
1996 1996 1997
------------ ----------------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
VIALOG CORPORATION STATEMENT OF
OPERATIONS DATA:
Net revenues........................ $ -- $ -- $ --
Gross profit........................ -- -- --
Selling, general and administrative
expenses........................... 1,308 703 3,898
------- ------- -------
Operating loss...................... (1,308) (703) (3,898)
Interest income (expense), net...... 1 -- (110)
------- ------- -------
Loss before income taxes............ (1,307) (703) (4,008)
Income tax benefit.................. (522) (281) --
------- ------- -------
Net loss............................ $ (785) $ (422) $(4,008)
======= ======= =======
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -----------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
VIALOG CORPORATION BALANCE SHEET DATA:
Working capital deficit............. $ (249) $(4,424)
Total assets........................ 1,263 996
Total debt, including current
portion ........................... -- 712
Stockholders' equity................ 287 (3,590)
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
(UNAUDITED)(1)(2):
Net revenues........................ $ 28,298 $26,351
Gross profit(3)..................... 13,487 12,655
Selling, general and administrative
expenses(4)........................ 9,425 10,635
Amortization of intangible
assets(5).......................... 2,809 2,107
-------- -------
Operating income (loss)............. 1,253 (87)
Interest expense, net............... (12,637) (9,596)
-------- -------
Loss before income taxes............ (11,384) (9,683)
Income tax benefit.................. (540) --
-------- -------
Net loss............................ $(10,844) $(9,683)
======== =======
OTHER FINANCIAL DATA (UNAUDITED):
EBITDA(6) .......................... $ 6,036 $ 3,825
Ratio of earnings to fixed
charges(7)......................... 0.10x N/A
<CAPTION>
PRO FORMA
SEPTEMBER 30, 1997(8)
---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (UNAUDITED)(1):
Cash and cash equivalents........... $11,829
Working capital..................... 10,641
Total assets........................ 84,016
Total debt, including current
portion(9)......................... 71,906
Stockholders' equity(9)............. 5,674
</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 September 30, 1997, 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 Notes 4 and 5 to the Unaudited Pro
Forma Combined Financial Statements. The pro forma statement of operations
data does not include a one-time charge of approximately $8.0 million for
in-process research and development.
(3) Reflects a reduction of approximately $1.0 million and $1.1 million in
long distance charges for the year ended December 31, 1996 and the nine
months ended September 30, 1997, respectively, as a result of contracts
available or entered into by certain of the Acquired Companies as if such
contracts had been in effect as of January 1, 1996.
(4) Reflects certain reductions of approximately $586,000 and $247,000 million
in compensation for the year ended December 31, 1996 and the nine months
ended September 30, 1997, respectively, for the owners and certain key
employees and consultants of the Acquired Companies to specified amounts
that the individuals have agreed to accept subsequent to the Acquisitions.
Additionally, the nine month period ended September 30, 1997 includes a
non-recurring charge of approximately $2.2 million related to an offering
of Common Stock which was terminated in early 1997.
(5) Reflects amortization of intangible assets to be recorded as a result of
the Acquisitions over periods ranging from 6 to 20 years and computed on
the basis described in Notes 3, 4(b) and 5(f) to the Unaudited Pro Forma
Combined Financial Statements.
(footnotes continued on following page)
26
<PAGE>
(6) EBITDA represents income from continuing operations before income taxes,
depreciation and amortization. EBITDA is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. EBITDA is not a measurement presented in accordance
with generally accepted accounting principles and should not be considered
as an alternative to net income as a measure of operating results or as an
alternative to cash flows as a better measure of liquidity.
(7) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings from continuing operations before income
taxes and fixed charges. Fixed charges consist of interest expense.
Earnings were not sufficient on a pro forma basis for the year ended
December 31, 1996 and the nine months ended September 30, 1997 to cover
fixed charges. The deficiencies were $11.4 million and $9.7 million for
the year ended December 31, 1996 and the nine months ended September 30,
1997, respectively.
(8) Computed on the basis described in Notes 3 and 4 to the Unaudited Pro
Forma Combined Financial Statements.
(9) Under generally accepted accounting principles, approximately $4.4 million
of the proceeds from the Private Placement has been allocated to the fair
value of the Warrants and approximately $70.6 million has been allocated
to the Notes. In addition, $1.7 million of the total estimated fair value
of certain warrants issued in connection with the Private Placement have
been allocated to debt issuance costs.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
VIALOG Corporation 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. On
November 12, 1997, VIALOG Corporation consummated agreements to acquire the
six Acquired Companies, all of which became wholly-owned subsidiaries of
VIALOG Corporation. Through the acquisition of six PCSBs, the Company
established 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 6,500 ports of
teleconferencing capability and a skilled staff with which it services
customers, which include Fortune 500 companies and several telecommunications
providers as well as medium and small businesses and institutions.
The following discussion should be read in conjunction with the Financial
Statements and related notes thereto and "Selected Financial Data" and
"Summary--Historical Individual 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 Acquired 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
combined financial statements included elsewhere in this Prospectus. See
"Management--Employment and Noncompetition Agreements."
VIALOG Corporation, which has only conducted operations since November 12,
1997 (other than in connection with the sale of the Old Notes and the
Acquisitions), intends to integrate certain operations and administrative
functions of the Acquired 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 Acquired 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 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.
In conjunction with the Acquisitions, the Company arranged for the
performance of an independent valuation of intangible assets in order to
allocate the purchase price. Included in this valuation is a determination of
the value associated with research and development projects that were in
process. Under generally accepted
28
<PAGE>
accounting principles, the value associated with research and development
projects which are in process and which do not have alternative future use is
to be expensed in the current period. Based on the valuation, the write-off to
expense is expected to be $8.0 million. This write-off is expected to occur
during the quarter ended December 31, 1997. The impact of this write-off will
include a reduction of the goodwill and goodwill amortization as presented in
the pro forma combined financial statements.
VIALOG Corporation
VIALOG Corporation was incorporated on January 1, 1996. VIALOG Corporation
incurred a net loss of $785,000, $422,000 and $4.0 million for the year ended
December 31, 1996 and the nine month periods ended September 30, 1996 and
1997, respectively, from general and administrative expenses. These expenses
consisted primarily of legal, travel, salaries and consulting fees related to
the organization of VIALOG Corporation and the consummation of business
combination agreements and the Acquisition agreements with the Acquired
Companies. Additionally, during the nine months ended September 30, 1997,
VIALOG Corporation wrote off approximately $2.0 million related to an offering
of Common Stock of VIALOG Corporation which was terminated in early 1997.
Combined Acquired Companies and VIALOG Corporation
The combined Acquired Companies' and VIALOG Corporation's Statements of
Operations data for the years ended December 31, 1994, 1995 and 1996 and for
the nine month periods ended September 30, 1996 and 1997 do not purport to
present the financial results or the financial condition of the combined
Acquired Companies and VIALOG Corporation 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 Acquired Companies and VIALOG Corporation 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 Acquired 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 ACQUIRED COMPANIES AND VIALOG CORPORATION
The following table sets forth certain unaudited combined data of the
Acquired Companies and VIALOG Corporation 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>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1997
-------------------------------------------- -----------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $19,390 100.0% $21,855 100.0% $29,005 100.0% $21,486 100.0% $26,351 100.0%
Cost of revenues........ 12,286 63.4% 13,143 60.1% 16,302 56.2% 11,993 55.8% 14,822 56.2%
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Gross Profit............ 7,104 36.6% 8,712 39.9% 12,703 43.8% 9,493 44.2% 11,529 43.8%
Selling, general and
administrative ex-
penses................. 5,707 29.4% 7,122 32.6% 10,558 36.4% 7,196 33.5% 11,031 41.2%
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Operating Income........ 1,397 7.2% 1,590 7.3% 2,145 7.4% 2,297 10.7% 498 1.9%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net revenues. All Acquired Companies reflected an increase in net revenues
during the nine months ended September 30, 1997 compared to the nine months
ended September 30, 1996. Combined net revenues increased $4.9 million, or
22.6%, from $21.5 million for the nine months ended September 30, 1996 to
$26.4 million for the nine months ended September 30, 1997. The major
components of this increase were (i) an increase in Access' net revenues of
$2.7 million, or 40.2%, from $6.6 million for the nine months ended September
30, 1996 to $9.3 million for the nine months ended September 30, 1997, which
was primarily attributable to sales of teleconferencing services to existing
customers and new customers, (ii) an increase in Call Points' net revenues
29
<PAGE>
of $624,000, or 11.1%, from $5.6 million for the nine months ended September
30, 1996 to $6.2 million for the nine months ended September 30, 1997, which
was primarily attributable to sales of teleconferencing services to existing
customers and sales to new customers, and (iii) an increase in TCC's net
revenues of $502,000, or 20.1%, from $2.5 million for the nine months ended
September 30, 1996 to $3.0 million for the nine months ended September 30,
1997, which was primarily attributable to sales to existing customers and
sales to new customers. This growth was achieved despite the fact that TCC's
net revenues for the nine months ended September 30, 1996 included $565,000 of
net revenues from a portion of TCC's business that was divested in December
1996.
Cost of revenues. Cost of revenues increased $2.8 million, or 23.6%, from
$12.0 million for the nine months ended September 30, 1996 to $14.8 million
for the nine months ended September 30, 1997 and increased as a percentage of
net revenues from 55.8% in 1996 to 56.2% in 1997. The dollar increase was
primarily attributable to (i) an increase in Access' cost of revenues of $1.6
million, or 53.9%, from $3.0 million for the nine months ended September 30,
1996 to $4.6 million for the nine months ended September 30, 1997 related to
the substantial investment made in personnel and related costs associated with
video teleconferencing and increased telecommunications and personnel expense
associated with the growth in revenues, (ii) an increase in Americo's cost of
revenues of $420,000, or 66.6%, from $631,000 for the nine months ended
September 30, 1996 to $1.1 million for the nine months ended September 30,
1997 primarily due to telecommunications costs and personnel expenses to
support the current and expected call volume, and (iii) an increase in Call
Points' cost of revenues of $371,000, or 8.4%, from $4.4 million for the nine
months ended September 30, 1996 to $4.8 million for the nine months ended
September 30, 1997, which was primarily attributable to increased
telecommunications costs and personnel expenses to support the increased call
volume.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $3.8 million, or 53.3%, from $7.2 million
for the nine months ended September 30, 1996 to $11.0 million for the nine
months ended September 30, 1997 and increased as a percentage of net revenues
from 33.5% in 1996 to 41.2% in 1997. The dollar increase was primarily
attributable to (i) an increase in VIALOG Corporation's selling, general and
administrative expenses of $3.2 million from $703,000 for the nine months
ended September 30, 1996 to $3.9 million for the nine months ended September
30, 1997, which was primarily attributable to a non-recurring charge of
approximately $2.0 million related to an offering of Common Stock that was
terminated in early 1997 and increased staffing and associated expenses
related to increased activities to consummate business combination agreements
and the Acquisition agreements with the Acquired Companies, and (ii) an
increase in Access' selling, general and administrative expenses of $735,000,
or 32.6%, from $2.3 million for the nine months ended September 30, 1996 to
$3.0 million for the nine months ended September 30, 1997, which was primarily
attributable to increased personnel, outside services and advertising costs.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net revenues. All Acquired Companies reflected an increase in net revenues
during 1996. Combined net revenues increased by $7.1 million, or 32.7%, from
$21.9 million in 1995 to $29.0 million in 1996. The major components of this
increase were (i) 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 (ii) 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,
and (iii) an increase in TCC's net revenues of $1.1 million, or 45.8%, from
$2.3 million in 1995 to $3.4 million in 1996 resulting from additional sales
of audio teleconferencing services to existing customers and sales to new
customers.
Cost of revenues. Cost of revenues increased by $3.2 million, or 24.0%, from
$13.1 million in 1995 to $16.3 million in 1996 and decreased as a percentage
of net revenues from 60.1% in 1995 to 56.2% in 1996. The dollar increase in
cost of revenues was primarily attributable to (i) an increase in CSI's cost
of revenues of $906,000, or 48.3%, from $1.9 million in 1995 to $2.8 million
in 1996 resulting from increased telecommunications costs associated with
increased call volumes and costs associated with the addition of nine
operators, (ii) an increase in Access' cost of revenues of $652,000, or 19.1%,
from $3.4 million in 1995 to $4.1
30
<PAGE>
million in 1996 resulting from increased telecommunications and occupancy
costs associated with increased call volumes, and (iii) an increase in TCC's
cost of revenues of $684,000, or 60.6%, from $1.1 million for the nine months
ended September 30, 1996 to $1.8 million for the nine months ended September
30, 1997 resulting from increased telecommunications and personnel costs
associated with increased call volumes.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $3.4 million, or 48.2%, from $7.1 million
in 1995 to $10.5 million in 1996 and increased as a percentage of net revenues
from 32.6% in 1995 to 36.4% in 1996. The dollar and percentage increases in
selling, general and administrative expenses were primarily attributable to
(i) $1.3 million from VIALOG Corporation, which was formed on January 1, 1996
and incurred expenses in connection with the consummation of business
combination agreements and the Acquisition agreements with the Acquired
Companies, (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 expenses 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.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net revenues. All Acquired Companies, with the exception of Call Points,
experienced an increase in net revenues in 1995. Overall net revenues
increased by $2.5 million, or 12.7%, from $19.4 million in 1994 to $21.9
million in 1995. This overall increase was primarily due to (i) 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, (ii) 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, and (iii) an increase in TCC's
net revenues of $814,000, or 53.7%, from $1.5 million in 1994 to $2.3 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 $857,000, or 7.0%, from
$12.3 million in 1994 to $13.1 million in 1995 and decreased as a percentage
of net revenues from 63.4% in 1994 to 60.1% in 1995. The dollar increase in
cost of revenues was primarily attributable to (i) 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 10 additional operators, and (ii) an increase in CSI's cost of
revenues of $411,000, or 28.1%, from $1.5 million in 1994 to $1.9 million in
1995 resulting from increased telecommunications and personnel costs to
support the increased call volumes. Partially offsetting these increases was
an $809,000 decrease in cost of revenues at Call Points, which was
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 Acquired 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 $1.4 million, or 24.8%, from $5.7 million
in 1994 to $7.1 million in 1995 and increased as a percentage of net revenues
from 29.4% in 1994 to 32.6% in 1995. The dollar increase was attributable to
(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, and (ii) an increase in TCC's selling,
general and administrative expenses of $379,000, or 74.3%, from $510,000 in
1994 to $889,000 in 1995 resulting primarily from increased marketing and
selling expenses to support TCC's growth.
31
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES--COMBINED ACQUIRED COMPANIES AND VIALOG
CORPORATION
The following table sets forth selected financial information from the
Acquired Companies' and VIALOG Corporation's cash flows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER ENDED SEPTEMBER
31, 30,
------------------------ ----------------
1994 1995 1996 1996 1997
------- ------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities............ $ 1,729 $2,619 $ 4,610 $ 3,462 $ 4,492
Investment activities........... (1,431) (2,014) (1,076) (690) (2,356)
Financing activities............ (301) 36 (2,821) (2,670) (2,256)
------- ------ ------- ------- -------
Net increase in cash and cash
equivalents...................... $ (3) $ 641 $ 713 $ 102 $ (120)
======= ====== ======= ======= =======
</TABLE>
All of the Acquired Companies had positive cash flows from operating
activities for all periods presented. 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 to stockholders. The combined Acquired Companies and VIALOG
Corporation had a working capital deficit of $4.1 million at September 30,
1997.
On the closing of the Private Placement, the Company repaid an aggregate of
approximately $2.8 million of indebtedness of VIALOG Corporation and the
Acquired Companies.
The Company anticipates that its cash flows 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
Acquired Companies made capital expenditures of $1.4 million, $1.9 million,
$1.1 million, and $2.4 million for the years ended December 31, 1994, 1995,
and 1996, and for the nine months ended September 30, 1997, 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
debt and/or equity securities.
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to
00. The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company will utilize both internal and external resources to identify,
correct or reprogram, and test the systems for the year 2000 compliance.
Management has not yet assessed the year 2000 compliance expense and related
potential effect on the Company's earnings.
Due to the relative 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.
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.
32
<PAGE>
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 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------- -------------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $5,114 100.0% $6,508 100.0% $9,073 100.0% $ 6,606 100.0% $ 9,261 100.0%
Cost of revenues........ 2,823 55.2% 3,419 52.5% 4,071 44.9% 2,977 45.1% 4,582 49.5%
------ ------ ------ ------ ------ ------ ------- ------- ------- -------
Gross profit............ 2,291 44.8% 3,089 47.5% 5,002 55.1% 3,629 54.9% 4,679 50.5%
Selling, general and
administrative......... 1,745 34.1% 2,582 39.7% 3,455 38.1% 2,255 34.1% 2,990 32.3%
------ ------ ------ ------ ------ ------ ------- ------- ------- -------
Operating income........ $ 546 10.7% $ 507 7.8% $1,547 17.0% $ 1,374 20.8% $ 1,689 18.2%
====== ====== ====== ====== ====== ====== ======= ======= ======= =======
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net revenues. Net revenues increased $2.7 million, or 40.2%, from $6.6
million for the nine months ended September 30, 1996 to $9.3 million for the
nine months ended September 30, 1997. This increase in net revenues resulted
primarily from additional sales of teleconferencing services to existing
customers and new customers. This increase included a substantial increase in
net revenues from unattended and enhanced conferencing services as well as
revenues of approximately $183,000 in video teleconferencing in 1997, compared
to an insignificant amount of video teleconferencing revenues for the
comparable period in 1996.
Cost of revenues. Cost of revenues increased $1.6 million, or 53.9%, from
$3.0 million for the nine months ended September 30, 1996 to $4.6 million for
the nine months ended September 30, 1997. As a percentage of revenue, cost of
revenues increased 4.4 percentage points, from 45.1% for the nine months ended
September 30, 1996 to 49.5 % for the nine months ended September 30, 1997.
This percentage increase was due primarily to the substantial investment in
personnel and related costs made in video teleconferencing.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $735,000, or 32.6% from $2.3 million for the
nine months ended September 30, 1996 to $3.0 million for the nine months ended
September 30, 1997. The dollar increase was primarily attributable to
increased personnel, outside services and advertising costs. As a percentage
of net revenues, selling, general and administrative expenses decreased 1.8
percentage points from 34.1% for the nine months ended September 30, 1996 to
32.3% for the nine months ended September 30, 1997.
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 dollar increase was primarily
attributable to increased telecommunications, occupancy costs and the salaries
and benefits of 16 additional operators. 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 increase resulted primarily from
increased occupancy costs and non-recurring executive compensation and bad
debt expense.
33
<PAGE>
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 10
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.
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. The dollar and percentage increases were
primarily attributable to moving expenses and increased occupancy costs
associated with relocating to a larger facility. 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.
LIQUIDITY AND CAPITAL RESOURCES--ACCESS
The following table sets forth selected financial information from Access'
statements of cash flows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------
1994 1995 1996 1996 1997
------- -------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used
in):
Operating activities........ $ 592 $ 821 $ 2,048 $ 1,681 $ 2,647
Investing activities........ (557) (1,432) (795) (431) (1,528)
Financing activities........ 22 771 (839) (820) (953)
------ -------- ------- -------- ---------
Net increase in cash and cash
equivalents.................. $ 57 $ 160 $ 414 $ 430 $ 166
====== ======== ======= ======== =========
</TABLE>
Access had a positive cash flow from operations in each of 1994, 1995 and
1996. Cash used in investing activities related primarily to the acquisition
of property and equipment. Net cash provided by financing activities was
primarily the result of borrowings on notes payable to finance the acquisition
of capital equipment. Cash used in financing activities consisted of the
repayments of notes payable, principal payments under capital leases
obligations, payments to a former stockholder and dividends to stockholders.
Dividends to stockholders totaled $39,000, $0 and $475,000 for 1994, 1995 and
1996, respectively.
Access generated positive cash flow from operations of $2.6 million during
the nine months ended September 30, 1997. Cash used in investing activities
was mainly for property and equipment. Net cash used in financing activities
for the nine months ended September 30, 1997 consisted of borrowings on notes
payable to finance the acquisition of capital equipment, offset by repayments
of notes payable and dividends to stockholders of $797,000.
CSI
Founded in 1992, CSI is headquartered and maintains its operations in
Atlanta, Georgia. CSI specializes in providing audio teleconferencing services
and enhanced services, on an outsourced basis, to certain facilities-based and
non-facilities-based telecommunications providers. CSI's customers generally
arrange for and directly bear the cost of long distance telephone
transmission. As a result, CSI's gross margin as a percentage of net revenues
is higher than those of the other Acquired Companies. In addition, CSI is not
required to spend significant marketing dollars under its outsourcing
arrangement with its customers. This has resulted in CSI having a historically
lower selling, general and administrative expense as a percentage of net
revenues than most of the other Acquired Companies.
34
<PAGE>
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 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------- -------------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $2,331 100.0% $3,808 100.0% $5,868 100.0% $ 4,483 100.0% $ 4,790 100.0%
Cost of revenues........ 1,463 62.8% 1,874 49.2% 2,780 47.4% 2,027 45.2% 2,010 42.0%
------ ------ ------ ------ ------ ------ ------- ------- ------- -------
Gross profit............ 868 37.2% 1,934 50.8% 3,088 52.6% 2,456 54.8% 2,780 58.0%
Selling, general and
administrative
expenses............... 735 31.5% 940 24.7% 1,049 17.9% 888 19.8% 686 14.3%
------ ------ ------ ------ ------ ------ ------- ------- ------- -------
Operating income........ $ 133 5.7% $ 994 26.1% $2,039 34.7% $ 1,568 35.0% $ 2,094 43.7%
====== ====== ====== ====== ====== ====== ======= ======= ======= =======
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net revenues. Net revenues increased $307,000 or 6.8% from $4.5 million for
the nine months ended September 30, 1996 to $4.8 million for the nine months
ended September 30, 1997. This increase is primarily due to increased revenues
from CSI's two major customers. Net revenues from CSI's two significant
customers represented 69.5% and 71.8% of CSI's net revenues for the nine
months ended September 30, 1996 and September 30, 1997, respectively.
Cost of revenues. Cost of revenues was virtually unchanged at $2.0 million
for the nine months ended September 30, 1996 and 1997. As a percentage of
revenue, cost of revenues decreased 3.2 percentage points from 45.2% for the
nine months ended September 30, 1996 to 42.0% for the nine months ended
September 30, 1997. The percentage decrease was due primarily to CSI's
negotiation of a favorable telecommunications contract which became effective
November 1996.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $202,000, or 22.7% from $888,000 for the
nine months ended September 30, 1996 to $686,000 for the nine months ended
September 30, 1997. As a percentage of net revenues, selling, general and
administrative expenses decreased 5.5 percentage points from 19.8% for the
nine months ended September 30, 1996 to 14.3% for the nine months ended
September 30, 1997. The dollar and percentage decreases were due primarily to
a reduction in outside services expenses.
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. Net revenues from CSI's two significant customers
represented 54.0% and 70.0% of CSI's net revenues for the year ended December
31, 1995 and 1996, respectively.
Cost of revenues. Cost of revenues increased $906,000, or 48.3%, from $1.9
million in 1995 to $2.8 million in 1996. As a percentage of net revenues, cost
of revenues decreased 1.8 percentage points from 49.2% in 1995 to 47.4% 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 $109,000, or 11.6%, from $940,000 in 1995 to
$1.0 million in 1996. As a percentage of net revenues, selling, general and
administrative expenses decreased 6.8 percentage points from 24.7% in 1995 to
17.9% in 1996. This percentage decrease was primarily attributable to
spreading fixed costs over a larger revenue base.
35
<PAGE>
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. Net revenues from CSI's two significant customers
represented 28.0% and 54.0% of total net revenues for 1994 and 1995,
respectively.
Cost of revenues. Cost of revenues increased $411,000, or 28.1%, from $1.5
million in 1994 to $1.9 million in 1995. As a percentage of net revenues, cost
of revenues decreased 13.6 percentage points from 62.8% in 1994 to 49.2% 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 $205,000, or 27.9%, from $735,000 in 1994 to
$940,000 in 1995. As a percentage of net revenues, selling, general and
administrative expenses decreased 6.8 percentage points from 31.5% in 1994 to
24.7% 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 (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used
in):
Operating activities....... $ 53 $ 721 $ 2,128 $ 1,450 $ 2,174
Investing activities....... (476) (225) (41) (31) (317)
Financing activities....... 426 (144) (2,144) (1,713) (2,163)
------- ------- --------- -------- --------
Net increase (decrease) in
cash and cash equivalents... $ 3 $ 352 $ (57) $ (294) $ (306)
======= ======= ========= ======== ========
</TABLE>
CSI had a positive cash flow from operations in each period presented. Cash
used in investing 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 dividends to stockholders. Dividends to
stockholders totaled $1.6 million in 1996. There were no dividends to
stockholders in 1994 and 1995. Dividends to stockholders totaled $1.3 million
and $2.1 million for the nine months ended September 30, 1996 and September
30, 1997, respectively. As of September 30, 1997, CSI had working capital of
$327,000.
Call Points
Founded in 1988, Call Points specializes in providing operator-attended
audio teleconferencing services primarily to the retail industry. Call Points
is headquartered and maintains its operations center in Montgomery, Alabama.
36
<PAGE>
RESULTS OF OPERATIONS--CALL POINTS
The following table sets forth certain historical financial data (in
thousands) of Call Points and such data as a percentage of net revenues for
the periods presented. In general, Call Points' retail customers are extremely
price sensitive for their teleconferencing services and will seek the best
price, regardless of the provider. As a result, Call Points has the lowest
average price per minute and gross margin as a percentage of net revenues of
all the Acquired Companies.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------
1994 1995 1996 1996 1997
------------- --------------- --------------- ----------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $8,537 100.0% $6,852 100.0% $7,509 100.0% $ 5,606 100.0% $ 6,230 100.0%
Cost of revenues........ 6,140 71.9% 5,331 77.8% 5,898 78.5% 4,392 78.3% 4,763 76.5%
------ ------ ------ ------- ------ ------- ------- -------- ------- -------
Gross profit............ 2,397 28.1% 1,521 22.2% 1,611 21.5% 1,214 21.7% 1,467 23.5%
Selling, general and
administrative
expenses............... 2,035 23.8% 1,820 26.6% 1,873 24.9% 1,377 24.6% 1,160 18.6%
------ ------ ------ ------- ------ ------- ------- -------- ------- -------
Operating income
(loss)................. $ 362 4.3% $ (299) (4.4)% $ (262) (3.4)% $ (163) (2.9)% $ 307 4.9%
====== ====== ====== ======= ====== ======= ======= ======== ======= =======
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net revenues. Net revenues increased $624,000 or 11.1%, from $5.6 million
for the nine months ended September 30, 1996 to $6.2 million for the nine
months ended September 30, 1997. This increase in net revenues resulted
primarily from additional sales of teleconferencing services to existing
customers and sales to new customers.
Cost of revenues. Cost of revenues increased $371,000, or 8.4% from $4.4
million for the nine months ended September 30, 1996 to $4.8 million for the
nine months ended September 30, 1997. As a percentage of revenue, costs of
revenues decreased 1.8 percentage points from 78.3% for the nine months ended
September 30, 1996 to 76.5% for the nine months ended September 30, 1997. The
percentage decrease was primarily attributable to a reduction in long distance
rates with one of Call Points' long distance providers.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $217,000 or 15.8% from $1.4 million for the
nine months ended September 30, 1996 to $1.2 million for the nine months ended
September 30, 1997. As a percentage of net revenues, selling, general and
administrative expenses decreased 6.0 percentage points from 24.6% for the
nine months ended September 30, 1996 to 18.6% for the nine months ended
September 30, 1997. The dollar and percentage decreases were primarily
attributable to a reduced reseller commission structure that went into effect
at the end of 1996 and a reduction in the rate of royalty payments.
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.
Cost of revenues. Cost of revenues increased $567,000, or 10.6%, from $5.3
million in 1995 to $5.9 million in 1996. This dollar increase was primarily
attributable to increased volume under unfavorable telecommunications
contracts. As a percentage of net revenues, cost of revenues remained
virtually unchanged between the periods.
37
<PAGE>
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 24.0% 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.
LIQUIDITY AND CAPITAL RESOURCES--CALL POINTS
The following table sets forth selected financial information from Call
Points' statements of cash flows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities......... $ 820 $ 841 $ 220 $ 262 $ 769
Investing activities......... (148) (105) (50) (39) (276)
Financing activities......... (695) (677) (288) (267) (43)
------- ------- ------- -------- --------
Net increase (decrease) in cash
and cash equivalents.......... $ (23) $ 59 $ (118) $ (44) $ 450
======= ======= ======= ======== ========
</TABLE>
Call Points had a positive cash flow from operations in each period
presented. Cash used in investing activities related solely to the acquisition
of property and equipment. Cash used in financing activities was the result of
repayment of notes payable to lenders and related parties. No dividends were
paid to stockholders in 1994, 1995 or 1996 or for the nine months ended
September 30, 1997. As of September 30, 1997, Call Points had a working
capital deficit of $91,000.
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 a line of business
("TCC's Distributed Business") unrelated to its core operations. Revenues
associated with these assets were $642,000, $727,000 and
38
<PAGE>
$707,000 for the years ended December 31, 1994 and 1995 and the period January
1, 1996 to 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 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------- -------------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $1,515 100.0% $2,329 100.0% $3,396 100.0% $ 2,501 100.0% $ 3,003 100.0%
Cost of revenues........ 816 53.9% 1,129 48.5% 1,813 53.4% 1,351 54.0% 1,650 54.9%
------ ------ ------ ------ ------ ------ ------- ------- ------- -------
Gross profit............ 699 46.1% 1,200 51.5% 1,583 46.6% 1,150 46.0% 1,353 45.1%
Selling, general and
administrative
expenses............... 510 33.7% 889 38.2% 1,329 39.1% 969 38.7% 1,015 33.8%
------ ------ ------ ------ ------ ------ ------- ------- ------- -------
Operating income........ $ 189 12.4% $ 311 13.3% $ 254 7.5% $ 181 7.2% $ 338 11.3%
====== ====== ====== ====== ====== ====== ======= ======= ======= =======
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net revenues. Net revenues increased $502,000 or 20.1% from $2.5 million for
the nine months ended September 30, 1996 to $3.0 million for the nine months
ended September 30, 1997. The increase in net revenues resulted primarily from
additional sales of teleconferencing services to existing customers and sales
to new customers and was achieved despite the fact that TCC's net revenues for
the nine months ended September 30, 1996 included $565,000 of net revenues
from TCC's Distributed Business which was divested in December 1996.
Cost of revenues. Cost of revenues increased $299,000 or 22.1% from $1.4
million for the nine months ended September 30, 1996 to $1.7 million for the
nine months ended September 30, 1997. As a percentage of revenue, cost of
revenues increased 0.9 percentage points from 54.0% for the nine months ended
September 30, 1996 to 54.9% for the nine months ended September 30, 1997. This
increase was due primarily to increased expenses associated with the hiring of
personnel working in the operations area.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $46,000 or 4.7% from $969,000 for the nine
months ended September 30, 1996 to $1.0 million for the nine months ended
September 30, 1997. As a percentage of net revenues, selling, general and
administrative expenses decreased 4.9 percentage points from 38.7% for the
nine months ended September 30, 1996 to 33.8% for the nine months ended
September 30, 1997. The percentage decrease was due primarily to the reduction
of selling, general and administrative costs related to TCC's Distributed
Business.
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 the addition of two
new salespeople 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 and the addition of 10 operators.
39
<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 dollar increase was primarily attributable to increased
telecommunications costs and the addition of two operators. 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 (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1994 1995 1996 1996 1997
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used
in):
Operating activities....... $ 62 $ 211 $ 159 $ 32 $ 150
Investing activities....... (20) (231) (156) (153) (144)
Financing activities....... (84) 68 40 72 (110)
------- -------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents... $ (42) $ 48 $ 43 $ (49) $ (104)
======= ======== ======== ======== ========
</TABLE>
TCC had a positive cash flow from operations in each period presented. Cash
used in investing 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. No dividends were paid to stockholders in 1994, 1995 or
1996. Dividends of $61,000 were paid to stockholders during the nine month
period ended September 30, 1997. As of September 30, 1997, TCC had a working
capital deficit of $15,000.
Americo
Founded in 1987, Americo services a general business clientele. Americo is
headquartered and maintains its operations center in Oradell, New Jersey.
40
<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 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------- -------------------------------------
1994 1995 1996 1996 1997
---------- ------------ ------------- ----------------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $772 100.0% $1,227 100.0% $1,679 100.0 % $ 1,210 100.0 % $ 1,581 100.0 %
Cost of revenues........ 335 43.4% 625 50.9% 854 50.9 % 631 52.1 % 1,051 66.5 %
---- ----- ------ ----- ------ ----- -------- ------- -------- -------
Gross profit............ 437 56.6% 602 49.1% 825 49.1 % 579 47.9 % 530 33.5 %
Selling, general and
administrative......... 345 44.7% 514 41.9% 889 52.9 % 593 49.0 % 840 53.1 %
---- ----- ------ ----- ------ ----- -------- ------- -------- -------
Operating income........ $ 92 11.9% $ 88 7.2% $ (64) (3.8)% $ (14) (1.1)% $ (310) (19.6)%
==== ===== ====== ===== ====== ===== ======== ======= ======== =======
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net revenues. Net revenues increased $371,000 or 30.7% from $1.2 million for
the nine months ended September 30, 1996 to $1.6 million for the nine months
ended September 30, 1997. This increase in net revenues resulted primarily
from additional sales of teleconferencing services to existing customers and
sales to new customers.
Cost of revenues. Cost of revenues increased $420,000 or 66.6% from $631,000
for the nine months ended September 30, 1996 to $1.1 million for the nine
months ended September 30, 1997. As a percentage of revenue, cost of revenues
increased 14.4 percentage points from 52.1% for the nine months ended
September 30, 1996 to 66.5% for the nine months ended September 30, 1997. The
dollar and percentage increases were primarily due to the addition of eight
employees in the operations area who were hired in anticipation of increased
call volume for 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $247,000, or 41.7%, from $593,000 for the
nine months ended September 30, 1996 to $840,000 for the nine months ended
September 30, 1997. As a percentage of revenue, selling, general and
administrative expenses increased 4.1 percentage points from 49.0% for the
nine months ended September 30, 1996 to 53.1% for the nine months ended
September 30, 1997. The dollar and percentage increases were primarily due to
higher levels of compensation paid to administrative and executive personnel.
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.
41
<PAGE>
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 (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used
in):
Operating activities........ $ 43 $ 17 $ 90 $ 19 $ (125)
Investing activities........ (47) (17) (25) (21) (47)
Financing activities........ (1) 17 (43) (6) 142
------- ------- ------- -------- ---------
Net increase (decrease) in
cash and cash equivalents.... $ (5) $ 17 $ 22 $ (8) $ (30)
======= ======= ======= ======== =========
</TABLE>
Americo had a positive cash flow from operations in each of 1994, 1995 and
1996 and the nine months ended September 30, 1996. Americo had a negative cash
flow from operations for the nine months ended September 30, 1997. Cash used
in investing activities for all periods presented related solely to the
acquisition of property and equipment. Cash provided by financing activities
for 1994, 1995 and 1996, resulted from borrowings under a line of credit and
for the nine months ended September 30, 1997 also included proceeds from the
issuance of long-term debt. Cash used in financing activities consisted of
principal payments under capital lease obligations and long term debt, and
dividends. Dividends paid to stockholders for 1994, 1995 and 1996 were $0, $0
and $19,000, respectively. Dividends paid to stockholders for the nine months
ended September 30, 1996 and 1997 were $16,000 and $0, respectively. As of
September 30, 1997 Americo had a working capital deficit of $692,000.
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.
42
<PAGE>
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 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------- ----------------------------------
1994 1995 1996 1996 1997
------------ -------------- ------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues.............. $1,121 100.0% $1,131 100.0 % $1,480 100.0% $ 1,080 100.0% $ 1,486 100.0%
Cost of revenues.......... 709 63.2% 765 67.6 % 886 59.9% 615 56.9% 766 51.5%
------ ----- ------ ------ ------ ----- -------- ------- -------- -------
Gross profit.............. 412 36.8% 366 32.4 % 594 40.1% 465 43.1% 720 48.5%
Selling, general and
administrative expenses.. 337 30.1% 377 33.3 % 655 44.2% 411 38.1% 442 29.8%
------ ----- ------ ------ ------ ----- -------- ------- -------- -------
Operating income............$ 75 6.7% $ (11) (.9)% $ (61) 4.1% $ 54 5.0% $ 278 18.7%
====== ===== ====== ====== ====== ===== ======== ======= ======== =======
</TABLE>
Nine months ended September 30, 1997 compared to nine months ended September
30, 1996
Net revenues. Net revenues increased $406,000 or 37.6 % from $1.1 million
for the nine months ended September 30, 1996 to $1.5 million for the nine
months ended September 30, 1997. The increase is a result of increased
penetration in sales in the pharmaceutical/medical marketing industries.
Increase in revenues also reflects the offerings of new services developed
specifically for clients in the pharmaceutical/medical marketing industries to
enhance their programs.
Cost of revenues. Cost of revenues increased $151,000 or 24.6%, from
$615,000 for the nine months ended September 30, 1996 to $766,000 for the nine
months ended September 30, 1997. The increase in cost of revenue is attributed
to the purchase of new computer equipment and network to support additional
employees and the growth of the pharmaceutical division and business in
general. Reservation and billing systems were upgraded, and customized
computer programs have been developed to service clients in the pharmaceutical
division. As a percentage of revenue, cost of revenues decreased 5.4
percentage points from 56.9% for the nine months ended September 30, 1996 to
51.5% for the nine months ended September 30, 1997. The percentage decrease is
primarily due to reductions in long distance rates and improved utilization of
existing capacity.
Selling, general, and administrative expenses. Selling, general and
administrative expenses increased $31,000 or 7.5% from $411,000 for the nine
months ended September 30, 1996 to $442,000 for the nine months ended
September 30, 1997. As a percentage of revenues, selling, general and
administrative expenses decreased 8.3 percentage points from 38.1% for the
nine months ended September 30, 1996 to 29.8% for the nine months ended
September 30, 1997 due to operating efficiencies and the spreading of fixed
costs over a larger revenue base.
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.
43
<PAGE>
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net revenues. Net revenues remained virtually unchanged from 1994 to 1995.
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
dollar and percentage increases resulted from the addition of two operators
and the doubling of office space in anticipation of additional volume.
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. As a percentage of net revenues, selling general and
administrative expenses increased 3.2 percentage points from 30.1% in 1994 to
33.3% in 1995. The dollar and percentage increases resulted from the doubling
of office space and increased compensation expense for administrative and
executive personnel.
LIQUIDITY AND CAPITAL RESOURCES--CDC
The following table sets forth selected financial information from CDC's
statements of cash flows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ------------------
1994 1995 1996 1996 1997
-------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used
in):
Operating activities........ $ 159 $ 8 $ 143 $ 137 $ 12
Investing activities........ (183) (4) (2) (13) (21)
Financing activities........ 31 1 (69) (63) (26)
-------- ------ ------- -------- --------
Net increase in cash and cash
equivalents.................. $ 7 $ 5 $ 72 $ 61 $ (35)
======== ====== ======= ======== ========
</TABLE>
CDC had a positive cash flow from operations in each period presented. Cash
used in investing activities 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
repayments of borrowings under a line of credit and repayments of long-term
debt. There were no dividends paid to stockholders during 1994, 1995 and 1996
or for the nine months ended September 30, 1997. As of September 30, 1997, CDC
had working capital of $245,000.
44
<PAGE>
BUSINESS
On November 12, 1997, VIALOG Corporation acquired, in separate transactions
(the "Acquisitions"), six private conference service bureaus (each, an
"Acquired Company" and, collectively, the "Acquired Companies") in exchange
for cash and shares of its Common Stock. Unless otherwise indicated, (i) all
information in this Prospectus gives effect to the Acquisitions and the
transactions described under "Organization and Acquisition of the Acquired
Companies", (ii) all references to "VIALOG Corporation" mean VIALOG
Corporation (which was founded on January 1, 1996) as a stand-alone entity and
(iii) all references to "VIALOG" or the "Company" refer to VIALOG Corporation
and include its consolidated subsidiaries.
COMPANY OVERVIEW
VIALOG is a leading independent provider of electronic group communications
services, consisting primarily of operator-assisted audio teleconferencing, as
well as video, data and unattended audio teleconference services. The Company
has one of the largest and most geographically diverse networks of sales and
operations centers focused solely on the electronic group communications
market, and has approximately 6,500 ports of teleconferencing capability (one
"port" is required for each conference participant) and state-of-the-art
digital conferencing technology. The Company believes it differentiates itself
from its competitors by providing superior customer service and support as
well as an extensive range of enhanced and customized communications
solutions. Combining these capabilities with targeted marketing and
relationship selling has allowed the Company to capitalize on the growth in
the developing teleconferencing services industry and to build a large, stable
client base of approximately 5,000 customers representing what the Company
estimates to be over 30,000 accounts. The Company's customer base is diverse,
ranging from Fortune 500 companies to medium and small businesses and
institutions. Customers also include certain major long distance
telecommunications providers which have outsourced their teleconferencing
services to VIALOG.
The Company facilitates 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, auction formats, coaching and event rehearsal services. The Company
derived approximately 97% and 3% of its 1996 net revenues from audio
teleconference services and related customized and enhanced services,
respectively.
The Acquired Companies had a combined compound annual growth rate in net
revenues of 27.3% during the three-year period ended December 31, 1996 and pro
forma combined net revenues of $28.3 million in 1996. VIALOG believes that the
consolidation of the Acquired Companies offers a number of significant
synergies that will contribute to VIALOG's continued growth in net revenues
and cash flow. These synergies include operating efficiencies such as reduced
costs for long distance charges, equipment and employee benefits. The Company
also expects to benefit from significantly enhanced marketing power by
creating the critical mass necessary to develop a brand name effectively,
implement a national selling strategy and offer a wide range of teleconference
services. The Company intends to establish its brand, VIALOG, as synonymous
with superior electronic group communications services. The Company also
intends to capitalize on strong industry fundamentals by leveraging its
service capabilities, targeted selling approach and unique industry position
to continue to increase penetration of its existing customer base and to win
new customers, including those long distance service providers that decide to
outsource their teleconferencing services. In addition to internal growth, the
Company believes there is substantial opportunity to consolidate the industry
further through future acquisitions.
45
<PAGE>
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 International
Teleconferencing Association ("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.
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 attributable to the service segment (the segment
in which the Company competes) constituted approximately $1.7 billion in 1996.
An audio teleconference is established through specialized telephone
equipment known as a Multipoint Control Unit ("MCU") or "bridge." Prior to
1984, audio teleconferencing was generally considered ineffective because only
one person could speak at a time. With the introduction of MCU technology in
1984, the industry then began to develop rapidly. Using MCU technology, the
number of participants in an audio teleconference can now vary from three to
thousands. 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. Of the $2.2 billion in 1996, industry
sources estimate that approximately $100 million was attributable to the
service segment in which the Company competes. The majority of these revenues
were 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
46
<PAGE>
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.
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 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, WorldCom, Inc. ("WorldCom"), Frontier and Cable & Wireless, (ii) the
PCSBs, a group of over 20 companies, excluding the Acquired 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.
The Company 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 directory assistance 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 Acquired
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
47
<PAGE>
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.
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, the Company 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, the Company
believes that some of the new entrants will elect to outsource
teleconferencing services and focus on entering the long distance market. To
date, the Company has received requests for proposals to provide
teleconferencing services from four of the five RBOCs.
COMPETITIVE STRENGTHS
The Company believes that several characteristics differentiate it from many
of its competitors, including:
Diverse and stable customer base. The Company has a diverse base of
customers that numbered approximately 5,000 in 1996, with only one customer
(at less than 11%) representing greater than 10% of net revenues and the
Company's top ten customers representing less than 28% of net revenues. The
Company believes that it has created strong customer loyalty for its services
through its emphasis on superior customer service and the importance of such
service to its clients. This loyalty is demonstrated by VIALOG's record of
attracting and retaining significant clients, with low customer turnover. The
Company estimates that it experienced a "churn" rate of less than 3% during
1995 and 1996 and that approximately 65% of its revenue growth in 1996 came
from existing customers.
Unique industry position. VIALOG believes that it is positioned as one of
the largest and most geographically diverse companies in the industry which
focuses solely on electronic group communications. The Company's largest
competitors are long distance service providers for whom teleconferencing
represents only a small fraction of their total revenues. Therefore, VIALOG
can focus its capabilities and resources solely on teleconferencing, including
its information systems, capital equipment, hiring practices, training and
marketing. The Company believes this focus offers significant flexibility and
competitive advantages in responding to the needs of customers. VIALOG is also
well situated to obtain future outsourcing contracts from long distance
service providers which the Company believes are reluctant to outsource to a
long distance service competitor, and would prefer to outsource to a larger,
independent group communications company with experience in managing the
outsourcing process.
Superior customer service capabilities. The Company believes that it has a
core competency in its customer service capabilities, which stress operator
training, personalized service and anticipation of customer needs. VIALOG has
developed and refined the technological capabilities, procedures and
management information systems necessary to provide superior customer service,
a factor that is critical to both customer retention and new business. An
example of these capabilities is the Company's proprietary billing system for
outsourced services. VIALOG has spent several years developing and revising
this software and believes that no competitor can currently match the
flexibility of this system in meeting customer needs.
Broad range of services. The Company believes that it offers the most
comprehensive selection of audio, video and data teleconferencing services in
its industry, providing it with significant marketing advantages. VIALOG
offers the features and pricing options to meet a wide variety of customer
needs. The Company intends
48
<PAGE>
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.
Experienced management team. VIALOG has one of the most experienced
management teams in the teleconferencing industry. The top nine managers of
the Company have on average 13 years of experience within the
teleconferencing/telecommunications industry. This experience is critical to
the Company's ability to implement its business strategy, respond to industry
trends and to identify and consummate acquisition opportunities successfully.
GROWTH STRATEGY
The Company's objective is to build upon its position as a leading
independent provider of electronic group communications services. Management
plans to achieve this goal by implementing the following initiatives:
Create 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 approximately $6.0
million in advertising and promotion during the 24 months following this
Offering, with significant expenditures for direct marketing and trade
advertising.
Establish a national sales network. The Company intends to establish a
national sales network with a total staff of approximately 40 salespeople,
including 25 field salespeople, 5 national accounts salespeople and 10
salespeople dedicated to telemarketing. The field salespeople will form the
core of the Company's selling effort. This group is expected to 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. The
Company 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.
Capitalize 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. The Company believes
the broad trend among long distance providers generally 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. The
Company 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, the Company 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 and LECs in the long distance markets or with the RBOCs, (ii) has the
capacity and resources to handle significant teleconferencing volume, and
(iii) already has experience in providing services on an outsourced basis.
Expand 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. The Company believes its acquisition experience and its
knowledge of the industry will be instrumental in identifying and successfully
49
<PAGE>
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 larger 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.
Capitalize on consolidation benefits. The Company expects to capitalize on
the benefits of its increased size, the combined experience of the Acquired
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 and marketing. The Company
also intends to improve allocation of personnel and equipment and to
streamline internal practices through coordination among the Acquired
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
Acquired Companies to all of the Company's customers, to maximize capacity
utilization and to integrate 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.
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 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. The following are examples of enhanced services.
50
<PAGE>
. 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 services 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. 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.
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 72 ports of capacity.
Video teleconferencing services accounted for approximately $13,000 of the
Acquired Companies' consolidated net revenues in 1996 and approximately
$183,000 for the nine months ended September 30, 1997.
51
<PAGE>
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,
both 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 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 Acquired Companies, emerging
trends, and other market segment information. Management of the Company
estimates that 70% of the sales efforts in the Acquired 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 40 salespeople, including 25 field salespeople, 5 national
accounts salespeople and 10 telemarketing specialists. The
52
<PAGE>
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 within
select industries, such as the financial services and pharmaceutical
industries, in order to capitalize on its industry-specific knowledge. The
Company 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. The Company
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. The Company has received requests for
proposals from four of the five RBOCs and believes that it is well-positioned
to be competitive in obtaining outsourced teleconferencing business since it
(i) is not a competitor with IXCs or LECs in the long distance markets or with
the RBOCs, (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 to confirm the teleconferences. Operators monitor
calls and provide the services requested in the reservation. Operators are
also trained to provide assistance to the 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 5,000 customers with what the Company
estimates to be over 30,000 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 20 customers by industry is as follows: health
and pharmaceutical (five), finance (five), retail (three), educational
(three), telecommunications (two) and industrial (two). Only one account (at
less than 11%)
53
<PAGE>
represented more than 10% of the Company's net revenues in 1996. The top 10
customers of the Company represented approximately 28% 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 Acquired 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 Acquired Company level. The Company intends to
centralize some administrative support activities within 12 to 18 months
following the closing of the Private Placement in order to standardize its
services, improve customer service and reduce Company expenses.
The Acquired Companies presently perform the entire billing and collection
process for their respective customer receivables. 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 Acquired 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 varies by Acquired Company and by
customer. Generally, individual invoices are sent out within two business days
of the conference call.
Each of the Acquired Companies validates its invoices against its telephone
bills to verify billing accuracy. Each Acquired Company also generates account
reports which detail payments and adjustments, credit status, aging of
accounts receivable, 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 believes that the flexibility and capabilities of its billing
systems represent a competitive advantage in allowing the Company to meet the
needs of its customers, particularly in the Company's outsourcing services
business. The Company has spent several years developing and refining the
proprietary software used in the billing services provided to long distance
service carriers that outsource their teleconferencing function to the
Company.
The Company intends to transition the Acquired Companies' systems to a
uniform system on an individual basis over the 18 months following the Private
Placement. Each of the Acquired 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 Consolidated Operating
History; Difficulty of Integrating the Acquired 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 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
54
<PAGE>
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 14% 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 could 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 the Company believes, outsource their teleconferencing services. There
can be no assurance that any telecommunications company able to offer
teleconferencing services legally, 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 their provider in case they do 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 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.
55
<PAGE>
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 Acquired Companies have purchased telecommunications services
from a number of vendors, including AT&T, Sprint, MCI, Cable & Wireless and
WorldCom. 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 Acquired Companies, the Company 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 Acquired 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 Company uses 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"), which
was acquired by PictureTel Corporation in 1997. 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 2,600
square feet of office space in Andover, Massachusetts under a lease expiring
May 31, 1999. The Company operates six 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 12,000 square foot facility in
Oradell, New Jersey, which is approximately 40% utilized. The Company occupies
the equipment centers and other facilities under leases which provide for a
total of 71,058 square feet at rates ranging from $5.00 to $23.00 per square
foot with expiration dates, excluding month-to-month leases, ranging from
February 1998 to May 2008. The Company's total lease expense related to its
facilities was approximately $908,000 for the year ended December 31, 1996 and
$699,000 for the nine months ended September 30, 1997. 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
a 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 it from locating in some areas,
the Company believes alternative locations are available for its facilities at
competitive prices.
56
<PAGE>
EMPLOYEES
On June 30, 1997 the Company had approximately 340 employees, of whom 6 were
employed full time at its corporate headquarters, 142 were employed full time
in various management, supervisory and administrative positions, and 167 were
employed full time as operators and 39 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, to
the Company's knowledge only one RBOC has filed an application to obtain the
approval of the FCC to offer in-region long distance services, and such
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 such 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 could have a
material adverse effect on the Company's growth strategy and 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, including teleconferencing. The
Telecommunications Act of 1996 has caused 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.
57
<PAGE>
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. The Company believes that the Company is currently in material
compliance with applicable communications laws and regulations.
LEGAL PROCEEDINGS
Other than as described below, 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 Acquired
Companies, the Company agreed to assume all disclosed liabilities with the
exception of any liabilities arising out of Equal Employment Opportunity
Commission ("EEOC") claims and litigation filed against Call Points and Ropir
Industries, Inc. ("Ropir"), the sole stockholder and parent corporation of
Call Points, by certain former and current employees. On October 30, 1997, 11
employees or former employees of Call Points filed claims in federal district
court against Call Points, Ropir and certain other parties named therein.
Complainants in these cases could seek to name the Company as a defendant in
such pending litigation and could seek to hold the Company liable for damages
resulting from the litigation as a successor in interest to Call Points. In
addition to equitable relief, the complainants are seeking back pay,
compensatory and punitive damages and attorneys fees based on allegations of
discrimination, retaliation and racially harassing atmosphere. 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 $250,000 in escrow with a third party to secure such
indemnification obligations. In light of such indemnification, the Company
does not believe that such claims if successful would have a material adverse
effect on the Company.
A former employee of CSI, one of the Acquired Companies, has claimed in
writing that he may be entitled to up 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. The
Company and CSI believe that such claim is without merit.
58
<PAGE>
ORGANIZATION AND ACQUISITION OF THE ACQUIRED COMPANIES
On November 12, 1997, VIALOG Corporation acquired (i) by merger, all of the
issued and outstanding stock of five Acquired Companies, and (ii) by purchase,
the assets of one Acquired Company. The aggregate consideration paid by VIALOG
Corporation for the Acquisitions was 559,330 shares of Common Stock valued at
$5.75 per share, approximately $53.0 million in cash and approximately
$925,000 in cash related to tax reimbursements. The consideration paid was
determined through arm's length negotiations among VIALOG Corporation, the
Acquired Companies and the stockholders of the Acquired Companies, and was
based upon a multiple of each Acquired Company's historical net revenue
adjusted to compare each Acquired Company on a consistent basis. The purchase
price of each Acquired Company was generally based upon such company's
customer base, 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
approximate consideration paid for each of the Acquired Companies.
<TABLE>
<CAPTION>
NAME CASH CONSIDERATION SHARES
---- ------------------ -------
<S> <C> <C>
Access.......................................... $19,000,000(1) --
CSI............................................. 18,675,000(2) --
Call Points..................................... 8,000,000(3) 21,000
TCC............................................. 3,645,000 166,156
Americo......................................... 1,260,000 267,826
CDC............................................. 2,400,000 104,348
----------- -------
Total Acquisition Consideration............... $52,980,000 559,330
=========== =======
</TABLE>
- --------
(1) VIALOG Corporation and Access agreed to make an election under Section
338(h)(10) of the Code to treat the purchase and sale of the capital stock
of Access as a purchase and sale of assets. VIALOG Corporation agreed to
reimburse the stockholders of Access an amount, estimated to be $700,000,
equal to the difference between the taxes incurred by such stockholders as
a result of the Section 338(h)(10) election and the taxes which would have
been incurred by such stockholders had no Section 338(h)(10) election been
made, together with the costs incurred in connection with making such
calculations. Such reimbursements have not been included in the Total
Acquisition Consideration shown above.
(2) VIALOG Corporation and CSI agreed to make an election under Section
338(h)(10) of the Code to treat the purchase and sale of the capital stock
of CSI as a purchase and sale of assets. VIALOG Corporation has reimbursed
the stockholders of CSI $225,000, an amount estimated to equal the
difference between the taxes incurred by such stockholders as a result of
the Section 338(h)(10) election and the taxes which would have been
incurred by such stockholders had no Section 338(h)(10) election been
made, together with the costs incurred in connection with making such
calculations. Such reimbursements have not been included in the Total
Acquisition Consideration shown above.
(3) Ropir Industries, Inc., the principal stockholder of Call Points, received
$1.0 million of the cash consideration of $8.0 million as compensation for
entering into a noncompetition agreement with VIALOG Corporation.
From June 30, 1997 to September 30, 1997, certain of the Acquired Companies
made S corporation distributions of $936,000. Additional S corporation
distributions of approximately $751,000 were made prior to or upon the
consummation of the Acquisitions. In addition, during the course of
operations, certain of the Acquired Companies incurred indebtedness or entered
into capital leases which were guaranteed by their principal stockholders. At
September 30, 1997, the aggregate amount of indebtedness and capital leases of
the Acquired Companies that was subject to such personal guarantees was
approximately $3.5 million. The Company repaid approximately $2.2 million of
such indebtedness upon the closing of the Private Placement, and the Company
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.
59
<PAGE>
The following is a discussion of the material information regarding the
Acquired Companies and their principal stockholders:
VIALOG Corporation (i) caused a subsidiary of VIALOG Corporation to merge
with Access, whereby Access became a wholly owned subsidiary of VIALOG
Corporation and (ii) delivered to the stockholders of Access approximately
$19.0 million in cash in exchange for their shares of Access. VIALOG
Corporation granted options for 142,850 shares of Common Stock exercisable at
$5.75 per share to certain key employees of Access. In the event the Company
completes an initial public offering of its shares or is acquired or otherwise
merges with another entity and such consideration is less than $13.75 per
share, such option holders will receive additional options exercisable at
$5.75 per share on a pro rata basis such that the total aggregate value of
such options equals $1.0 million. If an employee's employment is terminated,
other than by reason of death or disability, the option must be exercised
within 90 days thereafter or it will expire. Such terminated employees will be
entitled to cash bonuses equal to the consideration required to be paid upon
exercise of an option if such option is exercised. Stockholders' equity of
Access at September 30, 1997 was approximately $2.6 million. The Company
repaid approximately $1.4 million of indebtedness of Access, of which C.
Raymond Marvin was the guarantor. Such indebtedness was to mature through 2000
and bore interest at rates ranging from 9.25% to 9.5% per annum. The Company
agreed to arrange for the release of such guarantees or to indemnify Mr.
Marvin for any obligations arising under such guarantees. From June 30, 1997
to September 30, 1997, Access made S corporation tax distributions of
$165,000. Additional S corporation distributions of approximately $487,000
were made prior to or upon the consummation of the Acquisitions. Mr. Marvin
entered into a two-year employment agreement with Access which include a
covenant not to compete expiring no earlier than the latter of the third
anniversary of the merger or one year after the expiration of his severance
period under such agreement.
VIALOG Corporation (i) caused a subsidiary of VIALOG Corporation to merge
with CSI, whereby CSI became a wholly owned subsidiary of VIALOG Corporation
and (ii) delivered to the stockholders of CSI approximately $18.7 million in
cash in exchange for their shares of CSI. Stockholders' equity of CSI at
September 30, 1997 was approximately $615,000. Judy B. Crawford remained as
President of CSI following the closing of this Offering and received
approximately $9.3 million in cash. The Company repaid approximately $500,000
of indebtedness of CSI, of which Ms. Crawford was the guarantor. Such
indebtedness was to mature in 2000 and bore interest at 9.5% per annum. In
addition, Ms. Crawford had guaranteed all of CSI's capital leases, which had
remaining lease payments of approximately $774,000. The Company agreed to
arrange for the release of such guarantees or to indemnify her for any
obligations arising under such guarantees. From June 30, 1997 to September 30,
1997, CSI made S corporation profit and tax distributions of $757,000.
Additional S corporation distributions of approximately $123,000 were made
prior to or upon the consummation of the Acquisitions. Ms. Crawford entered
into a one-year employment agreement with CSI which included a covenant not to
compete expiring no earlier than the third anniversary of the merger.
VIALOG Corporation (i) caused a subsidiary of VIALOG Corporation to acquire
substantially all of the assets of, and assumed specified liabilities of, Call
Points, (ii) delivered to Call Points $7.0 million in cash and 21,000 shares
of Common Stock in exchange for such assets and (iii) delivered to the
principal stockholder of Call Points $1.0 million in cash in exchange for a
noncompetition agreement. Stockholders' equity of Call Points at September 30,
1997 was approximately $1.2 million. VIALOG Corporation obtained
noncompetition agreements with a two-year noncompetition period from the
principal stockholder and a key employee of Call Points.
VIALOG Corporation (i) caused a subsidiary of VIALOG Corporation to merge
with TCC, whereby TCC became a wholly owned subsidiary of VIALOG Corporation
and (ii) delivered to the stockholders of TCC 166,156 shares of Common Stock
and approximately $3.6 million in cash in exchange for their shares of TCC.
Stockholders' equity of TCC at September 30, 1997 was approximately $671,000.
In 1996, TCC distributed certain technology and hardware with a net book value
of approximately $12,000 to certain stockholders of TCC. Courtney P. Snyder
remained as President of TCC and received 48,780 shares of Common Stock and
60
<PAGE>
approximately $841,000 in cash. VIALOG Corporation granted to Mr. Snyder
options for 75,000 shares of Common Stock exercisable at the fair market value
as of the closing of the Private Placement as determined by the VIALOG
Corporation Board of Directors. Such options are exercisable for 5,700 shares
on December 31, 1997 and an additional 6,300 shares on the last day of each of
the 11 calendar quarters thereafter. The options will expire on the third
anniversary of the Private Placement closing. John J. Hassett, a principal
stockholder of VIALOG Corporation and of TCC, received 44,512 shares of Common
Stock and approximately $768,000 in cash. See "Principal Stockholders." The
Company repaid approximately $66,000 of indebtedness of TCC, of which Mr.
Snyder and Mr. Hassett were guarantors. Such indebtedness was to mature
through 1999 and bore interest at rates ranging from 9.5% to 11% per annum. In
addition, Mr. Snyder and Mr. Hassett were guarantors of all of TCC's capital
leases, which had remaining lease payments of approximately $324,000. The
Company agreed to arrange for the release of such guarantees or to indemnify
them for any obligations arising under such guarantees. From June 30, 1997 to
September 30, 1997, TCC made S corporation tax distributions of $14,000.
Additional S corporation distributions of approximately $142,000 were made
prior to or upon the consummation of the Acquisitions. Mr. Snyder entered into
a three-year employment agreement with TCC which included a covenant not to
compete expiring no earlier than the third anniversary of the merger or one
year from the expiration of his severance period under such agreement,
whichever is the later to occur. VIALOG Corporation has also obtained
noncompetition agreements with a two-year noncompetition period from certain
other principal stockholders and/or employees of TCC.
VIALOG Corporation (i) caused Americo to merge with and into a wholly owned
subsidiary of VIALOG Corporation and (ii) delivered to David L. Lipsky, the
sole stockholder of Americo, 267,826 shares of Common Stock and approximately
$1.3 million in cash in exchange for his shares of Americo. Stockholders'
deficit of Americo at September 30, 1997 was approximately $242,000. Mr.
Lipsky remained as President of Americo. VIALOG Corporation granted to Mr.
Lipsky options for 75,000 shares of Common Stock, exercisable at the fair
market value as of the closing of the Private Placement as determined by the
VIALOG Corporation Board of Directors. Such options are exercisable for 5,700
shares on December 31, 1997 and an additional 6,300 shares on the last day of
each of the 11 calendar quarters thereafter. The options will expire on the
third anniversary of the closing of the Private Placement. The Company repaid
approximately $185,000 of indebtedness of Americo, of which Mr. Lipsky was a
guarantor. Such indebtedness was to mature at various times through June 2001
and bore interest at 10% per annum. Mr. Lipsky entered into a three-year
employment agreement with Americo which included a covenant not to compete
expiring no earlier than the latter of the third anniversary of the merger or
one year from the expiration of his severance period under such agreement.
VIALOG Corporation (i) caused a subsidiary of VIALOG Corporation to merge
with CDC, whereby CDC became a wholly owned subsidiary of VIALOG Corporation
and (ii) delivered to the stockholders of CDC 104,348 shares of Common Stock
and approximately $2.4 million in cash in exchange for their shares of CDC.
Stockholders' equity of CDC at September 30, 1997 was approximately $305,000.
Patti R. Bisbano remained as President of CDC and received 52,174 shares of
Common Stock and approximately $1.2 million in cash. Maurya Suda, a principal
stockholder of CDC, received 52,174 shares of Common Stock and approximately
$1.2 million in cash. VIALOG Corporation granted to Ms. Bisbano and Ms. Suda
options for an aggregate of 75,000 shares of Common Stock exercisable at the
fair market value as of the closing of the Private Placement as determined by
the VIALOG Corporation Board of Directors. Ms. Bisbano received options for
62,500 shares which are exercisable for 5,212 shares on December 31, 1997 and
an additional 5,208 shares on the last day of each of the 11 calendar quarters
thereafter. Ms. Suda received options for 12,500 shares, which are exercisable
for 3,125 shares on December 31, 1997 and an additional 3,125 shares in the
last day of each of the 3 calendar quarters thereafter. The options will
expire on the third anniversary of the closing of the Private Placement. The
Company repaid indebtedness of CDC, of which Ms. Bisbano was a guarantor, of
approximately $43,000. Such indebtedness was to mature in 2000 and bore
interest at 9.5% per annum. Ms. Bisbano entered into a three-year employment
agreement with CDC which included 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. Ms. Suda
entered into a one-year employment agreement with CDC which included a
covenant
61
<PAGE>
not to compete expiring on the latter 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 agreed with all of the Acquired Companies, except Call Points,
that for the two-year period following the closing of the Private Placement
there will be no (i) change in the location of an Acquired Company's
facilities, (ii) physical merging of any Acquired Company's operations with
another operation, (iii) change in 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 Acquired Company's former stockholders.
In the case of Call Points, similar restrictions apply except that there are
no restrictions with respect to a change in the location of Call Points'
facilities.
Additionally, VIALOG Corporation agreed to maintain the Acquired Companies'
respective employee incentive compensation, fringe benefits and severance
programs, or their substantial equivalent, through December 31, 1997.
62
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with regard to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Glenn D. Bolduc(1)........... 45 Chief Executive Officer, President, Treasurer
and Director
John J. Dion................. 39 Vice President--Finance
Robert F. Moore.............. 43 Vice President--Marketing and Business
Development
Gary G. Vilardi.............. 43 Vice President--Sales
John R. Williams............. 36 Vice President--Operations
C. Raymond Marvin............ 58 Vice President
Joanna M. Jacobson(1)(2)..... 37 Director
David L. Lougee(1)(2)........ 57 Director
David L. Lipsky.............. 52 Director and President--Americo
Patti R. Bisbano............. 53 Director and President--CDC
William P. Pucci............. 51 President--Access
Judy B. Crawford............. 45 President--CSI
Courtney P. Snyder........... 47 President--TCC
Olen E. Crawford............. 45 President--Call Points, Inc.
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
GLENN D. BOLDUC has served as Chief Executive Officer, President and a
Director of the Company since October 1, 1996 and as Treasurer since July 9,
1997. From July 1989 to September 1996, Mr. Bolduc served as Chief Financial
Officer of MutliLink, Inc., an independent supplier of audio conferencing
bridges.
JOHN J. DION has served as Vice President--Finance for the Company since
November 1996, and served as a Director from July 9, 1997 to November 12,
1997. From August 1985 to August 1995, Mr. Dion served in various financial
positions for DSC Communications Corporation, a manufacturer of
telecommunications hardware and software. Mr. Dion's final position with DSC
was Director of Accounting.
ROBERT F. MOORE joined the Company on November 1, 1997 as Vice President--
Marketing and Business Development. Mr. Moore served as Vice President--Sales
and Marketing for Citizens Communication Corporation, a division of Citizens
Utilities, Inc. from March 1997 to October 31, 1997. From January 1994 to
February 1997, Mr. Moore was with Hill Holliday Connors Cosmopulos, Inc.
Advertising. For the 17 years prior to that, Mr. Moore served in various sales
and marketing positions with Southern New England Telephone, the last four
years of which he served as President of SNET Mobility, Inc., the cellular
communications subsidiary of SNET.
GARY G. VILARDI has served as Vice President--Sales of the Company since
April 1, 1997. He has spent 17 years in sales and sales management and has
focused on audio, video, and document conferencing sales during the last eight
years. From October 1995 to December 1996 Mr. Vilardi was Vice President--
Sales with Video-On, Inc., a GE Capital Company specializing in video
conferencing. From June 1995 to October 1995 he served as Eastern Regional
Vice President for Network MCI teleconferencing, and from March 1990 to June
1995 he was Vice President of U.S. Sales for Darome Teleconferencing.
JOHN R. WILLIAMS joined the Company on November 1, 1997 as Vice President--
Operations. Mr. Williams had served as General Manager of the Spring
Conference Line, Sprint's audio conferencing service bureau business, since
July 1995. Prior to this assignment, Mr. Williams held positions in product
development, marketing, and strategic planning in the Sprint Long Distance
Division. From June 1984 to November 1989 he was a National Account Manager at
IBM.
63
<PAGE>
RAYMOND MARVIN has served as a Vice President of the Company since December
31, 1997. He founded Access in 1987 and served as President and Chief
Executive Officer of Access from its inception to December 31, 1997 and as a
director of Access from its inception to November 12, 1997.
JOANNA M. JACOBSON served as a consultant to VIALOG Corporation prior to,
and became a Director of the Company upon, the closing of the Private
Placement. Since April 1996, Ms. Jacobson has been President of Keds, a
distributor 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, Ms.
Jacobson was a Senior Vice President of Marketing and Product Development for
Converse, Inc., a distributor of athletic footwear.
DAVID L. LOUGEE became a Director of the Company upon the closing of the
Private Placement. Mr. Lougee has been a partner of the law firm of Mirick,
O'Connell, DeMallie & Lougee, LLP since 1972. Mr. Lougee is also a director of
(i) Commonwealth BioVentures Inc., a venture capital company which provides
seed money to biotechnology companies; (ii) BioVentures Investors LLC, the
general partner of a partnership which invests in companies in the health
sciences industry; (iii) BioVentures Management Corporation, a company which
provides management services to the above-referenced partnership; and (iv)
Meridian Medical Technology, Inc., a public company in the medical devices and
drug delivery business. Mirick, O'Connell, DeMallie & Lougee, LLP serves as
outside general counsel to VIALOG Corporation.
DAVID L. LIPSKY founded Americo in August 1987 and has served as President,
Chief Executive Officer and as a director of Americo 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. Mr. Lipsky became a Director of the Company
upon the closing of the Private Placement.
PATTI R. BISBANO co-founded CDC in April 1990 and has served as President,
Treasurer and as a director of CDC since its inception. Ms. Bisbano became a
Director of the Company upon the closing of the Private Placement.
WILLIAM P. PUCCI has served as President of Access since December 31, 1997
and served as Vice President--Operations for the Company from May 1996 to
December 1997. Prior to joining the Company, Mr. Pucci spent 28 years in the
telecommunications industry with New England Telephone, AT&T, and NYNEX. He
has focused expertise in integrating multiple sites into a single ACD served
enterprise and in identifying and implementing "best in class" practices.
JUDY B. CRAWFORD co-founded CSI in February 1992 and has served as
President, Chief Executive Officer and as a director of CSI since its
inception.
COURTNEY P. SNYDER founded TCC in 1987 and has served as President, Chief
Executive Officer and as a director of TCC since its inception.
OLEN E. CRAWFORD co-founded CSI in February 1992 and served as Executive
Vice President until his appointment as President of Call Points in November
1997. From March 1988 until January 1992, Mr. Crawford was a principal in
Crawford and Associates, a telecommunications consulting firm. During 1990 and
1991, Mr. Crawford served as Executive Vice President and General Manager of
Call Points. Between 1972 and 1988, Mr. Crawford held positions at South
Central Bell Telephone Company and other telecommunications related entities.
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. Mr. Lipsky serves in the class whose terms expire in 1998, Ms.
Jacobson and Ms. Bisbano serve in the class whose terms expire in 1999, and
Mr. Bolduc and Mr. Lougee serve in the class whose term 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."
64
<PAGE>
On January 6, 1998, the Board of Directors 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 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 has received
upon his or her election as a Director an option to purchase 12,000 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 $250 for each committee
meeting (unless held on the same day as a Board of Directors meeting).
Directors are also reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof or otherwise incurred
in their capacity as Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On January 6, 1998, the Company's Board of Directors established a
Compensation Committee, consisting of Mr. Bolduc, Ms. Jacobson and Mr. Lougee.
Prior to the establishment of the Compensation Committee, decisions as to
executive compensation were made by the Board of Directors. From January 1,
1997 until February 21, 1997, the Board of Directors consisted of John J.
Hassett, Mr. Bolduc and Thomas M. Carroll. Mr. Carroll is the brother-in-law
of Mr. Hassett. On February 21, 1997, Mr. Carroll resigned as Director and was
replaced by Bruce T. Guzowski. On July 9, 1997, Mr. Guzowski resigned and was
replaced by John J. Dion. On November 12, 1997, John Dion and John Hassett
resigned as Directors, and David L. Lougee, Patti R. Bisbano, Joanna Jacobson
and David L. Lipsky were appointed Directors. Messrs. Hassett, Bolduc, Lougee
and Lipsky and Ms. Bisbano have been parties to certain transactions with the
Company. See "Certain Transactions."
65
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the individual who
served as the Company's President during the year ended December 31, 1997 and
the Company's four most highly-compensated executive officers other than the
President who were serving as executive officers on December 31, 1997 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
FISCAL YEAR 1997
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- ---------------------
AWARDS PAYOUTS
---------- ----------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/
SALARY BONUS COMPENSATION AWARD(S) SARS
NAME AND PRINCIPAL POSITION ($) ($) ($) ($)(3) (#)
- --------------------------- ------- ------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Glenn D. Bolduc.......... 33,000 270,000(1) (2) 0 75,000
President and CEO
C. Raymond Marvin........ 242,000 121,000 (2) 0 0
Vice President
David L. Lipsky.......... 238,000 94,000 (2) 0 75,000
Director, President--
Americo
Courtney P. Snyder....... 145,000 0 (2) 0 75,000
President--TCC
Judy B. Crawford......... 118,000 0 20,000(4) 0 0
President--CSI
</TABLE>
- --------
(1) Pursuant to an employment agreement executed by the Company and Mr. Bolduc
in 1996, Mr. Bolduc began to earn an annual salary of $250,000 and a
monthly automobile allowance of $1,000 upon the closing of the Private
Placement. In January, 1998, the Company paid Mr. Bolduc a one-time bonus
equal to 1/365th of his annualized salary and automobile allowance
multiplied by the number of days from the date of his employment by VIALOG
Corporation to the closing of the Private Placement.
(2) The aggregate amount of the Named Executive Officer's Compensation
reportable under this category falls below the reporting threshold under
Item 402(b)(2)(iii)(C)(1) of Regulation S-K.
(3) None of the Named Executive Officers received compensation for their
services in the form of restricted stock awards during the fiscal year
ended December 31, 1997. However, as of December 31, 1997, each of the
Named Executive Officers held restricted shares of the Company's Common
Stock as follows:
<TABLE>
<CAPTION>
VALUE($)
NAMED EXECUTIVE OFFICERS RESTRICTED SHARES(#) ($5.75/SHARE)
------------------------ -------------------- -------------
<S> <C> <C>
Glenn D. Bolduc......................... 20,000 115,000
C. Raymond Marvin....................... 0 0
David L. Lipsky......................... 267,826 1,539,999
Courtney P. Snyder...................... 48,780 280,485
Judy B. Crawford........................ 0 0
</TABLE>
The Company has no current plans to pay dividends on the above-referenced
restricted shares.
(4) Consists of an aggregate auto allowance of approximately $17,000 and
aggregate country club dues of approximately $3,000.
66
<PAGE>
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
The following table sets forth a summary of the terms of the employment
agreements that were entered into with the Named Executive Officers.
<TABLE>
<CAPTION>
NAME POSITION SALARY TERM
---- -------- -------- ----------
<S> <C> <C> <C>
Glenn D. Bolduc(1)............. President and CEO--VIALOG $250,000 indefinite
C. Raymond Marvin(2)........... President--VIALOG $242,000 2 years
David L. Lipsky(3)............. President--Americo $225,000 3 years
Courtney P. Snyder(4).......... President--TCC $160,000 3 years
Judy B. Crawford(5)............ President--CSI $255,000 1 year
</TABLE>
- --------
(1) Pursuant to an employment agreement executed by the Company and Mr. Bolduc
in 1996, Mr. Bolduc began to earn an annual salary of $250,000 and a
monthly automobile allowance of $1,000 upon the closing of the Private
Placement. In January, 1998, the Company paid Mr. Bolduc a one-time bonus
equal to 1/365th of his annualized salary and automobile allowance
multiplied by the number of days from the date of his employment by VIALOG
Corporation to the closing of the Private Placement. Mr. Bolduc's
employment agreement also provides for a severance payment of 18 months'
then current salary and the continuation of all fringe benefits for 18
months at the Company's expense after the termination of his employment.
(2) Mr. Marvin's employment agreement provides that if Mr. Marvin's employment
terminates during the term of his employment other than for cause, death
or disability, he will be entitled to receive his base compensation and
group insurance benefits during a period equal to the greater of (i) one
year or (ii) the remainder of the term of his employment contract.
(3) Mr. Lipsky's employment agreement provides that if Mr. Lipsky's employment
is terminated by Americo other than for cause, disability or death, he
will be entitled to receive his base compensation and group insurance
benefits during a period equal to the greater of (i) one year or (ii) the
remainder of the term of his employment agreement. Mr. Lipsky is entitled
to a monthly automobile allowance of $750.
(4) Mr. Snyder's employment agreement provides that if Mr. Snyder's employment
is terminated by TCC other than for cause, disability or death, he will be
entitled to receive his base compensation and group insurance benefits
during a period equal to the greater of (i) one year or (ii) the remainder
of the term of the employment agreement. TCC also maintains a life
insurance policy on the life of Mr. Snyder in the face amount 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.
(5) Ms. Crawford's employment agreement provides that if Ms. Crawford's
employment is terminated by CSI other than for cause, disability or death,
she will be entitled to receive her base compensation and group insurance
benefits during a period equal to the remainder of the term of her
employment agreement. 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 $1,440.
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
67
<PAGE>
may be issued or issuable under the Plan, determined immediately after the
grant of any award, may not exceed 3,250,000 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.
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 following table sets forth all options granted to the Named Executive
Officers in 1997:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR(%) ($/SHARE)(1) DATE 5%($) 10%($)
---- ----------- -------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Glenn D. Bolduc......... 75,000 14.7(4) 2.00 (2) 94,334 239,061
C. Raymond Marvin....... 0 0 0 (2) -- --
David L. Lipsky......... 75,000 14.7(5) 5.75 (2) 271,211 687,301
Courtney P. Snyder...... 75,000 14.7(5) 5.75 (2) 271,211 687,301
Judy B. Crawford........ 0 0 0 (2) -- --
</TABLE>
- --------
(1) 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.
(2) All options granted to the Named Executive Officers terminate on the
earlier of (i) the date of termination of employment if the Named
Executive Officer ceases to be employed by the Company or (ii) 10 years
from date of grant.
(3) 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.
(4) This option vests over a three year period vesting as to 25,000 shares on
the first anniversary of the grant date and as to 6,250 shares on the last
day of each quarter thereafter until the option has vested in full.
(5) This option vests over a three year period vesting as to 5,700 shares on
December 31, 1997 and as to 6,300 shares on the last day of each quarter
thereafter until the option has vested in full.
68
<PAGE>
The following table sets forth the value of all unexercised options held by
the Named Executive Officers at the end of 1997:
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END (#) YEAR END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Glenn D. Bolduc............. 66,690 168,310 $381,601 $815,170
C. Raymond Marvin........... 0 0 0 0
David L. Lipsky............. 5,700 69,300 0 0
Courtney P. Snyder.......... 5,700 69,300 0 0
Judy B. Crawford............ 0 0 0 0
</TABLE>
- --------
(1) There was no public trading market for the Common Stock on December 31,
1997. Accordingly, solely for the purposes of this table, the values in
this column have been calculated on the basis of a determination of the
fair market value of the Common Stock on December 31, 1997 ($5.75 per
share), less the aggregate exercise price of the options.
69
<PAGE>
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
In connection with the formation and initial financing of VIALOG
Corporation, Common Stock was issued at prices ranging from $.01 per share to
$4.00 per share prior to a 2:1 stock split effected in the form of a
recapitalization declared October 16, 1997, including 1,000,000 shares to John
J. Hassett, the founder of VIALOG Corporation, and 50,000 shares to Glenn D.
Bolduc, President and Chief Executive Officer of the Company.
See "Organization and Acquisition of the Acquired Companies" for a
discussion of certain information regarding the Acquisitions and the principal
stockholders of the Acquired Companies.
OTHER TRANSACTIONS
TCC provides teleconferencing services to customers of a company owned by
Susan C. Hassett, spouse of John J. Hassett, for which TCC recorded revenues
of $86,000, $175,000 and $230,000 in 1995, 1996 and 1997, respectively.
On November 6, 1997, John J. Hassett entered into a stockholder agreement
with the Company that provides, among other things, that while any Notes
remain outstanding or any obligation of the Company or the Subsidiary
Guarantors with respect thereto remains unpaid finally and in full, (i) with
respect to all matters submitted to a vote of the stockholders of the Company
regarding the appointment, election or removal of directors or officers of the
Company, Mr. Hassett will vote any shares of voting stock of the Company over
which he has direct or indirect voting power in the same proportion as the
votes cast in favor of and against the particular matter voted upon, by all of
the other stockholders of the Company, and (ii) Mr. Hassett will not serve as
a director or officer of the Company or any subsidiary.
Glenn D. Bolduc, President and Chief Executive Officer of the Company, owned
approximately five percent of the issued and outstanding common stock of
MultiLink, a principal supplier of MCUs to the Company. In 1995, 1996 and
1997, aggregate purchases of MCUs and ancillary services from MultiLink by the
Acquired Companies were approximately $889,000 and $811,000 and $878,000 ,
respectively. In 1997, MultiLink became a subsidiary of PictureTel
Corporation.
For information regarding consulting and employment agreements with certain
directors and executive officers, see "Management--Executive Compensation" and
"Management--Employment and Noncompetition Agreement."
David L. Lougee, one of the Company's Directors, is a partner of Mirick,
O'Connell, DeMallie & Lougee, LLP, the law firm currently retained as the
Company's legal counsel. In 1997, the Company paid Mirick, O'Connell, DeMallie
& Lougee, LLP an aggregate of approximately $1,712,000 in legal fees in
connection with general legal services, a withdrawn public offering, the
Acquisitions and the Private Placement.
COMPANY POLICY
The Company has implemented a policy whereby neither the Company nor any
subsidiary (which includes the Acquired Companies) will enter into contracts
or business arrangements with persons 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.
70
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of January 1, 1998 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,
(iii) each Named Executive Officer, and (iv) all executive officers and
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. As of January 1,
1998, the Company had outstanding 3,486,380 shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED(1) OF CLASS
---- --------------------- --------
<S> <C> <C>
John J. Hassett................................ 937,762(2) 26.9
J. Michael Powell.............................. 327,800(3) 9.4
Reynolds E. Moulton............................ 187,500 5.4
Glenn D. Bolduc................................ 134,402(4) 3.7
David L. Lougee................................ 74,008(5) 2.1
Joanna M. Jacobson............................. 4,000(6) *
David L. Lipsky................................ 273,526(7) 7.8
Courtney P. Snyder............................. 54,480(8) 1.6
C. Raymond Marvin.............................. 0 *
Judy B. Crawford............................... 5,700(9) *
Jefferies & Company, Inc....................... 358,145(10) 9.6
All executive officers and directors as a group
(7 persons)................................... 546,116(11) 15.2
</TABLE>
- --------
* Less than 1%.
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed.
(2) Includes 787,000 shares held by Mr. Hassett and 100,000 shares held by
Susan C. Hassett, the spouse of Mr. Hassett. Does not include 60,000
shares held by J. Michael Powell as Trustee for Mr. Hassett's two minor
children, as to which Mr. Hassett disclaims beneficial ownership.
(3) Includes 60,000 shares held as Trustee.
(4) Includes 32,500 shares held by Mr. Bolduc, 71,902 shares with respect to
which options held by Mr. Bolduc may be exercised as of March 1, 1998 and
30,000 shares held by Grace K. Bolduc, the spouse of Mr. Bolduc, as
Trustee for their three minor children.
(5) Includes 70,000 shares held by Mr. Lougee and 4,008 shares with respect
to which options held by Mr. Lougee may be exercised as of March 1, 1998.
(6) Includes 4,000 shares with respect to which options held by Ms. Jacobson
may be exercised as of March 1, 1998.
(7) Includes 267,826 issued to Mr. Lipsky in connection with the Acquisitions
and 5,700 shares with respect to which options granted to Mr. Lipsky may
be exercised as of March 1, 1998.
(8) Includes 48,780 shares issued to Mr. Snyder in connection with the
Acquisitions and 5,700 shares with respect to which options granted to
Mr. Snyder may be exercised.
(9) Includes 5,700 shares with respect to which options granted to Ms.
Crawford on January 1, 1998 may be exercised.
(10) Includes 358,145 shares with respect to which warrants issued to
Jefferies & Company, Inc. in connection with the Private Placement may be
exercised.
(11) See notes (1)-(10).
71
<PAGE>
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Rights Agreement. The Exchange Notes are being offered hereunder in order to
satisfy the obligations of the Company under the Registration Rights
Agreement. See "Registration Rights; Additional Interest."
For each $1,000 principal amount of Old Notes surrendered to the Company
pursuant to the Exchange Offer, the holder of Old Notes will receive $1,000
principal amount of Exchange Notes. Upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, the Company will accept all Old Notes properly tendered prior to
5:00 p.m., New York City time, on the Expiration Date. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer in integral multiples
of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available May 13, 1988),
the Morgan Stanley Letter and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes would
in general be freely transferable after the Exchange Offer without further
registration under the Securities Act by the respective holders thereof (other
than a "Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder is not participating in, and has no arrangement with any
person to participate in, the distribution (within the meaning of the
Securities Act) of such Exchange Notes. Eligible holders wishing to accept the
Exchange Offer must represent to the Company that such conditions have been
met. Any holder of Old Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes could not rely on the
interpretation by the staff of the SEC enunciated in the Morgan Stanley Letter
and similar no-action letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes
in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-
dealer tendering Old Notes acquired directly from the Company for its own
account, (ii) any Exchange Notes to be received by it are being acquired in
the ordinary course of its business and (iii) it is not participating in, and
it has no arrangement with any person to participate in, the distribution
(within the meaning of the Securities Act) of the Exchange Notes. In addition,
in connection with any resales of Exchange Notes, any broker-dealer (a
"Participating Broker-Dealer") who acquired Old Notes for its own account as a
result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes. The staff
of the SEC has taken the position in no-action letters issued to third parties
including Shearman & Sterling, SEC No-Action Letter (available July 2, 1993),
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of Old Notes) with this Prospectus, as
it may be amended or supplemented from time to time. Under the Registration
Rights Agreement, the Company is required to allow Participating Broker-
Dealers to use this Prospectus, as it may be amended or supplemented from time
to time, in connection with the resale of such Exchange Notes. See "Plan of
Distribution."
The Exchange Offer shall be deemed to have been consummated upon the earlier
to occur of (i) the Company having exchanged Exchange Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer or (ii) the Company having exchanged, pursuant
to the
72
<PAGE>
Exchange Offer, Exchange Notes for all Old Notes that have been tendered and
not withdrawn on the date that is 30 days following the commencement of the
Exchange Offer. In such event, holders of Old Notes seeking liquidity in their
investment would have to rely on exemptions to registration requirements under
applicable securities laws, including the Securities Act.
As of the date of this Prospectus, $75.0 million in principal amount of Old
Notes are issued and outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be eligible for trading in
the Private Offering, Resale and Trading through Automated Linkages (PORTAL)
Market, the National Association of Securities Dealers' screen based,
automated market trading of securities eligible for resale under Rule 144A.
The Company shall be deemed to have accepted for exchange validly tendered
Old Notes when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. See "--Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date. Holders of Old Notes who tender in the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "--Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1998 unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time. The Company reserves the right
(i) to delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "--Termination"
shall have occurred and shall not have been waived by the Company (if
permitted to be waived by the Company), by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, and (ii) to amend
the terms of the Exchange Offer in any manner deemed by it be advantageous to
the holders of the Old Notes. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform
the holders of the Old Notes of such amendment. Without limiting the manner in
acceptance, extension, termination or amendment of the Exchange Offer, the
Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely
release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable semi-annually on May 15 and
November 15 of each year, commencing May 15, 1998. Holders of Exchange Notes
of record on May 1, 1998 will receive interest on May 15, 1998 from the date
of the exchange of the Exchange Notes for the Old Notes, plus an amount equal
to the accrued interest on the Old Notes from the date of issuance of the Old
Notes, November 12, 1997, to the date of exchange thereof. Consequently,
assuming the Exchange Offer is consummated prior to the record date in respect
73
<PAGE>
of the May 15, 1998 interest payment for the Old Notes, holders who exchange
their Old Notes for Exchange Notes will receive the same interest payment on
May 15, 1998 that they would have received had they not accepted the Exchange
Offer. Interest on the Old Notes accepted for exchange will cease to accrue
upon exchange for and issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile or an Agent's Message
(defined below) in lieu thereof, together with the Old Notes and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. The tender by a holder of Old Notes will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal. Delivery of all documents must be made to the Exchange Agent at
its address set forth herein. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect such
tender for such holders. The method of delivery of Old Notes and the Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the holders. Instead of delivery by mail, it is
recommended that holders use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. No Letter
of Transmittal or Old Notes should be sent to the Company. Only a holder of
Old Notes may tender such Old Notes in the Exchange Offer. The term "holder"
with respect to the Exchange Offer means any person in whose name Old Notes
are registered on the books of the Company or any other person who has
obtained a properly completed stock power from the registered holder.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part
of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering Old Notes which are the subject of such
Book-Entry Confirmation that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal, and that the Company may
enforce such agreement against such participant. The term "Book-Entry
Confirmation" means a timely confirmation of book-entry transfer of Old Notes
to the Exchange Agent's Account at the Book-Entry Transfer Facility.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on behalf of the registered holder.
If such beneficial holder wishes to tender directly, such beneficial holder
must, prior to completing and executing the Letter of Transmittal and
delivering his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or obtain a properly
completed bond power from the registered holder. The transfer of record
ownership may take considerable time. If the Letter of Transmittal is signed
by the record holder(s) of the Old Notes tendered thereby, the signature must
correspond with the name(s) written on the face of the Old Notes without
alteration, enlargement or any change whatsoever. If the Letter of Transmittal
is signed by a participant in DTC, the signature must correspond with the name
as it appears on the security position listing as the holder of the Old Notes.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder (or by
a participant in DTC whose name appears on a security position listing as the
owner) who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal and the
Exchange Notes are being issued directly to such registered holder (or
deposited into the participant's account at DTC) or (ii) for the account of an
Eligible Institution. If the Letter of Transmittal is signed by a person other
than the registered holder of any Old Notes listed therein, such Old Notes
must be endorsed or accompanied by appropriate bond powers which authorize
such person to tender the Old Notes on behalf of the registered
74
<PAGE>
holder, in either case signed as the name of the registered holder or holders
appears on the Old Notes. If the Letter of Transmittal or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received by a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made
only against delivery of the Letter of Transmittal (and any other required
documents) and the tendered Old Notes (or a timely confirmation received of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC)
with the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance
of which would, in the option of the Company or its counsel, be unlawful. The
Company also reserves the absolute right to waive any conditions of the
Exchange Offer or defects or irregularities in tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the
Exchange Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within
such time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned without cost by the Exchange Agent to
the tendering holder of such Old Notes unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date. In
addition, the Company reserves the right in its sole discretion to (i)
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "--Termination," to terminate
the Exchange Offer and (ii) to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers may differ from the terms
of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC within two business days after the date of this
Prospectus, and any financial institution which is a participant in DTC may
make book-entry delivery of the Old Notes by causing DTC to transfer such Old
Notes into the Exchange Agent's account in accordance with DTC's procedure for
such transfer. Although delivery of Old Notes may be effected through book-
entry transfer into the Exchange Agent's account at DTC, an Agent's Message
must be transmitted to and received by the Exchange Agent on or prior to the
Expiration Date at one of its addresses set forth below under "Exchange
Agent," or the guaranteed delivery procedure described below must be complied
with. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT. All references in this Prospectus to deposit or delivery of
Old Notes shall be deemed to include DTC's book-entry delivery method.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer
on a timely basis and
75
<PAGE>
delivery of an Agent's Message, may effect a tender if: (i) the tender is made
by or through an Eligible Institution; (ii) prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder of the
Old Notes, the registration number of numbers of such Old Notes (if
applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a book-
entry transfer into the Exchange Agent's account at DTC) and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly
completed and executed Letter of Transmittal (or Agent's Message in lieu
thereof), together with the certificate(s) representing all tendered Old Notes
in proper form for transfer (or a confirmation of such a book-entry transfer)
and all other documents required by the Letter of Transmittal Letter of
Transmittal are received by the Exchange Agent within five business days after
the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely confirmation
of a book-entry transfer of such Old Notes into the Exchange Agent's account
at DTC) must be received by the Exchange Agent, with the Letter of Transmittal
(or Agent's Message in lieu thereof) and any other required documents, by the
Expiration Date or within the time periods set forth above pursuant to a
Notice of Guaranteed Delivery from an Eligible Institution. Each holder
tendering the Old Notes for exchange sells, assigns and transfers the Old
Notes to the Exchange Agent, as agent of the Company, and irrevocably
constitutes and appoints the Exchange Agent as the holder's agent and
attorney-in-fact to cause the Old Notes to be transferred and exchanged. The
holder warrants that it has full power and authority to tender, exchange,
sell, assign and transfer the Old Notes and to acquire the Exchange Notes
issuable upon the exchange of such tendered Old Notes, that the Exchange
Agent, as agent of the Company, will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances, and that the Old Notes tendered for exchange are not subject to
any adverse claims when accepted by the Exchange Agent, as agent of the
Company. The holder also warrants and agrees that it will, upon request,
execute and deliver any additional documents deemed by the Company or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment and transfer of the Old Notes. All authority conferred or agreed to
be conferred in the Letter of Transmittal by the holder will survive the
death, incapacity or dissolution of the holder and any obligation of the
holder shall be binding upon the heirs, personal representatives, successors
and assigns of such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including, if applicable, the
registration number or numbers and total principal amount of such Old Notes),
(iii) be signed by the Depositor in the same manner as the original signature
on the Letter of Transmittal by which such Old Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to permit
76
<PAGE>
the Trustee with respect to the Old Notes to register the transfer of such Old
Notes into the name of the Depositor withdrawing the tender, (iv) specify the
name in which any such Old Notes are to be registered, if different from that
of the Deposit and (v) if applicable because the Old Notes have been tendered
pursuant to the book-entry procedures, specify the name and number of the
participant's account at DTC to be credited, if different than that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for exchange will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tender" at any time prior to the
Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange any Old Notes not therefore accepted for
exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of
the SEC.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return the
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of
the Exchange Offer, subject to the rights of such holders of tendered Old
Notes to withdraw their tendered Old Notes or (iii) waive such termination
event with the respect to the Exchange Offer and accept all properly tendered
Old Notes that have not been withdrawn. If such waiver constitutes a material
change in the Exchange Offer, the Company will disclose such change by means
of a supplement to this Prospectus that will be distributed to each registered
holder of Old Notes, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period.
Holders of Old Notes will have certain rights against the Company under the
Registration Rights Agreement should the Company fail to consummate the
Exchange Offer.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
State Street Bank and Trust Company
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110
Attention: Sandy Wong
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent for its reasonable out-of-pocket
expenses in connection therewith. The Company may also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Old Notes
and in handling or forwarding tenders for exchange.
77
<PAGE>
The other expenses incurred in connection with the Exchange Offer including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Company. The Company will pay all transfer taxes, if
any, applicable to the exchange of Old Notes pursuant to the Exchange Offer.
If, however, Exchange Notes or Old Notes not tendered or accepted for exchange
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange
Offer will be amortized by the Company over the term of the Exchange Notes
under generally accepted accounting principles.
DESCRIPTION OF NOTES
The Exchange Notes will be issued, and the Old Notes were issued, pursuant
to the indenture (the "Indenture") dated as of November 12, 1997 by and among
the Company, the Subsidiary Guarantors and State Street Bank and Trust
Company, as Trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "TIA"), as in effect on the
date of the original issuance of the Notes. The following summary of certain
provisions of the Indenture, the Notes and the Subsidiary Guarantees (included
within the Indenture) does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the TIA, and to all of the
provisions of the Indenture (copies of which can be obtained from the Company
upon request), including the definitions of certain terms therein and those
terms made a part of the Indenture by reference to the TIA as in effect on the
date of the Indenture. The definitions of certain capitalized terms used in
the following summary are set forth under "--Certain Definitions" below. For
purposes of this Section, references to the "Company" shall mean VIALOG
Corporation, excluding its Subsidiaries.
GENERAL
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration of transfer and exchange at the offices of the
Registrar, which currently is the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to Holders of
the Notes and under certain circumstances the Company or any of its
Subsidiaries may act as Paying Agent and Registrar under the Indenture. The
Company will pay principal (and premium, if any) on the Notes at the Trustee's
corporate office in New York, New York. In addition, in the event the Notes do
not remain in book-entry form, interest may be paid, at the Company's option,
by wire transfer or check mailed to the registered address of the Holders as
shown on the Note Register.
The Company's operations are conducted exclusively through its subsidiaries.
As a consequence, the Company's ability to service its Indebtedness (including
the Notes) is dependent upon the Company's receipt of funds from its
Subsidiaries.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
78
<PAGE>
The obligations of the Company under the Notes will be guaranteed on a
senior basis, jointly and severally, by each of the Subsidiary Guarantors. See
"--Ranking and Guarantees."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $75,000,000 and
will mature on November 15, 2001. Interest on the Notes will accrue at the
rate per annum set forth on the cover of this Prospectus and will be payable
semi-annually in cash on each May 15 and November 15, commencing on May 15,
1998 to the persons who are registered Holders at the close of business on the
May 1 and November 1 immediately preceding the applicable interest payment
date. Interest on the Notes will accrue from and including the most recent
date to which interest has been paid or, if no interest has been paid, from
and including the Issue Date. Interest will be computed on the basis of a 360-
day year comprised of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after November 15, 1999 at the following
redemption prices (expressed as percentages of the principal amount) if
redeemed during the twelve-month period commencing on November 15 of the year
set forth below (but not including the date of maturity), plus, in each case,
accrued and unpaid interest thereon to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999.............................. 110%
2000.............................. 105%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to November 15, 1999,
the Company may redeem, in whole or in part, from time to time, up to an
aggregate of 35% of the original principal amount of Notes at a redemption
price of 112.75% of the principal amount thereof, plus accrued and unpaid
interest thereon to the redemption date, with the net proceeds of any Public
Equity Offering; provided that at least 65% in aggregate of the original
principal amount of the Notes remain outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption
occurs within 90 days of the date of the closing of such Public Equity
Offering.
In addition, prior to November 15, 1999, the Notes will be redeemable at the
Company's option, in whole or in part, at any time or from time to time, upon
not less than 30 nor more than 60 days' prior notice mailed by first-class
mail to each Holder's registered address, at a redemption price (expressed as
a percentage of principal amount) equal to the sum of the principal amount of
such Notes plus the applicable Make-Whole Premium thereon at the time of
redemption (subject to the right of Holders of record on the relevant record
date to receive interest due to the relevant interest payment date).
The following definitions are used to determine the applicable Make-Whole
Premium:
"Applicable Make-Whole Premium" means, with respect to a Note at the
redemption date, the greater of (i) 1.0% of the principal amount of such Note
and (ii) the excess of (A) the present value at such time of (1) the
redemption price of such Note at November 15, 1999 plus (2) all required
interest payments (excluding accrued but unpaid interest) due on such Note
through November 15, 1999, computed using a discount rate equal to the
Treasury Rate plus 100 basis points, over (B) the principal amount of such
Note at such time.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two business days prior to the
date fixed for repayment (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then Weighted Average Life to Maturity of the Notes; provided,
however, that if the Weighted
79
<PAGE>
Average Life to Maturity of the Notes is not equal to the constant maturity of
a United States Treasury security for which a weekly average yield is given,
the Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given.
MANDATORY REDEMPTION: SINKING FUND
Except as set forth below under "--Change of Control" and "--Certain
Covenants--Asset Sales," the Company is not required to make any mandatory
redemption, purchase or sinking fund payments with respect to the Notes.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part. Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. On and after the redemption date, interest will cease to accrue on Notes
or portions thereof called for redemption.
RANKING AND GUARANTEES
The indebtedness of the Company evidenced by the Notes will rank senior in
right of payment to all Subordinated Indebtedness of the Company and pari
passu in right of payment with all existing and future Senior Indebtedness of
the Company. The Notes will be effectively subordinated to secured
Indebtedness of the Company or its Subsidiaries to the extent of the assets
securing such Indebtedness. As of September 30, 1997, after giving pro forma
effect to the issuance of the Notes and the application of the estimated net
proceeds therefrom, the Company would have had no Senior Indebtedness
outstanding. The Company has accepted a proposal for, and is currently
negotiating, a commitment for the Senior Credit Facility consisting of a
revolving credit and term loan facility in the aggregate principal amount of
approximately $15.0 million. As of the date hereof, no amounts have been
advanced under the Senior Credit Facility.
Each Subsidiary Guarantor will fully and unconditionally guarantee, jointly
and severally, to each Holder and the Trustee, the full and prompt performance
of the Company's obligations under the Indenture and the Notes, including the
payment of principal of and interest on the Notes. The Subsidiary Guarantee of
each Subsidiary Guarantor will rank pari passu in right of payment to all
existing and future Senior Indebtedness of such Subsidiary Guarantor. As of
September 30, 1997, after giving pro forma effect to the issuance of the Notes
and the application of the estimated net proceeds therefrom, the Subsidiary
Guarantors would have had $1.3 million of Senior Indebtedness outstanding. The
obligations of each Subsidiary Guarantor are limited to the maximum amount
which, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to its contribution obligations under the Indenture,
will result in the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Subsidiary Guarantor that makes a
payment or distribution under a Subsidiary Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in an amount pro rata, based
on the net assets of each Subsidiary Guarantor, determined in accordance with
GAAP.
80
<PAGE>
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation, or
with other Persons upon the terms and conditions set forth in the Indenture.
See "--Certain Covenants--Mergers, Consolidations and Sale of Assets" and "--
Certain Covenants--Asset Sales." In the event all of the capital stock of a
Subsidiary Guarantor is sold (including by way of merger or consolidation) by
the Company and the sale complies with the provisions set forth in "--Certain
Covenants--Asset Sales," the Subsidiary Guarantee with respect to such
Subsidiary Guarantor will be released.
Separate financial statements of the Subsidiary Guarantors are not included
herein because such Subsidiary Guarantors are jointly and severally liable
with respect to the Company's obligations pursuant to the Notes, and the
aggregate net assets, earnings and equity of the Subsidiary Guarantors and the
Company are substantially equivalent to the net assets, earnings and equity of
the Company on a consolidated basis.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes on a Business
Day (the "Change of Control Payment Date") not more than 60 nor less than 30
days following such Change of Control, pursuant to the offer described below
(the "Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon to
the date of repurchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes pursuant to the procedures required
by the Indenture and described in such notice. The Company will comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered, and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
repurchased by the Company. The Paying Agent will promptly mail or otherwise
deliver to each Holder of Notes so tendered the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book-entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture will not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. The provisions of the Indenture may
not afford Holders protection in the event of a highly-leveraged transaction,
reorganization, restructuring, merger or similar transaction affecting the
Company that may adversely affect Holders, if such transaction is not the type
of transaction included within the definition of Change of Control. A
transaction involving the management of the Company or its Affiliates, or a
transaction involving a recapitalization of the Company will result in a
Change of Control only if it is the type of transaction specified in such
definition.
The existence of a Holder's rights to require the Company to repurchase
Notes in connection with a Change of Control may deter a third party from
acquiring the Company in a transaction that would constitute a "Change of
Control."
81
<PAGE>
The source of funds for any repurchase of Notes upon a Change of Control
will be the Company's cash or cash generated from operations or other sources,
including borrowings or sales of assets; however, there can be no assurance
that sufficient funds will be available at the time of any Change of Control
to repay all Indebtedness owing under other Senior Indebtedness or to make any
required repurchases of the Notes. In addition, if there is a Change of
Control, any Indebtedness then outstanding under the Senior Credit Facility
would be accelerated. Any failure by the Company to repurchase Notes tendered
pursuant to a Change of Control Offer will constitute an Event of Default. See
"Risk Factors--Substantial Leverage and Ability to Service Debt."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and repurchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries, taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under New York
law, which is the law governing the Indenture and the Notes or under
Massachusetts law, which is the jurisdiction of incorporation of the Company.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries, taken as a whole, to another Person or group may be uncertain.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Indebtedness. (a) The Indenture provides that neither the
Company nor any of its Subsidiaries will, directly or indirectly, Incur any
Indebtedness, including, without limitation, any Acquired Indebtedness (other
than Permitted Indebtedness).
(b) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur Indebtedness (including, without limitation, Acquired
Indebtedness), in each case, if (i) no Default or Event of Default shall have
occurred and be continuing on the date of the proposed Incurrence thereof or
would result as a consequence of such proposed Incurrence and (ii) immediately
after giving effect to such proposed Incurrence on a pro forma basis, the
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to
2.0 to 1.0 if such proposed Incurrence is on or prior to December 31, 1998;
and at least equal to 3.0 to 1.0 if such proposed Incurrence is thereafter.
(c) Neither the Company nor any Subsidiary Guarantor will, directly or
indirectly, in any event Incur any Indebtedness that by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated to any
other Indebtedness of the Company or such Subsidiary Guarantor, as the case
may be, unless such Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) made expressly subordinate to the Notes
or the Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be,
to the same extent and in the same manner as such Indebtedness is subordinated
pursuant to subordination provisions that are most favorable to the holders of
any other Indebtedness of the Company or such Subsidiary Guarantor, as the
case may be.
(d) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur no more than $15.0 million of secured Indebtedness.
Limitation on Restricted Payments. The Indenture provides that neither the
Company nor any of its Subsidiaries will, directly or indirectly (a) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the
Company, or any warrants, rights or options to acquire shares of any class of
such Capital Stock,
82
<PAGE>
other than through the exchange therefor solely of Qualified Capital Stock of
the Company or warrants, rights or options to acquire Qualified Capital Stock
of the Company, (b) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Indebtedness of the Company or (c) make any
Investment (other than Permitted Investments) in any Person (each of the
foregoing prohibited actions set forth in clauses (a), (b) and (c) being
referred to as a "Restricted Payment"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto:
(i) a Default or an Event of Default has occurred and is continuing or
would result therefrom, or
(ii) the Company is not able to Incur at least $1.00 of additional
Indebtedness in accordance with paragraph (b) of "--Limitation on
Indebtedness" above (as if such Restricted Payment had been made as of the
last day of the Four Quarter Period), or
(iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date exceeds or
would exceed the sum of: (v) 50% of the Consolidated Net Income (or if
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company during the period (treating such period as a single accounting
period) from the beginning of the first fiscal quarter commencing after the
Issue Date to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment; (w) 100% of the aggregate Net Equity Proceeds received
by the Company from any Person from the issuance and sale subsequent to the
Issue Date of Qualified Capital Stock of the Company other than any
Qualified Capital Stock sold to a Subsidiary of the Company; (x) the
aggregate net cash proceeds received after the Issue Date by the Company
(other than from any of its Subsidiaries) upon the exercise of any options,
warrants or rights to purchase shares of Qualified Capital Stock of the
Company; (y) the aggregate net cash proceeds received after the Issue Date
by the Company from the issuance or sale (other than to any of its
Subsidiaries) of debt securities or shares of Disqualified Capital Stock
that have been converted into or exchanged for Qualified Capital Stock of
the Company, together with the aggregate cash received by the Company at
the time of such conversion or exchange; and (z) an amount equal to the net
reduction in Investments, subsequent to the date of the Indenture, in any
Person resulting from payments of interest on debt, dividends, repayments
of loans or advances, return of capital, or other transfers of property
(but only to the extent such distributions are not included in the
calculation of Consolidated Net Income), in each case, to the Company or
any Subsidiary from any Person, not to exceed in the case of any Person,
the amount of Investments previously made by the Company or any Subsidiary
in such Person and which was treated as a Restricted Payment.
Notwithstanding the foregoing, these provisions do not prohibit: (1) the
acquisition of Capital Stock of the Company or warrants, rights or options to
acquire Capital Stock of the Company either (i) solely in exchange for shares
of Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company or warrants, rights or options to acquire Qualified Capital Stock
of the Company; (2) the acquisition of any Subordinated Indebtedness of the
Company either (i) solely in exchange for shares of Qualified Capital Stock of
the Company, or (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of (A) shares of Qualified Capital Stock of the Company or warrants,
rights or options to acquire Qualified Capital Stock of the Company or (B)
Permitted Refinancing Indebtedness; or (3) loans by the Company or any
Subsidiary to employees in the ordinary course of business up to an aggregate
principal amount of $250,000 at any one time outstanding; provided, however,
that in the case of clauses (1), (2) and (3) of this paragraph, no Default or
Event of Default shall have occurred and be continuing at the time of such
payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date, amounts expended
pursuant to clauses (1)(ii), (2)(i) and (2)(ii)(A) of this paragraph shall, in
each case, be included in such calculation.
For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
83
<PAGE>
delivered to the Trustee) on the date of the Restricted Payment of the
asset(s) proposed to be transferred by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. Not later than the date of
making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment complies with the
Indenture and setting forth in reasonable detail the basis upon which the
required calculations were computed, which calculations may be based upon the
Company's latest available internal quarterly financial statements.
For purposes of this covenant, if a particular Restricted Payment involves a
non-cash payment, including a distribution of assets, then such Restricted
Payment shall be deemed to be an amount equal to the cash portion of such
Restricted Payment, if any, plus an amount equal to the fair market value of
the non-cash portion of such Restricted Payment.
Limitation on Dividends. The Indenture provides that the Company will not
declare or pay any dividend or make any distribution (other than dividends or
distributions payable solely in Qualified Capital Stock of the Company) on
shares of the Company's Capital Stock to holders of such Capital Stock.
Asset Sales. The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, engage in an Asset
Sale unless (i) the Company or the Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors of the Company set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Properties issued or sold or otherwise disposed of and (ii) at least 85% of
the consideration therefor received by the Company or such Subsidiary is in
the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent
balance sheet) of the Company or any Subsidiary (other than contingent
liabilities and liabilities that are Subordinated Indebtedness or otherwise by
their terms subordinated to the Notes or the Subsidiary Guarantees) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Subsidiary from further liability
and (y) any notes or other obligations received by the Company or any such
Subsidiary from such transferee that are converted by the Company or such
Subsidiary into cash within 180 days of closing such Asset Sale (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 180 days after the receipt of any Net Cash Proceeds from any Asset
Sale, the Company may (i) apply all or any of the Net Cash Proceeds therefrom
to repay Indebtedness (other than Subordinated Indebtedness) of the Company or
any Subsidiary, provided, in each case, that the related loan commitment of
any revolving credit facility or other borrowing (if any) is thereby
permanently reduced by the amount of such Indebtedness so repaid, or (ii)
invest all or any part of the Net Cash Proceeds thereof in properties and
other capital assets that replace the properties or other capital assets that
were the subject of such Asset Sale or in other properties or other capital
assets that will be used in the Business. Pending the final application of any
such Net Cash Proceeds, the Company may temporarily reduce borrowings under
any revolving credit facility or otherwise invest such Net Cash Proceeds in
any manner that is not prohibited by the Indenture. Any Net Cash Proceeds from
an Asset Sale that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Available Proceeds
Amount." When the aggregate Available Proceeds Amount exceeds $2.5 million,
the Company shall make an offer to purchase, from all Holders of the Notes and
any then outstanding Pari Passu Indebtedness required to be repurchased or
repaid on a permanent basis in connection with an Asset Sale, an aggregate
principal amount of Notes and any such Pari Passu Indebtedness equal to such
Available Proceeds Amount as follows:
(i) (A) The Company shall make an offer to purchase (an "Asset Proceeds
Offer") from all Holders of the Notes in accordance with the procedures set
forth in the Indenture the maximum principal amount (expressed as a
multiple of $1,000) of Notes that may be purchased out of an amount (the
"Payment Amount") equal to the product of such Available Proceeds Amount
multiplied by a fraction, the numerator of which is the outstanding
principal amount of the Notes and the denominator of which is the sum of
the outstanding principal amount of the Notes and such Pari Passu
Indebtedness, if any (subject to proration in
84
<PAGE>
the event such amount is less than the aggregate Offered Price (as defined
in clause (ii) below) of all Notes tendered), and (B) to the extent
required by any such Pari Passu Indebtedness and provided there is a
permanent reduction in the principal amount of such Pari Passu
Indebtedness, the Company shall make an offer to purchase such Pari Passu
Indebtedness (a "Pari Passu Offer") in an amount (the "Pari Passu
Indebtedness Amount") equal to the excess of the Available Proceeds Amount
over the Payment Amount.
(ii) The offer price for the Notes shall be payable in cash in an amount
equal to 100% of the principal amount of the Notes tendered pursuant to an
Asset Proceeds Offer, plus accrued and unpaid interest, if any, to the date
such Asset Proceeds Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the Indenture. To the extent
that the aggregate Offered Price of the Notes tendered pursuant to an Asset
Proceeds Offer is less than the Payment Amount relating thereto or the
aggregate amount of the Pari Passu Indebtedness that is purchased or repaid
pursuant to the Pari Passu Offer is less than the Pari Passu Indebtedness
Amount (such shortfall constituting an "Asset Proceeds Deficiency"), the
Company may use such Asset Proceeds Deficiency, or a portion thereof, for
general corporate purposes, subject to the limitations of the "Limitation
on Restricted Payments" covenant.
(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by Holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis. Upon completion of such Net
Proceeds Offer and Pari Passu Offer, the amount of Excess Proceeds shall be
reset to zero.
The Company will not permit any Subsidiary to enter into or suffer to exist
any agreement (excluding Permitted Liens) that would place any restriction of
any kind (other than pursuant to law or regulation) on the ability of the
Company to make an Asset Proceeds Offer following any Asset Sale. The Company
will comply with Rule 14e-1 under the Exchange Act, and any other securities
laws and regulations thereunder, if applicable, in the event that an Asset
Sale occurs and the Company is required to purchase Notes as described above.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, create or otherwise cause or permit
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (a) pay dividends or make any other distributions
on its Capital Stock; (b) make loans or advances or pay any Indebtedness or
other obligation owed to the Company or to any Subsidiary of the Company; or
(c) transfer any of its property or assets to the Company or to any Subsidiary
of the Company (each such encumbrance or restriction in clause (a), (b), or
(c) a "Payment Restriction"), except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) the Indenture; (3)
customary non-assignment provisions of any lease or license agreements or
similar agreements entered into in the ordinary course of business of any
Subsidiary of the Company; (4) any instrument governing Acquired Indebtedness
Incurred in accordance with paragraph (b) of the covenant "--Limitation on
Indebtedness"; provided that such encumbrance or restriction is not, and will
not be, applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, becoming a
Subsidiary of the Company; (5) agreements existing on the Issue Date to the
extent and in the manner such agreements are in effect on the Issue Date; (6)
any restriction or encumbrance contained in contracts for the sale of assets
to be consummated in accordance with the Indenture solely in respect of the
assets to be sold pursuant to such contract; (7) any restrictions on the sale
or other disposition or encumbrance of any property securing Indebtedness as a
result of a Permitted Lien on such property; (8) any agreement relating to an
acquisition of property, so long as the encumbrances or restrictions in any
such agreement relate solely to the property so acquired and are not or were
not created in anticipation of or in connection with the acquisition thereof;
(9) the Senior Credit Facility; or (10) any encumbrance or restriction
contained in Permitted Indebtedness or Permitted Refinancing Indebtedness
Incurred to Refinance the Indebtedness Incurred pursuant to an agreement
referred to in clause (4), (5) or (9) above; provided that the provisions
relating to such encumbrance or restriction contained in any such Permitted
Refinancing Indebtedness are no less favorable to the Company or to the
Holders in any material respect in the reasonable and good faith judgment of
the Board of Directors of the Company than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(4), (5) or (9).
85
<PAGE>
Limitation on Issuances and Sales of Capital Stock of Subsidiaries. The
Indenture provides that the Company will not cause or permit any of its
Subsidiaries to issue or sell any Capital Stock (other than to the Company or
to a Wholly-owned Subsidiary of the Company) or permit any Person (other than
the Company or a Wholly-owned Subsidiary of the Company) to own or hold any
Capital Stock of any Subsidiary of the Company or any Lien or security
interest therein; provided, however, that such covenant shall not prohibit the
disposition (by sale, merger or otherwise) of all of the Capital Stock of a
Subsidiary provided any Net Cash Proceeds therefrom are applied in accordance
with the covenants described under "--Asset Sales."
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any Subsidiary to, directly or indirectly, create, incur,
assume, affirm or suffer to exist or become effective any Lien of any kind
except for Permitted Liens, upon any of their respective property or assets,
whether now owned or acquired after the Issue Date, or any income, profits or
proceeds therefrom, or convey any right to receive income therefrom. The
foregoing covenant will not apply to any Lien securing Acquired Indebtedness
incurred in accordance with the covenant "--Limitation on Indebtedness",
provided that any such Lien extends only to the property or assets that were
subject to such Lien prior to the related acquisition by the Company or such
Subsidiary and was not created, incurred or assumed in contemplation of such
transaction. The incurrence of additional secured Indebtedness by the Company
and its Subsidiaries is subject to further limitations on the incurrence of
Indebtedness as described under "--Limitation on Indebtedness."
Mergers, Consolidations and Sale of Assets. The Indenture provides that the
Company will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Company's Subsidiaries) whether as an entirety or substantially as an entirety
to any Person unless: (i) either (1) the Company shall be the surviving or
continuing corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and of the Company's Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a
corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual payment
of the principal of, and premium, if any, and interest on all of the Notes and
the performance of every covenant of the Notes, the Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and, if
applicable, the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall
be able to Incur at least $1.00 of additional Indebtedness pursuant to
paragraph (b) of "--Limitation on Indebtedness"; provided that in determining
the Consolidated Fixed Charge Coverage Ratio of the Company or such Surviving
Entity, as the case may be, such ratio shall be calculated on a pro forma
basis as if the transaction (including the Incurrence of any Indebtedness or
Acquired Indebtedness) took place on the first day of the Four Quarter Period;
(iii) immediately before and immediately after giving effect to such
transaction and, if applicable, the assumption contemplated by clause
(i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness Incurred or anticipated to be Incurred
and any Lien granted in connection with or in respect of the transaction), no
Default and no Event of Default shall have occurred or be continuing; and (iv)
the Company or the Surviving Entity shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with the applicable
provisions of the Indenture and that all conditions precedent in the Indenture
relating to such transaction have been satisfied.
Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor Person formed by such
consolidation or into which the Company is merged or to which such
86
<PAGE>
conveyance, lease or transfer is made will succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture
with the same effect as if such successor had been named as the Company
therein, and thereafter (except in the case of a sale, assignment, transfer,
lease, conveyance or other disposition) the predecessor corporation will be
relieved of all further obligations and covenants under the Indenture and the
Notes.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Subsidiary Guarantee is to be released in accordance with the terms of the
Guarantee and the Indenture in connection with any transaction complying with
the provisions of "--Asset Sales") will not, and the Company will not cause or
permit any Subsidiary Guarantor to, consolidate with or merge with or into any
Person, or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its assets, other than the Company or any other
Subsidiary Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Subsidiary Guarantor), or to which
such disposition shall have been made, is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) such entity assumes by supplemental indenture all of the
obligations of the Subsidiary Guarantor on the Subsidiary Guarantee;
(iii) immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on
a pro forma basis, the Company could satisfy the provisions of clause (ii) of
the first paragraph of this covenant. Any merger or consolidation of a
Subsidiary Guarantor with and into the Company (with the Company being the
surviving entity) or another Subsidiary Guarantor need only comply with
clauses (iii) and (iv) of the first paragraph of this covenant.
Limitation on Transactions with Affiliates. The Indenture provides that
neither the Company nor any Subsidiary of the Company will conduct any
business or enter into any transaction or series of transactions with or for
the benefit of any of their Affiliates (each an "Affiliate Transaction") but
excluding Specified Affiliate Transactions, except in good faith and on terms
that are no less favorable to the Company or such Subsidiary, as the case may
be, than those that could have been obtained in a comparable transaction on an
arm's-length basis from a Person not an Affiliate of the Company or such
Subsidiary. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $250,000
shall be approved by a majority of the independent members of the Board of
Directors of the Company, such approval to be evidenced by a Board Resolution
stating that such Board of Directors has determined that such transaction
complies with the foregoing provisions. If the Company or any Subsidiary of
the Company enters into an Affiliate Transaction (or a series of related
Affiliate Transactions related to a common plan) that involves an aggregate
fair market value of more than $5,000,000, the Company or such Subsidiary
shall, prior to the consummation thereof, obtain a favorable opinion as to the
fairness of such transaction or series of related transactions to the Company
or the relevant Subsidiary, as the case may be, from a financial point of
view, from an Independent Financial Advisor and file the same with the
Trustee. Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions between the Company and any
Subsidiary Guarantor or between Subsidiary Guarantors, (ii) reasonable fees
and compensation paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Subsidiary as
determined in good faith by the Company's Board of Directors or senior
management, or (iii) Restricted Payments not prohibited by the Indenture.
Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries
transfers or causes to be transferred, in one transaction or a series of
related transactions, any property to any Subsidiary that is not a Subsidiary
Guarantor, or if the Company or any of its Subsidiaries shall organize,
acquire or otherwise invest in another Subsidiary having total assets with a
book value in excess of $50,000, then such transferee or acquired or other
Subsidiary shall (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which
such Subsidiary shall fully and unconditionally guarantee all of the Company's
obligations under the Notes and the Indenture on the terms set forth in the
Indenture and (ii) deliver to the Trustee an Opinion of Counsel that such
supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and constitutes a legal, valid, binding and enforceable
obligation of such Subsidiary. Thereafter, such Subsidiary shall be a
Subsidiary Guarantor for all purposes of the Indenture.
87
<PAGE>
Limitation on Conduct of Business. The Indenture provides that the Company
will not, and will not permit any of its Subsidiaries to, engage in the
conduct of any business other than the Business on a basis consistent with the
conduct of such business as it is conducted on the Issue Date.
Limitation on Status as Investment Company. The Indenture will prohibit the
Company and the Subsidiary Guarantors from being required to register as an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or from otherwise becoming subject to regulation under the
Investment Company Act of 1940.
Sale and Leaseback Transactions. The Indenture provides that the Company
will not, and will not permit any of its Subsidiaries to, enter into any sale
and leaseback transaction; provided that the Company or any Subsidiary, as
applicable, may enter into a sale and leaseback transaction if (i) the Company
could have (a) incurred Indebtedness in an amount equal to the Attributable
Indebtedness relating to such sale and leaseback transaction pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in clause (b) of the
covenant described above under the caption "--Limitation on Indebtedness" and
(b) incurred a Lien to secure such Indebtedness pursuant to the covenant
described above under the caption "--Limitation on Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described under the caption "--Asset Sales."
Reports to Holders. So long as any of the Notes are outstanding or any
obligation of the Company or any Subsidiary Guarantor with respect thereto
remains unpaid finally and in full, the Company will file with the Commission
all information, documents and reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, whether or not
the Company is then subject to such filing requirements so long as the
Commission will accept such filings. The Company will file with the Trustee,
within 15 days after it files them with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and
regulations prescribe), without exhibits, which the Company files with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. Regardless of
whether the Company is required to furnish such reports to its stockholders
pursuant to the Exchange Act, the Company will cause its consolidated
financial statements, comparable to that which would have been required to
appear in annual or quarterly reports, to be delivered to the Trustee and the
Holders. The Company will also make such reports available to prospective
purchasers of the Notes, securities analysts and broker-dealers upon their
request. In addition, the Indenture requires that for so long as any of the
Notes remain outstanding or, any obligation of the Company or any Subsidiary
Guarantor with respect thereto remains unpaid finally and in full, the Company
will make available to any prospective purchaser of the Notes or beneficial
owner of the Notes in connection with any sale thereof the information
required by Rule 144A(d)(4) under the Securities Act, until such time as the
holders thereof have disposed of such Notes pursuant to an effective
registration statement filed by the Company.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Note for a period of 30 days or
more after such interest becomes due and payable; or
(ii) the failure to pay the principal on any Note, when such principal
becomes due and payable, at maturity, upon redemption, pursuant to an Asset
Sale Offer or a Change of Control Offer or otherwise; or
(iii) (x) the failure of the Company or any Subsidiary Guarantor to
comply with the terms and provisions of the Indenture summarized under "--
Certain Covenants--Mergers, Consolidations and Sale of Assets" or (y) a
default in the observance or performance of any other covenant or agreement
contained in the Indenture which default continues for a period of 30 days
after the Company receives written notice
88
<PAGE>
specifying the default from the Trustee or from Holders of at least 25% in
principal amount of outstanding Notes; or
(iv) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Subsidiary of the Company (or the
payment of which is guaranteed by the Company or any Subsidiary of the
Company) which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness after any applicable
grace period provided in such Indebtedness on the date of such default (a
"payment default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity
of which has been so accelerated, aggregates $1,000,000; or
(v) one or more judgments in an aggregate amount in excess of $1,000,000
(which are not covered by third-party insurance as to which a financially
sound insurer has not disclaimed coverage) being rendered against the
Company or any of its Subsidiaries and such judgments remain undischarged,
or unstayed or unsatisfied for a period of 60 days after such judgment or
judgments become final and non-appealable; or
(vi) certain events of bankruptcy, insolvency or reorganization affecting
the Company or any of its Subsidiaries; or
(vii) any of the Subsidiary Guarantees cease to be in full force and
effect or any of the Subsidiary Guarantees are declared to be null and void
and unenforceable or any of the Subsidiary Guarantees are found to be
invalid or any of the Subsidiary Guarantors denies its liability under its
Subsidiary Guarantee (other than by reason of release of a Subsidiary
Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the then outstanding Notes may declare the unpaid
principal of, premium, if any, and accrued and unpaid interest on, all the
Notes then outstanding to be due and payable, by a notice in writing to the
Company (and to the Trustee, if given by Holders) and upon such declaration
such principal amount, premium, if any, and accrued and unpaid interest will
become immediately due and payable. If an Event of Default with respect to the
Company specified in clause (vi) above occurs, all unpaid principal of, and
premium, if any, and accrued and unpaid interest on, the Notes then
outstanding will ipso facto become due and payable without any declaration or
other act on the part of the Trustee or any Holder.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and premium, if any, and interest on the Notes which has become
due solely by virtue of such acceleration) have been cured or waived and if
the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
Notwithstanding the foregoing, if an Event of Default specified in clause
(iv) above shall have occurred and be continuing, such Event of Default and
any consequential acceleration shall be automatically rescinded if the
Indebtedness that is the subject of such Event of Default has been repaid, or
if the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in each
case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period or the occurrence of such acceleration).
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its
consequences, except a Default in the payment of the principal of or interest
on any Notes or a Default in respect of any term or provision of the Notes or
the Indenture that cannot be modified or amended without the consent of all
Holders.
89
<PAGE>
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable security or indemnity. Subject to all
provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the then outstanding Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
Under the Indenture, the Company is required to provide an Officers'
Certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided, that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have the obligations of the Company and the Subsidiary Guarantors
discharged in accordance with the defeasance provisions set forth below with
respect to the Notes then outstanding. Such defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness
represented by such outstanding Notes and the Company and the Subsidiary
Guarantors shall be deemed to have satisfied all their respective other
obligations under the Notes, the Subsidiary Guarantees and the Indenture,
except for (i) the rights of holders of such outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's and the Subsidiary
Guarantors' respective obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and (iv) the redemption and defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the respective obligations of the Company and the
Subsidiary Guarantors released with respect to certain covenants in the
Indenture ("covenant defeasance"), and any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes. In order to exercise either defeasance or covenant defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Notes, cash in U.S. dollars, U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on such
outstanding Notes on the stated maturity thereof or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date; (ii)
in the case of defeasance, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B) since the
Issue Date, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance had not occurred; (iii) in the case of covenant defeasance, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
covenant defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit; (v) such
defeasance or covenant defeasance shall not result in a breach or violation
of, or constitute a default under, the Indenture or any other material
agreement or instrument to which the Company is a party or by default under,
the Indenture or any other material agreement or instrument to which the
Company is a party or by which it is bound; (vi) in the case of defeasance or
covenant defeasance, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect
90
<PAGE>
of any applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally and that such defeasance or covenant
defeasance will not result in the Trustee or the trust arising from such
deposit constituting an Investment Company as defined in the Investment
Company Act of 1940, as amended; and (vii) the Company shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel each stating
that all conditions precedent provided for relating to either the defeasance
or the covenant defeasance, as the case may be, have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations in the case of a Disposition, to
comply with the TIA, or to make other changes so long as such change does not
adversely affect the rights of any of the Holders. Other modifications and
amendments of the Indenture may be made with the consent of the Holders of a
majority in principal amount of the then outstanding Notes issued under the
Indenture, except that, without the consent of each Holder of the Notes
affected thereby, no amendment may, directly or indirectly: (i) reduce the
amount of Notes whose Holders must consent to an amendment; (ii) reduce the
rate of or change the time for payment of interest, including defaulted
interest, on any Notes; (iii) reduce the principal of or change the fixed
maturity of any Notes, or change the date on which any Notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price
therefor; (iv) make any Notes payable in money other than that stated in the
Notes; (v) make any change in provisions of the Indenture protecting the right
of each Holder to receive payment of principal of and interest on such Note on
or after the due date thereof or to bring suit to enforce such payment, or
permitting Holders of a majority in principal amount of the Notes to waive
Defaults or Events of Default; (vi) amend, modify or change the obligation of
the Company to make or consummate a Change of Control Offer, an Asset Sale
Offer or waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any such offers; (vii) adversely
affect the ranking of the Notes or the Subsidiary Guarantees; or (viii)
release any Subsidiary Guarantor from any of its obligations under its
Subsidiary Guarantee or the Indenture otherwise than in accordance with the
terms of the Indenture.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees are governed by, and
construed in accordance with, the laws of the State of New York.
THE TRUSTEE
State Street Bank and Trust Company is the Trustee under the Indenture.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided,
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign within 90 days of becoming aware of
such conflicting interest as provided in the TIA or apply to the Commission
for permission to continue as Trustee. The Trustee may resign at any time, in
which case a successor trustee is to be appointed pursuant to the terms of the
Indenture.
91
<PAGE>
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" of any Person means Indebtedness of another Person
and any of its Subsidiaries existing at the time such other Person becomes a
Subsidiary of such Person or at the time it merges or consolidates with such
Person or any of such Person's Subsidiaries or is assumed by such Person or
any Subsidiary of such Person in connection with the acquisition of assets
from such other Person and in each case not Incurred by such Person or any
Subsidiary of such Person or such other Person in connection with, or in
anticipation or contemplation of, such other Person becoming a Subsidiary of
such Person or such acquisition, merger or consolidation, and which
Indebtedness is without recourse to the Company or any of its Subsidiaries or
to any of their respective properties or assets other than the Person or such
Person's Subsidiaries or the assets to which such Indebtedness related prior
to the time such Person becomes a Subsidiary of the Company or the time of
such acquisition, merger or consolidation.
"Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning set forth in "--Certain Covenants--
Limitation on Transactions with Affiliates."
"Asset Acquisition" means (i) an Investment by the Company or any Subsidiary
of the Company in any other Person pursuant to which such Person shall become
a Subsidiary of the Company or shall be merged with or into the Company or any
Subsidiary of the Company or (ii) the acquisition by the Company or any
Subsidiary of the Company of assets of any Person comprising an existing
business (whether existing as a separate entity, subsidiary, division or unit
of such Person).
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or any Subsidiary Guarantor
(including, without limitation, by means of a sale and leaseback transaction
or a merger or consolidation) (collectively, for purposes of this definition,
a "transfer"), directly or indirectly, in one or a series of related
transactions, of (a) any Capital Stock of any Subsidiary Guarantor held by the
Company or any other Subsidiary Guarantor, (b) all or substantially all of the
properties and assets of any division or line of business of the Company or
any of the Subsidiary Guarantors, (c) any other properties or assets of the
Company or any of the Subsidiary Guarantors other than transfers of cash, Cash
Equivalents, accounts receivable, or properties or assets in the ordinary
course of business; provided that the transfer of all or substantially all of
the properties or assets of the Company and the Subsidiary Guarantors, taken
as a whole, will be governed by the provisions of the Indenture described
above under the captions "--Certain Covenants--Mergers, Consolidations and
Sale of Assets" and/or "--Change of Control" and not by the provisions of the
"Asset Sales" covenant. For the purposes of this definition, the term "Asset
Sale" also shall not include any of the following: (i) sales of damaged, worn-
out or obsolete equipment or assets that, in the Company's reasonable
judgment, are either (A) no longer used or (B) no longer useful in the
business of the Company or the Subsidiary Guarantors; (ii) any lease of any
property entered into in the ordinary course of business and with respect to
which the Company or any Subsidiary Guarantor is the lessor, except any such
lease that provides for the acquisition of such property by the lessee during
or at the end of the term thereof for an amount that is less than the fair
market value thereof at the time the right to acquire such property is
granted; (iii) a Restricted Payment or Permitted Investment permitted under
"Certain Covenants--Limitation on Restricted Payments;" and (iv) any transfers
that, but for this clause (iv), would be Asset Sales, if (A) the Company
elects to designate such transfers
92
<PAGE>
as not constituting Asset Sales and (B) after giving effect to such transfers,
the aggregate fair market value of the properties or assets transferred in
such transaction or any such series of related transactions so designated by
the Company does not exceed $1.0 million.
"Asset Proceeds Offer" has the meaning set forth in "--Certain Covenants--
Asset Sales."
"Attributable Indebtedness" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended). As used in the preceding sentence, the "net rental
payments" under any lease for any such period shall mean the sum of rental and
other payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on
account of maintenance and repairs, insurance, taxes, assessments, water rates
or similar charges. In the case of any lease that is terminable by the lessee
upon payment of penalty, such net rental payment shall also include the amount
of such penalty, but no rent shall be considered as required to be paid under
such lease subsequent to the first date upon which it may be so terminated.
"Available Proceeds Amount" has the meaning set forth in "--Certain
Covenants--Asset Sales."
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Clerk or Secretary or an Assistant Clerk or Assistant
Secretary of such Person to have been duly adopted by the board of directors
of such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business" means the business of providing audio, video and data
teleconferencing services.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in New York, New York or Boston, Massachusetts
are required or authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
or profit participation interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP and, for
purposes of this definition, the amount of such obligations at any date shall
be the capitalized amount of such obligations at such date, determined in
accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than 270 days from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
180 days from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations
93
<PAGE>
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; (vi) deposits available for
withdrawal on demand with any commercial bank not meeting the qualifications
specified in clause (ii) above, provided that all such deposits do not exceed
$5,000,000 in the aggregate at any one time; (vii) demand and time deposits
and certificates of deposit with any commercial bank organized in the United
States not meeting the qualifications specified in clause (ii) above, provided
that such deposits and certificates support bond, letter of credit and other
similar types of obligations incurred in the ordinary course of business; and
(viii) investments in money market or other mutual funds substantially all of
whose assets comprise securities of the types described in clauses (i) through
(v) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any person (as such term is used in Section 13(d)(3) of the
Exchange Act) other than to the Company or a Subsidiary Guarantor; (ii) the
Company consolidates with or merges into another Person or any Person
consolidates with, or merges into, the Company, in any such event pursuant to
a transaction in which the outstanding Voting Stock of the Company is changed
into or exchanged for cash, securities or other property, other than any such
transaction where (a) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that
is Qualified Capital Stock and (b) the holders of the Voting Stock of the
Company immediately prior to such transaction own, directly or indirectly, not
less than a majority of the Voting Stock of the surviving or resulting Person
immediately after such transaction; (iii) the adoption of a plan relating to
the liquidation or dissolution of the Company not involving a merger or
consolidation or a sale or other disposition of assets described in clause (i)
above; (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
person (as defined above), excluding Permitted Holders, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act), directly or indirectly, of more than 50% of the total
voting power of the Voting Stock of the Company; provided that the sale of
Voting Stock of the Company to a Person or Persons acting as underwriters in
connection with a firm commitment underwriting shall not constitute a Change
of Control; (v) the first day on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors (other than by action
of the Permitted Holders); or (vi) the appointment, selection or election of
John J. Hassett as a director or officer of the Company. For purposes of this
definition, any transfer of an equity interest of an entity that was formed
for the purpose of acquiring Voting Stock of the Company will be deemed to be
a transfer of such portion of such Voting Stock as corresponds to the portion
of the equity of such entity that has been so transferred.
"Common Stock" of any Person, means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income plus (ii) to the
extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all income taxes of such Person and
its Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or dispositions of
assets outside the ordinary course of business), Consolidated Interest
Expense, amortization expense and depreciation expense, and (B) other
Consolidated Non-Cash Charges (other than non-cash interest) reducing
Consolidated Net Income, other than any non-cash item which requires the
accrual of or a reserve for cash charges for any future period and other than
any non-cash charge constituting an extraordinary item of loss, less other
non-cash items increasing Consolidated Net Income, all as determined on a
consolidated basis for such Person and its Subsidiaries in conformity with
GAAP.
94
<PAGE>
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters for which financial information is available (the "Four
Quarter Period") ending on or prior to the date of the transaction or event
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person
for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the Incurrence or
repayment of any Indebtedness of such Person or any of its Subsidiaries (and
the application of the proceeds thereof) giving rise to the need to make such
calculation and any Incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the Incurrence or repayment
of Indebtedness in the ordinary course of business for working capital
purposes pursuant to working capital facilities, at any time subsequent to the
first day of the Four Quarter Period and on or prior to the Transaction Date,
as if such Incurrence or repayment, as the case may be (and the application of
the proceeds thereof), occurred on the first day of the Four Quarter Period,
and (ii) any Asset Sales or Asset Acquisitions (including, without limitation,
any Asset Acquisition giving rise to the need to make such calculation as a
result of such Person or one of its Subsidiaries (including any Person who
becomes a Subsidiary as a result of any such Asset Acquisition) Incurring,
assuming or otherwise being liable for Acquired Indebtedness) at any time
subsequent to the first day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
Incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness and also including any Consolidated EBITDA, based upon the four
fiscal quarters of such Person for which financial information is available
immediately preceding such Asset Acquisition, associated with such Asset
Acquisition) occurred on the first day of the Four Quarter Period; provided
that the Consolidated EBITDA of any Person acquired shall be included only to
the extent includable pursuant to the definition of "Consolidated Net Income."
If such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third person, the preceding sentence shall give effect to
the Incurrence of such guaranteed Indebtedness as if such Person or any
Subsidiary of such Person had directly Incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator)
of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
Indebtedness determined on a fluctuating basis as of the Transaction Date
(including Indebtedness actually Incurred on the Transaction Date) and which
will continue to be so determined thereafter shall be deemed to have accrued
at a fixed rate per annum equal to the rate of interest on such Indebtedness
in effect on the Transaction Date; and (2) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Common Stock)
paid, accrued or scheduled to be paid or accrued during such period times (y)
a fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated Federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense (without deduction of interest
income) of such Person and its Subsidiaries (excluding amortization of
deferred financing fees) for such period, on a consolidated basis, as
determined in accordance with GAAP, and including (a) all amortization of
original issue discount (other than any original issue discount on
Indebtedness attributable to proceeds of the sale of warrants issued in
connection with the Incurrence of such Indebtedness); (b) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to
be paid or accrued by such Person and its Subsidiaries during such period; (c)
net cash costs under all Interest Swap Obligations (including amortization of
fees); (d) all capitalized interest; and (e) the interest portion of any
deferred payment obligations for such period.
95
<PAGE>
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for
such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains from Asset
Sales or abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains, (c) the net income or loss
of any Person acquired in a "pooling of interests" transaction accrued prior
to the date it becomes a Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Subsidiary of the referent
Person, (d) the net income (but not loss) of any Subsidiary of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income of any Person, other than a
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly-owned Subsidiary of
the referent Person by such Person, (f) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued), and (h) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Subsidiaries for such period, on a consolidated basis,
as determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who: (i) was a member of such Board of
Directors on the Issue Date; or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Disqualified Capital Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the final maturity date of the Notes.
"Events of Default" has the meaning set forth in "--Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934, as amended or any
successor statute or statutes thereto.
"Existing Indebtedness" means up to $1.5 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries in existence on the
Issue Date, until such amounts are repaid.
"Fair market value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between an informed and willing seller and an informed
and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair market value shall be determined
by the Board of Directors of the Company acting reasonably and in good faith
and shall be evidenced by a Board Resolution delivered to the Trustee;
provided, however, that if the aggregate non-cash consideration to be received
by the Company or any of its Subsidiaries from any Asset
96
<PAGE>
Sale could be reasonably likely to exceed $1.0 million, the fair market value
shall be determined by an Independent Financial Advisor.
"Family Member" means, when used with reference to any natural Person, such
Person's spouse, siblings, parents, children, or other lineal descendants
(whether by adoption or consanguinity), and shall mean a trust, the primary
beneficiary of which is the Person's spouse, siblings, parents, children, or
other lineal descendants (whether by adoption or consanguinity).
"Financial Advisor" means an accounting, appraisal or investment banking
firm of nationally recognized standing that is, in the reasonable and good
faith judgment of the Board of Directors of the Company, qualified to perform
the task for which such firm has been engaged.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that (A)
any Indebtedness assumed in connection with an acquisition of assets and any
Indebtedness of a Person existing at the time such Person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) of the Company or
at the time such Person is merged or consolidated with the Company or any
Subsidiary of the Company shall be deemed to be Incurred at the time of the
acquisition of such assets or by such Subsidiary at the time it becomes, or is
merged or consolidated with, a Subsidiary of the Company or by the Company at
the time of such merger or consolidation, as the case may be, and (B) any
amendment, modification or waiver of any document pursuant to which
Indebtedness was previously Incurred shall not be deemed to be an Incurrence
of Indebtedness unless such amendment, modification or waiver shall increase
the principal or premium thereof or interest rate thereon (including by way of
original issue discount). A guarantee by the Company or a Subsidiary Guarantor
of Indebtedness Incurred by the Company or a Subsidiary Guarantor, as
applicable, shall not be a separate incurrence of Indebtedness.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and accrued
liabilities arising in the ordinary course of business that are not overdue by
90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) all Indebtedness of others
(including all dividends of other Persons for the payment of which is)
guaranteed, directly or indirectly, by such Person or that is otherwise its
legal liability or which such Person has agreed to purchase or repurchase or
in respect of which such Person has agreed contingently to supply or advance
funds but excluding endorsements of negotiable instruments and documents in
the ordinary course of business, (vii) net liabilities of such Person under
Interest Swap Obligations, (viii) all Indebtedness of others secured by (or
for which the holder of such
97
<PAGE>
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on any asset or property (including, without limitation, leasehold
interests and any other tangible or intangible property) of such Person,
whether or not such Indebtedness is assumed by such Person or is not otherwise
such Person's legal liability; provided that if the Obligations so secured
have not been assumed by such Person or are otherwise not such Person's legal
liability, the amount of such Indebtedness for the purposes of this definition
shall be limited to the lesser of the amount of such Indebtedness secured by
such Lien or the fair market value of the assets or property securing such
Lien, and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends if
any. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided
that the amount outstanding at any time of any non-interest bearing
Indebtedness or other Indebtedness issued with original issue discount is the
full amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP, but such Indebtedness shall only be deemed to be
Incurred as of the date of original issuance thereof.
"Independent" when used with respect to any specified Person means such a
Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions for the
Company or any of its Subsidiaries. Whenever it is provided in the Indenture
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by the Company and approved by the
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read this definition and that the signer is
Independent within the meaning thereof.
"Interest Swap Obligations" means the obligations of any Person under any
interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" by any Person means any direct or indirect (i) loan, advance or
other extension of credit or capital contribution (by means of transfers of
cash or other property (valued at the fair market value thereof as of the date
of transfer) to others or payments for property or services for the account or
use of others, or otherwise) (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business);
(ii) purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by any other Person;
(iii) guarantee or assumption of any Indebtedness or any other obligation of
any other Person (except for an assumption of Indebtedness for which the
assuming Person receives consideration at the time of such assumption in the
form of property or assets with a fair market value at least equal to the
principal amount of the Indebtedness assumed, extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance
with normal trade practices or otherwise in the ordinary course of business,
workers' compensation, utility, lease and similar deposits and prepaid
expenses made in the ordinary course of business, and endorsements of
negotiable instruments and documents in the ordinary course of business); and
(iv) all other items that would be classified as investments on a balance
sheet of such Person prepared in accordance with GAAP. The amount of any
Investment shall not be adjusted for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment. If the
Company or any Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer
owns, directly or indirectly, greater than 50% of the outstanding Common Stock
of such Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such Subsidiary not sold or disposed of.
"Issue Date" means the date on which the Notes were first issued under the
Indenture.
98
<PAGE>
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to
sell, in each case securing obligations of such Person and any filing of or
agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statute or statutes) of any jurisdiction other than to reflect
ownership by a third party of property leased to the referent Person or any of
its Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents) received by the Company or any of its Subsidiaries from such
Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating to
such Asset Sale (including, without limitation, brokerage, legal, accounting
and investment banking fees and sales commissions), (b) taxes paid or payable
((1) including, without limitation, income taxes reasonably estimated to be
actually payable as a result of any disposition of property within two years
of the date of disposition and (2) after taking into account any reduction in
tax liability due to available tax credits or deductions and any tax sharing
arrangements) and (c) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Net Equity Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
(including, without limitation, brokerage, legal, accounting and investment
banking fees and commissions) incurred in connection therewith, and (b) in the
case of any exchange, exercise, conversion or surrender of any outstanding
Indebtedness of the Company or any Subsidiary issued after the Issue Date for
or into shares of Qualified Capital Stock of the Company, the amount of such
Indebtedness (or, if such Indebtedness was issued at an amount less than the
stated principal amount thereof, the accrued amount thereof as determined in
accordance with GAAP) as reflected in the consolidated financial statements of
the Company prepared in accordance with GAAP as of the most recent date next
preceding the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder of such Indebtedness
to the Company or to any wholly-owned Subsidiary of the Company upon such
exchange, exercise, conversion or surrender and less any and all payments made
to the holders of such Indebtedness, and all other expenses incurred by the
Company in connection therewith), in each case (a) and (b) to the extent
consummated after the Issue Date.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers of the
Company (one of whom must be a principal executive officer, principal
financial officer or principal accounting officer).
"Opinion of Counsel" means a written opinion from legal counsel which and
who are reasonably acceptable to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is pari
passu in right of payment to the Notes.
"Paying Agent" shall initially be the Trustee until a successor paying agent
for the Notes is selected in accordance with the Indenture.
"Payment default" has the meaning set forth in "--Events of Default."
99
<PAGE>
"Permitted Holders" means the following Persons: J. Michael Powell, Reynolds
E. Moulton, Glenn D. Bolduc, William P. Pucci, David L. Lougee, John J. Dion,
Joanna M. Jacobson, David L. Lipsky and Patti R. Bisbano, and any of their
respective Affiliates and Family Members, each of the foregoing individually
being a Permitted Holder.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes;
(ii) Indebtedness under any Existing Indebtedness or under the Senior
Credit Facility;
(iii) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company or any Subsidiary thereof in the ordinary
course of business, including guarantees or obligations of the Company or
any Subsidiary thereof with respect to letters of credit supporting such
bid, performance or surety obligations (in each case other than for an
obligation for money borrowed);
(iv) Permitted Refinancing Indebtedness;
(v) the Subsidiary Guarantees of the Notes;
(vi) Interest Swap Obligations of the Company; provided, however, that
such Interest Swap Obligations are entered into to protect the Company and
its Subsidiaries from fluctuations in interest rates on Indebtedness
Incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(vii) Indebtedness of a direct or indirect Subsidiary of the Company to
the Company or to a direct or indirect Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a direct or indirect
Subsidiary of the Company in each case subject to no Lien held by a Person
other than the Company or a direct or indirect Subsidiary of the Company;
provided, that if as of any date any Person other than the Company or a
direct or indirect Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the date of the Incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to a direct or indirect Subsidiary of
the Company for so long as such Indebtedness is held by a direct or
indirect Subsidiary of the Company in each case subject to no Lien;
provided that (a) any Indebtedness of the Company to any direct or indirect
Subsidiary of the Company is unsecured and subordinated, pursuant to a
written agreement, to the Company's Obligations under the Indenture and the
Notes, and (b) if as of any date any Person other than a direct or indirect
Subsidiary of the Company owns or holds any such Indebtedness or any Person
holds a Lien in respect of such Indebtedness, such date shall be deemed the
date of the Incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness; and
(ix) additional Indebtedness not to exceed an aggregate principal amount
of $1.0 million at any one time outstanding and any guarantee thereof.
"Permitted Investments" means: (a) Investments in cash and Cash Equivalents;
(b) Investments by the Company or by any Subsidiary of the Company in any
Person that is or will become immediately after such Investment a direct or
indirect Subsidiary of the Company; (c) any Investments in the Company by any
Subsidiary of the Company; provided that any Indebtedness evidencing such
Investment is unsecured; (d) Investments made by the Company or by its
Subsidiaries as a result of an Asset Sale made in compliance with "--Certain
Covenants--Asset Sales"; (e) Interest Swap Obligations to the extent the same
constitute Permitted Indebtedness; (f) Investments in an amount not to exceed
$2.5 million at any one time outstanding; (g) Investments held by any Person
on the date such Person becomes a Subsidiary to the extent such Investments
are not incurred in anticipation of or in connection with such acquisition;
and (h) Investments in stock, obligations or securities received in settlement
of debts owing to the Company or any Subsidiary as a result of bankruptcy or
insolvency proceedings or upon the foreclosure, perfection or enforcement of
any Lien in favor of the Company or any Subsidiary, in each case as to debt
owing to the Company or any Subsidiary that arose in the ordinary course of
business of the Company or any such Subsidiary, provided that any stocks,
obligations or
100
<PAGE>
securities received in settlement of debts that arose in the ordinary course
of business (and received other than as a result of bankruptcy or insolvency
proceedings or upon foreclosure, perfection or enforcement of any Lien) that
are, within 30 days of receipt, converted into cash or Cash Equivalents shall
be treated as having been cash or Cash Equivalents at the time received.
"Permitted Liens" means the following types of Liens:
(i) Liens existing as of the date of the Indenture;
(ii) Liens securing the Notes, the Subsidiary Guarantees or any
Indebtedness under the Senior Credit Facility;
(iii) Liens in favor of the Company or as otherwise permitted by clause
(vii) of the "Permitted Indebtedness" definition;
(iv) Liens for taxes, assessments and governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or its Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP;
(v) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not delinquent for
more than 30 days or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall
have been made in respect thereof;
(vi) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds,
bids, government contracts and leases, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(vii) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the
period within which such proceeding may be initiated shall not have
expired;
(viii) any interest or title of a lessor under any Capital Lease
Obligation or operating lease;
(ix) Liens securing Purchase Money Indebtedness incurred in compliance
with the "Limitation on Indebtedness" covenant; provided, however, that (i)
the related Purchase Money Indebtedness shall not be secured by any
property or assets of the Company or any Subsidiary other than the property
or assets so acquired and any proceeds therefrom and (ii) the Lien securing
any such Indebtedness shall be created within 90 days of such acquisition;
(x) Liens securing obligations under or in respect of Interest Swap
Obligations;
(xi) Liens upon specific items of inventory or other goods of any Person
securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(xii) Liens securing reimbursement obligations with respect to commercial
letters of credit that encumber documents and other property or assets
relating to such letters of credit and products and proceeds thereof;
(xiii) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off;
(xiv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company and Liens on property or
assets of a Subsidiary existing at the time it became a Subsidiary,
provided that such Liens were in existence prior to the contemplation of
the acquisition and do not extend to any assets other than the property of
such Person or the acquired property (and the proceeds thereof), as
applicable; and
101
<PAGE>
(xv) Liens securing Permitted Refinancing Indebtedness which is incurred
to refinance any Indebtedness which has been secured by a Lien permitted
under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens (a) are no
less favorable to the Holders and not more favorable to the lienholders
with respect to such Liens than the Liens in respect of the Indebtedness
being refinanced, and (b) do not extend to or cover any property or assets
of the Company or any of its Subsidiaries not securing the Indebtedness so
refinanced.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of
which are used to refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Subsidiaries incurred pursuant to
clause (i), (ii) or (v) of the definition of "Permitted Indebtedness";
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so exchanged,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
related prepayment penalties, fees and reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being exchanged, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being exchanged, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes or the Subsidiary Guarantees, such Permitted Refinancing
Indebtedness is subordinated in right of payment to, the Notes or the
Subsidiary Guarantees, as the case may be, on terms at least as favorable to
the Holders of Notes as those contained in the documentation governing the
Indebtedness being exchanged, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by
the Subsidiary that is the obligor on the Indebtedness being exchanged,
refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated organization,
joint venture, union, business association, firm, governmental agency or
political subdivision thereof or other legal entity.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Subsidiary incurred in connection with the
acquisition by the Company or such Subsidiary, subsequent to the Issue Date,
of any property or assets.
"Public Equity Offering" means an underwritten offer and sale of Qualified
Capital Stock of the Company pursuant to a registration statement that has
been declared effective by the Commission pursuant to the Securities Act
(other than a registration statement on Form S-8 or otherwise relating to
equity securities issuable under any employee benefit plan of the Company).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Registrar" shall initially mean the Trustee until a successor registrar for
the Notes is selected in accordance with the Indenture.
"Senior Indebtedness" means all Indebtedness of the Company or a Subsidiary
Guarantor which is not, by its terms, Pari Passu Indebtedness or Subordinated
Indebtedness.
102
<PAGE>
"Specified Affiliate Transactions" means certain transactions among the
Company and Subsidiaries and certain Affiliates which were entered into prior
to the Issue Date as set forth in a Schedule to the Indenture.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor which, by its terms, is expressly subordinated in right
of payment to the Notes or the Subsidiary Guarantees, as the case may be.
"Subsidiary," with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantee" means any guarantee of the Notes by a Subsidiary
Guarantor in accordance with the provisions described under "--Ranking and
Guarantees."
"Subsidiary Guarantor" means each of Telephone Business Meetings, Inc.,
Conference Source International, Inc., Call Points, Inc., Kendall Square
Teleconferencing, Inc., American Conferencing Company, Inc., and Communication
Development Corporation and (ii) each of the Company's Subsidiaries that in
the future executes a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of the Indenture as a Subsidiary Guarantor; provided
that any Person constituting a Subsidiary Guarantor as described above shall
cease to constitute a Guarantor when its respective Subsidiary Guarantee is
released in accordance with the terms of the Indenture.
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-owned Subsidiary" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities which normally have the right
to vote in the election of directors, other than director's qualifying shares,
are owned by such Person or any wholly-owned Subsidiary of such Person.
REGISTRATION RIGHTS; ADDITIONAL INTEREST
Pursuant to the Registration Rights Agreement, the Company agreed to file
with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes.
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company will offer to the Holders of the Transfer Restricted Securities
pursuant to the Exchange Offer who are able to make certain representations
the opportunity to exchange their Transfer Restricted Securities for Exchange
Notes. Under existing SEC interpretations, the Transfer Restricted Securities
would, in general, be freely transferable after the Exchange Offer without
further registration under the Securities Act; provided, however, that in the
case of broker-dealers participating in the Exchange Offer, a prospectus
meeting the requirements of the Securities Act will be delivered upon resale
by such broker-dealers in connection with resales of the Exchange Notes. If
(i) the Company is not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any
103
<PAGE>
Holder of Transfer Restricted Securities notifies the Company within the
specified time period that (A) it is prohibited by law or Commission policy
from participating in the Exchange Offer or (B) that it may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales or (C)
that it is a broker-dealer and owns Old Notes acquired directly from the
Company or an affiliate of the Company, the Company will file with the
Commission a Shelf Registration Statement to cover resales of the Old Notes by
the Holders thereof who satisfy certain conditions relating to the provision
of information on connection with the Shelf Registration Statement. The
Company will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Note until (i) the date on which such Note has been exchanged by a person
other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Note for
an Exchange Note, the date on which such Exchange Note is sold to a purchaser
who receives from such broker-dealer on or prior to the date of such sale a
copy of the prospectus contained in the Exchange Offer Registration Statement,
(iii) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement provides that: (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 60
days after the Issue Date, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 120 days after the Issue Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company
will commence the Exchange Offer and use its best efforts to issue on or prior
to 30 business days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, Exchange Notes in exchange
for all Old Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on
or prior to 30 days after such filing obligation arises (and in any event
within 90 days after the Issue Date) and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 90 days after such
obligation arises. If (a) the Company fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for
such effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with the Exchange Offer or resales of Transfer Restricted
Securities, as the case may be, during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the interest rate on the
Transfer Restricted Securities, with respect to the first 90-day period
immediately following the occurrence of such Registration Default will
increase ("Additional Interest") by 0.50% per annum and will increase by an
additional 0.50% per annum with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of
Additional Interest of 1.5% per annum with respect to all Registration
Defaults. All accrued Additional Interests will be paid by the Company on each
Interest Payment Date to the Global Note Holder by wire transfer of
immediately available funds and to Holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of Additional Interest will
cease.
Each holder of Old Notes who wishes to exchange such Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any Exchange Notes to be received by it
will be acquired in the ordinary course of business, (ii) it is not
participating in, and it has no arrangement with any person to participate in
the distribution (within the meaning of the Securities Act) of the Exchange
Notes and (iii) it is neither an affiliate of the Company, as defined in Rule
405 of the Securities Act,
104
<PAGE>
nor a broker-dealer tendering notes acquired directly from the Company for its
own account. If the holder is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Old Notes that were acquired as a result
of market-making activities or other trading activities, it will be required
to acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. The Company has agreed, for a period of 180 days after
consummation of the Exchange Offer, to make available a prospectus meeting the
requirements of the Securities Act to any such broker-dealer for use in
connection with any resale of any Exchange Notes acquired in the Exchange
Offer. Holders of Notes will also be required to deliver information to be
used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth in the next paragraph, the Exchange Notes will be issued
in the form of one "Global Note" comprised of one or more fully registered
Global Notes (collectively, the "Global Note"). The Global Note will be
deposited with, or on behalf of, DTC and registered in the name of a nominee
of DTC.
Notes (i) originally purchased by or transferred to Accredited Investors who
are not qualified institutional buyers (as defined in "Transfer
Restrictions"), or (ii) held by qualified institutional buyers which elect to
take physical delivery of their certificates instead of holding their interest
through the Global Note (and which are thus ineligible to trade through DTC)
(collectively referred to herein as the "Non-Global Purchasers") will be
issued, in registered certificated form "Certificated Notes" (collectively,
"Certificated Securities"). Upon the transfer to a qualified institutional
buyer of any Certificated Security initially issued to a Non-Global Purchaser,
such Certificated Security will, unless the transferee requests otherwise or
the Global Note has previously been exchanged in whole for Certificated
Securities, be exchanged for an interest in the Global Note.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Note, DTC or its custodian will credit, on its internal
system, portions of the Global Note which shall be comprised of the
corresponding respective principal amount of the Global Note to the respective
accounts of persons who have accounts with such depositary and (ii) ownership
of the Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Initial Purchaser and ownership of
beneficial interests in the Global Note will be limited to persons who have
accounts with DTC ("participants") or persons who hold interests through
participants. Qualified institutional buyers may hold their interests in the
Global Note directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee will be considered the sole owner or holder of the
Notes represented by the Global Note for all purposes under the Indenture. No
beneficial owner of an interest in the Global Note will be able to transfer
such interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interest in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
105
<PAGE>
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium (if any) and interest (including Additional
Interest) on the Global Note, will credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Note as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Note held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and be settled in accordance with DTC rules in
same day funds. If a holder requires physical delivery of a Certificated
Security for any reason, including to sell Notes to persons in states which
require physical delivery of such securities or to pledge such securities,
such holder must transfer its interest in the Global Note in accordance with
the normal procedures of DTC and with the procedures set forth in the
Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note are credited and only in respect
to such portion of Notes, the aggregate principal amount of Notes as to which
such participant or participants have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Trustee or the Warrant
Agent will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Company,
within 90 days, the Company will issue Certificated Securities in exchange for
the Global Note.
106
<PAGE>
TRANSFER RESTRICTIONS ON OLD NOTES
The Old Notes have not been registered under the Securities Act and may not
be offered or sold except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act. The Old
Notes were offered and sold by the Initial Purchaser only (i) to a limited
number of "qualified institutional buyers" (as defined in Rule 144A
promulgated under the Securities Act) ("QIBs") in compliance with Rule 144A;
and (ii) to a limited number of other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Securities
Act) ("Accredited Investors") that prior to their purchase of any Notes
delivered to the Initial Purchaser a letter containing certain representations
and agreements.
Each purchaser of Old Notes, by its acceptance thereof, will be deemed to
have acknowledged, represented and agreed as follows:
1. It is purchasing the Old Notes for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account is (i) a QIB, and is aware that the sale to it is being
made in reliance on Rule 144A; or (ii) an Accredited Investor.
2. It acknowledges that the Old Notes have not been registered under the
Securities Act and may not be offered or sold except as set forth below.
3. It shall not resell or otherwise transfer the Old Notes except (i) to
the Company or any subsidiary thereof, (ii) to a QIB in compliance with
Rule 144A, (iii) to an Accredited Investor that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee, a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Old Notes (the form of
which letter can be obtained from the Trustee), (iv) pursuant to the
exemption from registration provided by Rule 144 promulgated under the
Securities Act (if available), or (v) pursuant to an effective registration
under the Securities Act. Each Accredited Investor that is not a QIB and
that is an original purchaser of the Old Notes will be required to sign an
agreement to the foregoing effect.
4. It agrees that it will give to each person to whom it transfers Old
Notes notice of any restrictions on transfer of such Old Notes.
5. It understands that the Old Notes will bear a legend substantially to
the following effect unless otherwise agreed by the Company and the holder
thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER
THEREOF OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES
ACT, (C) TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE OR WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
107
<PAGE>
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE TRUSTEE OR WARRANT AGENT AND THE
ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
6. It acknowledges that the Trustee will not be required to accept for
registration of transfer any Old Notes acquired by it, except upon
presentation of evidence satisfactory to the Company and the Trustee that
the restrictions set forth herein have been complied with.
7. It acknowledges that the Company, the Initial Purchaser and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that if any of the
acknowledgments, representations or agreements deemed to have been made by
its purchase of Old Notes are no longer accurate, it shall promptly notify
the Company and Initial Purchaser. If it is acquiring any Old Notes as a
fiduciary or agent for one or more investor accounts, it represents that it
has sole investment discretion with respect to each such account and it has
full power to make the foregoing acknowledgments, representations and
agreements on behalf of each account.
The Old Notes may not be sold or transferred to, and each purchaser by its
purchase of the Old Notes shall be deemed to have represented and covenanted
that it is not acquiring the Old Notes for or on behalf of, any pension or
welfare plan (as defined in Section 3 of the Employee Retirement Income
Security Act of 1974 ("ERISA")), except that such a purchase for or on behalf
of a pension or welfare plan shall be permitted:
(1) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchase in which no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets in such
collective investment fund and the applicable conditions of Prohibited
Transaction exemption 91-38 issued by the Department of Labor are
satisfied;
(2) to the extent such purchase is made by or on behalf of an insurance
company pooled separate account maintained by the purchase in which, at any
time while the Old Notes are outstanding, no plan (together with any other
plans maintained by the same employer or employee organization) has an
interest in excess of 10% of the total of all assets in such pooled
separate account and the applicable conditions of Prohibited Transaction
Exemption 90-1 issued by the Department of Labor are satisfied;
(3) to the extent such purchase is made on behalf of a plan by (A) an
investment advisor registered under the Investment Advisers Act of 1940
that had as of the last day of its most recent fiscal year total assets
under its management and control in excess of $50,000,000 and had
shareholders' or partners' equity in excess of $750,000, as shown in its
most recent balance sheet prepared in accordance with generally accepted
accounting principles, (B) a bank as defined in Section 202(a) of the
Investment Advisers Act of 1940 with equity capital in excess of $1,000,000
as of the last day of its most recent fiscal year or (C) an insurance
company which is qualified under the laws of more than on state to manage,
acquire or dispose of any assets of a plan, which company had, as of the
last day of its most recent fiscal year, net worth in excess of $1,000,000
and which is subject to supervision and examination by a state authority
having supervision over insurance companies, in each case, such investment
advisor, bank or insurance company is otherwise a qualified professional
asset manager, as such term is used in the Prohibited Transaction Exemption
84-14 issued by the Department of Labor, and the assets of such plan when
combined with the assets of other plans established or maintained by the
same employer (or affiliate thereof) or employee organization and managed
by such investment advisor, bank or insurance company, do not represent
more than 20% of the total client assets managed by such investment
advisor, bank or insurance company and the applicable conditions or
Prohibited Transaction Exemption 84-14 are otherwise satisfied; or
(4) to the extent such plan is a governmental plan (as defined in Section
3 of ERISA) which is not subject to the provisions of Title 1 of ERISA or
Section 4975 of the Code.
108
<PAGE>
Each purchaser by its purchase of the Old Notes shall also be deemed to have
represented that (a) if it is an insurance company, no part of the funds to be
used to purchase the Old Notes to be purchased by it constitutes assets
allocated to any separate account maintained by it such that the use of such
funds constitutes a transaction in violation of Section 406 of ERISA or a
Prohibited Transaction, as such term is defined in Section 4975 of the Code,
which could be subject to, respectively, a civil penalty assessed pursuant to
Section 502 of ERISA or a tax imposed by Section 4975 of the Code and (b) if
it is not an insurance company, that no part of the funds to be used to
purchase the Units to be purchased by it constitutes assets allocated to any
trust, plan or account which contains the assets of any employee pension
benefit plan, welfare plan or account prohibited pursuant to the preceding
paragraph of these "Transfer Restrictions."
Purchasers are advised that the Prohibited Transaction Exemptions described
above do not relieve a fiduciary or other party from all prohibited
transaction provisions of the Code and ERISA and from ERISA's general
fiduciary responsibilities including, but not limited to, a fiduciary's
obligation to discharge his or her duties solely in the interests of
participants and beneficiaries. As a result of the foregoing restrictions,
purchasers are advised to consult legal counsel prior to making any offer,
resale, pledge, hypothecation or other transfer or disposition of the Units or
any interest therein.
DESCRIPTION OF SENIOR CREDIT FACILITY
The Company has accepted a proposal for a commitment for the Senior Credit
Facility (which is subject to, among other things, lender due diligence and
final written approval) consisting of a revolving credit, term loan and
capital expenditures facility in the aggregate principal amount of $15.0
million. However, the Company has not entered into a binding agreement with
respect to the Senior Credit Facility, and as of the date of this Prospectus
is negotiating the terms of such agreement. The proposed Senior Credit
Facility is expected to be available to provide liquidity, fund future working
capital requirements of the Company, fund the purchase of new capital
equipment and finance future acquisitions consistent with the Company's
business strategy. The proposed Senior Credit Facility is for a term of two
years, has a minimum outstanding loan balance of $5.0 million and an interest
rate equal to a money center bank reference rate plus 1.0%. The borrowing base
of the proposed Senior Credit Facility consists of up to $8.0 million of
eligible accounts receivable, up to $3.0 million on existing equipment and up
to $4.0 million on new equipment purchases. The terms of the proposed Senior
Credit Facility also provide that it will be guaranteed by the Subsidiary
Guarantors, will be secured by substantially all of the assets of the Company
and the stock and assets of the Subsidiary Guarantors, and will contain
customary representations, warranties and covenants, including financial
covenants. See "Risk Factors--Senior Credit Facility; Effective
Subordination."
DESCRIPTION OF CAPITAL STOCK AND WARRANTS
GENERAL
The Company's authorized capital stock consists 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"). The Company has outstanding 3,358,630
shares of Common Stock and no shares of Preferred Stock. The Company has
reserved 3,250,000 shares of Common Stock for issuance pursuant to the Plan.
See "Management--1996 Stock Plan."
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
109
<PAGE>
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
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, conversion 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 (including, without limitation, the Warrant
Shares (defined below)). 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.
FEBRUARY 1997 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 initial Public
Equity Offering of the Company's Common Stock or one year from their date of
issuance, together with warrants to purchase an aggregate of 111,118 shares of
Common Stock at an exercise price of $4.50 per share. The notes were paid in
November 1997. The warrants expire on February 28, 1999 and contain
antidilution provisions. As of the date of this Prospectus, such Warrants
entitle the holders thereof to purchase an aggregate of 33,450 additional
shares of Common Stock as a result of adjustments required by the antidilution
provisions of such Warrants.
NOVEMBER 1997 WARRANTS
General. The Company issued Warrants as part of the issuance of the Old
Notes. Each Warrant, when exercised, will entitle the holder thereof to
receive 10.0886 shares of Common Stock of the Company (each, a "Warrant
Share") at an exercise price of $.01 per share (the "Exercise Price"). A total
of 75,000 Warrants, representing 756,645 Warrant Shares were issued in
connection with the Old Notes; in addition, the Company issued to the Initial
Purchaser warrants to purchase 302,657 shares of Common Stock at an exercise
price of $.01 per share. The Exercise Price and the number of Warrant Shares
issuable on exercise of a Warrant are both subject to adjustment in certain
cases. See "Adjustments" below. The Warrants are exercisable at any time on or
after the Issue Date (the "Exercisability Date"). Unless exercised, the
Warrants will automatically expire on the maturity date of the Notes (the
"Expiration Date"). The Company will give notice of expiration not less
110
<PAGE>
than 90 nor more than 120 days prior to the Expiration Date to the registered
holders of the then outstanding Warrants. The Warrants will entitle the
holders thereof to purchase in the aggregate approximately 12.5% of the
outstanding Common Stock of the Company on a fully diluted basis as of the
date of issuance of the Warrants. No fractional shares of Common Stock will be
issued upon exercise of the Warrants. The Company shall pay to holders of the
Warrants at the time of exercise an amount in cash equal to the same fraction
of the current market price of a share of Common Stock less the Exercise
Price.
Voting Rights. The holders of the Warrants will have no right to vote on
matters submitted to the stockholders of the Company and will have no right to
receive cash dividends. The holders of the Warrants will not be entitled to
share in the assets of the Company in the event of the liquidation,
dissolution or winding up of the Company's affairs.
Adjustments. Each of the number of Warrant Shares purchasable upon the
exercise of the Warrants and the Exercise Price will be subject to adjustment
in certain events including: (i) the payment by the Company of dividends (or
other distributions) on the Common Stock of the Company payable in shares of
such Common Stock or other shares of the Company's capital stock, (ii)
subdivisions, combinations and reclassifications of the Common Stock, and
(iii) the distribution to all holders of the Common Stock of any of the
Company's assets, debt securities or any rights or warrants to purchase
securities (excluding cash dividends or other cash distributions from current
or retained earnings).
Subject to certain exceptions set forth in the Warrant Agreement, if the
Company issues (i) shares of Common Stock for a consideration per share less
than the current market value per share or (ii) any securities convertible
into or exchangeable for Common Stock for a consideration per share of Common
Stock initially deliverable upon conversion or exchange of such securities
that is less than the current market value per share on the date of issuance
of such securities, the Company shall offer to sell to each holder of
Warrants, at the same price and on the same terms offered to all other
prospective buyers (provided that the holders of Warrants shall not be
required to buy any other securities in order to buy such Common Stock or
convertible securities), a portion of such Common Stock or convertible
securities that is equal to such holder's portion of the Common Stock then
outstanding if immediately prior thereto all the Warrants had been exercised.
Each such holder may elect to buy all or any portion of the Common Stock or
convertible securities offered or may decline to purchase any.
In case of certain consolidations or mergers of the Company, or the sale of
all or substantially all of the assets of the Company to another corporation,
each Warrant will thereafter be exercisable for the right to receive the kind
and amount of shares of stock or other securities or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the Warrants been exercised immediately prior thereto.
Registration Rights. The Company has granted demand and piggy back
registration rights to holders of the Warrants pursuant to a Securityholders'
and Registration Rights Agreement (the "Securityholders' Agreement"). From
time to time after 180 days following the completion by the Company of a
public equity offering, holders of Warrant shares owning, individually or in
the aggregate, not less than 25% of the Warrant shares held in the aggregate
by all holders of the Warrant shares may make a written request for
registration under the Securities Act of their warrant shares. Subject to
certain conditions, within 120 days of the receipt of such written request for
such a demand registration, the Company shall file with the Commission and use
its best efforts to cause to become effective under the Securities Act a
registration statement with respect to such securities. This summary of the
Securityholders' Agreement does not purport to be complete and is qualified in
its entirety by reference to the terms and provisions of the Securityholders'
Agreement.
Additional Information. Anyone who receives this Prospectus may obtain a
copy of the Warrant Agreement without charge by writing to the Company at the
address set forth herein.
111
<PAGE>
PROVISIONS OF MASSACHUSETTS LAW AND THE COMPANY'S ARTICLES OF ORGANIZATION AND
BY-LAWS
Certain Anti-Takeover Provisions. After the closing of any Public Equity
Offering, the Company expects that it will be subject to the provisions of
Chapter 110F of the Massachusetts General Law, 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 affiliate 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 corporation 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, 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 share acquires 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 for the issuing corporation. The Company has
amended its By-Laws to opt out of the provisions of Chapter 110D.
Massachusetts General Laws Chapter 156, 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 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 to discourage a proxy contest or the acquisition
of control by a holder of a substantial block of the Company's 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,
112
<PAGE>
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 Law 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 an 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 of 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.
CERTAIN REGISTRATION RIGHTS
In connection with the Acquisitions, the Company has entered into a
registration rights agreement with the principal stockholders of VIALOG
Corporation (the "VIALOG Stockholders") and the principal stockholders of each
of the Acquired Companies who are receiving shares of Common Stock in
connection with their respective Acquisitions (the "Acquired Company
Stockholders") granting demand and piggy-back registration rights with respect
to their shares and providing for a "lock-up" of their shares following the
effective date of a registration statement of the Company filed under the
Securities Act.
113
<PAGE>
The VIALOG Stockholders and the Acquired Company Stockholders may demand, on
two occasions only, that the Company will 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 to 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 Acquired 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 piggy-back 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 prior 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 Acquired Company Stockholders have agreed to
enter into a 180-day "lock-up" 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 of the principal stockholders, 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 Acquired Company Stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is State
Street Bank and Trust Company.
114
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain United States federal income tax
consequences associated with the acquisition, ownership, and disposition of
the Notes. The following summary does not discuss all of the aspects of
federal income taxation that may be relevant to a prospective holder of the
Notes in light of its particular circumstances, or to certain types of holders
that are subject to special treatment under the federal income tax laws
(including persons who hold the Notes as part of a conversion, straddle or
hedge, dealers in securities, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers and S corporations). Further, except as
specifically provided, this summary pertains only to holders who are citizens
or residents of the United States, corporations, partnerships, or other
business entities created in or under the laws of the United States or any
political subdivision thereof, estates the income of which is subject to
United States federal income taxation regardless of its source, or trusts if a
court within the United States is able to exercise primary supervision over
its administration and one or more U.S. persons have the authority to control
all of its substantial decisions. In addition, this summary does not describe
any tax consequences under state, local, or foreign tax laws and is limited to
holders who hold Notes as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code.
This summary is based upon the Code, Treasury Regulations (the
"Regulations"), rulings and pronouncements issued by the Internal Revenue
Service ("IRS") and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect the holder of the Notes. The Company has not sought and will not seek
any rulings from the IRS or opinions from counsel with respect to the matters
discussed below. There can be no assurance that the IRS will not take
positions concerning the tax consequences of the valuation, purchase,
ownership or disposition of the Notes that are different from those discussed
herein.
CLASSIFICATION OF THE NOTES
Under applicable authorities, the Notes should be treated as indebtedness of
the Company for federal income tax purposes. Pursuant to Section 385(c) of the
Code, a holder of a Note is required to treat such Note as indebtedness for
all United States federal income tax purposes unless such holder discloses
such inconsistent treatment on such holder's tax return. The characterization
of the Notes by the Company is not binding on the IRS. In the unlikely event
that the Notes are treated as equity, the amount treated as a distribution on
any such instrument would be treated as ordinary dividend income to the extent
of the current and accumulated earnings and profits of the Company, or
otherwise as a return of capital to the extent of a holder's basis in a Note,
and thereafter, capital gain.
TAXATION OF THE NOTES
Issue Price. The Units (Notes and Warrants sold together in the Private
Placement) are treated as investment units for federal income tax purposes.
The issue price of the Units was the first price at which a substantial amount
of such Units was sold to investors. In order to determine the issue price for
the Notes and Warrants in the Unit, the aggregate issue price of the Units was
allocated between the Notes and the Warrants based upon their relative fair
market values on the date of issuance. In general, a holder's initial tax
basis for the Note and the Warrants constituting the Unit equals the portion
of the issue price of the Unit allocated to each. The Company has allocated
the issue price of the Units on a per Note and per Warrant basis. See
"Capitalization." A holder of a Unit may not adopt a different allocation
unless such holder properly discloses such different allocation on such
holder's federal income tax return for the year in which the Units were
acquired.
Original Issue Discount. As noted above, because the Notes were offered as a
part of a Unit including the Warrants, a portion of the issue price for a Unit
was allocated to the Notes and a portion to the Warrants. Since the portion
allocable to a Note was less than the Note's principal amount, the Note was
issued at a discount from its principal amount. The total amount of such
discount with respect to the Notes was the difference between
115
<PAGE>
their issue price (determined as indicated above) and their principal amount.
If such discount exceeds a statutory de minimis amount ( 1/4 of 1% of an
obligation's stated redemption price at maturity multiplied by the number of
complete years to its maturity), the Notes will be considered to have been
issued with original issue discount ("OID") for federal income tax purposes.
In addition to including in income the amount of stated interest received or
accrued, a holder will be required to include a portion of any such OID as
ordinary income for federal income tax purposes each year over the term of the
Notes so as to provide a constant yield to maturity.
Under the OID rules, in general, holders of Notes with OID must include in
gross income for federal income tax purposes the sum of the daily portions of
OID with respect to the Note for each day during the taxable year or portion
of a taxable year on which such holder holds the Note (such sum, "Accrued
OID"). The daily portion is determined by allocating to each day of any
accrual period within a taxable year a pro rata portion of an amount equal to
the adjusted issue price of the Note at the beginning of the accrual period
multiplied by the yield to maturity of the Note less qualified stated interest
accrued for such period. For purposes of computing OID, the Company will use
six-month accrual periods that end on the days in the calendar year
corresponding to the maturity date of the Notes and the date six months prior
to such maturity date, with the possible exception of the initial accrual
period for the Notes. The adjusted issue price of a Note at the beginning of
any accrual period is the issue price of the Note increased by the Accrued OID
for all prior accrual periods (less all payments made on the Notes other than
payments of qualified stated interest). The yield to maturity of a debt
instrument is the interest rate that will produce an amount equal to the issue
price of the debt instrument used in computing the present value of all
payments to be made pursuant to the debt instrument. An investor in a Note who
purchases the Note subsequent to its initial issuance at a price less than its
principal amount but in excess of its revised issue price will reduce
proportionately the Accrued OID with respect to each accrual period. The
Company will annually furnish to certain record holders of the Notes and to
the IRS information with respect to any OID accruing during the calendar year
as may be required by applicable Regulations.
Market Discount and Premium. A purchaser of a Note may be subject to the
market discount rules of Sections 1276-1278 of the Code. A holder that
acquires a Note with more than a prescribed de minimis amount of "market
discount" (generally, the excess of the principal amount of the Note over the
purchaser's purchase price) will be required to include accrued market
discount in income as ordinary income only upon the retirement of the Note or,
if the Note is sold, to the extent of any gain realized. Such market discount
would in general accrue under a straight-line method or, at the election of
the holder, on the basis of a constant yield.
Section 1277 of the Code provides that the excess of interest paid or
accrued to purchase or carry a Note with market discount over interest
received on such Note is allowed as a current deduction only to the extent
such excess is greater than the market discount that accrued during the
taxable year in which such interest expense was incurred. In general, the
deferred portion of any interest expense will be deductible when such market
discount is included in income, including upon the sale, disposition, or
repayment of the Note. A holder may elect to include market discount in income
currently as it accrues on all market discount obligations acquired by such
holder during the taxable year such election is made and thereafter, in which
case the interest expense deferral rule will not apply.
A holder who purchases a Note at a cost greater than its principal balance
will not be required to include any amount of OID in gross income. In
addition, such holder generally will be considered to have purchased the Note
at a premium, which it may elect to amortize as an offset to interest income
on such Note (and not as a separate deduction item) on a constant yield method
except as otherwise provided in applicable Regulations. Premium on a Note that
is not amortized pursuant to an election under Section 171 of the Code may
only be deductible upon the maturity of a Note as a capital loss. In addition,
because the Notes may be redeemed by the Company at a premium prior to
maturity, special rules may apply that could result in a deferral of the
amortization of some of the premium until later in the term of the Note with
respect to Notes purchased prior to March 2, 1998. If a holder makes an
election to amortize premium on a Note, such election will apply to all
taxable debt instruments held by the holder at the beginning of the taxable
year in which the election is made, and to all taxable debt instruments
acquired thereafter by such holder, and will be irrevocable without the
consent of the IRS.
Purchasers should consult their tax advisers regarding the elections
discussed in the preceding three paragraphs and the methods to be employed.
116
<PAGE>
Disposition of Notes. Generally, any sale or redemption or other disposition
of Notes (including in connection with an Asset Proceeds Offer) will result in
taxable gain or loss equal to the difference between (i) the amount of cash
and the fair market value of other property received and (ii) the holder's
adjusted tax basis in the Note. A holder's adjusted tax basis in a Note will
equal the holder's purchase price allocated to the Note and will be increased
by any Accrued OID (reduced by any acquisition premium described above)
includable in such holder's gross income and the accruals of market discount,
if any, that the holder has previously elected to include in gross income on
an annual basis, and decreased by all payments received by such holder on such
Note, other than a payment of qualified stated interest, and by the accruals
of amortizable bond premium, if any, that the holder has elected to offset
against interest on the Note on an annual basis. Any gain (except as discussed
above in Market Discount) or loss upon a sale or other disposition of a Note
will generally be capital gain or loss, which will be long-term if the Note
has been held by the holder for more than one year, and generally will be
subject to lower maximum capital gains rates if held for more than eighteen
months.
EXCHANGE OFFER
Assuming a Registration Default has not occurred prior thereto, the offer to
exchange Old Notes for Exchange Notes pursuant to the Exchange Offer will not
constitute a material modification of the terms of the Old Notes and,
therefore, such exchange will not constitute an exchange for United States
federal income tax purposes. Accordingly, such exchange should have no United
States federal income tax consequences to holders of Old Notes. The basis of
the Exchange Notes will be the same as the basis of the Old Notes immediately
before the exchange and the holding period of the Exchange Notes will include
the holding period of the Old Notes.
If a Registration Default occurs prior to the Expiration Date of the
Exchange Offer, the offer to exchange the Old Notes for the Exchange Notes
pursuant to the Exchange Offer may constitute a material modification of the
terms of the Old Notes, thereby causing the holders of the Old Notes to
recognize gain or loss on the exchange for federal income tax purposes. The
amount of the gain would equal the difference between the holder's basis in
the Old Notes prior to the exchange and the issue price of the Exchange Notes
received in the exchange. Any gain or loss recognized upon the exchange
generally would be long-term capital gain or loss if the Old Notes had been
held by the holder for more than one year, and generally will be subject to
lower maximum capital gains rates if held for more than eighteen months at the
time of the exchange.
Under applicable tax regulations, a change in the yield of a debt instrument
constitutes a significant modification that results in a taxable exchange if
the yield of the debt instrument received in the exchange varies from the
annual yield of the instrument surrendered by more than the greater of 25
basis points or five percent of the annual yield of the instrument surrendered
in the exchange. If a Registration Default occurs, the Company will be
required to pay Additional Interest during the period of the Default. The
amount of Additional Interest due will depend on the length of the default
period, but cannot exceed a maximum of 1.50% per annum. If a Registration
Default occurs prior to the Expiration Date of the Exchange Offer, therefore,
the amount of Additional Interest payable on the Old Notes could cause the
annual yield on the Old Notes to exceed the annual yield on the Exchange Notes
by an amount that constitutes a material modification as such term is defined
in the applicable tax regulations, even though the rate of interest payable on
the Exchange Notes will be the same as the rate of interest payable on the Old
Notes prior to the Registration Default and the terms of the Exchange Notes
are in all other material respects identical to the Old Notes. Note holders
are urged to consult their own tax advisors regarding the tax consequences of
the Exchange Offer.
BACKUP WITHHOLDING
A noncorporate holder may be subject, under certain circumstances, to backup
withholding at a 31 percent rate with respect to payments received with
respect to the Notes. This withholding generally applies only if the holder
(i) fails to furnish his or her social security or other taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is
notified by the IRS that he or she has failed to report properly payments of
interest and dividends and the IRS has notified the Company that he or she is
subject to back-up withholding, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
117
<PAGE>
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's
federal income tax liability, provided that the required information is
furnished to the IRS. Certain holders (including, among others, corporations
and foreign individuals who comply with certain certification requirements)
are not subject to backup withholding. Holders should consult their tax
advisors as to their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption.
These backup withholding tax and information reporting rules currently are
under review by the IRS and proposed Regulations issued on April 15, 1996, if
finalized would modify certain of such rules generally with respect to
payments made after December 31, 1997. Accordingly, the application of such
rules to the Notes and Common Stock acquired upon exercise of a Warrant could
be changed.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that it will
make this Prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale for a period of 180 days
after consummation of the Exchange Offer, or such shorter period as will
terminate when all Old Notes acquired by broker-dealers for their own accounts
as a result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers. A broker-
dealer that delivers such a prospectus to purchasers in connection with such
resales will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. For a period of 180 days after consummation of the Exchange
Offer, or such shorter period as will terminate when all Old Notes acquired by
broker-dealers for their own accounts as a result of market-making activities
or other trading activities have been exchanged for Exchange Notes and resold
by such broker-dealers, the Company will promptly send additional copies of
this Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed in the Registration Rights Agreement to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act.
Any Old Notes not exchanged in the Exchange Offer for Exchange Notes will
remain subject to the transfer restrictions described above.
118
<PAGE>
LEGAL MATTERS
Certain legal matters regarding the Notes will be passed upon for the
Company by Mirick, O'Connell, DeMallie & Lougee, LLP, Worcester,
Massachusetts. David L. Lougee, a partner in such firm, is a director of the
Company. Partners and associates of Mirick, O'Connell, DeMallie & Lougee, LLP
own an aggregate of 74,000 shares of the Company's Common Stock and hold
options to acquire an additional 12,000 shares, 4,008 of which are exercisable
within the next 60 days.
EXPERTS
The historical financial statements as indicated in the index on page F-1 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.
119
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Basis of Presentation.................................................... F-2
Pro Forma Combined Balance Sheet as of September 30, 1997................ F-3
Pro Forma Combined Statement of Operations for the Year Ended December
31, 1996 ............................................................... F-4
Pro Forma Combined Statement of Operations for the Nine Months Ended
September 30, 1997...................................................... F-5
Notes to Unaudited Pro Forma Combined Financial Statements............... F-6
HISTORICAL FINANCIAL STATEMENTS
VIALOG Corporation
Independent Auditors' Report........................................... F-9
Balance Sheets......................................................... F-10
Statements of Operations............................................... F-11
Statements of Stockholders' Equity (Deficit)........................... F-12
Statements of Cash Flows............................................... F-13
Notes to Financial Statements.......................................... F-14
Telephone Business Meetings, Inc. ("Access")
Independent Auditors' Report........................................... F-19
Balance Sheets......................................................... F-20
Statements of Operations............................................... F-21
Statements of Stockholders' Equity..................................... F-22
Statements of Cash Flows............................................... F-23
Notes to Financial Statements.......................................... F-24
Conference Source International, Inc. ("CSI")
Independent Auditors' Report........................................... F-30
Balance Sheets......................................................... F-31
Statements of Operations............................................... F-32
Statements of Stockholders' Equity..................................... F-33
Statements of Cash Flows............................................... F-34
Notes to Financial Statements.......................................... F-35
Call Points, Inc. ("Call Points")
Independent Auditors' Report........................................... F-40
Balance Sheets......................................................... F-41
Statements of Operations............................................... F-42
Statements of Stockholders' Equity..................................... F-43
Statements of Cash Flows............................................... F-44
Notes to Financial Statements.......................................... F-45
Kendall Square Teleconferencing, Inc. ("TCC")
Independent Auditors' Report........................................... F-51
Balance Sheets......................................................... F-52
Statements of Operations............................................... F-53
Statements of Stockholders' Equity..................................... F-54
Statements of Cash Flows............................................... F-55
Notes to Financial Statements.......................................... F-56
American Conferencing Company, Inc. and Resource Objectives, Inc.
("Americo")
Independent Auditors' Report........................................... F-62
Combined Balance Sheets................................................ F-63
Combined Statements of Operations...................................... F-64
Combined Statements of Stockholders' Equity (Deficit).................. F-65
Combined Statements of Cash Flows...................................... F-66
Notes to Combined Financial Statements................................. F-67
Communication Development Corporation ("CDC")
Independent Auditors' Report........................................... F-73
Balance Sheets......................................................... F-74
Statements of Operations............................................... F-75
Statements of Stockholders' Equity..................................... F-76
Statements of Cash Flows............................................... F-77
Notes to Financial Statements.......................................... F-78
</TABLE>
F-1
<PAGE>
VIALOG CORPORATION AND ACQUIRED 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 of all of the stock of (a) Telephone
Business Meetings, Inc. ("Access"), (b) Conference Source International, Inc.
("CSI"), (c) Kendall Square Teleconferencing, Inc. ("TCC"), (d) American
Conferencing Company, Inc. ("Americo"), and (e) Communication Development
Corporation ("CDC"), and substantially all the net assets of Call Points, Inc.
("Call Points") (together, the "Acquired Companies"). These acquisitions (the
"Acquisitions") occurred simultaneously with the closing of the Private
Placement and will be accounted for using the purchase method of accounting.
The unaudited pro forma combined financial statements also give effect to the
sale of the Old Notes and the Warrants in connection with the Private
Placement. These statements are based on the historical financial statements
of VIALOG Corporation and the Acquired 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 Acquisition and the Private Placement) as if they had
occurred on September 30, 1997. The unaudited pro forma combined statements of
operations gives effect to these transactions as if they 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 Acquired 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 will result in a
significant charge to operations and a reduction in goodwill in the
accompanying pro forma combined balance sheet. These adjustments will be
finalized in the quarter ended December 31, 1997. 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-2
<PAGE>
VIALOG CORPORATION AND ACQUIRED COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES--HISTORICAL PRO FORMA
-------------------------------------------- ------------------------
VIALOG CALL
CORP. ACCESS CSI POINTS TCC AMERICO CDC ADJUSTMENTS(1) COMBINED
------- ------ ------ ------- ------ ------- ---- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.. $ 76 $ 970 $ 12 $ 481 $ -- $ 9 $ 55 $ 64,131 (a) $11,829
(53,905)(b)
Accounts receivable... -- 1,376 955 1,244 782 235 396 -- 4,988
Prepaid expenses and
other current
assets............... 86 204 58 3 73 62 28 -- 514
------- ------ ------ ------- ------ ------ ---- -------- -------
Total current assets.. 162 2,550 1,025 1,728 855 306 479 10,226 17,331
Other assets:
Property, net......... 25 3,116 1,065 1,659 902 556 100 -- 7,423
Other assets.......... 775 33 67 -- 12 78 4 (203)(b) 766
Debt issuance costs... 34 -- -- -- -- -- -- 5,666 (a) 7,440
1,740 (c)
Intangible assets,
net.................. -- 203 -- -- -- -- -- 50,853 (b) 51,056
------- ------ ------ ------- ------ ------ ---- -------- -------
Total Assets.......... $ 996 $5,902 $2,157 $ 3,387 $1,769 $ 940 $583 $ 68,282 $84,016
======= ====== ====== ======= ====== ====== ==== ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt....... $ 712 $ 971 $ 454 $ 861 $ 162 $ 106 $ 24 $ (1,885)(a) $ 423
(982)(b)
Accounts payable...... 1,510 336 151 363 343 535 72 (1,134)(a) 2,176
Accrued expenses...... 2,364 679 93 595 232 311 37 (500)(a) 3,811
Other current
liabilities.......... -- -- -- -- 133 46 101 -- 280
------- ------ ------ ------- ------ ------ ---- -------- -------
Total current
liabilities.......... 4,586 1,986 698 1,819 870 998 234 (4,501) 6,690
------- ------ ------ ------- ------ ------ ---- -------- -------
Long-term debt......... -- 925 844 338 228 184 25 (1,710)(a) 71,483
75,000 (a)
(4,351)(c)
Other liabilities...... -- 150 -- -- -- -- 19 -- 169
------- ------ ------ ------- ------ ------ ---- -------- -------
Total liabilities..... 4,586 3,061 1,542 2,157 1,098 1,182 278 64,438 78,342
------- ------ ------ ------- ------ ------ ---- -------- -------
Redeemable common
stock................. -- 273 -- -- -- -- -- (273)(d) --
Stockholders' equity:
Common stock.......... 28 -- 1 2 68 1 2 6 (b) 34
(74)(e)
Additional paid in
capital.............. 1,175 660 349 3,132 -- -- -- 3,210 (b) 10,476
(4,141)(e)
6,091 (c)
Treasury stock........ -- -- -- -- (15) -- -- 15 (e) --
Notes receivable from
stockholders......... -- -- -- -- (6) -- -- 6 (b) --
Retained earnings
(deficit)............ (4,793) 1,908 265 (1,904) 624 (243) 303 (43)(a) (4,836)
(953)(e)
------- ------ ------ ------- ------ ------ ---- -------- -------
Total stockholders'
equity (deficit)..... (3,590) 2,568 615 1,230 671 (242) 305 4,117 5,674
------- ------ ------ ------- ------ ------ ---- -------- -------
Total Liabilities and
Stockholders'
Equity.............. $ 996 $5,902 $2,157 $ 3,387 $1,769 $ 940 $583 $ 68,282 $84,016
======= ====== ====== ======= ====== ====== ==== ======== =======
</TABLE>
- --------
(1) See Note 4 to unaudited pro forma combined financial statements.
See accompanying notes to unaudited pro forma combined financial statements.
F-3
<PAGE>
VIALOG CORPORATION AND ACQUIRED COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES--HISTORICAL PRO FORMA
----------------------------------------------- ------------------------
VIALOG CALL
CORP. ACCESS CSI POINTS TCC AMERICO CDC ADJUSTMENTS(1) COMBINED
------- ------ ------ ------ ------ ------- ------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $ -- $9,073 $5,868 $7,509 $3,396 $1,679 $1,480 $ (707)(a) $ 28,298
Cost of revenues........ -- 4,071 2,780 5,898 1,813 854 886 (492)(a) 14,811
(999)(b)
------- ------ ------ ------ ------ ------ ------ --------
Gross profit............ -- 5,002 3,088 1,611 1,583 825 594 13,487
Operating expenses...... 1,308 3,455 1,049 1,873 1,329 889 655 (167)(a) 9,425
(586)(c)
(294)(d)
(86)(e)
Amortization of
intangibles............ -- -- -- -- -- -- -- 2,809 (f) 2,809
------- ------ ------ ------ ------ ------ ------ --------
Operating income
(loss)................. (1,308) 1,547 2,039 (262) 254 (64) (61) 1,253
Interest income
(expense).............. 1 (174) (165) (49) (42) (9) (11) (12,188)(g) (12,637)
------- ------ ------ ------ ------ ------ ------ --------
Income (loss) before
income taxes........... (1,307) 1,373 1,874 (311) 212 (73) (72) (11,384)
Income tax expense
(benefit).............. (522) -- -- -- -- (14) (28) 24 (h) (540)
------- ------ ------ ------ ------ ------ ------ --------
Net income (loss)....... $ (785) $1,373 $1,874 $ (311) $ 212 $ (59) $ (44) $(10,844)
======= ====== ====== ====== ====== ====== ====== ========
Supplementary
Information:
EBITDA(2).............. $(1,308) $ 6,036
</TABLE>
- --------
(1) See Note 5 to unaudited pro forma combined financial statements.
(2) EBITDA represents income from continuing operations before interest
expense, income taxes, depreciation and amortization. EBITDA is frequently
used by securities analysts and is presented here to provide additional
information about the Company's operations. EBITDA is not a measurement
presented in accordance with generally accepted accounting principles and
should not be considered as an alternative to net income as a measure of
operating results or as an alternative to cash flows as a better measure
of liquidity.
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE>
VIALOG CORPORATION AND ACQUIRED COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES--HISTORICAL PRO FORMA
---------------------------------------------- ------------------------
VIALOG CALL
CORP. ACCESS CSI POINTS TCC AMERICO CDC ADJUSTMENTS(1) COMBINED
------- ------ ------ ------ ------ ------- ------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $ -- $9,261 $4,790 $6,230 $3,003 $1,581 $1,486 $26,351
Cost of revenues........ -- 4,582 2,010 4,763 1,650 1,051 766 (1,126)(b) 13,696
------- ------ ------ ------ ------ ------ ------ -------
Gross profit............ -- 4,679 2,780 1,467 1,353 530 720 12,655
Operating expenses(2) .. 3,898 2,990 686 1,160 1,015 840 442 (247)(c) 10,635
(149)(d)
Amortization of
intangibles............ -- -- -- -- -- -- -- 2,107 (f) 2,107
------- ------ ------ ------ ------ ------ ------ -------
Operating income
(loss)................. (3,898) 1,689 2,094 307 338 (310) 278 (87)
Interest income
(expense).............. (110) (94) (99) 7 (31) (13) (4) (9,252)(g) (9,596)
------- ------ ------ ------ ------ ------ ------ -------
Income (loss) before
income taxes........... (4,008) 1,595 1,995 314 307 (323) 274 (9,683)
Income tax expense
(benefit).............. -- -- -- -- -- (25) 107 (82)(h) --
------- ------ ------ ------ ------ ------ ------ -------
Net income (loss)....... $(4,008) $1,595 $1,995 $ 314 $ 307 $ (298) $ 167 $(9,683)
======= ====== ====== ====== ====== ====== ====== =======
Supplementary
Information:
EBITDA(3)............. $(3,888) $ 3,825
</TABLE>
- --------
(1) See Note 5 to unaudited pro forma combined financial statements.
(2) Includes a non-recurring charge of approximately $2.2 million related to
an offering of Common Stock which was terminated in early 1997.
(3) EBITDA represents income from continuing operations before interest
expense, income taxes, depreciation and amortization. EBITDA is frequently
used by securities analysts and is presented here to provide additional
information about the Company's operations. EBITDA is not a measurement
presented in accordance with generally accepted accounting principles and
should not be considered as an alternative to net income as a measure of
operating results or as an alternative to cash flows as a better measure
of liquidity.
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE>
VIALOG CORPORATION AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. VIALOG CORPORATION BACKGROUND
VIALOG Corporation 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 Corporation conducted
no operations through November 12, 1997 and on that date consummated
agreements to acquire the six Acquired Companies simultaneously with the
consummation of the Private Placement.
2. HISTORICAL FINANCIAL STATEMENTS
The historical financial statements represent the financial position and
results of operations of the Acquired Companies and were derived from the
respective financial statements where indicated. All Acquired Companies have a
December 31 year-end or have been converted on to December 31 year-end.
3. ACQUISITION OF ACQUIRED COMPANIES
Concurrent with the closing of the Private Placement, VIALOG Corporation
acquired substantially all of the stock, or in one case, the net assets of the
Acquired Companies. The Acquisitions will be accounted for using the purchase
method of accounting.
The following table sets forth for each Acquired Company the consideration
paid its common stockholders (i) in cash and (ii) in shares of Common Stock.
<TABLE>
<CAPTION>
CASH(1) SHARES OF
(000'S) COMMON STOCK
------- ------------
<S> <C> <C>
Access..................................................... 19,000 --
CSI........................................................ 18,675 --
Call Points................................................ 8,000 21,000
TCC........................................................ 3,645 166,156
Americo.................................................... 1,260 267,826
CDC........................................................ 2,400 104,348
------ -------
Total Consideration........................................ 52,980 559,330
====== =======
</TABLE>
- --------
(1) Excludes tax reimbursements of approximately $925,000 to certain
stockholders of the Acquired Companies.
The purchase price of the Acquired Companies is estimated to be $57.6
million, which amount reflects the sum of the cash consideration paid in the
Acquisitions, a valuation of the shares issued in the Acquisitions and direct
costs associated with the Acquisitions. Of the estimated purchase price, $6.8
million has been allocated to the identifiable assets acquired and liabilities
assumed and the balance (currently estimated at $50.9 million) has been
allocated to intangible assets. In management's opinion, the preliminary
estimates regarding allocation of the purchase price to the Founding Companies
are not expected to differ materially from the final adjustments, except that
management anticipates allocating some portion of the purchase price to in-
process research and development expenses.
F-6
<PAGE>
VIALOG CORPORATION AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
4. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(a) Net proceeds from the Private Placement are calculated using the
following assumptions:
<TABLE>
<S> <C>
Proceeds from the Private Placement............................. $75,000,000
Less cash used for:
Direct acquisitions costs..................................... 500,000
Issuance costs and other cash expenses........................ 7,300,000
Debt assumed to be retired.................................... 3,069,000
-----------
Net proceeds................................................ $64,131,000
===========
</TABLE>
Proceeds from the debt are based on the Private Placement of $75,000,000
Senior Notes due 2001.
(b) The excess of total purchase price over the allocation of fair value to
the net assets will be recorded as intangible assets, which is calculated as
based on the following assumptions:
<TABLE>
<S> <C> <C>
Value of Common Stock consideration(1).............. $ 3,216,148
Cash consideration.................................. 52,979,588
Tax reimbursements to stockholders of certain Ac-
quired Companies................................... 925,000
Direct acquisition costs............................ 500,000
-----------
Total purchase price.............................. $57,620,736
Net tangible asset value of Acquired Companies...... $5,217,000
Debt of the Acquired Companies that will not be
assumed.......................................... 1,551,000
Net assets acquired............................... 6,768,000
-----------
Intangible assets (2)............................... $50,852,736
===========
</TABLE>
--------
(1) Consideration consists of 559,330 shares at $5.75 per share.
(2) The Company has not completed an assessment of the fair value of the
net assets acquired for purposes of allocating the purchase price.
Accordingly, the excess of the purchase price over the net asset value
of the Acquired Companies has been allocated entirely to intangible
assets. During the first quarter subsequent to the closing of the
Acquisitions, the Company intends to allocate a portion of the purchase
price to in-process research and development expense. Based on an
independent valuation, the amount of the write-off is expected to be
$8.0 million. This allocation will result in a charge to operations
during the first quarter subsequent to the closing of the Acquisitions
and would result in a reduction in goodwill and goodwill amortization.
(c) Under GAAP, approximately $4.4 million of the proceeds of the Private
Placement has been allocated to the fair value of the Warrants and $70.6
million has been allocated to the Notes. In addition, $1.7 million of the
total estimated fair value of certain warrants issued in connections with the
Private Placement has been allocated to debt issuance costs.
(d) Represents restricted Common Stock of an Acquired Company that will no
longer be restricted after the closing of the Acquisitions.
(e) Represents elimination of historical equity balances of the Acquired
Companies.
F-7
<PAGE>
VIALOG CORPORATION AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
5. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
(a) Accounts for the effect of assets that were distributed to certain
stockholders of one of the Acquired Companies. These assets were not part of
the core operations of the Company.
(b) Accounts for the reduction in long distance charges as a result of
contracts recently negotiated by the Acquired Companies.
(c) Reflects elimination of compensation paid to officers and consultants
that will be reduced after the Acquisitions.
(d) Adjustments reflect certain royalties paid to a related party that will
not exist after the Acquisitions.
(e) Adjustment reflects expense related to back taxes of an Acquired Company
the liability for which was not assumed by VIALOG Corporation.
(f) Reflects amortization of intangible assets, which are amortized over
periods ranging from 6 to 20 years.
(g) Adjustments to interest expense reflect the retirement of certain debt
outstanding and the issuance of the Old Notes. Does not include an adjustment
for interest income earned on excess cash balances.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Assumed interest expense on the Old
Notes(1)................................ $12,510,000 $9,383,000
Assumed interest expense on capitalized
lease obligations....................... 127,000 213,000
----------- ----------
Pro forma annual interest expense........ 12,637,000 9,596,000
Less: Combined interest expense.......... (449,000) (344,000)
----------- ----------
Net adjustment to interest expense....... $12,188,000 $9,252,000
=========== ==========
</TABLE>
--------
(1) Includes $1.9 million of annual amortization of bond issuance costs and
$1.1 million of amortization of original issue discount.
(h) The pro forma income tax provision (benefit) has been calculated as if
each Acquired Company had been included in the Company's consolidated income
tax return and, therefore, was subject to corporate income taxation at an
effective tax rate of approximately 40%. In all years presented, the tax
benefit has been limited to the extent of future projected income before tax
through 1999.
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
VIALOG Corporation:
We have audited the accompanying balance sheet of VIALOG Corporation
(VIALOG) as of December 31, 1996, and the related statement of operations,
stockholders' equity (deficit) and cash flows for the period from January 1,
1996 (inception) to December 31, 1996. These financial statements are the
responsibility of VIALOG'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 except
for Note 6 which is as
of October 16, 1997
Boston, Massachusetts
F-9
<PAGE>
VIALOG CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 337 $ 76
Deferred offering costs........................... 377 --
Other current assets.............................. 13 86
------ -------
Total current assets............................ 727 162
------ -------
Office equipment, net (note 2)...................... 7 25
Deferred acquisition costs.......................... -- 203
Deferred debt issuance costs........................ -- 34
Other assets........................................ 7 50
Deferred income taxes (note 5)...................... 522 522
------ -------
Total assets.................................... $1,263 $ 996
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable (note 7)............................ $ -- $ 712
Accounts payable.................................. 313 1,510
Accrued expenses (note 4)......................... 663 2,364
------ -------
Total current liabilities....................... 976 4,586
------ -------
Stockholders' equity (deficit) (note 3):
Preferred stock, $.01 par value. Authorized
10,000,000 shares; none issued and outstanding... -- --
Common stock, $.01 par value. Authorized
30,000,000 shares; issued and outstanding
2,695,300 and 2,799,300 shares at December 31,
1996 and September 30, 1997, respectively........ 28 28
Additional paid-in capital........................ 1,044 1,175
Accumulated deficit............................... (785) (4,793)
------ -------
Total stockholders' equity (deficit)............ 287 (3,590)
------ -------
Commitments and contingencies (notes 6 and 7)
Total liabilities and stockholders' equity...... $1,263 $ 996
====== =======
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
VIALOG CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, 1996 ENDED SEPTEMBER 30,
----------------- --------------------
1996 1997
--------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net revenues........................... $ -- $ -- $ --
General and administrative expenses.... 1,308 703 3,898
------- -------- ----------
Loss from operations................. (1,308) (703) (3,898)
Interest income (expense), net......... 1 -- (110)
------- -------- ----------
Loss before income tax benefit....... (1,307) (703) (4,008)
Income tax benefit (note 5)............ 522 281 --
------- -------- ----------
Net loss............................. $ (785) $ (422) $ (4,008)
======= ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
VIALOG CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
-------------------- PAID-IN ACCUMULATED EQUITY
SHARES PAR VALUE CAPITAL DEFICIT (DEFICIT)
--------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Initial investment at
incorporation on
January 1, 1996........ 1,332,800 $14 $ (7) $ -- $ 7
Additional shares issued
in connection with
initial
capitalization......... 360,000 4 21 -- 25
Issuance of common
stock:
Contribution of common
stock to capital..... (250,000) (2) 2 -- --
Outsiders by private
offering dated May 8,
1996................. 378,000 4 101 -- 105
Outsiders by private
placement dated
October 22, 1996..... 380,000 4 756 -- 760
Employees in lieu of
payment for
services............. 242,500 2 91 -- 93
Consultants in lieu of
payment for
services............. 177,000 2 28 -- 30
Options exercised..... 75,000 -- 2 -- 2
Options granted to
consultants.......... -- -- 50 -- 50
Net loss.............. -- -- -- (785) (785)
--------- --- ------ ------- -------
Balance at December 31,
1996................... 2,695,300 28 1,044 (785) 287
--------- --- ------ ------- -------
Options exercised
(unaudited).......... 104,000 -- 2 -- 2
Warrants related to
Notes Payable dated
February 24, 1997
(unaudited).......... -- -- 129 -- 129
Net loss (unaudited).. -- -- -- (4,008) (4,008)
--------- --- ------ ------- -------
Balance at September 30,
1997 (unaudited)....... 2,799,300 $28 $1,175 $(4,793) $(3,590)
========= === ====== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
VIALOG CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------
1996 1996 1997
------------ ----- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(785) $(422) $(4,008)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. -- -- 10
Amortization of warrants....................... -- -- 86
Deferred income taxes.......................... (522) (281) --
Compensation expense for issuance of common
stock and options
(note 3)...................................... 173 78 --
Changes in operating assets and liabilities:
Other current assets......................... (13) (3) (73)
Other assets................................. (7) -- (48)
Accounts payable............................. 313 49 1,197
Accrued expenses............................. 663 460 1,701
----- ----- -------
Net cash used in operating activities...... (178) (119) (1,135)
----- ----- -------
Cash flows from investing activities:
Additions to property and equipment............ (7) (2) (23)
----- ----- -------
Cash flows from financing activities:
Proceeds from issuance of notes payable and
warrants...................................... -- -- 755
Proceeds from issuance of common stock......... 899 132 2
Deferred offering costs........................ (377) -- 377
Deferred acquisition costs..................... -- (5) (203)
Deferred debt issuance costs................... -- -- (34)
----- ----- -------
Net cash provided by financing activities.. 522 127 897
----- ----- -------
Net increase (decrease) in cash.................. 337 6 (261)
Cash at beginning of period...................... -- -- 337
----- ----- -------
Cash at end of period............................ $ 337 $ 6 $ 76
===== ===== =======
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 & 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
VIALOG Corporation ("VIALOG") was incorporated in Massachusetts on January
1, 1996 as Interplay Corporation. In January 1997, the Company changed its
name to VIALOG Corporation. VIALOG was formed to create a national provider of
group communications services. VIALOG intends to acquire group communications
service providers, complete an offering of Senior Notes, with warrants to
purchase shares of its common stock (the "Private Placement"), and subsequent
to the Private Placement, continue to acquire similar companies to expand
their national operations. (See note 7.)
VIALOG has not conducted any operations, and all activities have related to
the acquisitions and a financing transaction to fund the acquisitions. During
1996, VIALOG raised a total of approximately $900,000 from issuance of Common
Stock which was expended on costs associated with the acquisitions and an
offering of VIALOG's Common Stock which was terminated in early 1997. During
the nine months ended September 30, 1997, VIALOG raised $775,500 from the
issuance of notes with warrants and convertible notes, which will be expended
on costs associated with the acquisitions and the Private Placement. See note
7 relating to the subsequent completion of the Private Placement.
(b) Interim Financial Statements
The financial statements of VIALOG as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 are unaudited. All adjustments and
accruals (consisting only of normal recurring adjustments) have been recorded
that, in the opinion of management, are necessary for a fair presentation.
Results of operations for the interim periods are not necessarily indicative
of the results for the full year.
(c) Use of Estimates
Management of VIALOG 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 VIALOG's
primary assets at December 31, 1996 and September 30, 1997 will occur through
the successful completion of the Offering and the acquisitions described in
note 7.
(d) 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.
(e) Stock-based Compensation
The Financial Accounting Standards Board has issued SFAS No. 123, Accounting
for Stock-Based Compensation. VIALOG 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 disclosure for options granted in 1995 and subsequent years,
F-14
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
as if the provisions of SFAS No. 123 had been applied. VIALOG 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 VIALOG's
reported financial position or results of operations for the year ended
December 31, 1996 and the nine months ended September 30, 1997.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Office equipment.................................. $ 7 $30
Less: Accumulated depreciation.................... -- 5
---- ---
$ 7 $25
==== ===
</TABLE>
(3) STOCKHOLDERS' EQUITY
(a) Sale of Common Stock
During 1996, VIALOG 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 a proposed financing. A total of
758,000 shares of common stock were sold for aggregate net proceeds of
$865,000.
(b) Common Stock Grants
Between February and November 1996, VIALOG issued a total of 419,500 shares
of common stock to consultants and employees as an inducement to them to
provide services to VIALOG. Compensation expense of $123,000, 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 VIALOG's stockholders
approved VIALOG'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 VIALOG. 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 3,000,000 and 3,250,000 shares as of December 31, 1996 and
September 30, 1997, respectively. 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 VIALOG, 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.
F-15
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During 1996, VIALOG granted and had outstanding ISOs to purchase a total of
815,000 shares of Common Stock as follows: (i) 660,000 shares of Common Stock
exercisable at $.2775 per share granted in September and October of 1996 and
(ii) 155,000 shares of Common Stock exercisable at $2.00 per share granted in
November 1996. In February 1997, 54,000 shares of Common Stock exercisable at
$4.50 per share were granted. The options vest in equal quarterly installments
over 3 years and have a 10 year term. During 1996, VIALOG also granted NQSOs
to purchase a total of 295,132 shares of Common Stock as follows: (i) 222,132
shares of Common Stock exercisable at $.025 to $.03 per share granted in
February, March and April of 1996 and (ii) 73,000 shares of common stock
exercisable at $.2775 per share granted in June through October of 1996. In
February 1997, 30,000 shares of Common Stock exercisable at $4.50 per share
were granted. The options generally vest in equal quarterly installments over
3 years and have a 10 year term. During 1996, 75,000 NQSOs with a $.025
exercise price were exercised so that 220,132 NQSOs are outstanding at
December 31, 1996. At December 31, 1996, 75,000 options were exercisable at
$.2775 per share.
In 1996 and the nine months ended September 30, 1997, VIALOG granted a total
of 111,112 and 30,000 options, respectively to consultants. Compensation
expense of $50,250 and $60,000 has been recorded in connection with these
transactions in 1996 and the nine months ended September 30, 1997,
respectively.
At December 31, 1996 and September 30, 1997, there were 1,914,868 and
2,764,678 additional shares available for grant under the Plan, respectively.
The per share weighted-average fair value of ISO and NQSO stock options
granted during 1996 were $.135 and $.02, 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.
VIALOG applies APB Opinion No. 25 Accounting for stock issued to employees
in accounting for its Plan and, accordingly, no compensation cost has been
recognized in the financial statements for stock options granted to employees.
Had VIALOG 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 amount indicated below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Net loss
As reported................................................... $(785)
Pro forma..................................................... $(826)
</TABLE>
(d) Preferred Stock
On February 14, 1997, the stockholders voted to authorize 10,000,000 shares
of preferred stock. No shares of preferred stock are issued and outstanding.
(4) ACCRUED EXPENSES
Accrued expenses principally consist of professional fees and salaries
related to the acquisitions of the Acquired Companies (defined below) and the
Private Placement.
F-16
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) INCOME TAXES
Income tax benefit consists of the following for the periods ended:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
December 31, 1996:
Federal............................................. $-- 398 398
State............................................... -- 124 124
---- --- ---
$-- 522 522
==== === ===
September 30, 1997 (unaudited)
Federal............................................. $-- -- --
State............................................... -- -- --
---- --- ---
$-- -- --
==== === ===
</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>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Computed "expected" tax benefit................. $445 $ 1,363
State and local income taxes, net of federal tax
benefit........................................ 82 238
Nondeductible amounts and other differences..... (5) (42)
Change in valuation allowance for deferred taxes
allocated to income tax expense................ -- (1,559)
---- -------
Tax benefit................................... $522 $ --
==== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portion of deferred tax assets and liabilities are presented below (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Deferred tax asset:
Organizational expenditures and start-up
costs........................................ $522 $ 2,081
Valuation allowance........................... -- (1,559)
---- -------
Net deferred tax asset...................... $522 $ 522
==== =======
</TABLE>
VIALOG had net operating loss carryforwards of $0 at December 31, 1996 and
$110,000 at September 30, 1997.
In assessing the realizability of deferred tax assets, VIALOG 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, a valuation allowance has been established for certain of the
deferred tax assets.
F-17
<PAGE>
VIALOG CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) STOCK SPLIT
On October 16, 1997, the Board of Directors approved a 2-for-1 stock split
of VIALOG's common stock. All prior periods have been restated to reflect this
stock split effected as a recapitalization.
(7) SUBSEQUENT EVENTS (UNAUDITED)
(a) Lease
In September 1997, VIALOG moved to new office space in Andover,
Massachusetts. The lease expires in May 1999, and future minimum payments
under this lease as of September 30, 1997 are approximately $87,000.
(b) Notes Payable
On February 24, 1997, VIALOG 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 111,118 common shares at an exercisable
price of $4.50 were issued in conjunction with the promissory notes. The
warrants may be exercised between November 1997 and February 1999. In November
1997, the promissory notes were repaid, including accrued interest, from the
proceeds of the Private Placement, which was completed on November 12, 1997.
(c) Acquisitions and the Private Placement
On November 12, 1997, VIALOG acquired all of the issued and outstanding
stock of Telephone Business Meetings, Inc. ("Access"), Conference Source
International, Inc. ("CSI"), Kendall Square Teleconferencing, Inc. ("TCC"),
American Conferencing Company, Inc. ("Americo") and Communication Development
Corporation ("CDC"), and substantially all of the net assets of Call Points
Inc. (together, the "Acquired Companies"). These acquisitions occurred
contemporaneously with the closing of the Private Placement of a total of
$75.0 million in Senior Notes due 2001. The Acquisitions will be accounted for
using the purchase method. The total purchase price of the Acquired Companies
consisted of $53.0 million in cash paid to the stockholders of the Acquired
Companies (the "Sellers") upon the consummation of the Private Placement, the
issuance of 559,330 shares of Common Stock to the Sellers and approximately
$925,000 in cash related to tax reimbursements.
(d) Convertible Bridge Facility
In October 1997, the Company completed a private placement to certain of its
existing investors of $255,500 in subordinated convertible promissory notes
bearing interest at 10% per annum and due on the earlier to occur of (a) five
(5) days after the closing of a sale of the Company's equity securities or
debt securities for an aggregate purchase price of $50.0 million or more or
(b) January 1, 1998. The notes are subordinate and junior in right to all
senior indebtedness of the Company outstanding at the date of the notes or
incurred after the date of the notes. The notes may be converted at the option
of the holder at any time prior to and including the due date into such number
of shares of the Company's Common Stock as determined by dividing the
aggregate unpaid principal amount of the notes by the conversion price of
$2.00 per share, subject to adjustment pursuant to the terms of the notes. In
November, 1997, the notes were converted into 127,750 shares of the Company's
Common Stock.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Telephone Business Meetings, Inc.:
We have audited the accompanying balance sheets of Telephone Business
Meetings, Inc. ("Access") as of December 31, 1995 and 1996, and the related
statements of operations, 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 Access' 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, Access repurchased all of the common stock of one of Access' founding
stockholders, representing a 50% interest in Access. 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-19
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (note 3)
Current assets:
Cash and cash equivalents....................... $ 390 $ 804 $ 970
Trade accounts receivable, less allowance for
doubtful accounts of $33, $206 and $292 at
December 31, 1995, December 31, 1996 and
September 30, 1997, respectively............... 802 1,103 1,376
Prepaid expenses and other current assets....... 108 161 204
------ ------ -------
Total current assets.......................... 1,300 2,068 2,550
------ ------ -------
Property and equipment, net (note 2).............. 2,032 2,201 3,116
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, $28 and $40 at December 31, 1995, December
31, 1996 and September 30, 1997, respectively
(note 4)......................................... 231 215 203
Other assets...................................... 4 11 33
------ ------ -------
Total assets.................................. $3,672 $4,605 $ 5,902
====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note
3)............................................. $ 732 $ 654 $ 821
Current installments of note payable to former
stockholder (note 4)........................... 109 116 121
Current installments of obligations under
capital leases (note 7)........................ 28 32 29
Accounts payable................................ 4 141 336
Accrued expenses (note 6)....................... 276 366 679
Income taxes payable............................ 10 -- --
------ ------ -------
Total current liabilities..................... 1,159 1,309 1,986
------ ------ -------
Long-term debt, excluding current installments
(note 3)....................................... 1,029 880 667
Note payable to former stockholder, excluding
current installments
(note 4)....................................... 439 323 231
Obligations under capital leases, excluding
current installments (note 7).................. 79 47 27
Deferred rent................................... 94 128 150
------ ------ -------
Total liabilities............................. 2,800 2,687 3,061
------ ------ -------
Common stock issued to employees with redemption
option, 15.464 shares at liquidation value (note
5)............................................... -- 148 273
------ ------ -------
Stockholders' equity (notes 4 and 5):
Common stock, $.01 par value. Authorized and
issued 1,000 shares; 500 shares outstanding.... -- -- --
Additional paid-in capital...................... 660 660 660
Retained earnings............................... 212 1,110 1,908
------ ------ -------
Total stockholders' equity.................... 872 1,770 2,568
------ ------ -------
Commitments and contingencies (notes 7 and 8)
Total liabilities and stockholders' equity...... $3,672 $4,605 $ 5,902
====== ====== =======
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD PERIOD NINE MONTHS
YEAR ENDED JANUARY 1, APRIL 10, TO YEAR ENDED ENDED SEPTEMBER 30,
DECEMBER 31, TO APRIL 9, DECEMBER 31, DECEMBER 31, -------------------
1994 1995 1995 1996 1996 1997
------------ ----------- ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $5,114 $1,590 $4,918 $9,073 $ 6,606 $ 9,261
Cost of revenues........ 2,823 855 2,564 4,071 2,977 4,582
------ ------ ------ ------ --------- ---------
Gross profit.......... 2,291 735 2,354 5,002 3,629 4,679
Selling, general and
administrative
expenses............... 1,745 524 2,058 3,455 2,255 2,990
------ ------ ------ ------ --------- ---------
Income from
operations........... 546 211 296 1,547 1,374 1,689
Interest expense, net... 49 12 140 174 135 94
------ ------ ------ ------ --------- ---------
Income before income
tax expense
(benefit)............ 497 199 156 1,373 1,239 1,595
Income tax expense
(benefit).............. 52 8 (56) -- -- --
------ ------ ------ ------ --------- ---------
Net income............ $ 445 $ 191 $ 212 $1,373 $ 1,239 $ 1,595
====== ====== ====== ====== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- TOTAL
NUMBER OF ADDITIONAL RETAINED STOCKHOLDERS'
SHARES PAR VALUE PAID IN CAPITAL EARNINGS EQUITY
--------- --------- --------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 1,000 $-- $ 4 $ 715 $ 719
Disbursements........... -- -- -- (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
Distributions........... -- -- -- (475) (475)
Net income.............. -- -- -- 1,373 1,373
----- ---- ---- ------ ------
Balance at December 31,
1996................... 500 -- 660 1,110 1,770
Distributions
(unaudited)............ -- -- -- (797) (797)
Net income (unaudited).. -- -- -- 1,595 1,595
----- ---- ---- ------ ------
Balance at September 30,
1997 (unaudited)....... 500 $-- $660 $1,908 $2,568
===== ==== ==== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
PERIOD PERIOD ENDED
YEAR ENDED JANUARY 1, APRIL 10, 1995 YEAR ENDED SEPTEMBER 30,
DECEMBER 31, TO APRIL 9, TO DECEMBER 31, DECEMBER 31, ---------------
1994 1995 1995 1996 1996 1997
------------ ----------- --------------- ------------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ $ 445 $ 191 $ 212 $1,373 $1,239 $ 1,595
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 269 121 375 630 456 713
Deferred income
taxes................ 24 -- (62) -- -- --
Compensation expense
for issuance of
common stock......... -- -- -- 148 -- 125
Changes in operating
assets and
liabilities:
Trade accounts
receivable, net..... (71) (170) (108) (301) (270) (273)
Prepaid expenses and
other current
assets.............. (58) 62 (5) (53) (51) (43)
Accounts payable and
accrued expenses.... (17) 90 22 227 292 508
Income taxes
payable............. -- -- -- (10) (10) --
Deferred rent........ -- -- 93 34 25 22
----- ------ ------- ------ ------ -------
Net cash provided by
operating
activities......... 592 294 527 2,048 1,681 2,647
----- ------ ------- ------ ------ -------
Cash flows from
investing activities:
Additions to property
and equipment........ (560) (123) (1,227) (783) (427) (1,616)
Restricted cash....... -- -- (105) (5) (4) 110
Other assets.......... 3 (40) 63 (7) -- (22)
----- ------ ------- ------ ------ -------
Net cash used in
investing
activities......... (557) (163) (1,269) (795) (431) (1,528)
----- ------ ------- ------ ------ -------
Cash flows from
financing activities:
Proceeds from long-
term debt............ 484 2,149 -- 587 250 500
Principal repayments
of long-term debt.... (338) (626) (389) (814) (660) (546)
Principal repayments
of notes payable to
stockholders......... (85) -- (51) (109) (81) (87)
Principal payments
under capital lease
obligations.......... -- -- (12) (28) (21) (23)
Cash portion of
consideration paid to
former stockholder... -- -- (300) -- -- --
Dividends............. (39) -- -- (475) (308) (797)
----- ------ ------- ------ ------ -------
Net cash provided by
(used in) financing
activities......... 22 1,523 (752) (839) (820) (953)
----- ------ ------- ------ ------ -------
Net increase
(decrease) in cash
and cash
equivalents.......... 57 1,654 (1,494) 414 430 166
Cash and cash
equivalents at
beginning of period.. 173 230 1,884 390 390 804
----- ------ ------- ------ ------ -------
Cash and cash
equivalents at end of
period............... $ 230 $1,884 $ 390 $ 804 $ 820 $ 970
===== ====== ======= ====== ====== =======
Supplemental
disclosures of cash
flow information:
Cash paid during the
period for:
Interest.............. $ 49 $ 18 $ 169 $ 191 $ 146 $ 131
===== ====== ======= ====== ====== =======
Income taxes.......... $ 22 $ -- $ -- $ 10 $ 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-23
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Telephone Business Meetings, Inc. ("Access"), which operates under the names
ACCESS Conference Call Service and ACCESS Teleconferencing International,
provides telephone and video group communications services to a broad spectrum
of individuals and businesses throughout the United States. Access' operations
center is located in Reston, Virginia.
(b) Interim Financial Statements
The financial statements of Access as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 are unaudited. All adjustments and
accruals (consisting only of normal recurring adjustments) have been recorded
that, in the opinion of management, are necessary for a fair presentation.
Results of operations for the interim periods are not necessarily indicative
of the results for the full year.
(c) Use of Estimates
Management of Access 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.
(d) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and short-term investments
with original maturities of three months or less.
(e) Restricted Cash
Restricted cash consists of a certificate of deposit which is security for
Access' commitment under its office lease and is classified as long-term in
the accompanying balance sheets.
(f) 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.
(g) Intangible Assets
Access 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, Access 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.
(h) Research and Development
Access maintains a technical support and engineering department that, in
part, develops features and products for group communications. In accordance
with SFAS No. 2, Accounting for Research and Development
F-24
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Costs, Access changes to expense (included in cost of revenues) that portion
of this department's costs which are related to research and development
activities. Access' research and development expenses for the years ended
December 31, 1994, 1995 and 1996 were $128,000, $207,000 and $288,000,
respectively. Access' research and development expenses for the nine months
ended September 30, 1996 and 1997 were $177,000 and $196,000, respectively.
(i) Income Taxes
Access has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code. Under those provisions, Access does not pay income
taxes on its taxable income. Instead, stockholders of Access are liable for
individual federal income taxes for their respective shares of Access' 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, Access moved all of
its property and office facilities to the State of Virginia.
(j) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(k) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Access 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
Access' financial position, results of operations, or liquidity.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Office furniture and equipment............... $ 66 $ 88 $ 264
Conferencing equipment....................... 1,982 2,632 3,911
Computer equipment........................... 456 567 728
Capitalized lease equipment.................. 120 120 120
Leasehold improvements....................... 234 234 234
------ ------ ------
2,858 3,641 5,257
Less: accumulated depreciation and amortiza-
tion........................................ 826 1,440 2,141
------ ------ ------
Property and equipment, net................ $2,032 $2,201 $3,116
====== ====== ======
</TABLE>
F-25
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to a bank, interest at the prime rate
plus 0.75% (9.25% at September 30, 1997), monthly
principal payments of 13,890 plus interest,
balance due in May 2000........................... $ -- $ -- $ 444
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 1,029 686
Note payable to a bank, interest at the prime rate
plus 0.75% (9.25% at September 30, 1997), monthly
principal payments of $7,000 plus interest,
balance due in March 1999......................... -- 187 124
Note payable to a bank, interest at 9.5%, monthly
principal payments of $9,400 plus interest,
balance due in October 1999....................... -- 318 234
Note payable to a bank, interest at 9.33%, repaid
in full in September 1996......................... 275 -- --
------ ------ ------
Total long-term debt............................. 1,761 1,534 1,488
Less current installments........................ 732 654 821
------ ------ ------
Long-term debt, excluding current installments... $1,029 $ 880 $ 667
====== ====== ======
</TABLE>
All of Access' assets are collateral for the bank notes. In addition,
Access' 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,
Access was not in compliance with a covenant which limits the amount of the
annual increase in executive compensation. Subsequent to December 31, 1996,
Access obtained a waiver of the noncompliance from the lender.
The aggregate maturities of all notes payable, including the note payable to
the former stockholder (see note 4), are as follows (in thousands):
<TABLE>
<S> <C>
October 1 to December 31, 1997....................... $ 234
1998................................................. 944
1999................................................. 524
2000................................................. 138
------
$1,840
======
</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 Access' founding stockholders
(representing a 50 percent interest in Access) was repurchased by Access for
total consideration of $899,000. The consideration consisted of $300,000 of
cash paid at closing and a note payable of $599,000 due May 2000, bearing
interest at 6%, with equal quarterly principal and interest payments. As of
the date of the repurchase, Access experienced a change in control and,
accordingly, the acquired 50% interest in the net assets of Access 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, Access 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
F-26
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
of $625,000 payable in equal quarterly payments by Access of $31,000
commencing with the first quarter subsequent to the closing and continuing
through April 2000.
As of December 31, 1995, December 31, 1996 and September 30, 1997, $548,000,
$439,000 and $352,000, respectively, were due under the note payable to the
former stockholder, of which $109,000, $116,000 and $121,000 respectively,
were current. During the period from April 10, 1995 to December 31, 1995, and
the year ended December 31, 1996, Access paid the former stockholder $62,000
and $125,000, respectively, under the agreements for consulting services and
not to compete. During the nine months ended September 30, 1996 and 1997,
Access paid the former stockholder $94,000 under the agreements for consulting
services and not to compete.
(5) EMPLOYEE BENEFITS
Stock Awards
During 1996, Access awarded 7.732 shares of common stock to each of two
executive officers of Access. 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 Access, Access has the right at its
sole option to require the executives to sell their shares back to Access and
the executives have the right to require Access to repurchase their shares,
all at the then determined fair market value. In the event of a public
offering of Access' shares or the sale of Access, all such restrictions,
rights, and options terminate.
As a result of the executive officers' right to require Access 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
Access' common stock. During the year ended December 31, 1996, Access
recognized a total of $148,000 of compensation expense relating to the stock
awards. Compensation expense of $0 and $125,000 was recorded during the nine
months ended September 30, 1996 and 1997, respectively. Further, the
liquidation value of the shares has been reflected between total liabilities
and stockholders' equity in the accompanying balance sheets.
Retirement Plan
Access 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 Access of 50
percent of employee contributions, up to certain limits as defined in the
Plan. Access' matching contributions vest over the employee's period of
service. Contributions by Access 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. Access' matching
contributions to the Plan for the nine months ended September 30, 1996 and
1997 were $30,000 and $37,000, respectively.
(6) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued salaries, wages and benefits........... $ 86 $ 215 $586
Accrued fees and other expenses................ 190 151 93
------ ------ ----
$276 $ 366 $679
====== ====== ====
</TABLE>
F-27
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES
Operating Lease
Access 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 are approximately as follows (in
thousands):
<TABLE>
<S> <C>
October 1, to December 31, 1997...................... $ 105
1998................................................. 373
1999................................................. 384
2000................................................. 396
2001................................................. 407
Thereafter........................................... 1,485
------
$3,150
======
</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, and $298,000 and $315,000 for the
nine months ended September 30, 1996 and 1997, respectively.
As of December 31, 1996, Access had an outstanding letter of credit in the
amount of $100,000 with a commercial bank which secures Access' obligations
under the office lease.
Capital Leases
Access 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%.
Future minimum payments under the leases are as follows (in thousands):
<TABLE>
<S> <C>
October 1, to December 31, 1997......................... $ 8
1998.................................................... 28
1999.................................................... 17
2000.................................................... 8
---
61
Less: imputed interest.................................. 5
---
Net present value of future lease obligations........... 56
Less: current portion................................... 29
---
Obligations under capital leases, net of current
portion................................................ $27
===
</TABLE>
F-28
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) SUBSEQUENT EVENTS (UNAUDITED)
On November 12, 1997, VIALOG Corporation ("VIALOG") acquired all of the
outstanding stock of Access for cash and Access became a wholly owned
subsidiary of VIALOG. The acquisition of Access will be accounted for by the
purchase method. Accordingly, all of the identified tangible and intangible
assets and liabilities will be recorded at their current fair market value and
the excess of the purchase price over the fair value of the net assets
acquired will be recorded as intangible assets, which will be amortized up to
20 years.
In conjunction with this merger, the tax status of Access was converted from
an S corporation to a C corporation, whereby Access will now be liable for
income taxes.
As stipulated in the business combination agreement between Access and
VIALOG, $662,000 of the purchase price was paid directly to the related party
referred to in note 4 to retire the note and to pay the remaining obligation
under the agreement for consulting services and an agreement not to compete.
In November 1997, all of the bank notes described in note 3 were repaid in
full.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors Conference Source International, Inc.
We have audited the accompanying balance sheets of Conference Source
International, Inc. ("CSI") 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 CSI'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-30
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------- -------------
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 3)
Current assets:
Cash and cash equivalents........................ $ 375 $ 318 $ 12
Trade account receivables, less allowance for
doubtful accounts of $5, $10 and $10 at December
31, 1995, December 31, 1996 and September 30,
1997, respectively (note 6)..................... 692 801 955
Due from stockholder (note 4).................... 72 -- --
Prepaid expenses and other current assets........ -- 24 58
------ ------ ------
Total current assets........................... 1,139 1,143 1,025
------ ------ ------
Property and equipment, net (notes 2 and 5)........ 866 1,059 1,065
Other assets....................................... 32 91 67
------ ------ ------
Total assets................................... $2,037 $2,293 $2,157
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 3).. $1,089 $ 111 $ 186
Current installments of obligations under capital
leases (note 5)................................. 141 375 268
Accounts payable................................. 201 121 151
Accrued expenses................................. 30 91 93
------ ------ ------
Total current liabilities...................... 1,461 698 698
------ ------ ------
Long-term debt, excluding current installments
(note 3).......................................... 43 219 338
Obligations under capital leases, excluding current
installments (note 5)............................. 173 700 506
------ ------ ------
Total liabilities.............................. 1,677 1,617 1,542
------ ------ ------
Stockholders' equity:
Common stock, $1.00 par value. Authorized 100,000
shares; issued and outstanding 1,000 shares..... 1 1 1
Additional paid-in capital....................... 349 349 349
Retained earnings................................ 10 326 265
------ ------ ------
Total stockholders' equity..................... 360 676 615
------ ------ ------
Commitments and contingencies (notes 5 and 7)
Total liabilities and stockholders' equity..... $2,037 $2,293 $2,157
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -----------------
1994 1995 1996 1996 1997
------ ------ ------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues (note 6).................. $2,331 $3,808 $5,868 $ 4,483 $ 4,790
Cost of revenues....................... 1,463 1,874 2,780 2,027 2,010
------ ------ ------ -------- --------
Gross profit......................... 868 1,934 3,088 2,456 2,780
Selling, general and administrative
expenses.............................. 735 940 1,049 888 686
------ ------ ------ -------- --------
Income from operations............... 133 994 2,039 1,568 2,094
Interest expense, net.................. 124 160 165 129 99
------ ------ ------ -------- --------
Net income........................... $ 9 $ 834 $1,874 $ 1,439 $ 1,995
====== ====== ====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL TOTAL
NUMBER OF PAID-IN RETAINED STOCKHOLDERS'
SHARES PAR 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......... -- -- -- (1,558) (1,558)
----- ---- ---- ------- -------
Balance at December 31,
1996................... 1,000 1 349 326 676
Net income
(unaudited).......... -- -- -- 1,995 1,995
Distributions
(unaudited).......... -- -- -- (2,056) (2,056)
----- ---- ---- ------- -------
Balance at September 30,
1997 (unaudited)....... 1,000 $ 1 $349 $ 265 $ 615
===== ==== ==== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-33
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------- ------------------
1994 1995 1996 1996 1997
----- ----- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income......................... $ 9 $ 834 $ 1,874 $ 1,439 $ 1,995
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 235 292 393 268 311
Changes in operating assets and
liabilities:
Trade accounts receivable, net... (205) (312) (109) (200) (154)
Due from stockholder............. (6) (66) 72 -- --
Prepaid expenses and other
assets.......................... (35) 4 (83) (4) (10)
Accounts payable and accrued
expenses........................ 55 (31) (19) (53) 32
----- ----- ------- -------- --------
Net cash provided by operating
activities..................... 53 721 2,128 1,450 2,174
----- ----- ------- -------- --------
Cash flows from investing
activities:
Additions to property and
equipment......................... (476) (225) (41) (31) (317)
----- ----- ------- -------- --------
Cash flows from financing
activities:
Proceeds from borrowings on long-
term debt......................... 652 201 -- -- 573
Principal repayment of long-term
debt.............................. (100) (197) (438) (351) (379)
Proceeds from refinancing of
obligations under capital leases.. -- -- 142 142 --
Principal repayment of obligations
under capital leases.............. (126) (148) (290) (227) (301)
Distributions to stockholder....... -- -- (1,558) (1,277) (2,056)
----- ----- ------- -------- --------
Net cash provided by (used in)
financing activities........... 426 (144) (2,144) (1,713) (2,163)
----- ----- ------- -------- --------
Net increase (decrease) in cash and
cash equivalents................... 3 352 (57) (294) (306)
Cash and cash equivalents at
beginning of period................ 20 23 375 375 318
----- ----- ------- -------- --------
Cash and cash equivalents at end of
period............................. $ 23 $ 375 $ 318 $ 81 $ 12
===== ===== ======= ======== ========
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest.......................... $ 119 $ 162 $ 169 $ 131 $ 112
===== ===== ======= ======== ========
Noncash transaction:
Equipment purchased under capital
lease obligations................ $ 296 $ -- $ 545 $ 545 $ --
===== ===== ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-34
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Conference Source International, Inc. ("CSI") is a provider of group
communications to a variety of customers located primarily in the United
States. CSI was incorporated in February, 1992, and is headquartered in
Atlanta, Georgia.
(b) Interim Financial Statements
The financial statements of CSI as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 are unaudited. All adjustments and
accruals (consisting only of normal recurring adjustments) have been recorded
that, in the opinion of management, are necessary for a fair presentation.
Results of operations for the interim periods are not necessarily indicative
of the results for the full year.
(c) Use of Estimates
Management of CSI 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.
(d) Cash and Cash Equivalents
CSI considers all highly liquid debt instruments with original maturities of
three months or less to be cash equivalents. At December 31, 1995 and December
31, 1996, certain cash deposits with financial institutions are in excess of
the $100,000 Federal Depository Insurance Corporation (FDIC) guarantee.
(e) 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.
(f) Income Taxes
CSI has elected by consent of its stockholders to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under those
provisions, CSI does not pay corporate income taxes on its taxable income.
Instead, the stockholders are liable for individual income taxes on CSI's
taxable income. Accordingly, these financial statements do not contain a
provision for income taxes.
(g) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(h) Research and Development
CSI maintains a technical support and engineering department that, in part,
develops features and products for group communications. In accordance with
SFAS No. 2, Accounting for Research and Development Costs,
F-35
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
CSI charges to expense (included in cost of revenues) that portion of this
department's costs which are related to research and development activities.
CSI's research and development expenses for the years ended December 31, 1994,
1995 and 1996 were $179,000, $209,000 and $218,000, respectively. CSI's
research and development expenses for the nine months ended September 30, 1996
and 1997 were $153,000 and $226,000, respectively.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
CSI 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
CSI's financial position, results of operations, or liquidity.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------ SEPTEMBER 30,
1995 1996 1997
----- ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Vehicles........................................ $ 27 $ 27 $ 27
Office equipment................................ 123 148 237
Bridge equipment................................ 1,313 1,874 2,102
Computer software............................... 62 62 62
----- ------ ------
1,525 2,111 2,428
Less: accumulated depreciation and
amortization................................. 659 1,052 1,363
----- ------ ------
Property, and equipment, net................ $ 866 $1,059 $1,065
===== ====== ======
</TABLE>
F-36
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------SEPTEMBER 30,
1995 1996 1997
------ -------------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to bank in monthly installments of
$18,412, including interest at 9.5%, matures
May 2000; collateralized by equipment and cash
surrender value of life insurance and personal
guarantee of stockholder....................... $ -- $ -- $517
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
stockholders................................... 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
stockholders................................... 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 7
------ ----- ----
Total long-term debt............................ 1,132 330 524
Less: current installments...................... 1,089 111 186
------ ----- ----
Long-term debt, excluding current installments.. $ 43 $ 219 $338
====== ===== ====
</TABLE>
The aggregate maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
October 1 to December 31, 1997....................................... $ 46
1998................................................................. 188
1999................................................................. 202
2000................................................................. 88
----
$524
====
</TABLE>
(4) RELATED PARTY TRANSACTIONS
(a) Advance to Stockholder
CSI loaned one of the stockholders a total of $72,000 during 1994 and 1995.
The note had no set repayment schedule and was interest free. The amount was
repaid in full during 1996.
(b) Lease Transactions
CSI paid monthly lease payments to a 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
lease payments for the nine months ended September 30, 1996 and September 30,
1997 were approximately $38,000 and $20,000, respectively. The leases expired
during 1997.
F-37
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) COMMITMENTS AND CONTINGENCIES
(a) Leases
CSI 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, and $152,000 and $187,000 for the nine months ended September
30, 1996 and 1997, respectively. Future minimum lease payments under
noncancelable operating leases are as follows (in thousands):
<TABLE>
<S> <C>
October 1 to December 31, 1997......................................... $ 55
1998................................................................... 164
1999................................................................... 158
2000................................................................... 152
2001................................................................... 152
2002 and thereafter.................................................... 139
----
Total minimum operating lease payments............................... $820
====
</TABLE>
CSI is also obligated under various capital leases for equipment that are
guaranteed by one of the owners. The gross amounts of equipment and related
accumulated amortization recorded under capital leases were as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Equipment........................................ $1,243 $1,788 $1,788
Less: accumulated amortization................... 521 852 1,106
------ ------ ------
$ 722 $ 936 $ 682
====== ====== ======
</TABLE>
Future minimum payments under capital leases are as follows (in thousands):
<TABLE>
<S> <C>
October 1, to December 31, 1997....................................... $109
1998.................................................................. 312
1999.................................................................. 287
2000.................................................................. 157
2001.................................................................. 69
----
Total minimum capital lease payments................................ 934
Less: amounts representing interest (at rates ranging from 10% to
18%)................................................................. 160
----
Present value of minimum capital lease payments..................... 774
Less: current installments of obligations under capital leases........ 268
----
Obligations under capital leases, excluding current installments.... $506
====
</TABLE>
(b) Purchase Agreements
CSI has entered into purchase agreements with two long distance telephone
service providers. CSI is committed to minimum monthly purchases under the
agreements which amount to $48,000 in 1997 and 1998, and $23,000 in 1999.
F-38
<PAGE>
CONFERENCE SOURCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(c) Consulting Agreement
CSI has entered into a consulting agreement with a stockholder and former
officer of CSI. 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 claimed that he may be entitled to 5% 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. CSI
believes that such claim is without merit.
(6) SIGNIFICANT CUSTOMERS
Two customers accounted for the following percentages of revenues and
accounts receivable:
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES PERCENTAGE OF ACCOUNTS RECEIVABLE
----------------------------------- -------------------------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
------------------- -------------- ------------------------ SEPTEMBER 30,
1994 1995 1996 1996 1997 1995 1996 1997
----- ----- ----- ------ ------ ----------- ----------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Customer A.............. 14% 30% 49% 49% 48% 47% 58% 53%
Customer B.............. 14% 24% 21% 21% 24% 26% 26% 28%
</TABLE>
(7) SUBSEQUENT EVENTS (UNAUDITED)
In November 1997, all of the outstanding stock of CSI was acquired by a
wholly owned subsidiary of VIALOG Corporation ("VIALOG") for cash. CSI was the
surviving entity of the merger and became a wholly owned subsidiary of VIALOG.
Under the terms of the merger agreement, the stockholders of CSI agreed to
make an election under Section 338(h) 10 of the Internal Revenue Code in order
for the merger to be treated as an asset purchase by the Internal Revenue
Service.
At the time of the merger, the tax election of CSI under the provisions of
the Internal Revenue Code was changed from an S corporation to a C
Corporation. As a result, CSI will be subject to corporate income taxes
subsequent to the date of the merger.
In November 1997, the remaining balance of long-term debt described in note
3 was repaid in full, plus accrued interest.
F-39
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Call Points, Inc.:
We have audited the accompanying balance sheets of Call Points, Inc. ("Call
Points") 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 Call Points' 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 will continue as a going concern. As discussed in Note 10 to the
financial statements, Call Points' 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-40
<PAGE>
CALL POINTS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 149 $ 31 $ 481
Trade accounts receivable, less allowance for
doubtful accounts of $73, $85 and $68 at
December 31, 1995, December 31, 1996 and
September 30, 1997 respectively (notes 4 and
8).......................................... 787 1,080 1,244
Due from related parties..................... 22 1 --
Prepaid expenses............................. 4 3 3
------- ------- -------
Total current assets....................... 962 1,115 1,728
------- ------- -------
Property and equipment, net (notes 2, 3 and
4)............................................ 2,256 1,919 1,659
Other assets................................... 4 2 --
------- ------- -------
Total assets............................... $ 3,222 $ 3,036 $ 3,387
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of notes payable to
related parties
(notes 4 and 7)............................. $ 439 $ 574 $ 861
Current installments of obligations under
capital lease-related party
(note 3).................................... -- 43 --
Accounts payable............................. 359 394 363
Accrued expenses (note 5).................... 273 315 595
Due to related parties (note 7).............. 140 169 --
------- ------- -------
Total current liabilities.................. 1,211 1,495 1,819
------- ------- -------
Notes payable to related parties, excluding
current installments
(notes 4 and 7)............................... 784 625 338
------- ------- -------
Total liabilities.......................... 1,995 2,120 2,157
------- ------- -------
Stockholders' equity:
Common stock--Class A, $1 par value.
Authorized 8,000 shares; issued and
outstanding 1,000 shares.................... 1 1 1
Common stock--Class B, $1 par value.
Authorized 12,000 shares; issued and
outstanding 1,400 shares.................... 1 1 1
Additional paid-in capital................... 3,132 3,132 3,132
Accumulated deficit.......................... (1,907) (2,218) (1,904)
------- ------- -------
Total stockholders' equity................. 1,227 916 1,230
------- ------- -------
Commitments and contingencies (notes 9, 10, 11
and 12)
Total liabilities and stockholders'
equity.................................... $ 3,222 $ 3,036 $ 3,387
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE>
CALL POINTS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues (note 8)........... $ 8,537 $ 6,852 $ 7,509 $ 5,606 $ 6,230
Cost of revenues................ 6,140 5,331 5,898 4,392 4,763
------- ------- ------- -------- --------
Gross profit.................. 2,397 1,521 1,611 1,214 1,467
Selling, general and
administrative expenses........ 2,035 1,820 1,873 1,377 1,160
------- ------- ------- -------- --------
Income (loss) from
operations................... 362 (299) (262) (163) 307
Other income (expense):
Other income (expense), net... 3 (7) -- -- --
Interest income/(expense),
net.......................... (64) (65) (49) (48) 7
------- ------- ------- -------- --------
Income (loss) before income
tax expense.................. 301 (371) (311) (211) 314
Income taxes (note 6)........... -- -- -- -- --
------- ------- ------- -------- --------
Net income (loss)............. $ 301 $ (371) $ (311) $ (211) $ 314
======= ======= ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-42
<PAGE>
CALL POINTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<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
Net income
(unaudited)........... -- -- -- 314 314
----- ---- ------ ------- ------
Balance at September 30,
1997 (unaudited)........ 2,400 $ 2 $3,132 $(1,904) $1,230
===== ==== ====== ======= ======
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE>
CALL POINTS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- --------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................... $ 301 $ (371) $ (311) $ (211) $ 314
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization...... 841 845 696 519 536
Changes in operating assets and
liabilities:
Trade accounts receivable, net.... (199) 183 (293) (212) (164)
Due from related parties.......... 16 14 21 -- 1
Prepaid expenses.................. -- 1 1 1 --
Other assets...................... 1 -- -- 31 2
Accounts payable.................. (146) 22 35 121 (31)
Accrued expenses.................. 71 (130) 42 13 280
Due to related parties............ (65) 277 29 -- (169)
------- ------- ------- ------ ------
Net cash provided by operating
activities...................... 820 841 220 262 769
------- ------- ------- ------ ------
Cash flows from investing
activities:
Additions to property and
equipment......................... (148) (105) (50) (39) (276)
------- ------- ------- ------ ------
Cash flows from financing
activities:
Principal payments on notes payable
to related party.................. (651) (669) (249) (249) --
Principal payments under capital
lease obligations--related party.. -- -- (39) (18) (43)
Principal repayment of long-term
debt.............................. (44) (8) -- -- --
------- ------- ------- ------ ------
Net cash used in financing
activities...................... (695) (677) (288) (267) (43)
------- ------- ------- ------ ------
Net increase (decrease) in cash and
cash equivalents................... (23) 59 (118) (44) 450
Cash and cash equivalents at
beginning of period................ 113 90 149 149 31
------- ------- ------- ------ ------
Cash and cash equivalents at end of
period............................. $ 90 $ 149 $ 31 $ 105 $ 481
======= ======= ======= ====== ======
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest.......................... $ 263 $ 65 $ 48 $ 48 $ --
======= ======= ======= ====== ======
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 finance the acquisition of new
equipment and to finance operating
expenses 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-44
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Call Points, Inc. ("Call Points") was incorporated in Delaware on December
29, 1988. Call Points 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. Call Points is a provider of international
group communications services to a wide range of organizations.
(b) Interim Financial Statements
The financial statements of Call Points as of September 30, 1997 and for the
nine months ended September 30, 1996 and 1997 are unaudited. All adjustments
and accruals (consisting only of normal recurring adjustments) have been
recorded that, in the opinion of management, are necessary for a fair
presentation. Results of operations for the interim periods are not
necessarily indicative of the results for the full year.
(c) Use of Estimates
Management of Call Points 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.
(d) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and money market deposits.
(e) 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.
(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.
(h) Research and Development
Call Points maintains a technical support and engineering department that,
in part, develops customized features and products for group communications.
In accordance with SFAS No. 2, Accounting for Research and
F-45
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Development Costs, Call Points charges to expense (included in cost of
revenues) that portion of this department's costs which are related to
research and development activities. Call Points' research and development
expenses for the years ended December 31, 1994, 1995 and 1996 were $217,000,
$199,000 and $236,000, respectively. Call Points' research and development
expenses for the nine months ended September 30, 1996 and 1997 were $177,000
and $161,000, respectively.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Call Points 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 Call
Points' financial position, results of operations, or liquidity.
(j) 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 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures........................... $ 382 $ 419 $ 512
Machinery and equipment.......................... 4,348 4,668 4,851
------ ------ ------
4,730 5,087 5,363
Less: accumulated depreciation................. 2,474 3,168 3,704
------ ------ ------
Property and equipment, net...................... $2,256 $1,919 $1,659
====== ====== ======
</TABLE>
(3) OBLIGATIONS UNDER CAPITAL LEASE--RELATED PARTY
Call Points was obligated to a related party under a capital lease that
expired during 1997. Leased equipment with a cost basis of $83,000 and
accumulated depreciation of $6,000 is included in property and equipment at
December 31, 1996. The present value of future minimum lease payments at
December 31, 1996 and September 30, 1997 is $43,000 and $0, respectively, and
is included in current liabilities.
F-46
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable to stockholder; due in monthly
installments of $15,000, including interest at 8%
through December 25, 2000 (note 7)................ $ -- $ 659 $ 659
Notes payable to affiliate; due in monthly
installments of $25,000, including interest at 8%
through July 15, 1998 (note 7).................... 666 540 540
Note payable to stockholder; due in monthly
installments of $9,678, including interest at 8%
through July 15, 1998............................. 270 -- --
Note payable to stockholder; due in monthly
installments of $7,834, including interest at 8%
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% of average indebtedness in
1995; secured by certain equipment and accounts
receivable........................................ 37 -- --
------ ------ ------
Total notes payable to related parties........... 1,223 1,199 1,199
Less current installments........................ 439 574 861
------ ------ ------
Notes payable to related parties, excluding
current installments............................ $ 784 $ 625 $ 338
====== ====== ======
</TABLE>
The aggregate maturities of notes payable to related parties are as follows
(in thousands):
<TABLE>
<S> <C>
October 1, to December 31, 1997................................. $ 574
1998............................................................ 304
1999............................................................ 160
2000............................................................ 161
------
$1,199
======
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------SEPTEMBER 30,
1995 1996 1997
------ -------------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued long distance fees...................... $ 208 $ 252 $ 354
Accrued fees and other expenses................. 65 63 145
Uninvoiced equipment purchases.................. -- -- 96
------ ----- -----
$ 273 $ 315 $ 595
====== ===== =====
</TABLE>
F-47
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
The components of income tax expense for the years ended December 31, 1994,
1995 and 1996, were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- ----
<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>
Call Points 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% to
income (loss) before taxes as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<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>
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 (in thousands):
<TABLE>
<CAPTION>
1995 1996
----- ----
<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
amortization............................................... 11 --
Equipment spare parts, principally due to differences in
obsolescence 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>
F-48
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, Call Points has net operating loss carryforwards of
approximately $2,474,000. 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). Call Points also has alternative minimum tax credit carryforwards of
$12,000 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, Call Points' 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, Call
Points 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
Call Points 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 $522,000; a noncompete agreement; and a
license agreement. Royalty payments accounted for as interest expense were
$61,000, $27,000, 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 was not changed,
the related parties waived $12,000 and $41,000 of interest payments during
1995 and 1996, respectively.
Call Points incurred expenses for services provided by its stockholders and
affiliates are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- --------------
1994 1995 1996 1996 1997
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Automotive usage................. $ 8 $ 4 $ 3 $ 2 $ 4
Computer rental.................. 19 19 18 12 6
Long-distance usage.............. 79 92 81 61 62
Management services.............. 64 67 94 70 66
Office space rental.............. 69 68 68 51 44
Miscellaneous.................... -- 1 -- -- 1
Teleconferencing bridge expense.. 286 207 137 103 49
</TABLE>
Teleconferencing bridge expenses include charges for access, maintenance and
equipment rental.
Call Points 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.
F-49
<PAGE>
CALL POINTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) SIGNIFICANT CUSTOMERS
For the years ended December 31, 1995 and 1996, one customer accounted for
approximately 10% and 17% of net revenues, respectively. For the nine months
ended September 30, 1996 and 1997, the same customer accounted for
approximately 14% and 20% of net revenues, respectively.
(9) LEGAL PROCEEDINGS
Call Points 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 Call
Points' 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
Call Points as a going concern. During 1994, Call Points did not retain a
significant portion of sales to one customer which represented approximately
15% of revenues. While management has been aggressively pursuing additional
customers, Call Points was unable to replace the revenue volume it lost in
1994 and therefore realized net losses of $371,000 in 1995 and $311,000 in
1996. At December 31, 1996, Call Points' current liabilities exceeded current
assets by $380,000. The recurring losses and working capital deficiency create
an uncertainty about Call Points' ability to continue as a going concern. Call
Points 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) SUBSEQUENT EVENTS (UNAUDITED)
On November 12, 1997, VIALOG Corporation ("VIALOG)" acquired all of the
assets and certain liabilities of Call Points for cash and shares of Common
Stock of VIALOG. In conjunction with the acquisition, VIALOG obtained two-year
non-competition agreements from the principal stockholder and a key employee
of Call Points.
In April 1997, Call Points settled one of the claims discussed in Note 9,
which required Call Points to make payment to the plaintiff of $30,000, which
Call Points paid in April 1997 and which is reflected in income from
operations for the nine months ended September 30, 1997. In July 1997, Call
Points settled one of the claims discussed in note 9, which required Call
Points to make payment to the plaintiff of $28,000, which Call Points paid in
July 1997 and which is reflected in income from operations for the nine months
ended September 30, 1997.
F-50
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Kendall Square Teleconferencing, Inc.:
We have audited the accompanying balance sheets of Kendall Square
Teleconferencing, Inc. ("TCC") 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 TCC'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-51
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------- -------------
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 3)
Current assets:
Cash and cash equivalents...................... $ 61 $ 104 $ --
Trade accounts receivable, less allowance for
doubtful accounts of $30, $60 and $85 at
December 31, 1995, December 31, 1996 and
September 30, 1997, respectively.............. 283 471 782
Due from related party (note 8)................ 16 61 70
Note receivable, stockholder................... 11 -- --
Other current assets........................... -- 28 3
------ ------ ------
Total current assets......................... 371 664 855
------ ------ ------
Property and equipment, net (notes 2, 3 and 4)... 643 733 902
Other assets..................................... 5 10 12
Deferred income taxes (note 6)................... 26 -- --
------ ------ ------
Total assets................................. $1,045 $1,407 $1,769
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note
3)............................................ $ 43 $ 28 $ 59
Current installments of obligations under
capital leases (note 4)....................... 33 65 103
Accounts payable (note 8)...................... 279 438 343
Accrued expenses (note 5)...................... 33 127 232
Income taxes payable (note 6).................. 74 -- --
Distributions payable.......................... -- 45 130
Other current liabilities...................... -- 11 3
------ ------ ------
Total current liabilities.................... 462 714 870
------ ------ ------
Long-term debt, excluding current installments
(note 3)........................................ 55 26 7
Obligations under capital leases, excluding
current installments
(note 4)........................................ 105 157 221
Other liabilities................................ 21 -- --
Deferred income taxes (note 6)................... 47 -- --
------ ------ ------
Total liabilities............................ 690 897 1,098
------ ------ ------
Stockholders' equity:
Common stock, no par value. Authorized 15,000
shares;
issued and outstanding 1,000 shares at
December 31, 1995; 1,740 at December 31, 1996
and September 30, 1997........................ 62 68 68
Treasury stock, 428 common shares at cost...... (15) (15) (15)
Note receivable, stockholder................... -- (6) (6)
Retained earnings.............................. 308 463 624
------ ------ ------
Total stockholders' equity................... 355 510 671
------ ------ ------
Commitments and contingencies (notes 4, 8 and 10)
Total liabilities and stockholders' equity... $1,045 $1,407 $1,769
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-52
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ------------------
1994 1995 1996 1996 1997
------ ------ ------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues (note 8 and 9)....... $1,515 $2,329 $3,396 $ 2,501 $ 3,003
Cost of revenues.................. 816 1,129 1,813 1,351 1,650
------ ------ ------ -------- --------
Gross profit.................. 699 1,200 1,583 1,150 1,353
Selling, general and
administrative expenses.......... 510 889 1,329 969 1,015
------ ------ ------ -------- --------
Income from operations........ 189 311 254 181 338
Other income (expense):
Interest expense, net........... (6) (23) (42) (31) (31)
Other income.................... 19 33 -- -- --
------ ------ ------ -------- --------
Income before income tax
expense...................... 202 321 212 150 307
Income tax expense (note 6)....... 82 129 -- -- --
------ ------ ------ -------- --------
Net income.................... $ 120 $ 192 $ 212 $ 150 $ 307
====== ====== ====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK NOTE TOTAL
-------------- ----------------- 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
options.............. -- 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
options.............. 740 6 -- -- (6) -- --
Distributions:
Declared............ -- -- -- -- -- (45) (45)
Asset Distribution.. -- -- -- -- -- (12) (12)
Net income............ -- -- -- -- -- 212 212
------- ---- ------- ------- ---- ----- -----
Balance at December 31,
1996................... 1,740 68 (428) (15) (6) 463 510
Net income
(unaudited).......... -- -- -- -- -- 307 307
Distributions:
Cash (unaudited).... -- -- -- -- -- (16) (16)
Declared
(unaudited)........ -- -- -- -- -- (130) (130)
------- ---- ------- ------- ---- ----- -----
Balance at September 30,
1997 (unaudited)....... $1 ,740 $ 68 (428) $ (15) $ (6) $ 624 $ 671
======= ==== ======= ======= ==== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------ ------------------
1994 1995 1996 1996 1997
---- ----- ----- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $120 $ 192 $ 212 $ 150 $ 307
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 16 67 133 109 138
Deferred income taxes................ 34 32 (21) (21) --
Compensation expense arising from
stock options granted............... 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) (170) (311)
Due from related party.............. -- -- (45) (20) (9)
Other current assets................ 15 -- (28) (6) 25
Other assets........................ (52) 46 (5) (4) (2)
Accounts payable.................... (28) 41 114 (99) (95)
Income taxes payable................ 23 (27) (74) (74) --
Accrued expenses.................... 24 5 94 159 105
Other current liabilities........... -- -- 11 8 (8)
Other liabilities................... -- 21 (21) -- --
---- ----- ----- -------- --------
Net cash provided by operating
activities........................ 62 211 159 32 150
---- ----- ----- -------- --------
Cash flows from investing activities:
Additions to property and equipment... (39) (231) (156) (153) (144)
Proceeds from sale of equipment....... 19 -- -- -- --
---- ----- ----- -------- --------
Net cash used in investing
activities........................ (20) (231) (156) (153) (144)
---- ----- ----- -------- --------
Cash flows from financing activities:
Proceeds from notes payable........... 20 121 -- -- 45
Principal payments on notes payable... (59) (53) (44) (29) (33)
Principal payments of capital lease
obligations.......................... -- -- (51) (34) (61)
Proceeds from capital lease
obligations.......................... -- -- 135 135 --
Repayment of stockholder loan......... (10) -- -- -- --
Payments to acquire treasury stock.... (35) -- -- -- --
Distributions to stockholders......... -- -- -- -- (61)
---- ----- ----- -------- --------
Net cash provided by (used in)
financing activities.............. (84) 68 40 72 (110)
---- ----- ----- -------- --------
Net increase (decrease) in cash and
cash equivalents....................... (42) 48 43 (49) (104)
Cash and cash equivalents at beginning
of period............................. 55 13 61 61 104
---- ----- ----- -------- --------
Cash and cash equivalents at end of
period................................ $ 13 $ 61 $ 104 $ 12 $ --
==== ===== ===== ======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest............................. $ 6 $ 19 $ 46 $ 34 $ 31
==== ===== ===== ======== ========
Taxes................................ $ 38 $ 92 $ 18 $ -- $ 13
==== ===== ===== ======== ========
Supplemental schedule of noncash
investing and financing activities:
Equipment acquired through capital
lease obligation..................... $-- $ 148 $ -- $ -- $ 163
==== ===== ===== ======== ========
Equipment acquired through accounts
payable to a related party (note 8).. $-- $ 216 $ 67 $ -- $ --
==== ===== ===== ======== ========
Distribution of assets to
stockholders......................... $-- $ -- $ 12 $ -- $ --
==== ===== ===== ======== ========
Distributions declared................ $-- $ -- $ 45 $ -- $ 130
==== ===== ===== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Kendall Square Teleconferencing, Inc. ("TCC") provides group communications
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, TCC operated under the
name Teleconversant Ltd.
On December 2, 1996, certain assets of TCC related to a contract for
services provided by TCC were distributed to certain of the stockholders of
TCC. These assets were incidental to the basic operations of TCC. The assets
distributed consisted of property and equipment, accounts receivable, accounts
payable and a customer contract with a net carrying value of $12,000 at
December 31, 1996. Revenues associated with the customer contract were
$642,000, $727,000, $565,000 and $707,000 for the years ended December 31,
1994, 1995 and the period January 1, to September 30, 1996 and January 1 to
December 2, 1996, respectively.
(b) Interim Financial Statements
The financial statements of TCC as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 are unaudited. All adjustments and
accruals (consisting only of normal recurring adjustments) have been recorded
that, in the opinion of management, are necessary for a fair presentation.
Results of operations for the interim periods are not necessarily indicative
of the results for the full year.
(c) Revenue Recognition
Revenue for conference calls is recognized upon completion of the call.
Revenue for services is recognized upon performance of the service.
(d) Cash and Cash Equivalents
TCC considers all highly liquid debt instruments with original maturities of
three months or less to be cash equivalents.
(e) 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.
(f) Income Taxes
Effective January 1, 1996, TCC elected by consent of its stockholders to be
taxed under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, TCC does not pay corporate income taxes on its taxable
income. Instead, the stockholders are liable for individual income taxes on
TCC'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
F-56
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
(g) Use of Estimates
Management of TCC 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.
(h) Research and Development
TCC maintains a technical support and engineering department that, in part,
develops features and products for group communications. In accordance with
SFAS No. 2, Accounting for Research and Development Costs, TCC charges to
expense (included in cost of revenues) that portion of this department's costs
which are related to research and development activities. TCC's research and
development expenses for the years ended December 31, 1994, 1995 and 1996 were
$51,000, $51,000 and $75,000, respectively. TCC's research and development
expenses for the nine months ended September 30, 1996 and 1997 were $56,000
and $90,000, respectively.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
TCC 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
TCC's financial position, results of operations, or liquidity.
(j) Stock Option Plan
Prior to January 1, 1996, TCC 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, TCC 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. TCC 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 and for the nine
month period ended September 30, 1997, therefore, no pro forma disclosures
have been provided for these periods.
F-57
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures......................... $ 3 $ 16 $ 32
Office equipment............................... 37 64 142
Conferencing equipment......................... 651 738 890
Purchased computer software.................... -- 96 153
------ ------ ------
691 914 1,217
Less: accumulated depreciation and amortiza-
tion.......................................... 48 181 315
------ ------ ------
Property and equipment, net.................. $ 643 $733 $ 902
====== ====== ======
</TABLE>
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 30,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to bank, due on demand at prime
plus 1% (9.5% at September 30, 1997); secured
by all assets and personal guarantees of
certain stockholders......................... $ -- $ -- $ 35
Note payable to bank, due in monthly
installments of $1,389 plus interest at 10%
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% through January 1999; secured by certain
equipment and personal guarantees of certain
stockholders. Additional principal repayments
were made without penalty during 1996........ 82 54 31
Note payable to bank; due in monthly
installments of $699, including interest at
11% through May, 1997; secured by certain
equipment. Balance was repaid during 1996.... 11 -- --
------ ------ -----
Total long-term debt........................ 98 54 66
Less: current installments.................. 43 28 59
------ ------ -----
Long-term debt, excluding current
installments............................... $ 55 $ 26 $ 7
====== ====== =====
</TABLE>
The aggregate maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
October 1 to December 31, 1997......................................... $41
1998................................................................... 23
1999................................................................... 2
---
$66
===
</TABLE>
F-58
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) LEASES
TCC is obligated for equipment under various capital leases that expire at
various dates during the next four years. At December 31, 1995 and 1996, and
September 30, 1997 the gross amount of equipment and related accumulated
amortization recorded under capital leases were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Equipment........................................ $ 142 $ 357 $520
Less: accumulated amortization................... 7 68 145
------ ------ ----
$ 135 $ 289 $375
====== ====== ====
</TABLE>
Amortization of assets held under capital leases is included in depreciation
expense.
TCC also leases two facilities under operating leases expiring at various
dates through March, 2001. TCC's total rent expense was $29,000, $47,000 and
$108,000 for the years ended December 31, 1994, 1995 and 1996, respectively,
and $65,000 and $103,000 for the nine months ended September 30, 1996 and
1997, respectively. Future minimum payments under operating and capital leases
(which are guaranteed by certain stockholders) are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(UNAUDITED)
<S> <C> <C>
October 1, to December 31, 1997.......................... $ 47 $ 29
1998..................................................... 188 147
1999..................................................... 176 126
2000..................................................... 176 69
2001..................................................... 44 30
---- ----
Total future minimum lease payments.................... $631 $401
====
Less: imputed interest................................... 77
----
Present value of minimum capital lease payments........ 324
Less: current installments of obligations under capital
leases................................................ 103
----
Obligations under capital leases excluding current in-
stallments............................................ $221
====
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued wages and related........................ $ 3 $ 53 $ 53
Accrued telephone charges and related............ 30 74 179
----- ------ ----
$33 $127 $232
===== ====== ====
</TABLE>
F-59
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
Income tax expense 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 TCC's election to be taxed under the provisions of Subchapter
S. Income tax expense 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
TCC provides conferencing services to customers of Conferencing Services
International Inc. ("CSII"), a company owned by the spouse of a stockholder.
Total revenue from CSII was $80,000, $86,000 and $175,000 for the years ended
December 31, 1994, 1995 and 1996, respectively, and $75,000 and $183,000 for
the nine
F-60
<PAGE>
KENDALL SQUARE TELECONFERENCING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
month periods ended September 30, 1996 and 1997, respectively. Total accounts
receivable from CSII were $16,000 and $61,000 and $70,000 at December 31, 1995
and 1996 and September 30, 1997, respectively.
TCC has certain accounts payable to a supplier. Several stockholders are
also stockholders of the supplier company. The amounts outstanding are
$209,000, $89,000 and $110,000 at December 31, 1995 and 1996 and September 30,
1997, respectively, and are included in accounts payable.
TCC 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. There were no consulting fees for the nine month
periods ending September 30, 1996 and 1997.
(9) SIGNIFICANT CUSTOMERS
For the years ended December 31, 1994, 1995 and 1996 and for the nine months
ended September 30, 1996 and 1997, no customer accounted for more than 10% of
TCC's net revenues. At December 31, 1996 and September 30, 1997, one customer,
CSII, the related party discussed in note 8, accounted for 11% and 7% of the
total accounts receivable balance, respectively.
(10) SUBSEQUENT EVENTS (UNAUDITED)
On November 12, 1997, VIALOG Corporation ("VIALOG") acquired all of the
outstanding stock of TCC for cash and Common Stock of VIALOG and TCC became a
wholly owned subsidiary of VIALOG. The acquisition of TCC will be accounted
for by the purchase method. Accordingly, all of the identified tangible and
intangible assets and liabilities will be recorded at their current fair
market value and the excess of the purchase price over the fair value of the
net assets acquired will be recorded as intangible assets, which will be
amortized over periods up to 20 years.
In conjunction with this merger, the tax status of Access was converted from
an S corporation to a C corporation, whereby TCC will now be liable for income
taxes.
In November 1997, all of the long-term debt described in note 3 was repaid
in full, plus accrued interest.
F-61
<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. (collectively
"Americo") as of December 31, 1995 and 1996, and the related combined
statements of operations, stockholders' equity (deficit), 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 Americo's 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-62
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (note 3)
Current assets:
Cash........................................... $ 17 $ 39 $ 9
Trade accounts receivable, net (note 8)........ 217 213 235
Inventory...................................... 30 4 3
Deferred income taxes (note 6)................. -- 15 15
Prepaid expenses and other current assets...... 5 5 44
------ ------ -----
Total current assets......................... 269 276 306
------ ------ -----
Property and equipment, net (note 2)............. 122 111 556
Other assets..................................... 14 17 78
------ ------ -----
Total assets................................. $ 405 $ 404 $ 940
====== ====== =====
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit agreement (note 3).............. $ 35 $ 35 $ 45
Current installments of long-term debt (note
11)........................................... -- -- 38
Current installments of obligations under
capital leases ............................... 15 7 23
Accounts payable............................... 100 64 535
Accrued expenses (notes 4 and 5)............... 57 196 311
Income taxes payable........................... 17 14 --
Due to stockholder (note 5).................... 14 18 46
------ ------ -----
Total current liabilities.................... 238 334 998
------ ------ -----
Long-term debt, excluding current installments
(note 11)....................................... -- -- 104
Obligations under capital leases, excluding
current installments ........................... 16 -- 80
Other liabilities................................ 4 -- --
Deferred income taxes (note 6)................... 13 14 --
------ ------ -----
Total liabilities............................ 271 348 1,182
Stockholders' equity (deficit):
American Conferencing Company Inc.--common
stock, at stated value
Authorized 1,000 shares; issued and outstanding
50 shares..................................... 1 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 (deficit).................... 168 90 (243)
------ ------ -----
Total stockholders' equity (deficit)......... 134 56 (242)
------ ------ -----
Commitments and contingencies (notes 7 and 10)
Total liabilities and stockholders' equity... $ 405 $ 404 $ 940
====== ====== =====
</TABLE>
See accompanying notes to combined financial statements.
F-63
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------
1994 1995 1996 1996 1997
--------------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues (note 8)............ $ 772 $ 1,227 $ 1,679 $ 1,210 $ 1,581
Cost of revenues................. 335 625 854 631 1,051
------ -------- -------- -------- --------
Gross profit................... 437 602 825 579 530
Selling, general, and
administrative expenses......... 345 514 889 593 840
------ -------- -------- -------- --------
Income (loss) from operations.. 92 88 (64) (14) (310)
Interest expense, net............ 6 6 9 10 13
------ -------- -------- -------- --------
Income (loss) before income tax
expense (benefit)................ 86 82 (73) (24) (323)
Income tax expense (benefit)
(note 6)........................ 16 22 (14) -- (25)
------ -------- -------- -------- --------
Net income (loss).............. $ 70 $ 60 $ (59) $ (24) $ (298)
====== ======== ======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-64
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AMERICAN
CONFERENCING
COMPANY, INC. RESOURCE OBJECTIVES, INC.
COMMON STOCK COMMON STOCK
------------- ------------------------------
NUMBER NUMBER TOTAL
OF STATED OF STATED TREASURY RETAINED STOCKHOLDERS'
SHARES VALUE SHARES VALUE STOCK EARNINGS (DEFICIT) EQUITY (DEFICIT)
------ ------ -------- -------- --------- ------------------ ----------------
<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
Net loss (unaudited)..... -- -- -- -- -- (298) (298)
Merger and
recapitalization (note
1a) (unaudited)......... 20 -- (100) -- 35 (35) --
--- ---- -------- -------- -------- ----- -----
Balance at September 30,
1997 (unaudited).............70 $ 1 -- $ -- $ -- $(243) $(242)
=== ==== ======== ======== ======== ===== =====
</TABLE>
See accompanying notes to combined financial statements.
F-65
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30,
------------------- ------------------
1994 1995 1996 1996 1997
----- ----- ----- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................... $ 70 $ 60 $ (59) $ (24) $ (298)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization........ 27 32 36 30 48
Deferred income taxes................ 9 -- (14) -- (14)
Changes in operating assets and
liabilities:
Trade accounts receivable, net...... (80) (35) 4 28 (22)
Inventory........................... (11) (17) 26 23 1
Prepaid expenses and other current
assets............................. 2 -- -- -- (39)
Other assets........................ (6) (2) (3) (18) (61)
Accounts payable.................... 18 (21) (36) (70) 131
Accrued expenses.................... (26) 38 139 21 115
Income taxes payable................ -- 16 (3) (17) (14)
Due to stockholder.................. 30 (48) 4 35 28
Other liabilities................... 10 (6) (4) 11 --
----- ----- ----- -------- --------
Net cash provided by (used in)
operating activities.............. 43 17 90 19 (125)
----- ----- ----- -------- --------
Cash flows from investing activities:
Additions to property and equipment... (47) (17) (25) (21) (47)
----- ----- ----- -------- --------
Cash flows from financing activities:
Proceeds from revolving line of
credit............................... -- 35 -- 10 10
Proceeds from issuance of long-term
debt................................. -- -- -- -- 150
Principal payments on long-term debt.. -- -- -- -- (8)
Principal payments under capital lease
obligations.......................... (1) (18) (24) -- (10)
Dividends............................. -- (19) (16) --
----- ----- ----- -------- --------
Net cash provided by (used in)
financing activities.............. (1) 17 (43) (6) 142
----- ----- ----- -------- --------
Net increase (decrease) in cash........ (5) 17 22 (8) (30)
Cash at beginning of period............ 5 -- 17 17 39
----- ----- ----- -------- --------
Cash at end of period.................. $ -- $ 17 $ 39 $ 9 $ 9
===== ===== ===== ======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest............................. $ 6 $ 6 $ 9 $ 6 $ 16
===== ===== ===== ======== ========
Income taxes......................... $ 17 $ 6 $ 3 $ -- $ 1
===== ===== ===== ======== ========
Supplemental schedule of non cash
investing and financing activities:
Equipment acquired through capital
lease obligation..................... $ -- $ -- $ -- $ -- $ 106
===== ===== ===== ======== ========
Equipment acquired through accounts
payable.............................. $ -- $ -- $ -- $ -- $ 340
===== ===== ===== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-66
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
American Conferencing Company, Inc. ("Americo") is a provider of group
communications services to a variety of customers primarily located in the
United States. Americo was incorporated in April 1987 and is headquartered in
Oradell, 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 Oradell, New Jersey. Effective in
January 1997, ROI was merged with and into Americo with the surviving entity
being Americo.
(b) Interim Financial Statements
The financial statements of Americo as of September 30, 1997 and for the
nine months ended September 30, 1996 and 1997 are unaudited. All adjustments
and accruals (consisting only of normal recurring adjustments) have been
recorded that, in the opinion of management, are necessarily for a fair
presentation. Results of operations for the interim periods are not
necessarily indicative of the results for the full year.
(c) Principles of Combination
Through 1996, the financial statements of Americo and ROI were combined, as
the 100% stockholder of ROI owned 50% of the stock of Americo, and ROI owned
the remaining 50% of Americo stock. Affiliated company accounts and
transactions are eliminated in combination.
(d) 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.
(e) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
(f) 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.
(g) 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
F-67
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
(h) 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.
(i) Research and Development
Americo maintains a technical support and engineering department that, in
part, develops features and products for group communications. In accordance
with SFAS No. 2, Accounting for Research and Development Costs, Americo
charges to expense (included in cost of revenues) that portion of this
department's costs which are related to research and development activities.
Americo's research and development expenses for the years ended December 31,
1994, 1995 and 1996 were $24,000, $62,000 and $85,000, respectively. Americo's
research and development expenses for the nine months ended September 30,
1996, and 1997 were $62,000 and $63,000, respectively.
(j) 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.
(k) Treasury Stock
Treasury stock purchases are recorded at cost.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment........................ $ 125 $ 125 $545
Furniture and fixtures......................... 3 7 50
Office equipment............................... 142 163 193
------ ------ ----
270 295 788
Less: accumulated depreciation and
amortization.................................. 148 184 232
------ ------ ----
Property and equipment, net.................... $ 122 $ 111 $556
====== ====== ====
</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,
$35,000 and $45,000 at December 31, 1995, December
F-68
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
31, 1996 and September 30, 1997, respectively. Amounts borrowed under the line
bear interest at the bank's base lending rate plus 1.25% (10% at September 30,
1997). 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 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll, commissions and related
taxes........................................ $ 15 $ 22 $ 27
Accrued payroll-stockholder................... 15 65 139
Accrued fees and other expenses............... 27 1 4
Profit Sharing Plan accrual................... -- 52 74
Money Purchase Plan accrual................... -- 56 67
----- ------ ----
$ 57 $ 196 $311
===== ====== ====
</TABLE>
(5) RELATED PARTY TRANSACTIONS
(a) Due to Stockholder
Amounts due to stockholder consist of short-term demand notes at December
31, 1995, December 31, 1996 and September 30, 1997. In addition, included in
accrued expenses at December 31, 1995, December 31, 1996 and September 30,
1997 is accrued payroll of $15,000, $65,000 and $139,000, respectively, due to
this stockholder.
(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 $40,000,
$105,000, and $105,000, respectively, and $83,000 and $9,000 for the nine
months ended September 30, 1996 and 1997, respectively. All rent expense under
these leases has been eliminated in the accompanying combined statements of
operations.
F-69
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
The components of income tax expense (benefit) attributable to income (loss)
before income tax expense (benefit) consists of the following for years ended:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
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>
In assessing the realizability of deferred tax assets, Americo 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 Americo has sufficient
taxable income in carryback periods, and Americo projects 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-70
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(7) COMMITMENTS
Americo has entered into noncancelable operating leases covering certain
office space and equipment. Rent expense amounted to $22,000, $67,000 and
$76,000 for the years ended December 31, 1994, 1995 and 1996, respectively and
$38,000 and $86,000 for the nine month periods ended September 30, 1996 and
1997, respectively. In June 1997, Americo entered into a 10-year lease
agreement for Americo's headquarters in Oradell, New Jersey. The lease
commenced in September 1997. Future minimum payments under noncancelable lease
agreements are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASE
--------------
(IN THOUSANDS)
<S> <C>
October 1, to December 31, 1997.............. $ 33
1998......................................... 192
1999......................................... 197
2000......................................... 197
2001......................................... 197
Thereafter................................... 1,373
-------
Total minimum lease payments............. $ 2,189
=======
</TABLE>
(8) SIGNIFICANT CUSTOMERS
For the year ended December 31, 1996, and the nine months ended September
30, 1997, one customer accounted for approximately 17% and 15% of net
revenues, respectively and approximately 14% and 25% of accounts receivable,
respectively.
(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 contributions charged to operations for the year ended
December 31, 1996 and nine months ended September 30, 1997, were $48,000 and
$67,000, respectively. Profit Sharing Plan contributions charged to operations
for the year ended December 31, 1996 and nine months ended September 30, 1997
were $71,000 and $74,000, respectively.
(10) SUBSEQUENT EVENTS (UNAUDITED)
On November 12, 1997, VIALOG Corporation ("VIALOG") acquired all of the
outstanding stock of Americo for cash and shares of Common Stock of VIALOG and
Americo became a wholly owned subsidiary of VIALOG. The acquisition of Americo
will be accounted for by the purchase method. Accordingly, all of the
identified tangible and intangible assets and liabilities will be recorded at
their current fair market value and the excess of the purchase price over the
fair value of the net assets acquired will be recorded as intangible assets,
which will be amortized up to 20 years.
F-71
<PAGE>
AMERICAN CONFERENCING COMPANY, INC.
AND RESOURCE OBJECTIVES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, Americo entered into a term loan in the amount of $150,000, of
which $38,000 is classified as current, with a bank in order to finance the
relocation of its operating facilities. The loan has an interest rate of 10%
and is payable over four years in equal monthly installments of $3,804,
including interest. Substantially all assets of Americo are pledged as
security for the amount borrowed under the loan. This note was repaid in full
in November 1997. In November 1997, the line of credit described in note 3 was
paid down in full.
F-72
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Communication Development Corporation:
We have audited the accompanying balance sheets of Communication Development
Corporation ("CDC") 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 CDC'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-73
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------ SEPTEMBER 30,
1995 1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 3)
Current assets:
Cash and cash equivalents......................... $ 18 $ 90 $ 55
Trade accounts receivable, less allowance for
doubtful accounts of $2 at December 31, 1995 and
1996 and $10 at September 30, 1997 (note 7)...... 237 186 396
Income taxes receivable........................... 6 1 --
Prepaid expenses and other current assets......... 8 9 28
----- ------ -----
Total current assets............................ 269 286 479
----- ------ -----
Property and equipment, net (note 2)................ 212 128 100
Other assets........................................ 1 1 4
----- ------ -----
Total assets.................................... $ 482 $ 415 $ 583
===== ====== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit (note 3).......... $ 37 $ -- $ --
Current installments of long-term debt (note 3)... 35 33 24
Accounts payable.................................. 82 74 72
Accrued expenses (note 5)......................... 9 102 37
Income taxes payable.............................. -- -- 94
Deferred income taxes (note 6).................... 35 7 7
----- ------ -----
Total current liabilities....................... 198 216 234
----- ------ -----
Long-term debt, excluding current installments (note
3)................................................. 72 42 25
Deferred income taxes (note 6)...................... 30 19 19
----- ------ -----
Total liabilities............................... 300 277 278
----- ------ -----
Stockholders' equity:
Common stock, no par value. Authorized, issued and
outstanding 5,000 shares at December 31, 1995 and
1996............................................. 2 2 2
Retained earnings................................. 180 136 303
----- ------ -----
Total stockholders' equity...................... 182 138 305
----- ------ -----
Commitments and contingencies (notes 4 and 8)
Total liabilities and stockholders' equity...... $ 482 $ 415 $ 583
===== ====== =====
</TABLE>
See accompanying notes to financial statements.
F-74
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------- -----------------
1994 1995 1996 1996 1997
------ ------ ------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues (note 7)................. $1,121 $1,131 $1,480 $ 1,080 $ 1,486
Cost of revenues...................... 709 765 886 615 766
------ ------ ------ -------- --------
Gross profit........................ 412 366 594 465 720
Selling, general and administrative
expenses............................. 337 377 655 411 442
------ ------ ------ -------- --------
Income (loss) from operations....... 75 (11) (61) 54 278
Interest expense, net................. 7 17 11 7 4
------ ------ ------ -------- --------
Income (loss) before income tax
expense (benefit).................. 68 (28) (72) 47 274
Income tax expense (benefit) (note
6)................................... 29 (11) (28) 18 107
------ ------ ------ -------- --------
Net income (loss)................... $ 39 $ (17) $ (44) $ 29 $ 167
====== ====== ====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-75
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<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
Net income (unaudited)............... -- -- 167 167
------ ---- ---- ----
Balance at September 30, 1997
(unaudited)........................... $5,000 $ 2 $303 $305
====== ==== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-76
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30,
----------------- -------------------
1994 1995 1996 1996 1997
----- ---- ---- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................... $ 39 $(17) $(44) $ 29 $ 167
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization........ 77 95 86 71 49
Deferred income taxes................ 1 (11) (39) 17 --
Changes in operating assets and
liabilities:
Trade accounts receivable, net..... (27) (73) 51 29 (210)
Income taxes receivable............ -- -- 5 -- 1
Prepaid expenses and other current
assets............................ (4) (1) (1) 2 (19)
Other asset........................ -- -- -- (2) (3)
Accounts payable................... 41 21 (8) (7) (2)
Accrued expenses................... 9 (3) 93 (2) (65)
Income taxes payable............... 23 (3) -- -- 94
----- ---- ---- -------- ---------
Net cash provided by operating
activities...................... 159 8 143 137 12
----- ---- ---- -------- ---------
Cash flows from investing activity:
Additions to property and equipment... (183) (4) (2) (13) (21)
----- ---- ---- -------- ---------
Cash flows from financing activities:
Proceeds from borrowings under line of
credit............................... -- 37 -- -- --
Repayments of borrowings under line of
credit............................... (38) -- (37) (37) --
Proceeds from long-term debt.......... 100 -- -- -- --
Principal repayments of long-term
debt................................. (31) (36) (32) (26) (26)
----- ---- ---- -------- ---------
Net cash provided by (used in)
financing activities............ 31 1 (69) (63) (26)
----- ---- ---- -------- ---------
Net increase (decrease) in cash and
cash equivalents...................... 7 5 72 61 (35)
Cash and cash equivalents at beginning
of period............................. 6 13 18 18 90
----- ---- ---- -------- ---------
Cash and cash equivalents at end of
period................................ $ 13 $ 18 $ 90 $ 79 $ 55
===== ==== ==== ======== =========
Supplemental cash flow information:
Cash paid during the year for:
Interest............................. $ 7 $ 17 $ 11 $ 8 $ 4
===== ==== ==== ======== =========
Taxes................................ $ 9 $ 3 $-- $ -- $ 16
===== ==== ==== ======== =========
</TABLE>
See accompanying notes to financial statements.
F-77
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Communication Development Corporation ("CDC") provides audio group
communications services to a variety of customers, primarily located in the
United States. CDC was incorporated in 1991 and has its operations center in
Danbury, Connecticut.
(b) Interim Financial Statements
The financial statements of CDC as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 are unaudited. All adjustments and
accruals (consisting only of normal recurring adjustments) have been recorded
that, in the opinion of management, are necessary for a fair presentation.
Results of operations for the interim periods are not necessarily indicative
of the results for the full year.
(c) Use of Estimates
Management of CDC 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.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and money market deposits.
(e) 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.
(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.
(h) Research and Development
CDC maintains a technical support and engineering department that, in part,
develops features and products for group communications. In accordance with
SFAS No. 2, Accounting for Research and Development Costs, CDC charges to
expense (included in cost of revenues) that portion of this department's costs
which are related
F-78
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
to research and development activities. CDC's research and development
expenses for the years ended December 31, 1994, 1995 and 1996 were $51,000,
$49,000 and $56,000, respectively. CDC's research and development expenses for
the nine months ended September 30, 1996 and 1997 were $42 and $76,
respectively.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
CDC 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 CDC's financial position,
results of operations, or liquidity.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Teleconferencing equipment..................... $ 427 $ 427 $427
Office equipment............................... 41 43 64
Leasehold improvements......................... 10 10 10
------ ------ ----
478 480 501
Less: accumulated depreciation and
amortization.................................. 266 352 401
------ ------ ----
Property and equipment, net.................. $ 212 $ 128 $100
====== ====== ====
</TABLE>
(3) DEBT
(a) Line of Credit
CDC 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 (8.5%, 9.25% and 9.5% at December 31, 1995 and 1996
and September 30, 1997, 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, $0 and $0 at December 31, 1995 and 1996 and September 30, 1997,
respectively.
(b) Long-term Debt
Long-term debt at December 31, 1995 and 1996 and September 30, 1997 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
CDC and are guaranteed by the stockholders. Amounts outstanding are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Bank term notes................................. $ 107 $ 75 $49
Less: current installments...................... 35 33 24
------ ----- ---
Long-term debt excluding current installments... $ 72 $ 42 $25
====== ===== ===
</TABLE>
F-79
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
October 1 to December 31, 1997.......................... $ 7
1998.................................................... 20
1999.................................................... 22
---
$49
===
</TABLE>
(4) COMMITMENTS
CDC 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 $31,000, $57,000 and $65,000,
respectively and $53,000 and $55,000 for the nine months ending September 30,
1996 and 1997, respectively. Future minimum lease payments under this lease
are as follows (in thousands):
<TABLE>
<S> <C>
October 1 to December 31, 1997.......................... $18
1998.................................................... 12
---
Total minimum lease payments.......................... $30
===
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued officer bonus............................ $ -- $ 90 $ --
Accrued long distance charges.................... -- -- --
Accrued payroll and related taxes................ 8 6 30
Other accrued expenses........................... 1 6 7
------ ------ -----
$ 9 $ 102 $ 37
====== ====== =====
</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>
F-80
<PAGE>
COMMUNICATION DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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).................. $23 $ (9) $(24)
State and local income taxes, net of federal tax benefit... 5 (2) (5)
Nondeductible items and other differences.................. 1 -- 1
--- ---- ----
$29 $(11) $(28)
=== ==== ====
</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:
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
The same five customers accounted for the following percentages of net
revenues and accounts receivable:
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF NET REVENUES ACCOUNTS RECEIVABLE
----------------------------------- -----------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
------------------- -------------- -------------- SEPTEMBER 30,
1994 1995 1996 1996 1997 1995 1996 1997
----- ----- ----- ------ ------ ------ ------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Customer A...... 25% 63% 35% 41% 35% 33% 17% 21%
Customer B...... -- 11% -- 10% -- 30% 25% --
Customer C...... 11% 10% 11% 12% 10% -- -- 10%
Customer D...... -- -- -- -- -- -- 14% --
Customer E...... -- -- -- -- 13% -- -- 16%
</TABLE>
(8) SUBSEQUENT EVENTS (UNAUDITED)
On November 12, 1997, VIALOG Corporation ("VIALOG") acquired all of the
outstanding stock of CDC for cash and shares of Common Stock of VIALOG and CDC
became a wholly owned subsidiary of VIALOG. The acquisition of CDC will be
accounted for by the purchase method. Accordingly, all of the identified
tangible and intangible assets and liabilities will be recorded at their
current fair market value and the excess of the purchase price over the fair
value of the net assets acquired will be recorded as intangible assets, which
will be amortized up to 20 years.
In November 1997, the remaining balances of the long-term debt described in
note 3 (b) was repaid in full, plus accrued interest.
F-81
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE NOTES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY IN ANY JURISDIC-
TION 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 OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER WILL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... iii
Prospectus Summary....................................................... 1
Disclosure Regarding Forward-Looking Statements.......................... 14
Risk Factors............................................................. 14
The Company.............................................................. 22
Private Placement........................................................ 23
Use of Proceeds.......................................................... 23
Dividend Policy.......................................................... 23
Capitalization........................................................... 24
Selected Financial Data.................................................. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 28
Business................................................................. 45
Organization and Acquisition of the Acquired Companies................... 59
Management............................................................... 63
Certain Transactions..................................................... 70
Principal Stockholders................................................... 71
The Exchange Offer....................................................... 72
Description of Notes..................................................... 78
Registration Rights; Additional Interest................................. 103
Book-Entry; Delivery and Form............................................ 105
Transfer Restrictions on Old Notes....................................... 107
Description of Senior Credit Facility.................................... 109
Description of Capital Stock and Warrants................................ 109
Certain Federal Income Tax Consequences.................................. 115
Plan of Distribution..................................................... 118
Legal Matters............................................................ 119
Experts.................................................................. 119
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SE-
CURITIES, WHETHER OR NOT PARTICIPATING 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 UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO]
VIALOG CORPORATION
OFFER TO EXCHANGE
$75,000,000 12 3/4% SENIOR NOTES DUE 2001, SERIES B
FOR
$75,000,000 12 3/4% SENIOR NOTES DUE 2001, SERIES A
---------------
PROSPECTUS
---------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 the
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-
laws 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 entitled to indemnification, which undertaking may be
accepted without reference to the financial ability of such person to make
repayment. 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 or 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.
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 Purchase Agreement (the 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.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* Purchase Agreement dated November 6, 1997 By and Among VIALOG
Corporation, TBMA Acquisition Corporation, CSII Acquisition
Corporation, Call Points Acquisition Corporation, KST Acquisition
Corporation, AMCS Acquisition Corporation, CDC Acquisition
Corporation, and Jefferies & Company, Inc.
1.2* Registration Rights Agreement Dated as of November 12, 1997 By and
Among VIALOG Corporation, Kendall Square Teleconferencing, Inc., AMCS
Acquisition Corporation, Communication Development Corporation,
Telephone Business Meetings, Inc., Conference Source International,
Inc., Call Points Acquisition Corporation and Jefferies & Company,
Inc.
2.1* 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 September 8, 1997.
2.2* Amendment to Agreement and Plan of Reorganization By and Among VIALOG
Corporation, TBMA Acquisition Corporation, Telephone Business
Meetings, Inc. and C. Raymond Marvin Dated as of October 20, 1997.
2.3* Letter Agreement Dated November 5, 1997 between VIALOG Corporation,
Telephone Business Meetings, Inc. and C. Raymond Marvin.
2.4* 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 September 8, 1997.
2.5* Amended and Restated Asset Purchase Agreement By and Among VIALOG
Corporation, Call Points Acquisition Corporation, Call Points, Inc.
and Ropir Industries, Inc. Dated as of October 17, 1997.
2.6* Amended and Restated Agreement and Plan of Reorganization By and Among
VIALOG Corporation, KST Acquisition Corporation, Kendall Square
Teleconferencing, Inc., Courtney Snyder, Paul Ballantine, John Hassett
and Dwight Grader Dated as of September 30, 1997.
2.7* First Amendment to Amended and Restated Agreement and Plan of
Reorganization By and Among VIALOG Corporation, KST Acquisition
Corporation, Kendall Square Teleconferencing, Inc. and Courtney
Snyder, Paul Ballantine, John Hassett and Dwight Grader Dated October
24, 1997.
2.8* 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 September 30,
1997.
2.9* Amended and Restated Agreement and Plan of Reorganization By and Among
VIALOG Corporation, CDC Acquisition Corporation and Communications
Development Corporation and Patti R. Bisbano and Maurya Suda Dated as
of September 30, 1997.
2.10* First Amendment to Amended and Restated Agreement and Plan of
Reorganization By and Among VIALOG Corporation, CDC Acquisition
Corporation, Communication Development Corporation and Patti R.
Bisbano and Maurya Suda Dated as of October 24, 1997.
3.1* Restated Articles of Organization of VIALOG Corporation.
3.2* Amended and Restated By-Laws of VIALOG Corporation.
3.3* Certificate of Incorporation of Communications Development
Corporation.
3.4* By-Laws of Communication Development Corporation.
3.5* Articles of Incorporation of Conference Source International, Inc.
3.6* By-Laws of Conference Source International, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.7* Unanimous Consent of Board of Directors of Conference Source
International, Inc. Amending Section 2 of Article II of the By-Laws.
3.8* Certificate of Incorporation of Telephone Business Meetings, Inc.
3.9* Regulations of Telephone Business Meetings, Inc.
3.10* Articles of Organization of Kendall Square Teleconferencing, Inc.
(f/k/a Teleconversant, LTD)
3.11* Articles of Amendment of Certificate of Incorporation of Kendall
Square Teleconferencing, Inc. Changing the Name of the Company from
Teleconversant, Ltd. To Kendall Square Teleconferencing, Inc.
3.12* Articles of Amendment of Certificate of Incorporation of Kendall
Square Teleconferencing, Inc. Deleting the Stock Transfer Restrictions
in Article V in Their Entirety.
3.13* By-Laws of Kendall Square Teleconferencing, Inc.
3.14* Certificate of Incorporation of American Conferencing Company, Inc.
(f/k/a AMCS Acquisition Corporation)
3.15* Certificate of Merger of American Conferencing Company, Inc. Into AMCS
Acquisition Corporation Evidencing Name Change, Filed with the
Secretary of State of Delaware.
3.16* By-Laws of American Conferencing Company, Inc.
3.17* Certificate of Incorporation of Call Points, Inc. (f/k/a Call Points
Acquisition Corporation).
3.18* Certificate of Amendment of Certificate of Incorporation of Call
Points Evidencing Name Change, Filed with the Secretary of State of
Delaware.
3.19* By-Laws of Call Points, Inc.
4.1* Indenture Dated as of November 12, 1997 Among VIALOG Corporation,
Telephone Business Meetings, Inc., Conference Source International,
Inc., Kendall Square Teleconferencing, Inc., American Conferencing
Company, Inc., Communication Development Corporation, Inc., and State
Street Bank and Trust Company (including Forms of Series A Security
and Series B Security attached to the Indenture as Exhibits A-1 and A-
2, respectively).
4.2* Unit Agreement Dated as of November 12, 1997 By and Among VIALOG
Corporation, Telephone Business Meetings, Inc., Conference Source
International, Inc., Call Points, Inc., Kendall Square
Teleconferencing, Inc., American Conferencing Company, Inc.,
Communications Development Corporation, and State Street Bank and
Trust Company (including Form of Unit Certificate attached to the Unit
Agreement as Exhibit A).
4.3* Warrant Agreement Dated as of November 12, 1997 Between VIALOG
Corporation and State Street Bank and Trust Company (including Form of
Warrant Certificate attached to the Warrant Agreement as Exhibit A).
4.4* Security Holders' and Registration Rights Agreement Dated as of
November 12, 1997 Among VIALOG Corporation and Jefferies & Company,
Inc.
4.5* Registration Rights Agreement Dated as of November 12, 1997 By and
Among VIALOG Corporation, Kendall Square Teleconferencing, Inc., AMCS
Acquisition Corporation, Communication Development Corporation,
Telephone Business Meetings, Inc., Conference Source International,
Inc., Call Points Acquisition Corporation and Jefferies & Company,
Inc.--attached as Exhibit 1.2 to this Registration Statement
4.6 Exchange Agent Agreement
5.1 Opinion of Mirick, O'Connell, DeMallie & Lougee, LLP.
10.1* 1996 Stock Plan of the Company.
10.2* Equipment Lease between CSI and Ally Capital Corporation Dated April
1, 1996.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.3* Equipment Lease between CSI and The CIT Group/Equipment Financing,
Inc. Dated November 11, 1996.
10.4* Equipment Lease between CSI and BSFS Equipment Leasing Dated April 8,
1996.
10.5* Equipment Lease between TCC (f/k/a Teleconversant Ltd.) and Wasco
Funding Corp. Dated May 21, 1996.
10.6* Equipment Lease between TCC (f/k/a Teleconversant Ltd.) and Wasco
Funding Corp. Dated July 20, 1995.
10.7* Lease between Aetna Life Insurance Company and ACCESS, as Amended,
Dated December 6, 1994.
10.8* Lease Agreement between SPP Real Estate (Georgia II), Inc. and CSI
Dated November 1, 1996.
10.9* Amended & Restated Employment Agreement By and Between VIALOG
Corporation and Glenn D. Bolduc Dated May 6, 1997.
10.10* Employment Agreement By and Between Telephone Business Meetings, Inc.
and C. Raymond Marvin Dated as of November 12, 1997.
10.11* Amendment to Employment Agreement between the Company and C. Raymond
Marvin Effective as of December 31, 1997.
10.12* Employment Agreement By and Between CSII Acquisition Corporation and
Judy B. Crawford Dated as of November 12, 1997.
10.13* Employment Agreement By and Between Kendall Square Teleconferencing,
Inc. and Courtney Snyder Dated November 12, 1997.
10.14* Employment Agreement By and Between American Conferencing Company,
Inc. and David Lipsky Dated as of November 12, 1997.
10.15* Employment Agreement By and Between Communication Development
Corporation and Patti R. Bisbano Dated as of November 12, 1997.
10.16* Employment Agreement By and Between the Company and William Pucci
Dated as of October 1, 1996.
10.17* Employment Agreement By and Between the Company and John Dion Dated as
of November 4, 1996.
10.18* Employment Agreement By and Between the Company and Gary Vilardi Dated
as of April 1, 1997.
10.19* Employment Agreement By and Between the Company and Robert Moore Dated
as of October 20, 1997.
10.20* Employment Agreement By and Between the Company and John Williams
Dated as of October 14, 1997.
10.21 Employment Agreement By and Between Call Points, Inc. And Olen E.
Crawford Dated as of , 1997.
10.22* Stockholder Agreement By and Among John J. Hassett and VIALOG
Corporation Dated as of November 6, 1997.
10.23* Form of Registration Rights Agreement between VIALOG Corporation and
certain of its stockholders specified in Schedules I and II attached
thereto.
10.24* Lease Between Tower Investment Group and Communication Development
Corp. Dated February 23, 1990, Including Subsequent Modifications
Thereto.
10.25* Lease Agreement by and Between 680-690 Kinderkamack Road and American
Conferencing Company, Inc. Dated June 1997.
10.26* Lease Between Robert A. Jones and K. George Najarian, Trustees of Old
Cambridge Realty Trust and Old Kendall Square Realty Trust, and
Kendall Square Teleconferencing, Inc. (f/k/a Teleconversant, Ltd.)
Dated February 15, 1996.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.27* Lease Between Ropir Communications and Call Points, Inc. Commencing
May 1, 1995.
10.28* Amendment to Lease Between Ropir Industries, Inc. and Call Points,
Inc.
10.29* Equipment Lease between Kendall Square Teleconferencing, Inc. and
Wasco Funding Corp. Dated July 31, 1997.
10.30* Sublease between Eisai Research Institute of Boston, Inc. and VIALOG
Corporation Dated as of August 20, 1997.
12.1* Statement Regarding Computation of Ratios.
21.1* Subsidiaries of the Company.
23.1* Consent of KPMG Peat Marwick LLP.
23.2 Consent of Mirick, O'Connell, DeMallie & Lougee, LLP (incorporated in
the Opinion Filed as Exhibit 5.1 Above).
24.1* Power of Attorney (included on the signature page of this Registration
Statement).
25.1* Statement of Eligibility of Trustee.
27.1* Financial Data Schedule.
99.1 Form of Letter of Transmittal for Exchange Offer.
</TABLE>
- --------
* Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are required to be included.
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415 will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
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 in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
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
II-5
<PAGE>
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 Act
and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
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, COMMONWEALTH OF
MASSACHUSETTS, ON JANUARY 9, 1998.
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. DION 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-4 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 each said
person hereby grants 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 each of
said persons hereby ratifies, confirms and approves 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 January 9, 1998
By: _________________________________ Executive Officer,
GLENN D. BOLDUC Treasurer and
Director
/s/ John J. Dion Vice President-- January 9, 1998
By: _________________________________ Finance, Principal
JOHN J. DION Financial Officer
and Principal
Accounting Officer
/s/ Joanna M. Jacobson Director January 8, 1998
By: _________________________________
JOANNA M. JACOBSON
II-7
<PAGE>
SIGNATURES TITLE DATE
/s/ David L. Lougee Director January 9, 1998
By: _________________________________
DAVID L. LOUGEE
/s/ David L. Lipsky Director January 9, 1998
By: _________________________________
DAVID L. LIPSKY
/s/ Patti R. Bisbano Director January 7, 1998
By: _________________________________
PATTI R. BISBANO
II-8
<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, COMMONWEALTH OF
MASSACHUSETTS, ON JANUARY 9, 1998.
Telephone Business Meetings, Inc.
/s/ Glenn D. Bolduc
By: ________________________________
GLENN D. BOLDUC AUTHORIZED
SIGNATORY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that TELEPHONE BUSINESS MEETINGS, INC., a
corporation organized under the laws of the State of Delaware (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. DION 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-4 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 each said
person hereby grants 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 each of
said persons hereby ratifies, confirms and approves 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/ William P. Pucci President January 9, 1998
By: _________________________________
WILLIAM P. PUCCI
/s/ John Novack Principal Financial January 9, 1998
By: _________________________________ Officer and
JOHN NOVACK Principal
Accounting Officer
/s/ Glenn D. Bolduc Director January 9, 1998
By: _________________________________
GLENN D. BOLDUC
II-9
<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, COMMONWEALTH OF
MASSACHUSETTS, ON JANUARY 9, 1998.
Conference Source International,
Inc.
/s/ Glenn D. Bolduc
By: _________________________________
GLENN D. BOLDUC
AUTHORIZED SIGNATORY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that CONFERENCE SOURCE INTERNATIONAL, INC.,
a corporation organized under the laws of the State of Georgia (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. DION 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-4 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 each said
person hereby grants 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 each of
said persons hereby ratifies, confirms and approves 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/ Judy B. Crawford President January 9, 1998
By: _________________________________
JUDY B. CRAWFORD
/s/ Katrina Bradbury Principal Financial January 9, 1998
By: _________________________________ Officer and
KATRINA BRADBURY Principal
Accounting Officer
/s/ Glenn D. Bolduc Director January 9, 1998
By: _________________________________
GLENN D. BOLDUC
II-10
<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, COMMONWEALTH OF
MASSACHUSETTS, ON JANUARY 9, 1998.
Call Points, Inc.
/s/ Glenn D. Bolduc
By: _________________________________
GLENN D. BOLDUC
AUTHORIZED SIGNATORY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that CALL POINTS, INC., a corporation
organized under the laws of the State of Delaware (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. DION 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-4 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 each said
person hereby grants 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 each of
said persons hereby ratifies, confirms and approves 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/ Olen E. Crawford President January 9, 1998
By: _________________________________
OLEN E. CRAWFORD
/s/ Marcus Jones Principal Financial January 9, 1998
By: _________________________________ Officer and
MARCUS JONES Principal
Accounting Officer
/s/ Glenn D. Bolduc Director January 9, 1998
By: _________________________________
GLENN D. BOLDUC
II-11
<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, COMMONWEALTH OF
MASSACHUSETTS, ON JANUARY 9, 1998.
Kendall Square Teleconferencing,
Inc.
/s/ Glenn D. Bolduc
By: _________________________________
GLENN D. BOLDUC
AUTHORIZED SIGNATORY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that KENDALL SQUARE TELECONFERENCING, INC., 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. DION 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-4 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 each said
person hereby grants 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 each of
said persons hereby ratifies, confirms and approves 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/ Courtney P. Snyder President January 9, 1998
By: _________________________________
COURTNEY P. SNYDER
/s/ Mark Pashoian Principal Financial January 9, 1998
By: _________________________________ Officer and
MARK PASHOIAN Principal
Accounting Officer
/s/ Glenn D. Bolduc Director January 9, 1998
By: _________________________________
GLENN D. BOLDUC
II-12
<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, COMMONWEALTH OF
MASSACHUSETTS, ON JANUARY 9, 1998.
American Conferencing Company, Inc.
/s/ Glenn D. Bolduc
By: _________________________________
GLENN D. BOLDUC
AUTHORIZED SIGNATORY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that AMERICAN CONFERENCING COMPANY, INC., a
corporation organized under the laws of the State of Delaware (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. DION 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-4 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 each said
person hereby grants 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 each of
said persons hereby ratifies, confirms and approves 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/ David L. Lipsky President January 9, 1998
By: _________________________________
DAVID L. LIPSKY
/s/ Michael Maraccia Principal Financial January 9, 1998
By: _________________________________ Officer and
MICHAEL MARACCIA Principal
Accounting Officer
/s/ Glenn D. Bolduc Director January 9, 1998
By: _________________________________
GLENN D. BOLDUC
II-13
<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, COMMONWEALTH OF
MASSACHUSETTS, ON JANUARY 9, 1998.
Communication Development
Corporation
/s/ Glenn D. Bolduc
By: _________________________________
GLENN D. BOLDUC
AUTHORIZED SIGNATORY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that COMMUNICATION DEVELOPMENT CORPORATION, a
corporation organized under the laws of the State of Connecticut (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. DION 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-4 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 each said
person hereby grants 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 each of
said persons hereby ratifies, confirms and approves 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/ Patti R. Bisbano President January 7, 1998
By: _________________________________
PATTI R. BISBANO
/s/ Gloria Ebbesen Principal Financial January 7, 1998
By: _________________________________ Officer and
GLORIA EBBESEN Principal
Accounting Officer
/s/ Glenn D. Bolduc Director January 9, 1998
By: _________________________________
GLENN D. BOLDUC
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* Purchase Agreement dated November 6, 1997 By and Among VIALOG
Corporation, TBMA Acquisition Corporation, CSII Acquisition
Corporation, Call Points Acquisition Corporation, KST Acquisition
Corporation, AMCS Acquisition Corporation, CDC Acquisition
Corporation, and Jefferies & Company, Inc.
1.2* Registration Rights Agreement Dated as of November 12, 1997 By and
Among VIALOG Corporation, Kendall Square Teleconferencing, Inc., AMCS
Acquisition Corporation, Communication Development Corporation,
Telephone Business Meetings, Inc., Conference Source International,
Inc., Call Points Acquisition Corporation and Jefferies & Company,
Inc.
2.1* 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 September 8, 1997.
2.2* Amendment to Agreement and Plan of Reorganization By and Among VIALOG
Corporation, TBMA Acquisition Corporation, Telephone Business
Meetings, Inc. and C. Raymond Marvin Dated as of October 20, 1997.
2.3* Letter Agreement Dated November 5, 1997 between VIALOG Corporation,
Telephone Business Meetings, Inc. and C. Raymond Marvin.
2.4* 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 September 8, 1997.
2.5* Amended and Restated Asset Purchase Agreement By and Among VIALOG
Corporation, Call Points Acquisition Corporation, Call Points, Inc.
and Ropir Industries, Inc. Dated as of October 17, 1997.
2.6* Amended and Restated Agreement and Plan of Reorganization By and Among
VIALOG Corporation, KST Acquisition Corporation, Kendall Square
Teleconferencing, Inc., Courtney Snyder, Paul Ballantine, John Hassett
and Dwight Grader Dated as of September 30, 1997.
2.7* First Amendment to Amended and Restated Agreement and Plan of
Reorganization By and Among VIALOG Corporation, KST Acquisition
Corporation, Kendall Square Teleconferencing, Inc. and Courtney
Snyder, Paul Ballantine, John Hassett and Dwight Grader Dated October
24, 1997.
2.8* 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 September 30,
1997.
2.9* Amended and Restated Agreement and Plan of Reorganization By and Among
VIALOG Corporation, CDC Acquisition Corporation and Communications
Development Corporation and Patti R. Bisbano and Maurya Suda Dated as
of September 30, 1997.
2.10* First Amendment to Amended and Restated Agreement and Plan of
Reorganization By and Among VIALOG Corporation, CDC Acquisition
Corporation, Communication Development Corporation and Patti R.
Bisbano and Maurya Suda Dated as of October 24, 1997.
3.1* Restated Articles of Organization of VIALOG Corporation.
3.2* Amended and Restated By-Laws of VIALOG Corporation.
3.3* Certificate of Incorporation of Communications Development
Corporation.
3.4* By-Laws of Communication Development Corporation.
3.5* Articles of Incorporation of Conference Source International, Inc.
3.6* By-Laws of Conference Source International, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.7* Unanimous Consent of Board of Directors of Conference Source
International, Inc. Amending Section 2 of Article II of the By-Laws.
3.8* Certificate of Incorporation of Telephone Business Meetings, Inc.
3.9* Regulations of Telephone Business Meetings, Inc.
3.10* Articles of Organization of Kendall Square Teleconferencing, Inc.
(f/k/a Teleconversant, LTD)
3.11* Articles of Amendment of Certificate of Incorporation of Kendall
Square Teleconferencing, Inc. Changing the Name of the Company from
Teleconversant, Ltd. To Kendall Square Teleconferencing, Inc.
3.12* Articles of Amendment of Certificate of Incorporation of Kendall
Square Teleconferencing, Inc. Deleting the Stock Transfer Restrictions
in Article V in Their Entirety.
3.13* By-Laws of Kendall Square Teleconferencing, Inc.
3.14* Certificate of Incorporation of American Conferencing Company, Inc.
(f/k/a AMCS Acquisition Corporation)
3.15* Certificate of Merger of American Conferencing Company, Inc. Into AMCS
Acquisition Corporation Evidencing Name Change, Filed with the
Secretary of State of Delaware.
3.16* By-Laws of American Conferencing Company, Inc.
3.17* Certificate of Incorporation of Call Points, Inc. (f/k/a Call Points
Acquisition Corporation).
3.18* Certificate of Amendment of Certificate of Incorporation of Call
Points Evidencing Name Change, Filed with the Secretary of State of
Delaware.
3.19* By-Laws of Call Points, Inc.
4.1* Indenture Dated as of November 12, 1997 Among VIALOG Corporation,
Telephone Business Meetings, Inc., Conference Source International,
Inc., Kendall Square Teleconferencing, Inc., American Conferencing
Company, Inc., Communication Development Corporation, Inc., and State
Street Bank and Trust Company (including Forms of Series A Security
and Series B Security attached to the Indenture as Exhibits A-1 and A-
2, respectively).
4.2* Unit Agreement Dated as of November 12, 1997 By and Among VIALOG
Corporation, Telephone Business Meetings, Inc., Conference Source
International, Inc., Call Points, Inc., Kendall Square
Teleconferencing, Inc., American Conferencing Company, Inc.,
Communications Development Corporation, and State Street Bank and
Trust Company (including Form of Unit Certificate attached to the Unit
Agreement as Exhibit A).
4.3* Warrant Agreement Dated as of November 12, 1997 Between VIALOG
Corporation and State Street Bank and Trust Company (including Form of
Warrant Certificate attached to the Warrant Agreement as Exhibit A).
4.4* Security Holders' and Registration Rights Agreement Dated as of
November 12, 1997 Among VIALOG Corporation and Jefferies & Company,
Inc.
4.5* Registration Rights Agreement Dated as of November 12, 1997 By and
Among VIALOG Corporation, Kendall Square Teleconferencing, Inc., AMCS
Acquisition Corporation, Communication Development Corporation,
Telephone Business Meetings, Inc., Conference Source International,
Inc., Call Points Acquisition Corporation and Jefferies & Company,
Inc.--attached as Exhibit 1.2 to this Registration Statement
4.6 Exchange Agent Agreement
5.1 Opinion of Mirick, O'Connell, DeMallie & Lougee, LLP.
10.1* 1996 Stock Plan of the Company.
10.2* Equipment Lease between CSI and Ally Capital Corporation Dated April
1, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.3* Equipment Lease between CSI and The CIT Group/Equipment Financing,
Inc. Dated November 11, 1996.
10.4* Equipment Lease between CSI and BSFS Equipment Leasing Dated April 8,
1996.
10.5* Equipment Lease between TCC (f/k/a Teleconversant Ltd.) and Wasco
Funding Corp. Dated May 21, 1996.
10.6* Equipment Lease between TCC (f/k/a Teleconversant Ltd.) and Wasco
Funding Corp. Dated July 20, 1995.
10.7* Lease between Aetna Life Insurance Company and ACCESS, as Amended,
Dated December 6, 1994.
10.8* Lease Agreement between SPP Real Estate (Georgia II), Inc. and CSI
Dated November 1, 1996.
10.9* Amended & Restated Employment Agreement By and Between VIALOG
Corporation and Glenn D. Bolduc Dated May 6, 1997.
10.10* Employment Agreement By and Between Telephone Business Meetings, Inc.
and C. Raymond Marvin Dated as of November 12, 1997.
10.11* Amendment to Employment Agreement between the Company and C. Raymond
Marvin Effective as of December 31, 1997.
10.12* Employment Agreement By and Between CSII Acquisition Corporation and
Judy B. Crawford Dated as of November 12, 1997.
10.13* Employment Agreement By and Between Kendall Square Teleconferencing,
Inc. and Courtney Snyder Dated November 12, 1997.
10.14* Employment Agreement By and Between American Conferencing Company,
Inc. and David Lipsky Dated as of November 12, 1997.
10.15* Employment Agreement By and Between Communication Development
Corporation and Patti R. Bisbano Dated as of November 12, 1997.
10.16* Employment Agreement By and Between the Company and William Pucci
Dated as of October 1, 1996.
10.17* Employment Agreement By and Between the Company and John Dion Dated as
of November 4, 1996.
10.18* Employment Agreement By and Between the Company and Gary Vilardi Dated
as of April 1, 1997.
10.19* Employment Agreement By and Between the Company and Robert Moore Dated
as of October 20, 1997.
10.20* Employment Agreement By and Between the Company and John Williams
Dated as of October 14, 1997.
10.21 Employment Agreement By and Between Call Points, Inc. And Olen E.
Crawford Dated as of , 1997.
10.22* Stockholder Agreement By and Among John J. Hassett and VIALOG
Corporation Dated as of November 6, 1997.
10.23* Form of Registration Rights Agreement between VIALOG Corporation and
certain of its stockholders specified in Schedules I and II attached
thereto.
10.24* Lease Between Tower Investment Group and Communication Development
Corp. Dated February 23, 1990, Including Subsequent Modifications
Thereto.
10.25* Lease Agreement by and Between 680-690 Kinderkamack Road and American
Conferencing Company, Inc. Dated June 1997.
10.26* Lease Between Robert A. Jones and K. George Najarian, Trustees of Old
Cambridge Realty Trust and Old Kendall Square Realty Trust, and
Kendall Square Teleconferencing, Inc. (f/k/a Teleconversant, Ltd.)
Dated February 15, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.27* Lease Between Ropir Communications and Call Points, Inc. Commencing
May 1, 1995.
10.28* Amendment to Lease Between Ropir Industries, Inc. and Call Points,
Inc.
10.29* Equipment Lease between Kendall Square Teleconferencing, Inc. and
Wasco Funding Corp. Dated July 31, 1997.
10.30* Sublease between Eisai Research Institute of Boston, Inc. and VIALOG
Corporation Dated as of August 20, 1997.
12.1* Statement Regarding Computation of Ratios.
21.1* Subsidiaries of the Company.
23.1* Consent of KPMG Peat Marwick LLP.
23.2 Consent of Mirick, O'Connell, DeMallie & Lougee, LLP (incorporated in
the Opinion Filed as Exhibit 5.1 Above).
24.1* Power of Attorney (included on the signature page of this Registration
Statement).
25.1* Statement of Eligibility of Trustee.
27.1* Financial Data Schedule.
99.1 Form of Letter of Transmittal for Exchange Offer.
</TABLE>
- --------
* Filed herewith.
<PAGE>
EXHIBIT 1.1
-----------
VIALOG CORPORATION
75,000 Units
Consisting of
$75,000,000
12 3/4% Senior Notes due 2001
and
75,000 Common Stock Purchase Warrants
PURCHASE AGREEMENT
------------------
November 6, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
VIALOG Corporation, a Massachusetts corporation (the "Company") and
-------
the Subsidiary Guarantors (as defined below) hereby confirm their agreement with
you (the "Initial Purchaser"), as set forth below.
-----------------
1. The Acquisitions. Each of Conference Source International, Inc.,
----------------
a Georgia corporation, Call Points, Inc., a Delaware corporation, Kendall Square
Teleconferencing, Inc. d/b/a The Conference Center, a Massachusetts corporation,
American Conferencing Company, Inc. d/b/a Americo, a New Jersey corporation,
Telephone Business Meetings, Inc., a Delaware corporation and Communication
Development Corporation, a Connecticut corporation, (collectively, the "Founding
--------
Companies") have entered into an agreement and plan of reorganization or stock
- ---------
or asset purchase agreement (each an "Acquisition Agreement", collectively the
---------------------
"Acquisition Agreements") pursuant to which the Company, through six wholly-
- -----------------------
owned subsidiaries (the "Acquisition Subsidiaries"), will acquire (i) by merger,
------------------------
all of the issued and outstanding stock of five Founding Companies and (ii) by
purchase, the assets of one Founding Company, Call Points, Inc. The
transactions contemplated by the Acquisition Agreements are herein referred to
as the "Acquisitions." The term "Subsidiary Guarantors" means (i) prior to the
------------ ---------------------
effectiveness of the Acquisitions, the collective reference to the Acquisition
Subsidiaries, and (ii) following the effectiveness of the Acquisitions, the
collective reference to the surviving company of each Acquisition which is a
merger and the Acquisition Subsidiary which has acquired the assets of Call
Points, Inc.
2. The Securities. Subject to the terms and conditions herein
--------------
contained, the Company proposes to issue and sell to the Initial Purchaser
75,000 Units (as defined below)
<PAGE>
consisting of an aggregate of $75,000,000 aggregate principal amount of its 12
3/4% Senior Notes due 2001, Series A (the "Senior Notes") and 75,000 warrants
------------
(the "Warrants") to purchase initially an aggregate of 756,645 shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"). The
------------
Senior Notes are to be issued under an indenture (the "Indenture") to be dated
---------
as of November 12, 1997 by and among the Company, the Subsidiary Guarantors and
State Street Bank and Trust Company, as Trustee (the "Trustee"). The Senior
-------
Notes will be unconditionally guaranteed (the "Guarantees") on a joint and
----------
several basis by the Subsidiary Guarantors. The Warrants are to be issued under
a Warrant Agreement to be dated as of November 12, 1997 (the "Warrant
-------
Agreement") of the Company for the benefit of the holders from time to time of
- ---------
the certificates evidencing the Warrants. The shares of Common Stock issuable
upon exercise of the Warrants are herein referred to as the "Warrant Shares."
--------------
The Senior Notes and the Warrants will initially be represented by 75,000 units
("Units"), each Unit consisting of one $1,000 principal amount of Senior Notes
-----
and one Warrant to purchase 10.0886 Warrant Shares at an initial exercise price
of $0.01 per Warrant Share. The Senior Notes, the Guarantees, the Warrants, the
Warrant Shares and the Units are collectively referred to herein as the
"Securities."
----------
The Securities will be offered and sold to the Initial Purchaser
without Registration under the Securities Act of 1933, as amended (the "Act"),
---
in reliance on an exemption pursuant to Section 4(2) under the Act.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering circular dated October 20, 1997 (the
"Preliminary Circular"), and a final offering circular dated November 6, 1997
--------------------
(the "Final Circular"; the Preliminary Circular and the Final Circular each
--------------
herein being referred to as a "Circular"), setting forth or including a
--------
description of the terms of the Securities, the terms of the offering of the
Securities, and a description of the business of the Company, the Subsidiary
Guarantors and the Founding Companies. Any references herein to the Preliminary
Circular and the Final Circular shall be deemed to include all amendments and
supplements thereto.
The Initial Purchaser and its direct and indirect transferees of the
Securities will be entitled to the benefits of (i) the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
---------
"Registration Rights Agreement"), pursuant to which the Company and the
-----------------------------
Subsidiary Guarantors shall agree, among other things, (i) to file a
registration statement (the "Registration Statement") with the Securities and
----------------------
Exchange Commission (the "Commission") registering the Senior Notes or the
----------
Exchange Notes (as defined in the Registration Rights Agreement) under the Act
and (ii) the Securityholders' and Registration Rights Agreement, substantially
in the form attached hereto as Exhibit B (the "Securityholders' Agreement" and,
--------- --------------------------
together with the Registration Rights Agreement, the "Rights Agreements").
-----------------
3. Representations and Warranties of the Company and the Subsidiary
----------------------------------------------------------------
Guarantors. The Company and the Subsidiary Guarantors, jointly and severally,
- ----------
represent and warrant to and agree with the Initial Purchaser that:
-2-
<PAGE>
(a) The Preliminary Circular and Final Circular with respect to the
Securities have been prepared by the Company for use by the Initial Purchaser in
connection with resales of the Securities. No order or decree preventing the use
of the Preliminary Circular or the Final Circular, or any order asserting that
the transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued and no proceeding for that purpose has
commenced or is pending or, to the knowledge of the Company and the Subsidiary
Guarantors, is contemplated.
(b) The Preliminary Circular and the Final Circular as of their
respective dates and the Final Circular as of the Closing Date (as defined in
Section 4 below) did not or will not at any time contain an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 3(b) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to the Initial Purchaser
furnished to the Company or the Subsidiary Guarantors in writing by the Initial
Purchaser expressly for use in the Preliminary Circular or Final Circular
pursuant to Section 13 hereof.
(c) The Company has the authorized capitalization set forth in the
Final Circular; all of the outstanding shares of capital stock of the Company
and the Subsidiary Guarantors have been, and as of the Closing Date will be,
duly authorized and validly issued, are fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights; except as set forth
in the Final Circular, all of the outstanding shares of capital stock of each of
the Subsidiary Guarantors are, and as of the Closing Date will be, owned,
directly or indirectly, by the Company, free and clear of all liens,
encumbrances, equities and claims or restrictions on transferability (other than
those imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting; except as set forth in the Final Circular (or, if the
Final Circular is not in existence, the most recent Circular), there are no
outstanding (i) options, warrants or other rights to purchase from the Company
or the Subsidiary Guarantors, (ii) agreements or other obligations of the
Company or any Subsidiary Guarantors to issue or (iii) other rights to convert
any obligation into, or exchange any securities for, in the case of each clause
(i)-(iii) shares of capital stock of the Company or any Subsidiary Guarantor.
The Company does not have any Subsidiaries (as defined in the Indenture) except
for the Subsidiary Guarantors; except for the capital stock of the Subsidiary
Guarantors and as otherwise disclosed in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular), the Company does not
own, directly or indirectly, any shares of capital stock or any other equity or
long-term debt securities or have any equity interest in any firm, partnership,
joint venture or other entity.
(d) Each of the Company, the Subsidiary Guarantors and the Founding
Companies has been duly incorporated, is validly existing and is in good
standing as a corporation under the laws of its jurisdiction of incorporation,
with all requisite corporate power and authority necessary to own its properties
and conduct its business as now conducted, and as described in the Preliminary
Circular and the Final Circular; each of the Company, the Subsidiary Guarantors
and the Founding Companies is duly qualified to do
-3-
<PAGE>
business as a foreign corporation in good standing in all other jurisdictions
where the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a material adverse effect on the
general affairs, management, business, condition (financial or otherwise),
prospects or results of operations of the Company, the Subsidiary Guarantors and
the Founding Companies, taken as a whole, both before and after giving effect to
the Acquisitions (any such event, a "Material Adverse Effect").
-----------------------
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Senior Notes, the
Exchange Notes and the Private Exchange Notes (as defined in the Registration
Rights Agreement). The Senior Notes, the Exchange Notes and the Private
Exchange Notes have each been duly and validly authorized by the Company and,
when executed by the Company and authenticated by the Trustee in accordance with
the provisions of the Indenture and, in the case of the Senior Notes, when
delivered to and paid for by the Initial Purchaser in accordance with the terms
of this Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in accordance with
their terms.
(f) Each of the Subsidiary Guarantors is a wholly-owned subsidiary of
the Company and has all requisite corporate power and authority to execute,
deliver and perform each of its obligations under the Guarantees. The
Guarantees to be endorsed on each of the Senior Notes, the Exchange Notes and
the Private Exchange Notes have been duly and validly authorized by each of the
Subsidiary Guarantors and, when the Senior Notes, the Exchange Notes and the
Private Exchange Notes are executed by the Company and authenticated by the
Trustee in accordance with the provisions of the Indenture and, in the case of
the Senior Notes, delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will constitute a valid and legally
binding obligation of each of the Subsidiary Guarantors, entitled to the
benefits of the Indenture and enforceable against the Subsidiary Guarantors in
accordance with their terms.
(g) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under the Indenture. The Indenture meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the "TIA").
---
The Indenture has been duly and validly authorized by the Company and each of
the Subsidiary Guarantors and, when executed and delivered by the Company and
each of the Subsidiary Guarantors a party thereto (assuming the due
authorization, execution and delivery by the Trustee if the Trustee is required
to execute any such document), each will constitute a valid and legally binding
agreement of the Company and each of the Subsidiary Guarantors, enforceable
against the Company and each of the Subsidiary Guarantors in accordance with its
terms.
(h) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under the Rights Agreements to which they are a party. Each
of the Rights Agreements has been
-4-
<PAGE>
duly and validly authorized by the Company and each of the Subsidiary Guarantors
and, when executed and delivered by the Company and each of the Subsidiary
Guarantors a party thereto (assuming the due authorization, execution and
delivery by the Initial Purchaser), will constitute a valid and legally binding
agreement of the Company and each such Subsidiary Guarantor, enforceable against
the Company and each such Subsidiary Guarantor in accordance with its terms.
(i) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Warrant
Agreement. The Warrant Agreement has been duly and validly authorized by the
Company and, when executed and delivered by the Company, will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(j) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Warrants and the
Additional Warrants (as defined in Section 4 below). The Warrants and the
Additional Warrants have been duly and validly authorized by the Company and,
when executed by the Company and countersigned by the Warrant Agent in
accordance with the provisions of the Warrant Agreement and when delivered to
and paid for by the Initial Purchaser in accordance with the terms of this
Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Warrant Agreement and enforceable against the Company in
accordance with their terms.
(k) The Warrant Shares have been duly and validly authorized for
issuance by the Company and when issued in accordance with the terms and
conditions contained in the Warrant Agreement upon exercise of the Warrants, the
Warrant Shares will be duly authorized, validly issued, fully paid and non-
assessable and will not be subject to any preemptive or similar rights. The
Warrant Shares have been duly reserved for issuance in accordance with the terms
of the Warrants and the Warrant Agreement.
(1) Each of the Company and the Subsidiary Guarantors has all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Company and each of the Subsidiary Guarantors and
is a valid and legally binding agreement of each of the Company and the
Subsidiary Guarantors enforceable against each of the Company and the Subsidiary
Guarantors in accordance with its terms. No consent, approval, authorization or
order of any court or governmental agency or body, or third party is required
for the performance of this Agreement by the Company or the Subsidiary
Guarantors or the consummation by the Company or the Subsidiary Guarantors of
the transactions contemplated hereby, except such as have been obtained. The
execution, delivery and performance by each of the Company and the Subsidiary
Guarantors of this Agreement and the consummation by each of the Company and
Subsidiary Guarantors of the transactions contemplated hereby, and the
fulfillment of the terms hereof, will not conflict with or constitute or result
in a breach of or a default under (or an event which with notice or passage of
time or both would constitute as a default under) or
-5-
<PAGE>
violation of any of (i) the terms or provisions of any indenture, mortgage,
deed of trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or instrument to which any of
the Company or the Subsidiary Guarantors is a party or to which any of them or
their respective properties or assets is subject, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of any of the
Company or the Subsidiary Guarantors, or (iii) (assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 9 hereof) any
statute, judgment, decree, order, rule or regulation applicable to any of the
Company or the Subsidiary Guarantors or any of their respective properties or
assets.
(m) None of the Company, the Subsidiary Guarantors or the Founding
Companies is (i) in violation of its certificate of incorporation or bylaws,
(ii) in breach or violation of any statute, judgment, decree, order, rule or
regulation applicable to any of them or any of their respective properties or
assets, except for any such breach or violation which would not, individually or
in the aggregate, have a Material Adverse Effect, or (iii) except as disclosed
in the Final Circular (or, if the Final Circular is not in existence, the most
recent Circular), in breach of or default under (nor has any event occurred
which, with notice or passage of time or both, would constitute a default under)
or in violation of any of the terms or provisions of any indenture, mortgage,
deed of trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or instrument to which any of
them is a party or to which any of them or their respective properties or assets
is subject, except for any such breach, default, violation or event which would
not, individually or in the aggregate, have a Material Adverse Effect.
(n) The audited historical financial statements of the Company and
the Founding Companies included in the Final Circular (or, if the Final Circular
is not in existence, the most recent Circular) present fairly in all material
respects the financial position, the results of their operations and their cash
flows at the dates and for the periods to which they relate and have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis, except as otherwise stated therein. The summary and selected
historical financial data in the Final Circular (or, if the Final Circular is
not in existence, the most recent Circular) present fairly in all material
respects the financial information shown therein and have been prepared and
compiled on a basis consistent with the audited financial statements included
therein, except as otherwise stated therein. KPMG Peat Marwick, LLP (the
"Independent Accountants") is an independent public accounting firm within the
-----------------------
meaning of the Act and the rules and regulations promulgated thereunder.
(o) Except as described in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular), the pro forma financial
statements under the headings "Selected Unaudited Pro Forma and Projected
Consolidated Financial Data," "Selected Pro Forma Consolidated Financial Data,"
and "Unaudited Pro Forma and Projected Consolidated Financial Statements"
(including the notes thereto) and the other pro forma financial information (but
excluding all projected or forecasted financial information) included in the
Final Circular (or, if the Final Circular is not in existence, the most recent
Circular) (i) comply as to form in all material respects with the applicable
requirements of Regulation S-X
-6-
<PAGE>
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), (ii) have been prepared in accordance with the Commission's rules and
- ---
guidelines with respect to pro forma financial statements, and (iii) have been
properly computed on the bases described therein; the assumptions used in the
preparation of the pro forma financial data and other pro forma and projected
financial information included in the Final Circular (or, if the Final Circular
is not in existence, the most recent Circular) are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein.
(p) Except as described in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular), there is not pending
or, to the best knowledge of the Company or any Subsidiary Guarantors,
threatened, any action, suit, proceeding, inquiry or investigation to which the
Company, any of the Subsidiary Guarantors or any Founding Company is a party, or
to which the property or assets of the Company, any of the Subsidiary Guarantors
or any Founding Company are subject, before or brought by any court or
governmental agency or body which, if determined adversely to the Company or the
Subsidiary Guarantors, would result, individually or in the aggregate, in any
material adverse change in the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of the Company and
the Subsidiary Guarantors, taken as a whole, both before and after giving effect
to the Acquisitions (any such event, a "Material Adverse Change"), or which
-----------------------
seeks to restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Securities to be sold hereunder or the consummation
of the other transactions described in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular).
(q) As of the Closing Date (as defined in Section 4 below), each of
the Company and the Subsidiary Guarantors owns or possesses adequate licenses or
other rights to use all trademarks, service marks, trade names and know-how
necessary to conduct the businesses now or proposed to be operated by it as
described in the Final Circular (or, if the Final Circular is not in existence,
the most recent Circular), and since December 31, 1996, none of the Company, the
Subsidiary Guarantors or the Founding Companies has received any notice of
conflict with (or knows of any such conflict with) asserted rights of others
with respect to any trademarks, service marks, trade names or know-how which, if
such assertion of conflict were sustained, would, individually or in the
aggregate, have a Material Adverse Effect.
(r) As of the Closing Date (as defined in Section 4 below), each of
the Company and the Subsidiary Guarantors possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals, presently required or necessary to own or lease, as the case
may be, and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Final Circular
(or, if the Final Circular is not in existence, the most recent Circular),
except where the failure to obtain such licenses, permits, certificates,
consents, orders, approvals and other authorizations, or to
-7-
<PAGE>
make all declarations and filings, would not, individually or in the aggregate,
have a Material Adverse Effect, and none of the Company or any of the Subsidiary
Guarantors or any of the Founding Companies has received any notice of any
proceeding relating to revocation or modification of any such license, permit,
certificate, consent, order, approval or other authorization, except as
described in the Final Circular (or, if the Final Circular is not in existence,
the most recent Circular) and except where such revocation or modification would
not, individually or in the aggregate, have a Material Adverse Effect.
(s) Since the respective dates as of which information is given in
the Final Circular (or, if the Final Circular is not in existence, the most
recent Circular), except as described therein, (i) there has not been a Material
Adverse Change, (ii) none of the Company or any of the Subsidiary Guarantors or
any of the Founding Companies has incurred any liabilities or obligations,
direct or contingent, or entered into or agreed to enter into any transactions
or contracts (written or oral) not in the ordinary course of business, and (iii)
none of the Company, any of the Subsidiary Guarantors or any of the Founding
Companies has purchased any of its outstanding capital stock, nor declared, paid
or otherwise made any dividend or distribution of any kind on its capital stock
(other than with respect to any such Subsidiary Guarantor, the purchase of, or
dividend or distribution on, capital stock owned by the Company).
(t) Each of the Company, the Subsidiary Guarantors and the Founding
Companies has filed all necessary federal, state and foreign income and
franchise tax returns, except where the failure to so file such returns would
not, individually or in the aggregate, have a Material Adverse Effect, and has
paid all taxes shown as due thereon; and other than tax deficiencies which the
Company, any Subsidiary Guarantor or any Founding Company is contesting in good
faith and for which the Company, such Subsidiary Guarantor or such Founding
Company has provided adequate reserves, there is no tax deficiency that has been
asserted against the Company, any of the Subsidiary Guarantors or any of the
Founding Companies that would have, individually or in the aggregate, a Material
Adverse Effect.
(u) The projected financial and operating data and statements
included in the Final Circular (or, if the Final Circular is not in existence,
the most recent Circular) are based on assumptions which the Company and the
Subsidiary Guarantors believe to be reasonable in light of current
circumstances.
(v) None of the Company, the Subsidiary Guarantors or any agent
acting on their behalf has taken or will take any action that might cause this
Agreement or the Securities to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date (as defined in Section 4
below).
(w) As of the Closing Date (as defined in Section 4 below), each of
the Company and the Subsidiary Guarantors has good and marketable title to all
real property and good and marketable title to all personal property described
in the Final Circular (or, if the Final Circular is not in existence, the most
recent Circular) as being owned by it and good and
-8-
<PAGE>
marketable title to a leasehold estate in the real and personal property
described in the Final Circular (or, if the Final Circular is not in existence,
the most recent Circular) as being leased by it, free and clear of all liens,
charges, encumbrances or restrictions, except as described in the Final Circular
(or, if the Final Circular is not in existence, the most recent Circular) or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect.
(x) There are no legal or governmental proceedings involving or
affecting the Company, any Subsidiary Guarantor or any Founding Company or any
of their respective properties or assets which would be required to be described
in a prospectus pursuant to the Act that are not described in the Final Circular
(or, if the Final Circular is not in existence, the most recent Circular), nor
are there any material contracts or other documents which would be required
to be described in a prospectus pursuant to the Act that are not described in
the Final Circular (or, if the Final Circular is not in existence, the most
recent Circular).
(y) To the best knowledge of the Company, except as described in the
Final Circular (or, if the Final Circular is not in existence, the most recent
Circular), each of the Company, the Subsidiary Guarantors and the Founding
Companies is in compliance in all respects with all laws, rules or regulations
relating to pollution or protection of public or employee health or the
environment ("Environmental Law") and with the terms and conditions of any
-----------------
permit, license or approval required thereunder in connection with the
ownership, operation or use of its business, property and assets except where
the failure to be in such compliance would not, individually or in the
aggregate, have a Material Adverse Effect; except as disclosed in the Final
Circular (or, if the Final Circular is not in existence, the most recent
Circular), none of the Company, the Subsidiary Guarantors or the Founding
Companies is subject to any liability, absolute or contingent, under any
Environmental Law except for any such liability which would not, individually or
in the aggregate, have a Material Adverse Effect; except as disclosed in the
Final Circular (or, if the Final Circular is not in existence, the most recent
Circular), there is no civil, criminal or administrative action, suit, demand,
hearing, notice of violation or deficiency, investigation, proceeding or notice
of potential responsibility or demand letter or request for information pending
or, to their knowledge, threatened against the Company, any of the Subsidiary
Guarantors or any Founding Company under any Environmental Law which, if
determined adversely to the Company or any such Subsidiary would, individually
or in the aggregate, result in a Material Adverse Effect.
(z) Each of the Company and its Subsidiary Guarantors carries
insurance (including self insurance) in such amounts and covering such risks as
in its reasonable determination is adequate for the conduct of its business and
the value of its properties.
(aa) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company, any of the Subsidiary Guarantors or any of the
Founding Companies which is pending or, to the best knowledge of the Company or
any Subsidiary Guarantor, threatened.
-9-
<PAGE>
(bb) None of the Company, the Subsidiary Guarantors or the Founding
Companies has any liability for any prohibited transaction or funding deficiency
or any complete or partial withdrawal liability with respect to any pension,
profit sharing or other plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which the Company, any Subsidiary
-----
Guarantor or any Founding Company makes or ever has made a contribution and in
which any employee of the Company, any Subsidiary Guarantor or any Founding
Company is or has ever been a participant. With respect to such plans, the
Company, each Subsidiary Guarantor and each Founding Company is in compliance in
all material respects with all applicable provisions of ERISA.
(cc) After giving effect to the offering and sale of the Securities,
neither the Company nor any of the Subsidiary Guarantors will be an "investment
company" or "promoter" or "principal underwriter" for an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder (the "Investment Company Act").
----------------------
(dd) The Senior Notes, the Exchange Notes, the Warrants, the Warrant
Shares, the Common Stock, the Units, the Indenture, the Warrant Agreement, the
Additional Warrants (as defined in Section 4 below) and the Rights Agreements
will, and this Agreement does, conform in all material respects to the
descriptions thereof in the Final Circular (or, if the Final Circular is not in
existence, the most recent Circular).
(ee) Except as disclosed in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular), no holder of securities
of the Company or any Subsidiary Guarantor will be entitled to have such
securities registered under the registration statements required to be filed by
the Company pursuant to the Rights Agreements other than as expressly permitted
thereby.
(ff) Immediately after the consummation of the transactions
contemplated by this Agreement, the Company believes that the fair value and
current fair saleable value of the assets of each of the Company and the
Subsidiary Guarantors (each on a consolidated basis) will exceed the sum of its
stated liabilities and identified contingent liabilities; neither the Company
nor any of the Subsidiary Guarantors (each on a consolidated basis) is, nor will
either the Company or any of the Subsidiary Guarantors (each on a consolidated
basis) be, after giving effect to the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
(a) left with unreasonably small capital with which to carry on its business as
it is proposed to be conducted, (b) unable to pay its debts (contingent or
otherwise) as they mature or (c) to the belief of the Company, otherwise
insolvent.
(gg) None of the Company nor any of its Affiliates (as defined in
Rule 501(b) of Regulation D under the Act ("Regulation D")) nor any person
------------
acting on its or their behalf has, directly or indirectly, offered or sold any
Security, or solicited offers to buy any Security under circumstances that would
require registration of the offer or sale of the Securities under the Act. None
of the Company, any of its Affiliates or any person acting on its or their
behalf
-10-
<PAGE>
has engaged in any general solicitation or general advertising within the
meaning of Rule 502(c) under the Act or, with respect to Securities sold outside
the United States to non-U.S. persons (as defined in Rule 902 under the Act), by
means of any directed selling efforts within the meaning of Rule 902 under the
Act. The Company, any Affiliate of the Company and any person acting on its or
their behalf (other than the Initial Purchaser) has complied with and will
implement the "offering restriction" within the meaning of such Rule 902.
(hh) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Act.
(ii) Except as disclosed in the Circular, within the six months
preceding the date hereof, neither the Company nor any other person acting on
behalf of the Company (other than the Initial Purchaser) has offered or sold to
any person any Securities, or any securities of the same or a similar class as
the Securities, other than Securities offered or sold to the Initial Purchaser
hereunder; and the Company will take reasonable precautions designed to insure
that any offer or sale, direct or indirect, in the United States or to any U.S.
person (as defined in Rule 902 under the Act) of any Securities or any
substantially similar security issued by the Company, within six months
subsequent to the date on which the distribution of the Securities has been
completed (as notified to the Company by Jefferies & Company, Inc.), is made
under restrictions and other circumstances reasonably designed not to affect the
status of the offer and sale of the Securities in the United States and to U.S.
persons contemplated by this Agreement as transactions exempt from the
registration provisions of the Act.
(jj) Assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 9 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial Purchaser in
the manner contemplated by this Agreement to register any of the Securities
under the Act or to qualify the Indenture under the TIA.
(kk) No securities of the Company or any Subsidiary Guarantor are of
the same class (within the meaning of Rule 144A under the Act) as the Securities
and listed on a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
(ll) None of the Company or the Subsidiary Guarantors have taken, nor
will any of them take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities.
(mm) None of the Company, any of the Subsidiary Guarantors, or any of
the Founding Companies, nor any director, officer, agent, employee or other
person associated with or acting on behalf of the Company, any of the Subsidiary
Guarantors, or any of the Founding Companies, has used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic governmental official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
-11-
<PAGE>
Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(nn) As of the date hereof, the Acquisitions have closed in escrow
and on the Closing Date (as defined in Section 4 below) the Acquisitions shall
have been finally consummated. On and as of the Closing Date, each merger
contemplated by the Acquisition Agreements shall have become effective pursuant
to the laws of the jurisdiction of organization of each applicable Founding
Company and corresponding Acquisition Subsidiary and the Company shall be the
sole record and beneficial owner of the equity of each surviving corporation of
each such merger, in each case as contemplated by the applicable Acquisition
Agreement. On and as of the Closing Date, Call Points Acquisition Corporation
shall have acquired all the assets of Call Points, Inc., as contemplated by the
applicable Acquisition Agreement. Other than the payment of the cash
consideration to be paid in the Acquisitions, all conditions precedent to the
Acquisitions have been satisfied (and not waived) and the Acquisition Agreements
have not been modified or amended in any way and are identical in all respects
to the Acquisition Agreements delivered to the Initial Purchaser on or prior to
the date hereof. The Acquisition Agreements will, on the Closing Date (as
defined in Section 4 below), conform in all material respects to the description
thereof contained in the Final Circular.
(oo) The Company has not paid or agreed to pay any person any
compensation for soliciting another to purchase any of the securities (except as
contemplated by this Agreement).
Any certificate signed by any authorized officer of the Company or any
Subsidiary Guarantor and delivered to the Initial Purchaser at the Closing or to
counsel for the Initial Purchaser shall be deemed a joint and several
representation and warranty by the Company and each of the Subsidiary Guarantors
to the Initial Purchaser as to the matters covered thereby.
4. Purchase, Sale and Delivery of the Securities. On the basis of
---------------------------------------------
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company and the
Subsidiary Guarantors agree to issue and sell to the Initial Purchaser, and the
Initial Purchaser agrees to purchase from the Company and the Subsidiary
Guarantors 75,000 Units at a purchase price of $960 per Unit. One or more
certificates in definitive form for the Securities that the Initial Purchaser
has agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as Jefferies & Company, Inc. requests upon
notice to the Company at least 24 hours prior to the Closing Date, shall be
delivered by or on behalf of the Company and the Subsidiary Guarantors to the
Initial Purchaser, against payment by or on behalf of the Initial Purchaser of
the purchase price therefor by wire transfer (same day funds) to such account or
accounts as the Company shall specify prior to the Closing Date. Such delivery
of and payment for the Securities shall be made at 10:00 a.m., New York time, on
November 12, 1997, or at such other place, time or date as the Initial
Purchaser, on the one hand, and the Company, on the other hand, may agree upon,
such time and date of delivery against payment
-12-
<PAGE>
being herein referred to as the "Closing Date." With respect to Securities to be
------------
delivered in definitive certificated form, the Company and the Subsidiary
Guarantors will make certificates for such Securities available for checking and
packaging by the Initial Purchaser at the offices of Jefferies & Company, Inc.
in New York, New York, or at such other place as Jefferies & Company, Inc. may
designate, at least 24 hours prior to the Closing Date. Securities to be
represented by one or more definitive global Securities in book-entry form will
be deposited on the Closing Date, by or on behalf of the Company, with The
Depository Trust Company ("DTC") or its designated custodian.
---
As additional compensation to the Initial Purchaser, the Company
agrees to issue to the Initial Purchaser (in such denomination or denominations
and registered in such name or names as the Initial Purchaser requests upon
notice to the Company at least 24 hours prior to the Closing Date) at the
Closing Date, for no additional consideration, 30,000 warrants to purchase
initially 302,658 shares of Common Stock at an initial exercise price of $.01
per share of Common Stock (the "Additional Warrants"). In addition to the
-------------------
foregoing, the Initial Purchaser will be paid by wire transfer (same day funds)
a fee for advisory services rendered of $1,000,000.
5. Offering by the Initial Purchaser. The Initial Purchaser
---------------------------------
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Final Circular, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchaser is advisable.
6. Covenants of the Company and the Subsidiary Guarantors. Each of
------------------------------------------------------
the Company and the Subsidiary Guarantors jointly and severally covenants and
agrees with the Initial Purchaser that:
(a) The Company and the Subsidiary Guarantors will not amend or
supplement the Final Circular or any amendment or supplement thereto of which
the Initial Purchaser shall not previously have been advised and furnished a
copy for a reasonable period of time prior to the proposed amendment or
supplement and as to which the Initial Purchaser shall not have given their
consent. The Company and the Subsidiary Guarantors will promptly, upon the
reasonable request of the Initial Purchaser or counsel for the Initial
Purchaser, make any amendments or supplements to the Preliminary Circular or the
Final Circular that may be necessary or advisable in connection with the resale
of the Securities by the Initial Purchaser.
(b) The Company and the Subsidiary Guarantors will cooperate with the
Initial Purchaser in arranging for the qualification of the Securities for
offering and sale under the securities or "Blue Sky" laws of such jurisdictions
as the Initial Purchaser may designate and will continue such qualifications in
effect for as long as may be necessary to complete the resale of the Securities;
provided, however, that in connection therewith, neither of the Company nor any
- -------- -------
Subsidiary Guarantors shall be required to qualify as a foreign corporation or
to execute a general consent to service of process in any jurisdiction or
subject itself to
-13-
<PAGE>
taxation in excess of a nominal dollar amount in any such jurisdiction where it
is not then so subject.
(c) If, at any time prior to the completion of the initial resale by
the Initial Purchaser of the Securities to persons other than affiliates of the
Initial Purchaser (as determined by the Initial Purchaser), any event occurs as
a result of which the Final Circular as then amended or supplemented would
include any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Final Circular to comply with
applicable law, the Company and the Subsidiary Guarantors will promptly notify
the Initial Purchaser thereof and will prepare, at the expense of the Company
and the Subsidiary Guarantors, an amendment or supplement to the Final Circular
that corrects such statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Preliminary Circular and the Final Circular or any amendment or supplement
thereto as the Initial Purchaser may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Final Circular.
(f) For and during the period ending on the date no Securities are
outstanding, the Company will furnish to the Initial Purchaser copies of all
reports and other communications (financial or otherwise) furnished by the
Company or the Subsidiary Guarantors to the Trustee, Warrant Agent or the
holders of the Securities and, as soon as available, copies of any reports or
financial statements furnished to or filed by the Company or the Subsidiary
Guarantors with the Commission or any national securities exchange on which any
class of securities of the Company or the Subsidiary Guarantors may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, a copy of any unaudited
interim financial statements of the Company for any period subsequent to the
period covered by the most recent financial statements appearing in the Final
Circular.
(h) From and after the date hereof until the second anniversary of
the date hereof, the Company will not, and will not permit any of its
"Affiliates" (as defined in Rule 144A under the Act) to, resell any Securities
which constitute "restricted securities" under Rule 144 that have been
reacquired by any of them.
(i) None of the Company, any of its Affiliates or any person acting
on its or their behalf will, directly or indirectly, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any "security" (as
defined in the Act) under circumstances which would require the registration
under the Act of the Securities.
-14-
<PAGE>
(j) The Company and the Subsidiary Guarantors will not solicit any
offer to buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act.
(k) For so long as any of the Securities remain outstanding, the
Company and the Subsidiary Guarantors will make available, upon request, to any
seller of such Securities the information specified in Rule 144A(d)(4) under the
Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange
Act.
(l) Each of the Company and the Subsidiary Guarantors will use its
best efforts to (i) permit the Securities to be designated PORTAL securities in
accordance with the rules and regulations adopted by the NASD relating to
trading in the Private Offerings, Resales and Trading through Automated Linkages
market (the "PORTAL Market") and (ii) permit the Securities to be eligible for
-------------
clearance and settlement through DTC.
(m) The Company and the Subsidiary Guarantors agree that prior to any
registration of the Securities pursuant to the Registration Rights Agreement, or
at such earlier time as may be required, the Indenture shall be qualified under
the TIA and will cause to be entered into any necessary supplemental indentures
in connection therewith.
(n) In connection with any disposition of Securities pursuant to a
transaction made in compliance with the transfer restrictions referred to in the
Final Circular, the Company will reissue certificates evidencing such Securities
without a restrictive legend (provided, if requested, that the legal opinion
referenced therein so permits).
(o) During the period of three years after the last date of original
issuance of the Securities, the Company will not be or become an "investment
company" under the Investment Company Act.
(p) Except as disclosed in the Final Circular prior to March 12,
1998, the Company will not, without the prior written consent of the Initial
Purchaser, directly or indirectly, issue, sell, offer or agree to sell, grant
any option for the sale of, or otherwise dispose of, or enter into an agreement
to sell Securities, any security convertible into, or exchangeable or
exerciseable for, Securities or any securities substantially similar to the
Securities (except for the Securities issued pursuant to this Agreement or
exchangeable therefor in accordance with the Rights Agreements).
7. Expenses. The Company and the Subsidiary Guarantors agree,
--------
jointly and severally, to pay all costs and expenses incident to the performance
of their obligations under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 12 hereof, including all costs and expenses incident to (i) the
printing, word processing or other production of documents with respect to the
transactions contemplated hereby, including any costs of printing the
Preliminary Circular and the Final Circular and any amendment or supplement
thereto, (ii) all arrangements relating to the delivery to the Initial Purchaser
of copies of the foregoing documents, (iii) the fees and
-15-
<PAGE>
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation, issuance and delivery to the Initial
Purchaser of the Securities, (v) the qualification of the Securities under state
securities and "Blue Sky" laws, including filing fees and fees and disbursements
of counsel for the Initial Purchaser relating thereto, (vi) all out-of-pocket
expenses incurred by the Initial Purchaser in connection with its services
rendered or to be rendered hereunder, (vii) the fees and expenses of counsel to
the Initial Purchaser in connection with the transactions contemplated hereby,
(viii) expenses in connection with any meetings with prospective investors in
the Securities, (ix) fees and expenses of the Trustee, the Warrant Agent and the
transfer agent for the Common Stock including fees and expenses of their
respective counsel, (x) all expenses and listing fees incurred in connection
with the application for quotation of the Securities on the PORTAL Market, and
(xi) any fees charged by investment rating agencies for the rating of the
Securities. The Company and the Subsidiary Guarantors agree that they will pay
in full on the Closing Date the fees and expenses referred to in clause (vii) by
delivery to counsel for the Initial Purchaser on such date a wire transfer (same
day funds) payable to such counsel in the requisite amount.
8. Conditions of the Initial Purchaser's Obligations. The obligation
-------------------------------------------------
of the Initial Purchaser to purchase and pay for the Securities shall, in its
sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Mirick, O'Connell, DeMallie & Lougee, LLP, counsel for the Company
and the Subsidiary Guarantors, in form and substance satisfactory to counsel for
the Initial Purchaser, to the effect that:
(i) Each of the Company, the Subsidiary Guarantors and the
Founding Companies is duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and
has all requisite corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Final
Circular. Each of the Company, the Subsidiary Guarantors and the Founding
Companies is duly qualified as a foreign corporation and in good standing
in each jurisdiction where the ownership or leasing of its properties or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect.
(ii) To the knowledge of such counsel, each of the Company and
the Subsidiary Guarantors hold all material licenses, certificates and
permits from governmental authorities necessary for the conduct of its
business as described in the Final Circular. Other than the Subsidiary
Guarantors, there is no other subsidiary of the Company.
(iii) As of the date thereof, the Company and the Subsidiary
Guarantors have the authorized, issued and outstanding capitalization set
forth in the
-16-
<PAGE>
Final Circular; all of the outstanding shares of capital stock of the
Subsidiary Guarantors have been duly and validly authorized and issued and
are fully paid and non-assessable and are directly owned by the Company,
and, to the knowledge of such counsel and except as set forth in the Final
Circular, free and clear of all liens, encumbrances, equities and claims or
restrictions on transferability or voting.
(iv) Except as set forth in the Final Circular, to the knowledge
of such counsel (A) no options, warrants or other rights to purchase from
the Company or any Subsidiary Guarantors shares of capital stock in the
Company or any Subsidiary Guarantors are outstanding, (B) no agreements or
other obligations of the Company or any Subsidiary Guarantors to issue, or
other rights to cause the Company or any Subsidiary Guarantors to convert,
any obligation into, or exchange any securities for, shares of capital
stock in the Company or any Subsidiary Guarantors are outstanding and (C)
no holder of securities of the Company or any Subsidiary Guarantors is
entitled to have such securities registered under a registration statement
filed by the Company or any Subsidiary Guarantors under the Act with
respect to the Securities or the Warrant Shares.
(v) Each merger contemplated by the Acquisition Agreements has
become effective pursuant to the laws of the jurisdiction of organization
of each applicable Founding Company and corresponding Acquisition
Subsidiary and the Company is the sole record owner of the shares of the
equity of each surviving corporation of each such merger. The transactions
contemplated in the Acquisition Agreement between Call Points, Inc. and
Call Points Acquisition Corporation have been consummated.
(vi) The Senior Notes have been duly and validly authorized and
executed by the Company and when delivered by the Company (assuming the due
authorization, execution, and delivery of the Indenture by the Trustee and
the due authentication of the Senior Notes by the Trustee in accordance
with the Indenture) and paid for by the Initial Purchaser in accordance
with the terms of this Agreement, will constitute the valid and legally
binding obligations of the Company enforceable against the Company in
accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent conveyance and transfer,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought.
(vii) Each of the Subsidiary Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Guarantees. The Guarantees endorsed on each Senior
Note have been duly and validly authorized and executed by each of the
Subsidiary Guarantors and, when the Senior Notes are authenticated by the
Trustee in accordance with the provisions of the Indenture and delivered to
and paid for by the Initial Purchaser in accordance with the terms of this
Agreement, will constitute the valid and legally binding obligations of
-17-
<PAGE>
each of the Subsidiary Guarantors, enforceable against each of the
Subsidiary Guarantors in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
fraudulent conveyance and transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(viii) Each of the Company and each of the Subsidiary Guarantors
has all requisite corporate power and authority to execute, deliver and
perform its respective obligations under the Indenture; the Indenture is in
sufficient form for qualification under the TIA; the Indenture has been
duly and validly authorized, executed and delivered by the Company and each
of the Subsidiary Guarantors and (assuming the due authorization, execution
and delivery thereof by the Trustee), constitutes the valid and legally
binding agreement of the Company and each of the Subsidiary Guarantors,
enforceable against the Company and the Subsidiary Guarantors in accordance
with its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, fraudulent conveyance and transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(ix) Each of the Company and each of the Subsidiary Guarantors
has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Registration Rights Agreements; the
Registration Rights Agreements have been duly and validly authorized,
executed and delivered by the Company and each of the Subsidiary Guarantors
(assuming the due authorization, execution and delivery thereof by the
Initial Purchaser), constitute the valid and legally binding agreement of
the Company and each such Subsidiary Guarantors, enforceable against the
Company and each such Subsidiary Guarantors in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance and transfer, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be brought, and
except that any agreement for indemnification contained therein may be
contrary to public policy as to which we express no opinion.
(x) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Warrant
Agreement. The Warrant Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent conveyance and transfer,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor
may be
-18-
<PAGE>
brought, and except that any agreement for indemnification contained
therein may be contrary to public policy as to which we express no opinion.
(xi) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Warrants and the Additional Warrants. The Warrants and the Additional
Warrants have been duly and validly authorized and executed by the Company
and when countersigned by the Warrant Agent in accordance with the
provisions of the Warrant Agreement and delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement, will have
been duly issued and delivered and will constitute the valid and legally
binding obligations of the Company, entitled to the benefits of the Warrant
Agreement, and enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, fraudulent conveyance and transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(xii) When issued in accordance with the terms and conditions
contained in the Warrant Agreement, upon exercise of the Warrants and upon
exercise of the Additional Warrants, the Warrant Shares and the Additional
Warrant Shares, as the case may be, will be duly authorized, validly
issued, fully paid and non-assessable and will not be subject to any
preemptive or similar rights. The Warrant Shares and the Additional
Warrant Shares, as the case may be, have been duly reserved for issuance in
accordance with the terms of the Warrants, the Warrant Agreement and the
Additional Warrants, as the case may be.
(xiii) Each of the Company and the Subsidiary Guarantors has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby; the execution, delivery and performance of this
Agreement by each of the Company and the Subsidiary Guarantors and the
consummation by each of the Company and the Subsidiary Guarantors of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of each of the Company and the
Subsidiary Guarantors. This Agreement has been duly executed and delivered
by each of the Company and the Subsidiary Guarantors.
(xiv) The Indenture, the Senior Notes, the Guarantees, the
Warrants, the Additional Warrants, the Warrant Shares, the Common Stock,
the Registration Rights Agreements and the Warrant Agreement conform in all
material respects to the descriptions thereof contained in the Final
Circular. The holders of the outstanding shares of capital stock of the
Company are not entitled to any preemptive or other rights to subscribe for
the Securities, pursuant to Massachusetts law or the Company's charter, and
to the knowledge of such counsel after due inquiry, such counsel is not
aware of the existence of such rights pursuant to any agreement.
-19-
<PAGE>
(xv) To the knowledge of such counsel except as described in
the Final Circular, no legal or governmental proceedings are pending or
threatened to which any of the Company or any of its subsidiaries is a
party or to which the property or assets of the Company or any subsidiary
is subject which, if determined adversely to the Company or the subsidiary,
would result, individually or in the aggregate, in a Material Adverse
Effect, or which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold
hereunder or the consummation of the other transactions described in the
Final Circular under the caption "Use of Proceeds."
(xvi) The execution and delivery of the Exchange Notes and the
Private Exchange Notes by the Company have been duly authorized by all
necessary corporate action of the Company, and when the Exchange Notes and
Private Exchange Notes have been duly executed and delivered by the Company
in accordance with the terms of the Registration Rights Agreement and the
Indenture, and assuming due authentication by the Trustee, the Exchange
Notes and the Private Exchange Notes will constitute the legal, valid,
binding and enforceable obligations of the Company, entitled to the
benefits of the Indenture, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent conveyance and transfer,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought.
(xvii) The Guarantees to be endorsed on each of the Exchange
Notes and the Private Exchange Notes by the Subsidiary Guarantors have been
duly authorized by all necessary corporate action of the Subsidiary
Guarantors, and when the Exchange Notes and the Private Exchange Notes have
been duly executed and delivered by the Company and the Subsidiary
Guarantors in accordance with the terms of the Registration Rights
Agreement and the Indenture, and assuming due authentication by the
Trustee, the Guarantees will constitute the legal, valid, binding and
enforceable obligations of the Subsidiary Guarantors, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
fraudulent conveyance and transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(xviii) The execution and delivery of this Agreement, the
Indenture, the Warrant Agreement and the Registration Rights Agreements, as
applicable, and the consummation of the transactions contemplated hereby
and thereby (including, without limitation, the issuance and sale of the
Securities to the Initial Purchaser) will not conflict with or constitute
or result in a breach or violation of or a default under (or an event which
with notice or passage of time or both would constitute a default under) or
violation of any of (i) the terms or provisions of any indenture, mortgage,
deed of trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or instrument known to
such counsel (including in any
-20-
<PAGE>
event any of the foregoing which have been filed by the Company with the
Commission) to which any of the Company or the Subsidiary Guarantors is a
party or to which any of them or their respective properties or assets is
subject, except for any such conflict, breach, violation, default or event
which would not, individually or in the aggregate, have a Material Adverse
Effect, (ii) the certificate of incorporation or bylaws of any of the
Company or the Subsidiary Guarantors, or (iii) (assuming the accuracy of
the representations and warranties of the Initial Purchaser in Section 9
hereof) any statute, judgment, decree, order, rule or regulation known to
such counsel to be applicable to the Company or the Subsidiary Guarantors
or any of their respective properties or assets, except for any such
conflict, breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(xix) To the knowledge of such counsel, no consent, approval,
authorization or order of any governmental authority is required for the
issuance and sale by the Company and the Subsidiary Guarantors of the
Securities to the Initial Purchaser or the other transactions contemplated
hereby.
(xx) No registration under the Act of the Securities is
required in connection with the sale of the Securities to the Initial
Purchaser as contemplated by this Agreement and the Final Circular or in
connection with the initial resale of the Securities by the Initial
Purchaser in accordance with Section 9 of this Agreement, and prior to the
commencement of the Exchange Offer (as defined in the Registration Rights
Agreement) or the effectiveness of the Shelf Registration Statement (as
defined in the Registration Rights Agreement), the Indenture is not
required to be qualified under the TIA, in each case assuming (i) that the
purchasers who buy such Securities in the initial resale thereof are
qualified institutional buyers as defined in Rule 144A promulgated under
the Act ("QIBs" or "Qualified Institutional Buyers"), accredited investors
---- ------------------------------
asin Rule 501 (a)(1), (2), (3) or (7) promulgated under the Act
("Accredited Investors"), or foreign purchasers, (ii) the accuracy of the
--------------------
Initial Purchaser's representations in Section 9 and those of the Company
and the Subsidiary Guarantors contained in this Agreement regarding the
absence of a general solicitation in connection with the sale of such
Securities to the Initial Purchaser and the initial resale thereof and
(iii) the due performance by the Initial Purchaser of the agreements set
forth in Section 9 hereof.
(xxi) Neither the consummation of the transactions contemplated
by this Agreement nor the sale, issuance, execution or delivery of the
Securities will violate Regulation G, T, U or X of the Board of Governors
of the Federal Reserve System.
(xxii) Neither the Company nor any of the Subsidiary Guarantors
is an "investment company" or "promoter" or "principal underwriter" for an
"investment company" as such terms are defined in the Investment Company
Act.
-21-
<PAGE>
(xxiii) The statements of legal matters, documents or
proceedings, and legal conclusions, if any, set forth in the Final Circular
under the headings "Description of Units," "Description of Notes,"
"Description of Warrants," "Exchange Offer; Registration Rights; Additional
Interest," and "Description of Capital Stock" fairly present the
information called for and fairly summarize the matters referred to
therein.
(xxiv) The statements made under the heading "Certain Federal
Income Tax Consequences" in the Final Circular, in so far as such
statements purport to summarize certain federal income tax laws of the
United States, constitute a fair and accurate summary of the principal
United States federal income tax consequences of an investment in the
Securities.
At the time the foregoing opinion is delivered, Mirick, O'Connell,
DeMallie & Lougee, LLP shall additionally state that it has participated in
conferences with officers and other representatives of the Company and the
Subsidiary Guarantors, representatives of the independent public accountants for
the Company, representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which conferences the contents of the Final Circular and
related matters were discussed, and, although it has not independently verified
and is not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Final Circular
(except to the extent specified in subsection 8(a)(iii) and (xiv)) and no facts
have come to its attention which lead it to believe that the Final Circular, on
the date thereof or at the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (except for the
financial statements, projections and other financial data included therein, as
to which such counsel expresses no opinion). The opinion of Mirick, O'Connell,
DeMallie & Lougee, LLP, described in this subsection (a) shall be rendered to
the Initial Purchaser at the request of the Company and the Subsidiary
Guarantors and shall so state therein.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser, dated
as of the Closing Date and addressed to the Initial Purchaser, of Cadwalader,
Wickersham & Taft, counsel for the Initial Purchaser, with respect to certain
legal matters relating to this Agreement and such other related matters as the
Initial Purchaser may require. In rendering such opinion, Cadwalader, Wickersham
& Taft shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(c) The Initial Purchaser shall have received from the Independent
Accountant a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to the effect
set forth in Exhibit C hereto.
---------
(d) The representations and warranties of each of the Company and the
Subsidiary Guarantors contained in this Agreement and the representations of the
Founding
-22-
<PAGE>
Companies contained in the Acquisition Agreements shall be true and correct in
all material respects on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date; the statements of the Company's
and the Subsidiary Guarantors' officers made pursuant to any certificate
delivered in accordance with the provisions hereof shall be true and correct in
all material respects on and as of the date made and on and as of the Closing
Date; the Company and the Subsidiary Guarantors shall have complied in all
material respects with all agreements and satisfied hereunder at or prior to the
Closing Date; and, except as described in the Final Circular (exclusive of any
amendment or supplement thereto after the date hereof), subsequent to the date
of the most recent financial statements in such Final Circular, there shall have
been no Material Adverse Change or any development that, singly or in the
aggregate, is reasonably likely to cause a Material Adverse Change.
(e) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial statements
contained in the Final Circular (exclusive of any amendment or supplement
thereto after the date hereof), there shall have not been (i) a change or
decrease specified in the accountants' letter or letters referred to in Section
8(c) hereof, or (ii) any change, or development involving a prospective change,
in or affecting the business or properties of the Company, the Subsidiary
Guarantors or the Founding Companies the effect of which, in any case referred
to in clause (i) or (ii) above, is, in the judgment of the Initial Purchaser, so
material and adverse as to make it impractical or inadvisable to proceed with
the offering or the delivery of the Securities as contemplated by the Final
Circular.
(g) The Initial Purchaser shall have received certificates of the
Company and each of the Subsidiary Guarantors, dated the Closing Date, signed on
behalf of the Company and each of the Subsidiary Guarantors by their respective
Chairman of the Board and Chief Executive Officer and the President and Chief
Operating Officer, to the effect that the signers of such certificate have
carefully examined the Final Circular, any amendment or supplement to the Final
Circular and this Agreement and that:
(i) the representations and warranties of the Company and each
of the Subsidiary Guarantors contained in this Agreement are true and
correct in all material respects as of the date hereof and as of the
Closing Date, and the Company and each of the Subsidiary Guarantors has
performed all covenants and agreements and satisfied hereunder all
conditions on their part to be performed or satisfied hereunder at or prior
to the Closing Date;
(ii) at the Closing Date, since the date hereof or since the date
of the most recent financial statements in the Final Circular (exclusive of
any amendment or supplement thereto after the date hereof), no event or
events have occurred, no information has become known nor does any
condition exist that, individually or in the aggregate, would have a
Material Adverse Effect;
-23-
<PAGE>
(iii) since the date hereof or since the date of the most
recent financial statements in the Final Circular (exclusive of any
amendment or supplement thereto after the date hereof), none of the Company
or any of the Subsidiary Guarantors has incurred any liabilities or
obligations, direct or contingent (other than in the ordinary course of
business), that are material to the Company or the Subsidiary Guarantors or
entered into any transactions not in the ordinary course of business that
are material to the business, condition (financial or other) or results of
operations or prospects of the Company or the Subsidiary Guarantors, taken
as a whole, and there has not been any change in the capital stock or long-
term indebtedness of the Company or the Subsidiary Guarantors that is
material to the business, condition (financial or other) or results of
operations or prospects of the Company or the Subsidiary Guarantors, taken
as a whole (both before and after giving effect to the Acquisitions); and
(iv) the sale of the Securities hereunder has not been
enjoined (temporarily or permanently).
(h) On the Closing Date, the Initial Purchaser shall have received
the Rights Agreements, the Indenture and the Warrant Agreement, each duly
executed by the Company and the Subsidiary Guarantors and shall have received
the Additional Warrants and such agreements shall be in full force and effect at
all times from and after the Closing Date.
(i) The Trustee shall have furnished to the Initial Purchaser the
opinion of its counsel, dated the Closing Date, to the effect that:
(i) The Trustee has been duly incorporated and is validly
existing as a Massachusetts trust company under the laws of the
jurisdiction of its organization.
(ii) The Indenture has been duly and validly authorized,
executed and delivered by the Trustee and (assuming the due authorization,
execution and delivery thereof by the Company and the Subsidiary
Guarantors) constitutes the valid and legally binding agreement of the
Trustee, enforceable against the Trustee in accordance with its terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought.
(iii) No consent, approval, authorization or order of any
federal or Massachusetts banking authority is required for the consummation
of the transactions contemplated by the Indenture by the Trustee.
(iv) Neither the execution and delivery of the Indenture or
the Warrant Agreement, the consummation of the transactions contemplated
therein, nor the fulfillment of the terms thereof by the Trustee or the
Warrant Agent will conflict with, result in a breach of will not conflict
with or constitute or result in a breach or violation of, or a default
under (or an event which with notice or passage of time or
-24-
<PAGE>
both would constitute a default under) or violation of any of (i) the terms
or provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate, contract or
other agreement or instrument known to such counsel to which the Trustee or
the Warrant Agent is a party or bound, (ii) the certificate of
incorporation or bylaws of the Trustee or the Warrant Agent, or (iii) any
statute, judgment, decree, order, rule or regulation known to such counsel
to be applicable to the Trustee or the Warrant Agent.
(j) On or before the Closing Date, the Initial Purchaser shall have
received a Stockholder Agreement, dated the closing date, between the Company
and John J. Hassett, duly executed by each of the Company and John J. Hassett in
form and substance satisfactory to the Initial Purchaser and its counsel.
(k) On or before the Closing Date, the Initial Purchaser shall have
received an opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of counsel for each of the Founding Companies with regard to the
applicable Acquisition, in form and substance satisfactory to the Initial
Purchaser and its counsel.
(l) On or before the Closing Date, the Initial Purchaser shall have
received a fully executed letter from each holder of any right to require
registration by the Company of the sale of such holder's securities which letter
shall provide for the waiver of certain registration rights and such other
matters as the Initial Purchaser may require, in each case in form and substance
satisfactory to the Initial Purchaser and its counsel.
(m) The Initial Purchaser shall have received evidence to its
satisfaction that: (i) on the Closing Date the Acquisitions shall have been
finally consummated; (ii) on and as of the Closing Date, each merger
contemplated by the Acquisition Agreements shall have become effective pursuant
to the laws of the jurisdiction of organization of each applicable Founding
Company and corresponding Acquisition Subsidiary and the Company shall be the
sole record and beneficial owner of the equity of each surviving corporation of
each such merger, in each case as contemplated by the applicable Acquisition
Agreement; (iii) on and as of the Closing Date, Call Points Acquisition
Corporation shall have acquired all the assets of Call Points, Inc., as
contemplated by the applicable Acquisition Agreement; (iv) other than the
payment of the cash consideration to be paid in the Acquisitions, all conditions
precedent to the Acquisitions shall have been satisfied (and not waived) and the
Acquisition Agreements shall not have been modified or amended in any way and
shall be identical in all respects to the Acquisition Agreements delivered to
the Initial Purchaser on or prior to the date hereof; and (v) the Acquisition
Agreements shall, on the Closing Date, conform in all material respects to the
description thereof contained in the Final Circular. Without limiting the
foregoing, on or prior to the Closing Date, the Initial Purchaser shall have
received evidence, to its and its counsel's satisfaction of the provision,
completion or satisfaction of each and every item which has not been identified
as "Completed" (or has otherwise been indicated to be incomplete) on the
letters, dated the date hereof, from Mirick, O'Connell, DeMallie & Lougee, LLP
to the Company and each Founding Company, a copy of each of which has been
presented to the Initial Purchaser.
-25-
<PAGE>
(n) On or before the Closing Date, the Initial Purchaser and counsel
for the Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiary
Guarantors as they shall have heretofore reasonably requested from the Company
and the Subsidiary Guarantors.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchaser and counsel for the Initial Purchaser. The Company and the
Subsidiary Guarantors shall furnish to the Initial Purchaser such conformed
copies of such documents, opinions, certificates, letters, schedules and
instruments in such quantities as the Initial Purchaser shall reasonably
request.
If any of the conditions specified in this Section 8 shall have not
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchaser and counsel to the Initial Purchaser,
this Agreement and all obligations of the Initial Purchaser hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial Purchaser.
Notice of such cancellation shall be given to the Company in writing or by
telephone or confirmed telecopy.
9. Offering of Securities: Restrictions on Transfer. The Initial
------------------------------------------------
Purchaser represents and agrees (as to itself only) that it is a qualified
institutional buyer as defined in Rule 144A promulgated under the Act (a "QIB").
---
The Initial Purchaser agrees with the Company and the Subsidiary Guarantors that
(a) it has not and will not solicit offers for, or offer or sell, the Securities
by any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Act; and (b) it has and will solicit
offers for the Securities only from, and will offer the Securities only to (i)
persons whom the Initial Purchaser reasonably believes to be QIBs, if any such
person is buying for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has represented to the
Initial Purchaser that each such account is a QIB, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A under the Act
("Rule 144A"), and, in each case, in transactions under Rule 144A or (ii) a
---------
limited number of other institutional investors reasonably believed by the
Initial Purchaser to be Accredited Investors that, prior to their purchase of
the Securities, deliver to the Initial Purchaser a letter containing the
representations and agreements set forth in Appendix A to the Final Circular
(or, if the Final Circular is not in existence, in the most recent Circular);
provided, however, that, in the case of this clause (b), in purchasing such
- -------- -------
Securities such persons are deemed to have represented and agreed as provided
under the caption "Transfer Restrictions" contained in the Final Circular (or,
if the Final Circular is not in existence, in the most recent Circular).
10. Indemnification and Contribution. (a) The Company and the
--------------------------------
Subsidiary Guarantors, jointly and severally, agree to indemnify and hold
harmless the Initial Purchaser,
-26-
<PAGE>
its directors, officers and each person, if any, who controls the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (collectively, an "Initial Purchaser Party"), against any losses,
-----------------------
claims, damages or liabilities to which any Initial Purchaser Party may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Circular or any amendment or supplement
thereto;
(ii) the omission or alleged omission to state, in any Circular
or any amendment or supplement thereto, a material fact required to be
stated therein or necessary to make the statements therein not misleading;
or
(iii) the breach of any representation, warranty or covenant of
any of the Company, the Subsidiary Guarantors or the Founding Companies,
and will reimburse, as incurred, the Initial Purchaser Party for any legal or
other expenses incurred by the Initial Purchaser Party in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof; provided, however, the Company and the Subsidiary Guarantors will not
-----------------
be liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Circular or any amendment
or supplement thereto in reliance upon and in conformity with written
information concerning the Initial Purchaser furnished to the Company or the
Subsidiary Guarantors by the Initial Purchaser specifically for use therein.
This indemnity agreement will be in addition to any liability that the Company
or the Subsidiary Guarantors may otherwise have to the indemnified parties.
Neither the Company nor the Subsidiary Guarantors shall be liable under this
Section 10 for any settlement of any claim or action effected without their
prior written consent, which shall not be unreasonably withheld. The Initial
Purchaser shall not, without the prior written consent of the Company and the
Subsidiary Guarantors, as applicable, effect any settlement or compromise of any
pending or threatened proceeding in respect of which the Company or any such
Subsidiary Guarantor is or could have been a party, or indemnity could have been
sought hereunder by the Company or such Subsidiary Guarantor, unless such
settlement (A) includes an unconditional written release of the Company or such
Subsidiary Guarantor, in form and substance reasonably satisfactory to the
Company or such Subsidiary Guarantor, from all liability or claims that are the
subject matter of such proceeding and (B) does not include any statement as to
any admission of fault, culpability or failure to act by or on behalf of the
Company or such Subsidiary Guarantor.
(b) The Initial Purchaser agrees to indemnify and hold harmless each
of the Company, the Subsidiary Guarantors, their directors, officers and each
person, if any, who controls the Company or the Subsidiary Guarantors within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to
-27-
<PAGE>
which the Company or the Subsidiary Guarantors or any such director, officer or
controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Circular or any
amendment or supplement thereto; (ii) the omission or the alleged omission to
state therein a material fact required to be stated in any Circular or any
amendment or supplement thereto or necessary to make the statements therein not
misleading and (iii) the breach of any representation, warranty or covenant of
the Initial Purchaser contained in this Agreement, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity with
written information concerning the Initial Purchaser, furnished to the Company
by the Initial Purchaser specifically for use therein; and subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any legal or other expenses incurred by the Company or the Subsidiary
Guarantors or any such director, officer or controlling person in connection
with investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Initial Purchaser may otherwise have to the indemnified parties. The Initial
Purchaser shall not be liable under this Section 10 for any settlement of any
claim or action effected without their consent, which shall not be unreasonably
withheld. None of the Company or any of the Subsidiary Guarantors shall, without
the prior written consent of the Initial Purchaser, effect any settlement or
compromise of any pending or threatened proceeding in respect of which the
Initial Purchaser is or could have been a party, or indemnity could have been
sought hereunder by the Initial Purchaser, unless such settlement (A) includes
an unconditional written release of the Initial Purchaser, in form and substance
reasonably satisfactory to the Initial Purchaser, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 10, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 10, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party or
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a) and (b) above. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if (i) the use of counsel chosen by the indemnifying
- -------- -------
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action include both the
indemnified party and the indemnifying party
-28-
<PAGE>
and the indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it and/or other indemnified parties that
are different from or additional to those available to the indemnifying party,
or (iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 10 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial Purchaser
in the case of paragraph (a) of this Section 10 or the Company and the
Subsidiary Guarantors in the case of paragraph (b) of this Section 10,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld), unless
such indemnified party waived in writing its rights under this Section 10, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 10 is unavailable to, or insufficient
to hold harmless, an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Securities or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof). The relative benefits received by the Company and the Subsidiary
Guarantors, on the one hand, and the Initial Purchaser, on the other, shall be
-29-
<PAGE>
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company and the Subsidiary
Guarantors bear to the total discounts and commissions received by the Initial
Purchaser. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Subsidiary Guarantors, on
the one hand, or the Initial Purchaser, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The Company, the Subsidiary Guarantors and the Initial Purchaser
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of the immediately preceding paragraph (d).
Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be
obligated to make contributions hereunder that in the aggregate exceed the total
discounts, commissions and other compensation received by the Initial Purchaser
under this Agreement, less the aggregate amount of any damages that the Initial
Purchaser has otherwise been required to pay by reason of the untrue or alleged
untrue statements or the omissions or alleged omissions to state a material
fact, and no person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of the
immediately preceding paragraph (d), each person, if any, who controls the
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribute as the Initial
Purchaser, and each director of the Company and the Subsidiary Guarantors, each
officer of the Company and the Subsidiary Guarantors and each person, if any,
who controls the Company and the Subsidiary Guarantors within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company and the Subsidiary Guarantors.
11. Survival Clause. The respective representations, warranties,
---------------
agreements, covenants, indemnities and other statements of the Company and the
Subsidiary Guarantors, their respective officers and the Initial Purchaser set
forth in this Agreement or made by or on behalf of them pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, the Subsidiary Guarantors and
the Founding Companies and any of their respective officers or directors, the
Initial Purchaser, its officers or directors or any controlling person referred
to in Section 10 hereof and (ii) delivery of and payment for the Securities.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 7, 10 and 15 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
12. Termination. (a) This Agreement may be terminated in the sole
-----------
discretion of the Initial Purchaser by notice to the Company given prior to the
Closing Date in the event that the Company or any of the Subsidiary Guarantors
shall have failed, refused or
-30-
<PAGE>
been unable to perform all obligations and satisfy all conditions on their
respective part to be performed or satisfied hereunder at or prior thereto or,
if at or prior to the Closing Date:
(i) any of the Company, the Subsidiary Guarantors or the
Founding Companies shall have sustained any loss or interference with
respect to its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any strike, labor dispute, slow down or work stoppage or any legal or
governmental proceeding, which loss or interference, in the sole judgment
of the Initial Purchaser, has had a Material Adverse Effect, or there shall
have been, in the sole judgment of the Initial Purchaser, any Material
Adverse Change, or any event or development involving or reasonably likely
to cause or result in a Material Adverse Change (including without
limitation a change in management or control of the Company or the
Subsidiary Guarantors), except in each case as described in the Final
Circular (exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the NASDAQ National Market shall have
been suspended or minimum or maximum prices shall have been established on
any such exchange or market;
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchaser, makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Securities as contemplated
by the Final Circular;
(v) any securities of the Company shall have been downgraded
or placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating agency; or
(vi) any of the Acquisition Agreements shall have terminated,
or in the reasonable view of the Initial Purchaser, any of the Acquisitions
will not be finally consummated on or prior to the Closing Date with no
material changes in form or substance to such Acquisition or Acquisition
Agreement from that described in the Final Circular (exclusive of any
amendment or supplement thereto).
(b) Termination of this Agreement pursuant to this Section 12 shall
be without liability of any party to any other party except as provided in
Section 11 hereof.
-31-
<PAGE>
13. Information Supplied by the Initial Purchaser. The statements
---------------------------------------------
set forth in the last paragraph on the front cover page and in the final two
sentences of the third paragraph under the heading "Private Placement" in the
Final Circular (to the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial Purchaser to the
Company for the purposes of Sections 3(b) and 10 hereof.
14. Notices. All communications hereunder shall be in writing and,
-------
if sent to the Initial Purchaser, shall be mailed or delivered or telecopied and
confirmed in writing to (i) Jefferies & Company, Inc., 11100 Santa Monica Blvd.,
10th Floor, Los Angeles, CA 90025, Attention: David J. Losito, Telecopy No.:
(310) 575-5200; and if sent to the Company or the Subsidiary Guarantors, shall
be mailed or delivered or telecopied and confirmed in writing to the Company at
Ten New England Business Center, Suite 302, Andover, MA 01810, Attention: Glenn
D. Bolduc, Telecopy No.: (978) 975-7208.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier, if by overnight courier; and
when receipt is acknowledged by the addressee, if telecopied.
15. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the Initial Purchaser, the Company and the Subsidiary Guarantors
and their respective successors and legal representatives, and nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any provisions herein contained; this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other person except
that (i) the indemnities of the Company and the Subsidiary Guarantors contained
in Section 10 of this Agreement shall also be for the benefit of any person or
persons who control the Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act and (ii) the indemnities of the
Initial Purchaser contained in Section 10 of this Agreement shall also be for
the benefit of the directors of the Company and the Subsidiary Guarantors, their
respective officers and any person or persons who control the Company or the
Subsidiary Guarantors within the meaning of Section 15 of the Act or Section 20
of the Exchange Act. No purchaser of Securities from the Initial Purchaser will
be deemed a successor because of such purchase.
16. Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of New York.
17. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
-32-
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
the Subsidiary Guarantors and the Initial Purchaser.
Very truly yours,
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
---------------------------------------------
Name: Glenn D. Bolduc
Title: Chief Executive Officer and President
TBMA ACQUISITION 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
CALL POINTS ACQUISITION 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
-33-
<PAGE>
AMCS ACQUISITION 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
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
JEFFERIES & COMPANY, INC.
By: /s/ David J. Losito
----------------------
Name: David J. Losito
Title: Managing Director
-34-
<PAGE>
EXHIBIT C
Pursuant to Section 8(c) of the Purchase Agreement, KPMG Peat Marwick,
LLP shall furnish a letter to the Initial Purchaser to the effect that:
(i) They are independent public accountants with respect to the
Company within the meaning of the Securities Act of 1933, as amended (the
"Act"), and the applicable published rules and regulations thereunder;
(ii) In their opinion, the consolidated financial statements audited
by them and included in the Offering Circular comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the related
published rules and regulations;
(iii) The unaudited summary historical financial information with
respect to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Final Circular
agrees with the corresponding amounts (after restatements where applicable) in
the audited consolidated financial statements for such five fiscal years;
(iv) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below, a
reading of the latest available interim financial statements of the Company and
its subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements of the
Company included in the Final Circular, inquiries of officials of the Company
and its subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter, nothing came
to their attention that caused them to believe that:
(A) the unaudited consolidated statements of operations,
consolidated balance sheets, consolidated statements of shareholders'
equity and consolidated statements of cash flows included in the Offering
Circular are not in conformity with generally accepted accounting
principles applied on the basis substantially consistent with the basis for
the audited consolidated statements of operations, consolidated balance
sheets, consolidated statements of shareholders' equity and consolidated
statements of cash flows included in the Final Circular;
(B) any other unaudited income statement data and balance sheet
items of the Company included in the Final Circular do not agree with the
corresponding items in the unaudited consolidated financial statements from
which such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated financial
statements included in the Final Circular;
-35-
<PAGE>
(C) any unaudited pro forma consolidated financial statements
included in the Final Circular do not comply as to form in all material
respects with the applicable accounting requirements or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements;
(D) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options or warrants, in each case which were outstanding on the date of the
latest financial statements included in the Final Circular) or any increase
in the consolidated long-term debt of the Company and its subsidiaries, or
any decreases in consolidated net current assets or stockholders' equity or
other items specified by the Initial Purchaser, or any changes in any other
items specified by the Initial Purchaser, in each case as compared with
amounts shown in the latest balance sheet of the Company included in the
Final Circular, except in each case for changes, increases or decreases
which the Final Circular discloses have occurred or may occur or which are
described in such letter; and
(E) for the period from the date of the latest financial
statements included in the Final Circular to the specified date referred to
in clause (D) there were any decreases in consolidated net revenues or
operating income or income before income taxes or the total or per share
amounts of consolidated net income or other items specified by the Initial
Purchaser, or any increases in any items specified by the Initial
Purchaser, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length specified
by the Initial Purchaser, except in each case for decreases or increases
which the Final Circular discloses have occurred or may occur or which are
described in such letter; and
(v) In addition to the examination referred to in their report(s)
included in the Final Circular and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and (iv)
above, they have carried out certain specified procedures, not constituting an
audit in accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by the Initial
Purchaser, which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Final Circular, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them to be
in agreement.
-36-
<PAGE>
EXHIBIT 1.2
-----------
REGISTRATION RIGHTS AGREEMENT
Dated as of November 12, 1997
by and among
VIALOG CORPORATION
THE SUBSIDIARY GUARANTORS
named herein
and
JEFFERIES & COMPANY, INC.,
as Initial Purchaser
________________________
$75,000,000
12 3/4 % SENIOR NOTES DUE 2001
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. DEFINITIONS.......................................................... 1
2. EXCHANGE OFFER....................................................... 4
3. SHELF REGISTRATION................................................... 7
4. ADDITIONAL INTEREST.................................................. 9
5. REGISTRATION PROCEDURES.............................................. 10
6. REGISTRATION EXPENSES................................................ 18
7. INDEMNIFICATION...................................................... 19
8. RULES 144 AND 144A................................................... 22
9. UNDERWRITTEN REGISTRATION............................................ 22
10. MISCELLANEOUS........................................................ 24
(a) No Inconsistent Agreements...................................... 24
(b) Adjustments Affecting Registrable Notes......................... 24
(c) Amendments and Waivers.......................................... 24
(d) Notices......................................................... 24
(e) Successors and Assigns.......................................... 26
(f) Counterparts.................................................... 26
(g) Headings........................................................ 26
(h) Governing Law................................................... 26
(i) Severability.................................................... 26
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(j) Notes Held by the Issuers or Their Affiliates................... 26
(k) Third Party Beneficiaries....................................... 27
(1) Entire Agreement................................................ 27
</TABLE>
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
---------
into as of November 12, 1997, by and among VIALOG Corporation, a Massachusetts
corporation (the "Company"), each of the subsidiaries of the Company listed on
-------
the signature pages hereto (collectively, the "Subsidiary Guarantors"), and
---------------------
Jefferies & Company, Inc. (the "Initial Purchaser").
-----------------
This Agreement is entered into in connection with the Purchase Agreement,
dated as of November 12, 1997, by and among the Company, the Subsidiary
Guarantors, and the Initial Purchaser (the "Purchase Agreement") which provides
------------------
for, among other things, the issuance and sale to the Initial Purchaser of
75,000 units (the "Units") consisting of an aggregate of $75,000,000 aggregate
-----
principal amount of the Company's 12 3/4% Senior Notes due 2001, Series A (the
"Notes") and 75,000 warrants to purchase an aggregate of 756,645 shares of
- ------
common stock, par value $.01 per share, of the Company. In order to induce the
Initial Purchaser to enter into the Purchase Agreement, the Company and the
Subsidiary Guarantors have agreed to provide the registration rights set forth
in this Agreement for the benefit of the Initial Purchaser and their direct and
indirect transferees and assigns. The execution and delivery of this Agreement
is a condition to the Initial Purchaser's obligation to purchase the Units under
the Purchase Agreement. The Company and the Subsidiary Guarantors are
collectively referred to herein as the "Issuers."
-------
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: See Section 4(a).
-------------------
Advice: See the last paragraph of Section 5.
------
Agreement: See the first introductory paragraph to this Agreement.
---------
Applicable Period: See Section 2(b).
-----------------
Business Day: Means any day other than a Saturday, Sunday or any other day
------------
on which banking institutions in The City of New York or Boston, Massachusetts
are required or authorized by law or other governmental action to be closed.
Company: Has the meaning ascribed to such term in the preamble of this
-------
Agreement and shall also include the Company's successors and assigns.
Effectiveness Date: The 120th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
<PAGE>
Event Date: See Section 4(b).
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
--------------
Exchange Offer: See Section 2(a).
--------------
Exchange Registration Statement: See Section 2(a).
-------------------------------
Filing Date: The 60th day after the Issue Date.
-----------
Holder: Any registered holder of Registrable Notes.
------
Indemnified Person: See Section 7(c).
------------------
Indemnifying Person: See Section 7(c).
-------------------
Indenture: The Indenture, dated as of November 12, 1997, by and among the
---------
Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchaser: See the first introductory paragraph to this Agreement.
-----------------
Initial Shelf Registration: See Section 3(a).
--------------------------
Inspectors: See Section 5(o).
----------
Issue Date: The date on which the Units were sold to the Initial Purchaser
----------
pursuant to the Purchase Agreement.
Issuers: The collective reference to the Company and the Subsidiary
-------
Guarantors.
NASD: National Association of Securities Dealers, Inc.
----
Notes: See the second introductory paragraph to this Agreement.
-----
Participant: See Section 7(a).
-----------
Participating, Broker-Dealer: See Section 2(b).
----------------------------
Person: An individual, trustee, corporation, partnership, limited
------
liability company, joint stock company, trust, unincorporated association, joint
venture, union, business association, firm, governmental agency or political
subdivision thereof or other legal entity.
Private Exchange: See Section 2(b).
----------------
-2-
<PAGE>
Private Exchange Notes: See Section 2(b).
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
Purchase Agreement: See the second introductory paragraph to this
------------------
Agreement.
Records: See Section 5(o).
-------
Registrable Notes: Each Note upon original issuance thereof and at all
-----------------
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance thereof and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until, in the case of any such Note, Exchange Note or
Private Exchange Note, as the case may be, the earliest to occur of (i) a
Registration Statement (other than, with respect to any Exchange Note as to
which Section 2(c)(iv) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective under the Securities Act and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed of
in accordance with such effective Registration Statement, (ii) such Note,
Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144 (or any similar provision then in force, but not Rule
144A) promulgated under the Securities Act, (iii) in the case of any Note, such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes which may be resold without restriction under state and federal
securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceases to be outstanding for purposes of the Indenture.
Registration Statement: Any registration statement of the Issuers filed
----------------------
with the SEC under the Securities Act, including, but not limited to, the
Exchange Registration Statement, that covers any of the Registrable Notes
pursuant to the provisions of this Agreement and all amendments and supplements
to such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may
--------
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such
-3-
<PAGE>
securities being free of the registration and prospectus delivery requirements
of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
---------
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
--------
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended from time to time,
--------------
and the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
------------
Shelf Registration: See Section 3(b).
------------------
Subsequent Shelf Registration: See Section 3(b).
-----------------------------
Subsidiary Guarantors: See the first introductory paragraph to this
---------------------
Agreement.
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The Trustee under the Indenture and, if existent, the trustee
-------
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of one or more of the issuers are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
--------------
(a) Each of the Issuers agrees to file with the SEC no later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
--------------
Registrable Notes (other than Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Company, guaranteed by the
Subsidiary Guarantors, which are identical in all material respects to the Notes
(the "Exchange Notes") (and which are entitled to the benefits of the Indenture
--------------
or a trust indenture which is identical in all material respects to the
Indenture (other than such changes to the Indenture or any such identical trust
indenture as are necessary to comply with any requirements of the SEC to effect
or maintain the qualification thereof under the TIA) and which, in either case,
has been qualified under the TIA), except that the Exchange Notes shall have
been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer shall be registered under the Securities Act on the appropriate form (the
"Exchange Registration Statement") and shall comply with all applicable tender
-------------------------------
offer rules and regulations under the Exchange Act. Each of the Issuers agrees
to use its best efforts to (x) cause the
-4-
<PAGE>
Exchange Registration Statement to be declared effective under the Securities
Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at
least 30 calendar days (or longer if required by applicable law) after the date
that notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 45th day following the date on which the
Exchange Registration Statement is declared effective. If after such Exchange
Registration Statement is initially declared effective by the SEC, the Exchange
Offer or the issuance of the Exchange Notes thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Exchange Registration Statement shall be
deemed not to have become effective for purposes of this Agreement. Each Holder
who participates in the Exchange Offer will be required to represent that any
Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes in violation of the provisions of the
Securities Act, and that such Holder is not an affiliate of any of the Issuers
within the meaning of the Securities Act. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this Agreement shall
continue to apply, mutatis mutandis, solely with respect to Registrable Notes
------- --------
that are Private Exchange Notes and Exchange Notes held by Participating Broker-
Dealers, and the Issuers shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in respect
of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to
Section 3 of this Agreement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
-------------
Broker-Dealer"), whether such positions or policies have been publicly
- -------------
disseminated by the staff of the SEC or such positions or policies, in the
judgment of the Initial Purchaser, represent the prevailing views of the staff
of the SEC. Such "Plan of Distribution" section shall also allow, to the extent
permitted by applicable policies and regulations of the SEC, the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of the
Securities Act, including, to the extent so permitted, all Participating Broker-
Dealers, and include a statement describing the manner in which Participating
Broker-Dealers may resell the Exchange Notes.
Each of the Issuers shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such Persons must comply with such requirements
in order to resell the Exchange Notes (the "Applicable Period").
-----------------
-5-
<PAGE>
If, upon consummation of the Exchange Offer, any Initial Purchaser holds
any Notes acquired by it and having the status of an unsold allotment in the
initial distribution, the Company upon the request of such Initial Purchaser
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to such Initial Purchaser, in exchange (the "Private
-------
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
- --------
of debt securities of the Company, guaranteed by the Subsidiary Guarantors, that
are identical in all material respects to the Exchange Notes except for the
existence of restrictions on transfer thereof under the Securities Act and
securities laws of the several states of the U.S. (the "Private Exchange Notes")
----------------------
(and which are issued pursuant to the same indenture as the Exchange Notes);
provided, however, that the Issuers shall not be required to effect such
- -------- -------
exchange if, in the written opinion of counsel for the Issuers (a copy of which
shall be delivered to the Initial Purchaser and any Holder affected thereby),
such exchange cannot be effected without registration under the Securities Act.
The Private Exchange Notes shall bear the same CUSIP number as the Exchange
Notes.
Interest on the Exchange Notes and the Private Exchange Notes will accrue
from (A) the later of (i) the last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor or (ii) if the Notes are
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date of such interest payment date or (B)
if no interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York, which may be
the Trustee or an affiliate thereof;
(3) permit Holders to withdraw tendered Registrable Notes at any time
prior to the close of business, New York time, on the last business day on
which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws.
As soon as practicable after the close of the Exchange Offer or the Private
Exchange, as the case may be, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer or the Private Exchange,
as the case may be;
-6-
<PAGE>
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder tendering such Registrable Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of such
Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be subject to any
conditions other than the following: (i) the Exchange Offer or the Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding is
instituted or threatened in any court or by any governmental agency which might
materially impair the ability of the Issuers to proceed with the Exchange Offer
or the Private Exchange and (iii) all governmental approvals have been obtained,
which approvals the Issuers reasonably deem necessary for the consummation of
the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under (i)
the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture and that the
Exchange Notes, the Private Exchange Notes and the Notes, if any, will vote and
consent together on all matters as one class and that none of the Exchange
Notes, the Private Exchange Notes or the Notes, if any, will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 150 days of
the Issue Date, (iii) any holder of Private Exchange Notes so requests in
writing to the Issuers within 120 days after the consummation of the Exchange
Offer or (iv) in the case of any Holder that participates in the Exchange Offer,
such Holder does not receive Exchange Notes on the date of the exchange that may
be sold without restriction under state and federal securities laws (other than
due solely to the status of such Holder as an affiliate of any of the Issuers
within the meaning of the Securities Act) and so notifies the Company within 60
days after such Holder first becomes aware of such restrictions and providing a
reasonable basis for its conclusions, in the case of each of clauses (i)-(iv),
then the Issuers shall promptly deliver to the Holders and the Trustee written
notice thereof (the "Shelf Notice") and, at its cost, shall file a Shelf
------------
Registration pursuant to Section 3.
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Shelf Registration. The Issuers shall as promptly as practicable file
------------------
with the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to
-7-
<PAGE>
Rule 415 covering all of the Registrable Notes (the "Initial Shelf
-------------
Registration"). If the Issuers shall not have yet filed the Exchange
- ------------
Registration Statement, each of the Issuers shall use its best efforts to file
with the SEC the Initial Shelf Registration on or prior to the Filing Date and
shall use its best efforts to cause such Initial Shelf Registration to be
declared effective under the Securities Act on or prior to the Effectiveness
Date. Otherwise, each of the Issuers shall use its best efforts to file with the
SEC the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice and shall use its best efforts to cause such Shelf Registration to be
declared effective under the Securities Act as promptly as practicable
thereafter. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Issuers shall not permit
any securities other than the Registrable Notes to be included in any Shelf
Registration (as defined below). The Issuers shall use their best efforts to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the date which is [36] months from the effective date of such Initial
Shelf Registration (subject to extension pursuant to the last paragraph of
Section 5 hereof) (the "Effectiveness Period"), or such shorter period ending
--------------------
when (i) all Registrable Notes covered by the Initial Shelf Registration have
been sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration (as defined below) covering
all of the Registrable Notes has been declared effective under the Securities
Act.
(b) Subsequent Shelf Registration. If the Initial Shelf Registration or
-----------------------------
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), each of the Issuers shall use its best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend such Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent
-----------------------------
Shelf Registration is filed, each of the Issuers shall use its best efforts to
cause the Subsequent Shelf Registration to be declared effective as soon as
practicable after such filing and to keep such Subsequent Shelf Registration
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
------------------
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly supplement and
--------------------------
amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Shelf Registration or by any underwriter of such Registrable
Notes.
-8-
<PAGE>
4. Additional Interest
-------------------
(a) The Issuers and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Issuers, jointly and severally, agree to pay, as liquidated damages,
additional interest on the Notes ("Additional Interest") under the circumstances
-------------------
and to the extent set forth below (each of which shall be given independent
effect):
(i) if the Exchange Registration Statement has not been filed on or
prior to the Filing Date, then commencing on the day after the Filing Date,
Additional Interest shall accrue on the Notes over and above the stated
interest at a rate of 0.50% per annum for the first 90 days immediately
following the Filing Date, such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period;
(ii) if the Exchange Registration Statement is not declared effective
on or prior to the Effectiveness Date, then commencing on the day after the
Effectiveness Date, Additional Interest shall accrue on the Notes over and
above the stated interest at a rate of 0.50% per annum for the first 90
days immediately following the day after the Effectiveness Date, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; and
(iii) if (A) the Issuers have not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 45th day after the date on which the Exchange
Registration Statement is declared effective or (B) the Initial Shelf
Registration, if required to be filed hereunder, is not declared effective
on or prior to the 120th day after the Issue Date or (C) if applicable, a
Shelf Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period, then
Additional Interest shall accrue on the Notes over and above the stated
interest at a rate of 0.50% per annum for the first 90 days commencing on
(x) the 45th day after the date on which the Exchange Registration
Statement is declared effective, in the case of (A) or (B) above, or (y)
the day such Shelf Registration ceases to be effective in the case of (C)
above, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not
- -------- -------
exceed at any one time in the aggregate 1.5% per annum; and provided further,
-------- -------
that (1) upon the filing of the Exchange Registration Statement (in the case of
(i) above), (2) upon the effectiveness of the Exchange Registration Statement
(in the case of (ii) above), or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), upon the effectiveness of the
Initial Shelf Registration (in the case of (iii)(B) above) or upon the
effectiveness of a Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) above),
-9-
<PAGE>
Additional Interest on the Notes as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one business day after each
and every date on which an event occurs in respect of which Additional Interest
is required to be paid (an "Event Date "). Any amounts of Additional Interest
----------
due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable
semi-annually by wire transfer of immediately available funds or by federal
funds check on each regular interest payment date specified in the Indenture (to
the Holders of record on the regular record date therefor (specified in the
Indenture) immediately preceding such dates), commencing with the first such
regular interest payment date occurring after any such Additional Interest
commences to accrue, subject to Section 2.17 of the Indenture with respect to
defaulted interest. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Notes, multiplied by a fraction, the numerator of which is the number of
days such Additional Interest rate was applicable during such period (determined
on the basis of a 360-day year comprised of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed), and the denominator
of which is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant to
Section 2 or 3 hereof, the Issuers shall effect such registrations to permit the
sale of such securities covered thereby in accordance with the intended method
or methods of disposition thereof, and pursuant thereto and in connection with
any Registration Statement filed by the Issuers hereunder, the Issuers shall:
(a) Prepare and file with the SEC prior to the Filing Date, the
Exchange Registration Statement or if the Exchange Registration Statement
is not filed because of the circumstances contemplated by Section 2(c)(i),
a Shelf Registration as prescribed by Section 2 or 3, and use their best
efforts to cause each such Registration Statement to become effective and
remain effective as provided herein; provided that, if (1) a Shelf
--------
Registration is filed pursuant to Section 3, or (2) a Prospectus contained
in an Exchange Registration Statement filed pursuant to Section 2 is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Issuers shall, if requested, furnish
to and afford the Holders of the Registrable Notes to be registered
pursuant to such Shelf Registration or each such Participating Broker-
Dealer, as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to
be incorporated by reference therein and all exhibits thereto) proposed to
be filed (in each case at least five business days prior to such filing).
The Issuers shall not file any such Registration Statement or Prospectus or
any amendments or supplements thereto if the Holders of a majority in
aggregate principal amount of the Registrable Notes covered by such
Registration Statement, or any such
-10-
<PAGE>
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented
by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. The Issuers
shall be deemed not to have used their best efforts to keep a Registration
Statement effective during the Applicable Period if they voluntarily take
any action that would result in selling Holders of the Registrable Notes
covered thereby or Participating Broker-Dealers seeking to sell Exchange
Notes not being able to sell such Registrable Notes or such Exchange Notes
during that period unless such action is required by applicable law or
unless the Issuers comply with this Agreement, including, without
limitation, the provisions of paragraph 5(k) hereof and the last paragraph
of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period from whom the Company has received written notice that it
will be a Participating Broker-Dealer in the Exchange Offer, notify the
selling Holders of Registrable Notes, or each such Participating Broker-
Dealer, as the case may be, their counsel and the managing underwriters, if
any, promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any posteffective amendment, when the same has
become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of any Prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection
with sales of the Registrable Notes the representations and warranties of
the Issuers contained in any agreement (including any underwriting
agreement) contemplated by Section 5(n) hereof cease to be true and
correct, (iv) of the receipt by the Issuers of any notification with
respect to the
-11-
<PAGE>
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any
condition or any information becoming known that makes any statement made
in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or suspension that requires the making of any changes
in, or amendments or supplements to, such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement,
it 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, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (vi) of any of the Issuers' reasonable
determination that a post-effective amendment to a Registration Statement
would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use their best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use their best efforts to obtain the withdrawal of any such
order at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) promptly as practicable
incorporate in a prospectus supplement or post-effective amendment such
information or revisions to information therein relating to such
underwriters or selling Holders as the managing underwriters, if any, or
such Holders or their counsel reasonably request to be included or made
therein and (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Issuers have
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes
and to each such Participating Broker-Dealer who so
-12-
<PAGE>
requests and to counsel and each managing underwriter, if any, without
charge, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable Notes
or each such Participating Broker-Dealer, as the case may be, their
respective counsel, and the underwriters, if any, without charge, as many
copies of the Prospectus and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, each Issuer
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use their best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Notes or Exchange Notes, as the case may be, for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing; provided that where Exchange Notes held by Participating Broker-
--------
Dealers or Registrable Notes are offered other than through an underwritten
offering, the Issuers agree to cause their counsel to perform Blue Sky
investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided that none of the Issuers shall
--------
be required to (A) qualify generally to do business in any jurisdiction
where it is not then so qualified, (B) take any action that would subject
it to general service of process in any such jurisdiction where it is not
-13-
<PAGE>
then so subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Use their best efforts to cause the Registrable Notes covered by
any Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Notes, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which
case each of the Issuers will cooperate in all reasonable respects with the
filing of such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare
and (subject to Section 5(a) hereof) file with the SEC, at the joint and
several expense of each of the Issuers, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(1) Use their best efforts to cause the Registrable Notes covered by a
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the managing
underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with printed
certificates for the
-14-
<PAGE>
Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations, warranties to, and covenants
with, the underwriters, with respect to the business of the Issuers and
their respective subsidiaries and the Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to the
Notes, and confirm the same in writing if and when requested; (ii) obtain
the opinion of counsel to the Issuers and updates thereof in form and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of debt
securities similar to the Notes and such other matters as may be reasonably
requested by underwriters; (iii) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriter or underwriters from the independent certified public
accountants of the Issuers (and, if necessary, any other independent
certified public accountants of any subsidiary of any of the Issuers or of
any business acquired by any of the Issuers for which financial statements
and financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters and the Holders of
Registrable Notes, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings of debt securities similar to the
Notes and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder
of such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or
other agent retained by any such selling Holder or each such Participating
Broker-Dealer, as
-15-
<PAGE>
the case may be, or underwriter (collectively, the "Inspectors"), at the
----------
offices where normally kept, during reasonable business hours, all
financial and other records and pertinent corporate documents of the
Issuers and their respective subsidiaries (collectively, the "Records") as
-------
shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees
of the Issuers and their respective subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such
Registration Statement. Such Records shall be kept confidential by each
Inspector and shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or omission in such Registration Statement or (ii) the release
of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to agree
that information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuers unless and until such is made
generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to further
agree that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Issuers and allow
the Issuers to undertake appropriate action to prevent disclosure of the
Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer or
the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the terms under any such indenture and
the Holders of the Registrable Notes, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best efforts
to cause such trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely
manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
-16-
<PAGE>
(r) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange Notes or the
Private Exchange Notes, as the case may be, and the related indenture
constitute legally valid and binding obligations of each of the Issuers,
enforceable against each of the Issuers in accordance with their respective
terms subject to customary exceptions and qualifications.
(s) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to
such other Person as directed by the Issuers) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Issuers shall
mark, or caused to be marked, on such Registrable Notes that such
Registrable Notes are being canceled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the NASD.
(u) Use their best efforts to take all other steps reasonably
necessary to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to which any
registration is being effected to furnish to the Issuers such information
regarding such seller and the distribution of such Registrable Notes as the
Issuers may, from time to time, reasonably request. The Issuers may exclude
from such registration the Registrable Notes of any seller who fails to furnish
such information within a reasonable time after receiving such request. Each
seller as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Issuers all information required to be disclosed in
order to make the information previously furnished to the Issuers by such seller
not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuers of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by a Registration
Statement and such Participating Broker Dealer will forthwith discontinue
disposition of such Exchange Notes pursuant to any Prospectus and, in each case,
forthwith discontinue dissemination of such Prospectus until such Holder's or
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(k), or until it is advised in
writing (the "Advice") by the Issuers that the use of the
------
-17-
<PAGE>
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto and, if so directed by the Issuers, such Holder or
Participating Broker-Dealer, as the case may be, will deliver to the Issuers all
copies, other than permanent file copies, then in such Holder's or Participating
Broker-Dealer's possession, of the Prospectus covering such Registrable
Securities current at the time of the receipt of such notice. In the event the
Issuers shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Notes covered by such Registration
Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as
the case may be, shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers, jointly and
severally, whether or not the Exchange Offer or a Shelf Registration is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, or by the Holders of a majority in aggregate principal
amount of the Registrable Notes included in any Registration Statement or by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) messenger, telephone and delivery expenses incurred in connection with the
Exchange Registration Statement and any Shelf Registration, (iv) fees and
disbursements of counsel for the Issuers and fees and disbursements of special
counsel for the sellers of Registrable Notes (subject to the provisions of
Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Issuers desire such insurance, (viii) fees and expenses of all
other Persons retained by the Issuers, (ix) internal expenses of the Issuers
(including, without limitation, all salaries and expenses of officers and
employees of the Issuers performing legal or accounting duties), (x) the expense
of any annual audit, (xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange and (xii)
the expenses relating to printing, word processing and
-18-
<PAGE>
distributing all Registration Statements, underwriting agreements, securities
sales agreements, indentures and any other documents necessary in order to
comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuers,
jointly and severally, shall reimburse the Holders of the Registrable Notes
being registered in such registration for the fees and disbursements of not more
than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Registrable Notes to
be included in such Shelf Registration and other out-of-pocket expenses of
Holders of Registrable Notes incurred in connection with the registration and
sale of Registrable Notes.
7. Indemnification
---------------
(a) Each of the Issuers, jointly and severally, agrees to indemnify and
hold harmless each Holder of Registrable Notes and each Participating Broker-
Dealer selling Exchange Notes during the Applicable Period, the officers and
directors of each such Person, and each Person, if any, who controls any such
Person within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act (each, a "Participant"), from and against any and all
-----------
losses, claims, damages and liabilities (including, without limitation, the
legal fees and other expenses actually incurred in connection with any suit,
action or proceeding or any claim asserted) caused by, arising out of or based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (as amended or supplemented if the
Issuers shall have furnished any amendments or supplements thereto) or caused
by, arising out of or based upon 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 (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (as amended or
supplemented if the Issuers shall have furnished any amendments or supplements
thereto) or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the Issuers in writing by
or on behalf of such Participant expressly for use therein; provided, however,
-------- -------
that the Company will not be liable if such untrue statement or omission or
alleged untrue statement or omission was contained or made in any preliminary
prospectus and corrected in the Prospectus or any amendment or supplement
thereto and the Prospectus does not contain any other untrue statement or
omission or alleged untrue statement or omission of a material fact that was the
subject matter of the related proceeding and any such loss, liability, claim,
damage or expense suffered or incurred by the Participants resulted from any
action, claim or suit by any Person who purchased Registrable Notes or Exchange
Notes which are the subject thereof from such Participant and it is established
in the related proceeding that such Participant failed to deliver or provide a
copy of the Prospectus (as amended or supplemented) to such Person with or prior
to the confirmation of the sale of such Registrable Notes or Exchange Notes sold
to such Person if required by applicable law, unless
-19-
<PAGE>
such failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify and
hold harmless the Issuers, their respective directors and officers and each
Person who controls any of the Issuers within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only with
reference to information relating to such Participant furnished to the Issuers
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Person against whom such indemnity may be sought (the "Indemnifying
------------
Person") in writing, and the Indemnifying Person, upon request of the
- ------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Indemnifying Person and the Indemnifying Person was not otherwise aware of
such action or claim). In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that, unless there is a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed promptly after
receipt of the invoice therefor as they are incurred. Any such separate firm for
the Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes
sold by all such Participants and any such separate firm for the Issuers, their
directors, their officers and such control Persons of the Issuers shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without
-20-
<PAGE>
its prior written consent, but if settled with such consent or if there is a
final non-appealable judgment for the plaintiff for which the Indemnified Person
is entitled to indemnification pursuant to this Agreement, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for reasonable fees and
expenses actually incurred by counsel as contemplated by the third sentence of
this paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its prior written consent if (i)
such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement; provided, however, that the Indemnifying
-------- -------
Person shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Person is contesting, in good
faith, the request for reimbursement. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
release of such indemnified Person, in form and substance satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of an Indemnified Person.
(d) If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable (other than by reason of the exceptions
specifically provided therein) to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Registrable
Notes or Exchange Notes, as the case may be or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other in
connection with the statements or omissions (or alleged statements or omissions)
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand or by the Participants or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission and any other equitable considerations appropriate
under the circumstances.
-21-
<PAGE>
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
Each of the Issuers covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
it is not required to file such reports, it will, upon the request of any Holder
of Registrable Notes, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A. Each of the
Issuers further covenants, for so long as any Registrable Notes remain
outstanding, to make available to any Holder or beneficial owner of Registrable
Notes in connection with any sale thereof and any prospective purchaser of such
Registrable Notes from such Holder or beneficial owner, the information required
by Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Notes pursuant to Rule 144A.
9. Underwritten Registration
-------------------------
If any of the Registrable Notes covered by any Shelf Registration are to be
sold in an underwritten offering, the investment banker or investment bankers
and manager or managers that will manage the offering will be selected by the
Holders of a majority in aggregate principal amount of such Registrable Notes
included in such offering and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of
-22-
<PAGE>
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
-23-
<PAGE>
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. None of the Issuers has entered, as of the
--------------------------
date hereof, and none of the Issuers shall enter, after the date of this
Agreement, into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. None of the
Issuers has entered and the Issuers will enter into any agreement with respect
to any of its securities which will grant to any Person piggy-back rights with
respect to a Registration Statement.
(b) Adjustments Affecting Registrable Notes. Neither the Company nor the
---------------------------------------
Subsidiary Guarantors shall, directly or indirectly, take any action with
respect to the Registrable Notes as a class that would adversely affect the
ability of the Holders of Registrable Notes to include such Registrable Notes in
a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate principal
amount of the then outstanding Registrable Notes and (B) in circumstances that
would adversely affect Participating Broker-Dealers, the Participating Broker-
Dealers holding not less than a majority in aggregate principal amount of the
Exchange Notes held by all Participating Broker-Dealers; provided, however, that
-------- -------
Section 7 and this Section 10(c) may not be amended, modified or supplemented
without the prior written consent of each Holder and each Participating Broker-
Dealer (including any Person who was a Holder or Participating Broker-Dealer of
Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to
any Registration Statement). Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter than relates
exclusively to the rights of Holders of Registrable Notes whose securities are
being tendered pursuant to the Exchange Offer or sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of not less than a majority in aggregate principal amount of the
Registrable Notes being tendered or being sold by such Holders pursuant to such
Registration Statement. In addition, each such amendment, modification,
supplement and waiver must be agreed to in writing by the Issuers.
(d) Notices. Any notices or other communications required or permitted
-------
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
1. if to a Holder of Registrable Notes or any Participating Broker-
Dealer, at the most current address of such Holder or Participating Broker-
Dealer, as the case may be, set forth on the records of the registrar under
the Indenture, with a copy in like manner to the Initial Purchaser as
follows:
-24-
<PAGE>
Jefferies & Company, Inc.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, CA 90025
Telephone: (310) 575-5200
Facsimile No.: (310) 575-5165
Attention: Corporate Finance Department
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Telephone: (212) 504-6000
Facsimile No.: (212) 504-6666
Attention: Lawrence A. Larose
2. if to the Initial Purchaser, at the address specified in Section
10(d)(1);
3. if to an Issuer, as follows:
VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, Massachusetts 01810
Facsimile: (978) 975-7208
Telephone: (978) 975-3700
Attention: President
with copies to:
Mirick, O'Connell, DeMallie & Lougee, LLP
1700 Bank of Boston Tower
100 Front Street
Worcester, MA 01608
Telephone: (508) 799-0541
Facsimile No.: (508) 752-7305
Attention: David L. Lougee
Each of such persons by written notice to each other such person may
designate additional or different addresses for notices to such person. Any
notice or communication shall be deemed to have been given or made as of the
date so delivered if personally delivered; when answered back, if telexed; when
receipt is affirmatively acknowledged, if telecopied; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid
-25-
<PAGE>
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties hereto and
the Holders; provided, however, that this Agreement shall not inure to the
-------- -------
benefit of or be binding upon a successor or assign of a Holder unless such
successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) Notes Held by the Issuers or Their Affiliates. Whenever the consent or
---------------------------------------------
approval of Holders of a specified percentage of Registrable Notes is required
hereunder, Registrable Notes held by the Issuers or their affiliates (as such
term is defined in Rule 405
-26-
<PAGE>
under the Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(1) Entire Agreement. This Agreement, together with the Purchase Agreement
----------------
and the Indenture, is intended by the parties as a final and exclusive statement
of the agreement and understanding of the parties hereto in respect of the
subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser on the
one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
VIALOG CORPORATION
BY: /s/ Glenn D. Bolduc
-------------------
Name: Glenn D. Bolduc
Title: President and Chief Executive
Officer
KENDALL SQUARE TELECONFERENCING, INC. D/B/A
THE CONFERENCE CENTER
BY: /s/ Glenn D. Bolduc
-------------------
Name: Glenn D. Bolbuc
Title: Authorized Signatory
AMCS ACQUISITION CORPORATION
BY: /s/ Glenn D. Bolduc
-------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
COMMUNICATION DEVELOPMENT CORPORATION
BY: /S/ Glenn D. Bolbuc
-------------------
Name: Glenn D. Bolbuc
Title: Authorized Signatory
-28-
<PAGE>
TELEPHONE BUSINESS MEETINGS, INC., d/b/a
ACCESS CONFERENCE CALL SERVICE
BY: /s/ Glenn D. Bolduc
-------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
CONFERENCE SOURCE INTERNATIONAL, INC.
BY: /s/ Glenn D. Bolduc
-------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
CALL POINTS ACQUISITION CORPORATION
BY: /s/ Glenn D. Bolduc
-------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
-29-
<PAGE>
JEFFERIES & COMPANY, INC.
By: /s/ Turner C. Smith
--------------------
Name: Turner C. Smith
Title: Managing Director
-30-
<PAGE>
EXHIBIT 2.1
-----------
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 September 8, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <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..................................... 3
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...................................... 5
SECTION 2.3 Stock Transfer Books..................................... 7
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights........................................... 7
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..................................... 11
SECTION 3.4 Liabilities.............................................. 11
SECTION 3.5 Title to Properties; Leases.............................. 12
SECTION 3.6 Compliance with Private Authorizations................... 13
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law........................................... 14
SECTION 3.8 Intangible Assets........................................ 15
SECTION 3.9 Related Transactions..................................... 15
SECTION 3.10 Insurance................................................ 16
SECTION 3.11 Tax Matters.............................................. 16
SECTION 3.12 Employee Retirement Income Security Act of 1974.......... 17
SECTION 3.13 Absence of Sensitive Payments............................ 20
SECTION 3.14 Inapplicability of Specified Statutes.................... 20
SECTION 3.15 Authorized and Outstanding Capital Stock................. 20
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....................................... 24
</TABLE>
i
<PAGE>
<TABLE>
<S> <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.............................................. 27
SECTION 3.25 Solvency................................................. 27
SECTION 3.26 This Section Intentionally Left Blank.................... 27
SECTION 3.27 Compliance with Regulations Relating to Securities Credit 27
SECTION 3.28 Certain State Statutes Inapplicable...................... 28
SECTION 3.29 Continuing Representations and Warranties................ 28
SECTION 3.30 Financing Document....................................... 28
SECTION 3.31 Predecessor Status, etc.................................. 28
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.......................................... 29
SECTION 4.5 No Conflict; Required Filings and Consents............... 29
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...................................... 30
SECTION 5.3 No Conflict; Required Filings and Consents............... 31
SECTION 5.4 Financing................................................ 31
SECTION 5.5 Broker or Finder......................................... 31
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary.. 31
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary.... 32
SECTION 5.8 Financing Document....................................... 32
SECTION 5.9 Solvency................................................. 32
SECTION 5.10 This Section Intentionally Left Blank.................... 33
SECTION 5.11 Participating Agreements of Other Participating Companies 33
SECTION 5.12 Continuing Representations and Warranties................ 33
ARTICLE 6 ADDITIONAL COVENANTS............................................... 33
SECTION 6.1 Access to Information; Confidentiality................... 33
SECTION 6.2 Agreement to Cooperate................................... 34
SECTION 6.3 Assignment of Contracts and Rights....................... 36
SECTION 6.4 Compliance with the Securities Act....................... 36
SECTION 6.5 Conduct of Business...................................... 36
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 6.6 No Solicitation............................................. 37
SECTION 6.7 Directors' and Officers' Indemnification and Insurance...... 37
SECTION 6.8 Notification of Certain Matters............................. 38
SECTION 6.9 Public Announcements........................................ 38
SECTION 6.10 Conveyance Taxes............................................ 39
SECTION 6.11 Obligations of VIALOG....................................... 39
SECTION 6.12 Employee Benefits; Severance Policy......................... 39
SECTION 6.13 Certain Actions Concerning Business Combinations............ 39
SECTION 6.14 Termination of Option Securities and Convertible Securities. 40
SECTION 6.15 Tax Returns................................................. 40
SECTION 6.16 Employment and Noncompetition............................... 40
SECTION 6.17 Distributions, Liabilities, Etc............................. 41
SECTION 6.18 Release from Personal Guarantees............................ 41
SECTION 6.19 No Significant Changes...................................... 41
SECTION 6.20 Financing Document.......................................... 42
SECTION 6.21 Tax Status.................................................. 42
SECTION 6.22 Self Dealing................................................ 42
ARTICLE 7 CLOSING CONDITIONS..................................................... 42
SECTION 7.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................... 42
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger
Subsidiary.................................................. 43
SECTION 7.3 Conditions to Obligations of the Company.................... 48
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER...................................... 51
SECTION 8.1 Termination................................................. 51
SECTION 8.2 Effect of Termination....................................... 53
SECTION 8.3 Amendment................................................... 53
SECTION 8.4 Waiver...................................................... 53
SECTION 8.5 Fees, Expenses and Other Payments........................... 54
SECTION 8.6 Effect of Investigation..................................... 54
ARTICLE 9 THIS ARTICLE INTENTIONALLY LEFT BLANK.................................. 54
ARTICLE 10 INDEMNIFICATION....................................................... 55
SECTION 10.1 Indemnification............................................. 55
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 10.2 Procedures Concerning Claims by Third Parties;
Payment of Damages; etc..................................... 56
SECTION 10.3 Access to Books and Records................................. 57
SECTION 10.4 Exclusivity................................................. 58
ARTICLE 11 GENERAL PROVISIONS.................................................... 58
SECTION 11.1 Effectiveness of Representations; etc....................... 58
SECTION 11.2 Notices..................................................... 58
SECTION 11.3 Headings.................................................... 60
SECTION 11.4 Severability................................................ 60
SECTION 11.5 Entire Agreement............................................ 60
SECTION 11.6 Assignment.................................................. 60
SECTION 11.7 Parties in Interest......................................... 60
SECTION 11.8 Governing Law............................................... 61
SECTION 11.9 Enforcement of the Agreement................................ 61
SECTION 11.10 Counterparts................................................ 61
SECTION 11.11 Disclosure Supplements...................................... 61
ARTICLE 12 DEFINITIONS........................................................... 61
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of September 8, 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 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 one of the other Participating
Companies will merge with and into such Subsidiary 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 or cash and shares
of VIALOG Stock determined in accordance with provisions substantially similar
to those in Section 2.1(a).
3. 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 forward cash merger pursuant to 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.
4. 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.
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
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 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.
2
<PAGE>
(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 any filing required pursuant to the Securities Act of 1933 , as
amended, (the "Securities Act") or any filing required by state law and in any
event within 30 days of the date hereof.
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 on the date designated by VIALOG by written notice in accordance with
Article 11 hereof delivered at least three (3) days prior to such 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 one day prior to the Merger
Closing, 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
Financing Closing Date, which is expected to occur no later than 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 Financing
Closing Date. In the event that the Effective Time and Financing 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 Financing 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), (f), and (h), to be satisfied prior to the Merger
Closing.
1.4 Effective Time. On the Financing 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 Financing 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)".
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
3
<PAGE>
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 cash pursuant to the following formula:
Aggregate Merger Consideration = $19,000,000*
Merger Consideration = Aggregate Merger Consideration
------------------------------
Aggregate Equity
*The Aggregate Merger Consideration shall be reduced 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,
4
<PAGE>
the Aggregate Merger Consideration will be increased or decreased to reflect the
actual amount due at the Effective Time.
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, cash equal to the number of Shares represented by such Certificate
multiplied by the Merger Consideration. A holder of more than one Certificate
will have the right to receive cash equal to the Merger Consideration multiplied
by the number of Shares represented by all such Certificates (the "Exchange
Merger Consideration"). 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 the 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.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Within one (1) business day of the Financing Closing Date,
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, 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 Merger Consideration
multiplied by the number of 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") 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.
5
<PAGE>
(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 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 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 Financing Closing Date, or (ii) surrender of a Certificate and the
related Transmittal Documents, and 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). 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.
6
<PAGE>
(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 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 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) 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, and (b)
VIALOG shall grant options for 142,850 shares exercisable at $7.00 per share to
such key employees of the Surviving Corporation as VIALOG and the Principal
Stockholder shall mutually agree. The grant of an option pursuant to this
Section 2.4(b) shall be in addition to and not in lieu of any other options
VIALOG shall deem appropriate to motivate employees of the Surviving Corporation
to exert their best efforts on behalf of VIALOG. At such time that VIALOG
completes an initial public offering of its shares or is acquired or otherwise
merges with another entity and the initial public offering price
7
<PAGE>
or acquisition or merger consideration is less than $15.00 per share, such
option holders shall receive additional options at $7.00 per share on a pro rata
basis such that the total aggregate value to said option holders at the time of
the initial public offering or acquisition or merger is equal to $1,000,000. If
prior to a VIALOG initial public offering or merger for the consideration set
forth in the previous sentence, such option holder leaves the employ of the
Surviving Corporation or an affiliated VIALOG entity so as to require such
option holder to exercise such option or lose such option, VIALOG shall cause a
bonus to be granted to such option holder equal to $7.00 times the number of
such options held by such holder.
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 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
8
<PAGE>
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
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 Financing
and
9
<PAGE>
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
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:
10
<PAGE>
(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 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
11
<PAGE>
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 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
12
<PAGE>
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.
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
13
<PAGE>
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, 1996, 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 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
14
<PAGE>
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 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
15
<PAGE>
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 Financing 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. 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.
16
<PAGE>
(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.
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
17
<PAGE>
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,
(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.
18
<PAGE>
(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,
(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 Financing Closing Date, such
amounts are set forth in Section 3.12(a) of the
Disclosure Schedule,
19
<PAGE>
(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 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
20
<PAGE>
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 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
21
<PAGE>
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 Financing 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 Financing 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
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.
22
<PAGE>
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, 1996 to the date of this Agreement, and until the Financing 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,
(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
23
<PAGE>
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
(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 Financing
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.
24
<PAGE>
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, 1996, 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
25
<PAGE>
(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 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 Financing 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
26
<PAGE>
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.
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
Financing Closing Date, will be solvent.
3.26 This Section Intentionally Left Blank.
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
27
<PAGE>
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 Company set forth in this Article will be
true and correct in all material respects on the Financing 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 Financing Document. All information furnished by or on behalf of the
------------------
Company or any Stockholder in writing for use in the Financing Document is set
forth in Section 3.30 of the Disclosure Schedule 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 Financing 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.
28
<PAGE>
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 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
29
<PAGE>
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 Financing, 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 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
30
<PAGE>
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 Financing and except pursuant to
the HSR Act (if applicable).
5.4 Financing. On the Financing Closing Date VIALOG 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), 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.
5.5 Broker or Finder. Except for the Underwriter and as set forth in
----------------
Section 5.5 of the Disclosure Schedule, 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 proposed
registration of VIALOG Stock under the Securities Act, compliance with the
31
<PAGE>
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 Financing Document. The Financing Document and any amendments
------------------
thereto will comply when the Financing 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 contained in the Financing Document 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 Financing Document or the
Prospectus contained therein 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 Financing Document and of each amendment thereto until the Merger
Closing and thereafter will furnish the Principal Stockholder with each
amendment thereto and any 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.
32
<PAGE>
5.10 This Section Intentionally Left Blank.
-------------------------------------
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
Financing 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
33
<PAGE>
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
Financing Document, 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 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
34
<PAGE>
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
Financing Document, and 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 Financing 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
Financing 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 Financing 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.
35
<PAGE>
(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 This Section Intentionally Left Blank.
-------------------------------------
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,
36
<PAGE>
(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 or solicit, directly or indirectly, any inquires or
the making of any proposal with respect to an Other Transaction, engage in
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 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 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
37
<PAGE>
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 earlier of the Effective Time or the
--------------------
termination of this Agreement, 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 issuance of VIALOG
securities under the Securities Act. 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
38
<PAGE>
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 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 hereof 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,
39
<PAGE>
(ii) participate in any negotiations 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
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 Financing
40
<PAGE>
Closing Date. From and after the Financing 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 Time) 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 Financing
--------------------------------
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 Financing
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 Financing 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.
41
<PAGE>
6.20 Financing Document.
------------------
(a) The Company and the Principal Stockholder will furnish to VIALOG
all necessary information concerning the Company and the Principal Stockholder
for VIALOG to prepare the Financing Document.
(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 the Financing
Document prior to October 30, 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 use
thereof.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder agree
----------
(i) to use their best efforts to maintain the status of the Merger as a cash
forward merger pursuant to the Code and (ii) not to take any action to endanger
the tax free status for a period of two (2) years from the Merger Closing.
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 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,
42
<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 Financing, 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 Financing Documents 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 securities
of VIALOG offered in the Financing 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 Financing (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 Financing and
distribution of the proceeds of the sale of securities of VIALOG sold and
purchased in the Financing shall have been unconditionally authorized by the
Underwriter upon consummation of the Merger and the Participating Mergers,
(e) This subsection intentionally left blank,
(f) Subject to such material amendments, if any, as shall be
proposed prior to the Merger Closing by VIALOG to be effective immediately after
the 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) This subsection intentionally left blank,
(h) VIALOG shall have delivered to the Exchange Agent that number of
shares of VIALOG Stock as determined pursuant to Section 2.1 of the
Participating Agreements issued in the name of 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:
43
<PAGE>
(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 Financing 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,
(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,
44
<PAGE>
(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 Financing 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 Financing 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 and correct in all material respects
at and as of the Financing Closing Date with the same force
45
<PAGE>
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 Financing 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 Financing 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 Financing 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
Financing Document 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
Financing Document prepared by the Accountants as contemplated by Section 6.1(a)
to a date not more than five (5) days prior to the Financing 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 Financing Document,
(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,
46
<PAGE>
(i) Between the date of this Agreement and the Financing 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 Financing Document,
(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 Financing Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Financing
---------------
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) This subsection intentionally left blank,
(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,
47
<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 Financing 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 Financing 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 Financing 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 Financing
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 368(a) of the Code applies or
as a cash forward merger pursuant to the Code 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 Financing 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
48
<PAGE>
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) 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,
(iv) 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
49
<PAGE>
(v) 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 Financing 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 Financing 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 Financing 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),
(g) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Financing 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, and
50
<PAGE>
(h) The Company shall have received a letter from the Accountants to
the effect that the Merger and the Transactions qualify as a cash forward merger
pursuant to the Code for federal income tax purposes.
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 Financing 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 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 Merger Closing or will
prevent or delay consummation of the Merger by or beyond
the Termination Date, or
(ii) in the event Jeffries & Company, Inc. shall terminate its
engagement or otherwise withdraw as an Underwriter for
any substantive reason other than material failure to
perform or material nonfulfillment of any covenant by the
Company or the Principal Stockholder or a material breach
of a representation or warranty of the Company or the
Principal Stockholder.
51
<PAGE>
(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 Financing,
(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
52
<PAGE>
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 Merger Closing 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)
---------------------
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,
53
<PAGE>
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.
ARTICLE
9
This Article Intentionally Left Blank.
54
<PAGE>
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 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;
55
<PAGE>
(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 Merger Consideration pursuant to Sections
2.1(a) and 2.4. VIALOG will not be required to pay any Company Indemnified Party
an aggregate amount in excess of the amount of cash delivered to such Company
Indemnified Party pursuant to Section 2.1(a) 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 percent (1%) of the total amount of cash paid to all
Stockholders pursuant to Sections 2.1(a) 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
56
<PAGE>
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, 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.
10.3 Access to Books and Records. In the event of any claim for indemnity
---------------------------
under Section 10.1 or 10.2, VIALOG agrees to give the Principal Stockholder and
its Representatives reasonable access to all files, documents, instruments,
papers, books and records relating to the Company or the Principal Stockholder,
and to all employees of the Company in connection with the matters for which
indemnification is sought to the extent the Principal Stockholder reasonably
deems necessary in connection with his rights and obligations under this Article
10.
57
<PAGE>
10.4 Exclusivity. After the Financing Closing Date, to the extent
-----------
permitted by Law, the indemnities set forth in this Article 10 shall be the
exclusive remedies of the VIALOG Indemnified Parties and the Company Indemnified
Parties for any misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which the
parties hereto hereby waive.
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 and Section 3.12 until sixty (60) days after
the applicable statute of limitations, as the same may be
extended from time to time, has terminated; and
(ii) all other Sections, until January 31, 1999.
(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
3 Riverside Drive
Andover, MA 01810
(508) 975-3700
58
<PAGE>
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
59
<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.
60
<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 Financing
-----------------------
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
61
<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).
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.
62
<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.
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.
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.
63
<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
64
<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 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
65
<PAGE>
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.
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,
66
<PAGE>
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).
Financing means the sale of VIALOG securities or borrowings from financial
institutions necessary to raise the cash so as to enable VIALOG to pay the
Aggregate Merger Consideration.
Financing Closing Date means the date on which the Financing is closed.
Financing Document means the Registration Statement including the
Prospectus, exhibits and financing statements included therein, and any
amendments thereto and any securities of VIALOG issued to consummate the
Financing.
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;
67
<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.
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.
68
<PAGE>
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).
Multiemployer Plan means a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
69
<PAGE>
Net Shares will have the meaning given to it in Section 2.2(a).
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.
70
<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 offering document used by VIALOG in completing
the Financing including any preliminary prospectus first filed by VIALOG in the
Registration Statement dated February 28, 1997 and the prospectus filed pursuant
to Rule 424(b) under the Securities Act and any supplements or amendments
thereto used by VIALOG in connection with the Financing.
Registration Statement means the registration statement of VIALOG filed
February 28, 1997 (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)),
used relating to the securities of VIALOG.
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.
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).
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.
71
<PAGE>
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) December 31, 1997, or (b) such date after
December 31, 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 sale of VIALOG securities pursuant to the Financing Document or any
credit facilities between VIALOG and any bank described in the Financing
Document.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
72
<PAGE>
Underwriter means any entity who assists VIALOG either as agent or for its
own account in selling VIALOG's securities pursuant to the Financing Document.
Underwriting Agreement means the agreement between VIALOG and the
Underwriter.
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.]
73
<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/ John Hassett
---------------------------------
Name: John Hassett
Title: Chairman
TBMA ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
---------------------------------
Name: Glenn 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
74
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. FURTHER INFORMATION
WILL BE FURNISHED UPON REQUEST
------------------------------
SECTION 3.1(A)
. Jurisdiction of incorporation of the Company.
. Jurisdictions where Company 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, including 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.
. Exceptions to no liens against subsidiaries.
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.
<PAGE>
SECTION 3.4
. Exceptions to liabilities of the Company or any subsidiary.
. 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, 1996.
. Governmental authorizations.
2
<PAGE>
SECTION 3.7(B)
. Breaches, violations or defaults under governmental authorizations or any
applicable law or under any requirement of any insurance carrier.
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.
3
<PAGE>
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 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.
4
<PAGE>
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.
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.
5
<PAGE>
SECTION 3.23(C)
. Above or underground tanks for the storage of hazardous materials.
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 3.30
. Information furnished by or on behalf of the Company or any stockholder for
use in financing document.
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
. 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.
6
<PAGE>
. 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.
. Governmental authorizations, governmental filing or private authorizations
required as a result of the execution and delivery of this Agreement or any
collateral document.
SECTION 5.5
. Exceptions to no broker, agent or finder.
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 7.2(D)
. Persons executing non-competition agreements.
7
<PAGE>
SECTION 7.2(Q)
. Leases and Contractual Obligations not satisfied and discharged as of the
public offering closing date.
SECTION 7.2(T)
. Individuals executing and delivering employment agreements.
8
<PAGE>
EXHIBIT 2.2
-----------
AMENDMENT
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This Amendment is made as of the 20th day of October, 1997 by and among
VIALOG Corporation ("VIALOG"), TBMA Acquisition Corporation (the "VIALOG Merger
Subsidiary"), Telephone Business Meetings, Inc. (the "Company") and C. Raymond
Marvin (the "Principal Stockholder").
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholder are parties to that certain Amended Agreement and Plan of
Reorganization dated September 8, 1997 (the "Agreement"); and
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholder desire to amend the Agreement.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein and of those contained in the
Agreement, VIALOG, the VIALOG Merger Subsidiary, the Company and the Principal
Stockholder covenant, agree, represent and warrant as follows:
1. Terms. Terms defined in the Agreement are used herein as so defined unless
-----
otherwise specifically stated herein.
2. Amendments.
----------
(a) Article 6 is hereby amended by deleting Section 6.21 in its entirety
and replacing it with the following new Section 6.21:
6.21 Section 338(h)(10) Election. The Company, the Principal
---------------------------
Stockholder, and each other stockholder of the Company agree to join with VIALOG
in making an election under Section 338(h)(10) of the Code (and any
corresponding election under state, local and foreign tax law) with respect to
the purchase and sale of the stock of the Company hereunder (the "Section
338(h)(10) Election"). Each stockholder of the Company agrees to include any
income, gain, loss, deduction or other tax item resulting from the Section
338(h)(10) Election on its tax returns to the extent permitted by applicable law
and agrees to pay any taxes imposed on the Company attributed to the making of
the Section 338(h)(10) Election, including but not limited to, (i) any taxes
imposed under Section 1374 of the Code, (ii) any taxes imposed under Regulation
Section 1.338(h)(10)-1(e)(5), or (iii) any state, local or foreign taxes imposed
on the Company's gain. At
<PAGE>
the Closing, VIALOG shall pay to each of the Company's stockholders (i) an
amount (the "Estimated Additional Tax Liability") equal to the difference
between (A) the estimated taxes incurred by such stockholder under the
immediately preceding sentence and (B) the estimated taxes which such
stockholder would have incurred if no Section 338(h)(10) Election had been made,
and (ii) an amount equal to an estimate of any additional professional fees
arising out of the preparation, review and filing of such election. The
estimated amounts to be paid to each stockholder in accordance with clause (i)
are set forth on Schedule 6.21 (or Section 6.21 of the Disclosure Schedule, as
the case may be). In addition, VIALOG shall indemnify each stockholder, in
accordance with Article 6 of this Agreement, for any and all additional tax
liability, in excess of the Estimated Additional Tax Liability, associated with
each such stockholder's Section 338(h)(10) Election. The Estimated Additional
Tax Liability will be calculated by VIALOG's accountants based on information
available as of the closing and will assume that each of the Company's
stockholders is in the highest federal and applicable state income tax brackets.
By April 15th of the year following the closing each of the Company's
stockholders agrees to provide VIALOG's accountants with all information
necessary to permit VIALOG's accountants to adjust the Estimated Additional Tax
Liability to reflect the stockholder's actual income tax brackets and all other
relevant tax information affecting these calculations (the "Final Additional Tax
Liability"). VIALOG's accountants will provide each of the stockholders with a
schedule showing their calculation of the Final Additional Tax Liability within
thirty (30) days after receipt of all necessary information from the
stockholder. VIALOG agrees to reimburse the Company's stockholders to the
extent that the Final Additional Tax Liability exceeds the Estimated Additional
Tax Liability, and each of the stockholders agrees to reimburse VIALOG to the
extent that the Estimated Additional Tax Liability exceeds the Final Additional
Tax Liability, such reimbursement to be made in each case within thirty (30)
days after the Final Additional Tax Liability is finally determined.
(b) The definition of "Financing Document" contained in Article 12 is
hereby amended by deleting it in its entirety and replacing it with a new
definition as follows:
Financing Document means the private offering circular furnished to
potential investors or financial institutions in connection with the Financing
(which may include the Registration Statement, the Prospectus, exhibits, and
financial statements, and any amendments thereto) and any securities of VIALOG
issued to consummate the Financing.
3. Except as specifically amended hereby, all other terms and provisions of
the Agreement shall remain in full force and effect.
2
<PAGE>
4. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
EXECUTED as an instrument under seal as of the date first above written.
TELEPHONE BUSINESS VIALOG CORPORATION
MEETINGS, INC.
By: /s/ C. Raymond Marvin By: /s/ Glenn D. Bolduc
------------------------- ------------------------
Name: C. Raymond Marvin Name: Glenn D. Bolduc
Title: President Title: President
PRINCIPAL STOCKHOLDERS: TBMA ACQUISITION CORPORATION
/s/ C. Raymond Marvin By: /s/ Glenn D. Bolduc
- ---------------------------- ------------------------
Name: C. Raymond Marvin Name: Glenn D. Bolduc
Title: President
3
<PAGE>
DISCLOSURE SCHEDULE 6.21
------------------------
VIALOG PREP'D: BEECY
ACCESS ACQUISITION DATE: 10-17-97
1997 BOND OFFERING
- --------------------------------------------------------------------------------
ACQUISITION OF STOCK W/(S)998(h)(10) ELECTION
<TABLE>
<CAPTION>
- ------------------------------
AS OF 12-31-96
- ------------------------------
TAX BASIS OF ASSETS:
<S> <C> <C> <C>
CASH 803,988
A/R -
PREPAID EXPS -
FIXED ASSETS -
COST 3,641,590
TAX A/D (1,476,150)
----------
2,165,440
DEPOSITS 121,300
----------
TAX BASIS OF ASSETS 3,090,728
PROCEEDS ON (h)(10)
CASH 19,000,000
LIABS ASSUMED
A/P 141,000
CURR LTD 9,185
CURR LEASES 31,909
ACCRD EXPS 366,000
LTD 1,202,657
LEASES 47,605
DEFERRED RENT -
----------
1,798,356
----------
20,796,356
----------
GAIN UNDER (S)338(h)(10) 17,707,628
==========
CHARACTER OF GAIN:
ORD INC
(S)1245 DEPR RECAPTR 1,476,150
A/R 1,309,000
PREPAID EXPS 161,000
A/P (141,000)
ACCRD EXPS (366,000)
DEFERRED RENT -
(S)123] CAP GAIN 14,761,478
TOTAL (h)(10) GAIN 17,200,628
==========
TAX A/D AS FOLLOWS:
CUMLTV DTL AT 12-31-94 (123,209)
1995 TNBE M-1 (41,843)
1996 BNTE M-1 129,417
----------
CUMLTV DTL AT 12-31-96 (35,635)
BOOK A/D AT 12-31-96 (1,440,515)
----------
TAX A/D AT 12-31-96 (1,478,150)
----------
</TABLE>
4
<PAGE>
VIALOG PREP'D: BEECY
ACCESS ACQUISITION DATE: 10-17-97
1997 BOND OFFERING
________________________________________________________________________________
<TABLE>
<CAPTION>
ANALYSIS OF GAINS
- ---------------------------
AS OF 12-31-96
- ---------------------------
BASIS OF STOCK:
S/H MARVIN MICHELA MENDES TOTAL
<S> <C> <C> <C> <C>
% OWNED EOY 97.000737% 1.499631% 1.499631% 100.000000%
----------------------------------------------------
STOCK 1,446,513 74,948 74,946 1,596,407
DEBT 761,000 - - 761,000
----------------------------------------------------
TOTAL 2,207,513 74,948 74,946 2,357,407
ALL OC SALES PRICE 18,430,140 284,930 284,930 19,000,000
----------------------------------------------------
CAP GAIN ON STOCK SALE 16,222,627 209,982 209,984 16,642,593
====================================================
</TABLE>
<TABLE>
<CAPTION>
S/H MARVIN MICHELA MENDES TOTAL
<S> <C> <C> <C> <C>
% OWNED EOY 97.000737% 1.499631% 1.499631% 100.000000%
----------------------------------------------------
TOTAL BASIS 2,207,513 74,948 74,946 2,357,407
ALLOCTD (h)(10) GAIN 16,684,736 257,946 257,946 17,200,628
----------------------------------------------------
BASIS AFTER GAIN 18,892,249 332,894 332,892 19,558,035
S-CORP LIQ'G DISTRBTN 18,430,140 284,930 284,930 19,000,000
----------------------------------------------------
LIQ'G DISTRBTN GAIN (LOSS) (462,109) (47,964) (47,962) (558,035)
====================================================
</TABLE>
2
<PAGE>
VIALOG PREP'D: BEECY
ACCESS ACQUISITION DATE: 10-17-97
1997 BOND OFFERING
________________________________________________________________________________
<TABLE>
<CAPTION>
TAXES ON ALTERNATIVES
- ----------------------------------
AS OF 12-31-96
- ----------------------------------
(h)(10) GAIN TAXES:
CHARACTER OF GAIN:
ORD INC. AMOUNT STATE RATE (a) FED RATE TOTAL TAX
---------------------------------------------------------------
<S> <C> <C> <C> <C>
(S)1245 DEPR RECAPTR 1,476,150 9.50% 39.6% 724,790
A/R 1,309,000 9.50% 39.6% 642,719
PREPAID EXPS 161,000 9.50% 39.6% 79,051
A/P (141,000) 9.50% 39.6% (69,231)
ACCRD EXPS (366,000) 9.50% 39.6% (179,706)
DEFERRED RENT - 9.50% 39.6% -
(S)1231 CAP GAIN 14,761,478 9.50% 20.0% 4,354,636
LIQ'G DISTRTBTN G(L) (558,035) 9.50% 20.0% (164,620)
----------- ----------
TOTAL (h)(10) GAIN AND TAX 16,642,583 5,387,639
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
CAPITAL GAIN TAXES:
AMOUNT STATE RATE (a) FED RATE TOTAL TAX
---------------------------------------------------------------
<S> <C> <C> <C> <C>
GAIN ON STOCK SALE 16,642,593 9.50% 20.0% 4,909,565
========== =========
(h)(10) TAX greater than STOCK TAX 478,074
RECIPROCAL OF TAX RATE (b) 90.00%
------
GROSS UP REQ'D FOR (h)(10) 597,593
=======
</TABLE>
<TABLE>
<CAPTION>
PROOF:
ORD INC. AMOUNT TAX ORD TAX CAPTL DIFF
---------------------------------------------------------------
<S> <C> <C> <C> <C>
(S)1245 DEPR RECAPTR 1,476,150 724,790 435,464 289,326
A/R 1,309,000 642,719 386,155 256,584
PREPAID EXPS 161,000 79,051 47,495 31,556
A/P (141,000) (69,231) (41,595) (27,636)
ACCRD EXPS (366,000) (179,706) (107,970) (71,736)
DEFERRED RENT - - - -
-----------------------------------------------------------------
TOTAL ORD INC. 2,439,150 1,197,623 719,549 478,074
=================================================================
39.6% LESS 20% 19.6%
-----------------------
TAX DIFFRNTL ON (h)(10) 478,073
RECPRCL ON CAP GAIN RATE 80%
-----------------------
GROSS UP REQ'D 597,591
=======================
</TABLE>
(a) ASSUME NO FED SIT DEDCTN DUE TO INCOME PHASE OUT OF BENEFIT. ALSO ASSUMES DC
INC TAX RATE AS MARVIN IS RES OF DC AND THE RATE THERE IS HIGHER THAN VA. DC
GIVES CR FOR TAXES PAID TO OTHER JURIS.
(b) RECIPROCAL BASED ONLY ON CAPITAL GAINS RATE AS ANY ADDT'L CONSIDERATION RCVD
FOR GROSS UP ON THE TXN WILL BE (S)1231 CAP GAIN. STATE RATE IS CONSTANT, SO NO
GROSS UP REQ'D.
3
<PAGE>
EXHIBIT 2.3
-----------
November 5, 1997
VIA FACSIMILE
- -------------
C. Raymond Marvin, President
Telephone Business Meetings, Inc.
1861 Wiehle Avenue
Reston, VA 22090
Dear Ray:
This letter will confirm our understanding that the options to be issued
pursuant to Section 2.4(b) under the Agreement and Plan of Reorganization By and
Among VIALOG Corporation, TBMA Acquisition Corporation and Telephone Business
Meeting, Inc. and C. Raymond Marvin dated as of the 7th day of September 1997,
as amended (the "Agreement") will be granted at $5.75 per share rather than the
$7.00 number set forth in the Agreement.
Additionally, the $15.00 price per share and the $7.00 price per share on
page 8 of the Agreement shall be $13.75 and $5.75 respectively.
Please indicate your agreement with number changes by executing a copy of
this letter. The information contained herein is a supplement to the Amendment
to the Agreement and Plan of Reorganization dated the 20th day of October, 1997.
Very truly yours,
VIALOG Corporation
By: /s/ John J. Hassett
---------------------------
John J. Hassett, Chairman
The foregoing is agreed.
Telephone Business Meetings, Inc.
By: /s/ C. Raymond Marvin
----------------------------------
C. Raymond Marvin, President
/s/ C. Raymond Marvin
----------------------------------
C. Raymond Marvin, Principal Stockholder
<PAGE>
EXHIBIT 2.4
-----------
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 September 8, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <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............................ 5
SECTION 2.3 Stock Transfer Books........................................................................ 7
SECTION 2.4 Option Securities and Convertible Securities;Payment Rights................................. 7
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........................................................................ 11
SECTION 3.4 Liabilities................................................................................. 11
SECTION 3.5 Title to Properties; Leases................................................................. 12
SECTION 3.6 Compliance with Private Authorizations...................................................... 13
SECTION 3.7 Compliance with Governmental Authorizations and Applicable Law.............................. 14
SECTION 3.8 Intangible Assets........................................................................... 15
SECTION 3.9 Related Transactions........................................................................ 15
SECTION 3.10 Insurance................................................................................... 16
SECTION 3.11 Tax Matters................................................................................. 16
SECTION 3.12 Employee Retirement Income Security Act of 1974............................................. 17
SECTION 3.13 Absence of Sensitive Payments............................................................... 20
SECTION 3.14 Inapplicability of Specified Statutes....................................................... 20
SECTION 3.15 Authorized and Outstanding Capital Stock.................................................... 20
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.......................................................................... 24
</TABLE>
i
<PAGE>
<TABLE>
<S> <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..................................................................................... 27
SECTION 3.25 Solvency........................................................................................ 27
SECTION 3.26 This Section Intentionally Left Blank........................................................... 27
SECTION 3.27 Compliance with Regulations Relating to Securities Credit....................................... 27
SECTION 3.28 Certain State Statutes Inapplicable............................................................. 28
SECTION 3.29 Continuing Representations and Warranties....................................................... 28
SECTION 3.30 Financing Document.............................................................................. 28
SECTION 3.31 Predecessor Status; Etc......................................................................... 28
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................................................................................. 29
SECTION 4.5 No Conflict; Required Filings and Consents...................................................... 29
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............................................................................. 30
SECTION 5.3 No Conflict; Required Filings and Consents...................................................... 31
SECTION 5.4 Financing....................................................................................... 31
SECTION 5.5 Broker or Finder................................................................................ 31
SECTION 5.6 Prior Activities of VIALOG and VIALOG Merger Subsidiary......................................... 31
SECTION 5.7 Capitalization of VIALOG and VIALOG Merger Subsidiary........................................... 32
SECTION 5.8 Financing Document.............................................................................. 32
SECTION 5.9 Solvency........................................................................................ 32
SECTION 5.10 This Section Intentionally Left Blank........................................................... 32
SECTION 5.11 Participating Agreements of Other Participating Companies....................................... 33
SECTION 5.12 Continuing Representations and Warranties....................................................... 33
ARTICLE 6 ADDITIONAL COVENANTS...................................................................................... 33
SECTION 6.1 Access to Information; Confidentiality.......................................................... 33
SECTION 6.2 Agreement to Cooperate.......................................................................... 34
SECTION 6.3 Assignment of Contracts and Rights.............................................................. 36
SECTION 6.4 This Section Intentionally Left Blank........................................................... 36
SECTION 6.5 Conduct of Business............................................................................. 36
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 6.6 No Solicitation............................................................................... 37
SECTION 6.7 Directors' and Officers' Indemnification and Insurance........................................ 37
SECTION 6.8 Notification of Certain Matters............................................................... 38
SECTION 6.9 Public Announcements.......................................................................... 38
SECTION 6.10 Conveyance Taxes.............................................................................. 39
SECTION 6.11 Obligations of VIALOG......................................................................... 39
SECTION 6.12 Employee Benefits; Severance Policy........................................................... 39
SECTION 6.13 Certain Actions Concerning Business Combinations.............................................. 39
SECTION 6.14 Termination of Option Securities and Convertible Securities................................... 40
SECTION 6.15 Tax Returns................................................................................... 40
SECTION 6.16 Employment and Noncompetition................................................................. 40
SECTION 6.17 Distributions; Liabilities; Etc............................................................... 41
SECTION 6.18 Release from Personal Guarantees.............................................................. 41
SECTION 6.19 No Significant Changes........................................................................ 41
SECTION 6.20 Financing Document............................................................................ 41
SECTION 6.21 Section 338(h)(10) Election................................................................... 42
SECTION 6.22 Self Dealing.................................................................................. 42
ARTICLE 7 CLOSING CONDITIONS.................................................................................... 42
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger.................................. 42
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary.............................. 43
SECTION 7.3 Conditions to Obligations of the Company...................................................... 49
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER..................................................................... 52
SECTION 8.1 Termination................................................................................... 52
SECTION 8.2 Effect of Termination......................................................................... 54
SECTION 8.3 Amendment..................................................................................... 54
SECTION 8.4 Waiver........................................................................................ 54
SECTION 8.5 Fees, Expenses and Other Payments............................................................. 55
SECTION 8.6 Effect of Investigation....................................................................... 55
ARTICLE 9 THIS ARTICLE INTENTIONALLY LEFT BLANK................................................................. 55
ARTICLE 10 INDEMNIFICATION...................................................................................... 55
SECTION 10.1 Indemnification............................................................................... 55
SECTION 10.2 Procedures Concerning Claims by Third Parties; Payment of Damages; Etc........................ 57
SECTION 10.3 Access to Books and Records................................................................... 58
SECTION 10.4 Exclusivity................................................................................... 58
ARTICLE 11 GENERAL PROVISIONS................................................................................... 58
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 11.1 Effectiveness of Representationsb Etc......................................................... 59
SECTION 11.2 Notices....................................................................................... 59
SECTION 11.3 Headings...................................................................................... 60
SECTION 11.4 Severability.................................................................................. 60
SECTION 11.5 Entire Agreement.............................................................................. 60
SECTION 11.6 Assignment.................................................................................... 60
SECTION 11.7 Parties in Interest........................................................................... 61
SECTION 11.8 Governing Law................................................................................. 61
SECTION 11.9 Enforcement of the Agreement.................................................................. 61
SECTION 11.10 Counterparts.................................................................................. 61
SECTION 11.11 Disclosure Supplements........................................................................ 61
ARTICLE 12 DEFINITIONS............................................................................................ 62
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION dated as of
September 8, 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 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 one of the Other Participating Companies
will merge with and into such Subsidiary 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, or cash and shares of VIALOG
Stock determined in accordance with provisions substantially similar to those in
Section 2.1(a).
3. 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 forward cash merger pursuant to 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>
4. 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 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
2
<PAGE>
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 any filing required pursuant to the Securities Act of 1933, as amended
(the "Securities Act") or any filing required by state law and in any event
within 30 days of the date hereof.
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 on the date designated by VIALOG by written notice in accordance with
Article 11 hereof delivered at least three (3) days prior to such 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 one day prior to the Merger
Closing, 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
Financing Closing Date, which is expected to occur no later than 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 Financing
Closing Date. In the event that the Effective Time and Financing 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 Financing 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), (f), and (h), to be satisfied prior to the Merger
Closing.
1.4 Effective Time. On the Financing 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 such time (but not
prior to the Financing Closing Date) as such articles or certificates, as the
case
3
<PAGE>
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 cash pursuant to the following formula:
Aggregate Merger Consideration = $18,675,000
Merger Consideration = Aggregate 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,
4
<PAGE>
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, cash equal to the
number of Shares represented by such Certificate multiplied by the Merger
Consideration. A holder of more than one Certificate will have the right to
receive cash equal to the Merger Consideration multiplied by the number of
Shares represented by all such Certificates (the "Exchange Merger
Consideration"). 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 the 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.
2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures.
----------------------------------------------------------------
(a) Within one (1) business day of the Financing Closing Date, 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,
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 Merger Consideration multiplied by the
number of 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") 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
5
<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 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 Financing Closing Date, or (ii) surrender of a Certificate and the
related Transmittal Documents, and 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). 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.
6
<PAGE>
(e) None of VIALOG, VIALOG Merger Subsidiary, the Company or the
Surviving Corporation will be liable to any holder of Shares for any 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 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) 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:
7
<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.
8
<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 Financing 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,
9
<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
10
<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
11
<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
12
<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,
1996, 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
13
<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 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.
14
<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 Financing 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
15
<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
16
<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,
17
<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)
18
<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 Financing 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.
19
<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 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
20
<PAGE>
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 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 Financing 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 Financing Closing
Date or during the twelve-month period immediately prior thereto.
21
<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 of 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
failed 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, 1996 to the date of this Agreement, and until the Financing Closing
Date, except as may be described in 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,
22
<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
23
<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 Financing
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
24
<PAGE>
insurance carrier, has at any time since December 31, 1996, 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:
25
<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 Financing 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
26
<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
Financing Closing Date, will be solvent.
3.26 This Section Intentionally Left Blank.
-------------------------------------
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 Financing
27
<PAGE>
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 Financing Document. All information furnished by or on behalf of the
------------------
Company or any Stockholder in writing for use in the Financing Document is set
forth in Section 3.30 of the Disclosure Schedule 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 Financing 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
28
<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 Financing, pursuant to the HSR
Act (if applicable) or as set forth in Section 4.5 of the Disclosure Schedule.
29
<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
30
<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 Financing and except pursuant to
the HSR Act (if applicable).
5.4 Financing. On the Financing Closing Date VIALOG 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), 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.
5.5 Broker or Finder. Except for the Underwriter and as set forth in
----------------
Section 5.5 of the Disclosure Schedule, 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
-------------------------------------------------------
VIALOG nor 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 proposed
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
31
<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.
5.8 Financing Document. The Financing Document and any amendments thereto
------------------
will comply when the Financing Document 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 Financing Document 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 of 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 Financing Document and of each amendment thereto
until the Merger Closing and thereafter will furnish the Principal Stockholder
with each amendment thereto and any 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 This Section Intentionally Left Blank.
-------------------------------------
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.
32
<PAGE>
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
Financing 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 Financing Document, 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
33
<PAGE>
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 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 Financing Document, any 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
34
<PAGE>
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 Financing 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 Financing 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 Financing 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
35
<PAGE>
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 This Section Intentionally Left Blank.
-------------------------------------
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 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.
36
<PAGE>
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 or solicit, directly or indirectly, any inquiries
or the making of any proposal with respect to an Other Transaction, engage in
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 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 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.
37
<PAGE>
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 earlier of the Effective Time or the
--------------------
termination of this Agreement 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 issuance of VIALOG
securities under the Securities Act. 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.
38
<PAGE>
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 hereof 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
negotiations 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 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
39
<PAGE>
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 Financing
Closing Date. From and after the Financing 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 Time) only to the extent provided in Schedule 6.17 (or
Section 6.17 of the Disclosure Schedule, as the case may be); and
40
<PAGE>
(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 Financing
--------------------------------
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 Financing
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 Financing 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 Financing Document.
------------------
(a) The Company and the Principal Stockholder will furnish to VIALOG
all necessary information concerning the Company and the Principal Stockholder
for VIALOG to prepare the Financing Document.
(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 the Financing
Document prior to October 30, 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 use
thereof.
6.21 Section 338(h)(10) Election. The Company, the Principal Stockholder,
---------------------------
and each other stockholder of the Company agree to join with VIALOG in making an
election under Section 338(h)(10) of the Code (and any corresponding election
under state, local and foreign tax
41
<PAGE>
law) with respect to the purchase and sale of the stock of the Company hereunder
(the "Section 338(h)(10) Election"). Each stockholder of the Company agrees to
include any income, gain, loss, deduction or other tax item resulting from the
Section 338(h)(10) Election on its tax returns to the extent permitted by
applicable law and agrees to pay any taxes imposed on the Company attributed to
the making of the Section 338(h)(10) Election, including but not limited to, (i)
any taxes imposed under Section 1374 of the Code, (ii) any taxes imposed under
Regulation Section 1.338(h)(10)-1(e)(5), or (iii) any state, local or foreign
taxes imposed on the Company's gain. At or promptly following the closing,
VIALOG agrees to reimburse each of the Company's stockholders an amount (the
"preliminary reimbursement amount") equal to the difference between (i) the
taxes incurred by such stockholder under the immediately preceding sentence and
(ii) the taxes which such stockholder would have incurred if no Section
338(h)(10) Election had been made. The preliminary reimbursement amount will be
calculated by VIALOG's accountants based on information available as of the
closing and will assume that each of the Company's stockholders is in the
highest federal and applicable state income tax brackets. By April 15th of the
year following the closing each of the Company's stockholders agrees to provide
VIALOG's accountants with all information necessary to permit VIALOG's
accountants to adjust the preliminary reimbursement amount to reflect the
stockholder's actual income tax brackets and all other relevant tax information
affecting these calculations (the "final reimbursement amount"). VIALOG's
accountants will provide each of the stockholders with a schedule showing their
calculation of the final reimbursement amount within thirty (30) days after
receipt of all necessary information from the stockholder. VIALOG agrees to
reimburse the Company's stockholders to the extent that the final reimbursement
amount exceeds the preliminary reimbursement amount, and each of the
stockholders agrees to reimburse VIALOG to the extent that the preliminary
reimbursement amount paid to the stockholder exceeds the final reimbursement
amount, such reimbursement to be made in each case within thirty (30) days after
the final reimbursement amount is finally determined.
6.22 Tax Status. VIALOG, the Company and the Principal Stockholder agree
----------
(i) to use their best efforts to maintain the status of the Merger as a cash
forward merger pursuant to the Code and (ii) not to take any action to endanger
the tax free status for a period of two (2) years from the Merger Closing.
6.23 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
42
<PAGE>
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,
(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 Financing, 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 Financing Document 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 securities
of VIALOG offered in the Financing 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 Financing (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 Financing and
distribution of the proceeds of the sale of securities of VIALOG sold and
purchased in the Financing shall have been unconditionally authorized by the
Underwriter upon consummation of the Merger and the Participating Mergers,
(e) This subsection intentionally left blank,
(f) Subject to such material amendments, if any, as shall be proposed
prior to Merger Closing by VIALOG to be effective immediately after the 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) This subsection intentionally left blank,
(h) VIALOG shall have delivered to the Exchange Agent that number of
shares of VIALOG Stock as determined pursuant to Section 2.1 of the
Participating Agreements issued
43
<PAGE>
in the name of 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 Financing 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-
accessibility 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,
44
<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
45
<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 Financing 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 Financing 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
46
<PAGE>
and correct in all material respects at and as of the Financing 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 Financing 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 Financing 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 Financing 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 Financing
Document 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 Financing
Document prepared by the Accountants as contemplated by Section 6.1(a) to a date
not more than five (5) days prior to the Financing 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 Financing Document,
(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,
47
<PAGE>
(i) Between the date of this Agreement and the Financing 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 Financing Document,
(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 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 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 Financing Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Financing
--------------
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) This subsection intentionally left blank,
(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,
48
<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 Financing 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 Financing 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 Financing 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 Financing
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 368(a) of the Code applies or
as a cash forward merger pursuant to the Code 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 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 Financing 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
49
<PAGE>
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) 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,
(iv) 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
(v) The required filings with the Delaware Secretary of State
and the Georgia Secretary of State shall have been made,
and a Certificate
50
<PAGE>
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 Financing 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 Financing 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
Financing 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),
(g) No Legal Action or other Claim shall be pending or threatened at
any time prior to or on the Financing 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, and
51
<PAGE>
(h) The Company shall have received a letter from the Accountants to
the effect that the Merger and the Transactions qualify as a cash forward merger
pursuant to the Code.
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 Financing 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 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 Merger Closing or will
prevent or delay consummation of the Merger by or beyond
the Termination Date, or
(ii) in the event Jeffries & Company, Inc. shall terminate its
engagement or otherwise withdraw as an Underwriter for
any substantive reason other than material failure to
perform or material nonfulfillment of any covenant by the
Company or the Principal Stockholder or a material breach
of a representation or warranty of the Company or the
Principal Stockholder.
(d) by VIALOG:
52
<PAGE>
(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 Financing,
(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
53
<PAGE>
(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
Merger Closing 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)
---------------------
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
54
<PAGE>
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.
ARTICLE
9
THIS ARTICLE INTENTIONALLY LEFT BLANK
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:
55
<PAGE>
(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 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 Merger
56
<PAGE>
Consideration pursuant to Sections 2.1(a) and 2.4. VIALOG will not be required
to pay any Company Indemnified Party an aggregate amount in excess of the amount
of cash delivered to such Company Indemnified Party pursuant to Section 2.1(a)
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 any of 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 percent (1%) of the Aggregate Merger
Consideration paid to all Stockholders pursuant to Sections 2.1(a) 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
57
<PAGE>
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.
10.3 Access to Books and Records. In the event of any claim for indemnity
---------------------------
under Section 10.1 or 10.2, VIALOG agrees to give the Principal Stockholder and
its Representatives reasonable access to all files, documents, instruments,
papers, books and records relating to the Company or the Principal Stockholder,
and to all employees of the Company in connection with the matters for which
indemnification is sought to the extent the Principal Stockholder reasonably
deems necessary in connection with his rights and obligations under this Article
10.
10.4 Exclusivity. After the Financing Closing Date, to the extent
-----------
permitted by, Law, the indemnities set forth in this Article 10 shall be the
exclusive remedies of the VIALOG Indemnified Parties and the Company Indemnified
Parties for any misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which the
parties hereto hereby waive.
58
<PAGE>
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 and Section 3.12 until sixty (60) days after
the applicable statute of limitations, as the same may be
extended from time to time, has terminated; and
(ii) all other Sections, until January 31, 1999.
(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
3 Riverside Drive
Andover, MA 01810
(508) 975-3700
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, llp
Attention: David L. Lougee, Esq.
1700 Bank of Boston Tower
Worcester, MA 01608
59
<PAGE>
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
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
60
<PAGE>
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.
11.11 Disclosure Supplements. From time to time prior to the Financing
-----------------------
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.
61
<PAGE>
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 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.
62
<PAGE>
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).
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 benefits, (e) any equity
compensation plan, (f) any deferred compensation plan, and (g) any compensation
policy and practice.
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.
63
<PAGE>
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 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.
64
<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 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,
65
<PAGE>
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.
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.
66
<PAGE>
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.
Financing means the sale of VIALOG securities or borrowings from financial
institutions necessary to raise the cash so as to enable VIALOG to pay the
Aggregate Merger Consideration.
Financing Closing Date means the date on which the Financing is closed.
Financing Document means the private offering circular furnished to
potential investors or financial institutions in connection with the Financing
(which may include the Registration Statement, the Prospectus, exhibits, and
financial statements, and any amendments thereto) and any securities of VIALOG
issued to consummate the Financing.
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
67
<PAGE>
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 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.
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.
68
<PAGE>
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 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
69
<PAGE>
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).
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 or 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.
70
<PAGE>
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.
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 offering document used by VIALOG in completing
the Financing including any preliminary prospectus first filed by VIALOG in the
Registration Statement dated February 28, 1997 and the prospectus filed pursuant
to Rule 424(b) under the Securities Act and any supplements or amendments
thereto used by VIALOG in connection with the Financing.
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)) relating to the securities of VIALOG.
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.
71
<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).
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.
72
<PAGE>
Taxing Authority means any Authority responsible for the imposition of any
Tax.
Termination Date means (a) December 31, 1997, or (b) such date after
December 31, 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 sale of VIALOG securities pursuant to the Registration Statement or
any credit facilities between VIALOG and any bank described in the Financing
Document.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any entity who assists VIALOG either as agent or for its
own account in selling VIALOG's securities pursuant to the Financing Document.
Underwriting Agreement means the agreement between VIALOG and the
Underwriter.
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.]
73
<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
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
74
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. FURTHER INFORMATION
WILL BE FURNISHED UPON REQUEST
------------------------------
SECTION 3.1(A)
. Jurisdiction of incorporation of the Company.
. Jurisdictions where Company 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, including 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.
. Exceptions to no liens against subsidiaries.
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.
<PAGE>
SECTION 3.4
. Exceptions to liabilities of the Company or any subsidiary.
. 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, 1996.
. Governmental authorizations.
2
<PAGE>
SECTION 3.7(B)
. Breaches, violations or defaults under governmental authorizations or any
applicable law or under any requirement of any insurance carrier.
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.
3
<PAGE>
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 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.
4
<PAGE>
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.
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.
5
<PAGE>
SECTION 3.23(C)
. Above or underground tanks for the storage of hazardous materials.
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 3.30
. Information furnished by or on behalf of the Company or any stockholder for
use in financing document.
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
. 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.
6
<PAGE>
. 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.
. Governmental authorizations, governmental filing or private authorizations
required as a result of the execution and delivery of this Agreement or any
collateral document.
SECTION 5.5
. Exceptions to no broker, agent or finder.
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 7.2(D)
. Persons executing non-competition agreements.
7
<PAGE>
SECTION 7.2(Q)
. Leases and Contractual Obligations not satisfied and discharged as of the
public offering closing date.
SECTION 7.2(T)
. Individuals executing and delivering employment agreements.
<PAGE>
EXHIBIT 2.5
-----------
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND AMONG
VIALOG CORPORATION
CALL POINTS ACQUISITION CORPORATION
CALL POINTS, INC.
AND
ROPIR INDUSTRIES, INC.
Dated as of October 17, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <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 Stockholder.................. 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; Exchange Agent; Etc....... 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 6
SECTION 3.1 Organization and Business; Power and Authority; Etc.. 6
SECTION 3.2 Financial and Other Information...................... 8
SECTION 3.3 Changes in Condition................................. 9
SECTION 3.4 Liabilities.......................................... 9
SECTION 3.5 Title to Properties and Assets; Leases............... 10
SECTION 3.6 Compliance with Private Authorizations............... 11
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law....................................... 11
SECTION 3.8 Intangible Assets.................................... 13
SECTION 3.9 Related Transactions................................. 13
SECTION 3.10 Insurance............................................ 13
SECTION 3.11 Tax Matters.......................................... 14
SECTION 3.12 Employee Retirement Income Security Act of 1974...... 15
SECTION 3.13 Absence of Sensitive Payments........................ 18
SECTION 3.14 Inapplicability of Specified Statutes................ 18
SECTION 3.15 Authorized and Outstanding Capital Stock............. 18
SECTION 3.16 Employment Arrangements.............................. 19
SECTION 3.17 Material Agreements.................................. 20
SECTION 3.18 Ordinary Course of Business.......................... 21
SECTION 3.19 Bank Accounts; Etc................................... 22
SECTION 3.20 Adverse Restrictions................................. 23
SECTION 3.21 Broker or Finder..................................... 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc............... 23
SECTION 3.23 Environmental Matters.................................................. 23
SECTION 3.24 Materiality............................................................ 25
SECTION 3.25 Solvency............................................................... 26
SECTION 3.26 Acquisition of the Entire Business..................................... 26
SECTION 3.27 Compliance with Regulations Relating to Securities Credit.............. 26
SECTION 3.28 Certain State Statutes Inapplicable.................................... 25
SECTION 3.29 Continuing Representations and Warranties.............................. 26
SECTION 3.30 Financing Document..................................................... 26
SECTION 3.31 Predecessor Status; Etc................................................ 27
ARTICLE 4 ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDER........................................................... 27
SECTION 4.1 Organization........................................................... 27
SECTION 4.2 Power and Authority.................................................... 27
SECTION 4.3 Enforceability......................................................... 27
SECTION 4.4 Equity Ownership....................................................... 27
SECTION 4.5 No Conflict; Required Filings and Consents............................. 28
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............................. 29
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..................................... 30
SECTION 5.8 Financing Document..................................................... 30
SECTION 5.9 Solvency............................................................... 30
SECTION 5.10 This Section Intentionally Left Blank.................................. 30
SECTION 5.11 Participating Agreements of Other Participating Companies.............. 31
SECTION 5.12 Continuing Representations and Warranties.............................. 31
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 Compliance With Securities Act......................................... 34
SECTION 6.5 Conduct of Business.................................................... 34
SECTION 6.6 No Solicitation........................................................ 35
SECTION 6.7 Directors' and Officers' Indemnification and Insurance................. 36
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 6.8 Notification of Certain Matters.............................................. 36
SECTION 6.9 Public Announcements......................................................... 36
SECTION 6.10 Conveyance Taxes............................................................. 37
SECTION 6.11 Obligations of VIALOG........................................................ 37
SECTION 6.12 Employee Benefits; Severance Policy.......................................... 37
SECTION 6.13 Certain Actions Concerning Business Combinations............................. 38
SECTION 6.14 Maintenance of Corporate Existence........................................... 38
SECTION 6.15 Tax Returns.................................................................. 38
SECTION 6.16 Noncompetition............................................................... 38
SECTION 6.17 Distributions, Liabilities; Etc.............................................. 38
SECTION 6.18 Release from Guarantees...................................................... 39
SECTION 6.19 No Significant Changes....................................................... 39
SECTION 6.20 Financing Document........................................................... 39
SECTION 6.21 Self Dealing................................................................. 39
ARTICLE 7 CLOSING CONDITIONS...................................................................... 40
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Asset
Purchase..................................................................... 40
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........................................................ 52
SECTION 8.3 Amendment.................................................................... 52
SECTION 8.4 Waiver....................................................................... 52
SECTION 8.5 Fees, Expenses and Other Payments............................................ 52
SECTION 8.6 Effect of Investigation...................................................... 53
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER RESTRICTIONS.......................................... 53
SECTION 9.1 Shares not Registered........................................................ 53
SECTION 9.2 Economic Risk; Sophistication................................................ 53
SECTION 9.3 Restrictions on Resale; Legends.............................................. 53
ARTICLE 10 INDEMNIFICATION........................................................................ 54
SECTION 10.1 Indemnification.............................................................. 54
SECTION 10.2 Procedures Concerning Claims by Third Parties; Payment of Damages; Etc....... 56
SECTION 10.3 Access to Books and Records.................................................. 57
SECTION 10.4 Exclusivity.................................................................. 57
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 11 GENERAL PROVISIONS........................................................... 57
SECTION 11.1 Effectiveness of Representations; Etc............................. 57
SECTION 11.2 Notices........................................................... 58
SECTION 11.3 Headings.......................................................... 59
SECTION 11.4 Severability...................................................... 60
SECTION 11.5 Entire Agreement.................................................. 60
SECTION 11.6 Assignment........................................................ 60
SECTION 11.7 Parties in Interest............................................... 60
SECTION 11.8 Governing Law..................................................... 60
SECTION 11.9 Enforcement of the Agreement...................................... 60
SECTION 11.10 Counterparts...................................................... 61
SECTION 11.11 Disclosure Supplements............................................ 61
ARTICLE 12 DEFINITIONS.................................................................. 61
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT dated as of October 17, 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 one of the Other
Participating Companies will merge with and into such Subsidiary 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, cash and
notes or cash and shares of common stock, $.01 par value per share of VIALOG
("VIALOG Stock") determined in accordance with the respective Participating
Agreements.
3. 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.
4. The Board of Directors of Buyer has approved and adopted this
Agreement and VIALOG has approved this Agreement as the sole stockholder of
Buyer.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
<PAGE>
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 on the date designated by VIALOG by written
notice in accordance with Article 11 hereof delivered in at least three (3) days
prior to such 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 one day prior to the Asset Purchase Closing 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 Financing
Closing Date, which is expected to occur no later than 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 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
Financing Closing Date. In the event that the Effective Time and Financing
Closing Date occur on a date other than the fifth business day following the
Asset Purchase Closing, all such
2
<PAGE>
certificates, legal opinions and instruments shall be re-dated as of the
Financing 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), (f) 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.
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.
3
<PAGE>
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 Financing 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 (i) cash of Seven Million Dollars
($7,000,000) (the "Cash Consideration") and 21,000 shares of VIALOG Stock as
constituted at the Effective Time (the "Stock Consideration") (the Cash
Consideration together with the Stock Consideration referred to as the "Purchase
Price"),
(b) assume the Assumed Liabilities, and
4
<PAGE>
(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; Exchange Agent; Etc. The Purchase Price
----------------------------------------------
shall be paid by Buyer to the Company as follows:
(a) Prior to the Asset Purchase 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 Company for delivery in
accordance with this Article, through the Exchange Agent, the stock portion of
the Purchase Price and within one (1) business day of the Financing 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 (the "Exchange
Fund"). The Exchange Agent will, pursuant to irrevocable instructions from
VIALOG, (i) deliver $6,750,000 of the Cash Consideration to be issued pursuant
to Section 2.1(a) out of the Exchange Fund and the Stock Consideration to the
Company, and (ii) deliver $250,000 of the Cash Consideration (the "Escrowed
Funds") to the Montgomery, Alabama branch office of Merrill, Lynch, Pierce,
Fenner & Smith (the "Escrow Agent"), or such other branch office as may be
designated by the Exchange Agent, for disposition in accordance with the Escrow
Agreement substantially in the form of Exhibit 2.3(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; and
(b) The Purchase Price 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 two
business days after the Financing Closing Date. The Cash Consideration may be
paid 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.
5
<PAGE>
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; Etc.
---------------------------------------------------
(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 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,
6
<PAGE>
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 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 Financing 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
7
<PAGE>
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 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
8
<PAGE>
(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 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.
9
<PAGE>
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 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
10
<PAGE>
(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 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, 1996, in which the Company or any of its
Subsidiaries, or any of its officers or directors,
11
<PAGE>
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 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.
12
<PAGE>
(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 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.
---------
13
<PAGE>
(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 Financing 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. 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.
14
<PAGE>
(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 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
15
<PAGE>
(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,
(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,
16
<PAGE>
(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,
(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
Financing 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,
17
<PAGE>
(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 "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
18
<PAGE>
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 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 Financing Closing Date will not conduct, a "plant closing" or
"mass layoff" of employees of
19
<PAGE>
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 Financing 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.
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 of 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
failed 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.
20
<PAGE>
(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, 1996 to the date of this Agreement, and until the Financing
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,
(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,
21
<PAGE>
(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
(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
Financing 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
22
<PAGE>
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, 1996, 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,
23
<PAGE>
(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 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.
24
<PAGE>
(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 Financing 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.
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.
25
<PAGE>
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
Financing 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.
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 Financing 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 Financing Document. All information furnished by or on behalf of the
------------------
Company or the Principal Stockholder in writing for use in the Financing
Document is set forth in Section 3.30 of the Disclosure Schedule 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 Financing 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.
26
<PAGE>
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 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.
27
<PAGE>
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 Financing and
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 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
28
<PAGE>
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
(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 Financing and
except pursuant to the HSR Act (if applicable).
5.4 Financing. On the Financing Closing Date VIALOG has or, upon
---------
consummation of the Financing, 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 Financing.
5.5 Broker and Finder. Except for the Underwriter and as set forth in
-----------------
Section 5.5 of the Disclosure Schedule, 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
29
<PAGE>
with the Other Participating Companies, the proposed 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. When issued in conjunction with the Asset Purchase, 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 Financing Document. The Financing Document and any amendments thereto
------------------
will comply when the Financing Document 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 Financing Document 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 Principal Stockholder. VIALOG will furnish the
Company with a copy of the Financing Document and of each amendment thereto
until the Asset Purchase Closing and thereafter will furnish the Principal
Stockholder with each amendment thereto and any 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 This Section Intentionally Left Blank.
-------------------------------------
30
<PAGE>
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 Financing 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
31
<PAGE>
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Financing Document, 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 "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 Financing Document, other filings
under the Securities Act or
32
<PAGE>
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 Financing 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 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 Financing 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 Financing 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,
33
<PAGE>
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 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 Asset Purchase and the Transactions
become, an "affiliate" of VIALOG, and the Principal Stockholder of the Company,
to deliver to VIALOG on or prior to the Asset Purchase 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
34
<PAGE>
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 or solicit, directly or indirectly, any inquires or
the making of any proposal with respect to an Other Transaction, engage in
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 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
35
<PAGE>
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
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 earlier of the Effective Time or the
--------------------
termination of this Agreement, the 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 issuance of VIALOG securities under the Securities Act. 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
36
<PAGE>
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 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.
------------------------------------------------
37
<PAGE>
(a) Neither the Principal Stockholder nor any Representative
thereof will, during the period commencing on the date hereof 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 negotiations 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 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.
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 Financing Closing Date. From and after the Financing 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).
---------------
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;
38
<PAGE>
(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 Financing 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 Financing 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 of the
Company for a period of two years after the Financing 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.
6.20 Financing Document.
------------------
(a) The Company and the Principal Stockholder will furnish to
VIALOG all necessary information concerning the Company and the Principal
Stockholder for VIALOG to prepare the Financing Document.
(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.
39
<PAGE>
(c) VIALOG agrees to use its best efforts to prepare the Financing
Document prior to October 30, 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 use
thereof.
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 Financing, 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, 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 Financing Document 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 securities
of VIALOG offered in the Financing 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 Financing (except
40
<PAGE>
as provided in clause (iv) immediately succeeding) shall have been satisfied or
properly waived and (iv) release of the closing documents relating to the
Financing and distribution of the proceeds of the sale of the securities of
VIALOG sold and purchased in the Financing shall have been unconditionally
authorized by the Underwriter upon consummation of the Asset Purchase and the
Participating Mergers,
(e) This subsection intentionally left blank,
----------------------------------------
(f) Subject to such material amendments, if any, as shall be
proposed prior to the Asset Purchase Closing by VIALOG to be effective
immediately after the 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,
(g) This subsection intentionally left blank, and
----------------------------------------
(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.
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 Financing Closing Date of Kaufman &
Rothfeder, 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:
41
<PAGE>
(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 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
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 Asset Purchase and the consummation by the Company of
the Asset Purchase,
42
<PAGE>
(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 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,
43
<PAGE>
(xiii) Nonapplicability of Alabama takeover laws, and
(xiv) such other customary matters concerning the Stockholders
in connection with the Financing 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 Financing 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 Financing 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 Financing 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 Financing 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 Financing 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
Financing Document 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
Financing
44
<PAGE>
Document prepared by the Accountants as contemplated by Section 6.1(a) to a date
not more than five (5) days prior to the Financing 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 Financing Document.
(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,
(i) Between the date of this Agreement and the Financing 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 Financing Document,
(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
45
<PAGE>
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 Financing 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.
(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 Registration Rights Agreement shall have been executed and
delivered by the Stockholders and the Executive Officers and Principal
Stockholders of VIALOG,
(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 Financing
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 Financing
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
Financing 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
46
<PAGE>
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) This Section Intentionally Left Blank.
-------------------------------------
(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.
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 Financing 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
47
<PAGE>
the effect of general principles of equity and (B) that no
opinion need be expressed as to the enforceability of
indemnification provisions,
(iii) 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,
(iv) 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
(v) 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 Financing 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 Financing Closing Date; each
and all of the agreements and
48
<PAGE>
conditions to be performed or satisfied by each of VIALOG and Buyer under this
Agreement at or prior to the Financing 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),
(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 Financing 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:
49
<PAGE>
(a) by mutual consent of the Company and VIALOG, or
(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 Financing shall have become final and
nonappealable, or if the terminating party determines
in its reasonable discretion that the Asset Purchase or
the Financing 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:
(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
(d) by VIALOG:
(i) in the event Jeffries & Company, Inc. shall terminate
its engagement or otherwise withdraw as an Underwriter
for any substantive reason other than material failure
to perform or material nonfulfillment of any covenant
by the Company or the Principal Stockholder or a
material breach of a representation or warranty of the
Company or the Principal Stockholder,
(ii) 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,
(iii) 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
50
<PAGE>
such Legal Action or proceedings, may be deemed by
VIALOG to be a threat of material Legal Action or
proceedings,
(iv) if arrangements reasonably satisfactory to VIALOG
cannot be made for (A) the assumption by the Buyer of
the Assumed Material Agreements substantially on the
terms and conditions in effect as of the date of this
Agreement, or (B) the Financing,
(v) 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,
(vi) 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,
(vii) if the terms of this Agreement shall not have been
approved by the Underwriter,
(viii) 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
(ix) 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
51
<PAGE>
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 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 by
---------
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 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
52
<PAGE>
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
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 Asset Closing VIALOG will have furnished a copy of the Prospectus
to the Stockholders and at the Asset 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 Asset Purchase, the Transactions, or Other Participating
Companies, the Participating Agreements and the Financing Document, and have
read and understood the matters described in the copies of the Financing
Document 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
53
<PAGE>
dilutive effects of the Financing and future acquisitions and projected uses of
the proceeds of the Financing. The Principal Stockholder will confirm at the
Asset Purchase 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,
-------------------------------
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 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;
54
<PAGE>
(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 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) plus, with respect to shares of
VIALOG Stock issued to such Stockholder the Indemnity Value thereof. 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) plus the Indemnity Value of the
VIALOG Stock issued to such Party. 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
55
<PAGE>
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 the greater of $100,000
or one percent (1%) of the Consideration paid to the Principal Stockholder
pursuant to Sections 2.1(a) and 2.1(c).
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 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'
56
<PAGE>
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.
(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.
10.3 Access to Books and Records. In the event of any claim for indemnity
---------------------------
under Section 10.1 or 10.2, VIALOG agrees to give the Principal Stockholder and
its Representatives reasonable access to all files, documents, instruments,
papers, books and records relating to the Company or the Principal Stockholder,
and to all employees of the Company in connection with the matters for which
indemnification is sought to the extent the Principal Stockholder reasonably
deems necessary in connection with his rights and obligations under this Article
10.
10.4 Exclusivity. After the Financing Closing Date, to the extent
-----------
permitted by Law, the indemnities set forth in this Article 10 shall be the
exclusive remedies of the VIALOG Indemnified Parties and the Company Indemnified
Parties for any misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which the
parties hereto hereby waive.
57
<PAGE>
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 Asset Purchase Closing
and remain operative and in full force and effect as follows:
(i) Section 3.11 and Section 3.12 until sixty (60) days
after the applicable statute of limitations, as the
same may be extended from time to time, has terminated;
and
(ii) all other Sections, until January 31, 1999.
(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
Ten New England Business Center
Suite 302
Andover, MA 01810
Fax: (978) 975-7208
with a copy to:
Mirick, O'Connell, DeMallie & Lougee, llp
Attention: David L. Lougee, Esq.
58
<PAGE>
1700 Bank of Boston Tower
Worcester, MA 01608
Fax: (508) 752-7305
(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
Alan Rothfeder, Esq.
Kaufman & Rothfeder
2740 Zelda Road
Montgomery, AL 36103-4540
(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:
Alan Rothfeder, Esq.
Kaufman & Rothfeder
2740 Zelda Road
Montgomery, AL 36103-4540
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.
59
<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 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. 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
60
<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 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 Financing
-----------------------
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
61
<PAGE>
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.
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. Additionally, it shall include all assets related to the Ropir Bridge
business together with all related research and development, schematics,
drawings, copyrights, patents, patents pending and other intellectual property.
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.
62
<PAGE>
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 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.
Cash Consideration 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
63
<PAGE>
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 the Principal
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.
64
<PAGE>
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.
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 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
65
<PAGE>
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:
(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.
66
<PAGE>
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).
ESCROW AGENT will have the meaning given to it in Section 2.3(b).
Exchange Fund will have the meaning given to it in Section 2.2(a).
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.
Financing means the sale of VIALOG securities or borrowings from financial
institutions necessary to raise the cash so as to enable VIALOG to pay the
Purchase Price.
Financing Closing Date means the date on which the Financing is closed.
Financing Document means the private offering circular furnished to
potential investors or financial institutions in connection with the Financing
(which may include the Registration Statement, the Prospectus, exhibits, and
financial statements, and any amendments thereto) and any securities of VIALOG
issued to consummate the Financing.
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.
67
<PAGE>
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 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.
Indemnity Value means with respect to each share of VIALOG Stock issued to
a Stockholder pursuant to the Asset Purchase Agreement, the sum of $11.50. In
satisfaction of a
68
<PAGE>
Claim under this Agreement for which a stockholder is liable to VIALOG, until
January 31, 1999 and in lieu of all cash, such Stockholder may tender shares of
VIALOG Stock valued at $11.50 and cash in a ratio not exceeding three (3) to
ninety-seven (97), for all payments by such Stockholder, and after January 31,
1999, 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 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.
69
<PAGE>
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.
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.
70
<PAGE>
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.
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 offering document used by VIALOG in completing
the Financing including any preliminary prospectus first filed by VIALOG in the
Registration Statement dated February 28, 1997 and the prospectus filed pursuant
to Rule 424(b) under the Securities Act and any supplements or amendments
thereto used in connection with the Financing.
Purchase Price will have the meaning given to it in Section 2.1(a).
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
71
<PAGE>
(including post-effective amendments and any registration statement filed under
Rule 462(b) relating to the securities of VIALOG.
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 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.
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.
Stock Consideration will have the meaning given to it in Section 2.1(a).
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.
72
<PAGE>
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.
Termination Date means (a) December 31, 1997, or (b) such dated after
December 31, 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 Mergers, the sale
of VIALOG securities pursuant to the Financing Document or any credit facilities
between VIALOG and any bank described in the Financing Document.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any entity who assists VIALOG either as agent or for its
own account in selling VIALOG's securities pursuant to the Financing Document.
Underwriting Agreement means the agreement between VIALOG and the
Underwriter.
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.
73
<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: /s/ Billie Pirnie
-------------------------
Name: Billie Pirnie
Title: President
ROPIR INDUSTRIES, INC.
By: /s/ Billie Pirnie
-------------------------
Name: Billie Pirnie
Title: President
74
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. FURTHER INFORMATION
WILL BE FURNISHED UPON REQUEST
------------------------------
SECTION 3.1(A)
. Jurisdiction of incorporation of the Company.
. Jurisdictions where Company 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, including 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.
. Exceptions to no liens against subsidiaries.
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.
1
<PAGE>
SECTION 3.4
. Exceptions to liabilities of the Company or any subsidiary.
. 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.
. Exceptions to legal title.
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, 1996.
2
<PAGE>
. Governmental authorizations.
SECTION 3.7(B)
. Breaches, violations or defaults under governmental authorizations or any
applicable law or under any requirement of any insurance carrier.
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.
3
<PAGE>
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 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 scurity.
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.
4
<PAGE>
SECTION 3.16(E)
. Exceptions to no accruals of vacation, sick days, personal days or other
employee accruals.
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.
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.
5
<PAGE>
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.
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 3.30
. Information furnished by or on behalf of the Company or any stockholder for
use in financing document.
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.
<PAGE>
EXHIBIT 2.6
-----------
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 September 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <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; Etc................................................. 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................... 9
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....................................................................... 13
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........................................................................... 22
SECTION 3.17 Material Agreements............................................................................... 23
SECTION 3.18 Ordinary Course of Business....................................................................... 23
SECTION 3.19 Bank Accounts; Etc................................................................................ 25
SECTION 3.20 Adverse Restrictions.............................................................................. 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 3.21 Broker or Finder.................................................................................. 26
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc.......................................... 26
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............................................................... 29
SECTION 3.29 Continuing Representations and Warranties......................................................... 29
SECTION 3.30 Financing Document................................................................................ 29
SECTION 3.31 Predecessor Status; Etc........................................................................... 29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER................................................. 30
SECTION 4.1 Organization...................................................................................... 30
SECTION 4.2 Power and Authority............................................................................... 30
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........................................................ 32
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............................................. 33
SECTION 5.8 Financing Document................................................................................ 33
SECTION 5.9 Solvency.......................................................................................... 33
SECTION 5.10 This Section Intentionally Left Blank............................................................. 33
SECTION 5.11 Participating Agreements of Other Participating Companies......................................... 34
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................................................................ 37
SECTION 6.4 Compliance with the Securities Act................................................................ 37
SECTION 6.5 Conduct of Business............................................................................... 37
SECTION 6.6 No Solicitation................................................................................... 38
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 6.7 Directors' and Officers' Indemnification and Insurance............................................ 39
SECTION 6.8 Notification of Certain Matters................................................................... 39
SECTION 6.9 Public Announcements.............................................................................. 40
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............................................................................ 43
SECTION 6.20 Financing Document................................................................................ 43
SECTION 6.21 This Section Intentionally Left Blank............................................................. 43
SECTION 6.22 Self Dealing...................................................................................... 43
ARTICLE 7 CLOSING CONDITIONS.......................................................................................... 44
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger...................................... 44
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger Subsidiary.................................. 45
SECTION 7.3 Conditions to Obligations of the Company.......................................................... 51
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........................................................................... 57
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
ARTICLE 10 INDEMNIFICATION............................................................................................ 58
SECTION 10.1 Indemnification................................................................................... 58
SECTION 10.2 Procedures Concerning Claims by Third Parties; Payment of Damages; Etc............................ 60
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 10.3 Access to Books and Records....................................................................... 61
SECTION 10.4 Exclusivity....................................................................................... 61
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..................................................................................... 64
SECTION 11.9 Enforcement of the Agreement...................................................................... 64
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
September 30, 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 Company will merge with and into the VIALOG
Merger Subsidiary (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 one of the Other Participating Companies
will merge with and into such Subsidiary 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, cash and notes or cash and
shares of VIALOG Stock determined in accordance with provisions substantially
similar to those in Section 2.1(a).
3. 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 merger pursuant to 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>
4. 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
Company will be merged with and into the VIALOG Merger Subsidiary. As a result
of the Merger, the separate existence of the Company will cease and the VIALOG
Merger Subsidiary 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 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
2
<PAGE>
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 any filing required pursuant to the Securities Act of 1933, as amended
(the "Securities Act") or any filing required by state law and in any event
within 30 days of the date hereof.
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, on the day designated by VIALOG by written notice in accordance with
Article 11 hereof delivered at least three (3) days prior to such 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 one day prior to the Merger
Closing, 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
Financing Closing Date, which is expected to occur no later than 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 Financing
Closing Date. In the event that the Effective Time and Financing 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 Financing 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 Financing 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 effective at such time (but not
prior to the Financing Closing Date) as such articles or certificates, as the
case
3
<PAGE>
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 = $4,600,000
Aggregate Stock Merger Consideration = 83,078 shares
Aggregate Cash Merger Consideration = $3,644,603
4
<PAGE>
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 converted and will constitute the
only outstanding shares of capital stock of the Surviving Corporation.
5
<PAGE>
(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.
(e) If a dividend is declared upon the VIALOG Stock payable in VIALOG
Stock between the date hereof and the Effective Time, then the shares of VIALOG
Stock the holder has the right to receive pursuant to Section 2.1(a) will be
increased proportionately. If the outstanding VIALOG Stock is changed into or
exchanged for a different number or class of shares of stock of VIALOG or of
another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there shall be
substituted for each such share of VIALOG Stock the holder has the right to
receive pursuant to Section 2.1(a) the number and class of shares of VIALOG
Stock into which each outstanding share of VIALOG Stock is so changed or
exchanged.
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 Financing 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
6
<PAGE>
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 Financing 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; Etc. 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), (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 and (c) VIALOG shall grant to
Courtney Snyder options for 75,000 shares of VIALOG stock as constituted at the
Effective Time exercisable at the fair market value at the Effective Time as
determined by the VIALOG Board of Directors, which such options shall become
exercisable for 5,700 shares on the last day of the calendar quarter in which
the Effective Time occurs and an additional 6,300 shares on the last day of each
of the 11 calendar quarters thereafter and expiring on the third anniversary of
the Effective Time.
8
<PAGE>
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 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,
9
<PAGE>
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 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 Financing 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,
10
<PAGE>
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 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
11
<PAGE>
(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 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.
12
<PAGE>
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 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
13
<PAGE>
(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 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,
1996, 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,
14
<PAGE>
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 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
15
<PAGE>
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 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.
16
<PAGE>
(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 Financing 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. 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.
17
<PAGE>
(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.
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
18
<PAGE>
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,
(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,
19
<PAGE>
(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,
(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
Financing 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,
20
<PAGE>
(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 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
21
<PAGE>
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 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 Financing 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
22
<PAGE>
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 Financing 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 of 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
failed 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, 1996 to the date of this Agreement, and until the Financing 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:
23
<PAGE>
(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,
(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,
24
<PAGE>
(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
(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 Financing
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
25
<PAGE>
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, 1996, 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
26
<PAGE>
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 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 Financing 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
27
<PAGE>
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.
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
Financing 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
28
<PAGE>
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 Financing 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 Financing Document. All information furnished by or on behalf of the
------------------
Company or any Stockholder in writing for use in the Financing Document is set
forth in Section 3.30 of the Disclosure Schedule 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 Financing 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.
29
<PAGE>
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 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
30
<PAGE>
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 Financing 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 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
31
<PAGE>
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 Financing and registration rights
and except pursuant to the HSR Act (if applicable).
5.4 Financing. On the Financing Closing Date VIALOG 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.
5.5 Broker or Finder. Except for the Underwriter and as set forth in
----------------
Section 5.5 of the Disclosure Schedule, 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
-------------------------------------------------------
VIALOG nor 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 proposed
registration of VIALOG Stock under the Securities Act, compliance with the
32
<PAGE>
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 Financing Document. The Financing Document and any amendments thereto
------------------
will comply when the Financing Document 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 Financing Document 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 Financing Document and of each amendment thereto
until the Merger Closing and thereafter will furnish the Principal Stockholder
with each amendment thereto and any 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 This Section Intentionally Left Blank.
-------------------------------------
33
<PAGE>
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
Financing 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
34
<PAGE>
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
Financing Document, 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 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
35
<PAGE>
(including without limitation the Financing Document, 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 Financing 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 Financing 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 Financing 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.
36
<PAGE>
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 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
37
<PAGE>
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 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 or solicit, directly or indirectly, any inquires or
the making of any proposal with respect to an Other Transaction, engage in
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 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
38
<PAGE>
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 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.
39
<PAGE>
6.9 Public Announcements. Until the earlier of the Effective Time or the
--------------------
termination of this Agreement, 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 issuance of VIALOG
securities under the Securities Act. 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
40
<PAGE>
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 hereof 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
negotiations 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 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
41
<PAGE>
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 Financing
Closing Date. From and after the Financing 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 Time) 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 Financing
--------------------------------
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
42
<PAGE>
which extend beyond the Financing 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 Financing 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 Financing Document.
------------------
(a) The Company and the Principal Stockholder will furnish to VIALOG
all necessary information concerning the Company and the Principal Stockholder
for VIALOG to prepare the Financing Document.
(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 the Financing
Document prior to October 30, 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 use
thereof.
6.21 This Section Intentionally Left Blank.
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.
43
<PAGE>
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,
(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 Financing, 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 Financing Document 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 securities
of VIALOG offered in the Financing 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 Financing (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 Financing and
distribution of the proceeds of the sale of securities of VIALOG sold and
purchased in the Financing shall have been unconditionally authorized by the
Underwriter upon consummation of the Merger and the Participating Mergers,
(e) This subsection intentionally left blank;
(f) Subject to such material amendments, if any, as shall be proposed
prior to Merger Closing by VIALOG to be effective immediately after the Merger
Closing, and to the extent reasonably satisfactory to the Company and the Other
Participating Companies, the
44
<PAGE>
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) This subsection intentionally left blank.
(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 Financing 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,
45
<PAGE>
(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 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,
46
<PAGE>
(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 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 Financing 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 Financing 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,
47
<PAGE>
(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 Financing 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 Financing 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
Financing 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 Financing 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 Financing
Document 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 Financing
Document prepared by the Accountants as contemplated by Section 6.1(a) to a date
not more than five (5) days prior to the Financing 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 Financing Document,
(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
48
<PAGE>
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 Financing 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 Financing Document,
(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 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 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 Financing Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Financing
--------------
Closing Date, releasing the Company and its Subsidiaries from any and all Claims
against them (other than Claims arising
49
<PAGE>
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 Financing 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 Financing 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 Financing 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 Financing
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 368(a) of the Code applies or
as a cash forward merger pursuant to the Code and will not result in any taxable
income or gain or deductible loss to the Company, VIALOG or VIALOG Merger
Subsidiary.
50
<PAGE>
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 Financing 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 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,
(v) 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
(vi) 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 Financing 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 Financing 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
Financing 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 Financing 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) This Section Intentionally Left Blank.
(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
Financing 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 Merger Closing or will
prevent or delay consummation of the Merger by or beyond
the Termination Date, or
(ii) in the event Jeffries & Company, Inc. shall terminate its
engagement or otherwise withdraw as an Underwriter for any
substantive reason other than material failure to perform
or material nonfulfillment of any covenant by the Company
or the Principal Stockholder or a material breach of a
representation or warranty of the Company or the Principal
Stockholder.
(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
54
<PAGE>
outstanding Indebtedness of the Company for borrowed money,
or (B) the Financing,
(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 Merger
Closing 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
55
<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),
---------------------
6.9 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.
56
<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 Stockholders 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 Financing Document, and have read and
understood the matters described in the copies of the Financing Document
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 Financing and future
acquisitions and projected uses of the proceeds of the Financing. 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
57
<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
58
<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(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), 2.1(e) 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.
59
<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 percent (1%) of the Aggregate Merger Consideration
paid to all Stockholders pursuant to Sections 2.1(a), 2.1(d), 2.1(e) 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
60
<PAGE>
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.
10.3 Access to Books and Records. In the event of any claim for indemnity
---------------------------
under Section 10.1 or 10.2, VIALOG agrees to give the Principal Stockholder and
its Representatives reasonable access to all files, documents, instruments,
papers, books and records relating to the Company or the Principal Stockholder,
and to all employees of the Company in connection with the matters for which
indemnification is sought to the extent the Principal Stockholder reasonably
deems necessary in connection with his rights and obligations under this Article
10.
10.4 Exclusivity. After the Financing Closing Date, to the extent
-----------
permitted by Law, the indemnities set forth in this Article 10 shall be the
exclusive remedies of the VIALOG Indemnified Parties and the Company Indemnified
Parties for any misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which the
parties hereto hereby waive.
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,
61
<PAGE>
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 and Section 3.12 until sixty (60) days after
the applicable statute of limitations, as the same may be
extended from time to time, has terminated; and
(ii) all other Sections, until January 31, 1999.
(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
Ten New England Business Center
Suite 302
Andover, MA 01810
Fax: (978) 975-7208
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
62
<PAGE>
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
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.
63
<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 Financing
----------------------
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
64
<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).
65
<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.
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
66
<PAGE>
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 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.
67
<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 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
-- ---
68
<PAGE>
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).
Exchange Fund will have the meaning given to it in Section 2.2(a).
69
<PAGE>
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.
Financing means the sale of VIALOG securities or borrowings from financial
institutions necessary to raise the cash so as to enable VIALOG to pay the
Aggregate Merger Consideration.
Financing Closing Date means the date on which the Financing is closed.
Financing Document means the private offering circular furnished to
potential investors or financial institutions in connection with the Financing
(which may include the Registration Statement, the Prospectus, exhibits, and
financial statements, and any amendments thereto) and any securities of VIALOG
issued to consummate the Financing.
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
70
<PAGE>
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 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
January 31, 1999 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 January 31, 1999, cash and shares of VIALOG Stock in such proportion as
such Stockholder determines.
71
<PAGE>
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 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
72
<PAGE>
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 adjusted for any
issuances pursuant to Section 2.1(e).
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
73
<PAGE>
of, any securities of the Company, or (d) any sale or other disposition of
assets of the Company or 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.
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 offering document used by VIALOG in completing
the Financing including any preliminary prospectus first filed by VIALOG in the
Registration Statement dated February 28, 1997 and the prospectus filed pursuant
to Rule 424(b) under the Securities Act and any supplements or amendments
thereto used by VIALOG in connection with the Financing.
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
74
<PAGE>
(including post-effective amendments and any registration statement filed under
Rule 462(b) relating to the securities of VIALOG.
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.
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
75
<PAGE>
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) December 31, 1997 or (b) such date after
December 31, 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, sale of VIALOG securities pursuant to the Financing Document or any
credit facilities between VIALOG and any bank described in the Financing
Document.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any entity who assists VIALOG either as agent or for its
own account in selling VIALOG's securities pursuant to the Financing Document.
Underwriting Agreement means the agreement between VIALOG and the
Underwriter.
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.
76
<PAGE>
[THIS SPACE IS INTENTIONALLY LEFT BLANK.]
77
<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
78
<PAGE>
THE FOLLOWING IS A SUMMARY OF INFORMATION PROVIDED
IN THE DISCLOSURE SCHEDULE OF THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION. FURTHER INFORMATION
WILL BE FURNISHED UPON REQUEST
------------------------------
SECTION 2.1
. Allocation of merger consideration.
SECTION 3.1(A)
. Jurisdiction of incorporation of the Company.
. Jurisdictions where Company 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, including 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.
. Exceptions to no liens against subsidiaries.
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.
1
<PAGE>
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.
. 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.
2
<PAGE>
SECTION 3.7(A)
. Legal actions pending, finally adjudicated or settled on or before December
31, 1996.
. Governmental authorizations.
SECTION 3.7(B)
. Breaches, violations or defaults under governmental authorizations or any
applicable law or under any requirement of any insurance carrier.
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.
3
<PAGE>
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 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 scurity.
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.
4
<PAGE>
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.
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.
5
<PAGE>
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.
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 3.30
. Information furnished by or on behalf of the Company or any stockholder for
use in financing document.
SECTION 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
6
<PAGE>
SECTION 4.4
. Exceptions to good and merchantable title to shares to be exchanged
pursuant to this Agreement.
SECTION 4.5
. 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.
. 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.
. Governmental authorizations, governmental filing or private authorizations
required as a result of the execution and delivery of this Agreement or any
collateral document.
SECTION 5.5
. Exceptions to no broker, agent or finder.
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.
7
<PAGE>
. Certain liabilities for which the Company will indemnify VIALOG as of the
merger closing.
SECTION 7.2(D)
. Persons executing non-competition agreements.
SECTION 7.2(Q)
. Leases and Contractual Obligations not satisfied and discharged as of the
public offering closing date.
SECTION 7.2(T)
. Individuals executing and delivering employment agreements.
8
<PAGE>
EXHIBIT 2.7
-----------
FIRST AMENDMENT
TO
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
---------------------------------------------------------
This Amendment is made as of the 24th day of October, 1997 by and among
VIALOG Corporation ("VIALOG"), KST Acquisition Corporation (the "VIALOG Merger
Subsidiary"), Kendall Square Teleconferencing, Inc. (the "Company") and Courtney
Snyder, Paul Ballantine, John Hassett and Dwight Grader (the "Principal
Stockholders").
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholders are parties to that certain Amended and Restated
Agreement and Plan of Reorganization dated as of September 30, 1997 (the
"Agreement"); and
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholders amended the Agreement by a First Amendment dated as of
October 24, 1997 attached as Exhibit A and desire to replace such amendment with
---------
this amendment;
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein and of those contained in the
Agreement, VIALOG, the VIALOG Merger Subsidiary, the Company and the Principal
Stockholders covenant, agree, represent and warrant as follows:
1. Terms. Terms defined in the Agreement are used herein as so defined
-----
unless otherwise specifically stated herein.
2. Amendments. The Agreement is hereby amended as follows:
----------
(A) Section 1 of the PREAMBLE is amended and shall hereafter read as
follows:
"1. The Company and the 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 Law (the "BCL") 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)."
(B) Section 1.1(a) is amended and shall hereafter read as follows:
"(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the BCL 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")."
<PAGE>
(C) All of the terms set forth in the Supplemental Merger Terms attached
as Exhibit B are hereby incorporated into the Agreement, for the express
---------
purpose of complying with Sections 78 and 79 of the BCL.
3. Except as specifically amended hereby, all other terms and provisions of
the Agreement shall remain in full force and effect.
4. This Amendment shall be binding upon and inure of the benefit of the
parties hereto, their successors and assigns.
5. The parties agree that the side letter dated October 9, 1997 attached as
Exhibit C is hereby incorporated into the Agreement by reference.
---------
6. By signing below, Dwight Grader acknowledges that his signature to the
Agreement was offered both individually and as Treasurer of the Company.
EXECUTED as an instrument under seal as of the date first above written.
KENDALL SQUARE VIALOG CORPORATION
TELECONFERENCING, INC.
By: /s/ Courtney Snyder By: /s/ Glenn D. Bolduc
------------------------------ -------------------------------
Name: Courtney Snyder Name: Glenn D. Bolduc
Title: President Title: President and Treasurer
KENDALL SQUARE
TELECONFERENCING, INC.
By: /s/ Dwight Grader
------------------------------
Name: Dwight Grader
Title: Treasurer
PRINCIPAL STOCKHOLDERS KST ACQUISITION CORPORATION
/s/ Courtney Snyder By: /s/ Glenn D. Bolduc
- ----------------------------------- -------------------------------
Name: Courtney Snyder Name: Glenn D. Bolduc
Title: President and Treasurer
/s/ Paul Ballantine
- -----------------------------------
Name: Paul Ballantine
/s/ John Hassett
- -----------------------------------
Name: John Hassett
/s/ Dwight Grader
- -----------------------------------
Name: Dwight Grader
2
<PAGE>
EXHIBIT A
---------
FIRST AMENDMENT
TO
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
---------------------------------------------------------
This Amendment is made as of the 24th day of October, 1997 by and among
VIALOG Corporation ("VIALOG"), KST Acquisition Corporation (the "VIALOG Merger
Subsidiary"), Kendall Square Teleconferencing, Inc. (the "Company") and Courtney
Snyder, Paul Ballantine, John Hassett and Dwight Grader (the "Principal
Stockholders").
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholders are parties to that certain Amended Agreement and Plan of
Reorganization dated September 30, 1997 (the "Agreement"); and
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholders desire to amend the Agreement.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein and of those contained in the
Agreement, VIALOG, the VIALOG Merger Subsidiary, the Company and the Principal
Stockholders covenant, agree, represent and warrant as follows:
7. Terms. Terms defined in the Agreement are used herein as so defined
-----
unless otherwise specifically stated herein.
8. Amendments. The Agreement is hereby amended as follows:
----------
(A) Section 1 of the PREAMBLE is amended and shall hereafter read as
follows:
"1. The Company and the 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)."
<PAGE>
(B) Section 1.1(a) is amended and shall hereafter read as follows:
"(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")."
9. Except as specifically amended hereby, all other terms and provisions of
the Agreement shall remain in full force and effect.
10. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
EXECUTED as an instrument under seal as of the date first above written.
KENDALL SQUARE VIALOG CORPORATION
TELECONFERENCING, INC.
By: /s/ Courtney Snyder By: /s/ Glenn D. Bolduc
------------------------------ -------------------------------
Name: Courtney Snyder Name: Glenn D. Bolduc
Title: President Title: President
PRINCIPAL STOCKHOLDERS: KST ACQUISITION CORPORATION
/s/ Courtney Snyder By: /s/ Glenn D. Bolduc
- ----------------------------------- -------------------------------
Name: Courtney Snyder Name: Glenn D. Bolduc
Title: President
/s/ Paul Ballantine
- -----------------------------------
Name: Paul Ballantine
/s/ John Hassett
- -----------------------------------
Name: John Hassett
/s/ Dwight Grader
- -----------------------------------
Name: Dwight Grader
2
<PAGE>
EXHIBIT B
---------
SUPPLEMENTAL MERGER TERMS
1. (a) Names of the corporations proposing to merge:
(i) Kendall Square Teleconferencing, Inc., a Massachusetts
corporation (the "Company"); and
(ii) KST Acquisition Corporation, a Delaware corporation (the "VIALOG
Merger Subsidiary").
(b) Name of the surviving corporation:
Kendall Square Teleconferencing, Inc., a Massachusetts corporation.
2. The purposes of the surviving corporation are the same as indicated in the
Articles of Organization, as amended of the Company.
3. The total number of shares and the par value, if any, of each class of
stock which the surviving corporation is authorized to issue: 15,000 shares of
Common Stock, no par value.
4. Only one class of stock is to be authorized at the Effective Time.
5. The terms and conditions of the merger are as set forth in the Agreement,
as amended.
6. The manner of converting the shares of each of the constituent corporations
into shares or securities of the surviving corporation, or the cash or other
consideration to be paid or delivered in exchange for shares of each constituent
corporation is as set forth in the Agreement, as amended.
7. The manner of fixing the effective date of the merger is as set forth in
the Agreement, as amended.
8. (a) The street address of the surviving corporation in Massachusetts is:
One Kendall Square, Cambridge, Massachusetts 02139.
1
<PAGE>
(b) The name, residential address and post office address of each director
and officer of the surviving corporation is:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Courtney P. Snyder 3 Lime Street, Marblehead, MA Same
01945
Treasurer: Dwight Grader 84 Beacon Street, Marblehead, MA Same
01945
Clerk: Courtney P. Snyder 3 Lime Street, Marblehead, MA Same
01945
Directors: Glenn D. Bolduc 7 Springvale Drive, Hollis, NH Same
03049
</TABLE>
(c) The fiscal year end of the surviving corporation shall end on the last
day of the month of December.
(d) The surviving corporation is not required to have a resident agent.
2
<PAGE>
EXHIBIT C
---------
October 9, 1997
VIA FACSIMILE
- -------------
VIALOG Corporation
Suite 302
Ten New England Business Center
Andover, MA 01810
Re: Kendall Square Teleconferencing, Inc. (the "Company")
-----------------------------------------------------
Gentlemen:
Reference is made to that certain Amended and Restated Agreement and
Plan of Reorganization By and Among VIALOG Corporation ("VIALOG"), the Company
and others, dated as of September 30, 1997 (the "Agreement"), and executed prior
to the date of this letter. It is agreed and understood by VIALOG and the
Company that at closing, in addition to any other consideration paid at closing,
VIALOG will pay to each of the shareholders of the Company as of the date of
this letter (the "Shareholders") an amount of money equal to that Shareholder's
percentage interest in the Company multiplied by the net taxable income of the
Company (as estimated by the Company immediately prior to the closing) through
the closing, multiplied by a percentage equal to the sum of the highest marginal
federal tax rate plus the highest marginal state tax rate of any of the
Company's shareholders, but only to the extent that the Company has not made the
full distribution to its shareholders referred to in Section 3.4 of the
Disclosure Schedule to the Agreement, as Section 3.4 may be updated from time to
time prior to the closing. In the event that the estimate of the amount of
taxable income of the Company through closing is less than the amount ultimately
determined by the Company's account pursuant to Section 6.15 of the Agreement,
then VIALOG shall make a further payment to the Shareholders in an amount equal
to the difference between the amount previously paid per this letter based on
estimated taxable income of the Company and the amount that would be due
pursuant to this letter if the above calculation had been made using the
Company's actual taxable income through the date of closing. VIALOG agrees to
pay any additional amounts due within fifteen (15) days of receipt of the final
calculation of the Company's taxable income through the closing. Please indicate
your acceptance and agreement to this by signing below where indicated, and
return it to the Company.
Kendall Square Teleconferencing, Inc.
By: /s/ Courtney Snyder
---------------------------------
Its:
ACCEPTED AND AGREED:
VIALOG Corporation
By: /s/ Glenn D. Bolduc
---------------------------
Its: President & CEO
<PAGE>
EXHIBIT 2.8
-----------
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 September 30, 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; Etc............. 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 9
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................................... 13
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....................................... 22
SECTION 3.17 Material Agreements........................................... 23
SECTION 3.18 Ordinary Course of Business................................... 23
SECTION 3.19 Bank Accounts; Etc............................................ 25
SECTION 3.20 Adverse Restrictions.......................................... 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.21 Broker or Finder.............................................. 26
SECTION 3.22 Personal Injury or Property Damage; Warranty Claims; Etc...... 26
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........................... 29
SECTION 3.29 Continuing Representations and Warranties..................... 29
SECTION 3.30 Financing Document............................................ 29
SECTION 3.31 Predecessor Status; Etc....................................... 29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDER...................................................... 30
SECTION 4.1 Organization.................................................. 30
SECTION 4.2 Power and Authority........................................... 30
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.................... 32
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 Financing Document............................................ 33
SECTION 5.9 Solvency...................................................... 33
SECTION 5.10 This Section Intentionally Left Blank......................... 33
SECTION 5.11 Participating Agreements of Other Participating Companies..... 34
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............................ 37
SECTION 6.4 Compliance with the Securities Act............................ 37
SECTION 6.5 Conduct of Business........................................... 37
SECTION 6.6 No Solicitation............................................... 38
SECTION 6.7 Directors' and Officers' Indemnification and Insurance........ 39
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.8 Notification of Certain Matters............................... 39
SECTION 6.9 Public Announcements.......................................... 40
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........................................ 43
SECTION 6.20 Financing Document............................................ 43
SECTION 6.21 Tax Status.................................................... 43
SECTION 6.22 Self Dealing.................................................. 43
ARTICLE 7 CLOSING CONDITIONS.................................................... 44
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger.. 44
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG Merger
Subsidiary.................................................... 45
SECTION 7.3 Conditions to Obligations of the Company...................... 51
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....................................... 57
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
SECTION 10.3 Access to Books and Records.................................. 61
SECTION 10.4 Exclusivity.................................................. 61
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
September 30, 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 Company will merge with and into the VIALOG
Merger Subsidiary (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 one of the Other Participating
Companies will merge with and into such Subsidiary 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, cash and notes or
cash and shares of VIALOG Stock determined in accordance with provisions
substantially similar to those in Section 2.1(a).
3. 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 merger pursuant to 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>
4. 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
Company will be merged with and into the VIALOG Merger Subsidiary. As a result
of the Merger, the separate existence of the Company will cease and the VIALOG
Merger Subsidiary 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 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
2
<PAGE>
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 any filing required pursuant to the Securities Act of 1933, as amended
(the "Securities Act") or any filing required by state law and in any event
within 30 days of the date hereof.
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 on the date designated by VIALOG by written notice in accordance with
Article 11 hereof delivered at least three (3) days prior to such 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 one day prior to the Merger
Closing, 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
Financing Closing Date, which is expected to occur no later than 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 Financing
Closing Date. In the event that the Effective Time and Financing 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 Financing 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), (f), and (h), to be satisfied prior to the Merger
Closing.
1.4 Effective Time. On the Financing 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 such time (but not
prior to the Financing Closing Date) as such articles or certificates, as the
case
3
<PAGE>
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:
<TABLE>
<S> <C>
Aggregate Merger Consideration = $2,800,000
Aggregate Stock Merger Consideration = 133,913 shares
Aggregate Cash Merger Consideration = $1,260,001
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
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 converted and will constitute the
only outstanding shares of capital stock of the Surviving Corporation.
5
<PAGE>
(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.
(e) If a dividend is declared upon the VIALOG Stock payable in VIALOG
Stock between the date hereof and the Effective Time, then the shares of VIALOG
Stock the holder has the right to receive pursuant to Section 2.1(a) will be
increased proportionately. If the outstanding VIALOG Stock is changed into or
exchanged for a different number or class of shares of stock of VIALOG or of
another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there shall be
substituted for each such share of VIALOG Stock the holder has the right to
receive pursuant to Section 2.1(a) the number and class of shares of VIALOG
Stock into which each outstanding share of VIALOG Stock is so changed or
exchanged.
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 Financing 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
6
<PAGE>
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 Financing 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; Etc. 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), (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, and (c) VIALOG
shall grant to the Principal Stockholder options for 75,000 shares of VIALOG
Stock as constituted at the Effective Time exercisable at the fair market value
at the Effective Time as determined by the VIALOG Board of Directors, which such
options shall become exercisable for 5,700 shares on the last day of the
calendar quarter in which the Effective Time occurs and an additional 6,300
shares on the last day of each of the 11 calendar quarters thereafter and
expiring on the third anniversary of the Effective Time.
8
<PAGE>
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 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,
9
<PAGE>
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 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 Financing 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,
10
<PAGE>
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 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
11
<PAGE>
(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 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.
12
<PAGE>
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 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
13
<PAGE>
(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 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,
1996, 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,
14
<PAGE>
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 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
15
<PAGE>
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 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.
16
<PAGE>
(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 Financing 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. 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.
17
<PAGE>
(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.
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
18
<PAGE>
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,
(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,
19
<PAGE>
(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,
(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 Financing 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,
20
<PAGE>
(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 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
21
<PAGE>
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 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 Financing 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
22
<PAGE>
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 Financing 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 of 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
failed 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, 1996 to the date of this Agreement, and until the Financing Closing
Date, except as may be described in 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:
23
<PAGE>
(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,
(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,
24
<PAGE>
(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
(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
Financing 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
25
<PAGE>
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, 1996, 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
26
<PAGE>
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 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 Financing 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
27
<PAGE>
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.
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
Financing 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
28
<PAGE>
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 Financing 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 Financing Document. All information furnished by or on behalf of the
------------------
Company or any Stockholder in writing for use in the Financing Document is set
forth in Section 3.30 of the Disclosure Schedule 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 Financing 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.
29
<PAGE>
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 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
30
<PAGE>
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 Financing 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 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
31
<PAGE>
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 Financing and registration rights
and except pursuant to the HSR Act (if applicable).
5.4 Financing. On the Financing Closing Date VIALOG has or, upon
---------
consummation of the Financing, 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.
5.5 Broker or Finder. Except for the Underwriter and as set forth in
----------------
Section 5.5 of the Disclosure Schedule, 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
-------------------------------------------------------
VIALOG nor 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 proposed
registration of VIALOG Stock under the Securities Act, compliance with the
32
<PAGE>
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 Financing Document. The Financing Document and any amendments
------------------
thereto will comply when the Financing Document 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 Financing Document 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 of 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 Financing Document and of each amendment thereto
until the Merger Closing and thereafter will furnish the Principal Stockholder
with each amendment thereto and any 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 This Section Intentionally Left Blank.
-------------------------------------
33
<PAGE>
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
Financing 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
34
<PAGE>
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Financing Document, 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 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 Financing Document, other filings under the
Securities Act or
35
<PAGE>
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 Financing 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 Financing 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 Financing 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.
36
<PAGE>
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 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
37
<PAGE>
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 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 or solicit, directly or indirectly, any inquires or
the making of any proposal with respect to an Other Transaction, engage in
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 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
38
<PAGE>
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 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.
39
<PAGE>
6.9 Public Announcements. Until the earlier of the Effective Time or the
--------------------
termination of this Agreement, 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 issuance of VIALOG
securities under the Securities Act. 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
40
<PAGE>
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 hereof 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
negotiations 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 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
41
<PAGE>
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 Financing
Closing Date. From and after the Financing 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 Time) 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 Financing
--------------------------------
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
42
<PAGE>
which extend beyond the Financing 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 Financing 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 Financing Document.
------------------
(a) The Company and the Principal Stockholder will furnish to
VIALOG all necessary information concerning the Company and the Principal
Stockholder for VIALOG to prepare the Financing Document.
(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 the
Financing Document prior to October 30, 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 use thereof.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder agree
----------
(i) to use their best efforts to maintain the status of the Merger as a merger
pursuant to the Code and (ii) not to take any action to endanger the tax free
status for a period of two (2) years from the Merger Closing.
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.
43
<PAGE>
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,
(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 Financing, 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 Financing Document 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
securities of VIALOG offered in the Financing 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 Financing (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 Financing and
distribution of the proceeds of the sale of securities of VIALOG sold and
purchased in the Financing shall have been unconditionally authorized by the
Underwriter upon consummation of the Merger and the Participating Mergers,
(e) This subsection intentionally left blank.
(f) Subject to such material amendments, if any, as shall be
proposed prior to Merger Closing by VIALOG to be effective immediately after the
Merger Closing, and to the extent reasonably satisfactory to the Company and the
Other Participating Companies, the
44
<PAGE>
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) This subsection intentionally left blank.
(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 Financing 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,
45
<PAGE>
(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 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,
46
<PAGE>
(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 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 Financing 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 Financing 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,
47
<PAGE>
(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 Financing 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 Financing 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
Financing 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 Financing 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 Financing Document 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
Financing Document prepared by the Accountants as contemplated by Section 6.1(a)
to a date not more than five (5) days prior to the Financing 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 Financing Document,
(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
48
<PAGE>
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 Financing 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 Financing Document,
(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 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 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 Financing Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an
agreement, substantially in the form of Exhibit 7.2(n), dated the Financing
---------------
Closing Date, releasing the Company and its Subsidiaries from any and all Claims
against them (other than Claims arising
49
<PAGE>
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 Financing
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 Financing 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 Financing 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 Financing
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 368(a) of the Code applies or
as a cash forward merger pursuant to the Code and will not result in any taxable
income or gain or deductible loss to the Company, VIALOG or VIALOG Merger
Subsidiary.
50
<PAGE>
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 Financing 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 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,
(v) 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
(vi) 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 Financing 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 Financing 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 Financing 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 Financing 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 368 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 Financing 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
Merger Closing or will prevent or delay consummation
of the Merger by or beyond the Termination Date, or
(ii) in the event Jeffries & Company, Inc. shall terminate
its engagement or otherwise withdraw as an
Underwriter for any substantive reason other than
material failure to perform or material
nonfulfillment of any covenant by the Company or the
Principal Stockholder or a material breach of a
representation or warranty of the Company or the
Principal Stockholder
(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
54
<PAGE>
outstanding Indebtedness of the Company for borrowed
money, or (B) the Financing ,
(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 Merger Closing 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
55
<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), 6.9 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.
56
<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 Financing Document, and have read and
understood the matters described in the copies of the Financing Document
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 Financing and future
acquisitions and projected uses of the proceeds of the Financing. 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
57
<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
58
<PAGE>
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 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), Section 2.1(e) 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 percent (1%) of the Aggregate Merger Consideration paid to
all Stockholders pursuant to Sections 2.1(a), 2.1(d), 2.1(e) 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.
10.3 Access to Books and Records. In the event of any claim for indemnity
---------------------------
under Section 10.1 or 10.2, VIALOG agrees to give the Principal Stockholder and
its Representatives reasonable access to all files, documents, instruments,
papers, books and records relating to the Company or the Principal Stockholder,
and to all employees of the Company in connection with the matters for which
indemnification is sought to the extent the Principal Stockholder reasonably
deems necessary in connection with his rights and obligations under this Article
10.
10.4 Exclusivity. After the Financing Closing Date, to the extent
-----------
permitted by Law, the indemnities set forth in this Article 10 shall be the
exclusive remedies of the VIALOG Indemnified Parties and the Company Indemnified
Parties for any misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which the
parties hereto hereby waive.
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 and Section 3.12 until sixty (60) days
after the applicable statute of limitations, as the
same may be extended from time to time, has
terminated; and
(ii) all other Sections, until January 31, 1999.
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
3 Riverside Drive
Andover, MA 01810
Fax: (508) 975-7208
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
62
<PAGE>
Fax: (201) 587-8845
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
63
<PAGE>
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 Financing
----------------------
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
64
<PAGE>
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.
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 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
68
<PAGE>
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.
Financing means the sale of VIALOG securities or borrowings from financial
institutions necessary to raise the cash so as to enable VIALOG to pay the
Aggregate Merger Consideration.
69
<PAGE>
Financing Closing Date means the date on which the Financing is closed.
Financing Document means the private offering circular furnished to
potential investors or financial institutions in connection with the Financing
(which may include the Registration Statement, the Prospectus, exhibits, and
financial statements, and any amendments thereto) and any securities of VIALOG
issued to consummate the Financing.
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,
70
<PAGE>
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 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
January 31, 1999, 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 January 31, 1999, 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
71
<PAGE>
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 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.
72
<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 adjusted for any
issuances pursuant to Section 2.1(e).
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 or 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.
73
<PAGE>
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.
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 offering document used by VIALOG in
completing the Financing including any preliminary prospectus first filed by
VIALOG in the Registration Statement dated February 28, 1997 and the prospectus
filed pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto used by VIALOG in connection with the Financing.
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) relating to the securities of VIALOG.
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.
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) December 31, 1997, or (b) such date after
December 31, 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 sale of VIALOG securities pursuant to the Registration Statement or
any credit facilities between VIALOG and any bank described in the Financing
Document.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any entity who assists VIALOG either as agent or for its
own account in selling VIALOG's securities pursuant to the Financing Document.
Underwriting Agreement means the agreement between VIALOG and the
Underwriter.
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 & CEO
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. FURTHER INFORMATION
WILL BE FURNISHED UPON REQUEST
------------------------------
SECTION 2.1
. Allocation of merger consideration.
SECTION 3.1(a)
. Jurisdiction of incorporation of the Company.
. Jurisdictions where Company 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, including 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.
. Exceptions to no liens against subsidiaries.
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.
<PAGE>
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.
. 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.
2
<PAGE>
SECTION 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before December
31, 1996.
. Governmental authorizations.
SECTION 3.7(b)
. Breaches, violations or defaults under governmental authorizations or any
applicable law or under any requirement of any insurance carrier.
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.
3
<PAGE>
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 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.
4
<PAGE>
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.
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.
5
<PAGE>
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.
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 3.30
. Information furnished by or on behalf of the Company or any stockholder for
use in financing document.
SECTION 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
6
<PAGE>
SECTION 4.4
. Exceptions to good and merchantable title to shares to be exchanged
pursuant to this Agreement.
SECTION 4.5
. 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.
. 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.
. Governmental authorizations, governmental filing or private authorizations
required as a result of the execution and delivery of this Agreement or any
collateral document.
SECTION 5.5
. Exceptions to no broker, agent or finder.
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.
7
<PAGE>
. Certain liabilities for which the Company will indemnify VIALOG as of the
merger closing.
SECTION 7.2(d)
. Persons executing non-competition agreements.
SECTION 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of the
public offering closing date.
SECTION 7.2(t)
. Individuals executing and delivering employment agreements.
8
<PAGE>
EXHIBIT 2.9
-----------
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 September 30, 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;
Etc............................................ 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 9
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.................... 13
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........................ 22
SECTION 3.17 Material Agreements............................ 23
SECTION 3.18 Ordinary Course of Business.................... 23
SECTION 3.19 Bank Accounts; Etc............................. 25
SECTION 3.20 Adverse Restrictions........................... 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.21 Broker or Finder............................... 26
SECTION 3.22 Personal Injury or Property Damage; Warranty
Claims; Etc.................................... 26
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............ 29
SECTION 3.29 Continuing Representations and Warranties...... 29
SECTION 3.30 Financing Document............................. 29
SECTION 3.31 Predecessor Status; Etc........................ 29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER....... 30
SECTION 4.1 Organization................................... 30
SECTION 4.2 Power and Authority............................ 30
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..... 32
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..................................... 33
SECTION 5.8 Financing Document............................. 33
SECTION 5.9 Solvency....................................... 33
SECTION 5.10 This Section Intentionally Left Blank.......... 33
SECTION 5.11 Participating Agreements of Other
Participating Companies........................ 34
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............. 37
SECTION 6.4 Compliance with the Securities Act............. 37
SECTION 6.5 Conduct of Business............................ 37
SECTION 6.6 No Solicitation................................ 38
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance...................................... 39
SECTION 6.8 Notification of Certain Matters................ 39
SECTION 6.9 Public Announcements........................... 40
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......................... 43
SECTION 6.20 Financing Document............................. 43
SECTION 6.21 Tax Status..................................... 43
SECTION 6.22 Self Dealing................................... 43
ARTICLE 7 CLOSING CONDITIONS................................................ 44
SECTION 7.1 Conditions to Obligations of Each Party to
Effect the Merger.............................. 44
SECTION 7.2 Conditions to Obligations of VIALOG and VIALOG
Merger Subsidiary.............................. 45
SECTION 7.3 Conditions to Obligations of the Company....... 51
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........................ 57
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
SECTION 10.3 Access to Books and Records.................... 61
SECTION 10.4 Exclusivity.................................... 61
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
September 30, 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 Company will merge with and into the VIALOG
Merger Subsidiary (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 one of the Other Participating
Companies will merge with and into such Subsidiary 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, cash and notes or
cash and shares of VIALOG Stock determined in accordance with provisions
substantially similar to those in Section 2.1(a).
3. 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 merger pursuant to 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>
4. 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
Company will be merged with and into the VIALOG Merger Subsidiary. As a result
of the Merger, the separate existence of the Company will cease and the VIALOG
Merger Subsidiary 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 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
2
<PAGE>
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 any filing required pursuant to the Securities Act of 1933, as amended
(the "Securities Act") or any filing required by state law and in any event
within 30 days of the date hereof.
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, on the date designated by VIALOG by written notice in accordance
with Article 11 hereof delivered at least three (3) days prior to such 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 one day prior to the Merger
Closing, 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
Financing Closing Date, which is expected to occur no later than 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 Financing
Closing Date. In the event that the Effective Time and Financing 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 Financing 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 Financing 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 such time (but not
prior to the Financing Closing Date) as such articles or certificates, as the
case
3
<PAGE>
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 = $3,000,000
Aggregate Stock Merger Consideration = 52,174 shares
Aggregate Cash Merger Consideration = $2,399,999
4
<PAGE>
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 converted and will constitute the
only outstanding shares of capital stock of the Surviving Corporation.
5
<PAGE>
(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.
(e) If a dividend is declared upon the VIALOG Stock payable in
VIALOG Stock between the date hereof and the Effective Time, then the shares of
VIALOG Stock the holder has the right to receive pursuant to Section 2.1(a) will
be increased proportionately. If the outstanding VIALOG Stock is changed into or
exchanged for a different number or class of shares of stock of VIALOG or of
another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there shall be
substituted for each such share of VIALOG Stock the holder has the right to
receive pursuant to Section 2.1(a) the number and class of shares of VIALOG
Stock into which each outstanding share of VIALOG Stock is so changed or
exchanged.
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 Financing 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
6
<PAGE>
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 Financing 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; Etc.
-----------------------------------------------------------------
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), (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, and (c) VIALOG
shall grant to the Principal Stockholder options for 75,000 shares of VIALOG
Stock as constituted at the Effective Time exercisable at the fair market value
at the Effective Time as determined by the VIALOG Board of Directors. Maurya
Suda shall receive an option for 12,500 shares as constituted at the Effective
Time, which such options shall become exercisable for 3,125 shares on the last
day of the calendar quarter in which the Effective Time occurs and an additional
3,125 shares on the last day of each of the 3 calendar quarters thereafter and
expiring on the third anniversary of the Effective Time. Patti R. Bisbano shall
receive an option for 62,500 shares as constituted at the Effective Time which
such options shall become exercisable for 5,212 shares on the last day of the
calendar quarter in which the Effective Time occurs and an additional 5,208
shares on the last day of each of the 11 calendar quarters thereafter and
expiring on the third anniversary of the Effective Time
8
<PAGE>
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 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
9
<PAGE>
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 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 Financing 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
10
<PAGE>
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 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,
11
<PAGE>
(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 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
12
<PAGE>
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 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,
13
<PAGE>
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 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:
14
<PAGE>
(i) all Legal Actions which are pending or, other than those
finally adjudicated or settled on or before December 31,
1996, 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 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,
15
<PAGE>
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 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.
---------
16
<PAGE>
(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 Financing 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. 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.
17
<PAGE>
(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.
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
18
<PAGE>
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,
(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,
19
<PAGE>
(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,
(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 Financing 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
20
<PAGE>
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 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
21
<PAGE>
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 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.
22
<PAGE>
(d) Neither the Company nor any Subsidiary has conducted, and on or
prior to the Financing 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 Financing 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
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
failed 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, 1996 to the date of this Agreement, and until the Financing Closing
Date, except as may be described on Section
23
<PAGE>
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,
(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,
24
<PAGE>
(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
(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 Financing
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
25
<PAGE>
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, 1996, 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
26
<PAGE>
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 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 Financing 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
27
<PAGE>
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.
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
Financing 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
28
<PAGE>
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 Financing 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 Financing Document. All information furnished by or on behalf of the
------------------
Company or any Stockholder in writing for use in the Financing Document is set
forth in Section 3.30 of the Disclosure Schedule 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 Financing 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.
29
<PAGE>
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 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
30
<PAGE>
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 Financing 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 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
31
<PAGE>
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 Financing and registration rights
and except pursuant to the HSR Act (if applicable).
5.4 Financing. VIALOG has or, upon consummation of the Financing, 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.
5.5 Broker or Finder. Except for the Underwriter and as set forth in
----------------
Section 5.5 of the Disclosure Schedule, 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
-------------------------------------------------------
VIALOG nor 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 proposed
registration of VIALOG Stock under the Securities Act, compliance with the
32
<PAGE>
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 Financing Document. The Financing Document and any amendments
------------------
thereto will comply when the Financing Document 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 Financing Document 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 Financing Document and of each amendment thereto
until the Merger Closing and thereafter will furnish the Principal Stockholder
with each amendment thereto and any 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 This Section Intentionally Left Blank
-------------------------------------
33
<PAGE>
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
Financing 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
34
<PAGE>
Subsidiaries and Stockholders that VIALOG or its Representatives requires, in
either case for inclusion in or in support of the Financing Document, 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 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
35
<PAGE>
(including without limitation the Financing Document, 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 Financing 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
Financing 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 Financing 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.
36
<PAGE>
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 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
37
<PAGE>
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 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 or solicit, directly or indirectly, any inquires or
the making of any proposal with respect to an Other Transaction, engage in
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 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
38
<PAGE>
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 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.
39
<PAGE>
6.9 Public Announcements. Until the earlier of the Effective Time of the
--------------------
termination of this Agreement, the closing of the Financing (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 issuance of VIALOG securities under
the Securities Act. 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
40
<PAGE>
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 hereof 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
negotiations 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 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
41
<PAGE>
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 Financing
Closing Date. From and after the Financing 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 Time) 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 Financing
--------------------------------
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
42
<PAGE>
which extend beyond the Financing 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 Financing 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 Financing Document.
------------------
(a) The Company and the Principal Stockholder will furnish to VIALOG
all necessary information concerning the Company and the Principal Stockholder
for VIALOG to prepare the Financing Document.
(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 the Financing
Document prior to October 30, 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 use
thereof.
6.21 Tax Status. VIALOG, the Company and the Principal Stockholder
----------
agree (i) to use their best efforts to maintain the status of the Merger a
merger pursuant to the code and (ii) not to take any action to endanger the tax
free status for a period of two (2) years from the Merger Closing.
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.
43
<PAGE>
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,
(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 Financing, 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 Financing Document 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 securities
of VIALOG offered in the Financing 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 Financing (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 Financing and
distribution of the proceeds of the sale of securities of VIALOG sold and
purchased in the Financing shall have been unconditionally authorized by the
Underwriter upon consummation of the Merger and the Participating Mergers,
(e) This subsection intentionally left blank.
----------------------------------------
(f) Subject to such material amendments, if any, as shall be proposed
prior to Merger Closing by VIALOG to be effective immediately after the Merger
Closing, and to the extent reasonably satisfactory to the Company and the Other
Participating Companies, the
44
<PAGE>
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) This subsection intentionally left blank.
----------------------------------------
(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 Financing 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,
45
<PAGE>
(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 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,
46
<PAGE>
(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
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 Financing 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 Financing 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,
47
<PAGE>
(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 Financing 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 Financing 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
Financing 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 Financing 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 Financing
Document 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 Financing
Document prepared by the Accountants as contemplated by Section 6.1(a) to a date
not more than five (5) days prior to the Financing 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 Financing Document.
(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
48
<PAGE>
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 Financing 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
Financing Document,
(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 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 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 Financing Closing Date,
(n) The Principal Stockholder shall have delivered to VIALOG an agreement,
substantially in the form of Exhibit 7.2(n), dated the Financing Closing Date,
---------------
releasing the Company and its Subsidiaries from any and all Claims against them
(other than Claims arising
49
<PAGE>
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 Financing 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 Financing 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 Financing 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
Financing 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 368(a) of the Code applies or
as a cash forward merger pursuant to the Code and will not result in any taxable
income or gain or deductible loss to the Company, VIALOG or VIALOG Merger
Subsidiary.
50
<PAGE>
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 Financing 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 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,
(v) 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
(vi) 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 Financing 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 Financing 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
Financing 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 Financing 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 368 of the Code applies for federal income tax purposes, 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
Financing 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 Merger Closing or will prevent or
delay consummation of the Merger by or beyond the
Termination Date, or
(ii) in the event Jeffries & Company, Inc. shall terminate its
engagement or otherwise withdraw as an Underwriter for any
substantive reason other than material failure to perform or
material nonfulfillment of any covenant by the Company or
the Principal Stockholder or a material breach of a
representation or warranty of the Company or the Principal
Stockholder
(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 Financing,
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 Merger Closing
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),
---------------------
6.9 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 Financing Document, and have read and
understood the matters described in the copies of the Financing Document
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 Financing and future
acquisitions and projected uses of the proceeds of the Financing. 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), Section 2.1(e) 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 percent (1%) of the Aggregate Merger Consideration paid to all
Stockholders pursuant to Sections 2.1(a), 2.1(d), 2.1(e) 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.
10.3 Access to Books and Records. In the event of any claim for
---------------------------
indemnity under Section 10.1 or 10.2, VIALOG agrees to give the Principal
Stockholder and its Representatives reasonable access to all files, documents,
instruments, papers, books and records relating to the Company or the Principal
Stockholder, and to all employees of the Company in connection with the matters
for which indemnification is sought to the extent the Principal Stockholder
reasonably deems necessary in connection with his rights and obligations under
this Article 10.
10.4 Exclusivity. After the Financing Closing Date, to the extent
-----------
permitted by Law, the indemnities set forth in this Article 10 shall be the
exclusive remedies of the VIALOG Indemnified Parties and the Company Indemnified
Parties for any misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which the
parties hereto hereby waive.
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 and Section 3.12 until sixty (60) days after
the applicable statute of limitations, as the same may be
extended from time to time, has terminated; and
(ii) all other Sections, until January 31, 1999.
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
3 Riverside Drive
Andover, MA 01810
Fax: (508) 975-7208
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
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 Financing
----------------------
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 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
68
<PAGE>
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.
Financing means the sale of VIALOG securities or borrowings from financial
institutions necessary to raise the cash so as to enable VIALOG to pay the
Aggregate Merger Consideration.
69
<PAGE>
Financing Closing Date means the date on which the Financing is closed.
Financing Document means the private offering circular furnished to
potential investors or financial institutions in connection with the Financing
(which may include the Registration Statement, the Prospectus, exhibits, and
financial statements, and any amendments thereto) and any securities of VIALOG
issued to consummate the Financing.
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,
70
<PAGE>
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 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
January 31, 1999, 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
twenty (20) percent of VIALOG Stock to eighty (80) percent cash, for all
payments by such Stockholder, and after January 31, 1999, 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
71
<PAGE>
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 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.
72
<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 adjusted for any
issuances pursuant to Section 2.1(e).
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 or 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.
73
<PAGE>
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.
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 offering document used by VIALOG in completing
the Financing including any preliminary prospectus first filed by VIALOG in the
Registration Statement, dated February 28, 1997 and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto used by VIALOG in connection with the Financing.
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) relating to the securities of VIALOG.
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.
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) December 31, 1997, or (b) such date after
December 31, 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 sale of VIALOG securities pursuant to the Financing Document or any
credit facilities between VIALOG and any bank described in the Financing
Document.
Transmittal Documents will have the meaning given to it in Section 2.2(b).
Underwriter means any entity who assists VIALOG either as agent or for its
own account in selling VIALOG's securities pursuant to the Financing Document.
Underwriting Agreement means the agreement between VIALOG and the
Underwriter.
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 & CEO
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. FURTHER INFORMATION
WILL BE FURNISHED UPON REQUEST
------------------------------
Section 2.1
. Allocation of merger consideration.
Section 3.1(a)
. Jurisdiction of incorporation of the Company.
. Jurisdictions where Company 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, including 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.
. Exceptions to no liens against subsidiaries.
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.
<PAGE>
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.
. 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.
2
<PAGE>
Section 3.7(a)
. Legal actions pending, finally adjudicated or settled on or before
December 31, 1996.
. Governmental authorizations.
Section 3.7(b)
. Breaches, violations or defaults under governmental authorizations or any
applicable law or under any requirement of any insurance carrier.
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.
3
<PAGE>
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 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.
4
<PAGE>
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.
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.
5
<PAGE>
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.
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 3.30
. Information furnished by or on behalf of the Company or any stockholder for
use in financing document.
Section 3.31
. Predecessor entities and entities from which, since December 31, 1991, the
Company previously acquired material properties or assets.
6
<PAGE>
Section 4.4
. Exceptions to good and merchantable title to shares to be exchanged
pursuant to this Agreement.
Section 4.5
. 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.
. 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.
. Governmental authorizations, governmental filing or private authorizations
required as a result of the execution and delivery of this Agreement or any
collateral document.
Section 5.5
. Exceptions to no broker, agent or finder.
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.
7
<PAGE>
. Certain liabilities for which the Company will indemnify VIALOG as of the
merger closing.
Section 7.2(d)
. Persons executing non-competition agreements.
Section 7.2(q)
. Leases and Contractual Obligations not satisfied and discharged as of the
public offering closing date.
Section 7.2(t)
. Individuals executing and delivering employment agreements.
8
<PAGE>
EXHIBIT 2.10
------------
FIRST AMENDMENT
TO
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
---------------------------------------------------------
This Amendment is made as of the 24th day of October, 1997 by and among
VIALOG Corporation ("VIALOG"), CDC Acquisition Corporation (the "VIALOG Merger
Subsidiary"), Communication Development Corporation (the "Company") and Patti R.
Bisbano and Maurya Suda (the "Principal Stockholders").
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholders are parties to that certain Amended Agreement and Plan of
Reorganization dated September 30, 1997 (the "Agreement"); and
WHEREAS, VIALOG, the VIALOG Merger Subsidiary, the Company and the
Principal Stockholders desire to amend the Agreement.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein and of those contained in the
Agreement, VIALOG, the VIALOG Merger Subsidiary, the Company and the Principal
Stockholders covenant, agree, represent and warrant as follows:
1. Terms. Terms defined in the Agreement are used herein as so defined unless
-----
otherwise specifically stated herein.
2. Amendments. The Agreement is hereby amended as follows:
----------
(A) Section 1 of the PREAMBLE is amended and shall hereafter read as
follows:
"1. The Company and the 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)."
<PAGE>
(B) Section 1.1(a) is amended and shall hereafter read as follows:
"(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")."
3. Except as specifically amended hereby, all other terms and provisions of
the Agreement shall remain in full force and effect.
4. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
EXECUTED as an instrument under seal as of the date first above written.
COMMUNICATION DEVELOPMENT VIALOG CORPORATION
CORPORATION
By: /s/ Patti Bisbano By: /s/ Glenn D. Bolduc
----------------------- --------------------------
Name: Patti Bisbano Name: Glenn D. Bolduc
Title: President Title: President
PRINCIPAL STOCKHOLDERS: CDC ACQUISITION CORPORATION
/s/ Patti Bisbano By: /s/ Glenn D. Bolduc
- --------------------------- ----------------------------
Name: Patti Bisbano Name: Glenn D. Bolduc
Title: President
/s/ Maurya Suda
- ----------------------------
Name: Maurya Suda
2
<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 OR 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 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:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
<S> <C> <C> <C> <C>
Common: Common: 30,000,000 $.01
Preferred: Preferred: 10,000,000 $.01
</TABLE>
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:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Glenn D. Bolduc 7 Springvale Street 7 Springvale Street
Hollis, NH 03049 Hollis, NH 03049
Treasurer: John J. Dion 41 Cypress Street 41 Cypress Street
Newton, MA 02159 Newton, MA 02159
Clerk: John J. Hassett 8 Harbor View 8 Harbor View
Marblehead, MA 01945 Marblehead, MA 01945
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
Thomas Carroll 96 Village Street 96 Village Street
Marblehead, MA 01945 Marblehead, MA 01945
</TABLE>
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 , *President
/s/
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 $200.00 having been paid, said articles are deemed to have
been filed with me this 27th day of February, 1997.
Effective Date:
----------------------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILED 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 this 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 identify of the
person or persons may require.
12
<PAGE>
EXHIBIT 3.3
-----------
113205A001 01/08/91R#37010
113205A001 01/08/91R#00300
CERTIFICATE OF INCORPORATION
OF
COMMUNICATION DEVELOPMENT CORPORATION
-------------------------------------
We, the incorporators, certify that we hereby form a body politic and
corporate under the Stock Corporation Act of the State of Connecticut.
1. The name of the corporation is COMMUNICATION DEVELOPMENT CORPORATION
(hereinafter called the "Corporation").
2. The nature of the business to be transacted or the purposes to be
promoted or carried by the corporation either in the capacity of principal or
agent, are as follows:
To engage in any lawful act or business for which said corporation may
be formed under said Act.
3. The designation of each class of shares, the authorized number of
shares of each class and the par value of each share thereof are as follows:
One class of 5,000 authorized shares of common stock without par
value.
4. The minimum amount of state capital with which the corporation shall
commence business is $1,000.00.
Under the penalties of false statement, we declare that the statements
contained in this Certificate of Incorporation are true.
Dated at Danbury, Connecticut this 31st day of December, 1990.
/s/ Patti Ryll Bisbano
----------------------
Patti Ryll Bisbano
/s/ Maurya E. Suda
------------------
Maurya E. Suda
FT: 150. FF: 45. CC: 12. T: 207.00
ROC: Nanette B. Bracken, Esq.
14 Mulberry St.
Richefield, CT 06877-3706
<PAGE>
EXHIBIT 3.4
-----------
CERTIFIED TO BE A TRUE
AND ACCURATE COPY OF
THE ORIGINAL DATE:
/s/ Maurya Suda
----------------------------
BY-LAWS
OF
COMMUNICATION DEVELOPMENT CORPORATION
Meetings of Shareholders
------------------------
1. Place of Meetings. Every meeting of shareholders of COMMUNICATION
-----------------
DEVELOPMENT CORPORATION (hereinafter called the Corporation) shall be held at
the principal office of the Corporation or at such other place either within or
without the State of Connecticut as shall be specified in the notice of said
meeting given as hereinafter provided.
2. Annual Meeting. An annual meeting of shareholders of the Corporation for
--------------
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on the first Monday of January in
each year, or, if such day shall be a legal holiday, then on the next following
business day, at such hour as shall be specified in the notice thereof.
3. Special Meetings. Special Meetings of shareholders may be called at any
----------------
time by the Board of Directors of the Corporation (hereinafter called the Board)
or by the President or by the Secretary. Business transacted at any special
meeting of shareholder shall be limited to the purposes stated in the notice.
4. Notice of Meetings and Waiver. A notice in writing of each meeting of
-----------------------------
shareholders shall be given by or at the direction of the President or by the
Secretary of the Corporation to each shareholder of record entitled to vote at
such meeting, by leaving such notice with him or at his residence or usual place
of business, or by mailing a copy thereof addressed to him at his last known
post-office address as last shown on the stock records of the Corporation,
postage prepaid, not less than seven days nor more than fifty days before the
date of the meeting. Such notice shall state the general purpose or purposes for
which the meeting is called and the place, day and hour of the meeting. A
written waiver of notice signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent to
the giving of notice. The attendance of any person at a meeting without
protesting, prior to the commencement of the meeting, the lack of proper notice
shall be deemed to be a waiver by him of notice of such meeting.
5. Voting List. The Secretary of the Corporation shall make, or cause to be
-----------
made, at least five days before each meeting of the shareholders at which notice
is given, a complete list or other equivalent record of the shareholders
entitled to vote at such meeting, arranged in
<PAGE>
alphabetical order, with the address of and the number of shares held by each.
Such list or other equivalent record shall, for a period of five days prior to
such meeting, be kept on file at the principal office of the Corporation.
6. Quorum, Adjournment and Manner of Acting. The holders of shares entitled to
----------------------------------------
vote present in person or by proxy at any meeting of shareholders shall
constitute a quorum for such meeting. The holders of a majority of the voting
power of the shares entitled to vote represented at a meeting may adjourn such
meeting from time to time. Any business which could have been transacted at any
meeting of shareholders may be transacted at any adjournment thereof, and it
shall not be necessary to give new notice of the adjourned meeting. The
shareholders present at a duly held meeting or at any adjournment thereof at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. Except as otherwise provided by statute or the Certificate of
Incorporation, the affirmative vote at a meeting of shareholders duly held and
at which a quorum is present of a majority of the voting power of the shares
represented at such meeting which are entitled to vote on the subject matter
shall be the act of the shareholders. Any action which may be taken at a meeting
of shareholders may be taken without a meeting if consent in writing, setting
forth the action so taken or to be taken is signed by all of the persons who
would be entitled to vote upon such action at a meeting or by their duly
authorized attorneys.
7. Voting and Proxies. Each outstanding share of common stock of the
------------------
Corporation shall be entitled to one vote on each matter submitted to a vote at
a meeting of shareholders. Each shareholder entitled to vote at any meeting of
shareholders or to execute consents, waivers or releases in respect of shares
may do so either in person or by one or more agents authorized by a written
proxy executed by him.
Board of Directors
------------------
8. Authority, Number, Term and Qualification. The business, property and
-----------------------------------------
affairs of the Corporation shall be managed by the Board. The Board may exercise
all such authority and powers of the Corporation and do all such lawful acts and
things as are not by statute or the Certificate of Incorporation or by these By-
Laws directed or required to be exercised or done by shareholders. The
Corporation shall have three directorships, except that where all the issued and
outstanding shares of common stock of the Corporation are owned beneficially and
of record by less than three shareholders, the number of directorship may be
less than three but not less than the number of shareholders. The number of
directorships may be increased to any number not exceeding seven by resolution
of the shareholders or directors or, in the absence thereof, shall be the number
of directors elected at the last annual meeting of shareholders. Each director
shall hold office from the time of his election and qualification until his
successor shall have been duly elected at the next annual meeting of
shareholders and shall have qualified, or until his death, or until he shall
have resigned or shall have been removed as provided in these By-Laws. Directors
need not be residents of the State of Connecticut or shareholders of the
Corporation.
9. Fees. Directors as such shall not receive any stated salary for their
----
services but shall have authority to fix fees, including reasonable allowance
for expenses actually incurred in connection
2
<PAGE>
with their duties; provided, however, that nothing herein contained shall be
construed so as to preclude any director from serving the Corporation in any
other capacity as an officer agent, or otherwise and receiving compensation
therefor.
10. Place of Meetings. The Board may hold its meetings, regular or special, at
-----------------
such place or places within or without the State of Connecticut as it may from
time to time by resolution determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
11. Regular Meetings. Each regular meeting of the Board shall be held at such
----------------
time and place: (a) as shall be specified in a resolution adopted by the Board
then in effect; or (b) if there shall not be any such resolution then in effect,
as shall be specified in a notice of such meeting, given as provided in
paragraph 12 of these By-Laws for notices of special meetings of the Board; or
(c) as shall be specified in a waiver of notice thereof signed by all the
directors of the Corporation then in office. If at the time any regular meeting
of the Board is to be held the time and place of holding regular meetings of the
Board shall have been fixed by resolution of the Board then in effect, then
notice of such regular meeting need not be given.
12. Special Meetings, Notice and Waiver. Special meetings of the Board shall be
-----------------------------------
held whenever called by the President or by the Secretary. At least two days'
written or oral notice of each such special meeting stated the time and place of
the meeting shall be given to each director. Neither the business to be
transacted at nor the purpose of any meeting of the Board need be specified in
the notice unless required by these By-Laws. A written waiver of notice signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be equivalent to the giving of notice. The attendance
of any director at a meeting without protesting prior to the commencement of the
meeting the lack of proper notice shall be deemed to be a waiver by him of
notice of such meeting.
13. Quorum, Adjournment and Manner of Acting. A majority of the number of
----------------------------------------
directorships at the time shall constitute a quorum for the transaction of
business. Any meeting of the Board may be adjourned from time to time by a
majority vote of the directors present at such meeting. In the absence of a
quorum for any such meeting a majority of the directors present thereat may
adjourn such meeting to another time and place until a quorum shall be present
thereat. Notice of any adjourned meeting need not be given. The act of a
majority of the directors present at a meeting at which a quorum is present at
the time of the act shall be the act of the Board, except as may be otherwise
specifically provided by statute or the severally or collectively consent in
writing to any action to be taken by the Corporation and the number of such
directors constitutes a quorum for such action, such action shall be as valid
corporate action as though it had been authorized at a meeting of the Board.
14. Removal of Directors. Any director may be removed with or without cause at
--------------------
any time by the act of shareholders; and the vacancy in the Board caused by any
such removal may be filled by the act of shareholders.
3
<PAGE>
Executive and Other Committees
------------------------------
15. Appointment and Authority. The Board, by resolution adopted by the
-------------------------
affirmative vote of directors holding a majority of the directorships, may
designate two or more directors to constitute an Executive Committee or other
committees, which committees shall have and may exercise all such authority of
the Board as shall be provided in such resolution.
Officers
--------
16. Number, Qualifications, Terms and Election. The officers of the Corporation
------------------------------------------
shall be the President one or more Vice Presidents, a Secretary, a Treasurer and
such other officers, agents and employees as shall be appointed in accordance
with the provisions of paragraph 17 of these By-Laws. Any two or more offices
may be held by the same person except the offices of President and Secretary.
The officers of the Corporation shall be elected from time to time by the Board.
The term of office of each officer shall be from the time of his election until
his successor shall have been duly elected following the next annual meeting of
shareholders, or until his death or until he shall have resigned or shall have
been removed as provided in these By-Laws.
17. Other Officers, Etc. The Board may from time to time appoint such other
--------------------
officers, agents or employees as the Board may deem necessary or advisable, each
of whom shall hold office for such period, have such authority and perform such
duties as the Board may from time to time determine.
18. Removal. Any officer, agent or employee of the Corporation may be removed,
-------
with or without cause, at any time by resolution adopted by the affirmative vote
of directors holding a majority of the directorships at a special meeting of the
Board called for that purpose.
19. The President. The President shall be the chief executive officer of the
-------------
Corporation and shall have general supervision over the business of the
Corporation, subject to the control of the Board. He shall see that all orders
and resolutions of the Board are carried into effect. In general he shall
perform all duties incident to the office of President and such other duties as
may from time to time be assigned to him by these By-Laws or by the Board.
20. Vice President. The Vice President shall perform all such duties as from
--------------
time to time may be assigned to him by the Board or the President. At the
request of the President, or in case of his absence or inability to act, the
Vice President shall perform the duties of the President and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President.
21. The Treasurer. The Treasurer shall have charged and custody of and be
-------------
responsible for all the funds and securities of the Corporation; he shall keep
full and accurate accounts of assets, liabilities, receipts and disbursements
and other transactions of the Corporation in books belonging to the Corporation;
he shall cause regular audits of such books to be made; and he shall deposit all
moneys and other valuable effects in the name of and to the credit of the
4
<PAGE>
Corporation in such banks or other depositaries as may be designated by the
Board. He shall disburse the funds of the Corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
President and to the directors at the meetings of the Board, or whenever they
may require it, a statement of all his transactions as Treasurer and an account
of the financial condition of the Corporation. In general he shall perform all
the duties incident to the office of Treasurer and such other duties as may from
time to time be assigned to him by the Board or by the President.
22. The Secretary. The Secretary shall act as secretary of and keep the minutes
-------------
of the meetings of the Board and of shareholders; he shall cause to be given
notice of all meetings of shareholders and directors; he shall be custodian of
the seal of the Corporation and shall affix the seal, or cause it to be affixed,
to all certificates for shares of stock of the Corporation and to all documents
the execution of which on behalf of the Corporation under its seal shall have
been specifically or generally authorized by the Board; he shall have
responsibility for the share transfer books for shares of the Corporation and
shall have charge of the other books, records and papers of the Corporation
relating to its organization as a corporation and shall see that the reports,
statements and other documents required by law are properly kept or filed; and
he shall in general perform all the duties incident to the office of Secretary
and such other duties as may from time to time be assigned to him by the Board
or by the President.
Vacancies and Resignations
--------------------------
23. Vacancies. Except as otherwise provided in these By-Laws, in case the
---------
office of any director or of the President, the Vice President, Secretary,
Treasurer or other officer, agent or employee appointed by the Board becomes
vacant due to death, resignation or removal, or should a vacancy exist from an
increase in the number of directors, the vacancy may be filled for the unexpired
term by action of the sole remaining directors in office, though such remaining
directors are less than a quorum, though the number of directors acting is less
than a quorum and though such majority is less than a quorum.
24. Resignations. Any director or officer, or any other officer, agent or
------------
employee appointed by the Board, may resign his office at any time by giving
written notice of his resignation to the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein
or, if no time is specified therein, at the time of the receipt thereof, and the
acceptance thereof shall not be necessary to make it effective.
Offices and Books
-----------------
25. Offices. The principal office of the Corporation shall be at such place in
-------
the State of Connecticut as the Board may determine. The Board may from time to
time and at any time establish other offices of the Corporation or branches of
its business at whatever place or places seem to it expedient.
26. Books and Records. There shall be kept correct and complete books and
-----------------
records of account and minutes of the proceedings of the Corporation's
incorporators, shareholders,
5
<PAGE>
directors and committees of directors. There shall also be maintained at the
principal office of the Corporation a record of the Corporation's shareholders,
giving the names and addresses of all shareholders and the number and class of
shares held by each. At intervals of not more than twelve months the Corporation
shall prepare a balance sheet showing its financial condition as of a date not
more than four months prior thereto and a profit and loss statement respecting
its operations for the twelve months preceding such date. The balance sheet and
a profit and loss statement shall be deposited at the principal office of the
Corporation and be kept for at least ten years from such date, and shall be
subject to inspection by any shareholder of record during business hours. In
addition, within thirty days after the preparation of each such annual balance
sheet and profit and loss statement, a copy thereof shall be mailed to each
shareholder of record or left with him or at his residence or usual place of
business.
27. Seal. The seal of the Corporation shall be circular in form and shall
----
contain the name of the Corporation and the words and figures "Corporate Seal
1990 Connecticut".
Fiscal Year
-----------
28. Fiscal Year. The fiscal year of the Corporation shall end on the last day
-----------
of December in each year.
Restriction on Transfer of Shares
---------------------------------
29. Restriction on Transfer of Shares. The Corporation and its shareholders
---------------------------------
shall have the first and second rights, respectively, subject to the conditions
set forth below, to purchase any shares of common stock in the event the holder
thereof elects to dispose of the same by sale, transfer or other disposition,
whether by operation of law or otherwise, and whether a gratuitous gift or
transfer upon death by will or laws of intestacy. The holder whose shares are to
be disposed of shall give to the Corporation a signed notice in writing, either
by delivery by hand or by mailing by registered or certified mail, to the
Corporation's principal office: (i) designating the number of shares to be
disposed of; (ii) stating the specific manner in which he proposes to dispose of
such shares if they are not purchased by the Corporation and its shareholders
pursuant to this By-Law provision; (iii) specifying the names and addresses of
the persons to whom he desires to dispose of such shares to the extent not so
purchased by the Corporation and its shareholder; (iv) offering to sell such
shares to the Corporation and its shareholders; (v) naming the per share price
in cash at which he is willing to sell such shares to the Corporation and its
shareholders, which price shall not be greater than the formula price as
determined herein; and (vi) designating his mailing address. The Corporation
shall have a period of thirty days after the receipt of such notice within which
to accept, by notice in writing to that effect mailed to the holder prior to the
expiration date of said thirty-day period to the mailing address designated in
the holder's notice, the holder's offer as contained in his notice. Should the
Corporation elect not to accept the holder's offer, it shall within the said
thirty-day period mail a copy of the holder's notice to each other shareholder
of record of the Corporation. Such shareholders of record shall have preemptive
rights to purchase the shares being disposed of by the holder. The preemptive
right may be exercised by notice in writing to that effect mailed to the holder
prior to the expiration of a period of thirty days after receipt of the
Corporation's notice, to the mailing
6
<PAGE>
address designated in the copy of the holder's notice. If at the expiration of
the period when the Corporation and its shareholders shall be entitled to
purchase any shares of the holder's to be disposed of there shall be any shares
which have not become subject to commitment by the Corporation and its
shareholders to purchase the same as aforesaid, the holder shall have the right
for a period of thirty days thereafter to dispose of such shares to the persons
specified in his notice at a price which is equal to or greater than the price
named in such notice. The formula price shall be an amount determined by
dividing the number of outstanding shares of common stock of the Corporation
(determined as the end of the fiscal year of the Corporation next preceding such
written notice) into four times the net income of the Corporation for such
fiscal year, except that the formula price for the first fiscal period shall be
$500.00 per share. Any shares not so disposed and transferred by the holder
within said thirty-day period shall not be disposed of thereafter without being
offered to the Corporation and its shareholders as hereinabove provided. The
provisions hereof shall be applicable to all shares issued or sold directly by
the Corporation.
Amendments
----------
30. Amendments. These By-Laws may be amended or repealed or new By-laws may be
----------
adopted at any annual or special meeting of shareholders, by the act of
shareholders, or at any regular or special meeting of the Board by resolution
adopted by the affirmative vote of directors holding a majority of the
directorship provided that the proposed action in respect thereof shall be
stated in the notice of such meeting. By-laws adopted or amended by the Board
shall be subject to amendment or repeal by shareholders.
7
<PAGE>
EXHIBIT 3.5
-----------
ARTICLES OF INCORPORATION
OF
CONFERENCE SOURCE INTERNATIONAL, INC.
I.
The name of the Corporation is:
CONFERENCE SOURCE INTERNATIONAL, INC.
II.
The Corporation shall have authority to issue not more that
100,000 shares of $1.00 par value common stock, all of which shall be of the
same class and designated "Common Stock." The Common Stock shall together have
unlimited voting rights and be entitled to receive the net assets of the
Corporation upon dissolution.
III.
The street address and county of the Corporation's initial
registered office shall be 3100 Equitable Building, 100 Peachtree Street, N.W.,
Atlanta, Fulton County, Georgia 30303. The initial registered agent shall be
Harold E. Abrams.
IV.
The name and address of the sole incorporator are:
Harold E. Abrams
3100 Equitable Building
100 Peachtree Street, N.W.
Atlanta, Georgia 30303
<PAGE>
V.
The mailing address of the initial principal office of the
Corporation shall be:
100 Hartsfield Centre Parkway
Suite 300
Atlanta, Georgia 30354
VI.
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages or breach of his duty of
care or other duty as a director, provided that this provision shall eliminate
or limit the liability of a director only to the extent permitted from time to
time by the Georgia Business Corporation Code or any successor law or laws.
VII.
Any action or actions required or permitted to be taken at a
meeting of the shareholders of the Corporation may be taken without a meeting by
those persons who would be entitled to vote at a meeting shares having voting
power to cast not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shareholders entitled
to vote are present and voting, provided that such action is evidenced by one or
more written consents describing the action taken which are signed by the
shareholders entitled to take such action and delivered to the Corporation for
filing with the corporate records.
<PAGE>
VII.
The Corporation shall have perpetual duration.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ Harold E. Abrams
------------------------------------
Harold E. Abrams
Incorporator
<PAGE>
EXHIBIT 3.6
-----------
BY-LAWS
OF
CONFERENCE SOURCE INTERNATIONAL, INC.
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office shall be in the Sate
------------------
of Georgia, County of Fulton.
Section 2. Other Offices. The corporation may also have offices at such
-------------
other places both within and without the State of Georgia as the board of
directors may from time to time determine and the business of the corporation
may require or make desirable.
ARTICLE II
SHAREHOLDERS MEETINGS
---------------------
Section 1. Annual Meetings. The annual meeting of the shareholders of the
---------------
corporation shall be held at the principal office of the corporation or at such
other place within or without the United States as may be determined by the
board of directors, at 10:00 a.m. on the last business day of the fifth month
following the close of each fiscal year or at such other time and date prior
thereto and following the close of the fiscal year as shall be determined by the
board of directors, for the purpose of electing directors and transacting such
other business as may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the shareholders shall
----------------
be held at the principal office of the corporation or at such other place within
or without the United States as may be designated in the notice of said
meetings, upon call of the chairman of the board of directors or the president
and shall be called by the president or the secretary when so directed by the
board of directors or at the request in writing of shareholders owning at least
25% of the issued and outstanding capital stock of the corporation entitled to
vote thereat. Any such request shall state the purposes for which the meeting
is to be called.
<PAGE>
Section 3. Notice of Meetings. Written notice of every meeting of
------------------
shareholders, stating the place, date and hour of the meetings, shall be given
personally or by mail to each shareholder of record entitled to vote at such
meeting not less than 10 nor more than 50 days before the date of the meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail with first class postage (air mail postage if the address is
outside the United States) thereon prepaid addressed to the shareholder at his
address as it appears on the corporation's record of shareholders. Attendance
of a shareholder at a meeting of shareholders shall constitute a waiver of
notice of such meeting and of all objections to the place or time of meeting, or
the manner in which it has been called or convened, except when a shareholder
attends a meeting solely for the purpose of stating, at the beginning of the
meeting, any such objection to the transaction of any business. Notice need not
be given to any shareholder who signs a waiver of notice, in person or by proxy,
either before or after the meeting.
Section 4. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at all meetings
of the shareholders except as otherwise provided by statute, by the articles of
incorporation, or by these bylaws. If a quorum is not present or represented
at any meeting of the shareholders, a majority of the shareholders entitled to
vote thereat, present in person or represented by proxy, may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
Section 5. Order of Business. At the annual meeting of shareholders the
-----------------
order of business shall be as follows:
1. Calling meeting to order.
2. Proof of notice of meeting.
3. Reading of minutes of last previous annual
meeting.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Miscellaneous business.
Section 6. Voting. When a quorum is present at any meeting, the vote of
------
the holders of a majority of the stock having voting power, present in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which by express provision of law or of the
articles of incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of the question. Each
2
<PAGE>
shareholder shall at every meeting of the shareholders be entitled to one vote,
in person or by proxy, for each share of the capital stock having voting power
registered in his name on the books of the corporation, but no proxy shall be
voted or acted upon after 11 months from its date, unless otherwise provided in
the proxy.
Section 7. Consent of Shareholders. Any action required or permitted to
-----------------------
be taken at any meeting of the shareholders may be taken without a meeting if
all of the shareholders consent thereto in writing, setting forth the action so
taken. Such consent shall have the same force and effect as a unanimous vote of
shareholders.
Section 8. List of Shareholders. The corporation shall keep at its
--------------------
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving their names
and addresses and the number, class and series, if any, of the shares held by
each. The officer who has charge of the stock transfer books of the corporation
shall prepare and make, before every meeting of shareholders or any adjournment
thereof, a complete list of the shareholders entitled to vote at the meeting or
any adjournment thereof, arranged in alphabetical order, with the address of and
the number and class and series, if any, of shares held by each. The list shall
be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the whole time of the meeting
for the purposes thereof. The said list may be the corporation's regular record
of shareholders if it is arranged in alphabetical order or contains an
alphabetical index.
ARTICLE III
DIRECTORS
---------
Section 1. Powers. Except as otherwise provided by any legal agreement
------
among shareholders, the property, affairs and board of directors, which may
exercise all powers of the corporation and do all lawful acts and things which
are not by law, by any legal agreement among shareholders, by the articles of
incorporation or by these by-laws directed or required to be exercised or done
by the shareholders.
Section 2. Number, Election and Term. The number of directors which shall
-------------------------
constitute the whole board shall be six (6). Provided, however, the number of
directors may be increased or decreased from time to time by the board of
directors by amendment of this by-law, but no decrease shall have the effect of
shortening the term of an incumbent director. The directors shall be elected by
plurality vote at the annual meeting of shareholders, except as hereinafter
provided, and each director elected shall hold office until his successor is
elected and qualified or until his earlier resignation, removal from office or
death. Directors shall be natural persons who have attained the age of 18
years, but need not be residents of the State of Georgia or shareholders of the
corporation.
3
<PAGE>
Section 3. Vacancies. Vacancies, including vacancies resulting from any
---------
increase in the number of directors, but not including vacancies resulting from
removal from office by the shareholders, may be filled by a majority of the
directors then in office, though less than a quorum, or by a sole remaining
director, and a director so chosen shall hold office until the next annual
election and until his successor is duly elected and qualified unless sooner
displaced. If there are no directors in office, then vacancies shall be filled
through election by the shareholders.
Section 4. Meetings and Notice. The board of directors of the corporation
-------------------
may hold meetings, both regular and special, either within or without the State
of Georgia. Regular meetings of the board of directors may be held without
notice at such time and place as shall from time to time be determined by
resolution of the board. Special meetings of the board may be called by the
chairman of the board or president or by any two directors on one day's oral,
telegraphic or written notice duly given or served on each director personally,
or three days' notice deposited, first class postage (air mail postage if the
address is outside of the United States) prepaid, in the United States mail.
Such notice shall state a reasonable time, date and place of meeting, but the
purpose need not be stated therein. Notice need not be given to any director
who signs a waiver of notice either before or after the meeting. Attendance of
a director at a meeting shall constitute a waiver of notice of such meeting and
waiver of all objections to the place and time of the meeting, or the manner in
which it has been called or convened except when the director states, at the
beginning of the meeting, any such objection or objections to the transaction of
business.
Section 5. Quorum. At all meetings of the board a majority of directors
------
shall constitute a quorum for the transaction of business, and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board, except as may be otherwise specifically provided
by law, by the articles of incorporation, or by these by-laws. If a quorum
shall not be present at any meeting of the board, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 6. Conference Telephone Meeting. Unless the articles of
----------------------------
incorporation or these by-laws otherwise provide, members of the board of
directors, or any committee designated by the board, may participate in a
meeting of the board or committee by means of conference telephone or similar
communications equipment whereby all persons participating in the meeting can
hear each other. Participation in the meeting shall constitute presence in
person.
Section 7. Consent of Directors. Unless otherwise restricted by the
--------------------
articles of incorporation or these by-laws, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, setting forth the action so taken, and
the writing or writings are filed with the minutes of the proceedings of the
board or committee. Such consent shall have the same force and effect as a
unanimous vote of the board.
4
<PAGE>
Section 8. Committees. The board of directors may, by resolution passed
----------
by a majority of the whole board, designate from among its members one or more
committees, each committee 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 member at any meeting of such committee. Any such committee,
to the extent provided in the resolution, shall have and may exercise all of the
authority of the board of directors in the management of the business and
affairs of the corporation except that it shall have no authority with respect
to (1) amending the articles of incorporation or these by-laws; (2) adopting a
plan of merger or consolidation; (3) the sale, lease, exchange or other
disposition of all or substantially all of the property and assets of the
corporation; and (4) a voluntary dissolution of the corporation or a revocation
thereof. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors. A
majority of each committee may determine its action and may fix the time and
places of its meetings, unless otherwise provided by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors when required.
Section 9. Removal of Directors. At any shareholders' meeting with
--------------------
respect to which notice of such purpose has been given, any director may be
removed from office, with or without cause, by the vote of shareholders
representing a majority of the issued and outstanding capital stock entitled to
vote for the election of directors, and his successor may be elected at the same
or any subsequent meeting of shareholders; provided that to the extent any
vacancy created by such removal is not filled by such an election within 60 days
after such removal, the remaining directors shall, by majority vote, fill any
such vacancy.
Section 10. Compensation of Directors. Directors shall be entitled to
-------------------------
such reasonable compensation for their services as directors or members of any
committee of the board as shall be fixed from time to time by resolution adopted
by the board, and shall also be entitled to reimbursement for any reasonable
expenses incurred in attending any meeting of the board or any such committee.
ARTICLE IV
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be chosen by the
------
board of directors and shall be a president, a secretary and a treasurer. The
board of directors may also choose a chairman of the board, one or more vice-
presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person. The board of directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the board.
5
<PAGE>
Section 2. Compensation. The salaries of all officers and agents of the
------------
corporation shall be fixed by the board of directors or a committee or officer
appointed by the board.
Section 3. Term of Office. Unless otherwise provided by resolution of the
--------------
board of directors, the principal officers shall be chosen annually by the board
at the first meeting of the board following the annual meeting of shareholders
of the corporation, or as soon thereafter as is conveniently possible.
Subordinate officers may be elected from time to time. Each officer shall serve
until his successor shall have been chosen and qualified, or until his death,
resignation or removal.
Section 4. Removal. Any officer may be removed from office at any time,
-------
with or without cause, by the board of directors whenever in its judgment the
best interest of the corporation will be served thereby.
Section 5. Vacancies. Any vacancy in an office resulting from any cause
---------
may be filled by the board of directors.
Section 6. Powers and Duties. Except as hereinafter provided, the
-----------------
officers of the corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the board of directors.
(a) President. The president shall be the chief executive officer of the
---------
corporation, shall preside at all meetings of the shareholders and (unless the
board shall have created an office of chairman of the board) the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
(b) Vice-President. In the absence of the president or in the event of his
--------------
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the president, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. The vice-presidents
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
(c) Secretary. The secretary shall attend all meetings of the board of
---------
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice
6
<PAGE>
of all meetings of the shareholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
(d) Assistant Secretary. The assistant secretary or if there be more than
-------------------
one, the assistant secretaries in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
(e) Treasurer. The treasurer shall have the custody of the corporate
---------
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors. He shall
disburse the funds of the corporation as may be ordered by the board of
directors, taking proper vouchers for such disbursements, and shall render to
the president and the board of directors, at its regular meetings, or when the
board of directors so requires, an account of all his transactions as treasurer
and of the financial condition of the corporation. If required by the board of
directors, he shall give the corporation a bond (which shall be renewed every
six years) in such sum and with such surety or sureties as shall be satisfactory
to the board of directors for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
(f) Assistant Treasurer. The assistant treasurer, or if there shall be
-------------------
more than one, the assistant treasurers in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 7. Voting Securities of Corporation. Unless otherwise ordered by
--------------------------------
the board of directors, the president shall have full power and authority on
behalf of the corporation to attend and to act and vote at any meetings of
security holders of corporations in which the corporation may hold securities,
and at such meetings shall possess and may exercise any and all rights and
powers incident to the ownership of such securities which the corporation might
have possessed and exercised if it had been present. The board of directors by
resolution from time to time may confirm like powers upon any other person or
persons.
7
<PAGE>
ARTICLE V
CERTIFICATE
-----------
Section 1. Form of Certificate. Every holder of fully-paid stock in the
--------------------
corporation shall be entitled to have a certificate in such form as the board of
directors may from time to time prescribe.
Section 2. Lost Certificates. The board of directors may direct that a
-----------------
new certificate be issued in place of any certificate theretofore issued by the
corporation and alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 3. Transfers. (a) Transfers of shares of the capital stock of the
---------
corporation shall be made only on the books of the corporation by the registered
holder thereof, or by his duly authorized attorney, or with a transfer clerk or
transfer agent appointed as provided in Section 5 of this Article, and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon.
(b) The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends,
and to vote as such owner, and for all other purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
(c) Shares of capital stock may be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificates or by separate written power of attorney to sell,
assign and transfer the same, signed by the record holder thereof, or by his
duly authorized attorney-in-fact, but no transfer shall affect the right of the
corporation to pay any dividend upon the stock to the holder of record as the
holder in fact thereof for all purposes, and no transfer shall be valid, except
between the parties thereto, until such transfer shall have been made upon the
books of the corporation as herein provided.
(d) The board may, from time to time, make such additional rules and
regulations as it may deem expedient, not inconsistent with these by-laws or the
articles of incorporation,
8
<PAGE>
concerning the issue, transfer and registration of certificates for shares of
the capital stock of the corporation.
Section 4. Record Date. In order that the corporation may determine the
-----------
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than 50 days and, in case of a meeting of shareholders,
not less than 10 days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If no record date is fixed
for the determination of shareholders entitled to notice of and to vote at any
meeting of shareholders, the record date shall be at the close of business on
the day next preceding the day on which the notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. If no record date is fixed for other purposes, the record
date shall be at the close of business on the day next preceding the day on
which the board of directors adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless the
board of directors shall fix a new record date for the adjourned meeting.
Section 5. Transfer Agent and Registrar. The board of directors may
----------------------------
appoint one or more transfer agents or one or more transfer clerks and one or
more registrars, and may require all certificates of stock to bear the signature
or signatures of any of them.
ARTICLE VI
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the articles of incorporation, if any,
may be declared by the board of directors at any regular or special meetings,
pursuant to law. Dividends may be paid in cash, in property, or in shares of
the corporation's capital stock, subject to the provisions of the articles of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 2. Fiscal Year. The fiscal year of the corporation shall be fixed
-----------
by resolution of the board of directors.
9
<PAGE>
Section 3. Seal. The corporate seal shall have inscribed thereon the name
----
of the corporation, the year of its organization and the words "Corporate Seal"
and "Georgia". The seal may be used by causing it or a facsimile thereof to be
impressed of affixed or reproduced or otherwise. In the event it is
inconvenient to use such a seal at any time, the signature of the corporation
followed by the word "Seal" enclosed in parentheses shall be deemed the seal of
the corporation.
Section 4. Annual Statements. Not later than four months after the close
-----------------
of each fiscal year, and in any case prior to the next annual meeting of
shareholders, the corporation shall prepare:
(1) A balance sheet showing in reasonable detail of the financial
condition of the corporation as of as of the close of its fiscal year, and
(2) A profit and loss statement showing the results of its operations
during its fiscal year.
Upon written request, the corporation promptly shall mail to any shareholder of
record a copy of the most recent such balance sheet and profit and loss
statement.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
-------------------------------------------------
AND AGENTS
----------
Section 1. Right of Indemnification and Standards of Conduct. Every
-------------------------------------------------
person (and the heirs and legal representatives of such person) who is or was a
director, officer, employee or agent of this corporation or any other
corporation, partnership, joint venture, trust or other enterprise of which he
served as such at the request of this corporation, may in accordance with
Section 2 hereof be indemnified for any expenses and other liabilities that may
be incurred by him in connection with or resulting from any threatened, pending
or completed action, suit or proceedings, whether civil, criminal,
administrative or investigative (provided, however, that in the case of actions,
suits or proceedings brought by or in the right of this corporation,
indemnification hereunder shall be limited solely to expenses arising
thereunder), or in connection with any appeal relating thereto, in which he may
become involved, as a party or prospective party or otherwise, by reason of his
being or having been a director, officer, employee or agent of this corporation
or such other corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action taken or not taken in such capacity or as
a member of any committee appointed by the board of directors of this
corporation to act for, in the interest of, or on behalf of this corporation,
whether or not he continues to be such at the time such expenses or other
liabilities shall have been incurred; provided such person acted in a manner he
reasonably believed to be in or not opposed to the best interests of this
corporation and, in the
10
<PAGE>
case of any action, suit or proceeding brought by or in the right of this
corporation, in good faith and, in addition, with respect to any criminal action
or proceeding, such person did not have reasonable cause to believe that his
conduct was unlawful. As used in this Article, the terms "expenses" and "other
liabilities" shall be limited to those expenses and other liabilities actually
and reasonably incurred, including, but not limited to attorneys' fees and
disbursement expenses and amounts of judgments, fines or penalties, and amounts
paid in compromise or settlement by a director, officer, employee or agent. The
termination of any claim, action , suit or proceeding, by judgment, order,
compromise, settlement (with or without court approval) or conviction or upon a
plea of guilty or of nolo contendere, or its equivalent, shall not create a
presumption that a director, officer, employee or agent did not meet the
standards of conduct set forth in this Section.
Section 2. Determination of Right of Indemnification. Every person (and
-----------------------------------------
the heirs and legal representatives of such person) referred to in Section 1
hereof who has been wholly successful, on the merits or otherwise, with respect
to any claim, action, suit or proceeding of the character described in Section 1
hereof shall be entitled to indemnification as of right without any further
action or approval by the board of directors. Except as provided in the
immediately preceding sentence, any indemnification under Section 1 next above
shall be made at the discretion of this corporation, but only if (a) the board
of directors, acting by majority vote of a quorum consisting of directors who
were not parties to such claim, action, suit or proceeding, present or voting,
shall find that the director, officer, employee or agent has met the standard of
conduct set forth in Section 1 hereof, or (b) if no such quorum of the board
exists, or if a quorum of disinterested directors so directs, independent legal
counsel selected by such disinterested directors or, if they so direct, by any
Judge of the United States District Court for the Northern District of Georgia,
Atlanta Division, at the request of either the corporation or the person seeking
indemnification, shall deliver to the corporation their written opinion that
such director, officer, employee or agent has met such standards, or (c) the
holders of a majority of stock then entitled to vote for the election of
directors shall determine by affirmative vote that such director, officer,
employee or agent has met such standards.
Notwithstanding the foregoing, no director, officer, employee or agent who
was or is a party to any action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of this or such other corporation,
partnership, joint venture, trust or other enterprise shall be indemnified in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to this corporation unless and except to the extent that
the Court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability and in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the Court shall deem proper.
Section 3. Advance of Expenses. Expenses incurred with respect to any
-------------------
claim, action, suit or proceeding of the character described in Section 1 of
this Article VII may be advanced by the corporation prior to the final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it shall ultimately be determined that he is
not entitled to indemnification under this Article.
11
<PAGE>
Section 4. Rights of Indemnification Cumulative. The rights of
------------------------------------
indemnification and advancement of expenses provided by or granted pursuant to
this Article VII shall be in addition to any rights to which any such director,
officer, employee or agent may otherwise be entitled under any by-law,
resolution or agreement otherwise permitted by applicable law, specifically or
in general terms approved by majority vote of shareholders, or otherwise, and
shall be in addition to the power of the corporation to purchase and maintain
insurance on behalf of any such director, officer, employee or agent against any
liability asserted against him and incurred by him in such capacity, or arising
out of his status as such, regardless of whether the corporation would have the
power to indemnify him against such liability under this Article or otherwise.
Section 5. Statement to Shareholder. If any expenses or other amounts are
------------------------
paid by way of indemnification, otherwise than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by the
corporation, the corporation shall, not later than the next annual meeting of
shareholders unless such meeting is held within three months from the date of
such payment, and, in any event, within 15 months from the date of such payment,
sent in accordance with the manner of disseminating notice of shareholders'
meetings to its shareholders of record at the time entitled to vote for the
election of directors a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
ARTICLE VIII
AMENDMENTS
----------
The board of directors shall have power to alter, amend or repeal the by-
laws or adopt new by-laws by majority vote of all the directors, but any by-laws
adopted by the board of directors may be altered, amended or repealed and new
by-laws adopted, by the shareholders by majority vote of all of the shares
having voting power.
12
<PAGE>
EXHIBIT 3.7
-----------
UNANIMOUS CONSENT OF BOARD OF DIRECTORS
OF
CONFERENCE SOURCE INTERNATIONAL, INC.
The undersigned, being all the Directors of Conference Source International,
Inc. (the "Corporation"), pursuant to Section 14-2-821 of the Georgia Business
Corporation Code, do hereby unanimously consent to the taking of, and do hereby
take, the following actions:
Resolved, that the Bylaws of the Corporation be, and they hereby are, amended in
the following particulars:
Section 2 of Article III of the Bylaws, concerning number, election and
term of directors, is hereby amended by deleting the first sentence thereof
and by substituting the following in lieu thereof:
"The number of directors which shall constitute the whole board shall be
three (3); provided, however, in the event that the number of shareholders
of the corporation is less than three (3), the number of directors which
shall constitute the whole board shall be equal to the number of
shareholders of the corporation."
The Amendment shall be effective as of January 1, 1996.
Dated as of the 29th day of October, 1997.
/s/ Judy B. Crawford
-------------------------------
Judy B. Crawford
/s/ Olen E. Crawford
-------------------------------
Olen E. Crawford
<PAGE>
EXHIBIT 3.8
-----------
CERTIFICATE OF INCORPORATION
OF
TELEPHONE BUSINESS MEETINGS, INC.
FIRST: The name of the corporation is Telephone Business Meetings, Inc.
SECOND: The registered office of the corporation in the State of Delaware
is located at 1310 King Street, Wilmington, New Castle County, Delaware, and its
registered agent is PJEKS Corporate Services, Inc.
THIRD: The purpose of the corporation and the nature and objects of the
business to be transacted, promoted, and carried on are primarily to establish,
operate and conduct a telephone conferencing business, and all necessary or
appropriate activities related thereto, including but not limited to, the
purchase, sale, or lease of real and personal property and to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is one thousand shares of common stock with a par value
of one cent each.
FIFTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provision of section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such a manner as the said Court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
SIXTH: The corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or
<PAGE>
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgment, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, upon a plea of nolo contendere or equivalent, shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect of any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SEVENTH: No director of the corporation shall have any personal liability
to the corporation or to any of its stockholders for monetary damages for breach
of fiduciary duty as a director; provided, however, that this provision
eliminating such personal liability of a director 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 (S)174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
EIGHTH: The name and address of the incorporator is Donna Rider, 26 The
Green, Dover, Delaware 19901.
NINTH: The Board of Directors shall have the power to make, add to, delete
from, alter, and repeal the By-Laws.
TENTH: The corporation reserves the right to amend, alter, change, or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law and all rights conferred on officers,
directors, and stockholders herein are granted subject to this reservation.
THE UNDERSIGNED INCORPORATOR, for the purposes of forming a corporation, in
pursuance of an act of the legislature of the State of Delaware entitled "An Act
Providing a General Corporation Law" (approved March 10, 1899) and any acts
amendatory thereof and supplemental thereto, does make and file this Certificate
of Incorporation, hereby declaring and certifying that the facts herein stated
are true and accordingly has hereunto set her hand and seal this 16th day of
December, 1981.
/s/ Donna C. Rider
------------------------------
INCORPORATOR
2
<PAGE>
EXHIBIT 3.9
-----------
REGULATIONS
OF
TELEPHONE BUSINESS MEETINGS, INC.
---------------------------------
(A Delaware Corporation)
The following constitutes the regulations and/or bylaws of Telephone Business
Meetings, Inc., and shall be effective upon such time and in such manner as set
forth below.
ARTICLE I - OFFICES
-------------------
SECTION 1. The principal office for the transaction of business of the
- ---------
Corporation shall be in the District of Columbia. The Board of Directors is
hereby granted full power and authority to fix the location of and to change
said principal office from one location to another either within or without the
District of Columbia.
ARTICLE II - SHAREHOLDERS
-------------------------
SECTION 1 - ANNUAL MEETINGS. A meeting of the shareholders shall be held
- ---------------------------
annually at the hour and day to be selected by the Board of Directors for the
purpose of electing directors and for the transaction of any other business that
may properly come before a meeting of shareholders.
SECTION 2 - SPECIAL MEETINGS. Special meetings of the shareholders may be
- ----------------------------
called by the President, the Secretary, the Board of Directors, of the holders
of not less than one-fifth of all the outstanding shares entitled to vote.
SECTION 3 - NOTICE OF ANNUAL OR SPECIAL MEETING OF SHAREHOLDERS. Written or
- ---------------------------------------------------------------
printed notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than ten or
more than fifty days before the meeting, either personally or by mail, by or at
the direction of the President, the Secretary or the officer calling the meeting
to each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the shareholder at his address as it appears on
the records of the Corporation.
SECTION 4 - PLACE OF MEETING. The directors may designate any place, either
- ----------------------------
within or without the District of Columbia unless otherwise prescribed by
statute, as the place of meeting for any annual meeting or for any special
meeting of shareholders. A waiver of notice signed by all shareholders entitled
to vote at a meeting may designate any place, either within or without the
District of Columbia unless otherwise prescribed by statute, as the place for
holding such meeting. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal office of the
Corporation.
<PAGE>
SECTION 5 - CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose
- --------------------------------------------------------------
of determining shareholders entitled to notice of, or to vote at, any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the directors of the Corporation may provide that the
share transfer books shall be closed for a stated period, but not to exceed in
any case fifty days. If the share transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the share transfer
books, the directors may fix in advance a date as the record date for any such
determination of shareholders entitled to notice of, or to vote at, a meeting of
shareholders or shareholders entitled to receive payment of a dividend, such
date in any case to be not more than fifty days in advance of such action and,
in case of a meeting of shareholders, not less than ten days prior to the date
on which the particular action requiring such determination of shareholders is
to be taken. If the transfer books are not closed and no such date is fixed by
the directors, the date on which notice of the meeting is mailed or the date on
which the resolution of the directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
SECTION 6 - VOTING LISTS. The officer or agent having charge of the share
- ------------------------
transfer books for shares of the Corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at that meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of the shareholder and the number of shares
held by each, which shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share transfer
book shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at the meeting of shareholders.
SECTION 7 - QUORUM. A majority of the outstanding shares of the Corporation
- ------------------
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than said number of the outstanding
shares are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 8 - PROXIES. At all meetings of shareholders, a shareholder may vote by
- -------------------
proxy executed in writing by the pertinent absent shareholder, or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the opening time of the meeting.
2
<PAGE>
SECTION 9 - VOTING. Each shareholder entitled to vote in accordance with the
- ------------------
terms and provisions of the Certificate of Incorporation and these Regulations
shall be entitled to one vote, in person or by proxy, for each share entitled to
vote held by such shareholder. Upon the demand of any shareholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote expect as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
SECTION 10 - INFORMAL ACTION BY SHAREHOLDERS. Unless otherwise provided by law,
- --------------------------------------------
any action required to be taken at meeting of the shareholders, or any other
action which may be taken at a meeting of the shareholders, may be taken without
a meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
SECTION 1 - GENERAL POWERS. The business and affairs of the Corporation shall
- --------------------------
be managed by its Board of Directors. The directors shall in all cases act as a
board, and they may adopt such rules and regulations for the conduct of their
meetings and the management of the Corporation as they may deem proper, but not
inconsistent with these Regulations and the laws of the State of Delaware or
other relevant jurisdiction.
SECTION 2 - NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the
- ---------------------------------------------
Corporation shall be two (2). The number of directors of the Corporation may be
increased upon the unanimous approval of all directors of the Corporation. Each
director shall hold office until the next annual meeting of shareholders and
until his successor shall have been duly elected and qualified.
SECTION 3 - REGULAR MEETINGS. A regular meeting of the directors shall be held
- ----------------------------
without notice immediately after, and at the same place as, the annual meeting
of shareholders. The directors may provide, by resolution, the time and place
for the holding of additional regular meetings without prior notice than that
contained in the resolution establishing such regular meetings.
SECTION 4 - SPECIAL MEETINGS. Special meetings of the directors may be called
- ----------------------------
by or at the request of the President or any director. The person or persons
authorized to call special meetings of the directors may fix the place for
holding any special meeting of the directors called by them.
SECTION 5 - NOTICE. Notice of any special meeting shall be given at least ten
- ------------------
days prior thereto by telephone or by written notice delivered personally or by
telegram or mailed to each director, at his business address. If by telephone,
such notice shall be deemed to be delivered when personally communicated. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. The attendance of a director at a meeting
shall constitute a waiver of
3
<PAGE>
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6 - QUORUM. At any meeting of the directors a majority of the directors
- ------------------
shall constitute a quorum for the transaction of business, but if less than said
number is present at a meeting of majority of the directors present may adjourn
the meeting from time to time without further notice.
SECTION 7 - MANNER OF ACTION. The act of the majority of the directors present
- ----------------------------
at a meeting at which a quorum is present shall be the act of the directors.
SECTION 8 - NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Any directorship to be
- -----------------------------------------------------
filled by reason of an increase in the number of directors may be filled by
election at an annual meeting or at a special meeting of shareholders entitled
to vote called for that purpose. Any vacancy occurring in the Board of
Directors for any cause other than by reason of an increase in the number of
directors may be filled by affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office.
SECTION 9 - REMOVAL OF DIRECTORS. Any or all of the directors may be removed
- --------------------------------
for cause by vote of the shareholders or by action of the Board. Directors may
be removed without cause only by vote of the shareholders.
SECTION 10 - RESIGNATION. A director may resign at any time by giving written
- ------------------------
notice to the Board, the President or the Secretary of the Corporation. Unless
otherwise specified in the notice, the resignation shall take effect upon
receipt thereof by the Board or such officer, and the acceptance of the
resignation shall not be necessary to make it effective.
SECTION 11 - COMPENSATION. No compensation shall be paid to directors, as such,
- -------------------------
for their services, but by resolution of the Board a fixed sum and expenses for
actual attendance at each regular or special meeting of the Board may be
authorized. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 12 - PRESUMPTION OF ASSENT. A director of the Corporation who is
- ----------------------------------
present at a meeting of the directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as a secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
SECTION 13 - EXECUTIVE AND OTHER COMMITTEES. The Board, by resolution, may
- -------------------------------------------
designate from among its members an executive committee and other committees,
each consisting of the directors wishing to serve thereon.
4
<PAGE>
SECTION 14 - INFORMAL ACTION BY DIRECTORS. Unless otherwise provided by law,
- -----------------------------------------
any action required to be taken at a meeting of the directors, or any other
action which may be taken at a meeting of the directors, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof.
ARTICLE IV - OFFICERS
---------------------
SECTION 1 - NUMBER. The officers of the Corporation shall be a President, a
- ------------------
Vice-President, a Secretary and a Treasurer, each of whom shall be elected by
the directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the directors.
SECTION 2 - ELECTION AND TERM OF OFFICE. The officers of the Corporation shall
- ---------------------------------------
be elected annually at the first meeting of the directors held after each annual
meeting of the shareholders. Each officer shall hold office until his successor
shall be chosen and duly qualified, or until such officer shall resign or shall
have been removed in the manner hereinafter provided.
SECTION 3 - REMOVAL. Any officer of agent elected or appointed by the directors
- -------------------
may be removed by the directors whenever in their judgment the best interests of
the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
SECTION 4 - VACANCIES. A vacancy in any office because of death, resignation,
- ---------------------
removal, disqualification or otherwise, may be filled by the directors for the
unexpired portion of the term.
SECTION 5 - PRESIDENT. The President shall be the principal executive officer
- ---------------------
of the Corporation and, subject to the control of the directors, shall supervise
and control all of the business and affairs of the Corporation. The President
shall, when present, preside at all meetings of the shareholders and of the
directors. The President may sign, with the Secretary of any other proper
officer of the Corporation thereunto authorized by the directors, certificates
for shares of the Corporation, deeds, mortgages, bonds, contracts or other
documents or instruments where the directors have authorized such documents to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the directors or by these Regulations to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties incident to the
office of the President and such other duties as may be prescribed by the
directors from time to time.
SECTION 6 - VICE-PRESIDENT. In the absence of the President or in event of
- --------------------------
his/her death, inability or refusal to act, the Vice-President shall perform the
duties of the President, and when so acting shall have all of the powers of, and
be subject to, all the restrictions upon the President. The Vice-President
shall perform such other duties as from time to time may be assigned to him/her
by the President or by the directors. The President in his/her discretion may
choose to act as the Vice-President and thereby serve in dual offices.
5
<PAGE>
SECTION 7 - SECRETARY. The Secretary shall keep the minutes of the shareholders
- ---------------------
and of the directors' meetings in one or more books provided for that purpose,
see that all notices are duly given in accordance with the provisions of these
Regulations or as required, be custodian of the corporate records and of the
seal of the Corporation and keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder, have
general charge of the share transfer books of the Corporation and in general
perform all duties incident to the office of the Secretary and such other duties
as from time to time may be assigned to him/her by the President or by the
directors.
SECTION 8 - TREASURER. If required by the directors, the Treasurer shall give a
- ---------------------
bond for the faithful discharge of his/her duties in such sum and with such
surety or sureties as the directors shall determine. He/she shall have charge
and custody of and be responsible for all funds and securities of the
Corporation; receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or other depositories as shall
be selected in accordance with these Regulations and in general perform all of
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him/her by the President or by the directors.
SECTION 9 - SALARIES. The directors from time to time may elect to have the
- --------------------
Corporation pay salaries to the officers in such amounts as the directors may
determine, and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the Corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------------------
SECTION 1 - CONTRACTS. The directors may authorize any officer or officers,
- ---------------------
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 2 - LOANS. No loans shall be contracted on behalf of the Corporation
- -----------------
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the directors. Such authority may be general or confined to
specific instances.
SECTION 3 - CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
- -------------------------------
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolution of the directors.
SECTION 4 - DEPOSITS. All funds of the Corporation not otherwise employed shall
- --------------------
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the directors may select.
6
<PAGE>
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
-------------------------------------------------------
SECTION 1 - CERTIFICATES FOR SHARES. Certificates representing shares of the
- -----------------------------------
Corporation shall be in such form as shall be determined by the directors. Such
certificates shall be signed by the President and by the Secretary or by such
other officers authorized by law and by the directors. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the shareholders, number of shares and date of issue shall be entered
on the share transfer books of the Corporation. All certificates surrendered to
the Corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefore upon such terms and indemnity to
the Corporation as the directors may prescribe.
SECTION 2 - TRANSFERS OF SHARES.
- -------------------------------
(a) Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be entered on the transfer
book of the Corporation which shall be kept at its principal office.
(b) The Corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not is shall have express or other notices
thereof, except as expressly provided by the laws of the District of Columbia.
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the Corporation shall begin on the first day of January of
each year.
ARTICLE VIII - DIVIDENDS
------------------------
The directors may from time to time declare, and the Corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
-----------------
The directors shall provide a corporate seal which shall be circular in form and
shall have inscribed thereon the name of the Corporation, the state of
incorporation, and the words "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
----------------------------
Unless otherwise provided by law, whenever any notice is required to be given to
any shareholder or director of the Corporation under the provisions of these
Regulations or under the provisions of the Certificate of Incorporation, a
waiver thereof in writing, signed by the person or
7
<PAGE>
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI - AMENDMENTS
-----------------------
These Regulations may be altered, amended or repealed and new regulations may be
adopted by a vote of the shareholders representing a majority of all the shares
issued and outstanding, at any annual shareholders' meeting without prior notice
or at any special shareholders' meeting but only if the proposed amendment has
been set out in the notice of such meeting, or by a majority vote of the
directors at any duly called meeting, but only if such action does not alter,
amend or repeal an alteration, amendment or repeal previously taken by the
shareholders.
ARTICLE XII - AGREEMENTS OF THE SHAREHOLDERS
--------------------------------------------
From time to time, the shareholders of the corporation may establish agreements
between them for the increase of capital to the Corporation. Such agreements
shall be binding on those shareholders party to such agreements as between
themselves, but irrespective of the fact that the beneficiary of such agreements
may be the Corporation, no right of enforceability shall exist in any third
parties to such agreements, and the Corporation will undertake no action against
a shareholder for failure to abide by the terms thereunder.
8
<PAGE>
EXHIBIT 3.10
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
Incorporators
NAME POST OFFICE ADDRESS
----
Include given name in full in case of natural persons; in case of a corporation,
give state of incorporation.
Richard G. Asoian 12 Essex Street
Andover, MA 01810
The above-named incorporator(s) do hereby associate (themselves) with the
intention of forming a corporation under the provisions of General Laws, Chapter
156B and hereby state(s):
1. The name by which the corporation shall be known is:
TELECONVERSANT, LTD.
2. The purpose for which the corporation is formed is as follows:
See Continuation Sheet 2A attached hereto.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left hand margin of a least 1 inch for binding. Additions to
more than one article may be continued on a single sheet so long as each article
requiring each such addition is clearly indicated.
<PAGE>
3. The total number of shares and the par value, if any, of each class of
stock within the corporation is authorized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
CLASS OF STOCK
- --------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES PAR AMOUNT
VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common 15,000
- --------------------------------------------------------------------------------
</TABLE>
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established:
N/A
*5. The restrictions, if any, imposed by the Articles of Organization upon
the transfer of shares of stock of any class are as follows:
See Continuation 5A attached hereto.
*6. Other lawful provisions, if any, for the conduct and regulation of
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:
See Continuation sheet 6A and 6B attached hereto.
* If there are no provisions state "None".
<PAGE>
Continuation Sheet 2A
Purpose Clause
--------------
To provide interactive telephone services for private individuals,
businesses, organizations of every type and description, on various telephone
lines, dealing with varied subjects. To provide communication service and
information to businesses, individuals, industries, commercial institutions,
both domestically and internationally.
To acquire, hold, dispose of, buy, sell, underwrite, handle on commission
and otherwise deal in stock, shares, bonds, notes and obligations of persons and
all forms of public and municipal securities of this or any other country, or
any right or interest therein, and while owner thereof, to exercise all rights,
powers and privileges of ownership in the same manner and to the same extent
that an individual might.
To acquire, hold, use, dispose of buildings, plants, factories, mills,
machinery, works and all other real and personal property, tangible or
intangible, of whatever kind and wherever situated, or any right or interest
therein for the purposes of the foregoing businesses; to acquire, hold, use or
dispose of patent rights and privileges, inventions, formulae, trademarks and
names, secret processes or any right or interest therein; to acquire, hold, use
or dispose of as a going business or otherwise, all or any part of the assets of
any corporation, joint-stock company, trust association, firm or person, and in
such cases to assume all or any part of its or his liabilities.
To engage in, transact, and carry on any or all of the above business or
any other business or activity necessary or convenient for or incidental to any
or all of the foregoing or which can advantageously be conducted in connection
therewith, and to engage in, transact and carry on any business or activity
necessary or convenient for or incidental to any or all of the foregoing or
which can advantageously be conducted in connection therewith, and to engage
in, transact and carry on any business or activity which a business corporation
organized under the provisions of Chapter 156B of the General Laws of
Massachusetts may lawfully engage in, transact or conduct.
<PAGE>
CONTINUATION SHEET 6A
PROVISIONS AS TO INTERCOMPANY DEALINGS
--------------------------------------
The Corporation may enter into contracts or transact business with one or
more of its directors, officers, or stockholders or with any corporation,
organization or other concern in which any one or more of its directors,
officers or stockholders are directors, officers, shareholders or otherwise
interested and other contracts or transactions in which any one or more of its
directors, officers, or stockholders is in any way interested; and, in the
absence of fraud, no such contract or transaction shall be invalidated or in any
wise affected by the fact that such directors, officers or stockholders of the
Corporation have or may have interests which are or might be adverse to the
interest of the Corporation even though the vote or action of directors,
officers or stockholders having such adverse interests may have been necessary
to obligate the corporation upon such contract or transaction. At any meeting
of the Board of Directors of the Corporation (or any duly authorized committee
thereof) any such director may vote or act thereat with like force and effect as
if he had no such interest, provided, in such case the nature of such interest
(though not necessarily the extent or details thereof), shall be disclosed or
shall have been known to the directors or a majority thereof. A general notice
that a director or officer is interested in any corporation or other concern of
any kind referred to shall be sufficient disclosure as to such director or
officer with respect to all contracts and transactions with such corporation or
other concern. No director shall be disqualified from holding office as
director or officer of the corporation by reason of any such adverse interests,
unless the interest is detrimental to the Corporation. In the absence of fraud,
no director, officer or stockholder having such adverse interest shall be liable
to the Corporation or to any stockholder or creditor thereof or to any other
person for any loss incurred by it under or by reason of such contract or
transaction nor shall any such director, officer or stockholder be accountable
for any gains or profits realized thereon.
The Corporation may be a partner in any business enterprise which it would
have the power to conduct by itself.
<PAGE>
7. By-laws of the corporation have been duly adopted and the initial
directors, president, treasurer and clerk, whose names are set out below,
have been duly elected.
8. The effective date of organization of the corporation shall be the date of
filing with the Secretary of the Commonwealth or if later date is desired,
specify date, (not more than 30 days after the date of filing.)
9. The following information shall not for any purpose be treated as a
permanent part of the Articles of Organization or of the corporation.
a. The post office address of the initial principal office of the
----------------------- ------------------------
corporation of Massachusetts is:
P.O. Box 1016, Marblehead, Massachusetts, 01945
b. The name, residence, and post office address of each of the initial
directors and following officers of the corporation are as follows:
<TABLE>
<CAPTION>
NAME RESIDENCE POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Courtney P. Snyder 6 Lindsey Street P.O. Box 1016
Marblehead, MA 01945 Marblehead, MA 01945
Treasurer: Courtney P. Snyder 6 Lindsey Street P.O. Box 1016
Marblehead, MA 01945 Marblehead, MA 01945
Clerk: Richard G. Asoian 9 Bateson Street P.O. Box 1016
Andover, MA 01810 Marblehead, MA 01945
Directors: Courtney P. Snyder 6 Lindsey Street P.O. Box 1016
Marblehead, MA 01945 Marblehead, MA 01945
Cathy A. Snyder 6 Lindsey Street P.O. Box 1016
Marblehead, MA 01945 Marblehead, MA 01945
Thomas Carroll Washington Street P.O. Box 1016
Marblehead, MA 01945 Marblehead, MA 01945
</TABLE>
c. The date initially adopted on which the corporation's fiscal year ends
is:
December 31
d. The date initially fixed in the by-laws for the annual meeting of
stockholders of the corporation is:
2nd Wednesday in February
e. The name and business address of the resident agent, if any, of the
corporation is:
/S/ RICHARD G. ASOIAN
-----------------------------------------------------------------------
-----------------------------------------------------------------------
IN WITNESS WHEREOF and under the penalties of perjury the INCORPORATOR(S)
sign(s) these Articles of Organization the 25 day of March, 1987.
--------
The signature of each incorporator which is not a natural person must be an
individual who shall show the capacity in which he acts and by signing shall
represent under the penalties of perjury that he is duly authorized on its
behalf to sign these Articles of Organization.
<PAGE>
EXHIBIT 3.11
------------
FEDERAL IDENTIFICATION
NO. 04-042956637
---------------------
/s/ JM The Commonwealth of Massachusetts
- ----------- William Francis Galvin
Examiner Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
- ----------- ARTICLES OF AMENDMENT
Name (General Laws, Chapter 156B, Section 72)
Approved
We, COURTNEY P. SNYDER , *President
--------------------------------------------------------
and COURTNEY P. SNYDER , *Clerk
----------------------------------------------------------
of TELECONVERSANT, LTD.
--------------------------------------------------------------------
(Exact name of corporation)
located at: 1 Kendall Square, Building 600, Cambridge, MA 02139
-------------------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles
numbered:
Article I
--------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5, and/or 6 being amended)
of the Articles of Organization were duly adopted by written consent
dated as of November 29, 1996, by vote of:
1,312 shares of Common Stock of 1,312 shares then outstanding.
----- ------------ -----
(type, class & series, if any)
shares of Common Stock of shares then outstanding.
----- ------------ -----
C [_] (type, class & series, if any)
P [_]
M [_] shares of Common Stock of shares then outstanding.
R.A. [_] ----- ------------ -----
(type, class & series, if any)
/1/ being at least a majority of each type, class or series
outstanding and entitled to vote thereon:
To change the name of the Corporation from "Teleconversant, Ltd." To
"Kendall Square Teleconferencing, Inc."
*Delete the inapplicable words. **Delete the inapplicable clause.
/1/ For amendments adopted pursuant to Chapter 156B, Section 70.
/2/ For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form
is insufficient, additions shall be set forth on one side only of
separate 8 1/2 x 11 sheets of paper with a left margin of at least 1
4 inch. Additions to more than one article may be made on a single
- ----------- sheet so long as each article requiring each addition is clearly
P.C. indicated.
3/27/87
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: .
-----------------------
SIGNED UNDER THE PENALTIES OF PERJURY, this 29th day of November, 1996.
/s/ Courtney P. Snyder , *President
- -----------------------------------
Courtney P. Snyder
/s/ Courtney P. Snyder , *Clerk
- -----------------------------------
Courtney P. Snyder
*Delete the inapplicable words.
<PAGE>
EXHIBIT 3.12
------------
FEDERAL IDENTIFICATION
NO. 04-2956637
--------------
/s/ BWG The Commonwealth of Massachusetts
- ----------- William Francis Galvin
Examiner Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
/s/ LB N/A
- ----------- ARTICLES OF AMENDMENT
Name (General Laws, Chapter 156B, Section 72)
Approved
I, Courtney P. Snyder, President and Clerk
-------------------
of Kendall Square Teleconferencing, Inc.
-------------------------------------
(Exact name of corporation)
located at: 1 Kendall Square, Cambridge, MA 02139
--------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article V
---------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5, and/or 6 being amended)
of the Articles of Organization were duly adopted by written consent
dated as of October 30, 1997, by vote of:
<TABLE>
<C> <S> <C>
1,312 shares of Common Stock of 1,312 shares then outstanding.
----- ------------------------------ -----
(type, class & series, if any)
shares of of shares outstanding, and
----- ------------------------------ -----
(type, class & series, if any)
shares of of shares outstanding.
----- ------------------------------ -----
(type, class & series, if any)
</TABLE>
C [_]
P [_] **being at least a majority of each type, class or series outstanding
M [_] and entitled to vote thereon:
R.A. [_]
VOTED: To amend Article 5 of the Corporation's Articles of
Organization by deleting in their entirety the restrictions on
transfer of the issued and outstanding stock of the
Corporation and to authorize the filing of an amendment to the
Corporation's Articles of Organization to reflect the deletion
of said restrictions on transfer.
*Delete the inapplicable words. **Delete the inapplicable clause.
/1/ For amendments adopted pursuant to Chapter 156B, Section 70.
/2/ For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of
separate 8 1/2 x 11 sheets of paper with a left margin of at least 1
4 inch. Additions to more than one article may be made on a single
- ---------- sheet so long as each article requiring each addition is clearly
P.C. indicated.
3/27/87
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PART VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PART VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: _____________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 9 day of December, 1997.
/s/ Courtney P. Snyder , *President
- -----------------------------------
Courtney P. Snyder
/s/ Courtney P. Snyder , *Clerk
- -----------------------------------
Courtney P. Snyder
*Delete the inapplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
============================================================
I hereby approve the within Articles of Amendment, and the
filing fee in the amount of $100.00 having been paid, said
article is deemed to have been filed with me this 16th day
of December, 1997.
Effective date: ____________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Jeffrey E. Swaim, Esq.
Mirick, O'Connell, DeMallie & Lougee, LLP
1700 Bank of Boston Tower
Worcester, MA 01608
<PAGE>
EXHIBIT 3.13
------------
BY-LAWS
OF
TELECONVERSANT, LTD.
ARTICLE I - OFFICES
---------------------
The Principal office of the corporation in the State of Massachusetts shall
be located at 6 Lindsey Street, Marblehead, Massachusetts. The corporation may
have such other offices, either within or without the State of Incorporation as
the Board of Directors may designate or as the business of the corporation may
from time to time require.
ARTICLE II - STOCKHOLDERS
---------------------------
1. ANNUAL MEETINGS.
---------------
The annual meeting of the Stockholders shall be held on the 2nd Wednesday
of February in each year, beginning with the year 1988 at the hour 9:00 o'clock,
for the purpose of electing Directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2. SPECIAL MEETING.
---------------
Special meetings of the Stockholders, for any purpose or purposes, unless
otherwise prescribed by the statute, may be called by the President or by a
majority of the Board of Directors, acting by vote or by written instrument or
instruments, and shall be called by the President at the request of the holders
of not less than 25% of all the outstanding shares of the corporation entitled
to vote at the meeting.
3. PLACE OF MEETING.
----------------
The Directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the Directors. A Waiver of Notice
signed by all Stockholders entitled to vote at a meeting may designate any
place, either within or without the State unless otherwise prescribed by
statute, as the place of holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
<PAGE>
4. NOTICE OF MEETING.
-----------------
A written notice of the place, date and hour of all meetings of the
Stockholders stating the purposes of the meeting shall be given at least three
(3) days before the meeting to each Stockholder entitled to vote thereat and to
each Stockholder who is otherwise entitled by law or by the Articles of
Organization to such notice, by leaving such notice with him or at his residence
or usual place of business, or by mailing it, certified mail, return receipt
requested, addressed to such Stockholder at his address as it appears on the
records of the corporation. Such mailed notice shall be deemed to be given on
the date any such Stockholder receives such notice.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
--------------------------------------------------
For the purpose of determining Stockholders entitled to notice of or to
vote at any meeting of Stockholders or any adjournment thereof, or Stockholders
entitled to receive payment of any dividend, or in order to make a determination
of Stockholders for any other proper purpose, the Directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, ten (10) days. If the stock transfer books
shall be closed for the purpose of determining Stockholders entitled to notice
of or to vote at a meeting of Stockholders, such books shall be closed for at
least five (5) days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Directors may fix in advance a date as the record date
for any such determination of Stockholders, date in any case to be not more than
seven (7) days prior to the date on which the particular action requiring such
determination of Stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of Stockholders
entitled to notice of or to vote at a meeting of Stockholders, or Stockholders
entitled to receive payment of a dividend, the date on which notice of meeting
is mailed or the date on which the resolution of the Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of Stockholders. When a determination of Stockholders entitled to
vote at any meeting of Stockholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof.
6. VOTING LISTS.
------------
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least seven (7) days before each meeting of
Stockholders, a complete list of the Stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
seven (7) days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to inspection by any Stockholder
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any Stockholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
Stockholders entitled to examine such list or transfer books or to vote at the
meeting of Stockholders.
2
<PAGE>
7. QUORUM.
------
At any meeting of Stockholders fifty (50%) percent of the outstanding
shares of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders. If less than said
number of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. The Stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Stockholder to leave less than a
quorum.
8. PROXIES.
-------
At all meeting of Stockholders, a Stockholder may vote by proxy executed in
writing by the Stockholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the Clerk of the corporation before or at the time of
the meeting.
9. VOTING.
------
Each Stockholder entitled to vote in accordance with the terms and
provisions of the Articles of Organization and these by-laws shall be entitled
to one vote, in person or by proxy, for each share of stock entitled to vote
held by such Stockholders. Upon the demand of any Stockholder, the vote for
Directors and upon any question before the meeting shall be by ballot. All
elections for Directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the Articles
of Organization or the laws of this State.
10. ORDER OF BUSINESS.
-----------------
The order of business at all meetings of the Stockholders, shall be as
follows:
1. Roll Call;
2. Proof of Notice of meeting or Waiver of Notice;
3. Reading of minutes of preceding meeting;
4. Reports of Officers;
5. Reports of Committees;
6. Election of Directors;
3
<PAGE>
7. Unfinished Business;
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
-------------------------------
Unless otherwise provided by law, any action required to be taken at a
meeting of the Stockholders, or any other action which may be taken at a meeting
of the Stockholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the Stockholders
entitled to vote with respect to the subject matter hereof.
ARTICLE III - BOARD OF DIRECTORS
----------------------------------
1. GENERAL POWERS.
--------------
The business and affairs of the corporation shall be managed by its Board
of Directors. The Directors shall in all cases act as a Board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this States.
2. NUMBER, TENURE AND QUALIFICATIONS.
---------------------------------
The Board of Directors shall consist of not fewer than three (3) Directors,
except that whenever there shall be only two (2) Stockholders, the number of
Directors shall be not fewer than two (2), and whenever there shall be only one
(1) Stockholder, the number of Directors shall be not fewer than one (1). The
number of Directors shall be as determined from time to time by the Stockholders
and may be enlarged by vote of a majority of the Directors then in office. The
Directors shall be chosen at the annual meeting of the Stockholders by such
Stockholders as have the right to vote thereon, and each shall hold office until
the next annual election of Directors and until his successor is chosen and
qualified or until he sooner dies, resigns, is removed or becomes disqualified.
No Director need be a Stockholder.
3. REGULAR MEETINGS.
----------------
A regular meeting of the Directors, shall be held without other notice than
this by-law immediately after, and at the same place as, the annual meeting of
Stockholders. The Directors may provide by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4
<PAGE>
4. SPECIAL MEETINGS.
----------------
Special meetings of the Directors may be called by or at the request of the
President or any one Director. The person or persons authorized to call special
meetings of the Directors may fix the place for holding any special meeting of
the Directors called by them.
5. NOTICE.
------
Notice of any special meeting shall be given at least three (3) days
previously thereto by written notice delivered personally, or by telegram or
mailed by certified mail, return receipt requested, to each Director at this
business address. If notice be given by telegram, such notice shall be deemed
to be delivered when the telegram is delivered to the telegraph company. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
6. QUORUM.
------
At any meeting of the Directors, a quorum for the consideration of any
question shall consist of a majority of the Directors then in office. Whether
or not a quorum is present, any meeting may be adjourned from time to time by a
majority of the votes properly cast upon the question, and the meeting may be
held and adjourned without further notice. When a quorum is present at any
meeting, the votes of a majority of the Directors present shall be requisite and
sufficient for election to any office and shall decide any question brought
before such meeting, expect in any case where a different vote is required by
law, by the Articles of Organization or by these by-laws.
7. ACTION BY CONSENT.
-----------------
Any action required or permitted to be taken at any meeting of the
Directors may be taken without a meeting if all of the Directors consent to the
action in writing and written consents are filed with the records of the
meetings of the Directors. Such consent shall be treated for all purposes as a
vote of the Directors at a meeting.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
-----------------------------------------
Newly created directorships resulting from an increase in the number of
Directors and vacancies occurring in the Board for any reason except the removal
of Directors without cause may be filled by a vote of a majority of the
Directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of Directors without cause shall be filled by
vote of the Stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
5
<PAGE>
9. REMOVAL OF DIRECTORS.
--------------------
Any or all of the Directors may be removed for cause by vote of the
Stockholders or by action of the Board. Directors may be removed without cause
only by vote of the Stockholders.
10. RESIGNATION.
-----------
A Director may resign at any time by giving written notice to the Board,
the President or the Clerk of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
11. COMPENSATION.
------------
No compensation shall be paid to Directors, as such, for their services,
but by resolution of the Board a fixed sum and expenses for actual attendance at
each regular or special meeting of the Board may be authorized. Nothing herein
contained shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation therefor.
12. PRESUMPTION OF ASSENT.
---------------------
A Director of the corporation who is present at a meeting of the Directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the Clerk of the meeting before the adjournment thereof.
13. EXECUTIVE AND OTHER COMMITTEES.
------------------------------
The Board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of one or more Directors. Each
such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
-----------------------
1. NUMBER.
------
The Officers of the corporation shall be a President, Vice President (if
elected by the Board of Directors), a Clerk and a Treasurer, each of whom shall
be elected by the Directors. Such other Officers and Assistant Officers as may
be deemed necessary may be elected or appointed by the Directors.
6
<PAGE>
2. ELECTION AND TERM OF OFFICE.
---------------------------
The Officers of the corporation to be elected by the Directors shall be
elected annually at the first meeting of the Directors held after each annual
meeting of the Stockholders. Each Officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
-------
Any officer or agent elected or appointed by the Directors may be removed
by the Directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES.
---------
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Directors for the unexpired
portion of the terms.
5. PRESIDENT.
---------
The President shall be the principal executive officer of the corporation
and, subject to the control of the Directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the Stockholders and of the Directors. He
may sign, with the Treasurer or any other proper officer of the corporation
thereunto authorized by the Directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the Directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Directors from time to time.
6. CLERK.
-----
The Clerk shall keep the minutes of the Stockholders' and of the Directors'
meetings in one or more books provided for that purpose, see that all notices
are duly given in accordance with the provisions of these by-laws or as
required, be the custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each Stockholder
which shall be furnished to the Clerk by each Stockholder, have general charge
of the stock transfer books of the corporation and in general perform all duties
incident to the office of Clerk
7
<PAGE>
and such other duties as from time to time may be assigned to him by the
President or by the Directors.
7. TREASURER.
---------
If required by the Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the President or by the Directors.
In the absence of the President or in the event of his death, inability or
refusal to act, the Treasurer, if any, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. The Treasurer shall perform such other
duties as from time to time may be assigned to him by the President or by the
Directors.
8. SALARIES.
--------
The salaries of the Officers shall be fixed from time to time by the
Directors and no Officer shall be prevented from receiving such salary by reason
of the fact that he is also a Director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
---------------------------------------------------
1. CONTRACTS.
---------
The Directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
-----
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the Directors. Such authority may be general or confined to specific instances.
8
<PAGE>
3. CHECKS, DRAFTS, ETC.
--------------------
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the Directors.
4. DEPOSITS.
--------
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
to other depositories as the Directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
---------------------------------------------------------
1. CERTIFICATES FOR SHARES.
-----------------------
Certificates representing shares of the corporation shall be in such form
as shall be determined by the Directors. Such certificates shall be signed by
the President and by the Treasurer or by such other officers authorized by law
and by the Directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the Stockholders, the
number of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the Directors may prescribe.
2. TRANSFERS OF SHARES.
-------------------
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer books of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, interest in such share on
the part of any other person whether or not is shall have express or other
notice thereof, except as expressly provided by laws of this state.
9
<PAGE>
ARTICLE VII - FISCAL YEAR
---------------------------
The fiscal year of the corporation shall end on the last day of December in
each year.
ARTICLE VIII - DIVIDENDS
--------------------------
The Directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
-------------------
The Directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal."
ARTICLE X - WAIVER OF NOTICE
------------------------------
Unless otherwise provided by law, whenever any notice is required to be
given to any Stockholder or Director of the corporation under the provisions of
the Articles of Incorporation, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI - AMENDMENTS
-------------------------
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the Stockholders representing a majority of all the shares
issued and outstanding, at any annual Stockholders' meeting or at any special
Stockholders' meeting when the proposed amendment has been set out in the notice
of such meeting.
10
<PAGE>
TELECONVERSANT, LTD.
Consent of Incorporators
------------------------
Date: March 27, 1987
The undersigned, being the sole incorporator of TELECONVERSANT, LTD.,
hereby consent to the adoption of the following actions:
VOTED: To adopt as the By-Laws of this Corporation, the By-Laws attached
- ----- hereto.
VOTED: To fix the number of initial Directors of this Corporation at three (3),
- ----- and to elect as Directors, President, Treasurer and Clerk, the
following, each to serve until his successor been duly elected and
qualified:
Directors: Courtney P. Snyder, Cathy A. Snyder and Thomas Carroll
President: Courtney P. Snyder
Treasurer: Courtney P. Snyder
Clerk: Richard G. Asoian
VOTED: That the Articles of Organization for this Corporation, in the form
- ----- executed by the undersigned, be filed with the office of the Secretary
of State of Massachusetts.
IN WITNESS WHEREOF, this Consent has been executed and filed with the
records of the Corporation, and shall be treated for all purposes as votes taken
at a Meeting.
/s/ RICHARD G. ASOIAN
----------------------------
11
<PAGE>
EXHIBIT 3.14
------------
CERTIFICATE OF INCORPORATION
OF
AMCS ACQUISITION CORPORATION
ARTICLE I
---------
The name of this corporation is AMCS Acquisition Corporation (the
"Corporation").
ARTICLE II
----------
The address of the registered office of the Corporation in the State
of Delaware is 222 Delaware Avenue, P. O. Box 2306, Wilmington, County of New
Castle, Delaware 19899, and the name of its registered agent at such address is
Delaware Corporate Services Inc.
ARTICLE III
-----------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
ARTICLE IV
----------
The total number of shares of stock which the Corporation shall have
authority to issue is three thousand (3,000). All such shares are to be common
stock, par value of one cent ($0.01) per share, and are to be of one class.
ARTICLE V
---------
The name and mailing address of the incorporator are Delaware
Corporate Services, Inc., 222 Delaware Avenue, P. O. Box 2306, Wilmington,
Delaware 19899.
ARTICLE VI
----------
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of
<PAGE>
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
ARTICLE VII
-----------
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law as the
same exists or may hereafter be amended. Any repeal or modification of the
foregoing sentence shall not adversely affect any right or protection of a
director of the Corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
ARTICLE VIII
------------
The original by-laws of the Corporation shall be adopted by the
incorporator. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered to adopt, amend and repeal the by-laws of the
Corporation, subject to the power of the stockholders of the Corporation to
amend or repeal any by-law made by the Board of Directors.
ARTICLE IX
----------
Unless and except to the extent that the by-laws of the Corporation
shall so require, the election of the directors of the Corporation need not be
by written ballot.
ARTICLE X
---------
The Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
Article X.
<PAGE>
THE UNDERSIGNED, being the incorporator hereinabove named, makes and
files this Certificate of Incorporation, and does hereby declare and certify
that said instrument is its act and deed and that the facts stated herein are
true, and accordingly has executed this Certificate of Incorporation this 23/rd/
day of December, 1996.
Delaware Corporate Services, Inc.
Incorporator
By: /s/
--------------------------------
Name: Jeanette Grodzicki
Title: Vice President
<PAGE>
EXHIBIT 3.15
------------
CERTIFICATE OF MERGER
OF
AMERICAN CONFERENCING COMPANY, INC.
(A NEW JERSEY CORPORATION)
INTO
AMCS ACQUISITION CORPORATION
----------------------------
(A DELAWARE CORPORATION)
- --------------------------------------------------------------------------------
Pursuant to Section 252 of the
General Corporation of Law of the State of Delaware
- --------------------------------------------------------------------------------
AMCS Acquisition Corporation, a Delaware corporation (the "Corporation"),
hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) AMCS Acquisition Corporation, a Delaware corporation; and
(b) American Conferencing Company, Inc., a New Jersey corporation.
2. An agreement of merger has been approved, adopted, certified, executed
and acknowledged by American Conferencing Company, Inc. and by the Corporation
in accordance with the provisions of Sections 252(c) of the General Corporation
Law of the State of Delaware.
3. The name of the surviving corporation is AMCS Acquisition Corporation.
4. The certificate of incorporation of the Corporation shall be the
certificate of incorporation of the surviving corporation except that Article I
of the certificate of incorporation of the Corporation shall be amended to read
in its entirety as follows:
The name of the corporation is American
Conferencing Company, Inc. (the "Corporation")
5. The executed agreement of merger is on file at an office of the
Corporation at 690 Kinderkamack Road, Oradell, NJ 07649.
6. A copy of the agreement of merger will be furnished by the surviving
corporation, on request and without cost, to any stockholder of the Corporation
or American Conferencing Company, Inc.
7. The authorized capital stock of American Conferencing Company, Inc., is
1,000 shares Common Stock, $0.01 par value per share.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Merger to be signed by its duly authorized officer this 12th day of November,
1997.
AMCS ACQUISITION CORPORATION
By: /s/ Glenn D. Bolduc
--------------------------------------
Name: Glenn Bolduc
Title: President
2
<PAGE>
EXHIBIT 3.16
------------
BY-LAWS
OF
AMCS ACQUISITION CORPORATION
ARTICLE I
Stockholders
------------
Section 1.1. Annual Meetings. An annual meeting of stockholders
---------------
shall be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders for
----------------
any purpose or purposes may be called at any time by the Board of Directors, or
by a committee of the Board of Directors that has been duly designated by the
Board of Directors and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
Section 1.3. Notice of Meetings. Whenever stockholders are required
-------------------
or permitted to take any action at a meeting, a written notice of the meeting
shall be given that shall state the place, date and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these by-laws, the written notice of any meeting shall be given not less than
ten (10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
------------
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. Except as otherwise provided by law, the
-------
certificate of incorporation or these by-laws, at each meeting of stockholders
the presence in person or by proxy of the holders of a majority in voting power
of the outstanding shares of stock entitled to
<PAGE>
vote at the meeting shall be necessary and sufficient to constitute a quorum. In
the absence of a quorum, the stockholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided in Section 1.4 of
these by-laws until a quorum shall attend. Shares of its own stock belonging to
the corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by the corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the corporation or any subsidiary of the corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 1.6. Organization. Meetings of stockholders shall be
------------
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the person presiding over the
meeting may appoint any person to act as secretary of the meeting. The person
presiding over the meeting shall announce at the meeting of stockholders the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote.
Section 1.7. Voting; Proxies. Except as otherwise provided by the
---------------
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one (1) vote for each share of stock held
by him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three (3) years from its date, unless the proxy provides for a longer
period. A proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing with the
Secretary of the corporation an instrument in writing revoking the proxy or by
delivering a proxy in accordance with applicable law bearing a later date to the
Secretary of the corporation. Voting at meetings of stockholders need not be by
written ballot. At all meeting of stockholders for the election of directors a
plurality of the votes cast shall be sufficient to elect. All other elections
and questions shall, unless otherwise provided by law, the certificate of
incorporation or these by-laws, be decided by the affirmative vote of the
holders of a majority in voting power of the shares of stock which are present
in person or by proxy and entitled to vote thereon.
Section 1.8. Fixing Date for Determination of Stockholders of Record.
-------------------------------------------------------
In order that the corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect to any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the
2
<PAGE>
record date is adopted by the Board of Directors, and which record date: (i) in
the case of determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall, unless otherwise required by law,
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting; (ii) in the case of determination of stockholders entitled to express
consent to corporate action in writing without a meeting, shall not be more than
ten (10) days from the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (iii) in the case of determination of
stockholders for the purpose of any other lawful action, shall not be more than
sixty (60) days prior to such other action. If no record date is fixed: (iv) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (v) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
of the Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (vi) the record date for determining stockholders for the
purpose of any other lawful action, shall be at the close of business on the day
on which the Board of Director adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 1.9. List of Stockholders Entitled to Vote. The Secretary
-------------------------------------
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present. Upon the willful neglect or refusal of the directors to produce such a
list at any meeting for the election of directors, they shall be ineligible for
election to any office at such meeting. Except as otherwise provided by law,
the stock ledger shall be the only evidence as to who are the stockholders
entitled (i) to examine the stock ledger, the list of stockholders entitled to
vote at the meeting or the books of the corporation, (ii) to vote in person or
by proxy at any meeting of stockholders, or (iii) to express consent or dissent
to corporate action in writing without a meeting.
Section 1.10. Action By Consent of Stockholders. Unless otherwise
---------------------------------
restricted by the certificate of incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
3
<PAGE>
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered (by hand or by certified or registered mail, return receipt requested)
to the corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which minutes of proceedings of
meetings of stockholders are recorded. Prompt notice of taking the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
Section 1.11. Inspectors of Election. The corporation may, and shall
----------------------
if required by law, in advance of any meeting of stockholders, appoint one (1)
or more inspectors of election, who may be employees of the corporation, to act
at the meeting or any adjournment thereof and to make a written report thereof.
The corporation may designate one (1) or more persons as alternate inspectors to
replace any inspector who fails to act. In the event that no inspector so
appointed or designated is able to act at a meeting of the stockholders, the
person presiding at the meeting shall appoint one (1) or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his or
her duties, shall take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector or inspectors so appointed or designated shall (i)
ascertain the number of shares of capital stock of the corporation outstanding
and the voting power of each such share, (ii) determine the shares of capital
stock of the corporation represented at the meeting and the validity of proxies
and ballots, (iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the
number of shares of capital stock of the corporation represented at the meeting
and such inspector's or inspectors' count of all votes and ballots. Such
certification and report shall specify such other information as may be required
by law. In determining validity and counting of proxies and ballots cast at any
meeting of stockholders of the corporation, the inspectors may consider such
information as is permitted by applicable law. No person who is a candidate for
an office at an election may serve as an inspector at such election.
Section 1.12. Conduct of Meetings. The Board of Directors of the
-------------------
corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the person presiding over any meeting of stockholders shall have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of such person, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board of Directors or prescribed by the person presiding over the
meeting, may include, without limitation, the following: (i) the establishment
of an agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the person presiding over the meeting shall determine; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. Unless
4
<PAGE>
and to the extent determined by the Board of Directors or the person presiding
over the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
ARTICLE II
Board of Directors
------------------
Section 2.1. Number; Qualifications. The Board of Directors shall
----------------------
consist of one (1) or more members. The number of members comprising the Board
of Directors initially shall be the number of persons named as directors in the
certificate of incorporation (or if no person is so named, the number of persons
elected by the incorporator). The number of members comprising the Board of
Directors thereafter shall be determined from time to time by resolution of the
Board of Directors. Directors need not be stockholders.
Section 2.2. Election; Resignation; Removal; Vacancies. The Board of
-----------------------------------------
Directors initially shall consist of the person or persons named as Directors in
the certificate of incorporation (or, if no person is so named, the person or
persons elected by the Incorporator), and each director so elected shall hold
office until his successor is elected and qualified or until his earlier death,
resignation, or removal. At the first annual meeting of stockholders and at
each annual meeting thereafter, the stockholders shall elect directors each of
whom shall hold office until his successor is elected and qualified or until his
earlier death, resignation, or removal. Any director may resign at any time
upon written notice to the corporation. Any newly created directorship or any
vacancy occurring in the Board of Directors for any cause may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each director so elected shall hold office until the
expiration of the term of office of the director whom he has replaced, or until
his successor is elected and qualified, or until his earlier death, resignation,
or removal.
Section 2.3. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
----------------
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Notice of a special meeting of the
Board of Directors shall be given by the person or persons calling the meeting
at least twenty-four (24) hours before the special meeting.
Section 2.5. Telephonic Meetings Permitted. Members of the Board of
-----------------------------
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all
5
<PAGE>
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of
--------------------------------
the Board of Directors a majority of the whole Board of Directors shall
constitute a quorum for the transaction of business. Except in cases in which
the certificate of incorporation, these by-laws or applicable law otherwise
provides, the vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
Section 2.7. Organization. Meetings of the Board of Directors shall
------------
be presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
the absence of the foregoing persons by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the person
presiding over the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Informal Action by Directors. Unless otherwise
----------------------------
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
ARTICLE III
Committees
----------
Section 3.1. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board of Directors, designate one (1) or more
committees, each committee to consist of one (1) or more of the directors of the
corporation. The Board of Directors may designate one (1) or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it.
Section 3.2. Committee Rules. Unless the Board of Directors
---------------
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article II of these by-
laws.
6
<PAGE>
ARTICLE IV
Officers
--------
Section 4.1. Executive Officers; Election; Qualifications; Term of
-----------------------------------------------------
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
- ---------------------------------------
President and Secretary, and it may, if so determines, choose a Chairman of the
Board and a Vice Chairman of the Board from among its members. The Board of
Directors may also choose one (1) or more Vice Presidents, one (1) or more
Assistant Secretaries, a Treasurer and one (1) or more Assistant Treasurers.
Each such officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders next succeeding his election,
and until his successor is elected and qualified or until his earlier death,
resignation, or removal. Any officer may resign at any time upon written notice
to the corporation. The Board of Directors may remove any officer with or
without cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the corporation. Any number of
offices may be held by the same person. Any vacancy occurring in any office of
the corporation by death, resignation, removal, or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 4.2. Powers and Duties of Executive Officers.
---------------------------------------
(i) President. The President shall be the chief
---------
executive officer of the corporation. Subject to the provisions of the
certificate of incorporation, these by-laws, and the direction of the Board of
Directors, the President shall have the responsibility for the general
management and control of the business and affairs of the corporation and shall
perform all duties and have all powers which are commonly incident to the office
of the chief executive or which are delegated to him or her by the Board of
Directors. The President shall have power to execute in the name of the
corporation all contracts, agreements, deeds, bonds, mortgages, and other
obligations and instruments of the corporation which are authorized, and to
affix the corporate seal thereto. The President shall have general supervision
and direction of all of the other officers, employees, and agents of the
corporation.
(ii) Vice President. Each Vice President, if any, shall
--------------
have such powers and perform such duties as the Board of Directors may from time
to time prescribe. The Vice President (if only one (1) Vice President is chosen
by the Board) or one (1) Vice President designated by the Board (if two (2) or
more Vice Presidents are chosen by the Board of Directors) shall perform the
duties and exercise the powers of the President in the event of the President's
absence or disability.
(iii) Treasurer. The Treasurer, if any, shall have the
---------
responsibility for maintaining the financial records of the corporation. The
Treasurer shall make such disbursements of the funds of the corporation as are
authorized and shall render from time to
7
<PAGE>
time an account of all such transactions and of the financial condition of the
corporation. The Treasurer shall have such other powers and perform such other
duties as the Board of Directors may from time to time prescribe.
(iv) Secretary. The Secretary shall issue all authorized notices for,
---------
and shall keep minutes of, all meetings of the stockholders and of the Board of
Directors. The Secretary shall have charge of the corporate books and shall
have such other powers and perform such other duties as the Board of Directors
may from time to time prescribe
(v) Assistant Secretary and Assistant Treasurer. Each Assistant
-------------------------------------------
Secretary, if any, and each Assistant Treasurer, if any, shall have such powers
and perform such duties as the Board of Directors may from time to time
prescribe.
(vi) Delegation of Authority. The Board of Directors may from time to
-----------------------
time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
ARTICLE V
Stock
-----
Section 5.1. Certificates. Every holder of stock shall be entitled
------------
to have a certificate signed by or in the name of the corporation by the
Chairman or Vice Chairman of the Board of Directors, if any, or the President or
a Vice President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, of the corporation certifying the number of
shares owned by him in the corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
------------------------------------------------------
of New Certificates. The corporation may issue a new certificate of stock in the
- -------------------
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Indemnification
---------------
Section 6.1. Right to Indemnification. The corporation shall
------------------------
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter
8
<PAGE>
be amended, any person who was or is made or is threatened to be made a party or
is otherwise involved in any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, other enterprise or non-profit entity, including service with respect to
employee benefit plans (an "indemnitee"), against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by such
indemnitee. The corporation shall be required to indemnify an indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if the initiation of such proceeding (or part thereof) by the indemnitee was
authorized by the Board of Directors of the corporation.
Section 6.2. Advancement of Expenses. The corporation shall pay the
-----------------------
expenses (including attorneys' fees) incurred by an indemnitee in defending any
proceeding referred to in Section 6.1 in advance of its final disposition;
provided, however, that the payment of expenses incurred by an indemnitee in
- -------- -------
advance of the final disposition of such proceeding shall be made only upon
receipt of an undertaking by the indemnitee to repay all amounts advanced if it
should ultimately be determined that the indemnitee is not entitled to be
indemnified under this Article or otherwise.
Section 6.3. Claims. If a claim for indemnification or advancement
------
of expenses under this Article is not paid in full within sixty (60) days after
a written claim therefor by the indemnitee has been received by the corporation,
the indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the corporation shall have the
burden of proving that the indemnitee was not entitled to the requested
indemnification or advancement of expenses.
Section 6.4. Non-Exclusivity of Rights. The rights conferred on any
-------------------------
person by this Article shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate or incorporation, these by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 6.5. Other Indemnification. The corporation's obligation, if
---------------------
any, to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or non-profit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or non-profit entity.
Section 6.6. Amendment or Repeal. Any repeal or modification of the
-------------------
foregoing provisions of this Article shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
9
<PAGE>
ARTICLE VII
Miscellaneous
-------------
Section 7.1. Fiscal Year. The fiscal year of the corporation shall
-----------
be determined by resolution of the Board of Directors.
Section 7.2. Seal. The corporate seal shall have the name of the
----
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors
-------------------------------------------------------
and Committees. Any written waiver of notice, signed by the person entitled to
- --------------
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 7.4. Interested Directors; Quorum. No contract or
----------------------------
transaction between the corporation and one (1) or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one (1) or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (i) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
Section 7.5. Form of Records. Any records maintained by the
---------------
corporation in the regular course of its business, including its stock ledger,
books of account, and minute books,
10
<PAGE>
may be kept on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time.
Section 7.6. Amendment of By-Laws. These by-laws may be altered or
--------------------
repealed, and new by-laws made, by the Board of Directors to the extent
permitted by the certificate of incorporation, but the stockholders may make
additional by-laws and may alter and repeal any by-laws whether adopted by them
or otherwise.
Date: December 23, 1996
11
<PAGE>
EXHIBIT 3.17
------------
CERTIFICATE OF INCORPORATION
OF
CALL POINTS ACQUISITION CORPORATION
ARTICLE I
---------
The name of this corporation is Call Points Acquisition Corporation (the
"Corporation").
ARTICLE II
----------
The address of the registered office of the corporation in the State of
Delaware is 222 Delaware Avenue, P.O. Box 2306, Wilmington, County of New
Castle, Delaware 19899, and the name of its registered agent at such address is
Delaware Corporate Services, Inc.
ARTICLE III
-----------
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware (the "General Corporation Law").
ARTICLE IV
----------
The total number of shares of stock which the Corporation shall have
authority to issue is three thousand (3,000). All such shares are to be common
stock, par value of one cent ($0.01) per share, and are to be of one class.
ARTICLE V
---------
The name and mailing address of the incorporator are Delaware Corporate
Services Inc., 222 Delaware Avenue, P.O. Box 2306, Wilmington, Delaware 19899.
ARTICLE VI
----------
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for this corporation
under the provisions of Section 279 of
<PAGE>
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
ARTICLE VII
-----------
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a directors, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law as the
same exists or may hereafter be amended. Any repeal or modification of the
foregoing sentence shall not adversely affect any right or protection of a
director of the Corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
ARTICLE VIII
------------
The original by-laws of the Corporation shall be adopted by the
incorporator. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered to adopt, amend and repeal the by-laws of the
Corporation, subject to the power of the stockholders of the Corporation,
subject to the power of the stockholders of the Corporation to amend or repeal
and by-law made by the Board of Directors.
ARTICLE IX
----------
Unless and except to the extent that the by-laws of the Corporation shall
so require, the election of the directors of the Corporation need not be by
written ballot.
ARTICLE X
---------
The Corporation reserves the right at any time, and from time to time, to
amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
Article X.
<PAGE>
THE UNDERSIGNED, being the incorporator hereinabove named, makes and files
this Certificate of Incorporation, and does hereby declare and certify that said
instrument is its act and deed and that the facts stated herein and true, and
accordingly has executed this Certificate of Incorporation this 10th day of
January, 1997.
Delaware Corporate Services, Inc.,
Incorporator
By: /s/ Jeanette Grodzicki
----------------------------------
Name: Jeanette Grodzicki
Title: Vice President
<PAGE>
EXHIBIT 3.18
------------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CALL POINTS ACQUISITION CORPORATION
Call Points Acquisition Corporation, a corporation duly organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:
1. The Certificate of Incorporation of the Corporation is hereby amended
by deleting the text of Article I thereof in its entirety and inserting the
following in lieu thereof:
The name of this corporation is Call Points, Inc. (the "Corporation").
2. The foregoing amendment was duly adopted in accordance with the
provisions of Sections 242 and 228 (by the unanimous written consent of the
stockholders) of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation as caused this Certificate of Amendment
to be executed by its duly authorized officer this 12th day of November, 1997.
CALL POINTS ACQUISITION CORPORATION
By:\s\ Glenn D. Bolduc
-----------------------------------
Name: Glenn D. Bolduc
Title: President
<PAGE>
EXHIBIT 3.19
------------
BY-LAWS
OF
CALL POINTS ACQUISITION CORPORATION
ARTICLE I
Stockholders
------------
Section 1.1. Annual Meetings. An annual meeting of stockholders shall be
---------------
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as may be designated by resolution of the
Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders for any
----------------
purpose or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors that has been duly designated by the Board
of Directors and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
Section 1.3. Notice of Meeting. Whenever stockholders are required or
-----------------
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these by-laws, the written notice of any meeting shall be given not less then
ten (10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
------------
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
<PAGE>
Section 1.5. Quorum. Except as otherwise provided by law, the certificate
------
of incorporation or these by-laws, at each meeting of stockholders the presence
in person or by proxy of the holders of a majority in voting power of the
outstanding shares of stock entitled to vote at the meeting shall be necessary
and sufficient to constitute a quorum. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from time to
time in the manner provided in Section 1.4 of these by-laws until a quorum shall
attend. Share s of its own stock belonging to the corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
corporation or any subsidiary of the corporation to vote stock, including but
not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meeting of the stockholders shall be presided
------------
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the President, or in his
absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by the chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the person presiding over the
meeting may appoint any person to act as secretary of the meeting. The person
presiding over the meeting shall announce at the meeting of stockholders the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote.
Section 1.7. Voting; Proxies. Except as otherwise provided by the
---------------
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one (1) vote for each share of stock held
by him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person
or persons to act for him by proxy, but no such proxy shall be voted or acted
upon after three (3) years from its date, unless the proxy provides for a longer
period. A proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing with the
Secretary of the corporation an instrument in writing revoking the proxy or by
delivering a proxy in accordance with applicable law bearing a later date to the
Secretary of the corporation. Voting a meeting of stockholders need not be by
written ballot. At all meetings of stockholders for the election o directors a
plurality of the votes cast shall be sufficient to elect. All other elections
and questions shall, unless otherwise provided by law, the certificate of
incorporation or these by-laws, be decided by the affirmative vote of the
holders of a majority in voting power of the shares of stock which are present
in person or by proxy and entitled to vote thereon.
Section 1.8. Fixing Date for Determination of Stockholder of Record. In
------------------------------------------------------
order that the corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or
<PAGE>
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date: (i) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty (60) nor less than ten (10) days before the date of such meeting; (ii) in
the case of determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall not be ore than ten (10)
days from the date upon which the resolution fixing the record date is adopted
by the Board of Directors; and (iii) in the case of determination of
stockholders for the purpose of any other lawful action, shall not be more than
sixty (60) days prior to such other action. If no record date is fixed: (iv) the
record date for determining stockholder entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which the meeting is held; (v) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(vi) the record date for determining stockholders for the purpose of any other
lawful action, shall be a t the close of business on the day on which the Board
of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall
-------------------------------------
prepare and make, at lease ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of the stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten(10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the
willful neglect or refusal of the directors to produce such a list at any
meeting for the election of directors, they shall be ineligible for election to
any office at such meeting. Except as otherwise provided by law, the stock
ledger shall be the only evidence as to who are the stockholders entitled (i) to
examine the stock ledger, the list of stockholder entitled to vote fat the
meeting or the books of the corporation, (ii) to vote in person or by proxy at
any meeting of stockholders, or (iii) to express consent or dissent to corporate
action in writing without a meeting.
Section 1.10. Action By Consent of Stockholders. Unless otherwise
---------------------------------
restricted by the certificate of incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a
<PAGE>
vote, if a consent or consents in prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted and shall be
delivered (by hand or by certified or registered mail, return receipt requested)
to the corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which minutes of proceedings of
meetings of stockholders are recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
Section 1.11. Inspectors of Election. The corporation may, and shall if
----------------------
required by law, in advance of any meeting of stockholders, appoint one (1) or
ore inspectors of election, who may be employees of the corporation, to act at
the meeting or any adjournment thereof and to make a written report thereof.
The corporation may designate one (1) or more persons as alternate inspectors to
replace any inspector who fails to act. In the event that no inspector so
appointed or designated is able to act at a meeting of the stockholders, the
person presiding at the meeting shall appoint one (1) or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his or
her duties, shall take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector or inspectors so appointed or designated shall (i)
ascertain the number of shares of capital stock of the corporation outstanding
and the voting power of each such share, (ii) determine the shares of capital
stock of the corporation represented at the meeting and the validity of proxies
and ballots, (iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify heir determination of the
number of shares of capital stock of the corporation represented at the meeting
and such inspector's or inspectors' count of all votes and ballots. Such
certification and report shall specify such other information as may be required
by law. In determining validity and counting of proxies and ballots cast at any
meeting of stockholders of the corporation, the inspectors may consider such
information as is permitted by applicable law. No person who is a candidate for
an office at an election may serve as an inspector at such election.
Section 1.12. Conduct of Meeting. The Board of Directors of the
------------------
corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
directors, the person presiding over any meeting of stockholders shall have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of such person, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board of Directors or prescribed by the person presiding over the
meeting, may include, without limitation, the following: (i) the establishment
of an agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the person presiding over the meeting shall
<PAGE>
determine; (iv) restrictions on entry to the meeting after the time fixed for
the commencement thereof; and (v) limitations on the time allotted to questions
or comments by participants. Unless and to the extent determined by the Board of
Directors or the person presiding over the meeting, meeting of stockholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
ARTICLE II
Board of Directors
------------------
Section 2.1. Number; Qualifications. The Board of Directors shall consist
----------------------
of one (1) or more members. The number of members comprising the Board of
Directors initially shall be the number of persons named as directors in the
certificate of incorporation (or if no person is so named, the number of persons
elected by the Incorporator). The number of members comprising the Board of
Directors thereafter shall be determined from time to time by resolution of the
Board of Directors. Directors need not be stockholders.
Section 2.2. Election; Resignation; Removal; Vacancies. The Board of
-----------------------------------------
Directors initially shall consist of the person of persons named as Directors in
the certificate of incorporation (or, if no person is no named, the person or
persons elected by the Incorporator), and each director so elected shall hold
office until his successor is elected and qualified or until his earlier death,
resignation, or removal. At the first annual meeting of stockholders and a t
each annual meeting thereafter, the stockholders shall elect directors each of
whom shall hold office until his successor is elected and qualified or until his
earlier death, resignation, or removal. Any director may resign at any time
upon written notice to the corporation. Any newly created directorship or any
vacancy occurring in the Board of Directors for any cause may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each director so elected shall hold office until the
expiration of the term of office of the director whom he has replaced, or until
his successor is elected and qualified, or until his earlier death, resignation,
or removal.
Section 2.3. Regular Meetings. Regular meetings of the Board of Directors
----------------
may be held a such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined notices thereof need not be given.
Section 2.4. Special Meeting. Special meetings of the Board of Directors
---------------
may be held at any time or place within or without the State of Delaware
wherever called by the President, any Vice President, the Secretary, or by any
member of the Board of Directors. Notice of a special meeting of the Board of
Directors shall be given by the person or persons calling the meeting at least
twenty-four (24) hours before the special meeting.
Section 2.5. Telephonic Meetings Permitted. Members of the Board of
-----------------------------
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by
<PAGE>
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
--------------------------------
Board of Directors a majority of the whole Board of Directors shall constitute a
quorum for the transaction of business. Except in the cases in which the
certificate of incorporation, these by-laws or applicable law otherwise
provides, the vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
Section 2.7. Organization. Meetings of the Board of Directors shall be
------------
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
the absence of the foregoing persons by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the person
presiding over the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Informal Action by Directors. Unless otherwise restricted by
----------------------------
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
ARTICLE III
Committees
----------
Section 3.1. Committees. The Board of Directors may, by resolution passed
----------
by a majority of the whole Board of Directors, designate one (1) or more
committees, each committee to consist of one (1) or more of the directors of the
corporation. The Board of Directors may designate one (1) or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all of the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
---------------
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the
<PAGE>
same manner as the Board of Directors conducts its business pursuant to Article
II of these by-laws.
ARTICLE IV
Officers
--------
Section 4.1. Executive Officers; Election; Qualifications; Term of Office;
-------------------------------------------------------------
Resignation; Removal; Vacancies. The Board of Directors shall elect a President
- -------------------------------
and Secretary, and it may, if it so determines, choose a Chairman of the Board
and a Vice Chairman of the Board from among its members. The Board of Directors
may also choose one (1) or more Vice Presidents, one (1) or more Assistant
Secretaries, a Treasurer and one (1) or more Assistant Treasurers. Each such
officer shall hold office until the first meeting of the Board of directors
after the annual meeting of stockholders next succeeding his election, and until
his successor is elected and qualified or until his earlier death, resignation,
or removal. Any officer may resign at any time upon written notice to the
corporation. The Board of Directors may remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the corporation. Any number of
offices may be held by the same person. Any vacancy occurring in any office of
the corporation by death, resignation, removal, or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 4.2. Powers and Duties of Executive Officers.
----------------------------------------
(i) President. The President shall be the chief executive
---------
officer of the corporation. Subject to the provisions of the certificate of
incorporation, these by-laws, and the direction of the Board of Directors, the
President shall have the responsibility for the general management and control
of the business and affairs of the corporation and shall perform all duties and
have all powers which are commonly incident to the office of chief executive or
which are delegated to him or her by the Board of Directors. The President shall
have power to execute in the name of the corporation all contracts, agreements,
deeds, bonds, mortgages, and other obligations and instruments of the
corporation which are authorized, and to affix the corporate seal thereto. The
President shall have general supervision and direction of all of the other
officers, employees, and agents of the corporation.
(ii) Vice President. Each Vice President, if any, shall
--------------
have such powers and perform such duties as the Board of Directors may from time
to time prescribe. The Vice President (if only one (1) Vice President is chosen
by the Board) or one (1) Vice President designated by the Board (if two (2) or
more Vice Presidents are chosen by the Board of Directors) shall perform the
duties and exercise the powers of the President in the event of the President's
absence or disability.
(iii) Treasurer. The Treasurer, if any, shall have the
---------
responsibility for maintaining the financial records of the corporation. The
Treasurer shall make such disbursements of the funds of the corporation as are
authorized and shall render from time to
<PAGE>
time an account of all such transactions and of the financial condition of the
corporation. The Treasurer shall have such other powers and perform such other
duties as the Board of Directors may from time to time prescribe.
(iv) Secretary. The Secretary shall issue all authorized
---------
notices for, and shall keep minutes of, all meetings of the stockholders and of
the Board of Directors. The Secretary shall have charge of the corporate books
and shall have such other powers and perform such other duties as the Board of
Directors may from time to time prescribe.
(v) Assistant Secretary and Assistant Treasurer. Each
-------------------------------------------
Assistant Secretary, if any, and each Assistant Treasurer, if any, shall have
such powers and perform such duties as the Board of Directors may from time to
time prescribe.
(vi) Delegation of Authority. The Board of Directors may
-----------------------
from time to time delegate the powers or duties of any officer to any other
officers or agents, notwithstanding any provision hereof.
ARTICLE V
Stock
-----
Section 5.1. Certificates. Every holder of stock shall be entitled to
------------
have a certificate signed by or in the name of the corporation by the Chairman
or Vice Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the corporation certifying the number of shares owned
by him in the corporation. Any of or all the signatures on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
-------------------------------------------------------------
Certificates. The corporation may issue a new certificate of stock in the place
- -------------
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
<PAGE>
EXHIBIT 4.1
-----------
EXECUTION COPY
================================================================================
VIALOG CORPORATION
as Issuer,
THE SUBSIDIARY GUARANTORS NAMED HEREIN
AND
STATE STREET BANK AND TRUST COMPANY
as Trustee
------------------
INDENTURE
Dated as of November 12, 1997
------------------
$75,000,000
12 3/4% Series A Senior Notes
due November 15, 2001
12 3/4% Series B Senior Notes
due November 15, 2001
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310 (a) (1)..........................................................7.10
(a) (2)..........................................................7.10
(a) (3)..........................................................N.A.
(a) (4)..........................................................N.A.
(a) (5)..........................................................7.08;.7.10
(b)..............................................................7.08; 7.10; .11.02
(c)..............................................................N.A.
311 (a)..............................................................7.11
(b)..............................................................7.11
(c)..............................................................N.A.
312 (a)................................................................2.05
(b)..............................................................11.03
(c)..............................................................11.03
313 (a)..............................................................7.06
(b) (1)..........................................................N.A.
(b) (2)..........................................................7.06
(c)..............................................................7.06 .11.02
(d)..............................................................7.06
314 (a)..............................................................4.08; 4.10; 11.02
(b)..............................................................N.A.
(c) (1)..........................................................7.02; 11.04
(c) (2)..........................................................7.02; 11.04
(c) (3)..........................................................N.A.
(d)..............................................................N.A.
(e)..............................................................11.05
(f)..............................................................N.A.
315 (a)..............................................................7.01(b)
(b)..............................................................7.05; 11.02
(c)..............................................................7.01(a)
(d)..............................................................6.50; 7.01(c)
(e)..............................................................6.11
316 (a) (last sentence)..............................................2.09
(a) (1) (A)......................................................6.05
(a) (1) (B)......................................................6.04
(a) (2)..........................................................N.A.
(b)..............................................................6.07
(c)..............................................................9.04
317 (a) (1)..........................................................6.08
(a) (2)..........................................................6.09
(b)..............................................................2.04
318 (a)..............................................................11.01
(b)..............................................................11.01
</TABLE>
- ------------------------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C>
SECTION 1.01. Definitions................................... 1
SECTION 1.02. Incorporation by Reference of TIA............. 21
SECTION 1.03. Rules of Construction......................... 21
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating............................... 22
SECTION 2.02. Execution and Authentication.................. 23
SECTION 2.03. Registrar and Paying Agent.................... 23
SECTION 2.04. Paying Agent to Hold Assets in Trust.......... 24
SECTION 2.05. Security holder Lists......................... 24
SECTION 2.06. Transfer and Exchange......................... 24
SECTION 2.07. Replacement Securities........................ 25
SECTION 2.08. Outstanding Securities........................ 25
SECTION 2.09. Treasury Securities........................... 26
SECTION 2.10. Temporary Securities.......................... 26
SECTION 2.11. Cancellation.................................. 26
SECTION 2.12. CUSIP Number.................................. 27
SECTION 2.13. Deposit of Moneys............................. 27
SECTION 2.14. Book-Entry Provisions for Global Securities... 27
SECTION 2.15. Registration of Transfers and Exchanges....... 28
SECTION 2.16. Designation................................... 32
SECTION 2.17. Defaulted Interest............................ 33
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee............................ 33
SECTION 3.02. Selection of Securities to Be Redeemed........ 33
SECTION 3.03. Notice of Redemption.......................... 34
SECTION 3.04. Effect of Notice of Redemption................ 34
SECTION 3.05. Deposit of Redemption Price................... 35
SECTION 3.06. Securities Redeemed in Part................... 35
SECTION 3.07 Optional Redemption........................... 35
SECTION 3.08. Procedures for Purchase Offers................ 36
ARTICLE FOUR
COVENANTS
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 4.01. Payment of Securities............................ 38
SECTION 4.02. Maintenance of Office or Agency.................. 38
SECTION 4.03. Limitation on Restricted Payments................ 38
SECTION 4.04. Limitation on Indebtedness....................... 40
SECTION 4.05. Corporate Existence.............................. 41
SECTION 4.06. Payment of Taxes and Other Claims................ 41
SECTION 4.07. Maintenance of Properties and Insurance.......... 41
SECTION 4.08. Compliance Certificate: Notice of Default; Tax
Information..................................... 42
SECTION 4.09. Compliance with Laws............................. 43
SECTION 4.10. SEC Reports...................................... 43
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.......... 43
SECTION 4.12. Limitation on Transactions with Affiliates....... 44
SECTION 4.13. Limitation on Conduct of Business................ 44
SECTION 4.14. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries............ 44
SECTION 4.15. Limitation on Liens.............................. 45
SECTION 4.16. Offer to Repurchase Upon Change of Control....... 46
SECTION 4.17. Asset Sales...................................... 46
SECTION 4.18. Limitation on Issuances and Sales of Capital Stock
of Subsidiaries................................. 48
SECTION 4.19. Limitation on Status as Investment Company....... 48
SECTION 4.20. Sale and Leaseback Transactions.................. 49
SECTION 4.21. Additional Subsidiary Guarantees................. 49
SECTION 4.22. Limitation on Dividends.......................... 49
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets....... 50
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default................................ 51
SECTION 6.02. Acceleration..................................... 53
SECTION 6.03. Other Remedies................................... 53
SECTION 6.04. Waiver of Past Defaults.......................... 54
SECTION 6.05. Control by Majority.............................. 54
SECTION 6.06. Limitation on Suits.............................. 54
SECTION 6.07. Rights of Holders to Receive Payment............. 55
SECTION 6.08. Collection Suit by Trustee....................... 55
SECTION 6.09. Trustee May File Proofs of Claim................. 55
SECTION 6.10. Priorities....................................... 56
SECTION 6.11. Undertaking for Costs............................ 56
SECTION 6.12. Restoration of Rights and Remedies............... 56
</TABLE>
-iii-
<PAGE>
ARTICLE SEVEN
TRUSTEE
<TABLE>
<S> <C>
SECTION 7.01. Duties of Trustee................................ 57
SECTION 7.02. Rights of Trustee................................. 58
SECTION 7.03. Individual Rights of Trustee..................... 59
SECTION 7.04. Trustee's Disclaimer............................. 59
SECTION 7.05. Notice of Default................................ 59
SECTION 7.06. Reports by Trustee to Holders.................... 60
SECTION 7.07. Compensation and Indemnity....................... 60
SECTION 7.08. Replacement of Trustee........................... 61
SECTION 7.09. Successor Trustee by Merger, Etc................. 62
SECTION 7.10. Eligibility; Disqualification.................... 62
SECTION 7.11. Preferential Collection of Claims Against Company 62
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance......... 62
SECTION 8.02. Satisfaction and Discharge....................... 65
SECTION 8.03. Survival of Certain Obligations.................. 66
SECTION 8.04. Acknowledgment of Discharge by Trustee........... 67
SECTION 8.05. Application of Trust Assets...................... 67
SECTION 8.06. Repayment to the Company or Subsidiary Guarantors:
Unclaimed Money................................. 67
SECTION 8.07. Reinstatement.................................... 68
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders....................... 68
SECTION 9.02. With Consent of Holders.......................... 69
SECTION 9.03. Compliance with TIA.............................. 70
SECTION 9.04. Revocation and Effect of Consents................ 70
SECTION 9.05. Notation on or Exchange of Securities............ 71
SECTION 9.06. Trustee to Sign Amendments, Etc.................. 71
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee......................... 71
SECTION 10.02. Severability.................................... 72
SECTION 10.03. Limitation of Subsidiary Guarantor's Liability.. 72
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc.,
on Certain Terms............................... 73
SECTION 10.05. Contribution.................................... 74
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
SECTION 10.06. Waiver of Subrogation........................... 74
SECTION 10.07. Execution of Subsidiary Guarantee............... 75
SECTION 10.08. Waiver of Stay, Extension or Usury Laws......... 75
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.................................... 76
SECTION 11.02. Notices......................................... 76
SECTION 11.03. Communications by Holders with Other Holders.... 77
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent...................................... 78
SECTION 11.05. Statements Required in Certificate or Opinion... 78
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar....... 78
SECTION 11.07. Legal Holidays.................................. 79
SECTION 11.08. Governing Law................................... 79
SECTION 11.09. No Adverse Interpretation of Other Agreements... 79
SECTION 11.10. No Recourse Against Others...................... 79
SECTION 11.11. Successors...................................... 79
SECTION 11.12. Counterparts.................................... 79
SECTION 11.13. Severability.................................... 80
SECTION 11.14. Entire Agreement................................ 80
</TABLE>
-v-
<PAGE>
THIS INDENTURE dated as of November 12, 1997, is among VIALOG
CORPORATION, a Massachusetts corporation (the "Company"), TELEPHONE BUSINESS
-------
MEETINGS, INC. d/b/a ACCESS CONFERENCE CALL SERVICE, a Delaware corporation,
CONFERENCE SOURCE INTERNATIONAL, INC., a Georgia corporation, CALL POINTS, INC.,
a Delaware corporation, KENDALL SQUARE TELECONFERENCING, INC. d/b/a THE
CONFERENCE CENTER, a Massachusetts corporation, AMERICAN CONFERENCING COMPANY,
INC. d/b/a AMERICO, a Delaware corporation, and COMMUNICATION DEVELOPMENT
CORPORATION, a Connecticut corporation (collectively, the "Subsidiary
----------
Guarantors"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
- ----------
company, as Trustee (the "Trustee").
-------
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Series A
Securities and the Series B Securities (as such terms are hereinafter defined),
without preference of one such series over the other:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Acquired Indebtedness" of any Person means Indebtedness of another
---------------------
Person and any of its Subsidiaries existing at the time such other Person
becomes a Subsidiary of such Person or at the time it merges or consolidates
with such Person or any of such Person's Subsidiaries or is assumed by such
Person or any Subsidiary of such Person in connection with the acquisition of
assets from such other Person and in each case not Incurred by such Person or
any Subsidiary of such Person or such other Person in connection with, or in
anticipation or contemplation of, such other Person becoming a Subsidiary of
such Person or such acquisition, merger or consolidation, and which Indebtedness
is without recourse to the Company or any of its Subsidiaries or to any of their
respective properties or assets other than the Person or such Person's
Subsidiaries or the assets to which such Indebtedness related prior to the time
such Person becomes a Subsidiary of the Company or the time of such acquisition,
merger or consolidation.
"Adjusted Net Assets" has the meaning provided in Section 10.05.
-------------------
"Affiliate" means, when used with reference to any Person, any other
---------
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
----------- ----------
correlative of the foregoing.
<PAGE>
"Affiliate Transaction" has the meaning provided in Section 4.12.
---------------------
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Asset Acquisition" means (i) an Investment by the Company or any
-----------------
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be merged with or into the
Company or any Subsidiary of the Company or (ii) the acquisition by the Company
or any Subsidiary of the Company of assets of any Person comprising an existing
business (whether existing as a separate entity, subsidiary, division or unit of
such Person).
"Asset Proceeds Deficiency" has the meaning set forth in Section 4.17.
-------------------------
"Asset Proceeds Offer" has the meaning set forth in Section 4.17.
--------------------
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
----------
other disposition to any Person other than the Company or any of its
Subsidiaries (including, without limitation, by means of a sale and leaseback
transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of related
--------
transactions, of (a) any Capital Stock of any Subsidiary held by the Company or
any other Subsidiary, (b) all or substantially all of the properties and assets
of any division or line of business of the Company or any of its Subsidiaries,
(c) any other properties or assets of the Company or any of its Subsidiaries
other than transfers of cash, Cash Equivalents, accounts receivable, or
properties or assets in the ordinary course of business; provided that the
--------
transfer of all or substantially all of the properties or assets of the Company
and its Subsidiaries, taken as a whole, will be governed by the provisions of
Section 5.01 and/or Section 4.16 and not by the provisions of Section 4.17. For
the purposes of this definition, the term "Asset Sale" also shall not include
any of the following: (i) sales of damaged, worn-out or obsolete equipment or
assets that, in the Company's reasonable judgment, are either (A) no longer used
or (B) no longer useful in the business of the Company or its Subsidiaries; (ii)
any lease of any property entered into the ordinary course of business and with
respect to which the Company or any Subsidiary is the lessor, except any such
lease that provides for the acquisition of such property by the lessee during or
at the end of the term thereof for an amount that is less than the Fair Market
Value thereof at the time the right to acquire such property is granted; (iii) a
Restricted Payment or Permitted Investment permitted under Section 4.03; and
(iv) any transfers that, but for this clause (iv), would be Asset Sales, if (A)
the Company elects to designate such transfers as not constituting Asset Sales
and (B) after giving effect to such transfers, the aggregate Fair Market Value
of the properties or assets transferred in such transaction or any such series
of related transactions so designated by the Company does not exceed $1,000,000.
"Attributable Indebtedness" in respect of a sale and leaseback
-------------------------
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at
-2-
<PAGE>
the option of the lessor, be extended). As used in the preceding sentence, the
"net rental payments" under any lease for any such period shall mean the sum of
-------------------
rental and other payments required to be paid with respect to such period by the
lessee thereunder, excluding any amounts required to be paid by such lessee on
account of maintenance and repairs, insurance, taxes, assessments, water rates
or similar charges. In the case of any lease that is terminable by the lessee
upon payment of penalty, such net rental payment shall also include the amount
of such penalty, but no rent shall be considered as required to be paid under
such lease subsequent to the first date upon which it may be so terminated.
"Available Proceeds Amount" has the meaning set forth in Section 4.17.
-------------------------
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the Board of
------------------
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business" means the business of providing audio, video and
--------
teleconferencing services.
"Business Day" means any day other than a Saturday, Sunday or any
------------
other day on which banking institutions in The City of New York or Boston,
Massachusetts are required or authorized by law or other governmental action to
be closed.
"Capital Stock" means (i) with respect to any Person that is a
-------------
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity or profit participation interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
----------------------------
obligations of such Person to pay rent or other amounts under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP and, for purposes of this definition, the amount of such obligations at any
date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
----------------
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one
-3-
<PAGE>
year from the date of acquisition thereof; (ii) marketable direct obligations
issued by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and, at the time of acquisition, having one
of the two highest ratings obtainable from either Standard & Poor's Ratings
Group ("S&P") or Moody's Investors Service, Inc. ("Moody's'"); (iii) commercial
--- --------
paper maturing no more than 270 days from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at least P-
1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within 180 days from the date of acquisition thereof issued by any commercial
bank including, without limitation, the Trustee, organized under the laws of the
United States of America or any state thereof or the District of Columbia or any
U.S. branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; (vi) deposits available for
withdrawal on demand with any commercial bank not meeting the qualifications
specified in clause (iv) above, provided that all such deposits do not exceed
--------
$5,000,000 in the aggregate at any one time; (vii) demand and time deposits and
certificates of deposit with any commercial bank organized in the United States
not meeting the qualifications specified in clause (iv) above, provided that
--------
such deposits and certificates support bond, letter of credit and other similar
types of obligations incurred in the ordinary course of business; and (viii)
investments in money market or other mutual funds including, without limitation,
an SSgA mutual fund, substantially all of whose assets comprise securities of
the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following: (i)
-----------------
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any person (as such term is used in Section 13(d)(3) of the Exchange
Act) other than to the Company or a Subsidiary Guarantor; (ii) the Company
consolidates with or merges into another Person or any Person consolidates with,
or merges into, the Company, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Company is changed into or exchanged
for cash, securities or other property, other than any such transaction where
(a) the outstanding Voting Stock of the Company is changed into or exchanged for
Voting Stock of the surviving or resulting Person that is Qualified Capital
Stock and (b) the holders of the Voting Stock of the Company immediately prior
to such transaction own, directly or indirectly, not less than a majority of the
Voting Stock of the surviving or resulting Person immediately after such
transaction; (iii) the adoption of a plan relating to the liquidation or
dissolution of the Company not involving a merger or consolidation or a sale or
other disposition of assets described in clause (i) above; (iv) the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that any person (as defined above), excluding Permitted
Holders, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50%
of the total voting power of the Voting Stock of the Company; provided that the
--------
sale of Voting Stock of the Company to a Person or Persons acting as
underwriters in connection with a firm commitment underwriting
-4-
<PAGE>
shall not constitute a Change of Control; or (v) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors (other than by action of the Permitted Holders). For
purposes of this definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring Voting Stock of the Company will be
deemed to be a transfer of such portion of such Voting Stock as corresponds to
the portion of the equity of such entity that has been so transferred.
"Change of Control Offer" has the meaning provided in Section 4.16.
-----------------------
"Change of Control Payment" has the meaning provided in Section 4.16.
-------------------------
"Change of Control Payment Date" has the meaning provided in Section
------------------------------
4.16.
"Common Stock" of any Person means any and all shares, interests or
------------
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
-------
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" means, with respect to any Person, for any
-------------------
period, the sum (without duplication) of (i) Consolidated Net Income plus (ii)
to the extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all income taxes of such Person and its
Subsidiaries paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions of assets outside the
ordinary course of business), Consolidated Interest Expense, amortization
expense and depreciation expense, and (B) other non-cash items (other than non-
cash interest) reducing Consolidated Net Income, other than any non-cash item
which requires the accrual of or a reserve for cash charges for any future
period and other than any non-cash charge constituting an extraordinary item of
loss, less other non-cash items increasing Consolidated Net Income, all as
----
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
----------------------------------------
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters for which financial information is available (the "Four Quarter
------------
Period") ending on or prior to the date of the transaction or event giving rise
- ------
to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
- -----------------
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
--- -----
period of such calculation to (i) the Incurrence or repayment of any
Indebtedness of such Person or any of its Subsidiaries (and the application of
the proceeds thereof) giving rise to the need to make such calculation and any
Incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the Incurrence or repayment of Indebtedness in the
ordinary course of
-5-
<PAGE>
business for working capital purposes pursuant to working capital facilities, at
any time subsequent to the first day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period, and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of any such Asset Acquisition)
Incurring, assuming or otherwise being liable for Acquired Indebtedness) at any
time subsequent to the first day of the Four Quarter Period and on or prior to
the Transaction Date, as if such Asset Sale or Asset Acquisition (including the
Incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness and also including any Consolidated EBITDA, based upon the four
fiscal quarters of such Person for which financial information is available
immediately preceding such Asset Acquisition, associated with such Asset
Acquisition) occurred on the first day of the Four Quarter Period; provided that
--------
the Consolidated EBITDA of any Person acquired shall be included only to the
extent includable pursuant to the definition of "Consolidated Net Income." If
such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third person, the preceding sentence shall give effect to the
Incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary
of such Person had directly Incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness
determined on a fluctuating basis as of the Transaction Date (including
Indebtedness actually Incurred on the Transaction Date) and which will continue
to be so determined thereafter shall be deemed to have accrued at a fixed rate
per annum equal to the rate of interest on such Indebtedness in effect on the
-----
Transaction Date; and (2) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
---------
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
--------------------------
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Common Stock) paid,
accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated Federal, state and local tax rate
of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
-----------------------------
any period, the aggregate of the interest expense (without deduction of interest
income) of such Person and its Subsidiaries (excluding amortization of deferred
financing fees) for such period, on a consolidated basis, as determined in
accordance with GAAP, and including (a) all amortization of original issue
discount (other than any original issue discount on Indebtedness attributable to
proceeds of the sale of warrants issued in connection with the Incurrence of
such Indebtedness); (b) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued
-6-
<PAGE>
by such Person and its Subsidiaries during such period; (c) net cash costs under
all Interest Swap Obligations (including amortization of fees); (d) all
capitalized interest; and (e) the interest portion of any deferred payment
obligations for such period.
"Consolidated Net Income" means, with respect to any Person, for any
-----------------------
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains from Asset
- --------
Sales or abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains, (c) the net income or loss of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Subsidiary of the referent Person or is merged or consolidated
with the referent Person or any Subsidiary of the referent Person, (d) the net
income (but not loss) of any Subsidiary of the referent Person to the extent
that the declaration of dividends or similar distributions by that Subsidiary of
that income is restricted by a contract, operation of law or otherwise, (e) the
net income of any Person, other than a Subsidiary of the referent Person, except
to the extent of cash dividends or distributions paid to the referent Person or
to a wholly-owned Subsidiary of the referent person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
----------------------
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person for
-----------------------------
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any
-------------------
member of the Board of Directors of the Company who: (i) was a member of such
Board of Directors on the Issue Date; or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
"Covenant Defeasance" has the meaning set forth in Section 8.01(c).
-------------------
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
-7-
<PAGE>
"Default" means an event or condition the occurrence of which is, or
-------
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means, with respect to the Securities issued in the form
----------
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Disqualified Capital Stock" means any Capital Stock which, by its
--------------------------
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the final maturity date of the Securities.
"Events of Default" has the meaning set forth in Section 6.01.
-----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute or statutes thereto.
"Existing Indebtedness" means up to $1.5 million in aggregate
---------------------
principal amount of Indebtedness of the Company and its Subsidiaries in
existence on the Issue Date, until such amounts are repaid.
"Fair Market Value" or "Fair Value" means, with respect to any asset
----------------- ----------
or property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between an informed and willing seller and an informed
and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value shall be determined
by the Board of Directors of the Company acting reasonably and in good faith and
shall be evidenced by a Board Resolution delivered to the Trustee; provided,
--------
however, that if the aggregate non-cash consideration to be received by the
- -------
Company or any of its Subsidiaries from any Asset Sale could be reasonably
likely to exceed $1.0 million, the Fair Market Value shall be determined by an
Independent Financial Advisor.
"Family Member" means, when used with reference to any natural Person,
-------------
such Person's spouse, siblings, parents, children, or other lineal descendants
(whether by adoption or consanguinity), and shall mean a trust, the primary
beneficiary of which is the Person's spouse, siblings, parents, children, or
other lineal descendants (whether by adoption or consanguinity).
"Financial Advisor" means an accounting, appraisal or investment
-----------------
banking firm of nationally recognized standing that is, in the reasonable and
good faith judgment of the Board of Directors of the Company, qualified to
perform the task for which such firm has been engaged.
"Four Quarter Period" has the meaning set forth in the definition of
-------------------
"Consolidated Fixed Charge Coverage Ratio" above.
-8-
<PAGE>
"Funding Guarantor" has the meaning provided in Section 10.05.
-----------------
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Global Security" means a Security evidencing all or a part of the
---------------
Securities issued to the Depository in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit B.
"Holder" or "Security holder" means a Person in whose name a Security
------ ---------------
is registered on the Registrar's books.
"Incur" means, with respect to any Indebtedness or other obligation of
-----
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
---------- -------- ---------- ---------
correlative to the foregoing); provided, however, that (A) any Indebtedness
-------- -------
assumed in connection with an acquisition of assets and any Indebtedness of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) of the Company or at the time such
Person is merged or consolidated with the Company or any subsidiary of the
Company shall be deemed to be Incurred at the time of the acquisition of such
assets or by such Subsidiary at the time it becomes, or is merged or
consolidated with, a Subsidiary of the Company or by the Company at the time of
such merger or consolidation, as the case may be, and (B) any amendment,
modification or waiver of any document pursuant to which Indebtedness was
previously Incurred shall not be deemed to be an Incurrence of Indebtedness
unless such amendment, modification or waiver increases the principal or premium
thereof or interest rate thereon (including by way of original issue discount).
A guarantee by the Company or a Subsidiary Guarantor of Indebtedness Incurred by
the Company or a Subsidiary Guarantor, as applicable, shall not be a separate
incurrence of Indebtedness.
"Indebtedness" means with respect to any Person, without duplication,
------------
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and accrued liabilities arising
in the ordinary course of business that are not overdue by 90 days or more or
are being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted), (v) all Obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance
-9-
<PAGE>
or similar credit transaction, (vi) all Indebtedness of others (including all
dividends of other Persons for the payment of which is) guaranteed, directly or
indirectly, by such Person or that is otherwise its legal liability or which
such Person has agreed to purchase or repurchase or in respect of which such
Person has agreed contingently to supply or advance funds but excluding
endorsements of negotiable instruments and documents in the ordinary course of
business, (vii) net liabilities of such Person under Interest Swap Obligations,
(viii) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on any asset or property (including, without limitation, leasehold
interests and any other tangible or intangible property) of such Person, whether
or not such Indebtedness is assumed by such Person or is not otherwise such
Person's legal liability; provided that if the Obligations so secured have not
--------
been assumed by such Person or are otherwise not such Person's legal liability,
the amount of such Indebtedness for the purposes of this definition shall be
limited to the lesser of the amount of such Indebtedness secured by such Lien or
the Fair Market Value of the assets or property securing such Lien, and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends if any. The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations at such date; provided that the amount outstanding at any time of
--------
any non-interest bearing Indebtedness or other Indebtedness issued with original
issue discount is the full amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP, but such Indebtedness shall only be
deemed to be Incurred as of the date of original issuance thereof.
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time in accordance with the terms hereof
"Independent" when used with respect to any specified Person means
-----------
such a Person who (a) is in fact independent, (b) does not have any direct
financial interest or any material indirect financial interest in the Company or
any of its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions for the
Company or any of its Subsidiaries. Whenever it is provided in this Indenture
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by the Company and approved by the
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read this definition and that the signer is
Independent within the meaning thereof.
"Initial Purchaser" means Jefferies & Company, Inc.
-----------------
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
-10-
<PAGE>
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person under
-------------------------
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" by any Person means any direct or indirect (i) loan,
----------
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property (valued at the Fair Market Value thereof as
of the date of transfer) to others or payments for property or services for the
account or use of others, or otherwise) (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business); (ii) purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by any other
Person; (iii) guarantee or assumption of any Indebtedness or any other
obligation of any other Person (except for an assumption of Indebtedness for
which the assuming Person receives consideration at the time of such assumption
in the form of property or assets with a Fair Market Value at least equal to the
principal amount of the Indebtedness assumed, extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or otherwise in the ordinary course of business, workers'
compensation, utility, lease and similar deposits and prepaid expenses made in
the ordinary course of business, and endorsements of negotiable instruments and
documents in the ordinary course of business); and (iv) all other items that
would be classified as investments on a balance sheet of such Person prepared in
accordance with GAAP. The amount of any Investment shall not be adjusted for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment. If the Company or any Subsidiary of the Company
sells or otherwise disposes of any Common Stock of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the Fair Market Value of the Common Stock of such Subsidiary not sold
or disposed of.
"Issue Date" means the date on which the Series A Securities were
----------
first issued hereunder.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
----
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction other than to reflect ownership by a
third party of property leased to the referent Person or any of its Subsidiaries
under a lease that is not in the nature of a conditional sale or title retention
agreement).
-11-
<PAGE>
"Maturity Date" mean November 15, 2001.
-------------
"Net Cash Proceeds" means, with respect to any Asset Sale, the
-----------------
proceeds in the form of cash or Cash Equivalents (including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, brokerage, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be actually
payable as a result of any disposition of property within two years of the date
of disposition and (2) after taking into account any reduction in tax liability
due to available tax credits or deductions and any tax sharing arrangements) and
(c) appropriate amounts to be provided by the Company or any Subsidiary, as the
case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Net Equity Proceeds" means (a) in the case of any sale by the Company
-------------------
of Qualified Capital Stock of the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
(including, without limitation, brokerage, legal, accounting and investment
banking fees and commissions) incurred in connection therewith, and (b) in the
case of any exchange, exercise, conversion or surrender of any outstanding
Indebtedness of the Company or any Subsidiary issued after the Issue Date for or
into shares of Qualified Capital Stock of the Company, the amount of such
Indebtedness (or, if such Indebtedness was issued at an amount less than the
stated principal amount thereof, the accrued amount thereof as determined in
accordance with GAAP) as reflected in the consolidated financial statements of
the Company prepared in accordance with GAAP as of the most recent date next
preceding the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder of such Indebtedness to the
Company or to any wholly-owned Subsidiary of the Company upon such exchange,
exercise, conversion or surrender and less any and all payments made to the
holders of such Indebtedness, and all other expenses incurred by the Company in
connection therewith), in each case (a) and (b) to the extent consummated after
the Issue Date.
"Obligations" means all obligations for principal, premium, interest,
-----------
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offered Price" has the meaning set forth in Section 4.17.
-------------
"Officer" means, with respect to any Person, the Chairman of the
-------
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Chief Accounting Officer, the Treasurer or Assistant
Treasurer, the Controller, the Secretary or Assistant Secretary of such Person.
-12-
<PAGE>
"Officers' Certificate" means a certificate signed by two officers of
---------------------
the Company (one of whom must be a principal executive officer, principal
financial officer or principal accounting officer).
"Opinion of Counsel" means a written opinion from legal counsel which
------------------
and who are reasonably acceptable to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company that
-----------------------
is pari passu in right of payment to the Securities.
----------
"Pari Passu Offer" has the meaning set forth in Section 4.17.
----------------
"Paying Agent" shall have the meaning set forth in Section 2.03.
------------
"Payment Amount" has the meaning set forth in Section 4.17.
--------------
"Payment Default" has the meaning set forth in Section 6.01.
---------------
"Payment Restriction" has the meaning set forth in Section 4.14.
-------------------
"Permitted Holders" means the following Persons: J. Michael Powell,
-----------------
Reynolds E. Moulton, Glenn D. Bolduc, William P. Pucci, David L. Lougee, John J.
Dion, Joanna M. Jacobson, David L. Lipsky and Patti R. Bisbano, and any of their
respective Affiliates and Family Members, each of the foregoing individually
being a "Permitted Holder".
"Permitted Indebtedness" means, without duplication, each of the
----------------------
following:
(i) Indebtedness under the Securities;
(ii) Indebtedness under any Existing Indebtedness or under the
Senior Credit Facility;
(iii) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company or any Subsidiary thereof in
the ordinary course of business, including guarantees or obligations of the
Company or any Subsidiary thereof with respect to letters of credit
supporting such bid, performance or surety obligations (in each case other
than for an obligation for money borrowed);
(iv) Permitted Refinancing Indebtedness;
(v) The Subsidiary Guarantees of the Securities;
(vi) Interest Swap Obligations of the Company; provided,
--------
however, that such Interest Swap Obligations are entered into to protect
-------
the Company and its Subsidiaries from fluctuations in interest rates on
Indebtedness Incurred in accordance with this Indenture to the extent the
notional principal amount of such Interest Swap
-13-
<PAGE>
Obligation does not exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(vii) Indebtedness of a direct or indirect Subsidiary of the
Company to the Company or to a direct or indirect Subsidiary of the Company
for so long as such Indebtedness is held by the Company or a direct or
indirect Subsidiary of the Company in each case subject to no Lien held by
a Person other than the Company or a direct or indirect Subsidiary of the
Company; provided that if as of any date any Person other than the Company
--------
or a direct or indirect Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the date of the Incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to a direct or indirect
Subsidiary of the Company for so long as such Indebtedness is held by a
direct or indirect Subsidiary of the Company in each case subject to no
Lien; provided, that (a) any Indebtedness of the Company to any direct or
--------
indirect Subsidiary of the Company is unsecured and subordinated, pursuant
to a written agreement, to the Company's Obligations under this Indenture
and the Securities, and (b) if as of any date any Person other than a
direct or indirect Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the date of the Incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness; and
(ix) additional Indebtedness not to exceed an aggregate
principal amount of $1.0 million at any one time outstanding and any
guarantee thereof.
"Permitted Investments" means (a) Investments in cash and Cash
---------------------
Equivalents; (b) Investments by the Company or by any Subsidiary of the Company
in any Person that is or will become immediately after such Investment a direct
or indirect Subsidiary of the Company; (c) any Investments in the Company by any
Subsidiary of the Company; provided that any Indebtedness evidencing such
--------
Investment is unsecured; (d) Investments made by the Company or by its
Subsidiaries as a result of an Asset Sale made in compliance with Section 4.17;
(e) Interest Swap Obligations to the extent the same constitute Permitted
Indebtedness; (f) Investments in an amount not to exceed $2.5 million at any one
time outstanding; (g) Investments held by any Person on the date such Person
becomes a Subsidiary to the extent such Investments are not incurred in
anticipation of or in connection with such acquisition; and (h) Investments in
stock, obligations or securities received in settlement of debts owing to the
Company or any Subsidiary as a result of bankruptcy or insolvency proceedings or
upon the foreclosure, perfection or enforcement of any Lien in favor of the
Company or any Subsidiary, in each case as to debt owing to the Company or any
Subsidiary that arose in the ordinary course of business of the Company or any
such Subsidiary, provided that any stocks, obligations or securities received in
--------
settlement of debts that arose in the ordinary course of business (and received
other than as a result of bankruptcy or insolvency proceedings or upon
foreclosure, perfection or enforcement of any Lien) that are, within 30 days of
receipt,
-14-
<PAGE>
converted into cash or Cash Equivalents shall be treated as having been cash or
Cash Equivalents at the time received.
"Permitted Liens" means, without duplication, each of the following:
---------------
(i) Liens existing as of the date of this Indenture;
(ii) Liens securing the Securities, the Subsidiary Guarantees
or any Indebtedness under the Senior Credit Facility;
(iii) Liens in favor of the Company or as otherwise permitted by
clause (vii) of the definition of "Permitted Indebtedness";
(iv) Liens for taxes, assessments and governmental charges or
claims either (i) not delinquent or (ii) contested in good faith by
appropriate proceedings and as to which the Company or its Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(v) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
delinquent for more than 30 days or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(vi) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the payment or performance
of tenders, statutory or regulatory obligations, surety and appeal bonds,
bids, government contracts and leases, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(vii) judgment Liens not giving rise to an Event of Default so
long as any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated
shall have not expired;
(viii) any interest or title of a lessor under any Capital Lease
Obligation or operating lease;
(ix) Liens securing Purchase Money Indebtedness incurred in
compliance with Section 4.04; provided, however, that (i) the related
-------- -------
Purchase Money Indebtedness shall not be secured by any property or assets
of the Company or any Subsidiary other than the property or assets so
acquired and any proceeds therefrom and (ii) the Lien securing any such
Indebtedness shall be created within 90 days of such acquisition;
-15-
<PAGE>
(x) Liens securing obligations under or in respect of Interest
Swap Obligations;
(xi) Liens upon specific items of inventory or other goods of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(xii) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property or
assets relating to such letters of credit and products and proceeds
thereof;
(xiii) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of
the Company or any of its Subsidiaries, including rights of offset and set-
off;
(xiv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company and Liens on
property or assets of a Subsidiary existing at the time it became a
Subsidiary, provided that such Liens were in existence prior to the
--------
contemplation of the acquisition and do not extend to any assets other than
the property of such Person or the acquired property (and the proceeds
thereof), as applicable; and
(xv) Liens securing Permitted Refinancing Indebtedness which is
incurred to refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance
with the provisions of the Indenture; provided, however, that such Liens
(a) are no less favorable to the Holders and not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced, and (b) do not extend to or cover any
property or assets of the Company or any of its Subsidiaries not securing
the Indebtedness so refinanced.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
----------------------------------
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Subsidiaries incurred pursuant to
clause (i), (ii) or (v) of the definition of "Permitted Indebtedness"; provided
--------
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so exchanged, refinanced,
renewed, replaced, defeased or refunded (plus the amount of related prepayment
penalties, fees and reasonable expenses incurred in connection therewith); (ii)
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
exchanged, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being exchanged, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Securities or the Subsidiary
Guarantees, such Permitted Refinancing
-16-
<PAGE>
Indebtedness is subordinated in right of payment to, the Securities or the
Subsidiary Guarantees, as the case may be, on terms at least as favorable to the
Holders of Securities as those contained in the documentation governing the
Indebtedness being exchanged, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Subsidiary that is the obligor on the Indebtedness being exchanged, refinanced,
renewed, replaced, defeased or refunded.
"Person" means an individual, trustee, corporation, partnership,
------
limited liability company, joint stock company, trust, unincorporated
organization, joint venture, union, business association, firm, governmental
agency or political subdivision thereof or other legal entity.
"Physical Securities" has the meaning set forth in Section 2.01.
-------------------
"Preferred Stock" of any Person means any Capital Stock of such Person
---------------
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Principal" of any Indebtedness (including the Securities) means the
---------
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" has the meaning provided in the Registration
----------------------
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Series A Securities in the form set forth on Exhibit A-1.
"Public Equity Offering" means an underwritten offer and sale of
----------------------
Qualified Capital Stock of the Company pursuant to a registration statement that
has been declared effective by the SEC pursuant to the Securities Act (other
than a registration statement on Form S-8 or otherwise relating to equity
securities issuable under any employee benefit plan of the Company).
"Purchase Agreement" means the purchase agreement dated as of November
------------------
12, 1997 by and among the Company, the Subsidiary Guarantors named therein and
the Initial Purchaser.
"Purchase Date" means the Change of Control Payment Date or purchase
-------------
date with respect to an Asset Proceeds Offer, as applicable.
"Purchase Money Indebtedness" means Indebtedness or that portion of
---------------------------
Indebtedness of the Company or any Subsidiary incurred in connection with the
acquisition by the Company or such Subsidiary, subsequent to the Issue Date, of
any property or assets.
"Purchase Offer" means either a Change of Control Offer or an Asset
--------------
Proceeds Offer, as applicable.
-17-
<PAGE>
"Qualified Capital Stock" means any Capital Stock that is not
-----------------------
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
----------------------------- ---
Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Securities.
-----------
"Redemption Date," when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption pursuant to the terms of this
Indenture and Paragraph 5 in the forms of Security annexed hereto as Exhibit A-1
and A-2.
"Redemption Price," when used with respect to any Security to be
----------------
redeemed, means the price fixed for such redemption pursuant to the terms of
this Indenture and Paragraph 5 in the forms of Security annexed hereto as
Exhibit A-1 and A-2.
"Refinance" means, in respect of any security or Indebtedness, to
---------
refinance, renew, refund, repay, prepay, redeem, defease or retire, or to issue
a security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
---------- -----------
correlative meanings.
"Registered Exchange Offer" means the offer to exchange the Series B
-------------------------
Securities for all of the outstanding Series A Securities in accordance with the
Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03.
---------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement by and among the Company, the Subsidiary Guarantors named therein and
the Initial Purchaser, relating to the Securities and dated as of the Issue
Date, as the same may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Resale Restriction Termination Date" has the meaning provided in
-----------------------------------
Section 2.15.
"Responsible Officer," when used with respect to the Trustee, means
-------------------
any officer within the Corporate Trust Group (or any successor group) of the
Trustee, including without limitation any Vice President, any Assistant Vice
President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers, who shall, in any case, be responsible for the
administration of this document or have familiarity with it, and also means,
with respect to particular corporate trust matters, any other officer to whom
such matter is referred because of his or her knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning provided in Section 4.03.
------------------
-18-
<PAGE>
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
-------------------
under the Securities Act and includes, without limitation, any Private Exchange
Note (as defined in the Registration Rights Agreement); provided that the
--------
Trustee shall be entitled to request and conclusively rely upon an Opinion of
Counsel with respect to whether any Security is a Restricted Security.
"Rule 144A" means Rule 144A promulgated under the Securities Act, as
---------
such Rule may be amended from time to time, or any similar role (other than Rule
144) or regulation hereinafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
---
"Securities" means the Series A Securities and Series B Securities as
----------
amended or supplemented from time to time in accordance with the terms hereof
that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
"Senior Credit Facility" means, with respect to the Company, a senior
----------------------
bank financing credit facility to be provided to the Company by Coast Business
Credit (or an affiliate thereof), pursuant to the proposal letter dated October
29, 1997, consisting of a revolving credit, term loan and capital expenditure
facility in the aggregate principal amount of $15.0 million.
"Series A Securities" means the 12 3/4% Series A Senior Notes due
-------------------
November 15, 2001, being issued and sold pursuant to the Purchase Agreement and
this Indenture.
"Series B Securities" means the 12 3/4% Series B Senior Notes due
-------------------
November 15, 2001 (the terms of which are identical to the Series A Securities
except that the offer and sale of the Series B Securities shall be registered
under the Securities Act, and such securities shall not contain the restrictive
legend on the face of the form of the Series A Securities), to be issued in
exchange for the Series A Securities pursuant to the Registered Exchange Offer
and this Indenture.
"Specified Affiliate Transactions" means certain transactions among
--------------------------------
the Company and Subsidiaries and certain Affiliates which were entered into
prior to the Issue Date as set forth in Schedule I to this Indenture.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
-------------------------
Subsidiary Guarantor which, by its terms, is expressly subordinated in right of
payment to the Securities or the Subsidiary Guarantees, as the case may be.
"Subsidiary," with respect to any Person, means (i) any corporation of
----------
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or
-19-
<PAGE>
indirectly, by such Person or (ii) any other Person of which at least a majority
of the voting interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Subsidiary Guarantee" means any guarantee of the Securities by a
--------------------
Subsidiary Guarantor in accordance with the provisions described under Article
Ten.
"Subsidiary Guarantor" means (i) each of Telephone Business Meetings,
--------------------
Inc. d/b/a/ Access Conference Call Service, Conference Source International,
Inc., Call Points, Inc., Kendall Square Teleconferencing, Inc. d/b/a/ The
Conference Center, American Conferencing Company, Inc. d/b/a Americo, and
Communication Development Corporation, each of which is a wholly-owned
subsidiary of the Company, and (ii) each of the Company's Subsidiaries that in
the future executes a supplemental indenture in which such Subsidiary agrees to
be bound by the terms of this Indenture as a Subsidiary Guarantor; provided that
--------
any Person constituting a Subsidiary Guarantor as described above shall cease to
constitute a Guarantor when its respective Subsidiary Guarantee is released in
accordance with the terms of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb), as amended, as in effect on the date of the execution of this Indenture
until such time as this Indenture is qualified under the TIA, and thereafter as
in effect on the date on which this Indenture is qualified under the TIA, except
as otherwise provided in Section 9.03.
"Trust Officer" means any officer within the corporate trust
-------------
administration department (or any successor group of the Trustee), including any
vice president, assistant vice president, assistant secretary or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means, with respect to a particular corporate trust matter,
any other officer to whom such trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. Government Obligations" has the meaning provided in Section
---------------------------
8.01.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" means, with respect to any Person, securities of any
------------
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
-20-
<PAGE>
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-owned Subsidiary" of any Person means any Subsidiary of such
-----------------------
Person of which all the outstanding voting securities which normally have the
right to vote in the election of directors, other than director's qualifying
shares, are owned by such Person or any wholly-owned Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
----------
"indenture securities" means the Securities;
--------------------
"indenture security holder" means a Holder or a Security holder;
-------------------------
"indenture to be qualified" means this Indenture;
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee; and
----------------- ---------------------
"obligor" on the indenture securities means the Company, any
-------
Subsidiary Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
-21-
<PAGE>
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
The Series A Securities and Series B Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibits A-1
and A-2, respectively. The Securities may have notations, legends or
endorsements (including notations relating to the Guarantee) required by law,
stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Securities and any notation, legend or endorsement (including
notations relating to the Subsidiary Guarantee) on them. Each Security shall be
dated the date of its authentication.
The terms and provisions contained in the Securities and the
Subsidiary Guarantee shall constitute, and are hereby expressly made, a part of
this Indenture. The Series A Securities and the Series B Securities shall be
considered collectively to be a single class for all purposes of this Indenture,
including, without limitation, waivers, amendments, redemptions and offers to
purchase.
Series A Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in Exhibit A-1 ("Global
------
Securities"), deposited with the Trustee, as custodian for the Depository, and
- ----------
shall bear the legend set forth on Exhibit B. Series B Securities (other than
any constituting Private Exchange Notes) shall be issued initially in the form
of one or more permanent Global Securities in registered form, substantially in
the form set forth in Exhibit A-2, deposited with the Trustee, as custodian for
the Depositary, and shall bear the legend set forth on Exhibit B. The aggregate
principal amount of any Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Series A Securities offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph and any Series B Securities constituting Private
Exchange Notes shall be issued in the form of certificated Securities in
registered form in substantially the form set forth in Exhibit A-1 and Exhibit
A-2, respectively (the "Physical Securities").
-------------------
-22-
<PAGE>
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers, or an Officer and a Clerk or Assistant Clerk, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Securities for the Company by manual or
facsimile signature. The Company's seal shall also be affixed to or imprinted
or reproduced on the Securities.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless. Each
Subsidiary Guarantor shall execute the Subsidiary Guarantee in the manner set
forth in Section 10.07.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture. For the purpose of determining the date of issuance of any
Security, an authentication by the applicable unit agent of a unit of which such
Security is a part shall be deemed to be the authentication by the Trustee of
the applicable Security.
The Trustee shall authenticate (i) Series A Securities for original
issue in the aggregate principal amount of $75,000,000 and (ii) Series B
Securities from time to time for issue only in exchange for a like principal
amount of Series A Securities, in each case upon receipt of a written order of
the Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Securities to be authenticated, the series and type
of Securities and the date on which the Securities are to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
$75,000,000, except as provided in Section 2.07. Upon receipt of a written order
of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in The City of New
York, where (a) Securities may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), and (b) Securities may be presented or
---------
surrendered for payment
-23-
<PAGE>
("Paying Agent"). The Registrar shall keep a register of the Securities and of
------------
their transfer and exchange. The Company, upon notice to the Trustee, may have
one or more co-Registrar and one or more additional Paying Agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
------------
Paying Agent. The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed. Except as set forth in Section 2.13, neither the Company nor any
Affiliate of the Company may act as Paying Agent.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by such Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Company in making any such payment. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent, the
Paying Agent shall have no further liability for such assets. If the Company or
any of its Affiliates acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. During the continuance of any Event of Default, the Trustee shall
serve as the sole Paying Agent of the Securities.
SECTION 2.05. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
---------------------
Subject to the provisions of Sections 2.14 and 2.15, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of the same series and other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
- -------- -------
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar or co-
-24-
<PAGE>
Registrar's written request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or other
governmental charge payable upon exchanges or transfers pursuant to Section
2.10, 3.06, 4.16, or 9.05). The Registrar or co-Registrar shall not be required
to register the transfer of or exchange of any Security (i) during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Securities and ending at the close of business on the day of such
mailing, (ii) selected for redemption in whole or in part pursuant to Article
Three, except the unredeemed portion of any Security being redeemed in part,
(iii) during a period beginning 15 days before the mailing of a notice of an
offer to repurchase pursuant to Section 4.16 or 4.17, or (iv) between a Record
Date and the next succeeding Interest Payment Date.
Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that, subject to Section 2.15(d), transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depository (or its agent), and that ownership of a
beneficial interest in the Global Security shall be required to be reflected in
a book entry.
SECTION 2.07. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee, upon the Company's written
request, shall authenticate a replacement Security of the same series if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee and any Agent from any loss which any of them may suffer if a Security
is replaced. The Company and the Trustee may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Security, including reasonable
fees and expenses of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because the
Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
---- ----
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
-25-
<PAGE>
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Securities payable on that date, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities that the Trustee actually
knows are so owned shall be disregarded. Securities so owned which have been
pledged in good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledge's right so to act with respect to the
Securities and that the pledgee is not the Company, a Subsidiary Guarantor or
any other obligor upon the Securities or any Affiliate of any of them.
The Trustee may require an Officers' Certificate listing Securities
owned by the Company, a Subsidiary of the Company or an Affiliate of the
Company.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall, upon the Company's written request, authenticate
temporary Securities upon receipt of a written order of the Company in the form
of an Officers' Certificate. The Officers' Certificate shall specify the amount
of temporary Securities to be authenticated and the date on which the temporary
Securities are to be authenticated. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate, upon receipt of a
written order of the Company pursuant to Section 2.02, definitive Securities in
exchange for temporary Securities.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Securities
to replace Securities that it has paid or delivered to the Trustee for
cancellation. If the Company or any Subsidiary Guarantor shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
-26-
<PAGE>
SECTION 2.12. CUSIP Number.
------------
The Company in issuing each series of the Securities will use a
"CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that any such
--------
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company shall promptly notify the Trustee of any such CUSIP
number used by the Company in connection with the Securities and any change in
such CUSIP number.
SECTION 2.13. Deposit of Moneys.
-----------------
Prior to 11:00 a.m. Boston time on each Interest Payment Date and
Maturity Date, the Company shall have deposited with the Paying Agent U.S. Legal
Tender sufficient to make cash payments due on such Interest Payment Date or
Maturity Date, as the case may be, and so as to permit the Paying Agent to remit
payment in immediately available funds to the Holders on such Interest Payment
Date or Maturity Date, as the case may be. Alternatively, the Company may make
payments on the Securities by wire transfer, in same day funds, or, in the case
of Physical Securities, by check delivered to the Holders thereof at their
registered addresses. To the extent the Company makes such payments directly to
the Holders, the Company shall simultaneously notify the Trustee thereof in
writing.
SECTION 2.14. Book-Entry Provisions for Global Securities.
-------------------------------------------
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit B.
Members of, or participants in, the Depository ("Agent Members") shall
-------------
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Global Securities may be transferred as a whole, and interests of
beneficial owners in Global Securities may be transferred or exchanged for
Physical Securities, only in accordance with the rules and procedures of the
Depository and the provisions of Section 2.15. In addition, Physical Securities
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Securities if (i) the Depository notifies the Company that
it is unwilling or unable to continue as Depository for any Global Security and
a
-27-
<PAGE>
successor depositary is not appointed by the Company within 90 days of such
notice, or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depository to issue Physical
Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b), the Global Securities
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal amount of
Physical Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) or (c) of this Section shall, except as otherwise provided by Section 2.15,
bear the legend regarding transfer restrictions applicable to the Physical
Securities set forth in Exhibit A-1.
(e) The Holder of any Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.15. Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Physical Securities. When Physical
--------------------------------------------
Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal number of
Physical Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Section 2.15 for such transactions are met;
provided, however, that the Physical Securities presented or surrendered for
- -------- -------
registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act and are
presented for transfer or exchange prior to (x) the date which is
two years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company
was the owner of such Security, or any predecessor thereto and
(y) such later date, if any, as may be required by
-28-
<PAGE>
any subsequent change in applicable law (the "Resale Restriction
------------------
Termination Date"), such Physical Securities shall be
----------------
accompanied, in the sole discretion of the Company, by the
following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the
Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder
to that effect (in substantially the form of Exhibit C
hereto); or
(B) if such Physical Security is being transferred to a
qualified institutional buyer (as defined in Rule 144A
promulgated under the Securities Act) in accordance with
Rule 144A promulgated under the Securities Act or pursuant
to an exemption from registration in accordance with Rule
144 or Regulation S promulgated under the Securities Act, a
certification to that effect (in substantially the form of
Exhibit C hereto); or
(C) if such Physical Security is being transferred to an
institutional "accredited investor" within the meaning of
subparagraph (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501
promulgated under the Securities Act, delivery of a
Transferee Letter of Representation in the form of Exhibit D
hereto and an opinion of counsel and/or other information
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(D) if such Physical Security is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in
substantially the form of Exhibit C hereto) and an opinion
of counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
----------------------------------------------------------------
Interest in a Global Security. A Physical Security may not be exchanged for a
- -----------------------------
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar of a Physical
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Registrar, together with:
(A) certification, substantially in the form of Exhibit C
hereto, that such Security is being transferred to a
qualified institutional buyer (as defined in Rule 144A
promulgated under the Securities Act) in accordance with
Rule 144A promulgated under the Securities Act; and
-29-
<PAGE>
(B) written instructions directing the Registrar to make, or to
direct the Depositary to make, an endorsement on the Global
Security to reflect an increase in the aggregate amount of
the Securities represented by the Global Security,
then the Registrar shall cancel such Physical Security and cause, or direct the
Depositary to cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Registrar, the number of Securities
represented by the Global Security to be increased accordingly. If no Global
Security is then outstanding, the Company shall issue and the Registrar shall
authenticate a new Global Security in the appropriate amount.
(c) Transfer and Exchange of Global Securities. The transfer and
------------------------------------------
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Exchange of a Beneficial Interest in a Global Security for a
------------------------------------------------------------
Physical Security.
- -----------------
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a
Physical Security. Upon receipt by the Registrar of written
instructions or such other form of instructions as is
customary for the Depositary from the Depositary or its
nominee on behalf of any Person having a beneficial interest
in a Global Security and upon receipt by the Registrar of a
written order or such other form of instructions as is
customary for the Depositary or the Person designated by the
Depositary as having such a beneficial interest containing
registration instructions and, in the case of any such
transfer or exchange prior to the Resale Restriction
Termination Date, the following additional information and
documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the
beneficial owner, a certification from such Person to
that effect (in substantially the form of Exhibit C
hereto); or
(B) if such beneficial interest is being transferred to a
qualified institutional buyer (as defined in Rule 144A
promulgated under the Securities Act) in accordance
with Rule 144A promulgated under the Securities Act or
pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S promulgated
under the Securities Act, a certification to that
effect from the transferee or transferor (in
substantially the form of Exhibit C hereto); or
-30-
<PAGE>
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning
of subparagraph (a)(1), (a)(2), (a)(3) or (a)(7) of
Rule 501 promulgated under the Securities Act, delivery
of a Transferee Letter of Representation in the form of
Exhibit D hereto and an opinion of counsel and/or other
information satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act; or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (in substantially the form of Exhibit C
hereto) and an opinion of counsel reasonably acceptable
to the Company to the effect that such transfer is in
compliance with the Securities Act,
the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depositary
and the Registrar, the aggregate amount of the Global
Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication
order in the form of an Officers' Certificate, the Registrar
will authenticate and deliver to the transferee a Physical
Security.
(ii) Physical Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section
2.15(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar in writing. The
Registrar shall deliver such Physical Securities to the
Persons in whose names such Physical Securities are so
registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
----------------------------------------------------------
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.15), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities
-31-
<PAGE>
that bear the Private Placement Legend unless, and the Trustee is hereby
authorized to deliver Securities without the Private Placement Legend only if,
(i) the circumstances contemplated by paragraph (a)(ii)(II) of this Section 2.15
exist, (ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Security has been sold pursuant to an effective registration statement under the
Securities Act.
(g) Authentication of Physical Securities in Absence of Depositary.
--------------------------------------------------------------
If at any time:
(i) the Depositary for the Securities notifies the Company that
the Depositary is unwilling or unable to continue as
Depositary for the Global Security and a successor
Depositary for the Global Security is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Registrar
in writing that it elects to cause the issuance of Physical
Securities under this Indenture,
then the Company will execute, and the Registrar, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Physical Securities,
will authenticate and deliver Physical Securities, in an aggregate principal
amount equal to the aggregate principal amount of Securities represented by the
Global Security, in exchange for such Global Security.
(h) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of, and each beneficial interest in, such a
Security acknowledges the restrictions on transfer of such Security set forth in
this Indenture and in the Private Placement Legend and agrees that it will
transfer such Security only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section 2.15.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.16. Designation.
-----------
The Indebtedness evidenced by the Securities is hereby irrevocably
designated as "senior indebtedness" or such other term denoting seniority for
the purposes of any future Indebtedness of the Company which the Company makes
subordinate to any senior indebtedness or such other term denoting seniority.
-32-
<PAGE>
SECTION 2.17. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Securities and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Security and the date of the proposed payment. The Trustee may fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the payment
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Securities pursuant to Section 3.07
hereof, it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed. The Company shall give notice of
redemption to the Paying Agent and Trustee at least 30 days but not more than 60
days before the Redemption Date (unless a shorter notice shall be agreed to by
the Trustee in writing), together with an Officers' Certificate stating that
such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed at any time,
selection of such Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Securities are listed or, if such Securities are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
--- ----
method as the Trustee shall deem fair and appropriate.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $ 1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
-33-
<PAGE>
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Trustee, at the Company's request made at least 45 days before the
Redemption Date (unless a shorter notice shall be agreed to by the Trustee in
writing) shall mail a notice of redemption by first class mail, postage prepaid,
to each Holder whose Securities are to be redeemed at the addresses of such
Holders as they appear in the register maintained by the Register pursuant to
Section 2.03. The Trustee shall give the notice of redemption in the Company's
name and at the Company's expense. Each notice for redemption shall identify
the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price upon surrender to the
Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the Redemption
Date, and upon surrender of such Security, a new Security or Securities in
aggregate principal amount equal to the unredeemed portion thereof will be
issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Securities to be redeemed and the
aggregate principal amount of Securities to be outstanding after such partial
redemption; and
(8) the subparagraph of the Securities pursuant to which the
Securities are to be redeemed.
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Trustee or Paying Agent, such Securities called for redemption shall be paid
at the Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of
-34-
<PAGE>
which is on or prior to the Redemption Date, shall be payable to Holders of
record at the close of business on the relevant Record Dates. Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before 11:00 a.m. (Boston time) on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date. The Paying Agent shall promptly return to the Company
any U.S. Legal Tender so deposited which is not required for that purpose upon
the written request of the Company, except with respect to monies owed as
obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee, upon the Company's written request, shall
authenticate for the Holder a new Security or Securities equal in principal
amount to the unredeemed portion of the Security surrendered.
SECTION 3.07 Optional Redemption.
--------------------
(a) The Securities shall be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after November 15, 1999
at the following Redemption Prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on November 15 of
the year set forth below (but not including the date of maturity), plus, in each
case, accrued and unpaid interest thereon to the Redemption Date.
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
1999............................................. 110%
2000............................................. 105%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or prior to
November 15, 1999, the Company may redeem, in whole or in part, from time to
time, up to an aggregate of 35% of the original principal amount of Securities
at a Redemption Price of 112.75% of the principal amount thereof, plus accrued
and unpaid interest thereon to the Redemption Date, with the net proceeds of any
Public Equity Offering; provided that at least 65% in aggregate of the original
--------
principal amount of Securities remain outstanding immediately after the
occurrence
-35-
<PAGE>
of such redemption; and, provided, further, that such redemption occurs within
-------- -------
90 days of the date of the closing of such Public Equity Offering.
In addition, prior to November 15, 1999, the Notes will be redeemable
at the Company's option, in whole or in part, at any time or from time to time,
upon not less than 30 nor more than 60 days' prior notice mailed by first-class
mail to each Holder's registered address, at a redemption price (expressed as a
percentage of principal amount) equal to the sum of the principal amount of such
Notes plus the applicable Make-Whole Premium thereon at the time of redemption
(subject to the right of Holders of record on the relevant record date to
receive interest due to the relevant interest payment date).
The following definitions are used to determine the applicable Make-
Whole Premium:
"Applicable Make-Whole Premium" means, with respect to a Note at the
redemption date, the greater of (i) 1.0% of the principal amount of such Note
and (ii) the excess of (A) the present value of such time of (1) the redemption
price of such Note at November 15, 1999 plus (2) all required interest payments
(excluding accrued but unpaid interest) due on such Note through November 1,
1999, computed using a discount rate equal to the Treasury Rate plus 100 basis
points, over (B) the principal amount of such Note at such time.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for repayment (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining average life to Stated Maturity) of the Notes; provided, however, that
if the average life to Stated Maturity of the Notes is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. Procedures for Purchase Offers.
------------------------------
Notice of a Purchase Offer pursuant to this Section 3.08 shall be
mailed or caused to be mailed, by first class mail, by the Company not less than
30 nor more than 60 days before the Purchase Date to all Holders at their last
registered addresses, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Securities
pursuant to the Purchase Offer and shall state the following terms:
(1) the section of the Indenture pursuant to which the Purchase Offer
is being made and that all Securities properly tendered will be
accepted for
-36-
<PAGE>
payment; provided, however, that if the aggregate principal
-------- -------
amount of Securities tendered in connection with an Asset
Proceeds Offer plus accrued interest at the expiration of such
offer exceeds the Payment Amount, the Company shall select the
Securities to be purchased on a pro rata basis (with such
--- ----
adjustments as may be deemed appropriate by the Company so that
only Securities in denominations of $1,000 or multiples thereof
shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the Purchase Date and that the Purchase Offer will remain open
for at least 20 Business Days and until the close of business on
the Business Day prior to the Purchase Date;
(3) that any Security not properly tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Purchase Offer
shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security purchased pursuant to a
Purchase Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on
the third Business Day prior to the Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than one Business Day prior to
the Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount
of the Securities the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have
such Security purchased; and
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; provided that
--------
each Security purchased and each new Security issued shall be in
an original principal amount of $1,000 or integral multiples
thereof.
On or before 11:00 a.m. (Boston time) on the Purchase Date, the
Company shall (i) accept for payment Securities or portions thereof tendered
pursuant to the Purchase Offer which are to be purchased in accordance with item
(1) above, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the purchase price plus accrued interest, if any, of all Securities to be
purchased and (iii) deliver to the Trustee Securities so accepted together with
an Officers' Certificate stating the Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail or otherwise
deliver to the Holders
-37-
<PAGE>
of Securities so accepted payment in an amount equal to the purchase price plus
accrued interest, if any. For purposes of any Purchase Offer, the Trustee shall
act as the Paying Agent.
Any amounts remaining after the purchase of Securities pursuant to a
Purchase Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Securities pursuant to a Purchase Offer. To the extent the provisions of any
such rule conflict with the provisions of this Indenture relating to a Purchase
Offer, the Company shall comply with the provisions of such rule and be deemed
not to have breached its obligations relating to such Purchase Offer by virtue
thereof.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
in Boston, Massachusetts in the manner provided in the Securities and this
Indenture. An installment of principal of or interest on the Securities shall
be considered paid on the date it is due if the Trustee or Paying Agent holds on
that date U.S. Legal Tender designated for and sufficient to pay the
installment.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in The City of New York, the office or
agency required under Section 2.03. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations and surrenders may be made or served at the address
of the Trustee set forth in Section 11.02. The Company hereby initially
designates the office of the Trustee, as its office or agency in The City of New
York.
SECTION 4.03. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, (a) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company, or any warrants,
rights or options to acquire shares of any class of such Capital Stock, other
than through the exchange therefor solely of Qualified Capital Stock
-38-
<PAGE>
of the Company or warrants, rights or options to acquire Qualified Capital Stock
of the Company, (b) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Subordinated Indebtedness of the Company or (c) make any Investment (other
than Permitted Investments) in any Person (each of the foregoing prohibited
actions set forth in clauses (a), (b) and (c) being referred to as a "Restricted
----------
Payment"), if at the time of such proposed Restricted Payment or immediately
- -------
after giving effect thereto, (i) a Default or an Event of Default has occurred
and is continuing or would result therefrom, or (ii) the Company is not able to
Incur at least $ 1.00 of additional Indebtedness in accordance with paragraph
(b) of Section 4.04 (as if such Restricted Payment had been made as of the last
day of the Four Quarter Period), or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date exceeds or would exceed the sum of: (v) 50% of the Consolidated Net
Income (or if Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company during the period (treating such period as a single accounting
period) from the beginning of the first fiscal quarter commencing after the
Issue Date to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such Restricted
Payment; (w) 100% of the aggregate Net Equity Proceeds received by the Company
from any Person from the issuance and sale subsequent to the Issue Date of
Qualified Capital Stock of the Company other than any Qualified Capital Stock
sold to a Subsidiary of the Company; (x) the aggregate net cash proceeds
received after the Issue Date by the Company (other than from any of its
Subsidiaries) upon the exercise of any options, warrants or rights to purchase
shares of Qualified Capital Stock of the Company; (y) the aggregate net cash
proceeds received after the Issue Date by the Company from the issuance or sale
(other than to any of its Subsidiaries) of debt securities or shares of
Disqualified Capital Stock that have been converted into or exchanged for
Qualified Capital Stock of the Company, together with the aggregate cash
received by the Company at the time of such conversion or exchange; and (z) an
amount equal to the net reduction in Investments, subsequent to the date of the
Indenture, in any Person resulting from payments of interest on debt, dividends,
repayments of loans or advances, return of capital, or other transfers of
property (but only to the extent such distributions are not included in the
calculation of Consolidated Net Income), in each case, to the Company or any
Subsidiary from any Person, not to exceed in the case of any Person, the amount
of Investments previously made by the Company or any Subsidiary in such Person
and which was treated as a Restricted Payment.
Notwithstanding the foregoing, these provisions do not prohibit: (1)
the acquisition of Capital Stock of the Company or warrants, rights or options
to acquire Capital Stock of the Company either (i) solely in exchange for shares
of Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company, or (ii) through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company
or warrants, rights or options to acquire Qualified Capital Stock of the
Company; (2) the acquisition of any Subordinated Indebtedness of the Company
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the
-39-
<PAGE>
Company) of (A) shares of Qualified Capital Stock of the Company or warrants,
rights or options to acquire Qualified Capital Stock of the Company or (B)
Permitted Refinancing Indebtedness; or (3) loans by the Company or any
Subsidiary to employees in the ordinary course of business up to an aggregate
principal amount of $250,000 at any one time outstanding; provided, however,
-------- -------
that in the case of clauses (1), (2) and (3) of this paragraph, no Default or
Event of Default shall have occurred and be continuing at the time of such
payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date, amounts expended pursuant
to clauses (1)(ii), (2)(i) and (2)(ii)(A) of this paragraph shall, in each case,
be included in such calculation.
For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the Fair Market Value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment of the asset(s)
proposed to be transferred by the Company or such Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment complies with this Indenture
and setting forth in reasonable detail the basis upon which the required
calculations were computed, which calculations may be based upon the Company's
latest available internal quarterly financial statements.
For purposes of this Section 4.03, if a particular Restricted Payment
involves a non-cash payment, including a distribution of assets, then such
Restricted Payment shall be deemed to be an amount equal to the cash portion of
such Restricted Payment, if any, plus an amount equal to the Fair Market Value
of the non-cash portion of such Restricted Payment.
SECTION 4.04. Limitation on Indebtedness.
--------------------------
(a) The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, Incur any Indebtedness, including,
without limitation, any Acquired Indebtedness (other than Permitted
Indebtedness).
(b) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur Indebtedness (including, without limitation, Acquired
Indebtedness), in each case, if (i) no Default or Event of Default shall have
occurred and be continuing on the date of the proposed Incurrence thereof or
would result as a consequence of such proposed Incurrence and (ii) immediately
after giving effect to such proposed Incurrence on a pro forma basis , the
--- -----
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.0
to 1.0 if such proposed Incurrence is on or prior to December 31, 1998; and at
least equal to 3.0 to 1.0 if such proposed Incurrence is thereafter.
(c) Neither the Company nor any Subsidiary Guarantor will, directly
or indirectly, in any event Incur any Indebtedness which by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated to any other
Indebtedness of the Company or such Subsidiary Guarantor, as the case may be,
unless such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly
-40-
<PAGE>
subordinate to the Securities or the Subsidiary Guarantee of such Subsidiary
Guarantor, as the case may be, to the same extent and in the same manner as such
Indebtedness is subordinated pursuant to subordination provisions that are most
favorable to the holders of any other Indebtedness of the Company or such
Subsidiary Guarantor, as the case may be.
(d) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur no more than $15 million of secured Indebtedness.
SECTION 4.05. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of its Subsidiaries and the rights (charter and statutory) and material
franchises of the Company and each of its Subsidiaries; provided, however, that
-------- -------
the Company shall not be required to preserve any such right or franchise, or
the corporate, partnership or other existence of any Subsidiary, if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and each of its
Subsidiaries, taken as a whole, and that the loss thereof is not, and will not
be, disadvantageous in any material respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges levied or imposed upon it or any of its Subsidiaries or
upon the income, profits or property of it or any of its Subsidiaries and (ii)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a Lien upon the property of it or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
-------- -------
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which appropriate provision has been
made.
SECTION 4.07. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall cause all material properties owned by or
leased by it or any of its Subsidiaries used or useful to the conduct of its
business or the business of any of its Subsidiaries to be improved or maintained
and kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its judgment may
be necessary, s o that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section 4.07 shall prevent the Company or any of its
Subsidiaries from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors or of the board of directors of any
Subsidiary of the Company concerned, or of an officer (or other agent
-41-
<PAGE>
employed by the Company or of any of its Subsidiaries) of the Company or any of
its Subsidiaries having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Subsidiary of the
Company, and if such discontinuance or disposal is not adverse in any material
respect to the Holders.
(b) The Company shall maintain, and shall cause its Subsidiaries to
maintain, insurance with responsible carriers against such risks and in such
amounts, and with such deductibles, retentions, self-insured amounts and co-
insurance provisions, as are customarily carried by similar businesses of
similar size.
SECTION 4.08. Compliance Certificate: Notice of Default; Tax Information.
-----------------------------------------------------------
(a) For so long as any of the Securities are outstanding or any
obligation of the Company or the Subsidiary Guarantors with respect thereto
remains unpaid finally and in full, the Company shall deliver to the Trustee,
within 120 days after the close of each fiscal year an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries has
been made under the supervision of the signing officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge the Company during
such preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event of Default occurred during such year
and at the date of such certificate there is no Default or Event of Default has
occurred and is continuing or, if such signers do know of such Default or Event
of Default, the certificate shall describe its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end. Upon the
qualifications of this Indenture under the TIA, such Officer's Certificate shall
comply with TIA (S)314(a)(4).
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
annual financial statements delivered pursuant to Section 4.10 shall be
accompanied by a written report of the Company's independent accountants (who
shall be a firm of established national reputation) that in conducting their
audit of such financial statements nothing has come to their attention that
would lead them to believe that the Company has violated any provisions of
Article 4 or 5 of this Indenture insofar as they relate to accounting matters
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) The Company shall deliver to the Trustee, promptly upon any
Officer becoming aware of any Default or Event of Default in the performance of
any covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its status
with particularity.
(d) The Company shall calculate and deliver to the Trustee all
original issue discount information to be reported by the Trustee to Holders as
required by law.
-42-
<PAGE>
SECTION 4.09. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as would not in the aggregate have a
material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries taken as a whole.
SECTION 4.10. SEC Reports.
-----------
(a) For so long as any of the Securities remain outstanding or any
obligation of the Company or the Subsidiary Guarantors with respect thereto
remains unpaid finally and in full, the Company will file with the SEC all
information, documents and reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act, whether or not the Company is subject
to such filing requirements so long as the SEC will accept such filings. The
Company will file with the Trustee within 15 days after it files them with the
SEC, copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe), without exhibits, which the Company files with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification
of this Indenture under the TIA, the Company shall also comply with the
provisions of TIA (S) 314(a).
(b) Regardless of whether the Company is required to furnish such
reports to its stockholders pursuant to the Exchange Act, the Company shall
cause its consolidated financial statements, comparable to that which would have
been required to appear in annual or quarterly reports, to be delivered to the
Trustee and the Holders. The Company will also make such reports available to
prospective purchasers of the Securities, securities analysts and broker-dealers
upon their request.
(c) For so long as any of the Securities remain outstanding or any
obligation of the Company or the Subsidiary Guarantors with respect thereto
remains unpaid finally and in full, the Company will make available to any
prospective purchaser of the Securities or beneficial owner of the Securities in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as the Company has consummated the
exchange offer the Series A Securities for Series B Securities which have been
registered under the Securities Act or until such time as the holders thereof
have disposed of such Securities pursuant to an effective registration statement
filed by the Company.
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or
-43-
<PAGE>
forgive the Company from paying all or any portion of the principal of and/or
interest on the Securities as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture, and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 4.12. Limitation on Transactions with Affiliates.
------------------------------------------
(a) The Company shall not, and shall not cause or permit any of its
Subsidiaries to, conduct any business or enter into any transaction or series of
transactions with or for the benefit of any of their Affiliates (each an
"Affiliate Transaction") but excluding Specified Affiliate Transactions, except
- ----------------------
in good faith and on terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than those that could have been obtained in a
comparable transaction on an arm's-length basis from a Person not an Affiliate
of the Company or such Subsidiary. All Affiliate Transactions (and each series
of related Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a Fair Market Value in
excess of $250,000 shall be approved by a majority of the independent members of
the Board of Directors of the Company, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Subsidiary of the Company enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate Fair Market Value of more than $5,000,000, the Company or such
Subsidiary shall, prior to the consummation thereof, obtain a favorable opinion
as to the fairness of such transaction or series of related transactions to the
Company or the relevant Subsidiary, as the case may be, from a financial point
of view, from an Independent Financial Advisor and file the same with the
Trustee. Notwithstanding the foregoing, the restrictions set forth in this
Section 4.12 shall not apply to (i) transactions between the Company and any
Subsidiary Guarantor or between Subsidiary Guarantors, (ii) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary as determined in good
faith by the Company's Board of Directors or senior management, or (iii)
Restricted Payments not prohibited by Section 4.03.
SECTION 4.13. Limitation on Conduct of Business.
---------------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in the conduct of any business other than the Business on a basis
consistent with the conduct of such business as it is conducted on the Issue
Date.
SECTION 4.14. Limitation on Dividend and Other
Payment Restrictions Affecting Subsidiaries.
-------------------------------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective
-44-
<PAGE>
any encumbrance or restriction on the ability of any Subsidiary to (a) pay
dividends or make any other distributions on its Capital Stock; (b) make loans
or advances or pay any Indebtedness or other obligation owed to the Company or
to any Subsidiary of the Company; or (c) transfer any of its property or assets
to the Company or to any Subsidiary of the Company (each such encumbrance or
restriction in clause (a), (b), or (c) a "Payment Restriction"), except for such
-------------------
encumbrances or restrictions existing under or by reason of: (1) applicable law;
(2) this Indenture; (3) customary non-assignment provisions of any lease or
license agreements or similar agreements entered into the ordinary course of
business of any Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness Incurred in accordance with paragraph (b) of Section 4.04; provided
--------
that such encumbrance or restriction is not, and will not be, applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, becoming a Subsidiary of the Company; (5)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (6) any restriction or encumbrance
contained in contracts for the sale of assets to be consummated in accordance
with this Indenture solely in respect of the assets to be sold pursuant to such
contract; (7) any restrictions on the sale or other disposition or encumbrance
of any property securing Indebtedness as a result of a Permitted Lien on such
property; (8) any agreement relating to an acquisition of property, so long as
the encumbrances or restrictions in any such agreement relate solely to the
property so acquired and are not or were not created in anticipation of or in
connection with the acquisition thereof; (9) the Senior Credit Facility; or (10)
any encumbrance or restriction contained in Permitted Indebtedness or Permitted
Refinancing Indebtedness Incurred to Refinance the Indebtedness Incurred
pursuant to an agreement referred to in clauses (4), (5) or (9) above; provided,
--------
that the provisions relating to such encumbrance or restriction contained in any
such Permitted Refinancing Indebtedness are no less favorable to the Company or
to the Holders in any material respect in the reasonable and good faith judgment
of the Board of Directors of the Company than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(4), (5) or (9).
SECTION 4.15. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, affirm or suffer
to exist or become effective any Lien of any kind except for Permitted Liens,
upon any of their respective property or assets, whether now owned or acquired
after the Issue Date, or any income, profits or proceeds therefrom, or convey
any right to receive income therefrom. The foregoing covenant will not apply to
any Lien securing Acquired Indebtedness incurred in accordance with the
provisions of Section 4.04, provided that any such Lien extends only to the
--------
property or assets that were subject to such Lien prior to the related
acquisition by the Company or such Subsidiary and was not created, incurred or
assumed in contemplation of such transaction. The incurrence of additional
secured Indebtedness by the Company and its Subsidiaries is subject to further
limitations on the incurrence of Indebtedness as described under Section 4.04.
-45-
<PAGE>
SECTION 4.16. Offer to Repurchase Upon Change of Control.
------------------------------------------
(a) Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to repurchase all or any
part (equal to $ 1,000 or an integral multiple thereof) of such Holder's
Securities on a Business Day (the "Change of Control Payment Date") not more
------------------------------
than 60 nor less than 30 days following such Change of Control, pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
-----------------------
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase (the "Change of Control Payment").
-------------------------
Within 30 days following any Change of Control, the Trustee, at the written
direction of the Company, shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and the
Company's offer to repurchase Securities pursuant to the procedures required by
Section 3.08 and 4.16 and described in such notice. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Securities
as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Securities or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted, together with an Officers'
Certificate stating the aggregate principal amount of Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail or
otherwise deliver to each Holder of Securities so tendered the Change of Control
Payment for such Securities, and the Trustee shall promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Security
equal in principal amount to any unpurchased portion of the Securities
surrendered, if any; provided that each such new Security shall be in a
--------
principal amount of $ 1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) The Change of Control provisions described above shall be
applicable whether or not any other provisions of this Indenture are applicable.
(d) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Company and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
SECTION 4.17. Asset Sales.
-----------
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, engage in an Asset Sale unless (i) the Company or
the Subsidiary, as the case
-46-
<PAGE>
may be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value (evidenced by a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate delivered to the Trustee) of
the assets or Properties issued or sold or otherwise disposed of and (ii) at
least 85% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
--------
of (x) any liabilities (as shown on the Company's or such Subsidiary's most
recent balance sheet) of the Company or any Subsidiary (other than contingent
liabilities and liabilities that are Subordinated Indebtedness or otherwise by
their terms subordinated to the Securities or the Subsidiary Guarantees) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Subsidiary from further
liability and (y) any notes or other obligations received by the Company or any
such Subsidiary from such transferee that are converted by the Company or such
Subsidiary into cash within 180 days of closing such Asset Sale (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 180 days after the receipt of any Net Cash Proceeds from any
Asset Sale, the Company may (i) apply all or any of the Net Cash Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Subsidiary, provided, in each case, that the related loan
commitment of any revolving credit facility or other borrowing (if any) is
thereby permanently reduced by the amount of such Indebtedness so repaid, or
(ii) invest all or any part of the Net Cash Proceeds thereof in properties and
other capital assets that replace the properties or other capital assets that
were the subject of such Asset Sale or in other properties or other capital
assets that will be used in the Business. Pending the final application of any
such Net Cash Proceeds, the Company may temporarily reduce borrowings under any
revolving credit facility or otherwise invest such Net Cash Proceeds in any
manner that is not prohibited by this Indenture. Any Net Cash Proceeds from an
Asset Sale that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Available Proceeds Amount." When
-------------------------
the aggregate Available Proceeds Amount exceeds $2,500,000, the Company shall
make an offer to purchase, from all Holders of the Securities and any then
outstanding Pari Passu Indebtedness required to be repurchased or repaid on a
permanent basis in connection with an Asset Sale, an aggregate principal amount
of Securities and any such Pari Passu Indebtedness equal to such Available
Proceeds Amount as follows:
(i) (A) The Company shall make an offer to purchase (an "Asset
-----
Proceeds Offer") from all Holders of the Securities in accordance with the
--------------
procedures set forth in this Indenture the maximum principal amount
(expressed as a multiple of $1,000) of Securities that may be purchased out
of an amount (the "Payment Amount") equal to the product of such Available
--------------
Proceeds Amount multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Securities and the denominator of which
is the sum of the outstanding principal amount of the Securities and such
Pari Passu Indebtedness, if any (subject to probation in the event such
amount is less than the aggregate Offered Price (as defined in clause (ii)
below) of all Securities tendered), and (B) to the extent required by any
such Pari Passu Indebtedness and provided there is a permanent reduction in
the principal amount of such Pari Passu Indebtedness, the
-47-
<PAGE>
Company shall make an offer to purchase such Pari Passu Indebtedness (a
"Pari Passu Offer") in an amount (the "Pari Passu Indebtedness Amount")
---------------- ------------------------------
equal to the excess of the Available Proceeds Amount over the Payment
Amount.
(ii) The offer price for the Securities shall be payable in cash in
an amount equal to 100% of the principal amount of the Securities tendered
pursuant to an Asset Proceeds Offer, plus accrued and unpaid interest, if
any, to the date such Asset Proceeds Offer is consummated (the "Offered
-------
Price"), in accordance with the procedures set forth in this Indenture. To
-----
the extent that the aggregate Offered Price of the Securities tendered
pursuant to an Asset Proceeds Offer is less than the Payment Amount
relating thereto or the aggregate amount of the Pari Passu Indebtedness
that is purchased or repaid pursuant to the Pari Passu Offer is less than
the Pari Passu Indebtedness Amount (such shortfall constituting an "Asset
-----
Proceeds Deficiency"), the Company may use such Asset Proceeds Deficiency,
-------------------
or a portion thereof, for general corporate purposes, subject to the
limitations of Section 4.03.
(iii) If the aggregate Offered Price of Securities validly tendered
and not withdrawn by Holders thereof exceeds the Payment Amount, Securities
to be purchased will be selected on a pro rata basis. Upon completion of
--- ----
such Net Proceeds Offer and Pari Passu Offer, the amount of Available
Proceeds Amount shall be reset to zero.
The Company shall not permit any Subsidiary to enter into or suffer to
exist any agreement (excluding Permitted Liens) that would place any restriction
of any kind (other than pursuant to law or regulation) on the ability of the
Company to make an Asset Proceeds Offer following any Asset Sale. The Company
will comply with Rule 14e-1 under the Exchange Act, and any other securities
laws and regulations thereunder, if applicable, in the event that an Asset Sale
occurs and the Company is required to purchase Securities as described above.
Any amounts remaining after the purchase of Securities pursuant to an
Asset Proceeds Offer shall be returned by the Trustee to the Company.
SECTION 4.18. Limitation on Issuances and Sales of Capital Stock of
-----------------------------------------------------
Subsidiaries.
- ------------
The Company shall not cause or permit any of its Subsidiaries to issue
or sell any Capital Stock (other than to the Company or to a wholly-owned
Subsidiary of the Company) or permit any Person (other than the Company or a
wholly-owned Subsidiary of the Company) to own or hold any Capital Stock of any
Subsidiary of the Company or any Lien or security interest therein; provided,
--------
however, that this Section 4.18 shall not prohibit the disposition (by sale,
- -------
merger or otherwise) of all of the Capital Stock of a Subsidiary provided any
Net Cash Proceeds therefrom are applied in accordance with Section 4.17.
SECTION 4.19. Limitation on Status as Investment Company.
------------------------------------------
The Company shall not, nor shall it permit any Subsidiary Guarantor
to, register as an "investment company" (as that term is defined in the
Investment Company Act
-48-
<PAGE>
of 1940, as amended), or otherwise become subject to regulation under the
Investment Company Act of 1940.
SECTION 4.20. Sale and Leaseback Transactions.
-------------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, enter into any sale and leaseback transaction; provided that the Company or
--------
any Subsidiary, as applicable, may enter into a sale and leaseback transaction
if (i) the Company could have (a) incurred Indebtedness in an amount equal to
the Attributable Indebtedness relating to such sale and leaseback transaction
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in
clause (b) of Section 4.04 and (b) incurred a Lien to secure such Indebtedness
pursuant to the covenant described above under Section 4.15, (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the Fair
Market Value (as determined in good faith by the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
the covenant described under Section 4.17.
SECTION 4.21. Additional Subsidiary Guarantees.
--------------------------------
If the Company or any of its Subsidiaries transfers or causes to be
transferred, in one transaction or a series of related transactions, any
property to any Subsidiary that is not a Subsidiary Guarantor, or if the Company
or any of its Subsidiaries shall organize, acquire or otherwise invest in
another Subsidiary having total assets with a book value in excess of $50,000,
then such transferee or acquired or other Subsidiary shall (i) execute and
deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Subsidiary shall fully and unconditionally
guarantee all of the Company's obligations under the Notes and the Indenture on
the terms set forth in the Indenture and (ii) deliver to the Trustee an Opinion
of Counsel that such supplemental indenture has been duly authorized, executed
and delivered by such Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Subsidiary. Thereafter, such Subsidiary shall be
a Subsidiary Guarantor for all purposes of the Indenture.
SECTION 4.22. Limitation on Dividends.
-----------------------
The Company will not declare or pay any dividend or make any
distribution (other than dividends or distributions payable solely in Qualified
Capital Stock of the Company) on shares of the Company's Capital Stock to
holders of such Capital Stock.
-49-
<PAGE>
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets.
------------------------------------------
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the Company's assets (determined on a consolidated basis for the Company and
the Company's Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
----------------
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Securities and the
performance of every covenant of the Securities, this Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and, if
applicable, the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to Incur at least $1.00 of additional Indebtedness pursuant to paragraph
(b) of Section 4.04 hereof; provided that in determining the Consolidated Fixed
--------
Charge Coverage Ratio of the Company or such Surviving Entity, as the case may
be, such ratio shall be calculated on a pro forma basis as if the transaction
---------
(including the Incurrence of any Indebtedness or Acquired Indebtedness) took
place on the first day of the Four Quarter Period; (iii) immediately before and
immediately after giving effect to such transaction and, if applicable, the
assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness Incurred
or anticipated to be Incurred and any Lien granted in connection with or in
respect of the transaction) no Default and no Event of Default shall have
occurred or be continuing; and (iv) the Company or the Surviving Entity shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have been
satisfied.
(b) Upon any such consolidation, merger, conveyance, lease or
transfer in accordance with the foregoing, the successor Person formed by such
consolidation or into
-50-
<PAGE>
which the Company is merged or to which such conveyance, lease or transfer is
made will succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor had been named as the Company therein, and thereafter (except in the
case of a sale, assignment, transfer, lease, conveyance or other disposition)
the predecessor corporation will be relieved of all further obligations and
covenants under this Indenture and the Securities.
(c) Each Subsidiary Guarantor (other than any Subsidiary Guarantor
whose Subsidiary Guarantee is to be released in accordance with the terms of the
Guarantee and this Indenture in connection with any transaction complying with
the provisions of Section 4.17) will not, and the Company will not cause or
permit any Subsidiary Guarantor to, consolidate with or merge with or into any
Person or sell, assign, transfer, care, convey or otherwise dispose of all or
substantially all of its assets, other than the Company or any other Subsidiary
Guarantor unless: (i) the entity formed by or surviving any such consolidation
or merger (if other than the Subsidiary Guarantor), or to which such disposition
shall have been made, is a corporation organized and existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) such
entity assumes by supplemental indenture all of the obligations of the
Subsidiary Guarantor on the Subsidiary Guarantee; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; and (iv) immediately after giving effect to such transaction
and the use of any net proceeds therefrom on a pro forma basis, the Company
--- -----
could satisfy the provisions of clause (a)(ii) of this Section 5.01. Any merger
or consolidation of a Subsidiary Guarantor with and into the Company (with the
Company being the surviving entity) or another Subsidiary Guarantor need only
comply with clauses (a)(iii) and (a)(iv) of this Section 5.01.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
----------------
(1) the Company fails to pay interest on any Security when the same
becomes due and payable and such failure continues for a period of 30 days
or more; or
(2) the Company fails to pay the principal of or premium on any
Security, when such principal or premium becomes due and payable, whether
at maturity, upon redemption or otherwise (including the failure to make a
payment to purchase securities properly tendered pursuant to a Change of
Control Offer or an Asset Proceeds Offer); or
(3) the Company defaults in the observance or performance of any
other covenant or agreement contained in this Indenture or any Security
Document which default continues for a period of 30 days after the Company
receives written notice
-51-
<PAGE>
specifying the default from the Trustee or from Holders of at least 25% in
principal amount of outstanding Securities (except in the case of a default
with respect to Section 5.01 hereof, which will constitute an Event of
Default with notice but without passage of time); or
(4) the Company defaults under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness of the Company or of any Subsidiary of the
Company (or the payment of which is guaranteed by the Company or any
Subsidiary of the Company) which default (a) is caused by a failure to pay
principal of, interest or premium, if any, on such Indebtedness after any
applicable grace period provided in such Indebtedness on the date of such
default (a "Payment Default"), or (b) results in the acceleration of such
---------------
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $1,000,000; or
(5) one or more judgments in an aggregate amount in excess of
$1,000,000 (which are not covered by third-party insurance as to which a
financially sound insurer has not disclaimed coverage) being rendered
against the Company or any of its Subsidiaries and such judgments remain
undischarged, or unstayed or unsatisfied for a period of 60 days after such
judgment or judgments become final and non-appealable; or
(6) the Company or any of its Subsidiaries (A) admits in writing its
inability to pay its debts generally as they become due, (B) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (C) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy Law,
(D) consents to the appointment of a Custodian of it or for substantially
all of its property, (E) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (F) makes a general
assignment for the benefit of its creditors, or (G) takes any corporate
action to authorize or effect any of the foregoing;
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Subsidiaries in an
involuntary case or proceeding under any Bankruptcy Law, which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any of its
Subsidiaries, (B) appoint a Custodian of the Company or any of its
Subsidiaries or for substantially all of its property or (C) order the
winding-up or liquidation of its affairs, and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(8) any of the Subsidiary Guarantees ceases to be in full force and
effect, or any of the Subsidiary Guarantees is declared to be null and void
and unenforceable or
-52-
<PAGE>
any of the Subsidiary Guarantees is found to be invalid or any of the
Subsidiary Guarantors denies its liability under its Subsidiary Guarantee
(other than by reason of release of a Subsidiary Guarantor in accordance
with the terms of this Indenture).
The Trustee shall, within 90 days after the occurrence of any Default
actually known to it, give to the Holders notice of such Default; provided that,
--------
except in the case of a Default in the payment of principal of or interest on
any of the Securities, the Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee, or a trust
committee of directors and/or Responsible Officers, of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders.
Notwithstanding the foregoing, if an Event of Default specified in
Section 6.01(4) shall have occurred and be continuing, such Event of Default and
any consequential acceleration shall be automatically rescinded if the
Indebtedness that is the subject of such Event of Default has been repaid, or if
the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in each
--------
case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period or the occurrence of such acceleration).
SECTION 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
clauses (6) or (7) above with respect to the Company) occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the then outstanding Securities may declare the
unpaid principal of, premium, if any, and accrued and unpaid interest on, all
the Securities then outstanding to be due and payable, by a notice in writing to
the Company (and to the Trustee, if given by Holders) and upon such declaration
such principal amount, premium, if any, and accrued and unpaid interest will
become immediately due and payable. If an Event of Default with respect to the
Company specified in clauses (6) or (7) above occurs, all unpaid principal of,
and premium, if any, and accrued and unpaid interest on, the Securities then
outstanding will ipso facto become due and payable without any declaration or
---- -----
other act on the part of the Trustee or any Holder. The Holders of a majority
in principal amount of the Securities then outstanding by notice to the Trustee
may rescind an acceleration and its consequences if (i) all existing Events of
Default, other than the non-payment of the principal and premium, if any, and
interest of the Securities which has become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
-53-
<PAGE>
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Security holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09, 6.02, 6.07 and 9.02, the Holders of not less
than a majority in principal amount of the outstanding Securities by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (1) and (2) of Section 6.01. The Company shall
deliver to the Trustee an Officers' Certificate stating that the requisite
percentage of Holders have consented to such waiver and attaching copies of such
consents. When a Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of not less than a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. Subject to Section 7.01,
however, the Trustee may refuse to follow any direction that conflicts with any
law or this Indenture that the Trustee determines may be unduly prejudicial to
the rights of another Security holder, or that may involve the Trustee in
personal liability; provided that the Trustee may take any other action deemed
--------
proper by the Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture or any Security Document the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
any loss or expense caused by taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
-------------------
Subject to Section 6.07 below, a Security holder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holder or Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
-54-
<PAGE>
(3) such Holder or Holders offer and, if requested, provide to the
Trustee security or indemnity reasonably satisfactory to the Trustee
against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holder or Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Security holder may not use this Indenture to prejudice the rights
of another Security holder or to obtain a preference or priority over such other
Security holder.
SECTION 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of principal
and accrued interest and fees remaining unpaid, together with interest on
overdue principal, in each case at the rate per annum borne by the Securities
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Security holders allowed in any judicial proceedings relating to the Company or
the Subsidiary Guarantors, its creditors or its property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Security holder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Security holders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due
-55-
<PAGE>
the Trustee under Section 7.07. The Trustee may also take any other action with
respect to such claims as it deems necessary or advisable, including
participating as a member of any official committee of creditors appointed in
such proceeding. Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Security
holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Security holder in any such
proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company or the Subsidiary Guarantors, as their
respective interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Security holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
-56-
<PAGE>
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default actually known to the Trustee has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs. The Trustee will be under no
obligation to exercise any of its rights or powers under this Indenture at the
request of any of the holders of Securities, unless they shall have offered and,
if requested, provided to the Trustee security and indemnity satisfactory to it.
(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(1) The Trustee need perform only those duties as are specifically
set forth herein and no others and no implied covenants or obligations
shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions and such
other documents delivered to it and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform, on their face, to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment
-57-
<PAGE>
of such funds is not assured to it or it does not receive security or indemnity
reasonably satisfactory to it in its sole discretion against such risk,
liability, loss, fee or expense which might be incurred by it in compliance with
such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Subsidiary Guarantor. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may conclusively rely on any document believed by it
to be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel, which shall conform to the
provisions of Section 11.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other than an
agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization and
protection from liability in respect of any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered and, if requested, provided to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
(g) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Subsidiary
Guarantor shall be sufficient if signed by an Officer of the Company or such
Subsidiary Guarantor.
-58-
<PAGE>
(h) Except with respect to Section 4.01 and 4.08 hereof, the Trustee
shall have no duty to inquire as to the performance of the Company's covenants
in Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any event of Default
occurring pursuant to Sections 6.01(1) and 6.01(2) hereof or (ii) any Default or
Event of Default of which the Trustee shall have received written notification
or obtained actual knowledge.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Securities or the
Subsidiary Guarantees, it shall not be accountable for the Company's use of the
proceeds from the Securities, it shall not be responsible for the use or
application of any money by a Paying Agent other than the Trustee and it shall
not be responsible for any statement of the Company in this Indenture or any
document issued in connection with the sale of Securities or any statement in
the Securities other than the Trustee's certificate of authentication. The
Trustee makes no representations with respect to the effectiveness or adequacy
of this Indenture or the validity or perfection, if any, of Liens granted under
this Indenture. The Trustee shall not be responsible for independently
ascertaining or maintaining such validity or perfection, if any, and shall be
fully protected in relying upon certificates and opinions delivered to it in
accordance with the terms of this Indenture.
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Security holder, as their names and addresses appear on the Securityholder list
described in Section 2.05, notice of the uncured Default or Event of Default
within 90 days after the Trustee receives such notice. Except in the case of a
Default or an Event of Default in payment of principal of, or interest on, any
Security, including the failure to make any payment due on (i) the Change of
Control Payment Date pursuant to a Change of Control Offer or (ii) the Purchase
Date pursuant to a Purchase Offer, the Trustee may withhold the notice if and so
long as the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers, of the Trustee in good faith determines
that withholding the notice is in the interest of the Securityholders.
-59-
<PAGE>
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA, and, until such qualification,
this Indenture shall be construed as if this Section 7.06 were not contained
herein.
Within 60 days after each May 15 beginning with May 15, 1998, the
Trustee shall, to the extent that any of the events described in TIA (S) 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Securityholder a brief report dated as of such June 15 that complies with TIA
(S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b), 313(c) and
313(d).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each securities
exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any securities exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder (which shall be agreed to from time to
time by the Company and the Trustee). The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall promptly reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for its
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel and any taxes or other expenses
incurred by a trust created pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee and each predecessor trustee
for, and hold it harmless against, any loss, liability, claim, damage or expense
incurred by the Trustee without negligence or willful misconduct on its part
arising out of or in connection with the administration of this trust and its
duties under this Indenture, including the reasonable expenses and attorneys'
fees of defending itself against any claim of liability arising hereunder. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. However, the failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder. The Company shall defend the claim and the Trustee shall cooperate
in the defense (and may employ its own counsel) at the Company's expense. The
Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee as a result of the violation of this Indenture
by the Trustee if such violation arose from the Trustee's negligence or bad
faith.
-60-
<PAGE>
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (6) or (7) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Company's obligations under
this Section 7.07 and any claim arising hereunder shall survive the resignation
or removal of any Trustee, the discharge of the Company's obligations pursuant
to Article Eight and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to its rights under Section 7.07, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Security holder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least
-61-
<PAGE>
10% in principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Security holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
Person, the resulting, surviving or transferee corporation without any further
act shall, if such resulting, surviving or transferee Person is otherwise
eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1) and 310(a)(5). The Trustee and/or its
ultimate parent entity shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition.
The Trustee shall have a combined capital and surplus of at least
$150,000 as set forth in its most recent published annual report of condition.
The Trustee shall comply with TIA (S) 310(b); provided, however, that there
-------- -------
shall be excluded from the operation of TIA (S) 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA (S) 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee, in its capacity as Trustee hereunder shall comply with
TIA (S) 311(a), excluding, in accordance with TIA (S)(S) 311(a) and 311(b), any
creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or
been removed shall be subject to TIA (S) 31I(a) to the extent indicated.
-62-
<PAGE>
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either paragraph (b) or paragraph
(c) below be applied to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company and the Subsidiary Guarantors
shall be deemed to have been released and discharged from their respective
obligations with respect to the outstanding Securities and the Subsidiary
Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
----------------
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
-----------
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all their respective obligations under such Securities, the Subsidiary
Guarantees and this Indenture, except for the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders
of outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of and interest on such Securities when such payments
are due and (ii) obligations listed in Section 8.03, subject to compliance with
this Section 8.01. The Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company and the Subsidiary Guarantors
shall be released and discharged from their respective obligations under any
covenant contained in Article 5 and in Sections 4.03 through 4.22 with respect
to the outstanding Securities on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Securities
-------------------
shall thereafter be deemed to be not "outstanding" for the purpose of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Securities, the Company and any Subsidiary Guarantor may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01(3), nor shall any event referred to in Section 6.01(4) or (5)
thereafter constitute a Default or an Event of Default thereunder but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
-63-
<PAGE>
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited or caused to be
deposited, in trust, with the Trustee, for the benefit of the Holders, U.S.
Legal Tender or direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America for the payment of
which obligation or guarantee the full faith and credit of the United
States of America is pledged ("U.S. Government Obligations") maturing as to
---------------------------
principal and interest in such amounts and at such times as are sufficient,
without consideration of the reinvestment of such interest and after
payment of all Federal, state and local taxes or other charges or
assessments in respect thereof payable by the Trustee, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof (in form and substance reasonably
satisfactory to the Trustee) delivered to the Trustee, to pay the principal
of, premium, if any, and interest on all the outstanding Securities on the
dates on which any such payments are due and payable in accordance with the
terms of this Indenture and of the Securities (whether at stated maturity
or on the applicable redemption date);
(2) Such deposits shall not cause the Trustee to have a conflicting
interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates stating
that no Default or Event of Default or event which with notice or lapse of
time or both would become a Default or an Event of Default with respect to
the Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Section 6.01(6) or (7) is concerned, at any time
during the period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until
the expiration of such period);
(4) The Trustee shall have received Officers' Certificates stating
that such deposit will not result in a Default under this Indenture or a
breach or violation of, or constitute a default under, any other material
instrument or agreement to which the Company or any of its Subsidiaries is
a party or by which it or its property is bound;
(5) (i) In the event the Company elects paragraph (b) hereof, the
Company shall deliver to the Trustee an Opinion of Counsel in the United
States, in form and substance reasonably satisfactory to the Trustee to the
effect that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the Issue Date,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel shall
state that Holders of the Securities will not recognize income gain or loss
for Federal income tax purposes as a result of such deposit and the
defeasance contemplated hereby and will be subject to Federal income taxes
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred, or (ii) in the event the
Company elects paragraph (c) hereof, the Company shall deliver to the
-64-
<PAGE>
Trustee an Opinion of Counsel in the United States, in form and substance
reasonably satisfactory to the Trustee, to the effect that Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated hereby
and will be subject to Federal income tax in the same amounts and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred;
(6) The deposit shall not result in the Company, the Trustee or the
trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
(7) The Company shall have delivered to the Trustee an Officer's
Certificate, in form and substance reasonably satisfactory to the Trustee,
stating that the deposit under clause (1) was not made by the Company or
any Subsidiary with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or any Subsidiary or others;
(8) The Company shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that, (A) the trust funds will not be subject to any rights of
holders of Indebtedness, including, without limitation, those rights
arising under this Indenture, and (B) the 91st day following the deposit
after the trust funds will not be subject to any applicable Bankruptcy Law;
provided, however, that if a court were to rule under any such law in any
-------- -------
case or proceeding that the trust funds remained property of the Company,
no opinion needs to be given as to the effect of such laws on the trust
funds except the following: (A) assuming such trust funds remained in the
Trustee's possession prior to such court ruling to the extent not paid to
Holders of Securities, the Trustee will hold, for the benefit of the
Holders of Securities, a valid and enforceable security interest in such
trust funds that is not avoidable in bankruptcy or otherwise, subject only
to principles of equitable subordination, (B) the Holders of Securities
will be entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used, and (C) no property, rights in
property or other interests granted to the Trustee or the Holders of
Securities in exchange for or with respect to any of such funds will be
subject to any prior rights of any other person, subject only to prior
Liens granted under Section 364 of Title 11 of the U.S. Bankruptcy Code (or
any section of any other Bankruptcy Law having the same effect), but still
subject to the foregoing clause (B); and
(9) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
specified herein relating to the defeasance contemplated by this Section
8.01 have been complied with.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time
-65-
<PAGE>
of such deposit, for the giving of the notice of such redemption or redemptions
by the Trustee in the name and at the expense of the Company.
SECTION 8.02. Satisfaction and Discharge.
--------------------------
This Indenture shall upon the request of the Company cease to be of
further effect (except as provided in Section 8.03) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(a) either
(i) all Securities theretofore authenticated and delivered (other
than (A) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.07 and (B) Securities
for whose payment money has been deposited in trust with the Trustee or any
Paying Agent and thereafter paid to the Company or discharged from such
trust) have been delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee for
cancellation
(A) have become due and payable, or
(B) will become due and payable at their maturity within one
year, or
(C) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of clause (A), (B) or (C) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose money or U.S. Government Obligations in an amount sufficient (as
certified by an independent public accountant designated by the Company) to pay
and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Securities which have
become due and payable) or the stated maturity or Redemption Date, as the case
may be;
(b) the Company has paid or caused to paid all other sums then due
and payable hereunder by the Company;
(c) no Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit and after
giving effect to such deposit; and
-66-
<PAGE>
(d) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
SECTION 8.03. Survival of Certain Obligations.
-------------------------------
Notwithstanding the satisfaction and discharge of this Indenture and
of the Securities referred to in Section 8.01 or 8.02, the respective
obligations of the Company and the Trustee under Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.08. 2.10, 2.12, 3.01, 3.02, 3.03, 3.04, 3.05, 3.06, 3.07(a),
4.02, 6.07, Article Seven, Sections 8.04, 8.05, 8.06 and 8.07 shall survive
until the Securities are no longer outstanding, and thereafter the obligations
of the Company and the Trustee under Sections 7.07, 8.04, 8.05, 8.06 and 8.07
shall survive. Nothing contained in this Article Eight shall abrogate any of
the obligations or duties of the Trustee under this Indenture.
SECTION 8.04. Acknowledgment of Discharge by Trustee.
--------------------------------------
Subject to Section 8.07, after (i) the conditions of Section 8.01 or
8.02 have been satisfied, (ii) the Company has paid or caused to be paid all
other sums payable hereunder by the Company and (iii) the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified in Section 8.03.
SECTION 8.05. Application of Trust Assets.
---------------------------
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it pursuant to this Article Eight in the irrevocable
trust established pursuant to Section 8.01 or 8.02. The Trustee shall apply the
deposited U.S. Legal Tender or the U.S. Government Obligations, together with
earnings thereon, either directly or through the Paying Agent, in accordance
with this Indenture to the payment of principal of and interest on the
Securities. The U.S. Legal Tender or U.S. Government Obligations so held in
trust and deposited with the Trustee in compliance with Section 8.01 or 8.02
shall not be part of the trust estate under this Indenture, but shall constitute
a separate trust fund for the benefit of all Holders entitled thereto.
SECTION 8.06. Repayment to the Company or Subsidiary Guarantors: Unclaimed
-------------------------------------------------------------
Money.
-----
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to
the Company, or if deposited with the Trustee by any Subsidiary Guarantor, to
such Subsidiary Guarantor, upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Section 8.01, held
by it at any time. The Trustee and the Paying Agent shall pay to the Company or
any Subsidiary Guarantor, as the case may be,
-67-
<PAGE>
upon receipt by the Trustee or the Paying Agent, as the case may be, of an
Officers' Certificate, any money held by it for the payment of principal,
premium, if any, or interest that remains unclaimed for one year after payment
to the Holders is required; provided, however, that the Trustee and the Paying
-------- -------
Agent before being required to make any payment may, but need not, at the
expense of the Company cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein, which shall be at least 30 days from the date of such publication or
mailing, any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company of any Subsidiary Guarantor, as the
case may be, Security holders entitled to money must look solely to the Company
for payment as general creditors unless an applicable abandoned property law
designates another person, and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.
SECTION 8.07. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then the Company's and each Subsidiary Guarantor's, if any, obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had been made pursuant to this Indenture until such time as
the Trustee is permitted to apply all such money or U.S. Government Obligations
in accordance with this Indenture provided, however, that if the Company or the
-------- -------
Subsidiary Guarantors, as the case may be, have made any payment of principal
of, premium, if any, or interest on any Securities because of the reinstatement
of its obligations, the Company or the Subsidiary Guarantors, as the case may
be, shall be, subrogated to the rights of the holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company and each Subsidiary Guarantor, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture or
the Securities without notice to or consent of any Security holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article V hereof of
another Person to the Company and the assumption by any such successor of
the covenants of the Company herein and in the Securities;
-68-
<PAGE>
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any other change that does not materially adversely
affect the rights of any Securityholders hereunder; or
(5) to comply with any requirements of the SEC in connection with the
qualification of this Indenture under the TIA; or
(6) to add or release any Subsidiary Guarantor pursuant to the terms
of this Indenture; or
(7) to evidence and provide for the acceptance or appointment
hereunder by a successor Trustee with respect to the Securities.
provided that the Company has delivered to the Trustee an Opinion of Counsel and
- --------
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Company and each Subsidiary Guarantor,
when authorized by a Board Resolution, and the Trustee, together, with the
written consent of the Holder or Holders of at least a majority in aggregate
principal amount of the outstanding Securities, may amend or supplement this
Indenture, or the Securities, without notice to any other Securityholders.
Subject to Section 6.07, the Holder or Holders of a majority in aggregate
principal amount of the outstanding Securities may waive compliance by the
Company with any provision of this Indenture, or the Securities without notice
to any other Securityholder. Without the consent of each Securityholder
affected hereby, however, no amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities or the Subsidiary Guarantees;
(2) reduce the rate or change the time for payment of interest,
including default interest, on any Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security, or change the date on
which any Securities may be subject to redemption or repurchase or reduce
the redemption price or repurchase price therefor;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Security on or after
-69-
<PAGE>
the due date thereof or to bring suit to enforce such payment, or
permitting Holders of a majority in principal amount of the Securities to
waive Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this Section 9.02;
(7) make the principal of, or the interest on any Security payable in
money other than as provided for in this Indenture, the Securities and the
Guarantees as in effect on the date hereof,
(8) affect the ranking of the Securities or the Guarantees, in each
case in a manner adverse to the Holders;
(9) amend, modify or change the obligation of the Company to make or
consummate a Change of Control Offer, or an Asset Proceeds Offer or waive
any default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers; or
(10) release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee or the Indenture otherwise than in
accordance with the terms of the Indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with TIA.
-------------------
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have
-70-
<PAGE>
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to revoke any consent previously given, whether or not such
persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 120 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (10) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new security shall not
affect the validity of such amendment, supplement or waiver.
SECTION 9.06. Trustee to Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine provided that the Trustee may, but
--------
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and constituted the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel shall
be at the expense of the Company, and the Trustee shall have a lien under
Section 7.07 for any such expense.
-71-
<PAGE>
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.
-----------------------
Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees (such guarantee to be referred to herein as the
"Subsidiary Guarantee") to each Holder of a Security authenticated and delivered
- ---------------------
by the Trustee and to the Trustee and its successors and assigns, the Securities
or the Obligations of the Company hereunder or thereunder, that: (i) the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any, and
interest on any interest, to the extent lawful, of the Securities and all other
Obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (ii) in case of any extension of time of payment or
renewal of any Securities or of any such other obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration or otherwise, subject, however, in the case of clauses
(i) and (ii) above, to the limitations set forth in Section 10.03. Each
Subsidiary Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, and action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Subsidiary
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that this Subsidiary Guarantee will not be
discharged except by complete performance of the obligations contained in the
Securities, this Indenture and in this Subsidiary Guarantee. If any
Securityholder or the Trustee is required by any court or otherwise to return to
the Company, any Subsidiary Guarantor, or any custodian, trustee, liquidator or
other similar official acting in relation to the Company or any Subsidiary
Guarantor, any amount paid by the Company or any Subsidiary Guarantor to the
Trustee or such Securityholder, the Subsidiary Guarantees, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Six for the purposes of the Subsidiary Guarantees, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article Six, such obligations (whether or not
due and payable) shall forthwith become due and payable by each Subsidiary
Guarantor for the purpose of the Subsidiary Guarantees. A Subsidiary Guarantee
shall not become valid or obligatory for any purpose with respect to a Security
-72-
<PAGE>
unless the certificate of authentication on such Security shall have been signed
by or on behalf of the Trustee.
SECTION 10.02. Severability.
------------
In case any provision of the Subsidiary Guarantees shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. Limitation of Subsidiary Guarantor's Liability.
----------------------------------------------
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under the Subsidiary Guarantee shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to Section 10.05, result in
the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not
constituting such fraudulent transfer or conveyance under federal or state law.
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
-------------------------------------------------------------
(a) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
the Company or another Subsidiary Guarantor or shall prevent any sale of assets
or conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to the Company or another Subsidiary Guarantor.
Upon any such consolidation, merger, sale or conveyance, the Subsidiary
Guarantee given by such Subsidiary Guarantor shall no longer have any force or
effect.
(b) Except as set forth in Article Four, Article Five hereof and
Section 10.04(c), nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into other Persons other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor) or shall
prevent any sale of assets, or conveyance of the property, of a Subsidiary
Guarantor as an entirety or substantially as an entirety, to Persons other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor); provided, however, that, (i) immediately after such
-----------------
transaction, and giving effect thereto such transaction does not (a) violate any
covenants set forth herein or (b) result in a Default or Event of Default under
this Indenture that is continuing, and (ii) upon any such consolidation, merger,
sale or conveyance, the Subsidiary Guarantee set forth in this Article Ten, and
the due
-73-
<PAGE>
and punctual performance and observance of all of the covenants and conditions
of this Indenture to be performed by such Subsidiary Guarantor, shall be
expressly assumed (in the event that the Subsidiary Guarantor is not the
surviving Person in the merger), by supplemental indenture satisfactory in form
to the Trustee, executed and delivered to the Trustee, by the Person formed by
such consolidation, or into which the Subsidiary Guarantor shall have merged, or
by the Person that shall have acquired such assets or property. In the case of
any such consolidation, merger, sale or conveyance and upon the assumption by
the successor corporation, by supplemental indenture executed and delivered to
the Trustee and satisfactory in form to the Trustee of the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Subsidiary Guarantor, such successor Person shall succeed to
and be substituted for the Subsidiary Guarantor with the same effect as if it
had been named herein as a Subsidiary Guarantor; provided, however, that solely
-------- -------
for purposes of computing amounts described in subclause (iii) of the first
paragraph of Section 4.03 any such successor Person shall only be deemed to have
succeeded to and be substituted for any Subsidiary Guarantor with respect to
periods subsequent to the effective time of such merger, consolidation or
transfer of assets.
(c) Upon the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Subsidiary Guarantor (or all or substantially all
its assets) to an entity which is not a Subsidiary of the Company and which sale
or disposition is otherwise in compliance with the terms of this Indenture
(including, without limitation, Sections 4.17, 4.20 and 4.21), such Subsidiary
Guarantor shall be deemed released from all obligations under this Article Ten
without any further action required on the part of the Trustee or any Holder;
provided, however, that any such termination shall occur only to the extent that
- -------- -------
all obligations of such Subsidiary Guarantor under all of its Guarantees of, and
under all of its pledges of assets or other security interests which secure, any
other Indebtedness of the Company shall also terminate upon such release, sale
or transfer.
The Trustee shall deliver an appropriate instrument or instruments
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 10.04. Any Subsidiary Guarantor not so released remains liable
for the full amount of principal of and interest on the Securities as provided
in this Article Twelve.
SECTION 10.05. Contribution.
------------
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
----- --
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Subsidiary Guarantee, such Funding Guarantor
- ------------------
shall be entitled to a contribution from all other Subsidiary Guarantors in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor
- --- ----
(including the Funding Guarantor) for all payments, damages and expenses
incurred by that Funding Guarantor in discharging the Company's obligations with
respect to the Securities or any other Subsidiary Guarantor's obligations with
respect to the Subsidiary Guarantee. "Adjusted Net Assets" of such Subsidiary
-------------------
Guarantor at any date shall
-74-
<PAGE>
mean the lesser of the amount by which (x) the Fair Value of the property of
such Subsidiary Guarantor exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date (other than
liabilities of such Subsidiary Guarantor under Indebtedness Subordinated to such
Subsidiary Guarantor's Subsidiary Guarantee)), but excluding liabilities under
the Subsidiary Guarantee, of such Subsidiary Guarantor at such date and (y) the
present fair salable value of the assets of such Subsidiary Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Subsidiary Guarantor on its debts (after giving effect to all other fixed
and contingent liabilities incurred or assumed on such date and after giving
effect to any collection from any Subsidiary of such Subsidiary Guarantor in
respect of the obligations of such Subsidiary under the Subsidiary Guarantee),
excluding debt in respect of the Subsidiary Guarantee of such Subsidiary
Guarantor, as they become absolute and matured.
SECTION 10.06. Waiver of Subrogation.
---------------------
Until all Subsidiary Guarantee Obligations are paid in full each
Subsidiary Guarantor hereby irrevocably waives any claims or other rights which
it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under the Subsidiary Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding sentence
and the Securities shall not have been paid in full, such amount shall have been
deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Securities, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Subsidiary Guarantor acknowledges that
it will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
10.06 is knowingly made in contemplation of such benefits.
SECTION 10.07. Execution of Subsidiary Guarantee.
---------------------------------
To evidence their guarantee to the Securityholders set forth in this
Article Ten, the Subsidiary Guarantors hereby agree to execute the Subsidiary
Guarantee in substantially the form included in Exhibit A-1 and A-2, which shall
be endorsed on each Security ordered to be authenticated and delivered by the
Trustee. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee
set forth in this Article Ten shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Subsidiary Guarantee. Each such Subsidiary Guarantee shall be signed on behalf
of each Subsidiary
-75-
<PAGE>
Guarantor by an Officer (who shall, in each case, have been duly authorized by
all requisite corporate actions) prior to the authentication of the Security on
which it is endorsed, and the delivery of such Security by the Trustee, after
the authentication thereof hereunder, shall constitute due delivery of such
Subsidiary Guarantee on behalf of such Subsidiary Guarantor. Such signature upon
the Subsidiary Guarantee may be by manual or facsimile signature of such Officer
and may be imprinted or otherwise reproduced on the Subsidiary Guarantee, and in
case any such Officer who shall have signed the Subsidiary Guarantee shall cease
to be such officer before the Security on which such Subsidiary Guarantee is
endorsed shall have been authenticated and delivered by the Trustee or disposed
of by the Company, such Security nevertheless may be authenticated and delivered
or disposed of as though the person who signed the Subsidiary Guarantee had not
ceased to be such Officer of the Subsidiary Guarantor.
SECTION 10.08. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive each
such Subsidiary Guarantor from performing its Subsidiary Guarantee as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) each such Subsidiary Guarantor hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of Sections 310 to 318, inclusively of the
TIA, the imposed duties shall control.
SECTION 11.02. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
-76-
<PAGE>
if to the Company or any Subsidiary Guarantor:
VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, Massachusetts 01810
Attention: President
Facsimile: (978) 975-7208
Telephone: (978) 975-3700
with copies to:
Mirick, O'Connell, DeMallie & Lougee, LLP
1700 Bank of Boston Tower
100 Front Street
Worcester, MA 01608
Attention: David L. Lougee
Facsimile: (508) 752-7305
Telephone: (508) 799-0541
if to the Trustee:
State Street Bank and Trust Company
Corporate Trust Division
Two International Place
Boston, Massachusetts 02110
Attention: Mr. Roland Gustafsen
Facsimile: (617) 664-5371
Telephone: (617) 664-5665
with copies to:
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: Robert J. Coughlin
Facsimile: (617) 951-2125
Telephone: (617) 951-2100
Each of the Company, the Subsidiary Guarantors and the Trustee by
written notice to each other such person may designate additional or different
addresses for notices to such person. Any notice or communication to the Company
and the Trustee, shall be deemed to have been given or made as of the date so
delivered if personally delivered; when answered
-77-
<PAGE>
back, if telexed; when receipt is acknowledged, if telecopied; and five (5)
calendar days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Security holder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture, the
Securities or the Subsidiary Guarantees. The Company, the Trustee, the
Registrar and any other person shall have the protection of TIA (S) 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
-78-
<PAGE>
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
--------
however, that with respect to matters of fact an Opinion of Counsel may
-------
rely on an Officers' Certificate or certificates of public officials.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such Person
or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one or
more other such Persons as to such other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee, Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.07. Legal Holidays.
--------------
If a payment date is not a Business Day, payment may be made on the
next succeeding day that is a Business Day and no interest shall accrue for the
period from such Redemption Date to such succeeding Business Day.
SECTION 11.08. Governing Law.
-------------
THIS INDENTURE, THE SECURITIES AND THE SUBSIDIARY GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
-79-
<PAGE>
SECTION 11.10. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder, partner or incorporator,
as such, of the Company or any Subsidiary Guarantor whether past, present or
future shall not have any liability for any obligations of the Company or such
Subsidiary Guarantor under the Securities, this Indenture or the Subsidiary
Guarantees or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 11.11. Successors.
----------
This Agreement shall inure to the benefit of and be binding upon the
successors and assignees of the Company, the Subsidiary Guarantees and the
Trustee.
SECTION 11.12. Counterparts.
------------
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
SECTION 11.13. Severability.
------------
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
SECTION 11.14. Entire Agreement.
----------------
This Agreement is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, warranties, contracts, understandings,
correspondence, conversations and memoranda between the parties hereto, any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof and
thereof are merged herein and replaced hereby.
-80-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
------------------------------
Name: Glenn D. Bolduc
Title: President and Chief Executive Officer
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Roland S. Gustafsen
-------------------------------
Name: Roland S. Gustafsen
Title: Assistant Vice President
THE SUBSIDIARY GUARANTORS:
TELEPHONE BUSINESS MEETINGS, INC.
d/b/a ACCESS CONFERENCE CALL SERVICE
By: /s/ Glenn D. Bolduc
------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
CONFERENCE SOURCE INTERNATIONAL,
INC.
By: /s/ Glenn D. Bolduc
------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
CALL POINTS, INC.
By: /s/ Glenn D. Bolduc
------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
-81-
<PAGE>
KENDALL SQUARE TELECONFERENCING,
INC. d/b/a THE CONFERENCE CENTER
By: /s/ Glenn D. Bolduc
------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
AMERICAN CONFERENCING COMPANY,
INC. d/b/a AMERICO
By: /s/ Glenn D. Bolduc
------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
COMMUNICATION DEVELOPMENT
CORPORATION
By: /s/ Glenn D. Bolduc
------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
-82-
<PAGE>
SCHEDULE I
Specified Affiliate Transactions
The following are Specified Affiliate Transactions:
[To be completed.]
-83-
<PAGE>
EXHIBIT A-1
-----------
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1993, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
--------------
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
-------------------
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
-------------------- ------------- ----
PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
- ------
-84-
<PAGE>
[THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $57.93 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS NOVEMBER 12, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 14.7%
COMPOUNDED SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON
ACCRUAL PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE
360 DAYS PER YEAR CONVENTION.]
-85-
<PAGE>
CUSIP No. [ ]
VIALOG CORPORATION
12 3/4% Senior Note
due November 15, 2001
No. $
VIALOG CORPORATION, a Massachusetts corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on November 15,
2001.
Interest Payment Dates: May 15 and November 15 commencing May 15, 1998
Record Dates: May 1 and November 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
VIALOG CORPORATION
[SEAL] By:
-----------------------------------
Name:
Title:
Attest:
- ------------------------------
Secretary
-86-
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned Indenture.
Dated: STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
-----------------------------------
Authorized Signatory
-87-
<PAGE>
VIALOG CORPORATION
12 3/4% Senior Note
due November 15, 2001
1. Interest.
--------
VIALOG CORPORATION, a Massachusetts corporation (the "Company"),
-------
promises to pay interest on the principal amount of this Security at the rate
per annum shown above, which rate is subject to increase of up to 1.50% per
annum in certain circumstances described in the Registration Rights Agreement
dated November 12, 1997 between the Company, the Initial Purchaser and the
Subsidiary Guarantors. The Company will pay interest semi-annually on May 15
and November 15 of each year (the "Interest Payment Date"), commencing May 15,
---------------------
1998. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from November 12, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
-----------------
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date, except as provided
in Section 2.17 of the Indenture with respect to defaulted interest. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest at the location of the principal office
of the Paying Agent in money of the United States that at the time of payment is
legal tender for payment of public and private debts ("U.S. Legal Tender").
-----------------
However, the Company may pay principal and interest by wire transfer in same day
funds, or, in the case of Physical Securities, by check payable in such U.S.
Legal Tender.
3. Paying Agent and Registrar.
--------------------------
Initially, State Street Bank and Trust Company (the "Trustee") will
-------
act as Paying Agent and Registrar. The Company may charge any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
------------------------
The Company issued the Securities under an Indenture, dated as of
November 12, 1997 (the "Indenture"), among the Company, the Subsidiary
---------
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"),
---
as in effect on the date of the Indenture until such time as the Indenture is
qualified
-88-
<PAGE>
under the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Holders of Securities are referred
to the Indenture and said Act for a statement of them. The Securities are
general unsecured obligations of the Company limited in aggregate principal
amount to $75,000,000. Payment on each Security is guaranteed on a senior basis,
jointly and severally, by the Subsidiary Guarantors pursuant to Article Ten of
the Indenture.
5. Optional Redemption.
-------------------
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after November 15, 1999 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on November 15 of the year
set forth below (but not including the date of maturity), plus, in each case,
accrued interest thereon to the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999........................... 110%
2001........................... 105%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to November 15,
1999, the Company may redeem up to an aggregate of 35% of the original principal
amount of Securities at a redemption price of 112.75% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the redemption date with
the net proceeds of any Public Equity Offering; provided that at least 65% in
--------
aggregate of the original principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
-------- -------
such redemption occurs within 90 days of the date of the closing of such Public
Equity Offering.
In addition, prior to November 15, 1999, the Securities will be
redeemable at the Company's option, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' prior notice mailed
by first-class mail to each Holder's registered address, at a redemption price
(expressed as a percentage of principal amount) equal to the sum of the
principal amount of such Securities plus the applicable Make-Whole Premium
thereon at the time of redemption (subject to the right of Holders of record on
the relevant record date to receive interest due to the relevant interest
payment date).
The following definitions are used to determine the applicable Make-
Whole Premium:
"Applicable Make-Whole Premium" means, with respect to a Security at
the redemption date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value of such time of (1) the
redemption price of such Security at November 15, 1999 plus (2) all required
interest payments (excluding accrued but unpaid interest) due on such Security
through November 1, 1999, computed using a discount rate
-89-
<PAGE>
equal to the Treasury Rate plus 100 basis points, over (B) the principal amount
of such Security at such time.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for repayment (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
Weighted Average Life to Maturity) of the Securities; provided, however, that if
the Weighted Average Life to Maturity of the Securities is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given.
6. Repurchase at Option of Holder.
------------------------------
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
-----------------------
to $1,000 or an integral multiple thereof) of each Holder's Securities at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment"). Within
-------------------------
30 days following the occurrence of a Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions and setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, the
Indenture requires that certain proceeds be used, subject to the limitations
contained therein, to make an offer to all Holders of Securities (an "Asset
-----
Proceeds Offer") pursuant to Section 4.17 of the Indenture to purchase certain
- --------------
amounts of Securities in accordance with the procedures set forth in the
Indenture.
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the redemption
date, interest will cease to accrue on Securities or portions thereof called for
redemption.
-90-
<PAGE>
8. Sinking- Fund.
-------------
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith. The
Registrar need not register the transfer of or exchange any securities or
portions thereof selected for redemption, except the unredeemed portion of any
security being redeemed in part.
10. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
----------------------------------------
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
----------------
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
-------------------
case upon satisfaction of certain conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA,
-91-
<PAGE>
or make any other change that does not materially adversely affect the rights of
any Holder of a Security.
14. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
---------------------
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest, including an accelerated
payment) if it determines that withholding notice is in their interest.
16. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
17. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the securities.
-92-
<PAGE>
18. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
VIALOG Corporation, 3 Riverside Drive, Andover, MA 01810, Attn.: President.
-93-
<PAGE>
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) have unconditionally
guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Ten of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
TELEPHONE BUSINESS MEETINGS, INC.
d/b/a ACCESS CONFERENCE CALL SERVICE
By:
-----------------------------------
Name:
Title:
CONFERENCE SOURCE INTERNATIONAL,
INC.
By:
-----------------------------------
Name:
Title:
CALL POINTS, INC.
By:
-----------------------------------
-94-
<PAGE>
Name:
Title:
KENDALL SQUARE TELECONFERENCING,
INC. d/b/a THE CONFERENCE CENTER
By:
-----------------------------------
Name:
Title:
AMERICAN CONFERENCING COMPANY,
INC. d/b/a AMERICO
By:
-----------------------------------
Name:
Title:
COMMUNICATION DEVELOPMENT
CORPORATION
By:
-----------------------------------
Name:
Title:
-95-
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
______________________________________________________________________________
______________________________________________________________________________
(Print or type name, address and zip code of assignee)
______________________________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Security (which
--------------
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) _____________, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that:
[Check One]
-----------
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.15 of the Indenture shall have
been satisfied.
Dated: Signed:
-------------------------- ---------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-96-
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
--------------------- ------------------------------------
NOTICE: To be executed by an
executive officer
-97-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, state this amount:
$ ____________________________
(multiple of $1,000)
Date: Your Signature:
--------------------------- ----------------------------
(Sign exactly as your name
appears on the other side of
this Security )
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-98-
<PAGE>
EXHIBIT A-2
-----------
[FORM OF SERIES B SECURITY]
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $57.93 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS NOVEMBER 12, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 14.7%
COMPOUNDED SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON
ACCRUAL PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE
360 DAYS PER YEAR CONVENTION.
VIALOG CORPORATION CUSIP No. [ ]
12 3/4% Senior Note
due November 15, 2001
No. $
VIALOG CORPORATION, a Massachusetts corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on November
15, 2001.
Interest Payment Dates: May 15 and November 15 commencing May 15,
1997
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
VIALOG CORPORATION
[SEAL]
By:
-------------------------------
Name:
Attest: Title:
- -------------------------------
Secretary
-99-
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
Dated: STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
-----------------------------------
Authorized Signatory
-100-
<PAGE>
VIALOG CORPORATION
12 3/4% Senior Note
due November 15, 2001
1. Interest.
--------
VIALOG CORPORATION, a Massachusetts corporation (the "Company"),
-------
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on May 15
and November 15 of each year (the "Interest Payment Date"), commencing May 15,
1998. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from November 12, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
-----------------
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest at the location of the principal office
of the Paying Agent in money of the United States that at the time of payment is
legal tender for payment of public and private debts ("U.S. Legal Tender").
-----------------
However, the Company may pay principal and interest by wire transfer in same day
funds, or, in the case of Physical Securities, by check payable in such U.S.
Legal Tender.
3. Paying Agent and Registrar.
--------------------------
Initially, State Street Bank and Trust Company (the "Trustee") will
-------
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
------------------------
The Company issued the Securities under an Indenture, dated as of
November 12, 1997 (the "Indenture"), among the Company, the Subsidiary
---------
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"),
---
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement
-101-
<PAGE>
of them. The Securities are general unsecured obligations of the Company limited
in aggregate principal amount to $75,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Subsidiary
Guarantors pursuant to Article Ten of the Indenture.
5. Optional Redemption.
-------------------
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after November 15, 1999 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on November 15 of the year
set forth below (but not including the date of maturity), plus, in each case,
accrued interest thereon to the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999........................ 110%
2000........................ 105%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to November 15,
1999, the Company may redeem up to an aggregate of 35% of the original principal
amount of Securities at a redemption price of 112.75% of the original principal
amount thereof, plus accrued and unpaid interest thereon, to the redemption date
with the net proceeds of any Public Equity Offering; provided that at least 65%
--------
in aggregate of the original principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
-------- -------
such redemption occurs within 90 days of the date of the closing of such Public
Equity Offering.
In addition, prior to November 15, 1999, the Notes will be redeemable
at the Company's option, in whole or in part, at any time or from time to time,
upon not less than 30 nor more than 60 days' prior notice mailed by first-class
mail to each Holder's registered address, at a redemption price (expressed as a
percentage of principal amount) equal to the sum of the principal amount of such
Notes plus the applicable Make-Whole Premium thereon at the time of redemption
(subject to the right of Holders of record on the relevant record date to
receive interest due to the relevant interest payment date).
The following definitions are used to determine the applicable Make-
Whole Premium:
"Applicable Make-Whole Premium" means, with respect to a Note at the
redemption date, the greater of (i) 1.0% of the principal amount of such Note
and (ii) the excess of (A) the present value of such time of (1) the redemption
price of such Note at November 15, 1999 plus (2) all required interest payments
(excluding accrued but unpaid interest) due on such Note through November 1,
1999, computed using a discount rate equal to the Treasury Rate plus 100 basis
points, over (B) the principal amount of such Note at such time.
-102-
<PAGE>
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for repayment (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining average life to Stated Maturity) of the Notes; provided, however, that
if the average life to Stated Maturity of the Notes is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given.
6. Repurchase at option of Holder.
------------------------------
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
-----------------------
to $1,000 or an integral multiple thereof) of each Holder's Securities at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment"). Within
-------------------------
30 days following the occurrence of a Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions and setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, the
Indenture requires that certain proceeds be used, subject to the limitations
contained therein, to make an offer to all Holders of Securities (an "Asset
-----
Proceeds Offer") pursuant to Section 4.17 of the Indenture to purchase certain
- --------------
amounts of Securities in accordance with the procedures set forth in the
Indenture.
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the redemption
date, interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Sinking-Fund.
------------
There will be no mandatory sinking fund payments for the Securities.
-103-
<PAGE>
9. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection not register the
transfer of or exchange any securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
10. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
----------------------------------------
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
----------------
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
-------------------
case upon satisfaction of certain conditions specified in the Indenture.
13. Amendment; Supplements; Waiver.
------------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder of a Security.
-104-
<PAGE>
14. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
---------------------
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest, including an accelerated
payment) if it determines that withholding notice is in their interest.
16. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
17. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the securities.
18. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
-105-
<PAGE>
19. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
VIALOG Corporation, 3 Riverside Drive, Andover, MA 01810, Attn.: President.
-106-
<PAGE>
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) have unconditionally
guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Ten of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
TELEPHONE BUSINESS MEETINGS, INC.
d/b/a ACCESS CONFERENCE CALL SERVICE
By:
-------------------------------------
Name:
Title:
CONFERENCE SOURCE INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
CALL POINTS, INC.
By:
-------------------------------------
-107-
<PAGE>
Name:
Title:
KENDALL SQUARE TELECONFERENCING,
INC. d/b/a THE CONFERENCE CENTER
By:
-------------------------------------
Name:
Title:
AMERICAN CONFERENCING COMPANY,
INC. d/b/a AMERICO
By:
-------------------------------------
Name:
Title:
COMMUNICATION DEVELOPMENT
CORPORATION
By:
-------------------------------------
Name:
Title:
-108-
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
--------------------------- ------------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-109-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Sections 4.16 or 4.17 of the Indenture, state the
amount: $
Dated: Signed:
-------------------------- ----------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-110-
<PAGE>
EXHIBIT B
---------
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR
BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR
---
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
-111-
<PAGE>
EXHIBIT C
---------
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 12 3/4% Senior Notes due 2001, (the "Securities") of VIALOG Corporation.
----------
This Certificate relates to Securities held in* _______ book-entry or*
_______ certificated form by ____________ (the "Transferor").
----------
The Transferor:*
[_] has requested that the Registrar by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Security (or the portion thereof indicated above); or
[_] has requested that the Registrar by written order to exchange or register
the transfer of a Security or Securities.
[_] In connection with such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Section 2.15 of such Indenture, and that the
transfer of this Securities does not require registration under the Securities
Act of 1933, as amended (the "Securities Act") because[*]:
--------------
[_] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.15(a)(II)(A) or Section
2.15(d)(i)(A) of the Indenture).
[_] Such Security is being transferred to a qualified institutional buyer
(as defined in Rule 144A promulgated under the Act), in reliance on Rule
144A or in accordance with Regulation S promulgated under the Act.
[_] Such Security is being transferred in accordance with Rule 144
promulgated under the Securities Act.
-112-
<PAGE>
[_] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A or Rule 144 or Regulation S promulgated under the
Securities Act. An opinion of counsel to the effect that such transfer
does not require registration under the Securities Act accompanies this
Certificate.
------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------
Date:
------------------------
*Check applicable box.
-113-
<PAGE>
EXHIBIT D
---------
Transferee Letter of Representation
VIALOG Corporation
3 Riverside Drive
Andover, MA 01810
Ladies and Gentlemen:
In connection with our proposed purchase of 12 3/4% Senior Notes due
2001, (the "Securities") of VIALOG Corporation (the "Company") we confirm that:
---------- -------
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") and, unless so
--------------
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Securities to offer, sell or otherwise transfer such Securities prior
to the date which is two years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was the owner
of such Securities, or any predecessor thereto (the "Resale Restriction
------------------
Termination Date") only (a) to the Company, (b) pursuant to a registration
- ----------------
statement which has been declared effective under the Securities Act, (c) so
long as the Securities are eligible for resale pursuant to Rule 144A, under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
---
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S promulgated under the
Securities Act, (e) to an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
that is purchasing for his own account or for the account of such an
institutional "accredited investor," or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and to compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the registrar under
the Indenture pursuant to which the Securities were issued (the "Registrar")
---------
which shall provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 promulgated under the Securities Act and that it is acquiring such
Securities for investment purposes and not for distribution in violation of the
Securities Act. The Registrar and the Company reserve the right prior to any
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Securities pursuant to clause (e) or (f) above to require the
-114-
<PAGE>
delivery of a written opinion of counsel, certifications, and or other
information satisfactory to the Company and the Registrar.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Securities, and we and any accounts
for which we are acting are each able to bear the economic risk of our or its
investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
4. You and your counsel are entitled to rely upon this letter and
you are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
--------------------------------------
(Name of Purchaser)
By:
-----------------------------------
Date:
---------------------------------
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name:
--------------------
Address:
-----------------
Taxpayer ID Number:
------
-115-
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
310(a)(1).............................................................7.10
(a)(2).............................................................7.10
(a)(3).............................................................N.A.
(a)(4).............................................................N.A.
(a)(5).......................................................7.08; 7.10
(b)...................................................7.08; 7.10; 11.02
(c)................................................................N.A.
311(a)................................................................7.11
(b)................................................................7.11
(c)................................................................N.A.
312(a)................................................................2.05
(b)...............................................................11.03
(c)...............................................................11.03
313(a)................................................................7.06
(b)................................................................7.06
(c).........................................................7.06; 11.02
(d)................................................................7.06
314(a)...................................................4.08; 4.10; 11.02
(b)................................................................N.A.
(c)(1)......................................................7.02; 11.04
(c)(2)......................................................7.02; 11.04
(c)(3).............................................................N.A.
(d)................................................................N.A.
(e)...............................................................11.05
(f)................................................................N.A.
315(a).............................................................7.01(b)
(b).........................................................7.05; 11.02
(c).............................................................7.01(a)
(d).......................................................6.05; 7.01(c)
(e)................................................................6.11
316(a)(last sentence).................................................2.09
(a)(1)(A)..........................................................6.05
(a)(1)(B)..........................................................6.04
(a)(2).............................................................N.A.
(b)................................................................6.07
317(a)(1).............................................................6.08
(a)(2).............................................................6.09
(b)................................................................2.04
318(a)...............................................................11.01
(c)...............................................................11.01
</TABLE>
-116-
<PAGE>
- -----------------------
N.A. means Not Applicable
-117-
<PAGE>
EXHIBIT 4.2
-----------
EXECUTION COPY
- --------------------------------------------------------------------------------
UNIT AGREEMENT
Dated as of November 12, 1997
By and Among
VIALOG CORPORATION
The Subsidiary Guarantors named herein
and
STATE STREET BANK AND TRUST COMPANY
as Unit Agent, Trustee and Warrant Agent
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF UNIT
CERTIFICATES
<S> <C> <C>
SECTION 1.01. Issuance of Units................................................... 2
SECTION 1.02. Form of Unit Certificates........................................... 2
SECTION 1.03. Execution of Unit Certificates...................................... 2
SECTION 1.04. Authentication and Delivery......................................... 3
SECTION 1.05. Temporary Unit Certificates......................................... 3
SECTION 1.06. Separation of Units and Notes....................................... 4
SECTION 1.07. Registration........................................................ 4
SECTION 1.08. Registration of Transfers and Exchanges............................. 5
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Unit Certificates..... 12
SECTION 1.10. Offices for Exercise, etc........................................... 12
ARTICLE II
OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF UNITS
SECTION 2.01. Rights of Unit Holders.............................................. 13
ARTICLE III
CONCERNING THE UNIT AGENT
SECTION 3.01. Unit Agent.......................................................... 13
SECTION 3.02. Conditions of Unit Agent's Obligations.............................. 14
SECTION 3.03. Resignation and Appointment of Successor............................ 17
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Amendment........................................................... 18
SECTION 4.02. Notices and Demands to the Company and Unit Agent................... 19
SECTION 4.03. Notices............................................................. 19
SECTION 4.04. Governing Law....................................................... 21
SECTION 4.05. Obtaining of Governmental Approvals................................. 21
SECTION 4.06. Persons Having Rights Under Agreement............................... 21
SECTION 4.07. Headings............................................................ 21
SECTION 4.08. Counterparts........................................................ 21
SECTION 4.09. Inspection of Agreement............................................. 21
SECTION 4.10. Successors and Assigns.............................................. 21
SECTION 4.11. Severability........................................................ 21
SECTION 4.12. Entire Agreement.................................................... 22
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
EXHIBIT A - Form of Unit Certificate
EXHIBIT B - Certificate To Be Delivered upon Exchange or
Registration of Transfer of Units
EXHIBIT C - Transferee Letter of Representation
</TABLE>
ii
<PAGE>
UNIT AGREEMENT
UNIT AGREEMENT ("Unit Agreement" or "Agreement"), dated as of November
-------------- ---------
12, 1997 (the "Effective Date") by VIALOG CORPORATION, a Massachusetts
--------------
corporation (together with any successor thereto, the "Company"), TELEPHONE
-------
BUSINESS MEETINGS, INC. d/b/a ACCESS CONFERENCE CALL SERVICE, a Delaware
corporation, CONFERENCE SOURCE INTERNATIONAL, INC., a Georgia corporation, CALL
POINTS, INC., a Delaware corporation, KENDALL SQUARE TELECONFERENCING, INC.
d/b/a THE CONFERENCE CENTER, a Massachusetts corporation, AMERICAN CONFERENCING
COMPANY, INC. d/b/a AMERICO, a Delaware corporation, and COMMUNICATION
DEVELOPMENT CORPORATION, a Connecticut corporation (collectively, the
"Subsidiary Guarantors"), and STATE STREET BANK AND TRUST COMPANY, a
---------------------
Massachusetts trust company, as trustee under the Indenture referred to herein
(with any successor Trustee, the "Trustee"), as warrant agent (with any
-------
successor Warrant Agent, the "Warrant Agent") and as unit agent hereunder (with
-------------
any successor unit agent, the "Unit Agent").
----------
WHEREAS, the Company has entered into a purchase agreement dated
November 6, 1997 with Jefferies & Company, Inc. (the "Initial Purchaser")
-----------------
pursuant to which the Company has agreed, among other things, to sell to the
Initial Purchaser 75,000 units (the "Units") consisting in the aggregate of (i)
-----
$75,000,000 aggregate principal amount of 12 3/4% Senior Notes due 2001 (as the
same may be amended or modified from time to time, the "Notes") of the Company
-----
to be issued under an indenture dated as of November 12, 1997 (as the same may
be amended or modified from time to time, the "Indenture"), among the Company,
---------
the Subsidiary Guarantors named therein and State Street Bank and Trust Company,
as trustee (the "Trustee"), and (ii) 75,000 Warrants to purchase an aggregate of
-------
756,645 shares of common stock, $.01 par value per share (the "Common Stock"),
------------
of the Company (the "Warrants," and the certificates evidencing the Warrants
--------
being hereinafter referred to as "Warrant Certificates"), in each case subject
--------------------
to adjustment in accordance with the terms hereof to be issued under the warrant
agreement, dated as of November 12, 1997 (as the same may be amended or modified
from time to time, the "Warrant Agreement"); and
-----------------
WHEREAS, the Warrants and the Notes comprising the Units shall be
separately transferable on or after May 15, 1998 or such earlier date as the
Initial Purchaser may determine in its sole discretion; and
WHEREAS, the Company desires the Unit Agent to assist the Company in
connection with the issuance, exchange, cancellation and replacement of the
Units, and in this Agreement wishes to set forth, among other things, the terms
and conditions on which the Units may be issued, exchanged, canceled and
replaced;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF UNIT CERTIFICATES
-------------------------------------
SECTION 1.01. Issuance of Units. Each certificate evidencing Units
-----------------
(a "Unit Certificate") shall evidence the number of Units specified therein.
---- -----------
SECTION 1.02. Form of Unit Certificates. Unit Certificates
-------------------------
representing Units offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Units (the "Global
------
Units"). Units offered and sold in reliance on any other exemption from
- -----
registration under the Securities Act other than as described in the preceding
sentence shall be issued in the form of definitive Unit Certificates (the
"Definitive Units"). The Unit Certificates evidencing the Global Units or the
----------------
Definitive Units to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto (in the case of
---------
the Global Units, including footnote 1 thereto). Such Global Units shall
represent such of the outstanding Units as shall be specified therein and each
shall provide that it shall represent the aggregate amount of outstanding Units
from time to time endorsed thereon and that the aggregate amount of outstanding
Units represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Unit to reflect the amount of any
increase or decrease in the amount of outstanding Units represented thereby
shall be made by the Unit Agent and Depositary (as defined below) in accordance
with instructions given by the holder thereof. The Depository Trust Company
shall act as the Depositary (the "Depositary") with respect to the Global Units
----------
until a successor shall be appointed by the Company. Upon written request, a
Unit holder may receive from the Unit Agent Definitive Units as set forth in
Section 1.08 hereof.
SECTION 1.03. Execution of Unit Certificates. The Unit Certificates
------------------------------
shall be executed on behalf of the Company by the chairman of its Board of
Directors, its president or any vice president and attested by its clerk or
assistant clerk, under its corporate seal. Such signatures may be the manual or
facsimile signatures of the present or any future such officers. The seal of
the Company may be in the form of a facsimile thereof and may be impressed,
affixed, imprinted or otherwise reproduced on the Unit Certificates.
Typographical and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Unit Certificate that has been duly countersigned and delivered by the Unit
Agent.
In case any officer of the Company who shall have signed any of the
Unit Certificates shall cease to be such officer before the Unit Certificate so
signed shall be countersigned and delivered by the Unit Agent or disposed of by
the Company, such Unit Certificate nevertheless may be countersigned and
delivered or disposed of as though the person who signed such Unit Certificate
had not ceased to be such officer of the Company; and any Unit Certificate may
be signed on behalf of the Company by such persons as, at the actual date of the
execution of such Unit Certificate, shall be the proper officers of the
-2-
<PAGE>
Company, although at the date of the execution and delivery of this Agreement
any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the immediate
---------------------------
following paragraph, Unit Certificates shall be authenticated by manual
signature and dated the date of authentication by the Unit Agent and shall not
be valid for any purpose unless so authenticated and dated. For the purpose of
determining the date of issuance of any Note or Warrant comprising a Unit, an
authentication by the Unit Agent of such Unit shall be deemed to be the
authentication by the Trustee or Warrant Agent of the underlying Notes and
Warrants, as applicable. The Unit Certificates shall be numbered and shall be
registered in the Unit Register (as defined in Section 1.07 hereof).
Upon the receipt by the Unit Agent of a written order of the Company,
which order shall be signed by the chairman of its Board of Directors, its
president or any vice president and attested by its clerk or assistant clerk,
and shall specify the amount of Units to be authenticated, whether the Units are
to be Global Units or Definitive Units, the date of such Units and such other
information as the Unit Agent may reasonably request, without any further action
by the Company, the Unit Agent is authorized, upon receipt from the Company at
any time and from time to time of the Unit Certificates, duly executed as
provided in Section 1.03 hereof, to authenticate the Unit Certificates and
deliver them. Such authentication shall be by a duly authorized signatory of
the Unit Agent (although it shall not be necessary for the same signatory to
sign all Unit Certificates).
In case any authorized signatory of the Unit Agent who shall have
authenticated any of the Unit Certificates shall cease to be such authorized
signatory before the Unit Certificate shall be disposed of by the Company, such
Unit Certificate nevertheless may be delivered or disposed of as though the
person who authenticated such Unit Certificate had not ceased to be such
authorized signatory of the Unit Agent; and any Unit Certificate may be
authenticated on behalf of the Unit Agent by such persons as, at the actual time
of authentication of such Unit Certificates, shall be the duly authorized
signatories of the Unit Agent, although at the time of the execution and
delivery of this Agreement any such person is not such an authorized signatory.
The Unit Agent's authentication on all Unit Certificates shall be in
substantially the form set forth in Exhibit A hereto.
SECTION 1.05. Temporary Unit Certificates. Pending the preparation
---------------------------
of definitive Unit Certificates, the Company may execute, and, upon receipt of
an authentication order in accordance with Section 1.04 hereof, the Unit Agent
shall authenticate and deliver, temporary Unit Certificates, which are printed,
lithographed, typewritten or otherwise produced, in a form substantially similar
to the definitive Unit Certificates in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Unit Certificates may determine, as evidenced by
their execution of such Unit Certificates.
-3-
<PAGE>
If temporary Unit Certificates are issued, the Company will cause
definitive Unit Certificates to be prepared without unreasonable delay. After
the preparation of definitive Unit Certificates, the temporary Unit Certificates
shall be exchangeable for definitive Unit Certificates upon surrender of the
temporary Unit Certificates at any office or agency maintained by the Company
for that purpose pursuant to Section 1.10 hereof. Subject to the provisions of
Section 4.01 hereof, such exchange shall be without charge to the holder. Upon
surrender for cancellation of any one or more temporary Unit Certificates, the
Company shall execute, and, upon receipt of an authentication order in
accordance with Section 1.04 hereof, the Unit Agent shall authenticate and
deliver in exchange therefor, one or more definitive Unit Certificates
representing in the aggregate a like number of Units. Until so exchanged, the
holder of a temporary Unit Certificate shall in all respects be entitled to the
same benefits under this Agreement as a holder of a definitive Unit Certificate.
SECTION 1.06. Separation of Units and Notes. The Warrants and the
-----------------------------
Notes comprising the Units will be separately transferable on or after May 15,
1998, or such earlier date as the Initial Purchaser may determine in its sole
discretion (the "Separability Date"). Upon presentation after the Separability
-----------------
Date of any Unit Certificate for exchange for Notes and Warrants or for
registration of transfer or otherwise, (i) the Unit Agent shall notify the
Trustee and the Warrant Agent of the number of Units so presented, the
registered owner thereof, such owner's registered address, the nature of any
legends or restrictive endorsements set forth on such Unit Certificate and any
other information provided by the holder thereof in connection therewith, (ii)
the Trustee, if the requirements of the Indenture for such transaction are met,
as the case may be, shall promptly register, authenticate and deliver a new Note
equal in principal amount to the Notes represented by such Unit Certificate in
accordance with the direction of such holder and (iii) the Warrant Agent, if its
requirements for such transactions are met, shall promptly countersign, register
and deliver a new Warrant certificate for the number of Warrants previously
represented by such Unit Certificate in accordance with the directions of such
holder. The Warrant Agent and the Trustee will notify the Unit Agent of any
additional requirements in connection with a particular transfer or exchange.
Following the Separability Date, no Unit Certificates shall be issued upon
transfer or exchange of Unit Certificates or otherwise. Notwithstanding
anything herein to the contrary, upon the effectiveness of the Registration
Statement on Form S-4 of the Company and the Subsidiary Guarantors filed with
the Securities and Exchange Commission (pertaining to an offer by the Company to
exchange publicly registered notes (the "Exchange Notes") having substantially
--------------
the same terms as the Notes for the Notes), the Unit Agent shall, upon
instruction (in accordance with the terms of such exchange offer and the
Indenture) of the beneficial holders of Notes comprising the Units, exchange the
Notes desired to be exchanged for the Exchange Notes.
SECTION 1.07. Registration. The Company will keep, at the office or
------------
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Units as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Units is hereinafter called, individually and collectively, the
"Registrar".
---------
-4-
<PAGE>
The Company hereby initially appoints the Unit Agent as Registrar. Upon written
notice to the Unit Agent and any acting Registrar, the Company may appoint a
successor Registrar for such purposes.
The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Units (the "Unit Register"). The Unit
-------------
Agent will act as such repository unless and until some other person is, by
written notice from the Company to the Unit Agent and the Registrar, designated
by the Company to act as such. The Company shall cause each Registrar to
furnish to such repository, on a current basis, such information as to all
registrations of transfer and exchanges effected by such Registrar, as may be
necessary to enable such repository to maintain the Unit Register on as current
a basis as is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Definitive Units. When Definitive Units
-----------------------------------------
are presented to the Unit Agent with a request:
(i) to register the transfer of the Definitive Units; or
(ii) to exchange such Definitive Units for an equal number of
Definitive Units,
the Unit Agent shall register the transfer or make the exchange as requested if
the requirements under this Unit Agreement as set forth in this Section 1.08
hereof for such transactions are met; provided, however, that the Definitive
-------- -------
Units presented or surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Company
and the Unit Agent, duly executed by the holder thereof or
by his attorney, duly authorized in writing; and
(y) in the case of Units the offer and sale of which have not
been registered under the Securities Act and are presented
for transfer or exchange prior to (x) the date which is two
years after the later of the date of original issue and the
last date on which the Company or any affiliate of the
Company was the owner of such Unit, or any predecessor
thereto and (y) such later date, if any, as may be required
by any subsequent change in applicable law (the "Resale
------
Restriction Termination Date"), such Units shall be
----------------------------
accompanied, in the sole discretion of the Company, by the
following additional information and documents, as
applicable:
(A) if such Unit is being delivered to the Unit Agent by a
holder for registration in the name of such holder,
without
-5-
<PAGE>
transfer, a certification from such holder to that
effect (in substantially the form of Exhibit B hereto);
---------
or
(B) if such Unit is being transferred to a qualified
institutional buyer (as defined in Rule 144A
promulgated under the Securities Act) in accordance
with Rule 144A promulgated under the Securities Act or
pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S promulgated
under the Securities Act, a certification to that
effect (in substantially the form of Exhibit B hereto);
---------
or
(C) if such Unit is being transferred to an institutional
"accredited investor" within the meaning of
subparagraph (a)(1), (a)(2), (a)(3) or (a)(7) of Rule
501 promulgated under the Securities Act, delivery of a
Transferee Letter of Representation in the form of
Exhibit C hereto and an opinion of counsel and/or other
---------
information satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act; or
(D) if such Unit is being transferred in reliance on
another exemption from the registration requirements of
the Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto) and an
---------
opinion of counsel reasonably acceptable to the Company
to the effect that such transfer is in compliance with
the Securities Act.
(b) Restrictions on Transfer of a Definitive Unit for a Beneficial
--------------------------------------------------------------
Interest in a Global Unit. A Definitive Unit may not be transferred for a
- -------------------------
beneficial interest in a Global Unit except upon satisfaction of the
requirements set forth below. Upon receipt by the Unit Agent of a Definitive
Unit, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Unit Agent, together with:
(A) certification, substantially in the form of Exhibit B
---------
hereto, that such Definitive Unit is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A
promulgated under the Securities Act) in accordance with
Rule 144A promulgated under the Securities Act; and
(B) written instructions directing the Unit Agent to make, or to
direct the Depositary to make, an endorsement on the Global
Unit to reflect an increase in the aggregate amount of the
Units represented by the Global Unit,
-6-
<PAGE>
then the Unit Agent shall cancel such Definitive Unit and cause, or direct the
Depositary to cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Unit Agent, the number of Units
represented by the Global Unit to be increased accordingly. If no Global Unit is
then outstanding, the Company shall issue and the Unit Agent shall authenticate
a new Global Unit in the appropriate amount.
(c) Transfer and Exchange of Global Units. The transfer and exchange
-------------------------------------
of Global Units or beneficial interests therein shall be effected through the
Depositary, in accordance with this Section 1.08 and the procedures of the
Depositary therefor.
(d) Exchange of a Beneficial Interest in a Global Unit for a
--------------------------------------------------------
Definitive Unit.
- ---------------
(i) Any person having a beneficial interest in a Global Unit may
upon request exchange such beneficial interest for a
Definitive Unit. Upon receipt by the Unit Agent of written
instructions or such other form of instructions as is
customary for the Depositary from the Depositary or its
nominee on behalf of any person having a beneficial interest
in a Global Unit and upon receipt by the Unit Agent of a
written order or such other form of instructions as is
customary for the Depositary or the person designated by the
Depositary as having such a beneficial interest containing
registration instructions from such person having a
beneficial interest therein and, in the case of any such
transfer or exchange prior to the Resale Restriction
Termination Date, the following additional information and
documents:
(A) if such beneficial interest is being transferred to the
person designated by the Depositary as being the
beneficial owner, a certification from such person to
that effect (in substantially the form of Exhibit B
---------
hereto); or
(B) if such beneficial interest is being transferred to a
qualified institutional buyer (as defined in Rule 144A
promulgated under the Securities Act) in accordance
with Rule 144A promulgated under the Securities Act or
pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S promulgated
under the Securities Act, a certification to that
effect from the transferee or transferor (in
substantially the form of Exhibit B hereto); or
---------
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning
of subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) of
Rule 501 promulgated under the Securities Act, delivery
of a Transferee Letter of Representation in the form of
Exhibit
-------
-7-
<PAGE>
C hereto and an opinion of counsel and/or other
-
information satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act; or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (in substantially the form of Exhibit B
---------
hereto) and an opinion of counsel reasonably acceptable
to the Company to the effect that such transfer is in
compliance with the Securities Act,
the Unit Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary
and the Unit Agent, the aggregate amount of the Global Unit
to be reduced and, following such reduction, the Company will
execute and, upon receipt of an authentication order in the
form of an Officers' Certificate (as defined), the Unit Agent
will authenticate and deliver to the transferee a Definitive
Unit.
(ii) Definitive Units issued in exchange for a beneficial
interest in a Global Unit pursuant to this Section 1.08(d)
shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall
instruct the Unit Agent in writing. The Unit Agent shall
deliver such Definitive Units to the persons in whose names
such Units are so registered.
(e) Restrictions on Transfer and Exchange of Global Units.
-----------------------------------------------------
Notwithstanding any other provisions of this Unit Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Unit may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Units in Absence of Depositary. If
-----------------------------------------------------------
at any time:
(i) the Depositary for the Units notifies the Company that the
Depositary is unwilling or unable to continue as Depositary
for the Global Unit and a successor Depositary for the
Global Unit is not appointed by the Company within 90 days
after delivery of such notice; or
-8-
<PAGE>
(ii) the Company, at its sole discretion, notifies the Unit Agent
in writing that it elects to cause the issuance of
Definitive Units under this Unit Agreement,
then the Company will execute, and the Unit Agent, upon receipt of an officers'
certificate signed by two officers of the Company (one of whom must be the
principal executive officer, principal financial officer or principal accounting
officer) (an "Officers' Certificate") requesting the authentication and delivery
---------------------
of Definitive Units, will authenticate and deliver Definitive Units, in an
aggregate number equal to the aggregate number of Units represented by the
Global Unit, in exchange for such Global Unit.
(g) Legends.
-------
(i) Except to the extent permitted by the following paragraph
(ii), each Unit Certificate evidencing the Global Units and
the Definitive Units (and all Units issued in exchange
therefor or substitution thereof) shall bear a legend
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
--------------
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A PROMULGATED
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3) OR (7) PROMULGATED
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT
-------------------
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE UNIT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 PROMULGATED
-9-
<PAGE>
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE UNIT
AGENT AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
--------------------
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
------------- -----------
REGULATIONS UNDER THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED AS OF NOVEMBER 12, 1997 AMONG
JEFFERIES & COMPANY, INC., THE COMPANY AND THE SUBSIDIARY GUARANTORS
NAMED HEREIN AND A SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
DATED AS OF NOVEMBER 12, 1997 AMONG JEFFERIES & COMPANY, INC. AND THE
COMPANY, A COPY OF EACH OF WHICH IS ON FILE WITH THE CLERK OF THE
COMPANY.
To the extent a Unit Certificate evidences a Global Unit, such Unit
Certificate shall also bear the legend with respect thereto
substantially in the form set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Unit pursuant to Rule 144 under
the Securities Act in accordance with Section 1.08 hereof or an
effective registration statement under the Securities Act:
(A) in the case of any Unit that is a Definitive Unit, the Unit
Agent shall permit the holder thereof to exchange such Unit
for a Definitive Unit that does not bear the first paragraph
of the legend set forth above and rescind any related
restriction on the transfer of such Unit; and
-10-
<PAGE>
(B) any such Unit represented by a Global Unit shall not be
subject to the provisions set forth in (i) above (such sales
or transfers being subject only to the provisions of Section
1.08(c) hereof) provided, however, that with respect to any
-------- -------
request for an exchange of a Unit that is represented by a
Global Unit for a Definitive Unit that does not bear the
first paragraph of the legend set forth in (i) above, which
request is made in reliance upon Rule 144 under the
Securities Act, the holder thereof shall certify in writing
to the Unit Agent that such request is being made pursuant
to Rule 144 under the Securities Act (such certification to
be substantially in the form of Exhibit B hereto).
---------
(h) Cancellation and/or Adjustment of a Global Unit. At such time as
-----------------------------------------------
all beneficial interests in a Global Unit have either been exchanged for
Definitive Units, redeemed, repurchased or canceled, such Global Unit shall be
returned to or retained and canceled by the Unit Agent. At any time prior to
such cancellation, if any beneficial interest in a Global Unit is exchanged for
Definitive Units, redeemed, repurchased or canceled, the number of Units
represented by such Global Unit shall be reduced and an endorsement shall be
made on such Global Unit, by the Unit Agent to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of Definitive
-----------------------------------------------------------------
Units.
- -----
(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Unit Agent's request, and the
Unit Agent shall, upon receipt of an authentication order in
accordance with Section 1.04 hereof, authenticate Definitive
Units and Global Units.
(ii) All Definitive Units and Global Units issued upon any
registration of transfer or exchange of Definitive Units or
Global Units shall be the valid obligations of the Company,
entitled to the same benefits under this Unit Agreement as
the Definitive Units or Global Units surrendered upon the
registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Unit, the Unit Agent and the Company may deem and treat
the person in whose name any Unit is registered as the
absolute owner of such Unit, and neither the Unit Agent nor
the Company shall be affected by notice to the contrary.
(j) Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes attributable to the initial issuance of the Units or to the separation of
the Notes and Warrants comprising the Units as described in Section 1.06;
provided, however, that the Company shall not be required to pay any tax or
- -------- -------
other governmental charge which may be payable in respect
-11-
<PAGE>
of any transfer or exchange of any Unit Certificates or any Warrants and Notes
comprising the Units in a name other than that of the registered holder of a
Unit Certificate. The Company shall not be required to issue or deliver such
Unit Certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or other
governmental charge or shall have established to the satisfaction of the Company
that such tax or other governmental charge has been paid or an exemption is
available therefrom.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Unit
--------------------------------------------------
Certificates. Upon receipt by the Company and the Unit Agent (or any agent of
- ------------
the Company or the Unit Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Unit Certificate and of indemnity and/or insurance reasonably
satisfactory to them and, in the case of mutilation or defacement, upon
surrender thereof to the Unit Agent for cancellation, then, in the absence of
notice to the Company or the Unit Agent that such Unit Certificate has been
acquired by a bona fide purchaser or holder in due course, the Company shall
---- ----
execute, and, upon receipt of an authentication order in accordance with Section
1.04 hereof, an authorized signatory of the Unit Agent shall manually
authenticate and deliver, in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Unit Certificate, a new Unit Certificate
representing a like number of Units, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Unit
Certificate under this Section, the Company may require the payment from the
holder of such Unit Certificate of a sum sufficient to cover any tax, stamp tax
or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Unit Agent and the
Registrar) in connection therewith. Every substitute Unit Certificate executed
and delivered pursuant to this Section in lieu of any lost, stolen or destroyed
Unit Certificate shall constitute an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Unit Certificate shall be
at any time enforceable by anyone, and shall be entitled to the benefits of (but
shall be subject to all the limitations of rights set forth in) this Agreement
equally and proportionately with any and all other Unit Certificates duly
executed and delivered hereunder. The provisions of this Section 1.09 are
exclusive with respect to the replacement of lost, stolen, destroyed, defaced or
mutilated Unit Certificates and shall preclude (to the extent lawful) any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of lost,
stolen, destroyed, defaced or mutilated Unit Certificates.
The Unit Agent is hereby authorized to authenticate, in accordance
with the provisions of this Agreement, and deliver the new Unit Certificates
required pursuant to the provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any of the Units
-------------------------
remain outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York and/or The City of Boston: (a) an office or
agency where the Unit Certificates may be presented for exercise, and (b) an
office or agency where the Unit Certificates may be presented for registration
of transfer and for exchange (including the exchange of temporary Unit
Certificates for definitive Unit Certificates pursuant to Section 1.05 hereof).
The
-12-
<PAGE>
Company may from time to time change or rescind such designation, as it may deem
desirable or expedient; provided, however, that an office or agency shall at all
-------- -------
times be maintained in the Borough of Manhattan, The City of New York and/or The
City of Boston, as provided in the first sentence of this Section. In addition
to such office or offices or agency or agencies, the Company may from time to
time designate and maintain one or more additional offices or agencies within or
outside The City of New York and/or The City of Boston, where Unit Certificates
may be presented for exercise or for registration of transfer or for exchange,
and the Company may from time to time change or rescind such designation, as it
may deem desirable or expedient. The Company will give to the Unit Agent written
notice of the location of any such office or agency and of any change of
location thereof. The Company hereby designates the office of the Unit Agent, in
The City of Boston (the "Unit Agent Office"), as the initial agency maintained
-----------------
for each such purpose.
ARTICLE II
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF UNITS
--------------------------
SECTION 2.01. Rights of Unit Holders. The registered owner of a Unit
----------------------
Certificate shall have all the rights and privileges of a registered owner of
the principal amount of Notes represented thereby and the number of Warrants
represented thereby and shall be treated as the registered owner thereof for all
purposes. The Company and the Subsidiary Guarantors agree that they shall be
bound by all provisions of the Indenture, the Notes, the Warrant Agreement and
the Warrants to which they are a party and that the Notes and Warrants
represented by each Unit Certificate shall be deemed legal, valid and binding
obligations of the Company and/or the Subsidiary Guarantors, as the case may be,
and that upon exercise of the Warrants, the Warrant Shares (as defined in the
Warrant Agreement) will be fully paid, nonassessable, free of preemptive rights
and free from all taxes, liens, charges and security interests with respect to
the issue thereof.
ARTICLE III
CONCERNING THE UNIT AGENT
-------------------------
SECTION 3.01. Unit Agent. The Company hereby appoints State Street
----------
Bank and Trust Company as unit agent (and in all capacities in this Agreement,
the "Unit Agent") of the Company in respect of the Units and the Unit
----------
Certificates upon the terms and subject to the conditions herein and in the Unit
Certificates set forth; and State Street Bank and Trust Company hereby accepts
such appointment. The Unit Agent shall have the powers and authority
specifically granted to and conferred upon it hereby and in the Unit
Certificates and such further powers and authority to act on behalf of the
Company as the Company may hereafter grant to or confer upon it and it shall
accept in writing. All of the terms and provisions with respect to such powers
and authority contained in the Unit Certificates are subject to and governed by
the terms and provisions hereof.
-13-
<PAGE>
SECTION 3.02. Conditions of Unit Agent's Obligations. The Unit Agent
--------------------------------------
accepts its obligations herein set forth upon the terms and conditions hereof
and in the Unit Certificates, including the following, to all of which the
Company agrees and to all of which the rights hereunder of the holders from time
to time of the Unit Certificates shall be subject:
(a) The Unit Agent shall be entitled to compensation to be agreed upon
with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Unit Agent for its
reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Unit Agent, each successor Unit Agent, and their respective
directors, officers, affiliates, agents and employees for, and to hold it and
its directors, officers, affiliates, agents and employees harmless against, any
loss, liability or expense of any nature whatsoever (including, without
limitation, fees and expenses of counsel) incurred without gross negligence or
willful misconduct on the part of the Unit Agent or successor Unit Agent,
arising out of or in connection with its acting as such Unit Agent hereunder and
its exercise or failure to exercise of its rights and performance of its
obligations hereunder. The obligations of the Company under this Section 3.02
shall survive the exercise and the expiration of the Unit Certificates and the
resignation and removal of the Unit Agent.
(b) In acting under this Agreement and in connection with the Unit
Certificates, the Unit Agent is acting solely as agent of the Company and does
not assume any obligation or relationship of agency or trust for or with any of
the owners or holders of the Unit Certificates.
(c) The Unit Agent may consult with counsel and any advice or written
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion.
(d) The Unit Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Unit Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it, in the absence of bad faith,
to be genuine and to have been presented or signed by the proper parties.
(e) The Unit Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any interest
---------------
in, Unit Certificates, shares or other obligations of the Company with the same
rights that it or they would have it if were not the Unit Agent hereunder and,
to the extent permitted by applicable law, it or they may engage or be
interested in any financial or other transaction with the Company and may act
on, or as depositary, trustee or agent for, any committee or body of holders of
shares or other obligations of the Company as freely as if it were not the Unit
Agent hereunder.
-14-
<PAGE>
Nothing in this Agreement shall be deemed to prevent the Unit Agent or such
Related Parties from acting in any other capacity for the Company.
(f) The Unit Agent shall not be under any liability for interest on,
and shall not be required to invest, any monies at any time received by it
pursuant to any of the provisions of this Agreement or of the Unit Certificates.
(g) The recitals and other statements contained herein and in the Unit
Certificates (except as to the Unit Agent's authentication thereon) shall be
taken as the statements of the Company and the Unit Agent assumes no
responsibility for the correctness of the same. The Unit Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Unit Certificates and shall not be under any responsibility in respect of the
validity or sufficiency of this Agreement (or any term or provision hereof) or
the execution and delivery hereof (except, in each case, the due execution and
delivery hereof by the Unit Agent) or in respect of the validity or sufficiency
or execution of any Unit Certificate (except, in each case, its authentication
thereof); provided, however, that the Unit Agent shall not be relieved of its
-------- -------
duty to authenticate the Unit Certificates as authorized by this Agreement.
(h) Before the Unit Agent acts or refrains from acting with respect to
any matter contemplated by this Unit Agreement, it may require:
(1) an Officers' Certificate (defined earlier) stating that, in
the opinion of the signers, all conditions precedent, if any, provided
for in this Unit Agreement relating to the proposed action have been
complied with; and
(2) if reasonably necessary in the sole judgment of the Unit
Agent, an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or, if requested, an opinion of counsel with respect
to compliance with a condition or covenant provided for in this Unit Agreement
shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
-15-
<PAGE>
(i) The Unit Agent shall be obligated to perform such duties as are
herein and in the Unit Certificates specifically set forth and no implied duties
or obligations shall be read into this Agreement or the Unit Certificates
against the Unit Agent. The Unit Agent shall not be accountable or under any
duty or responsibility for the use by the Company of any of the Unit
Certificates authenticated by the Unit Agent and delivered by it to the Company
pursuant to this Agreement. The Unit Agent shall have no duty or responsibility
in case of any default by the Company in the performance of its covenants or
agreements contained in the Unit Certificates or in the case of the receipt of
any written demand from a holder of a Unit Certificate with respect to such
default, including, without limiting the generality of the foregoing, any duty
or responsibility to initiate or attempt to initiate any proceedings at law or
otherwise or, except as provided in Section 3.02 hereof, to make any demand upon
the Company. The Unit Agent shall not be obligated to perform any duty to the
extent prohibited by law.
(j) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the Board of Directors, its president, its treasurer,
its controller or any vice president or its clerk or any assistant secretary.
(k) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Unit Agent for the carrying out or performing by the Unit Agent
of the provisions of this Agreement.
(l) The Unit Agent is hereby authorized and directed to accept written
instructions with respect to the performance of its duties hereunder from any
one of the chairman of the Board of Directors, the president, the treasurer, the
controller, any vice president or the clerk of the Company or any other officer
or official of the Company reasonably believed to be authorized to give such
instructions and to apply to such officers or officials for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions with respect to any matter arising in connection with the Unit
Agent's duties and obligations arising under this Agreement. Such application
by the Unit Agent for written instructions from the Company may, at the option
of the Unit Agent, set forth in writing any action proposed to be taken or
omitted by the Unit Agent with respect to its duties or obligations under this
Agreement and the date on or after which such action shall be taken and the Unit
Agent shall not be liable for any action taken or omitted in accordance with a
proposal included in any such application on or after the date specified therein
(which date shall be not less than 10 Business Days after the Company receives
such application unless the Company consents to a shorter period), provided that
(i) such application includes a statement to the effect that it is being made
pursuant to this paragraph (l) and that unless objected to prior to such date
specified in the application, the Unit Agent will not be liable for any such
action or omission to the extent set forth in such application and (ii) prior to
taking or omitting any such action,
-16-
<PAGE>
the Unit Agent has not received written instructions objecting to such proposed
action or omission.
(m) Whenever in the performance of its duties under this Agreement the
Unit Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the chairman of the Board of
Directors, the president, the treasurer, the controller, any vice president or
the clerk of the Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions and delivered to
the Unit Agent; and such certificate shall be full authorization to the Unit
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(n) The Unit Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 3.03. Resignation and Appointment of Successor.
----------------------------------------
(a) The Company agrees, for the benefit of the holders from time to
time of the Unit Certificates, that there shall at all times be a Unit Agent
hereunder.
(b) The Unit Agent may at any time resign as Unit Agent by giving
written notice to the Company of such intention on its part, specifying the date
on which its desired resignation shall become effective, provided that such date
shall be at least 30 days after the date on which such notice is given unless
the Company agrees to accept less notice. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Unit Agent,
qualified as provided in Section 3.03(d) hereof, by written instrument in
duplicate signed on behalf of the Company, one copy of which shall be delivered
to the resigning Unit Agent and one copy to the successor Unit Agent. As
provided in Section 3.03(d) hereof, such resignation shall become effective upon
the earlier of (x) the acceptance of the appointment by the successor Unit Agent
or (y) 30 days after receipt by the Company of notice of such resignation. The
Company may, at any time and for any reason, and shall, upon any event set forth
in the next succeeding sentence, remove the Unit Agent and appoint a successor
Unit Agent by written instrument in duplicate, specifying such removal and the
date on which it is intended to become effective, signed on behalf of the
Company, one copy of which shall be delivered to the Unit Agent being removed
and one copy to the successor Unit Agent. The Unit Agent shall be removed as
aforesaid if it shall become incapable of acting, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Unit Agent or of its property shall
be appointed, or any public officer shall take charge or control of it or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation. Any removal of the Unit Agent and any appointment of a successor
Unit Agent shall become effective upon acceptance of appointment by the
successor Unit Agent as provided in Section 3.03(d). As soon as practicable
after appointment of the successor Unit Agent, the Company shall cause written
-17-
<PAGE>
notice of the change in the Unit Agent to be given to each of the registered
holders of the Units in the manner provided for in Section 4.04 hereof.
(c) Upon resignation or removal of the Unit Agent, if the Company
shall fail to appoint a successor Unit Agent within a period of 30 days after
receipt of such notice of resignation or removal, then the holder of any Unit
Certificate or the Unit Agent may apply to a court of competent jurisdiction for
the appointment of a successor to the Unit Agent. Pending appointment of a
successor to the Unit Agent, either by the Company or by such a court, the
duties of the Unit Agent shall be carried out by the Company.
(d) Any successor Unit Agent, whether appointed by the Company or by a
court, shall be a bank or trust company in good standing, incorporated under the
laws of the United States of America or any State thereof and having, at the
time of its appointment, a combined capital surplus of at least $50 million.
Such successor Unit Agent shall execute and deliver to its predecessor and to
the Company an instrument accepting such appointment hereunder and all the
provisions of this Agreement, and thereupon such successor Unit Agent, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as Unit Agent hereunder, and such predecessor shall
thereupon become obligated to (i) transfer and deliver, and such successor Unit
Agent shall be entitled to receive, all securities, records or other property on
deposit with or held by such predecessor as Unit Agent hereunder and (ii) upon
payment of the amounts then due it pursuant to Section 3.02(a) hereof, pay over,
and such successor Unit Agent shall be entitled to receive, all monies deposited
with or held by any predecessor Unit Agent hereunder.
(e) Any corporation or bank into which the Unit Agent hereunder may be
merged or converted, or any corporation or bank with which the Unit Agent may be
consolidated, or any corporation or bank resulting from any merger, conversion
or consolidation to which the Unit Agent shall be a party, or any corporation or
bank to which the Unit Agent shall sell or otherwise transfer all or
substantially all of its corporate trust business, shall be the successor to the
Unit Agent under this Agreement (provided that such corporation or bank shall be
qualified as aforesaid) without the execution or filing of any document or any
further act on the part of any of the parties hereto.
(f) No Unit Agent under this Unit Agreement shall be personally liable
for any action or omission of any successor Unit Agent or of the Company.
ARTICLE IV
MISCELLANEOUS
-------------
SECTION 4.01. Amendment. This Agreement and the terms of the Units may
---------
be amended by the Company and the Unit Agent, without the consent of the holder
of any Unit Certificate, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision contained
herein or therein or in any
-18-
<PAGE>
other manner which the Company may deem necessary or desirable and which shall
not adversely affect in any material respect the interests of the holders of the
Unit Certificates.
The Company and the Unit Agent may modify this Agreement and the terms
of the Units with the consent of holders of a majority of the outstanding Units
("Majority Holders") for the purpose of adding any provision to or changing in
----------------
any manner or eliminating any of the provisions of this Agreement or modifying
in any manner the rights of the holders of the outstanding Units; provided,
--------
however, that no modification shall be made to the Notes or Warrants underlying
- -------
the Units except in accordance with the provisions of the Indenture and the
Warrant Agreement, respectively.
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Unit
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Unit Certificates. Any instrument given by or on
behalf of any holder of a Unit Certificate in connection with any consent to any
modification or amendment will be conclusive and binding on all subsequent
holders of such Unit Certificate.
SECTION 4.02. Notices and Demands to the Company and Unit Agent. If
-------------------------------------------------
the Unit Agent shall receive any notice or demand addressed to the Company by
the holder of a Unit Certificate pursuant to the provisions hereof or of the
Unit Certificates, the Unit Agent shall promptly forward such notice or demand
to the Company.
SECTION 4.03. Notices. Any notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
1. Notices to holders of Units shall be mailed to the most current
address of such holders as set forth in the Unit Register, which address
initially is, with respect to the Initial Purchaser, as follows:
Jefferies & Company, Inc.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, CA 90025
Facsimile No.: (310) 575-5165
Telephone: (310) 575-5200
Attention: Corporate Finance Department
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
-19-
<PAGE>
Facsimile No.: (212) 504-6666
Telephone: (212) 504-6000
Attention: Lawrence A. Larose
2. to the Company:
VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, Massachusetts 01810
Attention: President
Facsimile: (978) 975-7208
Telephone: (978) 975-3700
with copies to:
Mirick, O'Connell, DeMallie
& Lougee, LLP
1700 Bank of Boston Tower
100 Front Street
Worcester, Massachusetts 01608
Attention: David L. Lougee
Facsimile: (508) 752-7305
Telephone: (508) 799-0541
3. to the Unit Agent:
State Street Bank and Trust Company
2 International Place
Boston, Massachusetts 02110
Attention: Roland Gustafsen
Facsimile: (617) 664-5150
Telephone: (617) 664-5665
with copies to:
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: Robert Coughlin
Facsimile: (617) 951-2125
Telephone: (617) 951-2100
or at any other address of which either of the foregoing shall have notified the
other in writing.
-20-
<PAGE>
SECTION 4.04. GOVERNING LAW. THIS AGREEMENT AND EACH UNIT CERTIFICATE
-------------
ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
SECTION 4.05. Obtaining of Governmental Approvals. The Company will
-----------------------------------
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under United States Federal and State laws, and the rules and regulations of all
stock exchanges on which the Units are listed which may be or become requisite
in connection with the issuance, sale, transfer, and delivery of the Unit
Certificates, the exercise of the Units or the issuance, sale, transfer and
delivery of the shares issued upon exercise of the Units.
SECTION 4.06. Persons Having Rights Under Agreement. Nothing in this
-------------------------------------
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Unit Agent and the
holders of the Unit Certificates any right, remedy or claim under or by reason
of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Unit Agent and their successors and of the
holders of the Unit Certificates.
SECTION 4.07. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning or construction of any of the provisions hereof.
SECTION 4.08. Counterparts. This Agreement may be executed in any
------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
SECTION 4.09. Inspection of Agreement. A copy of this Agreement shall
-----------------------
be available at all reasonable times at the principal corporate trust office of
the Unit Agent, for inspection by the holder of any Unit Certificate. The Unit
Agent may require such holder to submit his Unit Certificate for inspection by
it.
SECTION 4.10. Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the successors and assigns of the Company or
the Unit Agent.
SECTION 4.11. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or
-21-
<PAGE>
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
SECTION 4.12. Entire Agreement. This Agreement, together with the
----------------
Unit Certificates (together with the certificates evidencing the Notes and
Warrants underlying the Units and the Indenture and Warrant Agreement), is
intended by the parties as a final and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings, correspondence,
conversations and memoranda between the parties hereto, any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
-22-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
--------------------------------------
Name: Glenn D. Bolduc
Title: President and Chief Executive Officer
SUBSIDIARY GUARANTORS:
TELEPHONE BUSINESS MEETINGS, INC.
d/b/a ACCESS CONFERENCE CALL SERVICE
By: /s/ Glenn D. Bolduc
----------------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
CONFERENCE SOURCE INTERNATIONAL,
INC.
By: /s/ Glenn D. Bolduc
------------------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
CALL POINTS, INC.
By: /s/ Glenn D. Bolduc
-------------------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
KENDALL SQUARE TELECONFERENCING,
INC. d/b/a THE CONFERENCE CENTER
By: /s/ Glenn D. Bolduc
-------------------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
AMERICAN CONFERENCING COMPANY,
INC. d/b/a AMERICO
By: /s/ Glenn D. Bolduc
-------------------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
<PAGE>
COMMUNICATION DEVELOPMENT
CORPORATION
By: /s/ Glenn D. Bolduc
-------------------------------------------
Name: Glenn D. Bolduc
Title: Authorized Signatory
<PAGE>
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Roland S. Gustafsen
---------------------------------------------
Name: Roland S. Gustafsen
Title: Assistant Vice President
STATE STREET BANK AND TRUST
COMPANY, as Warrant Agent
By: /s/ Roland S. Gustafsen
---------------------------------------------
Name: Roland S. Gustafsen
Title: Assistant Vice President
STATE STREET BANK AND TRUST
COMPANY, as Unit Agent
By: /s/ Roland S. Gustafsen
---------------------------------------------
Name: Roland S. Gustafsen
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[FORM OF UNIT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Units in
certificated form, this Unit may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
---
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
--------------
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
-------------------
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
DEALER) TO THE UNIT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 PROMULGATED
- ---------------------------------------
/1/ This paragraph is to be included only if the Unit is in global form.
<PAGE>
UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE UNIT AGENT AND THE ISSUER SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
-------------------- ------
STATES" AND "U.S.PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
- ------ ----------
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A REGISTRATION
RIGHTS AGREEMENT DATED AS OF NOVEMBER 12, 1997 AMONG JEFFERIES & COMPANY, INC.,
THE COMPANY AND THE SUBSIDIARY GUARANTORS NAMED HEREIN AND A SECURITYHOLDERS'
AND REGISTRATION RIGHTS AGREEMENT DATED AS OF NOVEMBER 12, 1997 AMONG JEFFERIES
& COMPANY, INC. AND THE COMPANY, A COPY OF EACH OF WHICH IS ON FILE WITH THE
CLERK OF THE COMPANY.
A-2
<PAGE>
UNIT CERTIFICATE
VIALOG CORPORATION
TELEPHONE BUSINESS MEETINGS, INC.
CONFERENCE SOURCE INTERNATIONAL, INC.
CALL POINTS, INC.
KENDALL SQUARE TELECONFERENCING, INC.
AMERICAN CONFERENCING COMPANY, INC.
COMMUNICATION DEVELOPMENT CORPORATION
Units Consisting of
$1,000 Principal Amount of 12-3/4% Senior Notes due 2001
and
a Warrant to Purchase 10.0886 shares of the Common Stock
of VIALOG Corporation
CUSIP # [ ]
No. [ ] [ ] Units
This Unit Certificate certifies that [ ], or
registered assigns, is the registered holder of [ ] Units (the "Units")
as described above.
Each Unit consists of (i) $1,000 principal amount of 12-3/4% Senior
Notes due 2001 (the "Notes") of VIALOG Corporation (the "Company") and Telephone
Business Meetings, Inc., Conference Source International, Inc., Call Points,
Inc., Kendall Square Teleconferencing, Inc., American Conferencing Company,
Inc., and Communication Development Corporation (the "Subsidiary Guarantors"),
and (ii) one warrant (the "Warrant") to purchase 10.0886 shares of the Common
Stock, par value $.01 per share, of the Company. This Unit is issued pursuant
to the Unit Agreement (the "Unit Agreement"), dated as of November 12, 1997, by
and among, the Company, the Subsidiary Guarantors, the Trustee (as defined
below), the Warrant Agent (as defined below) and State Street Bank and Trust
Company, as unit agent (the "Unit Agent"), and is subject to the terms and
provisions contained therein, to all of which terms and provisions the holder of
this Unit Certificate consents by acceptance hereof. The terms of the Notes are
governed by an Indenture (the "Indenture"), dated as of November 12, 1997, among
the Company, the Subsidiary Guarantors and State Street Bank and Trust Company,
as trustee (the "Trustee"), and are subject to the terms and provisions
contained therein, to all of which terms and provisions the holder of this Unit
Certificate consents by acceptance hereof. The terms of the Warrants are
governed by a Warrant Agreement (the "Warrant Agreement"), dated as of November
12, 1997, by and between the Company and State Street Bank and Trust Company, as
warrant agent
A-3
<PAGE>
(the "Warrant Agent"), and are subject to the terms and provisions contained
therein, to all of which terms and provisions the holder of this Unit
Certificate consents by acceptance hereof. The Company will furnish to any
holder of this Unit Certificate upon written request and without charge a copy
of the Unit Agreement, Indenture and Warrant Agreement.
The Notes and Warrants represented by this Unit Certificate shall be
separably transferable on or after May 15, 1998, or such earlier date as the
Jefferies & Company, Inc. may determine in its sole discretion (the
"Separability Date").
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place. Capitalized terms used in this Unit Certificate
but not defined herein shall have the meanings ascribed thereto in the Unit
Agreement.
This Unit Certificate shall not be valid unless authenticated by the
Unit Agent, as such term is used in the Unit Agreement.
THIS UNIT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
A-4
<PAGE>
WITNESS the facsimile seal of the Company and facsimile signatures of
its duly authorized officers.
Dated:
VIALOG CORPORATION
By:________________________________
Name: Glenn D. Bolduc
Title: President
SUBSIDIARY GUARANTORS:
TELEPHONE BUSINESS MEETINGS, INC.
d/b/a ACCESS CONFERENCE CALL SERVICE
By:________________________________
Name: Glenn D. Bolduc
Title: Authorized Signatory
CONFERENCE SOURCE INTERNATIONAL,
INC.
By:________________________________
Name: Glenn D. Bolduc
Title: Authorized Signatory
CALL POINTS, INC.
By:________________________________
Name: Glenn D. Bolduc
Title: Authorized Signatory
KENDALL SQUARE TELECONFERENCING,
INC. d/b/a THE CONFERENCE CENTER
By:________________________________
Name: Glenn D. Bolduc
Title: Authorized Signatory
A-5
<PAGE>
AMERICAN CONFERENCING COMPANY,
INC. d/b/a AMERICO
By:________________________________
Name: Glenn D. Bolduc
Title: Authorized Signatory
COMMUNICATION DEVELOPMENT
CORPORATION
By:________________________________
Name: Glenn D. Bolduc
Title: Authorized Signatory
Certificate of Authentication:
This is one of the Units
referred to in the within
mentioned Unit Agreement:
STATE STREET BANK AND TRUST COMPANY
as Unit Agent
By:________________________________
Name:
Title:
A-6
<PAGE>
[FORM OF UNIT CERTIFICATE]
[REVERSE]
VIALOG CORPORATION
TELEPHONE BUSINESS MEETINGS, INC.
CONFERENCE SOURCE INTERNATIONAL, INC.
CALL POINTS, INC.
KENDALL SQUARE TELECONFERENCING, INC.
AMERICAN CONFERENCING COMPANY, INC.
COMMUNICATION DEVELOPMENT CORPORATION
Units Consisting of
$1,000 Principal Amount of 12-3/4% Senior Notes due 2001 (each, a "Security")
and
a Warrant to Purchase 10.0886 shares of the Common Stock
of VIALOG Corporation
I. PROVISIONS RELATING TO THE NOTES
1. Interest.
--------
VIALOG CORPORATION, a Massachusetts corporation (the "Company"),
-------
promises to pay interest on the principal amount of the Securities at the rate
per annum shown above. The Company will pay interest semi-annually on May 15
and November 15 of each year (the "Interest Payment Date"), commencing May 15,
1998. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from November 12, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
-----------------
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest at the location of the principal office
of the Paying Agent in money of the United States that at the time of payment is
legal tender for payment of public and private debts ("U.S. Legal Tender").
-----------------
However, the Company may pay principal and interest by wire transfer in same day
funds, or, in the case of Physical Securities, by check payable in such U.S.
Legal Tender.
A-7
<PAGE>
3. Paying Agent and Registrar.
--------------------------
Initially, State Street Bank and Trust Company (the "Trustee") will
-------
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
------------------------
The Company issued the Securities under an Indenture, dated as of
November 12, 1997 (the "Indenture"), among the Company, the Subsidiary
---------
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"),
---
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general unsecured obligations of the Company limited in aggregate
principal amount to $75,000,000. Payment on each Security is guaranteed on a
senior basis, jointly and severally, by the Subsidiary Guarantors pursuant to
Article Ten of the Indenture.
5. Optional Redemption.
-------------------
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after November 15, 1999 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on November 15 of the year
set forth below (but not including the date of maturity), plus, in each case,
accrued interest thereon to the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999.................................. 110%
2000.................................. 105%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to November 15,
1999, the Company may redeem up to an aggregate of 35% of the original principal
amount of Securities at a redemption price of 112.75% of the original principal
amount thereof, plus accrued and unpaid interest thereon, to the redemption date
with the net proceeds of any Public Equity Offering; provided that at least 65%
--------
in aggregate of the original principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
-------- -------
such redemption occurs within 90 days of the date of the closing of such Public
Equity Offering.
A-8
<PAGE>
In addition, prior to November 15, 1999, the Notes will be redeemable
at the Company's option, in whole or in part, at any time or from time to time,
upon not less than 30 nor more than 60 days' prior notice mailed by first-class
mail to each Holder's registered address, at a redemption price (expressed as a
percentage of principal amount) equal to the sum of the principal amount of such
Securities plus the applicable Make-Whole Premium thereon at the time of
redemption (subject to the right of Holders of record on the relevant record
date to receive interest due to the relevant interest payment date).
The following definitions are used to determine the applicable Make-
Whole Premium:
"Applicable Make-Whole Premium" means, with respect to a Security at
the redemption date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value of such time of (1) the
redemption price of such Security at November 15, 1999 plus (2) all required
interest payments (excluding accrued but unpaid interest) due on such Security
through November 1, 1999, computed using a discount rate equal to the Treasury
Rate plus 100 basis points, over (B) the principal amount of such Security at
such time.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for repayment (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
Weighted Average Life to Maturity) of the Securities; provided, however, that if
the Weighted Average Life to Maturity of the Securities is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given.
6. Repurchase at Option of Holder.
------------------------------
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
-----------------------
to $1,000 or an integral multiple thereof) of each Holder's Securities at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment"). Within
-------------------------
30 days following the occurrence of a Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions and setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, the
Indenture requires that certain proceeds be used, subject to the limitations
contained therein, to make an offer to all Holders of Securities (an "Asset
-----
Proceeds Offer") pursuant to Section
- --------------
A-9
<PAGE>
4.17 of the Indenture to purchase certain amounts of Securities in accordance
with the procedures set forth in the Indenture.
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the redemption
date, interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Sinking- Fund.
-------------
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection not register the
transfer of or exchange any securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
10. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
A-10
<PAGE>
12. Legal Defeasance and Covenant Defeasance.
----------------------------------------
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
----------------
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
-------------------
case upon satisfaction of certain conditions specified in the Indenture.
13. Amendment; Supplements; Waiver.
------------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder of a Security.
14. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
---------------------
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may
A-11
<PAGE>
withhold from Holders of Securities notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest, including an
accelerated payment) if it determines that withholding notice is in their
interest.
16. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
17. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the securities.
18. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act). Capitalized terms used herein and not otherwise defined have
the meanings set forth in the Indenture.
20. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
VIALOG Corporation, Ten New England Business Center, Suite 302, Andover, MA
01810, Attn.: President.
A-12
<PAGE>
II. PROVISIONS RELATING TO THE WARRANTS
The Warrants evidenced by this Unit Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to purchase at
any time on or after November 12, 1997, until 5:00 p.m., Boston time, on
November 15, 2001, 10.0886 shares of Common Stock of the Company, subject to
adjustment as set forth in the Warrant Agreement. The Warrants are issued
pursuant to a Warrant Agreement dated as of November 12, 1997 (the "Warrant
-------
Agreement"), duly executed and delivered by the Company to State Street Bank and
- ---------
Trust Company, as Warrant Agent (the "Warrant Agent"), which Warrant Agreement
-------------
is hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Warrants. Warrants may be exercised by (i)
surrendering at any Warrant Agent Office this Unit Certificate with the form of
Election to Exercise set forth hereon duly completed and executed and (ii)
paying in full the Warrant Exercise Price for each such Warrant exercised or
tendering a Warrant or Warrants in accordance with the cashless exercise
provisions of the Warrant Agreement and any other amounts required to be paid
pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., Boston
time, on a Business Day, the exercise of the Warrant to which such items relate
will be effective on such Business Day. If any items referred to in the last
sentence of the preceding paragraph are received after 2:00 p.m., Boston time,
on a Business Day, the exercise of the Warrants to which such item relates will
be deemed to be effective on the next succeeding Business Day. Notwithstanding
the foregoing, in the case of an exercise of Warrants on the Expiration Date, if
all of the items referred to in the last sentence of the preceding paragraph are
received by the Warrant Agent at or prior to 5:00 p.m., Boston time, on such
Expiration Date, the exercise of the Warrants to which such items relate will be
effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as practicable
after the exercise of any Warrant or Warrants, the Company shall issue or cause
to be issued to or upon the written order of the registered holder of this Unit
Certificate, a certificate or certificates evidencing the Shares of such holder
pursuant to the Election to Exercise, as set forth on the reverse of this Unit
Certificate. In addition, such holder will receive a certificate or
certificates evidencing the Securities which were previously evidenced by the
applicable Unit. Such Shares and Securities will not be transferable until the
Separability Date. Such certificate or certificates evidencing the Shares or
Securities shall be deemed to have been issued and any persons who are
designated to be named therein shall be deemed to have become the holder of
record of such Shares or Securities as of the close of business on the date upon
which the exercise of the Warrant was deemed to be effective as provided in the
preceding paragraph.
The Company will not be required to issue fractional shares of Common
Stock upon exercise of the Warrants or distribute Share certificates that
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, there shall be paid to the
A-13
<PAGE>
registered holder of this Unit Certificate at the time the Warrant or Warrants
comprising such Unit is exercised an amount in cash equal to the same fraction
of the Current Market Value per share as determined in accordance with the
Warrant Agreement.
Unit Certificates, when surrendered at any office or agency maintained
by the Company for that purpose by the registered holder thereof in person or by
legal representative or attorney duly authorized in writing, may be exchanged
for a new Unit Certificate or new Unit Certificates evidencing in the aggregate
a like number of Units in the manner and subject to the limitations provided in
the Unit Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
Upon due presentment for registration of transfer of a Unit
Certificate at any office or agency maintained by the Company for that purpose,
a new Unit Certificate evidencing in the aggregate a like number of Unit shall
be issued to the transferee in exchange for such Unit Certificate, subject to
the limitations provided in the Unit Agreement, without charge except for any
tax or other governmental charge imposed in connection therewith.
The Company and the Unit Agent may deem and treat the registered
holder hereof as the absolute owner of this Unit Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone) for the
purpose of any exercise hereof and for all other purposes, and neither the
Company nor the Unit Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which (i) banking institutions in The City of New
York or Boston, Massachusetts, (ii) the principal national securities exchange
or market on which the Common Stock is listed or admitted to trading and (iii)
the principal national securities exchange or market on which the Units are
listed or admitted to trading are required or authorized by law or other
governmental action to be closed.
A-14
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this security to
______________________________________________________________________________
______________________________________________________________________________
(Print or type name, address and zip code of assignee)
______________________________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ______________________________________________________
agent to transfer this security on the books of the Company. The agent may
substitute another to act for him.
Dated: __________________________ Signed:_____________________________
(Sign exactly as name appears on
the other side of this security)
Signature Guarantee:____________________________________________________________
Participant in a recognized Signature Guarantee Medallion Program
(or other signature guarantor program reasonably acceptable to the
Trustee)
A-15
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have the Notes underlying this security
purchased by the Company pursuant to Sections 4.16 or 4.17 of the Indenture,
check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of the Notes underlying this
security purchased by the Company pursuant to Sections 4.16 or 4.17 of the
Indenture, state the amount: $
Dated: __________________________ Signed:_____________________________
(Sign exactly as name appears on
the other side of this security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion Program
(or other signature guarantor program reasonably acceptable to
the Trustee)
A-16
<PAGE>
[FORM OF ELECTION TO EXERCISE]
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise _____________ of
the Warrants represented by this Unit Certificate and purchase the whole number
of Shares issuable upon the exercise of such Warrants and herewith tenders
payment for such Shares in the amount of $_________ in cash or by certified or
official bank check, in accordance with the terms hereof or tender such number
of Warrants as may be provided in accordance with the cashless exercise
provisions hereof. The undersigned requests that a certificate representing
such Shares be registered in the name of ___________________________________
______________________________________________________ whose address is
______________________________________________ and that such certificate be
delivered to _____________________________________________________ whose address
is ________________________________________. Any cash payments to be paid in
lieu of a fractional Share should be made to _____________________________ whose
address is ________________________________________ and the check representing
payment thereof should be delivered to ______________________________________
whose address is ________________________________________ delivered to
_____________________ whose address is ________________________________________.
Dated __________, _______
Name of holder of
Unit Certificate:
(Please Print)
Tax Identification or
Social Security Number:
Address:
Signature:
Note: The above signature must correspond with the name as written
upon the face of this Unit Certificate in every particular,
without alteration or enlargement or any change whatever.
Dated __________, _______
A-17
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED UNITS/2/
-------------------------------------------
The following exchanges of a part of this Global Unit for certificated Units
have been made:
<TABLE>
<CAPTION>
Number of Units of
this Global Unit
Amount of decrease Amount of increase following such Signature of
in Number of Units in Number of Units decrease (or authorized officer
Date of Exchange of this Global Unit of this Global Unit increase) of Unit Agent
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------------------
/2/ This is to be included only if the Unit is in global form.
A-18
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF UNITS
Re: Units consisting of (i) $1,000 principal amount of 12-3/4% Senior Notes due
2001 of VIALOG Corporation guaranteed by the Subsidiary Guarantors referred to
therein and (ii) Warrants to purchase 10.0886 shares of the Common Stock of
VIALOG Corporation
This Certificate relates to _________ Units held in* ______________
book-entry or* __________ certificated form by ______________________ (the
"Transferor")
- -----------
The Transferor: *
[_] has requested the Unit Agent by written order to deliver in exchange
for its beneficial interest in the Global Unit held by the Depositary a Unit or
Units in definitive, registered form and an aggregate number equal to its
beneficial interest in such Global Unit (or the portion thereof indicated
above); or
[_] has requested the Unit Agent by written order to exchange or register
the transfer of a Unit or Units.
[_] In connection with such request and in respect of each such Unit, the
Transferor does hereby certify that the Transferor is familiar with the Unit
Agreement relating to the above captioned Units and the restrictions on
transfers thereof as provided in Section 1.08 of such Unit Agreement, and that
the transfer of this Unit does not require registration under the Securities Act
of 1933, as amended (the "Securities Act") because[*]:
--------------
[_] Such Unit is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section
1.08(a)(y)(A) or Section 1.08(d)(i)(A) of the Unit
Agreement.
[_] Such Unit is being transferred to a qualified institutional
buyer (as defined in Rule 144A promulgated under the
Securities Act), in reliance on Rule 144A or in accordance
with Regulation S promulgated under the Securities Act.
[_] Such Unit is being transferred in accordance with Rule 144
promulgated under the Securities Act.
B-1
<PAGE>
[_] Such Unit is being transferred in reliance on and in
compliance with an exemption from the registration
requirements of the Securities Act, other than Rule 144A or
Rule 144 or Regulation S promulgated under the Securities
Act. An opinion of counsel to the effect that such transfer
does not require registration under the Securities Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By:
Date:
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
Transferee Letter of Representation
VIALOG Corporation
10 New England Business Center
Suite 302
Andover, Massachusetts 01810
Ladies and Gentlemen:
In connection with our proposed purchase of Units consisting of (i)
$1,000 Principal Amount of 12-3/4% Senior Notes due 2001 of VIALOG Corporation
(the "Company") guaranteed by the Subsidiary Guarantors referred to therein and
-------
(ii) Warrants to Purchase 10.0886 shares of the Common Stock of the Company
(collectively, the "Securities") we confirm that:
----------
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") and, unless
--------------
so registered, may not be sold except as permitted in the following sentence.
We agree on our own behalf and on behalf of any investor account for which we
are purchasing Securities to offer, sell or otherwise transfer such Securities
prior to the date which is two years after the later of the date of original
issue and the last date on which the Company or any affiliate of the Company was
the owner of such Securities, or any predecessor thereto (the "Resale
------
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
- ----------------------------
registration statement which has been declared effective under the Securities
Act, (c) so long as the Securities are eligible for resale pursuant to Rule
144A, under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
---
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S promulgated under
the Securities Act, (e) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act that is purchasing for his own account or for the account of such an
institutional "accredited investor", or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and to compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Unit agent under
the Unit Agreement pursuant to which the Securities were issued (the "Unit
----
Agent") which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 promulgated under the Securities Act and that it is
acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. The Unit Agent
C-1
<PAGE>
and the Company reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Securities pursuant to
clause (e) or (f) above to require the delivery of a written opinion of counsel,
certifications, and or other information satisfactory to the Company and the
Unit Agent.
2. We are an institutional "accredited investor" (as defined
in Rule 501 (a)(1), (2), (3) or (7) of Regulation D promulgated under the
Securities Act) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Securities for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Securities, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
4. You, the Unit Agent and your respective counsel are
entitled to rely upon this letter and you are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
(Name of Purchaser)
By:
Date:
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
C-2
<PAGE>
EXHIBIT 4.3
-----------
EXECUTION COPY
================================================================================
WARRANT AGREEMENT
Dated as of November 12, 1997
Between
VIALOG CORPORATION
and
STATE STREET BANK AND TRUST COMPANY
as Warrant Agent
----------------------
Warrants to Purchase Shares of Common Stock
Par Value $.01 Per Share
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants...........................................1
SECTION 1.02. Form of Warrant Certificates...................................2
SECTION 1.03. Execution of Warrant Certificates..............................2
SECTION 1.04. Authentication and Delivery....................................3
SECTION 1.05. Temporary Warrant Certificates.................................3
SECTION 1.06. Separation of Warrants and Notes...............................4
SECTION 1.07. Registration...................................................4
SECTION 1.08. Registration of Transfers and Exchanges........................4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates................................................11
SECTION 1.10. Offices for Exercise, etc.....................................12
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND
EXERCISE PRICE
SECTION 2.01. Duration of Warrants..........................................13
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery.............13
SECTION 2.03. Cancellation of Warrant Certificates..........................15
ARTICLE III
OTHER PROVISIONS RELATING TO RIGHTS OF
HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights.........................................15
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes..............................................16
i
<PAGE>
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of Shares Issuable..16
SECTION 5.02. Fractional Interest.........................................21
SECTION 5.03. When Adjustment Not Required................................22
SECTION 5.04. Challenges to Good Faith Determination......................22
SECTION 5.05. Treasury Stock..............................................22
SECTION 5.06. Notices to Warrant Holders..................................22
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent...............................................23
SECTION 6.02. Conditions of Warrant Agent's Obligations...................23
SECTION 6.03. Resignation and Appointment of Successor....................27
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment...................................................29
SECTION 7.02. Notices and Demands to the Company and Warrant Agent........29
SECTION 7.03. Notices.....................................................29
SECTION 7.04. Governing Law...............................................31
SECTION 7.06. Obtaining of Governmental Approvals.........................31
SECTION 7.07. Persons Having Rights Under Agreement.......................31
SECTION 7.08. Headings....................................................31
SECTION 7.09. Counterparts................................................32
SECTION 7.10. Inspection of Agreement.....................................32
SECTION 7.11. Successors and Assigns......................................32
SECTION 7.11. Severability................................................32
SECTION 7.12. Entire Agreement............................................32
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate To Be Delivered upon Exchange or
Registration of Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
ii
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of November 12, 1997 (the
---------
"Effective Date") by VIALOG CORPORATION, a Massachusetts corporation (together
--------------
with any successor thereto, the "Company"), and STATE STREET BANK AND TRUST
-------
COMPANY, a Massachusetts trust company, as warrant agent (with any successor
Warrant Agent, the "Warrant Agent").
-------------
WHEREAS, the Company has entered into a purchase agreement dated
November 6, 1997 with Jefferies & Company, Inc. (the "Initial Purchaser") in
-----------------
which the Company has agreed, among other things, to sell to the Initial
Purchaser (A) 75,000 units (the "Units") consisting in the aggregate of
-----
(i) $75,000,000 aggregate principal amount of 12 3/4% Senior Notes due 2001 (the
"Notes") of the Company to be issued under an indenture dated as of November 12,
- ------
1997 (the "Indenture"), among the Company, the Subsidiary Guarantors named
---------
therein and State Street Bank and Trust Company, as trustee (the "Trustee"), and
-------
(ii) 75,000 Warrants to purchase an aggregate of 756,645 shares of common stock,
$.01 par value per share (the "Common Stock"), of the Company (the "Note
------------ ----
Warrants") and (B) 30,000 warrants to purchase an aggregate of 302,658 shares of
- --------
Common Stock (the "Additional Warrants" and, together with the Note Warrants,
-------------------
the "Warrants," and the certificates evidencing the Warrants being hereinafter
---------
referred to as "Warrant Certificates"), in each case subject to adjustment in
--------------------
accordance with the terms hereof; and
WHEREAS, the Note Warrants and the Notes comprising the Units shall be
separately transferable immediately; and
WHEREAS, the Company desires the Warrant Agent to assist the Company
in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among other
things, the terms and conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
---------------------------------------
SECTION 1.01. Issuance of Warrants. Each Warrant Certificate shall
--------------------
evidence the number of Warrants specified therein, each Note Warrant evidenced
thereby shall represent the right, subject to the provisions contained herein
and therein, to purchase from the Company (and the Company shall issue and sell
to such holder of the Note Warrant) 10.0886 fully paid and non-assessable shares
of the Company's Common Stock, and each Additional Warrant evidenced thereby
shall represent the right, subject to the provisions contained herein and
therein, to purchase from the Company (and the Company shall issue and sell to
such holder of the Additional Warrant) 10.0886 fully paid and nonassessable
shares of the
<PAGE>
Company's Common Stock (the shares of Common Stock purchasable upon exercise of
a Warrant being hereinafter referred to as the "Shares" and, where appropriate,
------
such term shall also mean the other securities or property purchasable and
deliverable upon exercise of a Warrant as provided in Article V) at the price
specified herein and therein, in each case subject to adjustment as provided
herein and therein.
SECTION 1.02. Form of Warrant Certificates. Warrant Certificates
----------------------------
representing Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Warrants (the "Global
------
Warrants"). Warrants offered and sold in reliance on any other exemption from
- --------
registration under the Securities Act other than as described in the preceding
sentence shall be issued in the form of definitive Warrant Certificates (the
"Definitive Warrants"). The Warrant Certificates evidencing the Global Warrants
-------------------
or the Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto (in the case of
---------
the Global Warrants, including footnote 1 thereto). Such Global Warrants shall
represent such of the outstanding Warrants as shall be specified therein and
each shall provide that it shall represent the aggregate amount of outstanding
Warrants from time to time endorsed thereon and that the aggregate amount of
outstanding Warrants represented thereby may from time to time be reduced or
increased, as appropriate. Any endorsement of a Global Warrant to reflect the
amount of any increase or decrease in the amount of outstanding Warrants
represented thereby shall be made by the Warrant Agent and Depositary (as
defined below) in accordance with instructions given by the holder thereof. The
Depository Trust Company shall act as the Depositary (the "Depositary") with
----------
respect to the Global Warrants until a successor shall be appointed by the
Company. Upon written request, a Warrant holder may receive from the Warrant
Agent Definitive Warrants as set forth in Section 1.08 hereof.
SECTION 1.03. Execution of Warrant Certificates. The Warrant
---------------------------------
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
clerk or assistant clerk, under its corporate seal. Such signatures may be the
manual or facsimile signatures of the present or any future such officers. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such person was not such an officer.
-2-
<PAGE>
SECTION 1.04. Authentication and Delivery. Subject to the immediate
---------------------------
following paragraph, Warrant Certificates shall be authenticated by manual
signature and dated the date of authentication by the Warrant Agent and shall
not be valid for any purpose unless so authenticated and dated. For the purpose
of determining the date of issuance of any Warrant, an authentication by the
applicable unit agent of a unit of which such Warrant is a part shall be deemed
to be the authentication by the Warrant Agent of the applicable Warrant. The
Warrant Certificates shall be numbered and shall be registered in the Warrant
Register (as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of the
Company, which order shall be signed by the chairman of its Board of Directors,
its president or any vice president and attested by its clerk or assistant
clerk, and shall specify the amount of Warrants to be authenticated, whether the
Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof, to authenticate
the Warrant Certificates and deliver them. Such authentication shall be by a
duly authorized signatory of the Warrant Agent (although it shall not be
necessary for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall
be in substantially the form set forth in Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Pending the
------------------------------
preparation of definitive Warrant Certificates, the Company may execute, and,
upon receipt of an authentication order in accordance with Section 1.04 hereof,
the Warrant Agent shall authenticate and deliver, temporary Warrant
Certificates, which are printed, lithographed, typewritten or otherwise
produced, in a form substantially similar to the definitive Warrant Certificates
in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Warrant Certificates may determine, as evidenced by their execution of such
Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of
-3-
<PAGE>
definitive Warrant Certificates, the temporary Warrant Certificates shall be
exchangeable for definitive Warrant Certificates upon surrender of the temporary
Warrant Certificates at any office or agency maintained by the Company for that
purpose pursuant to Section 1.10 hereof. Subject to the provisions of Section
4.01 hereof, such exchange shall be without charge to the holder. Upon surrender
for cancellation of any one or more temporary Warrant Certificates, the Company
shall execute, and, upon receipt of an authentication order in accordance with
Section 1.04 hereof, the Warrant Agent shall authenticate and deliver in
exchange therefor, one or more definitive Warrant Certificates representing in
the aggregate a like number of Warrants. Until so exchanged, the holder of a
temporary Warrant Certificate shall in all respects be entitled to the same
benefits under this Agreement as a holder of a definitive Warrant Certificate.
SECTION 1.06. Separation of Note Warrants and Notes. The Note
-------------------------------------
Warrants and the Notes comprising the Units will be separately transferable on
or after May 15, 1998, or such earlier date as the Initial Purchaser may
determine in its sole discretion.
SECTION 1.07. Registration. The Company will keep, at the office or
------------
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Warrants is hereinafter called, individually and collectively, the
"Registrar". The Company hereby initially appoints the Warrant Agent as
---------
Registrar. Upon written notice to the Warrant Agent and any acting Registrar,
the Company may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Warrants (the "Warrant Register"). The
----------------
Warrant Agent will act as such repository unless and until some other person is,
by written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each
Registrar to furnish to such repository, on a current basis, such information as
to all registrations of transfer and exchanges effected by such Registrar, as
may be necessary to enable such repository to maintain the Warrant Register on
as current a basis as is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Definitive Warrants. When Definitive
--------------------------------------------
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants,
-4-
<PAGE>
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
1.08 hereof for such transactions are met; provided, however, that the
-------- -------
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Company
and the Warrant Agent, duly executed by the holder thereof
or by his attorney, duly authorized in writing; and
(y) in the case of Warrants the offer and sale of which have not
been registered under the Securities Act and are presented
for transfer or exchange prior to (x) the date which is two
years after the later of the date of original issue and the
last date on which the Company or any affiliate of the
Company was the owner of such Warrant, or any predecessor
thereto and (y) such later date, if any, as may be required
by any subsequent change in applicable law (the "Resale
------
Restriction Termination Date"), such Warrants shall be
----------------------------
accompanied, in the sole discretion of the Company, by the
following additional information and documents, as
applicable:
(A) if such Warrant is being delivered to the Warrant Agent
by a holder for registration in the name of such
holder, without transfer, a certification from such
holder to that effect (in substantially the form of
Exhibit B hereto); or
---------
(B) if such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A
promulgated under the Securities Act) in accordance
with Rule 144A promulgated under the Securities Act or
pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S promulgated
under the Securities Act, a certification to that
effect (in substantially the form of Exhibit B hereto);
---------
or
(C) if such Warrant is being transferred to an
institutional "accredited investor" within the meaning
of subparagraph (a)(1), (a)(2), (a)(3) or (a)(7) of
Rule 501 promulgated under the Securities Act, delivery
of a Transferee Letter of Representation in the form of
Exhibit C hereto and an opinion of counsel and/or other
---------
information satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act; or
-5-
<PAGE>
(D) if such Warrant is being transferred in reliance on
another exemption from the registration requirements of
the Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto) and an
---------
opinion of counsel reasonably acceptable to the Company
to the effect that such transfer is in compliance with
the Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
-----------------------------------------------------------------
Interest in a Global Warrant. A Definitive Warrant may not be transferred for a
- ----------------------------
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of Exhibit B
---------
hereto, that such Definitive Warrant is being transferred to
a "qualified institutional buyer" (as defined in Rule 144A
promulgated under the Securities Act) in accordance with
Rule 144A promulgated under the Securities Act; and
(B) written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the
Global Warrant to reflect an increase in the aggregate
amount of the Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall authenticate a new Global Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and
----------------------------------------
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Section 1.08 and the procedures
of the Depositary therefor.
(d) Exchange of a Beneficial Interest in a Global Warrant for a
-----------------------------------------------------------
Definitive Warrant.
- ------------------
(i) Any person having a beneficial interest in a Global Warrant
may upon request exchange such beneficial interest for a
Definitive Warrant. Upon receipt by the Warrant Agent of
written instructions or such other form of instructions as
is customary for the Depositary from the Depositary or its
nominee on behalf of any person having a beneficial interest
in a Global Warrant and upon receipt by the Warrant Agent of
a written order or such
-6-
<PAGE>
other form of instructions as is customary for the
Depositary or the person designated by the Depositary as
having such a beneficial interest containing registration
instructions from such person having a beneficial interest
therein and, in the case of any such transfer or exchange
prior to the Resale Restriction Termination Date, the
following additional information and documents:
(A) if such beneficial interest is being transferred to the
person designated by the Depositary as being the
beneficial owner, a certification from such person to
that effect (in substantially the form of Exhibit B
---------
hereto); or
(B) if such beneficial interest is being transferred to a
qualified institutional buyer (as defined in Rule 144A
promulgated under the Securities Act) in accordance
with Rule 144A promulgated under the Securities Act or
pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S promulgated
under the Securities Act, a certification to that
effect from the transferee or transferor (in
substantially the form of Exhibit B hereto); or
---------
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning
of subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) of
Rule 501 promulgated under the Securities Act, delivery
of a Transferee Letter of Representation in the form of
Exhibit C hereto and an opinion of counsel and/or other
---------
information satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act; or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (in substantially the form of Exhibit B
---------
hereto) and an opinion of counsel reasonably acceptable
to the Company to the effect that such transfer is in
compliance with the Securities Act,
the Warrant Agent will cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Warrant Agent, the aggregate amount of
the Global Warrant to be reduced and, following such
reduction, the Company will execute and, upon receipt of an
authentication order in the form
-7-
<PAGE>
of an Officers' Certificate (as defined), the Warrant Agent
will authenticate and deliver to the transferee a Definitive
Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section
1.08(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent in writing. The
Warrant Agent shall deliver such Definitive Warrants to the
persons in whose names such Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
--------------------------------------------------------
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
--------------------------------------------------------------
If at any time:
(i) the Depositary for the Warrants notifies the Company that
the Depositary is unwilling or unable to continue as
Depositary for the Global Warrant and a successor Depositary
for the Global Warrant is not appointed by the Company
within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the authentication
---------------------
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) Legends.
-------
(i) Except to the extent permitted by the following paragraph
(ii), each Warrant Certificate evidencing the Global
Warrants and the Definitive Warrants (and all Warrants
issued in exchange therefor or substitution thereof) shall
bear a legend substantially to the following effect:
-8-
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
--------------
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501 (A)(1), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
-------------------
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE ISSUER THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
WARRANT AGENT AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
-------------------- ------------- -----------
MEANING GIVEN TO THEM
-9-
<PAGE>
BY REGULATIONS UNDER THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT DATED AS OF
NOVEMBER 12, 1997 AMONG JEFFERIES & COMPANY, INC. AND THE COMPANY, A
COPY OF WHICH IS ON FILE WITH THE CLERK OF THE COMPANY.
To the extent a Warrant Certificate evidences a Global Warrant, such
Warrant Certificate shall also bear the legend with respect thereto
substantially in the form set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144 under
the Securities Act in accordance with Section 1.08 hereof or an
effective registration statement under the Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant, the
Warrant Agent shall permit the holder thereof to exchange
such Warrant for a Definitive Warrant that does not bear the
first paragraph of the legend set forth above and rescind
any related restriction on the transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant shall not
be subject to the provisions set forth in (i) above (such
sales or transfers being subject only to the provisions of
Section 1.08(c) hereof) provided, however, that with respect
-------- -------
to any request for an exchange of a Warrant that is
represented by a Global Warrant for a Definitive Warrant
that does not bear the first paragraph of the legend set
forth in (i) above, which request is made in reliance upon
Rule 144 under the Securities Act, the holder thereof shall
certify in writing to the Warrant Agent that such request is
being made pursuant to Rule 144 under the Securities Act
(such certification to be substantially in the form of
Exhibit B hereto).
---------
(h) Cancellation and/or Adjustment of a Global Warrant. At such time
--------------------------------------------------
as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and canceled by the Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exchanged for Definitive Warrants, redeemed, repurchased or canceled, the number
of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
-10-
<PAGE>
(i) Obligations with Respect to Transfers and Exchanges of Definitive
-----------------------------------------------------------------
Warrants.
- --------
(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Warrant Agent's request, and
the Warrant Agent shall, upon receipt of an authentication
order in accordance with Section 1.04 hereof, authenticate
Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration of transfer or exchange of Definitive Warrants
or Global Warrants shall be the valid obligations of the
Company, entitled to the same benefits under this Warrant
Agreement as the Definitive Warrants or Global Warrants
surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Warrant Agent and the Company may deem and
treat the person in whose name any Warrant is registered as
the absolute owner of such Warrant, and neither the Warrant
Agent nor the Company shall be affected by notice to the
contrary.
(j) Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes attributable to the initial issuance of the Warrants and of the Shares
upon the exercise of Warrants or to the separation of the Note Warrants and
Notes comprising the Units as described in Section 1.06; provided, however, that
-------- -------
the Company shall not be required to pay any tax or other governmental charge
which may be payable in respect of any transfer or exchange of any Warrant
Certificates or any certificates for Shares in a name other than that of the
registered holder of a Warrant Certificate surrendered upon the exercise of a
Warrant. The Company shall not be required to issue or deliver such Warrant
Certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or other
governmental charge or shall have established to the satisfaction of the Company
that such tax or other governmental charge has been paid or an exemption is
available therefrom.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
-----------------------------------------------------
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent
- ------------
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity and/or insurance reasonably
satisfactory to them and, in the case of mutilation or defacement, upon
surrender thereof to the Warrant Agent for cancellation, then, in the absence of
notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser or holder in due course, the Company
---- ----
shall execute, and, upon receipt of an authentication order in accordance with
Section 1.04 hereof, an authorized signatory of the Warrant Agent shall manually
authenticate and deliver, in exchange for or in
-11-
<PAGE>
lieu of the lost, stolen, destroyed, defaced or mutilated Warrant Certificate, a
new Warrant Certificate representing a like number of Warrants, bearing a number
or other distinguishing symbol not contemporaneously outstanding. Upon the
issuance of any new Warrant Certificate under this Section, the Company may
require the payment from the holder of such Warrant Certificate of a sum
sufficient to cover any tax, stamp tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Warrant Agent and the Registrar) in connection therewith. Every
substitute Warrant Certificate executed and delivered pursuant to this Section
in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute an
additional contractual obligation of the Company, whether or not the lost,
stolen or destroyed Warrant Certificate shall be at any time enforceable by
anyone, and shall be entitled to the benefits of (but shall be subject to all
the limitations of rights set forth in) this Agreement equally and
proportionately with any and all other Warrant Certificates duly executed and
delivered hereunder. The provisions of this Section 1.09 are exclusive with
respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Warrant Certificates and shall preclude (to the extent lawful) any and all other
rights or remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to authenticate, in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any of the
-------------------------
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York and/or The City of Boston: (a) an
office or agency where the Warrant Certificates may be presented for exercise,
and (b) an office or agency where the Warrant Certificates may be presented for
registration of transfer and for exchange (including the exchange of temporary
Warrant Certificates for definitive Warrant Certificates pursuant to Section
1.05 hereof). The Company may from time to time change or rescind such
designation, as it may deem desirable or expedient; provided, however, that an
-------- -------
office or agency shall at all times be maintained in the Borough of Manhattan,
The City of New York and/or The City of Boston, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York and/or The
City of Boston, where Warrant Certificates may be presented for exercise or for
registration of transfer or for exchange, and the Company may from time to time
change or rescind such designation, as it may deem desirable or expedient. The
Company will give to the Warrant Agent written notice of the location of any
such office or agency and of any change of location thereof. The Company hereby
designates the office of the Warrant Agent, in The City of Boston (the "Warrant
-------
Agent Office"), as the initial agency maintained for each such purpose.
- ------------
-12-
<PAGE>
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
-------------------------------------------------
SECTION 2.01. Duration of Warrants. Subject to the terms and
--------------------
conditions established herein, the Warrants shall expire at 5:00 p.m., New York
City time, on November 15, 2001 (the "Expiration Date"). Each Warrant may be
---------------
exercised on any Business Day (as defined below) on or after the Exercisability
Date (as defined below) and on or prior to the Expiration Date.
Any Warrant not exercised on or prior to the Expiration Date relating
to such Warrant shall become void, and all rights of the holder under the
Warrant Certificate evidencing such Warrant and under this Agreement shall
cease. The Company will give notice of the impending Expiration Date not less
than 90 nor more than 120 days prior thereto to the registered holders of the
then outstanding Warrants.
"Business Day" shall mean any day other than a Saturday, Sunday or any
------------
other day on which (i) banking institutions in The City of New York or Boston,
Massachusetts, (ii) the principal national securities exchange or market on
which the Common Stock is listed or admitted to trading and (iii) the principal
national securities exchange or market, if any, on which the Warrants are listed
or admitted to trading are required or authorized by law or other governmental
action to be closed.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery.
-------------------------------------------------
(a) Subject to the provisions of this Agreement, (i) a holder of Note Warrants
shall have the right to purchase from the Company on or after the Effective Date
(the "Exercisability Date") and on or prior to the Expiration Date 10.0886 fully
-------------------
paid, registered and non-assessable Shares, subject to adjustment in accordance
with Article V hereof, at the purchase price of $.01 for each Share issuable
upon exercise of a Note Warrant (the "Note Warrant Exercise Price") and (ii) a
---------------------------
holder of Additional Warrants shall have the right to purchase from the Company
on or after the Exercisability Date and on or prior to the Expiration Date
10.0886 fully paid, registered and non-assessable Shares, subject to adjustment
in accordance with Article V hereof, at the purchase price of $.01 for each
Share issuable upon exercise of an Additional Warrant (the "Additional Warrant
------------------
Exercise Price"). The term "Exercise Price" as used herein shall mean either
- -------------- --------------
the Note Warrant Exercise Price or the Additional Warrant Exercise Price, as
applicable.
(b) Warrants may be exercised on or after the Exercisability Date by
(i) surrendering at any office or agency maintained for that purpose by the
Company pursuant to Section 1.10 (each a "Warrant Exercise Office") the Warrant
-----------------------
Certificate evidencing such Warrants with the form of election to purchase
Shares set forth on the reverse side of the Warrant Certificate (the "Election
--------
to Exercise") duly completed and signed by the registered holder or holders
- -----------
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and (ii) paying in full the Exercise Price for each such
Share issuable
-13-
<PAGE>
upon exercise of a Warrant exercised and any other amounts required to be paid
pursuant to Section 1.08(j) hereof. Each Warrant may be exercised only in whole.
(c) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash or by certified or official bank
check to be delivered to the office or agency where the Warrant Certificate is
being surrendered. No payment or adjustment shall be made on account of any
dividends on the Shares issued upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "Exercise Date" for a Warrant shall be the date when all of the
-------------
items referred to in the first sentence of paragraphs (b) and (c) of this
Section 2.02 are received by the Warrant Agent at or prior to 2:00 p.m., New
York City time, on a Business Day and the exercise of the Warrants will be
effective as of such Exercise Date. If any items referred to in the first
sentence of paragraphs (b) and (c) are received after 2:00 p.m., New York City
time, on a Business Day, the exercise of the Warrants to which such item relates
will be effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of an exercise of Warrants on the Expiration Date, if all
of the items referred to in the first sentence of paragraphs (b) and (c) are
received by the Warrant Agent at or prior to 5:00 p.m., New York City time, on
such Expiration Date, the exercise of the Warrants to which such items relate
will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price,
the Warrant Agent shall: (i) cause an amount equal to the Exercise Price to be
paid to the Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii) advise the
Company immediately by telephone of the amount so deposited to the Company's
account and promptly confirm such telephonic advice in writing; and (iii) as
soon as practicable, advise the Company in writing of the number of Warrants
(giving effect to Section 5.01 below) exercised in accordance with the terms and
conditions of this Agreement and the Warrant Certificates, the instructions of
each exercising holder of the Warrant Certificates with respect to delivery of
the Shares to which such holder is entitled upon such exercise, and such other
information as the Company shall reasonably request.
(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Shares to which such
holder is entitled, in fully registered form, registered in such name or names
as may be directed by such holder pursuant to the Election to Exercise, as set
forth on the reverse of the Warrant Certificate. The Warrant Agent shall have
no obligation to ascertain the number of Shares to be issued with respect to the
exercised Warrant or Warrants. Such certificate or certificates evidencing the
Shares shall be deemed to have
-14-
<PAGE>
been issued and each person who is designated to be named therein shall be
deemed to have become the holder of record of such Shares as of the close of
business on the Exercise Date. After such exercise of any Warrant or Warrants,
the Company shall also issue or cause to be issued to or upon the written order
of the registered holder of such Warrant Certificate, a new Warrant Certificate,
countersigned by the Warrant Agent pursuant to the Company's written
instruction, evidencing the number of Warrants, if any, remaining unexercised
unless such Warrants shall have expired.
(g) In addition to and without limiting the rights of each holder of
Warrants hereunder, at each such holder's option, any Warrant or Warrants may be
exercised by being exchanged in whole or from time to time in part at any time
on or prior to the Expiration Date, for a number of Shares having a Current
Market Value (as hereinafter defined) on the date of such exercise equal to the
difference between (x) the Current Market Value of the number of Shares subject
to such Warrant or Warrants designated by such holder on the date of exercise
(the "Designated Number of Shares") and (y) the aggregate Exercise Price for
---------------------------
such Shares in effect at such time. Upon any such exercise, the number of
Shares purchasable upon exercise of such Warrant or Warrants shall be reduced by
the Designated Number of Shares and, if a balance of purchasable Shares remains
after such exercise, the Company shall execute and deliver to such holder of
Warrants (or its designee) a new Warrant or new Warrants for such balance of
such Shares. No payment of cash or any other consideration to the Company shall
be required from such holder (or its designee) in connection with any exercise
of a Warrant or Warrants by exchange pursuant to this Section 2.02(g). Such
exchange shall be effective upon the date of receipt by the Company of the
Warrant or Warrants surrendered for cancellation and a written request from such
holder that the exchange pursuant to this section be made, or at such later date
as may be specified in such request.
SECTION 2.03. Cancellation of Warrant Certificates. In the event the
------------------------------------
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates properly surrendered for exchange, substitution,
transfer or exercise. The Warrant Agent shall destroy canceled Warrant
Certificates held by it and deliver a certificate of destruction to the Company.
The Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of Warrant Shares through the exercise of such Warrants.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
-----------------------------
SECTION 3.01. Enforcement of Rights.
---------------------
(a) Notwithstanding any of the provisions of this Agreement, any
holder of any Warrant Certificate, without the consent of the Warrant Agent, the
holder of any Shares or the holder of any other Warrant Certificate, may, in and
for his own behalf, enforce, and may
-15-
<PAGE>
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, his right to exercise the Warrant or Warrants evidenced by
his Warrant Certificate in the manner provided in such Warrant Certificate and
in this Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle
the holders thereof to any of the rights of a holder of Shares, including,
without limitation, the right to vote or to receive any dividends or other
payments or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or for the election of directors of the Company or to
share in the assets of the Company in the event of the liquidation, dissolution
or winding up of the Company's affairs or any other matter, or any rights
whatsoever as stockholders of the Company.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
--------------------------------
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants or to the separation of the Note Warrants and
Notes comprising the Units as described in Section 1.06; provided, however, that
-------- -------
the Company shall not be required to pay any tax or other governmental charge
which may be payable in respect of any transfer or exchange of any Warrant
Certificates or any certificates for Shares in a name other than that of the
registered holder of a Warrant Certificate surrendered upon the exercise of a
Warrant. The Company shall not be required to issue or deliver such Warrant
Certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or other
governmental charge or shall have established to the satisfaction of the Company
that such tax or other governmental charge has been paid or an exemption is
available therefrom.
ARTICLE V
ADJUSTMENTS
-----------
SECTION 5.01. Adjustment of Exercise Price and Number of Shares
-------------------------------------------------
Issuable. The number and kind of Shares purchasable upon the exercise of
- --------
Warrants and the Exercise Price shall be subject to adjustment from time to time
as follows:
(a) Stock Dividends, Stock Splits, Reverse Splits, etc. In case the
--------------------------------------------------
Company shall hereafter (A) pay a dividend or make a distribution on its Common
Stock, in either case in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class) and excluding cash dividends,
(B) subdivide its outstanding shares of Common Stock or (C) reverse split or
combine its outstanding shares of Common Stock into a smaller number of shares,
the number of Shares purchasable upon exercise of each Warrant shall be adjusted
so that the holder of any Warrant exercised following such action shall be
entitled to receive the number of Shares which such holder would have owned
thereafter had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this paragraph shall
-16-
<PAGE>
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision or combination. If, as a result of an adjustment made pursuant to
this paragraph, the holder of any Warrant thereafter exercised shall become
entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.
(b) Reclassification, Business Combinations, Mergers, etc. In case
-----------------------------------------------------
of any reclassification or change of outstanding shares of Common Stock (other
than as set forth in Section 5.01 (a) above and other than a change in par
value, or from par value to no par value, or from no par value to par value), or
in case of any consolidation or merger of the Company with or into another
corporation or entity (other than a merger in which the Company is the
continuing entity and which does not result in any reclassification or change of
the then outstanding shares of Common Stock or other capital stock of the
Company (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination))
or in case of any sale or conveyance to another corporation, person or entity of
all or substantially all of the assets of the Company, then, as a condition of
such reclassification, change, consolidation, merger, sale or conveyance, the
Company or such a successor or purchasing corporation, person or entity, as the
case may be, shall forthwith make lawful and adequate provision whereby the
holder of any Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon exercise of such Warrant had it been exercised
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance, and the Company or such successor or purchasing corporation,
person or entity, as the case may be, shall enter into a supplemental warrant
agreement so providing. Such provisions shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article V. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental warrant agreement is an affiliate of
the formed, surviving or transferee corporation, that issuer shall join in the
supplemental warrant agreement.
In the case of any such reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation, person or entity
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant Agreement to be performed and observed by the Company and all the
obligations and liabilities of the Company hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares
of the Common Stock for which any Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Article V.
-17-
<PAGE>
The foregoing provisions of this Section 5.01(b) shall similarly apply
to successive reorganizations, reclassifications, mergers, consolidations or
dispositions of assets.
In the case of any such merger, consolidation or sale or disposition
of assets to a person that does not have publicly traded common equity for which
the Warrants become exercisable and the consideration for such transaction does
not consist solely of cash, the Company must offer to repurchase all Warrants at
the value (as determined by the holder of the Additional Warrants) of the Common
Stock issuable upon exercise thereof, less the Exercise Price.
(c) Issuance of Common Stock, Options or Convertible Securities. For
-----------------------------------------------------------
the purposes of this Warrant Agreement, Additional Shares of Common Stock shall
mean all shares of Common Stock issued or deemed to be issued by the Company
after the Effective Date, as defined in the following paragraph, other than
Excluded Shares (as defined below).
In the event the Company shall, at any time or from time to time after
the Effective Date, issue, sell, distribute or otherwise grant in any manner
(including by assumption) shares of Common Stock or any rights to subscribe for
or to purchase, or any warrants or options for the purchase of, Common Stock or
any stock or securities convertible into or exchangeable for Common Stock (any
such rights, warrants or options being herein called "Options" and any such
-------
convertible or exchangeable stock or securities being herein called "Convertible
-----------
Securities") or any Convertible Securities (other than upon exercise of any
- ----------
Option), whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise and/or conversion of such Options or
Convertible Securities, shall be deemed to be "Additional Shares of Common
---------------------------
Stock".
- -----
For purposes of this Warrant Agreement, the term "Issuance Date" shall
-------------
mean (i) with respect to Additional Shares of Common Stock deemed to have been
issued in connection with the issuance of an Option or Convertible Security, the
date such Option or Convertible Security is issued and (ii) in all other cases,
the actual date Additional Shares of Common Stock are issued.
For the purposes of this Warrant Agreement, "Excluded Shares" shall
---------------
mean: (i) shares for which the consideration per share as determined pursuant to
paragraph (d) below would be equal to or more than the Current Market Value (as
defined in clause (e) below) determined on the day prior to the Issuance Date;
(ii) shares of Common Stock issuable upon the exercise of Options or conversion
of Convertible Securities existing as of the Effective Date; and (iii) shares of
Common Stock (appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes) issued pursuant to any
stock options granted or obtained after the Effective Date pursuant to the
Company's Stock Option Plan adopted February 14, 1996, as may be amended from
time to time by the Company's Board of Directors. The issuance of Excluded
Shares shall not be an issuance of Additional
-18-
<PAGE>
Shares of Common Stock, and shall not give rise to a right to purchase
securities pursuant to paragraph (d) below.
In any such case in which the Additional Shares of Common Stock are
deemed to be issued, no right to purchase securities under Section 5.01(d) below
will accrue upon the subsequent issuance of shares of Common Stock upon the
exercise and/or conversion or exchange of such Option or Convertible Security
unless such Option or Convertible Security shall have been amended or modified
prior to exercise or conversion or exchange so as to increase the number of
Additional Shares of Common Stock deemed to have been issued thereunder or
decrease the exercise and/or conversion or exchange price payable thereunder to
an amount less than Current Market Value as of the Issuance Date thereof.
(d) If the price per share at which Common Stock is issued or is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (the "Consideration Per Share") (determined by
-----------------------
dividing (i) the aggregate amount, if any, received or receivable by the Company
as consideration for the issuance, sale, distribution or granting of such Common
Stock or Options or any such Convertible Security, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance of Common Stock or the exercise of all such Options or upon conversion
or exchange of all such Convertible Securities, plus, in the case of Options to
acquire Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of shares of Common
Stock to be issued or issuable upon the exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities or upon the conversion
or exchange of all Convertible Securities issuable upon the exercise of all
Options) shall be less than the Current Market Value per share of Common Stock
(determined pursuant to Section 5.01(e)) on the record date for the issuance,
sale, distribution or granting of such Options (any such event being herein
called a "Distribution") then, the number of shares of Common Stock issuable
------------
upon exercise of the Warrants following the consummation of such Distribution
shall be equal to: (i) the Warrant Value, divided by the New Enterprise Value
(as herein defined), multiplied by (ii) the number of shares of Common Stock
outstanding, on a fully-diluted basis, immediately following the consummation of
such Distribution. In the case of an adjustment pursuant to this Section
5.01(d), the number of shares of Common Stock issuable upon exercise of each
Warrant, following such adjustment, will equal the result of (I) the aggregate
number of shares of Common Stock issuable upon exercise of all Warrants then
outstanding, divided by (II) the aggregate number of Warrants then outstanding.
Notwithstanding the foregoing, the number of shares of Common Stock issuable
upon exercise of the Warrants will not be adjusted upon (i) the granting or
exercise of Options granted to employees, officers or directors or other
participants in a stock option or other employee benefit plan approved by a
majority of the non-employee members of the Board of Directors of the Company
and (ii) the issuance of shares of Common Stock pursuant to a registration
statement filed with the Securities and Commission pursuant to the Securities
Act and underwritten on a firm commitment basis by a nationally recognized
underwriter.
-19-
<PAGE>
"Warrant Value" means, as of the date prior to a Distribution (or
-------------
Asset Distribution (as herein defined), as the case may be), the product of
(A) a fraction equal to the number of shares of Common Stock issuable upon
exercise of the Warrants immediately prior to such Distribution (or Asset
Distribution, as the case may be) divided by the number of shares of Common
Stock then outstanding on a fully diluted basis, multiplied by (B) the Old
Enterprise Value of the Company. "New Enterprise Value" means the Enterprise
--------------------
Value of the Company immediately after the consummation of the applicable
Distribution (or Asset Distribution, as the case may be). "Old Enterprise Value"
--------------------
means the Enterprise Value of the Company immediately prior to the consummation
of the applicable Distribution (or Asset Distribution, as the case may be).
"Enterprise Value" means the value of the Company as of a particular date
----------------
determined by an internationally recognized investment banking firm selected by
the Company and approved by holders of a majority of the then outstanding
Warrants.
(e) Current Market Value. As used herein, the term "Current Market
-------------------- --------------
Value" per share of Common Stock or any other security at any date means, on any
- -----
date of determination (a) the average of the daily closing sale prices for each
of 15 business days immediately preceding such date (or such shorter number of
days during which such security has been listed or traded), if the security has
been listed on the New York Stock Exchange, the American Stock Exchange or other
national securities exchanges or the NASDAQ National Market for at least 10
business days prior to such date, (b) if such security is not so listed or
traded, the average of the daily closing bid prices for each of the 15 business
days immediately preceding such date (or such shorter number of days during
which such security had been quoted), if the security has been quoted on a
national over-the-counter market for at least 10 business days, and (c)
otherwise, the value of the security most recently determined as of a date
within the six months preceding such day by the Board of Directors of the
Company, in good faith.
(f) Consideration Received. If any shares of Common Stock, Options
----------------------
or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board of
Directors of the Company). If any Options shall be issued in connection with the
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
without consideration; provided, however, that if such Options have an exercise
-------- -------
price equal to or greater than the Current Market Value of the Common Stock on
the date of issuance of such Options, then such Options shall be deemed to have
been issued for consideration equal to such exercise price.
(g) Changes in Options and Convertible Securities. If the exercise
---------------------------------------------
price provided for in any Options referred to in Section 5.01 (d) above, the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 5.01 (d) above, or the rate at
which any Convertible Securities referred to in Section 5. 01 (d) above are
convertible into or exchangeable for Common Stock shall change at any time to a
price which is less than the Current Market Value thereof as of the Issuance
Date,
-20-
<PAGE>
then the Company shall make the offer to holders of the Warrants as required by
Section 5.01(d) above.
(h) Distribution of Indebtedness or Assets. In case the Company
--------------------------------------
shall make a distribution to all holders of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the surviving corporation) of evidences of its indebtedness or assets
(as "Asset Distribution"), the aggregate number of shares of Common Stock
------------------
issuable upon exercise of the Warrants following consummation of such Asset
Distribution shall be equal to: (i) the Warrant Value, divided by the New
Enterprise Value (determined as of consummation of such Asset Distribution),
multiplied by (ii) the number of shares of Common Stock outstanding, on a fully-
diluted basis, immediately following the consummation of such Asset
Distribution. In the case of an adjustment pursuant to this Section 5.01(h), the
number of shares of Common Stock issuable upon exercise of each Warrant,
following such adjustment, will equal the result of (A) the aggregate number of
shares of Common Stock issuable upon exercise of all Warrants then outstanding,
divided by (B) the aggregate number of Warrants then outstanding.
(i) Other Action Affecting Common Stock. In case at any time or from
-----------------------------------
time to time the Company shall take any action in respect of its Common Stock,
other than any action described in this Article V, then the number of Shares for
which any Warrant is exercisable shall be adjusted in such manner as may be
equitable in the circumstances. If the Company shall at any time or from time
to time issue or sell (i) any shares of any class of common stock other than
Common Stock, (ii) any evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for such shares of common
stock, with or without the payment of additional consideration in cash or
property or (iii) any warrants or other rights to subscribe for or purchase any
such shares of common stock or any such evidences, shares of stock or other
securities, then in each such case such issuance shall be deemed to be of, or in
respect of, Common Stock for purposes of this Article V; provided, however,
-------- --------
that, without limiting the generality of the foregoing, if the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution of, common stock
other than Common Stock, including shares of non-voting common stock, then the
number of Shares for which this Warrant is exercisable after the occurrence of
any such event shall be adjusted to equal the aggregate number of shares of such
common stock and of Common Stock which a record holder of the same number of
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event.
(j) Statement of Warrants. Irrespective of any adjustment in the
---------------------
number or kind of Shares issuable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued shall continue to express the same number and
kind of shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 5.02. Fractional Interest. The Company shall not be required
-------------------
to issue fractional shares of Common Stock on the exercise of Warrants. If more
than one
-21-
<PAGE>
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of shares
of Common Stock acquirable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall direct the transfer agent for the Common Stock, in
lieu of issuing such fractional share, to pay an amount in cash calculated by
the Company to equal the then-Current Market Value per share (determined
pursuant to Section 5.01(e)) multiplied by such fraction computed to the nearest
whole cent. Holders of Warrants, by their acceptances of the Warrant
Certificates, expressly waive any and all rights to receive any fraction of a
share of Common Stock or a stock certificate representing a fraction of a share
of Common Stock.
SECTION 5.03. When Adjustment Not Required. If the Company shall
----------------------------
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
SECTION 5.04. Challenges to Good Faith Determination. Whenever the
--------------------------------------
Board of Directors of the Company shall be required to make a determination in
good faith of the fair value of any item under this Article V, such
determination may be challenged in good faith by holders holding a majority of
the outstanding Warrants (the "Majority Holders"), and any dispute shall be
----------------
resolved by an investment banking firm of national standing selected by the
Company. The fee of such investment banking firm shall be paid by the Company,
unless such fair market value as determined by the investment banking firm is
more than 95% of the fair market value determined by the Board of Directors of
the Company, in which case the challenging holders shall be jointly and
severally liable for such fee.
SECTION 5.05. Treasury Stock. The sale or other disposition of any
--------------
issued shares of Common Stock owned or held by or for the account of the Company
shall be deemed an issuance thereof and a repurchase thereof and designation of
such shares as treasury stock shall be deemed to be a redemption thereof for the
purposes of this Agreement.
SECTION 5.06. Notices to Warrant Holders. In connection with any
--------------------------
adjustment pursuant to this Article V, the Company shall (i) promptly after such
adjustment or, if earlier, at least five days prior to the date on which notice
of such adjustment is required to be given, if at all, to The Depository Trust
Company cause to be filed with the Warrant Agent a certificate of an officer of
the Company setting forth the number of shares (or portion thereof) issuable
after such adjustment, upon exercise of a Warrant, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein, and
(ii) promptly after such adjustment cause to be given to each of the registered
holders of the Warrant Certificates at his address appearing on the Warrant
Register written notice of such adjustments by first-
-22-
<PAGE>
class mail, postage prepaid. The Warrant Agent shall be entitled to conclusively
rely on the above-referenced officer's certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time to any holder desiring an inspection thereof during normal
business hours upon reasonable notice. The Warrant Agent shall not at any time
be under any duty or responsibility to any holder to determine whether any facts
exist that may require any adjustment of the number of Shares issuable on
exercise of the Warrants or the Exercise Price, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment or the validity or value (or the kind or amount) of
any Shares which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other common stock or property upon the exercise of any Warrant.
The Company shall, in addition, promptly notify the holders of the
Warrants of any determination of its Board of Directors pursuant to
Section 5.01(i) that any actions affecting its Common Stock will not require an
adjustment to the number of Shares for which a Warrant is exercisable, and shall
specify in such notice the reasons for such determination. In the event that
the Majority Holders shall challenge any of the calculations set forth in such
notice within 20 days after Company's delivery thereof, the Company shall retain
a firm of independent certified public accountants or law firm of national
standing selected by the Company to prepare and execute a certificate verifying
that no adjustment is required. The Company shall promptly cause a signed copy
of any certificate prepared pursuant to this Section 5.06 to be delivered to
each holder at his address appearing in the Warrant Register. The Company shall
keep at its office or agency designated pursuant to Section 1.10 copies of all
such certificates and cause the same to be available for inspection at said
office during normal business hours upon reasonable notice by any holder or any
prospective purchaser of a Warrant designated by a holder thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT
----------------------------
SECTION 6.01. Warrant Agent. The Company hereby appoints State
-------------
Street Bank and Trust Company as warrant agent (and in all capacities in this
Agreement, the "Warrant Agent") of the Company in respect of the Warrants and
-------------
the Warrant Certificates upon the terms and subject to the conditions herein and
in the Warrant Certificates set forth; and State Street Bank and Trust Company
hereby accepts such appointment. The Warrant Agent shall have the powers and
authority specifically granted to and conferred upon it hereby and in the
Warrant Certificates and such further powers and authority to act on behalf of
the Company as the Company may hereafter grant to or confer upon it and it shall
accept in writing. All of the terms and provisions with respect to such powers
and authority contained in the Warrant Certificates are subject to and governed
by the terms and provisions hereof.
SECTION 6.02. Conditions of Warrant Agent's Obligations. The
-----------------------------------------
Warrant Agent accepts its obligations herein set forth upon the terms and
conditions hereof and in the
-23-
<PAGE>
Warrant Certificates, including the following, to all of which the Company
agrees and to all of which the rights hereunder of the holders from time to time
of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent, each successor Warrant Agent, and their
respective directors, officers, affiliates, agents and employees for, and to
hold it and its directors, officers, affiliates, agents and employees harmless
against, any loss, liability or expense of any nature whatsoever (including,
without limitation, fees and expenses of counsel) incurred without gross
negligence or willful misconduct on the part of the Warrant Agent or successor
Warrant Agent, arising out of or in connection with its acting as such Warrant
Agent hereunder and its exercise or failure to exercise of its rights and
performance of its obligations hereunder. The obligations of the Company under
this Section 6.02 shall survive the exercise and the expiration of the Warrant
Certificates and the resignation and removal of the Warrant Agent.
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel and any advice or
written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it, in the absence of bad faith,
to be genuine and to have been presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any interest
---------------
in, Warrant Certificates, shares or other obligations of the Company with the
same rights that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or they may engage
or be interested in any financial or other transaction with the Company and may
act on, or as depositary, trustee or agent for, any committee or body of holders
of shares or other obligations of the Company as freely as if it were not the
Warrant Agent hereunder. Nothing in this Agreement shall be deemed to prevent
the Warrant Agent or such Related Parties from acting in any other capacity for
the Company.
-24-
<PAGE>
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any monies at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates.
(g) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Warrant Certificates and shall not be under any responsibility in respect of the
validity or sufficiency of this Agreement (or any term or provision hereof) or
the execution and delivery hereof (except, in each case, the due execution and
delivery hereof by the Warrant Agent) or in respect of the validity or
sufficiency or execution of any Warrant Certificate (except, in each case, its
authentication thereof); provided, however, that the Warrant Agent shall not be
-------- -------
relieved of its duty to authenticate the Warrant Certificates as authorized by
this Agreement.
(h) The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may require:
(1) an Officers' Certificate (defined earlier) stating that, in
the opinion of the signers, all conditions precedent, if any, provided
for in this Warrant Agreement relating to the proposed action have
been complied with; and
(2) if reasonably necessary in the sole judgment of the Warrant
Agent, an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or, if requested, an opinion of counsel with respect
to compliance with a condition or covenant provided for in this Warrant
Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
-25-
<PAGE>
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform such duties as
are herein and in the Warrant Certificates specifically set forth and no implied
duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and delivered
by it to the Company pursuant to this Agreement. The Warrant Agent shall have no
duty or responsibility in case of any default by the Company in the performance
of its covenants or agreements contained in the Warrant Certificates or in the
case of the receipt of any written demand from a holder of a Warrant Certificate
with respect to such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to initiate any
proceedings at law or otherwise or, except as provided in Section 7.02 hereof,
to make any demand upon the Company. The Warrant Agent shall not be obligated to
perform any duty to the extent prohibited by law.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the Board of Directors, its president, its treasurer,
its controller or any vice president or its clerk or any assistant secretary.
(l) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the clerk of the Company or any
other officer or official of the Company reasonably believed to be authorized to
give such instructions and to apply to such officers or officials for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions with respect to any matter arising in connection with the Warrant
Agent's duties and obligations arising under this Agreement. Such application
by the Warrant Agent for written instructions from the Company may, at the
option of the Warrant Agent, set forth in writing any action proposed to be
taken or omitted by the Warrant Agent with respect to its duties or obligations
under this Agreement and the date on or after which such action shall be taken
and the Warrant Agent shall not be liable for any action taken or omitted in
accordance with a proposal included in any such application on or after the date
specified therein (which date
-26-
<PAGE>
shall be not less than 10 Business Days after the Company receives such
application unless the Company consents to a shorter period), provided that
(i) such application includes a statement to the effect that it is being made
pursuant to this paragraph (n) and that unless objected to prior to such date
specified in the application, the Warrant Agent will not be liable for any such
action or omission to the extent set forth in such application and (ii) prior to
taking or omitting any such action, the Warrant Agent has not received written
instructions objecting to such proposed action or omission.
(o) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the chairman of the Board of
Directors, the president, the treasurer, the controller, any vice president or
the clerk of the Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 6.03. Resignation and Appointment of Successor.
----------------------------------------
(a) The Company agrees, for the benefit of the holders from time to
time of the Warrant Certificates, that there shall at all times be a Warrant
Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective, provided that
such date shall be at least 30 days after the date on which such notice is given
unless the Company agrees to accept less notice. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Warrant Agent,
qualified as provided in Section 6.03(d) hereof, by written instrument in
duplicate signed on behalf of the Company, one copy of which shall be delivered
to the resigning Warrant Agent and one copy to the successor Warrant Agent. As
provided in Section 6.03(d) hereof, such resignation shall become effective upon
the earlier of (x) the acceptance of the appointment by the successor Warrant
Agent or (y) 30 days after receipt by the Company of notice of such resignation.
The Company may, at any time and for any reason, and shall, upon any event set
forth in the next succeeding sentence, remove the Warrant Agent and appoint a
successor Warrant Agent by written instrument in duplicate, specifying such
removal and the date on which it is intended to become effective, signed on
behalf of the Company, one copy of which shall be delivered to the Warrant Agent
being removed and one copy to the successor Warrant Agent. The Warrant Agent
shall be removed as aforesaid if it shall become incapable of acting, or shall
be adjudged a bankrupt or
-27-
<PAGE>
insolvent, or a receiver of the Warrant Agent or of its property shall be
appointed, or any public officer shall take charge or control of it or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation. Any removal of the Warrant Agent and any appointment of a successor
Warrant Agent shall become effective upon acceptance of appointment by the
successor Warrant Agent as provided in Section 6.03(d). As soon as practicable
after appointment of the successor Warrant Agent, the Company shall cause
written notice of the change in the Warrant Agent to be given to each of the
registered holders of the Warrants in the manner provided for in Section 7.04
hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 30 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the Warrant Agent may apply to a court of competent jurisdiction
for the appointment of a successor to the Warrant Agent. Pending appointment of
a successor to the Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i) transfer and
deliver, and such successor Warrant Agent shall be entitled to receive, all
securities, records or other property on deposit with or held by such
predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then
due it pursuant to Section 6.02(a) hereof, pay over, and such successor Warrant
Agent shall be entitled to receive, all monies deposited with or held by any
predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder
may be merged or converted, or any corporation or bank with which the Warrant
Agent may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent or of the
Company.
-28-
<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.01. Amendment. This Agreement and the terms of the
---------
Warrants may be amended by the Company and the Warrant Agent, without the
consent of the holder of any Warrant Certificate, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained herein or therein or in any other manner which
the Company may deem necessary or desirable and which shall not adversely affect
in any material respect the interests of the holders of the Warrant
Certificates.
The Company and the Warrant Agent may modify this Agreement and the
terms of the Warrants with the consent of the Majority Holders for the purpose
of adding any provision to or changing in any manner or eliminating any of the
provisions of this Agreement or modifying in any manner the rights of the
holders of the outstanding Warrants; provided, however, that no such
-------- -------
modification that increases the Exercise Price, reduces the period of time
during which the Warrants are exercisable hereunder, otherwise materially and
adversely affects the exercise rights of the holders of the Warrants, reduces
the percentage required for modification, or effects any change to this Section
7.01 may be made with respect to an outstanding Warrant without the consent of
the holder of such Warrant.
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Warrant Agent.
----------------------------------------------------
If the Warrant Agent shall receive any notice or demand addressed to the Company
by the holder of a Warrant Certificate pursuant to the provisions hereof or of
the Warrant Certificates, the Warrant Agent shall promptly forward such notice
or demand to the Company.
SECTION 7.03. Notices. Any notices or other communications required
-------
or permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
1. Notices to holders of Warrants shall be mailed to the most current
address of such holders as set forth in the Warrant Register, which address
initially is, with respect to the Initial Purchaser, as follows:
-29-
<PAGE>
Jefferies & Company, Inc.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, CA 90025
Facsimile No.: (310) 575-5165
Telephone: (310) 575-5200
Attention: Corporate Finance Department
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Facsimile No.: (212) 504-6666
Telephone: (212) 504-6000
Attention: Lawrence A. Larose
2. to the Company:
VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, Massachusetts 01810
Attention: President
Facsimile: (978) 975-7208
Telephone: (978) 975-3700
with copies to:
Mirick, O'Connell, DeMallie
& Lougee, LLP
1700 Bank of Boston Tower
100 Front Street
Worcester, Massachusetts 01608
Attention: David L. Lougee
Facsimile: (508) 752-7305
Telephone: (508) 799-0541
3. to the Warrant Agent:
State Street Bank and Trust Company
2 International Place
Boston, Massachusetts 02110
Attention: Roland Gustafsen
Facsimile: (617) 664-5150
Telephone: (617) 664-5665
-30-
<PAGE>
with copies to:
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: Robert Coughlin
Facsimile: (617) 951-2125
Telephone: (617) 951-2100
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT
-------------
CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
SECTION 7.05. Obtaining of Governmental Approvals. The Company will
-----------------------------------
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under United States Federal and State laws, and the rules and regulations of all
stock exchanges on which the Warrants are listed which may be or become
requisite in connection with the issuance, sale, transfer, and delivery of the
Warrant Certificates, the exercise of the Warrants or the issuance, sale,
transfer and delivery of the shares issued upon exercise of the Warrants.
SECTION 7.06. Persons Having Rights Under Agreement. Nothing in this
-------------------------------------
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent and the
holders of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
holders of the Warrant Certificates.
SECTION 7.07. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning or construction of any of the provisions hereof.
-31-
<PAGE>
SECTION 7.08. Counterparts. This Agreement may be executed in any
------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
SECTION 7.09. Inspection of Agreement. A copy of this Agreement
-----------------------
shall be available at all reasonable times at the principal corporate trust
office of the Warrant Agent, for inspection by the holder of any Warrant
Certificate. The Warrant Agent may require such holder to submit his Warrant
Certificate for inspection by it.
SECTION 7.10. Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the successors and assigns of the Company or
the Warrant Agent.
SECTION 7.11. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
SECTION 7.12. Entire Agreement. This Agreement, together with the
----------------
Warrant Certificates, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the parties hereto, any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof and
thereof are merged herein and replaced hereby.
-32-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
VIALOG CORPORATION
By:/s/ Glenn D. Bolduc
--------------------------------------------
Name: Glenn D. Bolduc
Title: President and Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY
as Warrant Agent
By:/s/ Roland S. Gustafsen
--------------------------
Name: Roland S. Gustafsen
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
---
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
--------------
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
-------------------
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
DEALER) TO THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 PROMULGATED
- --------------------------
/1/ This paragraph is to be included only if the Warrant is in global form.
<PAGE>
UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE ISSUER SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
-------------------- ------
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
- ------ -----------
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SECURITYHOLDERS'
AND REGISTRATION RIGHTS AGREEMENT DATED AS OF NOVEMBER 12, 1997 AMONG JEFFERIES
& COMPANY, INC. AND THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE CLERK OF
THE COMPANY.
CUSIP # 92552X-114
92552X-122
No. [ ] [ ] Warrants
A-2
<PAGE>
WARRANT CERTIFICATE
VIALOG CORPORATION
This Warrant Certificate certifies that [ ], or
registered assigns, is the registered holder of [ ] Warrants (the
"Warrants") to purchase shares of Common Stock, par value $.01 per share (the
"Common Stock"), of VIALOG CORPORATION, a Massachusetts corporation (the
"Company"). Each Warrant entitles the holder to purchase from the Company at
any time on or after November 12, 1997 until 5:00 p.m., New York City time, on
November 15, 2001 (the "Expiration Date"), 10.0886 fully paid and non-assessable
shares of Common Stock (a "Share", or, if adjusted, the "Shares", which may also
include any other securities or property purchasable upon exercise of a Warrant,
such adjustment and inclusion each as provided in the Warrant Agreement) at the
exercise price (the "Exercise Price") of $.01 per Share issuable upon exercise
of a Warrant upon surrender of this Warrant Certificate and payment of the
Exercise Price at any office or agency maintained for that purpose by the
Company (the "Warrant Agent Office"), subject to the conditions set forth herein
and in the Warrant Agreement.
The Exercise Price shall be payable by cash, certified check or
official bank check or by such other means as is acceptable to the Company in
the lawful currency of the United States of America which as of the time of
payment is legal tender for payment of public or private debts. The Company has
initially designated the office of State Street Bank and Trust Company, an
affiliate of the Warrant Agent, at its agent's office in the Borough of
Manhattan, The City of New York, as the initial Warrant Agent Office. The
number of Shares issuable upon exercise of the Warrants ("Exercise Rate") is
subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on November 15, 2001 shall thereafter be void.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place. Capitalized terms used in this Warrant
Certificate but not defined herein shall have the meanings ascribed thereto in
the Warrant Agreement.
This Warrant Certificate shall not be valid unless authenticated by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
A-3
<PAGE>
WITNESS the facsimile seal of the Company and facsimile signatures of
its duly authorized officers.
Dated:
VIALOG CORPORATION
[Seal] By:
------------------------------
Name: Glenn D. Bolduc
Title: President
Attest:
By:
------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
STATE STREET BANK AND TRUST COMPANY
as Warrant Agent
By:
------------------------------
Authorized Signatory
A-4
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
VIALOG CORPORATION
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to purchase at
any time on or after November 12, 1997, until 5:00 p.m., New York City time, on
November 15, 2001, 10.0886 shares of Common Stock of the Company, subject to
adjustment as set forth in the Warrant Agreement. The Warrants are issued
pursuant to a Warrant Agreement dated as of November 12, 1997 (the "Warrant
-------
Agreement"), duly executed and delivered by the Company to State Street Bank and
- ---------
Trust Company, as Warrant Agent (the "Warrant Agent"), which Warrant Agreement
-------------
is hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Warrants. Warrants may be exercised by (i)
surrendering at any Warrant Agent Office this Warrant Certificate with the form
of Election to Exercise set forth hereon duly completed and executed and (ii)
paying in full the Warrant Exercise Price for each such Warrant exercised or
tendering a Warrant or Warrants in accordance with the cashless exercise
provisions of the Warrant Agreement and any other amounts required to be paid
pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 5:00 p.m.,
New York City time, on such Expiration Date, the exercise of the Warrants to
which such items relate will be effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as practicable
after the exercise of any Warrant or Warrants, the Company shall issue or cause
to be issued to or upon the written order of the registered holder of this
Warrant Certificate, a certificate or certificates evidencing the Share or such
holder pursuant to the Election to Exercise, as set forth on the reverse of this
warrant Certificate. Such certificate or certificates evidencing the Share or
Shares shall be deemed to have been issued and any persons who are designated to
be named therein shall be deemed to have become the holder of record of such
Share or Shares as of the close of business on the date upon which the exercise
of this Warrant was deemed to be effective as provided in the preceding
paragraph.
A-5
<PAGE>
The Company will not be required to issue fractional shares of Common
Stock upon exercise of the Warrants or distribute Share certificates that
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, there shall be paid to the registered holder of this Warrant
Certificate at the time such Warrant Certificate is exercised an amount in cash
equal to the same fraction of the Current Market Value per share as determined
in accordance with the Warrant Agreement.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant Certificates evidencing
in the aggregate a like number of Warrants, in the manner and subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone) for the
purpose of any exercise hereof and for all other purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which (i) banking institutions in The City of New
York or Boston, Massachusetts, (ii) the principal national securities exchange
or market on which the Common Stock is listed or admitted to trading and (iii)
the principal national securities exchange or market on which the Warrants are
listed or admitted to trading are required or authorized by law or other
governmental action to be closed.
A-6
<PAGE>
[FORM OF ELECTION TO EXERCISE]
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise of the
-----------
Warrants represented by this Warrant Certificate and purchase the whole number
of Shares issuable upon the exercise of such Warrants and herewith tenders
payment for such Shares in the amount of $ in cash or by certified or
----
official bank check, in accordance with the terms hereof or tender such number
of Warrants as may be provided in accordance with the cashless exercise
provisions hereof. The undersigned requests that a certificate representing such
Shares be registered in the name of
--------------------------------------------
whose address is and that such
----------------------------------------
certificate be delivered to whose address is
-------------------------
Any cash payments to be paid in lieu
- ----------------------------------------.
of a fractional Share should be made to whose
-----------------------------
address is and the check representing
----------------------------------------
payment thereof should be delivered to
--------------------------------------
whose address is delivered to
----------------------------------------
whose address is
- --------------------- ----------------------------------------.
Dated
----------, -------
Name of holder of
Warrant Certificate:
(Please Print)
Tax Identification or
Social Security Number:
Address:
Signature:
Note: The above signature must correspond with the name as written
upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatever.
Dated
----------, -------
A-7
<PAGE>
[FORM OF ASSIGNMENT]
For value received hereby sells, assigns and
----------------------
transfers unto the within Warrant Certificate, together
----------------------
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint attorney, to transfer said Warrant
-----------------
Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated
-----------------, ----
Signature:
Note: The above signature must correspond with the name as written
upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatever.
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS/2/
----------------------------------------------
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Warrants
Amount of decrease Amount of increase of this Global
in Number of in Number of Warrant following Signature of
Warrants of this Warrants of this such decrease (or authorized officer
Date of Exchange Global Warrant Global Warrant increase) of Warrant Agent
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
/2/ This is to be included only if the Warrant is in global form.
A-9
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of VIALOG Corporation
--------
This Certificate relates to Warrants held in*
--------- --------------
book-entry or* certificated form by (the
---------- ----------------------
"Transferor")
----------
The Transferor: *
[ ] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form and an aggregate
number equal to its beneficial interest in such Global Warrant (or the portion
thereof indicated above); or
[ ] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
[ ] In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that the Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and the restrictions
on transfers thereof as provided in Section 1.08 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Securities Act") because[*]:
--------------
[ ] Such Warrant is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section
1.08(a)(y)(A) or Section 1.08(d)(i)(A) of the Warrant
Agreement.
[ ] Such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A promulgated
under the Securities Act), in reliance on Rule 144A or in
accordance with Regulation S promulgated under the
Securities Act.
[ ] Such Warrant is being transferred in accordance with Rule
144 promulgated under the Securities Act.
[ ] Such Warrant is being transferred in reliance on and in
compliance with an exemption from the registration
requirements of the Securities Act, other than Rule 144A or
Rule 144 or Regulation S promulgated under the Securities
Act. An opinion of counsel to the effect that such transfer
does not require registration under the Securities Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By:
Date:
*Check applicable box.
B-1
<PAGE>
EXHIBIT C
Transferee Letter of Representation
VIALOG Corporation
10 New England Business Center
Suite 302
Andover, Massachusetts 01810
Ladies and Gentlemen:
In connection with our proposed purchase of warrants to purchase
Common Stock, par value $.01 per share, (the "Securities") of VIALOG Corporation
----------
(the "Company") we confirm that:
-------
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") and, unless
--------------
so registered, may not be sold except as permitted in the following sentence.
We agree on our own behalf and on behalf of any investor account for which we
are purchasing Securities to offer, sell or otherwise transfer such Securities
prior to the date which is two years after the later of the date of original
issue and the last date on which the Company or any affiliate of the Company was
the owner of such Securities, or any predecessor thereto (the "Resale
------
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
- ----------------------------
registration statement which has been declared effective under the Securities
Act, (c) so long as the Securities are eligible for resale pursuant to Rule
144A, under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
---
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S promulgated under
the Securities Act, (e) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act that is purchasing for his own account or for the account of such an
institutional "accredited investor", or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and to compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the warrant agent
under the Warrant Agreement pursuant to which the Securities were issued (the
"Warrant Agent") which shall provide, among other things, that the transferee is
- --------------
an institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 promulgated under the Securities Act and
that it is acquiring such Securities for investment purposes and not for
distribution in violation of the Securities Act. The Warrant Agent and the
Company reserve the right prior to any offer, sale or other transfer prior to
the Resale Restriction Termination Date of the Securities pursuant to clause (e)
or (f) above to
<PAGE>
require the delivery of a written opinion of counsel, certifications, and or
other information satisfactory to the Company and the Warrant Agent.
2. We are an institutional "accredited investor" (as defined
in Rule 501 (a)(1), (2), (3) or (7) of Regulation D promulgated under the
Securities Act) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Securities for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Securities, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
4. You, the Warrant Agent and your respective counsel are
entitled to rely upon this letter and you are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
(Name of Purchaser)
By:
Date:
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
C-2
<PAGE>
EXHIBIT 4.4
-----------
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
Dated as of November 12, 1997
Among
VIALOG CORPORATION
AND
JEFFERIES & COMPANY, INC.
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions...................................................... 1
Section 2. Registration Rights.............................................. 4
2.1. (a) Demand Registration......................................... 4
(b) Effective Registration...................................... 5
(c) Restrictions on Sale by Holders............................. 5
(d) Underwritten Registrations.................................. 6
(e) Expenses.................................................... 6
(f) Priority in Demand Registration............................. 6
2.2. (a) Piggy-Back Registration..................................... 7
(b) Priority in Piggyback Registration.......................... 8
2.3. Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants........................................... 9
2.4. Restrictions on Sale by the Company and Others...................10
2.5. Rule 144 and Rule 144A...........................................10
Section 3. Registration Procedures..........................................11
Section 4. Indemnification and Contribution.................................16
Section 5. Miscellaneous....................................................19
(a) No Inconsistent Agreements..................................19
(b) Adjustments Affecting Registrable Securities................19
(c) Amendments and Waivers......................................20
(d) Notices.....................................................20
(e) Successors and Assigns......................................22
(f) Counterparts................................................22
(g) Headings....................................................22
i
<PAGE>
(h) Governing Law.................................................22
(i) Severability..................................................22
(j) Third Party Beneficiary.......................................23
(k) Entire Agreement..............................................23
(l) Securities Held by the Company or Its Affiliates..............23
ii
<PAGE>
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
THIS SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made and entered into as of November 12, 1997, among VIALOG
- ----------
CORPORATION, a Massachusetts corporation (the "Company") and JEFFERIES &
-------
COMPANY, INC. (the "Initial Purchaser").
-----------------
This Agreement is entered into in connection with the Purchase
Agreement, dated November 6, 1997, among the Company, the Subsidiary Guarantors
named therein and the Initial Purchaser (the "Purchase Agreement"), which
------------------
provides for the issuance and sale to the Initial Purchaser of (i) 75,000 units
consisting of an aggregate of $75,000,000 aggregate principal amount 12 3/4%
Senior Notes due 2001 (the "Notes") and 75,000 warrants (the "Note Warrants"),
----- -------------
initially exercisable for an aggregate of 756,645 of shares of common stock, par
value $.0l per share, of the Company (the "Common Stock") and (ii) 30,000
------------
warrants (the "Additional Warrants" and, together with the Note Warrants, the
-------------------
"Warrants") initially exercisable for an aggregate of 302,658 shares of Common
- ---------
Stock. In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide to the Initial Purchaser and the
Holders (as defined herein), among other things, the registration rights for the
Warrant Shares (as defined herein) set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the Initial
Purchaser under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement, the following
-----------
defined terms shall have the following meanings:
"Advice" has the meaning ascribed to such term in the last paragraph
------
of Section 3 hereof.
"Agreement" has the meaning ascribed to such term in the preamble of
---------
this Agreement.
"Business Day" means any day other than a Saturday, Sunday or any
------------
other day on which banking institutions in The City of New York or Boston,
Massachusetts are required or authorized by law or other governmental action to
be closed.
"Common Stock" has the meaning ascribed to such term in the preamble
------------
of this Agreement.
"Company" shall have the meaning ascribed to that term in the preamble
-------
of this Agreement and shall also include the Company's successors and assigns.
"Demand Registration" has the meaning ascribed to such term in Section
-------------------
2.1(a) hereof.
<PAGE>
"Demand Right Holders" means persons with "demand" registration rights
--------------------
pursuant to a contractual commitment of the Company.
"DTC" has the meaning ascribed to such term in Section 3(i) hereof.
---
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time and the rules and regulations of the SEC promulgated
thereunder.
"Holder" means the Initial Purchaser, for so long as it owns any
------
Warrants and/or Warrant Shares, and each of its successors, assigns and direct
and indirect transferees who become registered owners of such Warrants or
Warrant Shares.
"Included Securities" has the meaning ascribed to such term in Section
-------------------
2.1(a) hereof.
"indemnified party" has the meaning ascribed to such term in Section
-----------------
4(c) hereof.
"indemnifying party" has the meaning ascribed to such term in Section
------------------
4(c) hereof.
"Initial Purchaser" means Jefferies & Company, Inc.
-----------------
"Inspectors" has the meaning ascribed to such term in Section 3(n)
----------
hereof.
"Notes" has the meaning ascribed to such term in the preamble of this
-----
Agreement.
"Person" shall mean an individual, trustee, corporation, partnership,
------
limited liability company, joint stock company, trust, unincorporated
association, joint venture, union, business association, firm, governmental
agency or political subdivision thereof or other legal entity.
"Piggy-Back Registration" has the meaning ascribed to such term in
-----------------------
Section 2.2 hereof.
"Public Equity Offering" means an underwritten offer and sale of
----------------------
capital stock of the Company pursuant to a registration statement that has been
declared effective by the Commission pursuant to the Securities Act (other than
a registration statement on Form S-8 or otherwise relating to equity securities
issuable under any employee benefit plan of the Company).
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the
2
<PAGE>
offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Purchase Agreement" has the meaning ascribed to such term in the
------------------
preamble of this Agreement.
"Registrable Securities" means any of (i) the Warrant Shares (whether
----------------------
or not the related Warrants have been exercised) and (ii) any other securities
issued or issuable with respect to any Warrant Shares by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a Registration Statement covering such Registrable
Securities has been declared effective under the Securities Act and such
Registrable Securities have been disposed of in accordance with such
Registration Statement, (ii) such Registrable Securities are sold pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A)
promulgated under the Securities Act, (iii) such Registrable Securities shall
have been otherwise transferred by the Holder and new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company or its transfer agent and subsequent disposition of
such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force, or (iv) such Registrable
Securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
---------------------
Company's performance of or compliance with its obligations, under this
Agreement, including, without limitation, all SEC and stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees and
expenses, fees and expenses of compliance with securities or blue sky laws
(including, without limitation, fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), preparing, printing, filing, duplicating and distributing the
Registration Statement and the related Prospectus, the cost of printing stock
certificates, the cost and charges of any transfer agent, rating agency fees,
printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of counsel for the Company and all independent certified public
accountants, the fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (but not including any underwriting discounts
or commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Selling Holders), fees and expenses of one counsel for
the Holders and other reasonable out-of-pocket expenses of the Holders.
"Registration Statement" shall mean any registration statement of the
----------------------
Company filed with the SEC under the Securities Act, including, but not limited,
to the registration statement filed in connection with the Demand Registration
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the
3
<PAGE>
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Requisite Securities" shall mean a number of Registrable Securities
--------------------
equal to not less than 25% of the Registrable Securities held in the aggregate
by all Holders.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act,
--------
as such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
"Rule 144A" shall mean Rule 144A promulgated under the Securities Act,
---------
as such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"Securityholder" means, collectively, each Holder and their respective
--------------
successors and assigns.
"Selling Holder" shall mean a Holder who is selling Registrable
--------------
Securities in accordance with the provisions of Section 2.1 or 2.2 hereof.
"Warrants" has the meaning ascribed to such term in the preamble of
--------
this Agreement.
"Warrant Shares" means the shares of Common Stock deliverable upon
--------------
exercise of the Warrants.
"Withdrawal Election" has the meaning ascribed to such term in Section
-------------------
2.2(b) hereof.
Section 2. Registration Rights.
-------------------
2.1. (a) Demand Registration. From time to time, after 180 days
-------------------
following the completion by the Company of a Public Equity Offering, Holders
owning, individually or in the aggregate, not less than the Requisite Securities
may make a written request for registration under the Securities Act of their
Registrable Securities (a "Demand Registration"). Within 120 days of the
-------------------
receipt of such written request for a Demand Registration, the Company shall
file with the SEC and use its best efforts to cause to become effective under
the Securities Act a Registration Statement with respect to such Registrable
Securities. Any such request will specify the number of Registrable Securities
proposed to be sold and will also
4
<PAGE>
specify the intended method of disposition thereof. The Company shall give
written notice of such registration request to all other Holders of Registrable
Securities within 15 days after the receipt thereof. Within 20 days after notice
of such registration request by the Company, any Holder may request in writing
that such Holder's Registrable Securities be included in such Registration
Statement and the Company shall include in such Registration Statement the
Registrable Securities of any such Holder requested to be so included (the
"Included Securities"). Each such request by such other Holders shall specify
-------------------
the number of Included Securities proposed to be sold and the intended method of
disposition thereof. Subject to Section 2.1(b) hereof, the Company shall be
required to register Registrable Securities pursuant to this Section 2.1(a) on a
maximum of two separate occasions.
Subject to Section 2.1(f) hereof, no other securities of the Company
except securities held by any Holder, any Demand Right Holder, and any Person
entitled to exercise "piggyback" registration rights pursuant to contractual
commitments of the Company shall be included in a Demand Registration.
(b) Effective Registration. A Registration Statement will not be
----------------------
deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Company has complied in a timely manner
and in all material respects with all of its obligations under this Agreement
with respect thereto; provided, however, that if, after such Registration
-------- -------
Statement has become effective, the offering of Registrable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registrable Securities pursuant to such Registration Statement for any
reason not attributable to any Holder participating in such registration and
such Registration Statement has not become effective within a reasonable time
period thereafter (not to exceed 60 days), such Registration Statement will be
deemed not to have been effected. If (i) a registration requested pursuant to
this Section 2.1 is deemed not to have been effected or (ii) a Demand
Registration does not remain effective under the Securities Act until at least
the earlier of (A) an aggregate of 90 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby, then the Company shall continue to be
obligated to effect an additional Demand Registration pursuant to this Section
2.1 provided, that a Demand Registration shall not be counted as such unless the
Selling Holders have sold at least 80% of the Registrable Securities requested
to be included therein. For purposes of calculating the 90-day period referred
to in the preceding sentence, any period of time during which such Registration
Statement was not in effect shall be excluded. The Holders of Registrable
Securities shall be permitted to withdraw all or any part of the Registrable
Securities from a Demand Registration at any time prior to the effective date of
such Demand Registration.
(c) Restrictions on Sale by Holders. Each Holder of Registrable
-------------------------------
Securities whose Registrable Securities are covered by a Registration Statement
filed pursuant to this Section 2.1 and are to be sold thereunder agrees, if and
to the extent reasonably requested by the managing underwriter or underwriters
in an underwritten offering, not to effect any public sale or distribution of
Registrable Securities or of securities of the Company of the same class
5
<PAGE>
as any securities included in such Registration Statement, including a sale
pursuant to Rule 144 (except as part of such underwritten offering), during the
30-day period prior to, and during the 120-day period beginning on, the closing
date of each underwritten offering made pursuant to such Registration Statement,
to the extent timely notified in writing by the Company or such managing
underwriter or underwriters.
The foregoing provisions of Section 2.1(c) shall not apply to any
Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, however,
-------- -------
that any such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any such public sale or distribution of
Registrable Securities or of securities of the Company of the same class as any
securities included in such Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten offering) during such period,
unless it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.
(d) Underwritten Registrations. If any of the Registrable
--------------------------
Securities covered by a Demand Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Holders of not less than a
majority of the Registrable Securities then outstanding to be sold thereunder
and will be reasonably acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Rules 10b-6
and 10b-7 under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
(e) Expenses. The Company will pay all Registration Expenses in
--------
connection with the registrations requested pursuant to Section 2.1(a) hereof.
Each Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to this Section 2.1.
(f) Priority in Demand Registration. In a registration pursuant to
-------------------------------
Section 2.1 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders who have requested such Demand
Registration or who have sought inclusion therein that in such underwriter's or
underwriters' opinion the total number of securities which the Selling Holders
and any other Person desiring to participate in such registration intend to
include in such offering is such as to adversely affect the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such
6
<PAGE>
registration. In such event securities shall be registered in such registration
in the following order of priority: (i) first, the securities which have been
-----
requested to be included in such registration by the Holders of Registrable
Securities pursuant to this Agreement and the Demand Right Holders (pro rata
based on the amount of securities sought to be registered by such Persons), (ii)
second, provided that no securities sought to be included by the Holders and the
- ------
Demand Right Holders have been excluded from such registration, the securities
of other Persons entitled to exercise "piggy-back" registration rights pursuant
to contractual commitments of the Company (pro rata based on the amount of
securities sought to be registered by such Persons) and (iii) third, securities
-----
the Company proposes to register.
2.2. (a) Piggy-Back Registration. If at any time after the
-----------------------
Company has completed a Public Equity Offering, the Company proposes to file a
Registration Statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any of its securityholders
of any class of its Common Stock in a firmly underwritten Public Equity Offering
(other than (i) a Registration Statement on Form S-4 or S-8 (or any substitute
form that may be adopted by the SEC) or (ii) a Registration Statement filed in
connection with an exchange offer or offering of securities solely to the
Company's existing securityholders), then the Company shall give written notice
of such proposed filing to the Holders of Registrable Securities as soon as
practicable (but in no event fewer than 20 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register such
number of shares of Registrable Securities as each such Holder may request in
writing within 30 days after receipt of such written notice from the Company
(which request shall specify the Registrable Securities intended to be disposed
of by such Selling Holder (a "Piggy-Back Registration"). The Company shall use
-----------------------
its best efforts to keep such Piggy-Back Registration continuously effective
under the Securities Act until at least the earlier of (A) an aggregate of 90
days after the effective date thereof or (B) the consummation of the
distribution by the Holders of all of the Registrable Securities covered
thereby. The Company shall use its best efforts to cause the managing
Underwriter or underwriters, if any, of such proposed offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration to
be included on the same terms and conditions as any similar securities of the
Company or any other securityholder included therein and to permit the sale or
other disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective or the Company
may elect to delay the registration; provided, however, that the Company shall
-------- -------
give prompt written notice thereof to participating Selling Holders. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 2.2, and each
Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
effected pursuant to this Section 2.2.
7
<PAGE>
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration upon the request of Holders of Registrable
Securities pursuant to Section 2.1 hereof, and no failure to effect a
registration under this Section 2.2 and to complete the sale of securities
registered thereunder in connection therewith shall relieve the Company of any
other obligation under this Agreement.
(b) Priority in Piggyback Registration. In a registration pursuant
----------------------------------
to Section 2.2 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders requesting inclusion in such
offering that in such underwriter's or underwriters' opinion the total number of
securities which the Company, the Selling Holders and any other Persons desiring
to participate in such registration intend to include in such offering is such
as to adversely affect the success of such offering, including the price at
which such securities can be sold, then the Company will be required to include
in such registration only the amount of securities which it is so advised should
be included in such registration. In such event: (x) in cases initially
involving the registration for sale of securities for the Company's own account,
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which the Company proposes to register, and
-----
(ii) second, the securities which have been requested to be included in such
------
registration by Persons entitled to exercise "piggyback" registration rights
pursuant to contractual commitments of the Company (pro rata on the amount of
securities sought to be registered by such Persons); and (y) in cases not
initially involving the registration for sale of securities for the Company's
own account, securities shall be registered in such offering in the following
order of priority: (i) first, the securities of any Person whose exercise of a
-----
"demand" registration right pursuant to a contractual commitment of the Company
is the basis for the registration (provided that if such Person is a Holder of
Registrable Securities, as among Holders of Registrable Securities there shall
be no priority and Registrable Securities sought to be included by Holders of
Registrable Securities shall be included pro rata based on the amount of
securities sought to be registered by such Persons), (ii) second, securities of
------
other persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments (pro rata based on the amount of securities sought to be
registered by such persons) and (iii) third, the securities which the Company
-----
proposes to register.
If, as a result of the provisions of this Section 2.2(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a Piggy-
Back Registration that such Selling Holder has requested to be included, such
Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration (a "Withdrawal Election"); provided, however,
------------------- -------- -------
that a Withdrawal Election shall be irrevocable and, after making a Withdrawal
Election, a Selling Holder shall no longer have any right to include Registrable
Securities in the registration as to which such Withdrawal Election was made.
2.3 Limitations, Conditions and Qualifications to Obligations Under
---------------------------------------------------------------
Registration Covenants. The obligations of the Company set forth in Sections
- ----------------------
2.1 and 2.2 hereof are subject to each of the following limitations, conditions
and qualifications:
8
<PAGE>
(i) Subject to the next sentence of this paragraph, the Company shall
be entitled to postpone, for a reasonable period of time, the filing or
effectiveness of, or suspend the rights of any Holders to make sales pursuant
to, any Registration Statement otherwise required to be prepared, filed and made
and kept effective by it hereunder; provided, however, that the duration of such
-------- -------
postponement or suspension may not exceed the earlier to occur of (A) 15 days
after the cessation of the circumstances described in the next sentence of this
paragraph on which such postponement or suspension is based or (B) 120 days
after the date of the determination of the Board of Directors referred to in the
next sentence, and the duration of any such postponement or suspension shall be
excluded from the calculation of the 90-day period described in Section 2.l(b)
hereof. Such postponement or suspension may only be effected if the Board of
Directors of the Company determines in good faith that the filing or
effectiveness of, or sales pursuant to, such Registration Statement would
materially impede, delay or interfere with any financing, offer or sale of
securities, acquisition, corporate reorganization or other significant
transaction involving the Company or any of its affiliates (whether or not
planned, proposed or authorized prior to an exercise of demand registration
rights hereunder or any other registration rights agreement) or require
disclosure of material information which the Company has a bona fide business
purpose for preserving as confidential. If the Company shall so postpone the
filing or effectiveness of a Registration Statement or so suspend the rights of
Holders to make sales it shall, as promptly as possible, notify any Selling
Holders of such determination, and the Selling Holders shall (y) have the right,
in the case of a postponement of the filing or effectiveness of a Registration
Statement, upon the affirmative vote of the Holders of not less than a majority
of the Registrable Securities to be included in such Registration Statement, to
withdraw the request for registration by giving written notice to the Company
within 10 days after receipt of such notice or (z) in the case of a suspension
of the right to make sales, receive an extension of the registration period
equal to the number of days of the suspension. Any Demand Registration as to
which the withdrawal election referred to in the preceding sentence has been
effected shall not be counted for purposes of the two Demand Registrations the
Company is required to effect pursuant to Section 2.1 hereof.
(ii) The Company shall not be required by this Agreement to include
securities in a Registration Statement pursuant to Section 2.2 hereof if (i) in
the written opinion of counsel to the Company, addressed to the Holders and
delivered to them, the Holders of such securities seeking registration would be
free to sell all such securities within the current calendar quarter, without
registration, under Rule 144, which opinion may be based in part upon the
representation by such Holders, which representation shall not be unreasonably
withheld, that each such Holder is not an affiliate of the Company within the
meaning of the Securities Act and (ii) all requirements under the Securities Act
for effecting such sales are satisfied at such time.
(iii) The Company's obligations shall be subject to the obligations of
the Selling Holders, which the Selling Holders acknowledge, to furnish all
information and materials and to take any and all actions as may be required
under applicable federal
9
<PAGE>
and state securities laws and regulations to permit the Company to comply
with all applicable requirements of the SEC and to obtain any acceleration
of the effective date of such Registration Statement.
(iv) The Company shall not be obligated to cause any special audit to
be undertaken in connection with any registration pursuant to this
Agreement unless such audit is requested by the underwriters with respect
to such registration.
2.4. Restrictions on Sale by the Company and Others. The Company
----------------------------------------------
covenants and agrees that it shall not, and that it shall not cause or permit
any of its subsidiaries to, effect any public sale or distribution of any
securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities) during the 30-day period
prior to, and during the 120-day period beginning on, the commencement of any
underwritten offering of Registrable Securities pursuant to a Demand
Registration which has been requested pursuant to this Agreement, or a Piggy-
Back Registration.
2.5. Rule 144 and Rule 144A. The Company covenants that it will
----------------------
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A (to the extent Registrable Securities may
then be sold pursuant to Rule 144A). The Company further covenants for so long
as any Registrable Securities remain outstanding to make available to any Holder
or beneficial owner of Registrable Securities in connection with any sale
thereof and any prospective purchaser of such Registrable Securities from such
Holder or beneficial owner, the information required by Rule 144A(d)(y) under
the Securities Act in order to permit resales of such Registrable Securities
pursuant to Rule 144A. Upon the request of any Holder of Registrable
Securities, the Company will in a timely manner deliver to such Holder a written
statement as to whether it has complied with such information requirements.
Section 3. Registration Procedures. In connection with the
-----------------------
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1 and 2.2 hereof, the Company shall:
(a) Prepare and file with the SEC as soon as practicable each such
Registration Statement (but in any event on or prior to the date of filing
thereof required under this Agreement) and cause each such Registration
Statement to become effective and remain effective as provided herein;
provided, however, that before filing any such Registration Statement or
-------- -------
any Prospectus or any amendments or supplements thereto (including
documents that would be incorporated or deemed to be incorporated therein
by reference, including such documents filed under the Exchange Act that
would be incorporated therein by reference), the Company shall afford
promptly to the Holders of the Registrable Securities covered by such
Registration Statement, their counsel and the managing underwriter or
underwriters, if any, an
10
<PAGE>
opportunity to review copies of all such documents proposed to be filed a
reasonable time prior to the proposed filing thereof. The Company shall not file
any Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority of the Registrable Securities covered by
such Registration Statement, their counsel, or the managing underwriter or
underwriters, if any, shall reasonably object in writing unless failure to file
any such amendment or supplement would involve a violation of the Securities Act
or other applicable law.
(b) Prepare and file with the SEC such amendments and post-
effective amendments to such Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the time periods
prescribed hereby; cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to it with respect to the disposition of all securities covered by
such Registration Statement as so amended or such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities, their counsel
and the managing underwriter or underwriters, if any, promptly (but in any event
within two (2) Business Days), and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
confirmed copy of such Registration Statement or post-effective amendment
including financial statements and schedules and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any Prospectus or
the initiation or threatening of any proceedings for that purpose, (iii) if at
any time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities the representations and
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated by Section 3(m) below cease to be true and correct in
any material respect, (iv) of the receipt by the Company of any notification
with respect to (A) the suspension of the qualification or exemption from
qualification of the Registration Statement or any of the Registrable Securities
covered thereby for offer or sale in any jurisdiction, or (B) the initiation of
any proceeding for such purpose, (v) of the happening of any event, the
existence of any condition or information becoming known that requires the
making of any change in any Registration Statement or Prospectus so that, in the
case of such Registration Statement, it will conform in all material respects
with the requirements of the Securities Act and it 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, and
that in the case of any Prospectus, it will conform in all material respects
with the requirements of the Securities Act and it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading,
11
<PAGE>
and (vi) of the Company's reasonable determination that a post-effective
amendment to such Registration Statement would be appropriate.
(d) Use every reasonable effort to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order at the earliest possible moment.
(e) If requested by the managing underwriter or underwriters, if
any, or the Holders of a majority of the Registrable Securities being sold in
connection with an underwriting offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters, if any, or such Holders reasonably request
to be included therein to comply with applicable law, (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement.
(f) Furnish to each Holder of Registrable Securities who so
requests and to counsel for the Holders of Registrable Securities and each
managing underwriter, if any, without charge, upon request, one conformed copy
of the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, and of all documents incorporated
or deemed to be incorporated therein by reference and all exhibits (including
exhibits incorporated by reference).
(g) Deliver to each Holder of Registrable Securities, their
counsel and each underwriter, if any, without charge, as many copies of each
Prospectus and each amendment or supplement thereto as such Persons may
reasonably request; and, subject to the last paragraph of this Section 3, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the Holders of Registrable Securities and the
underwriter or underwriters or agents, if any, in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to register
or qualify, and cooperate with the Holders of such Registrable Securities, the
managing underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of, such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as the managing underwriter or underwriters reasonably request in
writing, or, in the event of a non-underwritten offering, as the Holders of a
majority of such Registrable Securities may request; provided, however, that
-------- -------
where Registrable Securities are offered other than through an underwritten
offering, the Company agrees to cause its counsel
12
<PAGE>
to perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 3(h); keep each such registration
or qualification (or exemption therefrom) effective during the period the
Registration Statement relating to such Registrable Securities is required to be
kept effective pursuant to this Agreement and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the securities covered thereby; provided, however, that the Company will not be
-------- -------
required to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
(C) become subject to taxation in any jurisdiction where it is not then so
subject.
(i) Cooperate with the Holders of Registrable Securities and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
---
registered in such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request at least two business days prior to any sale of
Registrable Securities in a firm commitment underwritten public offering.
(j) Use its best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United States as may be
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Securities, except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of the Registration Statement and the
granting of such approvals.
(k) Upon the occurrence of any event contemplated by Section
3(c)(v) or 3(c)(vi) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and, subject to Section 3(a) hereof, file such with the
SEC so that, as thereafter delivered to the purchasers of Registrable Securities
being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and will otherwise comply with law.
(l) Prior to the effective date of a Registration Statement, (i)
provide the registrar for the Registrable Securities with certificates for such
securities in a form eligible for deposit with DTC and (ii) provide a CUSIP
number for such securities.
(m) Enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriter or underwriters
in order to expedite or facilitate the registration
13
<PAGE>
or disposition of such Registrable Securities in any underwritten offering to be
made of the Registrable Securities in accordance with this Agreement, and in
such connection, (i) make such representations and warranties to, and covenants
with, the underwriter or underwriters and Holders, with respect to the business
of the Company and the subsidiaries of the Company, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested: (ii) use reasonable efforts to obtain
opinions of counsel to the Company and updates thereof, addressed to the
underwriter or underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by underwriters; (iii) use reasonable efforts to obtain "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if applicable, the subsidiaries of the Company) and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement, addressed to each of the underwriters and the Holders of
Registrable Securities, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings and such other matters as reasonably requested by
the managing underwriter or underwriters and as permitted by the Statement of
Auditing Standards No 72; and (iv) if an underwriting agreement is entered into,
the same shall contain customary indemnification provisions and procedures no
less favorable than those set forth in Section 5 (or such other provisions and
procedures acceptable to Holders of a majority of Registrable Securities covered
by such Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said Section.
The above shall be done at each closing under such underwriting agreement, or as
and to the extent required thereunder.
(n) Make available for inspection by a representative of the
Holders of Registrable Securities being sold, any underwriter participating in
any such disposition of Registrable Securities, if any, and any attorney or
accountant retained by such representative of the Holders or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
----------
reasonable business hours, all financial and other records and pertinent
corporate documents of the Company and the subsidiaries of the Company, and
cause the officers, directors and employees of the Company and the subsidiaries
of the Company to supply all information in each case reasonably requested by
any such Inspector in connection with such Registration Statement; provided,
--------
however, that all information shall be kept confidential by such Inspector,
- -------
except to the extent that (i) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in the Registration Statement, (ii)
the release of such information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, (iii) disclosure of such information is,
in the opinion of counsel for any Inspector, necessary or advisable in
connection with any action, claim, suit or proceeding, directly or indirectly,
involving or potentially involving such Inspector and arising out of, based
upon, relating to or involving this Agreement or any of the transactions
contemplated hereby or arising hereunder, or (iv) such information has been made
generally available to the public.
14
<PAGE>
Each Selling Holder of such Registrable Securities agrees that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of the Company or of any of its affiliates unless and until such is
generally available to the public. Each Selling Holder of such Registrable
Securities further agrees that it will, upon learning that disclosure of such
information is sought in a court of competent jurisdiction, give prompt notice
to the Company and allow the Company to undertake appropriate action to prevent
disclosure of the information deemed confidential at the Company's sole expense.
(o) Comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than forty-five (45) days after the end of any 12-month period (or ninety (90)
days after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to an underwriter or to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to an underwriter or to underwriters
in such an offering, commencing on the first day of the first fiscal quarter of
the Company after the effective date of the relevant Registration Statement,
which statements shall cover said 12-month periods.
(p) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed.
(q) Cooperate with the Selling Holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends and
registered in such names as the Selling Holders may reasonably request at least
two business days prior to the closing of any sale of Registrable Securities.
Each seller of Registrable Securities as to which any registration
is being effected agrees, as a condition to the registration obligations with
respect to such Holder provided herein, to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing
to comply with the Securities Act and other applicable law. The Company may
exclude from such registration the Registrable Securities of any seller who
fails to furnish such information within a reasonable time after receiving such
request. If the identity of a seller of Registrable Securities is to be
disclosed in the Registration Statement, such seller shall be permitted to
include all information regarding such seller as it shall reasonably request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(c)(ii), 3(c)(iv),
3(c)(v), or 3(c)(vi) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by the Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
15
<PAGE>
amended Prospectus contemplated by Section 3(k) hereof), or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
------
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto, and, if so directed by the Company, such Holder will
deliver to the Company all copies, other than permanent file copies, then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period of time for which a Registration Statement is
required hereunder to be effective shall be extended by the number of
days during such periods from and including the date of the giving of such
notice to and including the date when each seller of Registrable Securities
covered by such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof or (y)
the Advice.
Section 4. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Holder
and each Person, if any, who controls such Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, such Holder, from and against any and
all losses, claims, damages and liabilities (including, without limitation, the
reasonable legal fees and other reasonable out-of-pocket expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted), caused by, arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or caused by 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 (ii) any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or caused by any omission or alleged omission to state in
any such Prospectus a material fact required to be stated or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Holder furnished to the Company in writing by such
Holder expressly for use therein; provided, however, that the Company will not
-------- -------
be liable if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, liability, claim, damage or expense suffered or
incurred by the Holders resulted from any action, claim or suit by any Person
who purchased Registrable Securities which are the subject thereof from such
Holder and it is established in the related proceeding that such Holder failed
to deliver or provide a copy of the Prospectus (as amended or supplemented) to
such Person with or prior to the confirmation of the sale of such Registrable
Securities sold to such Person if required by applicable law, unless such
failure to
16
<PAGE>
deliver or provide a copy of the Prospectus (as amended or supplemented was a
result of noncompliance by the Company with Section 5 of this Agreement.
(b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign any
Registration Statement, and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Holder, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement or any Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus. The liability of any Holder under this
paragraph shall in no event exceed the proceeds received by such Holder from
sales of Registrable Securities giving rise to such obligations.
(c) In case any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
either paragraph (a) or (b) above, such Person (the "indemnified party") shall
-----------------
promptly notify the Person against which such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
------------------
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may reasonably designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred of such counsel relating to such
proceeding; provided, however, that the failure to so notify the indemnifying
-------- -------
party shall not relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that such failure directly
results in the loss or compromise of any material rights or defenses by such
indemnifying party and such indemnifying party was not otherwise aware of such
action or claim). In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed in writing to the contrary,
(ii) the indemnifying party shall have failed to retain within a reasonable
period of time counsel reasonably satisfactory to such indemnified party or
parties or (iii) the named parties to any such proceeding (including any
impleaded parties) include both such indemnified party or parties and the
indemnifying parties or an affiliate of the indemnifying parties or such
indemnified parties and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that unless there exists a conflict among indemnified parties, the
indemnifying parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed
promptly after receipt of the invoice therefore as they are incurred. Any such
separate firm for the Holders and such control Persons of the Holders shall be
designated in writing by Holders who sold a majority in interest of Registrable
Securities sold by all such Holders and any such separate firm for the Company,
its directors, its officers and such control Persons of the Company shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any
17
<PAGE>
settlement of any proceeding effected without its prior written consent but if
settled with such consent or if there is a final non-appealable judgment for the
plaintiff for which the indenmified party is entitled to indemnificaiton
indemnified party from and against any loss or liability by reason of such an
indemnified party shall have requested an indemnifying party to reimburse the as
contemplated by the third sentnece of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its prior written consent if (i) such settlement is entered into more
than 30 days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement; provided,
however, that the indemnifying party shall not be liable for any settlement
effected without its consent pursuant to this sentence if the indemnifying party
is contesting, in good faith, the request for reimbursement. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement (1) includes
an unconditional release of such indemnified party in form and substance
satisfactory to such indemnified party from all liability on Claims that are the
subject matter of such proceeding and (2) does not include any statement as to
an admission of fault, culpability or failure to act by or on behalf of any
indemnified party.
(d) If the indemnification provided for in paragraph (a) or (b)
of this Section 4 is unavailable (other than by reason of the exceptions
specifically provided therein) to, or insufficient to hold harmless, an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraphs, in lieu
of indemnifying such indemnified party thereunder and in order to provide for
just and equitable contribution, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Holders on the other
hand from the offering of such Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Company on the one hand and
the Holders on the other in connection with the statements or omissions (or
alleged statements or omissions) that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
the Holders on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in the
circumstances.
18
<PAGE>
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4, in no event shall a Holder be
required to contribute any amount in excess of the amount by which proceeds
received by such Holder from sales of Registrable Securities exceeds the amount
of any damages that such Holder has otherwise been required to pay or has paid
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 4 will be in addition to any which the indemnifying parties may
otherwise have to the indemnified parties referred to above.
Section 5. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not entered, as
--------------------------
of the date hereof, and the Company shall not enter, into nor after the date of
this Agreement, or cause or permit any of its subsidiaries to enter, into any
agreement with respect to any of its securities that is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
(b) Adjustments Affecting Registrable Securities. The Company
--------------------------------------------
shall not, directly or indirectly, take any action with respect to the
Registrable Securities as a class that would adversely affect the ability of the
Holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. This Agreement and the terms of the
----------------------
Registrable Securities may be amended by the Company, without the consent of the
Holders of the Registrable Securities, for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective or inconsistent
provision contained herein or therein or in any other manner which the Company
may deem necessary or desirable and which shall not adversely affect in any
material respect the interests of the Holders of the Registrable Securities.
Except for the purpose describe in the proceeding sentence, the provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given otherwise
than with the prior written consent of Holders of not less than a majority of
the then outstanding Warrants and/or Registrable Securities; provided, however,
-------- -------
that Section 4 hereof and this Section 5(c) may not be amended, modified or
supplemented without the prior written consent of each Holder
19
<PAGE>
(including any Person who was a Holder of Registrable Securities disposed of
pursuant to any Registration Statement). Notwithstanding the foregoing, a waiver
or consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Securities may be given by the Holders of not less than a
majority of the Registrable Securities proposed to be sold by such Holders
pursuant to such Registration Statement. In addition, each such amendment,
modification, supplement and waiver must be agreed to in writing by the Company.
(d) SEC Reports. For so long as any of the Registrable Securities
-----------
remain outstanding or any obligation of the Company or the Subsidiary Guarantors
with respect thereto remains unpaid finally and full, the Company will file with
the SEC all information, documents and reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company
is subject to such filing requirements so long as the SEC will accept such
filings. The Company will provide all the Holders of Registrable Securities
within 15 days after it files them with the SEC, copies of the annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as the SEC may by rules and regulations prescribe),
without exhibits, which the Company files with the SEC pursuant to Section 13 or
15(d) of the Exchange Act.
(e) Notices. Any notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
1. if to a Holder at the most current address of such Holder as
set forth in the register for the Warrants or the Warrant Shares, which address
initially is, with respect to the Initial Purchasers as follows:
Jefferies & Company, Inc.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, CA 90025
Facsimile No.: (310) 575-5165
Telephone: (310) 575-5200
Attention: Corporate Finance Department
20
<PAGE>
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Facsimile No.: (212) 504-6666
Telephone: (212) 504-6000
Attention: Lawrence A. Larose
2. if to the Company:
VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, Massachusetts 01810
Attention: President
Facsimile: (978) 975-7208
Telephone: (978) 975-3700
with copies to:
Mirick, O'Connell, DeMallie & Lougee, LLP
1700 Bank of Boston Tower
100 Front Street
Worcester, MA 01608
Attention: David L. Lougee
Facsimile No.: (508) 752-7305
Telephone: (508) 799-0541
Each of such persons by written notice to each other such person may
designate additional or different addresses for notices to such person. Any
notice or communication shall be deemed to have been given or made as of the
date so delivered if personally delivered; overnight carrier when receipt is
affirmatively acknowledged, if telecopied; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
(a) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto and the Holders;
21
<PAGE>
provided, however, that this Agreement shall not inure to the benefit of or be
- -------- -------
binding upon a successor or assign of a Holder unless such successor or assign
holds Registrable Securities.
(b) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
(c) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning or
construction of any of the provisions hereof.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(e) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(f) Third Party Beneficiary. The Holders are intended third party
-----------------------
beneficiaries of this Agreement and this Agreement may be enforced by such
Persons.
(g) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Warrant Agreement, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations or warranties, contracts,
understandings, correspondence, conversations and memoranda between or among the
parties hereto or any agents, representatives, parents, subsidiaries,
affiliates, predecessors in interest or successors in interest with respect to
the subject matter hereof and thereof are merged herein and replaced hereby.
(h) Securities Held by the Company or Its Affiliates. Whenever the
------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required hereunder, Registrable Securities or Warrants
held by the Company or by any of its
22
<PAGE>
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
holders of such required percentage.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
--------------------------------------------
Name: Glenn D. Bolduc
Title: President and Chief Executive Officer
JEFFERIES & COMPANY, INC.
By: /s/ Turner C. Smith
--------------------------------------------
Name: Turner C. Smith
Title: Managing Director
24
<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
representative, 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 1st 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
(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
<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)
<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
<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
------------
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 stated herein 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 /s/ Title Treasurer
------------------------------------- ----------------------------------
If corporation, have signed by President, Vice President or Treasurer, and
give official title. If owner or partner, state which.
900 Ashwood Parkway, 6th 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, 6th 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
<CAPTION>
Inventory:
- ----------
- --------------------------------------------------------------------------------
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 10.4
------------
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>
EXHIBIT 10.5
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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)
</TABLE>
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:
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION
<S> <C>
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)
</TABLE>
<PAGE>
ACCEPTANCE CERTIFICATE
Lessor: BSFS Equipment Leasing
Lessee: Conference Source International, Inc.
Agreement No./Schedule No.: 53716
This Acceptance Certificate is made with respect to that Master Lease
Agreement and Schedule referenced above. Capitalized terms used herein shall
have the same meanings assigned to them in the Agreement and Schedule.
On behalf of Lessee, I hereby certify that all of the System described in
the Schedule to the Agreement has been delivered to and received by the Lessee.
The System has been examined by the Lessee and is in good operating order and
condition and is satisfactory to the Lessee. Therefore, the System is
irrevocably accepted by the Lessee for all purposes under the Lease as of the
following date:
April 8, 1996
- -------------
By: /s/ Judy B. Crawford
--------------------
Title: President
--------------------
Date: April 8, 1996
--------------------
<PAGE>
CERTIFICATE OF SECRETARY
Lessor: BSFS Equipment Leasing
Lessee: Conference Source International, Inc.
Agreement No.: 53716
1. I am the duly elected, qualified and acting Secretary or Assistant
Secretary of CONFERENCE SOURCE INTERNATIONAL, INC., a Georgia corporation
("Corporation"); and I am charged with maintaining records, minutes, and seal of
the Corporation.
2. The leasing of equipment and the sublicensing of associated software by
the Corporation from Lessor named above, the execution and delivery of a Master
Lease Agreement and Equipment Schedules thereto, whether executed now or in the
future, together with all related instruments and documents as they may be
amended from time to time (collectively, "Lease") have been duly authorized by
appropriate corporate action.
3. Pursuant to the By-laws and Certificate of Incorporation, and any other
documents of the Corporation as may be applicable ("Corporate Documents"), the
following named person has been properly designated and appointed to the office
indicated below, and that person continues to hold the office at this time.
Print Name of Officer
Executing Lease Title Signature of Officer
Judy B. Crawford President /s/ Judy B. Crawford
- ---------------- --------- --------------------
4. Pursuant to Corporate Documents, the person designated to serve in the
above-entitled capacity has been given sufficient authority to act on behalf of,
and to bind the Corporation with respect to the execution and delivery of the
Lease.
5. The Lease will constitute a valid, legal, binding and enforceable
obligation of the Corporation upon execution by the person whose name is set
forth in Section 3 above and by any other necessary party.
6. Pursuant to Corporate Documents, I have the power and authority to
execute this Certificate on behalf of the Corporation, and I have so executed
this Certificate and set seal of the Corporation, if applicable, on the 8 day of
April, 1996.
By: /s/ Owen E. Crawford
----------------------------------------
Print Name: Owen E. Crawford
--------------------------------
Title: Secretary
-------------------------------------
(SEAL) Date: April 8, 1996
--------------------------------------
<PAGE>
EXHIBIT 10.5
------------
WASCO FUNDING CORP. EQUIPMENT LEASE
150 East 58th 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 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 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
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 10.6
------------
WASCO FUNDING CORP. EQUIPMENT LEASE
150 East 58th 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, 2nd 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.
1
<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 10.7
------------
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
-----------------
<TABLE>
<CAPTION>
ARTICLE
- -------
<S> <C>
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
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
<CAPTION>
<S> <C>
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
</TABLE>
13
<PAGE>
LEASE
-----
THIS LEASE (the "Lease") is made this 6th 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:
<TABLE>
<CAPTION>
<S> <C>
Installation Commencement Date: April 1, 1995
Operational Commencement Date: May 1, 1995
Lease Commencement Date: June 1, 1995
Lease Expiration Date: May 31, 2005
</TABLE>
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. 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. APRROVED 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:
- ------ --------
By: /s/ By: /s/
-------------------------------- ---------------------------------
Printed Name: C. Raymond Marvin Printed Name: Thomas G.[eligible]
Its: President Its: Assistant Vice President
------------------------------- --------------------------------
Date: 12/6/94 Date: 2/8/94
------------------------------ -------------------------------
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 =
$390,000.00. 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 28th
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: By:
-------------------------------- --------------------------------
Printed Name: Printed Name:
---------------------- ----------------------
Its: Its:
------------------------------- -------------------------------
Date: Date:
------------------------------ ------------------------------
Attest: Attest:
---------------------------- ----------------------------
Printed Name: Printed Name:
---------------------- ----------------------
Its: Its:
------------------------------- -------------------------------
Date: Date:
------------------------------ ------------------------------
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 10.8
------------
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.
<TABLE>
<CAPTION>
SCHEDULE
<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 includible 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
---------------------------
26
<PAGE>
(Signatures Continued on Following 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 10.9
------------
AMENDED & RESTATED EMPLOYMENT AGREEMENT
---------------------------------------
This Agreement is entered into on May 6, 1997, effective as of
September 19, 1996, by and between VIALOG 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 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 commenced 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 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 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 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.
<PAGE>
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. 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.
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 willful
misconduct in the performance of Executive's duties or responsibilities;
conviction of, or written admission to, a felony or other crime involving moral
turpitude; imprisonment for any crime constituting a felony; or any act
involving theft, embezzlement or fraud. 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
2
<PAGE>
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), Executive will be entitled to receive (i) a severance payment of eighteen
months' then current salary, such severance payment to be paid in eighteen 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) eighteen 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 VIALOG
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
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'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. Upon
the termination of Executive's employment, Executive will promptly deliver to
the Company all copies of all documents, equipment,
3
<PAGE>
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;
(b) solicit or accept business in competition with the VIALOG Group
from any 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;
(c) 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 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 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.
4
<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. 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 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 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, 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
5
<PAGE>
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 on May 6, 1997.
VIALOG Corporation
/s/ Glenn D. Bolduc By: /s/ John Hassett
- --------------------------------- ----------------------------------
Name: Glenn D. Bolduc Name: John J. Hassett
7 Springvale Street Title: Chairman
Hollis, NH 03049
6
<PAGE>
EXHIBIT 10.10
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of November 12, 1997 by and between
TELEPHONE BUSINESS MEETINGS, INC., a Delaware corporation with its principal
place of business at 1861 Wrehle Avenue, Reston, Virginia (the "Company") and C.
RAYMOND MARVIN, an individual residing at the address set forth under his
signature below ("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 substantial value as a result of the Acquisitions.
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 at the Effective Time,
----
as that term is defined in the Acquisition Agreements (the "Effective Time"),
and will continue for two years from the Effective Time 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 President, 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 President, 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 involved a substantially similar level of
compensation, authority and responsibility as the
<PAGE>
position of President. However, Executive will not be required to locate
outside the Reston, Virginia 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 $242,000 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.
5. Expense Reimbursement. Executive will be entitled to reimbursement 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.
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, 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 Commonwealth of Virginia.
11. 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 Virginia.
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:
Telephone Business Meetings, Inc.
c/o VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, MA 01810
5
<PAGE>
or to such other address as a party specifies in writing given in accordance
with this Section.
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.
16. Entire Agreement. This Agreement represents the entire agreement
----------------
between the Executive and the Company with respect to the subject matter hereof
and supersedes all other agreements between the Company and Executive with
respect to such subject matter.
Executed under seal as of November 12, 1997.
EXECUTIVE TELEPHONE BUSINESS MEETINGS, INC.
/s/ C. Raymond Marvin By: /s/ Glenn D. Bolduc
- ---------------------- --------------------
Name: C. Raymond Marvin Name: Glenn D. Bolduc
Title: Director
1371 Kirby Road
- ----------------
Address:
McLean, VA 22101
- ------------------
6
<PAGE>
EXHIBIT 10.11
-------------
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment to the Employment Agreement dated November 12, 1997 (the
"Employment Agreement") between Telephone Business Meetings, Inc. (the
"Company") and C. Raymond Marvin (the "Employee") is between the Employee, the
Company and the Company's parent corporation, VIALOG Corporation ("VIALOG") and
is made effective December 31, 1997.
WHEREAS, the Employee is currently the President and Chief Executive
Officer of the Company, and
WHEREAS, the parties desire to change the scope of Employee's duties;
NOW, THEREFORE, it is agreed as follows:
1. Employee shall cease to be the President and Chief Executive Officer of
the Company and shall become a Vice President of VIALOG;
2. Employee's duties as a Vice President for VIALOG shall be as follows:
(a) Employee shall act as a "good will ambassador" for the Company and
its customers and employees and assist in the overall generation and maintenance
of business;
(b) Employee shall assist in the acquisition of Teleconferencing
Service Bureaus ("TCSBs") and other businesses identified by VIALOG;
(c) Employee shall consult with the Company's and VIALOG's officers,
employees and agents, as may be reasonably requested by the Company and VIALOG,
with respect to the telecommunications industry; and
(d) Employee shall perform such other services as shall be mutually
agreed upon by VIALOG, the Company and Employee.
3. Employee shall receive the following additional compensation:
(a) Employee shall be granted a stock option for 100,000 shares of
VIALOG common stock exercisable at a price of $5.75 per share (the "Options");
and
(b) The Options shall be exercisable in VIALOG's standard form during
the term of the Employment Agreement and shall be exercisable as follows on the
successful closing of any acquisition other than any acquisition of the
teleconferencing business of Sprint Corporation during the term of the
Employment Agreement and one year beyond, as follows:
1,000 shares for each $1,000,000 of gross sales of the acquired
company for the 12-month period preceding the date of closing with a
cap of 25,000 shares of any single acquisition.
<PAGE>
4. Employee shall report to the President and Board of Directors of the
Company when rendering services on behalf of the Company and to the President
and Board of Directors of VIALOG when rendering services for VIALOG;
5. The Company and VIALOG shall provide office equipment, supplies and
support for Employee at his home office consisting of, among other things, the
following:
state of the art computer hardware, software, video conferencing
station, telephone equipment and lines, network access to the company's
computer network, internet services, and appropriate secretarial
support from the Company's or VIALOG's place of business.
6. The Company and VIALOG shall reimburse employee for all reasonable
travel, entertainment and business expenses;
7. VIALOG shall provide full coverage director's and officer's liability
insurance, including legal defense expenses and indemnify Employee against any
cost or liability pertaining to his employment to the greatest extent allowed by
law; and
8. In all other respects, the Employment Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and
seals.
/s/ Raymond Marvin
------------------------------------
C. Raymond Marvin
TELEPHONE BUSINESS
MEETINGS, INC.
By:/s/ Glenn D. Bolduc
---------------------------------
Glenn D. Bolduc, Director
VIALOG CORPORATION
By:/s/ Glenn D. Bolduc
---------------------------------
Glenn D. Bolduc, President
<PAGE>
EXHIBIT 10.12
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of November 12, 1997 by and between
CSII Acquisition Corporation, a Georgia corporation with its principal place of
business at 100 Heartsfield Parkway, Suite 300, Atlanta, Georgia (the "Company")
and JUDY B. CRAWFORD, an individual residing at the address which appears below
her signature to this Agreement ("Executive").
FACTS
Various 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 substantial value as a result of the Acquisitions.
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 at the Effective Time,
----
as that term is defined in the Acquisition Agreements (the "Effective Time"),
and will continue for one year from the Effective Time 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 President, 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 President, as may be assigned to her
from time to time by the Chief Executive Officer and the Board of Directors of
the Company. Executive will not be required to locate outside the Atlanta 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
<PAGE>
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 for the Term 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 Effective Time. 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. The
Executive is entitled to a monthly automobile allowance equal to her current
monthly auto allowance of $1,440.
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 willful misconduct in the performance of
Executive's duties or responsibilities; conviction of, or written admission to,
a felony or other crime involving moral turpitude; imprisonment for any crime
constituting a felony; or conviction of any crime involving theft, embezzlement
or fraud. If Executive's employment is terminated for Cause, the Company will
only be obligated to pay Executive her 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
2
<PAGE>
Agreement for one or more periods totaling one hundred fifty (150) days during
the Term. 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 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 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
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 her 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'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
3
<PAGE>
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 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.
4
<PAGE>
For purposes of this Agreement, the Restricted Period will be a period
beginning at the Effective Time, as that term is defined in the Acquisition
Agreements, and ending three (3) years after the Effective Time.
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 State of Georgia.
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
Georgia.
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:
5
<PAGE>
Conference Source International, Inc.
c/o VIALOG Corporation
3 Riverside Drive
Andover, MA 01810
ATTN: President
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.
17. Entire Agreement. This Agreement represents the entire agreement
----------------
between the Executive and the Company with respect to the subject matter hereof
and supersedes all other agreements between the Company and Executive with
respect to such subject matter.
Executed under seal as of the date first written above.
JUDY B. CRAWFORD CONFERENCE SOURCE INTERNATIONAL, INC.
/s/ Judy B. Crawford By: /s/ Glenn D. Bolduc
- ------------------------------- ------------------------------------
Glenn D. Bolduc, Director
6335 Westchester Place
- -------------------------------
Address:
Cumming, GA 30040
- -------------------------------
6
<PAGE>
EXHIBIT 10.13
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of November 12, 1997 by and between
Kendall Square Teleconferencing, Inc., a Massachusetts corporation with its
principal place of business at One Kendall Square, Cambridge, Massachusetts (the
"Company") and Courtney Snyder ("Executive").
FACTS
The Company and various other wholly-owned subsidiaries (the
"Subsidiaries") of VIALOG Corporation, a Massachusetts corporation ("VIALOG"),
have participated in various acquisitions 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.
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 President, 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 President, 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 involved a substantially similar level
of compensation, authority and responsibility as the
<PAGE>
position of President. 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 $160,000 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 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
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 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
5
<PAGE>
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:
Board of Directors
Kendall Square Teleconferencing, Inc.
One Kendall Square
Cambridge, Massachusetts
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. Entire Agreement. This Agreement represents the entire agreement
----------------
between the Executive and the Company with respect to the subject matter hereof
and supersedes all other agreements between the Company and Executive with
respect to such subject matter.
Executed under seal as of the date first written above.
COURTNEY SNYDER KENDALL SQUARE
TELECONFERENCING, INC.
/s/ Courtney Snyder By: /s/ Glenn D. Bolduc
- -------------------- --------------------
Glenn D. Bolduc, Director
- --------------------
Address:
- --------------------
7
<PAGE>
EXHIBIT 10.14
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of November 12, 1997 by and between
AMERICAN CONFERENCING COMPANY, INC. (f/k/a/ AMCS Acquisition Corporation), a
Delaware corporation with its principal place of business at 690 Kinderkamack,
Oradell, NJ 07649 (the "Company") and DAVID L. LIPSKY, an individual residing at
the address set forth under his signature below ("Executive").
FACTS
The Company and various other wholly-owned subsidiaries (the
"Subsidiaries") of VIALOG Corporation, a Massachusetts corporation ("VIALOG"),
have participated in various acquisitions 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.
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 President, 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 President, as may be assigned to him from
<PAGE>
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 position of President.
However, Executive will not be required to locate outside the Northern New
Jersey 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 the
Executive's employment is terminated for cause due to material willful
misconduct in or nonperformance of Executive's duties or responsibilities or
material violation of any Company written policy, such
2
<PAGE>
determination shall only take place after Executive has been notified of the
reasons for his termination and has the opportunity to confer with the Chief
Executive Officer of VIALOG or, at the discretion of the Chief Executive Officer
of VIALOG, the Board of Directors of the Company exclusive of the Executive. 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.
(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
3
<PAGE>
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'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;
4
<PAGE>
(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 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.
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 State of New Jersey.
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
New Jersey.
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:
American Conferencing Company, Inc.
c/o VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, MA 01810
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. Entire Agreement. This Agreement represents the entire agreement
----------------
between the Executive and the Company with respect to the subject matter hereof
and supersedes all other agreements between the Company and Executive with
respect to such subject matter.
Executed under seal as of November 12, 1997.
EXECUTIVE AMERICAN CONFERENCING
COMPANY, INC.
/s/ David L. Lipsky By: /s/ Glenn D. Bolduc
- ------------------------------- --------------------------------
Name: David L. Lipsky Name: Glenn D. Bolduc
Title: Director
- -------------------------------
Address:
- -------------------------------
7
<PAGE>
EXHIBIT 10.15
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of November 12, 1997 by and between
COMMUNICATION DEVELOPMENT CORPORATION, a Connecticut corporation with its
principal place of business at 30 Main Street, Suite 400, Danbury, CT 06810
(the "Company") and PATTI R. BISBANO, an individual residing at the address set
forth under her signature below ("Executive").
FACTS
The Company and various other wholly-owned subsidiaries (the
"Subsidiaries") of VIALOG Corporation, a Massachusetts corporation ("VIALOG"),
have participated in various acquisitions 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 President, and Executive will perform
all of the duties and responsibilities of said office, subject to direction by
the 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 President, as may be
assigned to her from time to time by the 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
<PAGE>
as such other positions involved a substantially similar level of compensation,
authority and responsibility as the position of President. 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 $140,000 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.
During the term of this Agreement, Executive will receive an automobile
allowance in the amount of $400 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 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 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 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 employees, consultants, clients,
customers, vendors, suppliers, or independent contractors to terminate their
relationship with the VIALOG Group; or
4
<PAGE>
(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.
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:
5
<PAGE>
Communications Development Corporation
c/o VIALOG Corporation
Ten New England Business Center, Suite 302
Andover, MA 01810
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.
17. Entire Agreement. This Agreement represents the entire agreement
----------------
between the Executive and the Company with respect to the subject matter hereof
and supersedes all other agreements between the Company and Executive with
respect to such subject matter.
Executed under seal as of November 12, 1997.
EXECUTIVE COMMUNICATION DEVELOPMENT
CORPORATION
/s/ Patti R. Bisbano By: /s/ Glenn D. Bolduc
- ----------------------------- ----------------------------
Patti R. Bisbano Name: Glenn D. Bolduc
Title: Director
31 Juniper Ridge Drive
- -----------------------------
Address:
Danbury, CT 06811
- -----------------------------
6
<PAGE>
EXHIBIT 10.16
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of October 1, 1996 by and between
InterPlay Corporation, a Massachusetts corporation (the "Company") and William
Pucci ("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 October 1, 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 Vice President - Operations, 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 Vice President -
Operations, 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 Vice President - Operations. 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 to
whatever extent may be reasonably necessary in the
<PAGE>
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 $120,000 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 earlier of (a) the date of the Consulting Agreement referred to
in Section 17 or (b) the Effective Date to the Closing Date multiplied by the
Executive's "daily rate" ($120,000 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. 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 May 17, 1996 between Executive and the Company will be terminated upon
execution of this Agreement.
Executed under seal as of October 1, 1996.
InterPlay Corporation
/s/ William Pucci By: /s/ Glenn D. Bolduc
- -------------------------- --------------------------
William Pucci Name: Glenn D. Bolduc
9 Balmoral Road Title: President
Boxford, MA 01921
<PAGE>
EXHIBIT 10.17
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of November 4, 1996 by and between
InterPlay Corporation, a Massachusetts corporation (the "Company") and John Dion
("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 November 4, 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 Vice President - Corporate Controller ,
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
Vice President - Corporate Controller , 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 Vice President
- - Corporate Controller . 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 to whatever extent may be reasonably
necessary in the
<PAGE>
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 $100,000 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" ($100,000 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. 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:
(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)
2
<PAGE>
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 termination; and (ii) continuation,
at the Company's sole expense, of all fringe benefits until the earlier
3
<PAGE>
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:
(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;
4
<PAGE>
(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.
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.
5
<PAGE>
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.
6
<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.
7
<PAGE>
Executed under seal as of November 4, 1996.
InterPlay Corporation
/s/ John Dion By: /s/ Glenn D. Bolduc
- ---------------------------------- ------------------------------------
John Dion Name: Glenn D. Bolduc
Title: President
8
<PAGE>
EXHIBIT 10.18
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of April 1, 1997 by and between VIALOG
Corporation, a Massachusetts corporation (the "Company") and GARY VILARDI
("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 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 commenced on April 1, 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 Vice President of Sales, 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 Vice President of
Sales, 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
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 Vice President of Sales. 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.
<PAGE>
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 Company
successfully closes the merger of a minimum of four (4) companies (the
"Mergers") and thereafter at the annual rate of $150,000 and such additional
compensation as may be mutually agreed upon from time to time by the Company and
Executive. Within ten (10) days following the closing of the Mergers (the
"Closing Date") the Executive will receive a cash bonus equal to the number of
days from the Effective Date to the Closing Date multiplied by the Executive's
"daily rate" ($ 150,000 divided by 365), less the aggregate compensation earned
by the Executive between the Effective Date and the Closing Date in connection
with the Executive's employment with American Conferencing Company. 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, Vacation and Stock Options. Executive will be eligible to
------------------------------------
participate in and/or receive such group retirement plans (qualified and non-
qualified), insurance plans, other fringe benefit plans and vacation as the
Company makes available to similarly situated senior executives. Executive will
be granted an incentive stock option to purchase 25,000 shares of the Company's
Common Stock, which option shall vest over three years pursuant to the
provisions of an Incentive Stock Option Agreement to be entered into between the
Company and the Executive. Executive will also receive a monthly auto allowance
of $500.00.
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;
misconduct in the performance of Executive's duties or responsibilities;
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.
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 comparable group insurance benefits as
Executive would have received (at such times as Executive would have received
them) during a period equal to one (1) year 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 comparable group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to one (1) year, 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, (i) the Executive will
receive a severance payment of one year's then current base salary, such
severance payment to be paid in twelve equal month installments commencing on
the first day of the first month following such termination; provided, however,
that for each of the last six monthly installments, the amount of such
installment shall be reduced, but not below zero, by the amount of compensation,
if any, earned by the Executive for service rendered to any third party during
such month; and (ii) to the extent permitted by law and by the terms of any
applicable insurance contract, the Company shall at its own cost and expense
continue to make available to, and to continue the Executive's participation in,
those group insurance plans and other fringe benefit plans in which the
Executive was a participant as of the date of his termination by the Company for
the period commencing on the date of such termination of employment and ending
on 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 VIALOG
Group, or use for Executive's own benefit or the benefit of any other person or
entity, any confidential information concerning the
3
<PAGE>
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'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;
4
<PAGE>
(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;
(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 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 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.
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 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, and
(b) If to the Company, at:
Ten New England Business Center, Suite 302
Andover, MA 01810
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>
EMPLOYEE VIALOG CORPORATION
/s/ Gary Vilardi By: /s/ Glenn D. Bolduc
- ---------------------------------- ------------------------------------
Name: Name: Glenn D. Bolduc
Title: President & CEO
91 Webster Drive
- ----------------------------------
Address:
Wayne, NJ 07470
- ----------------------------------
7
<PAGE>
EXHIBIT 10.19
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of October 20, 1997 by and between VIALOG
Corporation, a Massachusetts corporation (the "Company") and ROBERT MOORE
("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 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 commences on the date first written
----
above (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 Vice President of Sales and Marketing,
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
Vice President of Sales and Marketing, 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 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 Vice President of
Sales and Marketing. 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.
<PAGE>
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 Company
successfully closes the merger of a minimum of four (4) companies (the
"Mergers") and thereafter at the annual rate of $155,000 and such additional
compensation as may be mutually agreed upon from time to time by the Company and
Executive. Within ten (10) days following the closing of the Mergers (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" ($155,000 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, Vacation and Stock Options. Executive will be eligible to
------------------------------------
participate in and/or receive such group retirement plans (qualified and non-
qualified), insurance plans, other fringe benefit plans and vacation as the
Company makes available to similarly situated senior executives. Executive will
be granted an incentive stock option to purchase 70,000 shares of the Company's
Common Stock (as such Common Stock was constituted as of October 17, 1997),
which option shall vest over three years pursuant to the provisions of an
Incentive Stock Option Agreement to be entered into between the Company and the
Executive. Executive will be entitled to receive a monthly auto allowance of
$500 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;
misconduct in the performance of Executive's duties or responsibilities;
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.
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 comparable group insurance benefits as
Executive would have received (at such times as Executive would have received
them) during a period equal to one (1) year 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 comparable group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to one (1) year, 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, (i) the Executive will
receive a severance payment of one year's then current base salary, such
severance payment to be paid in twelve equal month installments commencing on
the first day of the first month following such termination; provided, however,
that for each of the last six monthly installments, the amount of such
installment shall be reduced, but not below zero, by the amount of compensation,
if any, earned by the Executive for service rendered to any third party during
such month; and (ii) to the extent permitted by law and by the terms of any
applicable insurance contract, the Company shall at its own cost and expense
continue to make available to, and to continue the Executive's participation in,
those group insurance plans and other fringe benefit plans in which the
Executive was a participant as of the date of his termination by the Company for
the period commencing on the date of such termination of employment and ending
on 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 VIALOG
Group, or use for Executive's own benefit or the benefit of any other person or
entity, any confidential information concerning the
3
<PAGE>
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'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;
4
<PAGE>
(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;
(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 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 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.
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 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, and
(b) If to the Company, at:
Ten New England Business Center, Suite 302
Andover, MA 01810
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>
EMPLOYEE VIALOG CORPORATION
/s/ Robert Moore By: /s/ Glenn D. Bolduc
- -------------------------------- ------------------------------------
Name: Name: Glenn D. Bolduc
Title: President & CEO
- --------------------------------
Address:
- --------------------------------
7
<PAGE>
EXHIBIT 10.20
-------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of October 14, 1997 by and between VIALOG
Corporation, a Massachusetts corporation (the "Company") and JOHN WILLIAMS
("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 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 commences on the date first written
----
above (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 Vice President of Operations, 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 Vice President of
Operations, 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 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 Vice President of Operations. 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.
<PAGE>
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 Company
successfully closes the merger of a minimum of four (4) companies (the
"Mergers") and thereafter at the annual rate of $150,000 and such additional
compensation as may be mutually agreed upon from time to time by the Company and
Executive. Within ten (10) days following the closing of the Mergers (the
"Closing Date") the Executive will receive a cash bonus equal to the number of
days from the Effective Date to the Closing Date multiplied by the Executive's
"daily rate" ($ 150,000 divided by 365). 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, Vacation and Stock Options. Executive will be eligible to
------------------------------------
participate in and/or receive such group retirement plans (qualified and non-
qualified), insurance plans, other fringe benefit plans and vacation as the
Company makes available to similarly situated senior executives. Executive will
be granted an incentive stock option to purchase 25,000 shares of the Company's
Common Stock, which option shall vest over three years pursuant to the
provisions of an Incentive Stock Option Agreement to be entered into between the
Company and the Executive.
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;
misconduct in the performance of Executive's duties or responsibilities;
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
2
<PAGE>
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 comparable group insurance
benefits as Executive would have received (at such times as Executive would have
received them) during a period equal to one (1) year 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 comparable group insurance benefits as Executive would
have received (at such times as Executive would have received them) during a
period equal to one (1) year, 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, (I) the Executive will
receive a severance payment of one year's then current base salary, such
severance payment to be paid in twelve equal month installments commencing on
the first day of the first month following such termination; provided, however,
that for each of the last six monthly installments, the amount of such
installment shall be reduced, but not below zero, by the amount of compensation,
if any, earned by the Executive for service rendered to any third party during
such month; and (ii) to the extent permitted by law and by the terms of any
applicable insurance contract, the Company shall at its own cost and expense
continue to make available to, and to continue the Executive's participation in,
those group insurance plans and other fringe benefit plans in which the
Executive was a participant as of the date of his termination by the Company for
the period commencing on the date of such termination of employment and ending
on 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 VIALOG
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
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
3
<PAGE>
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 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
4
<PAGE>
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;
(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 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 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 Commonwealth of Massachusetts.
5
<PAGE>
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
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, and
(b) If to the Company, at:
Ten New England Business Center, Suite 302
Andover, MA 01810
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>
EMPLOYEE VIALOG CORPORATION
/s/ John R. Williams By: /s/ Glenn D. Bolduc
- -------------------------------- -------------------------------------
Name: Name: Glenn D. Bolduc
Title: President & CEO
9910 Ensley Lane
- ---------------------------------
Address:
Leawood, KS 66206
- ---------------------------------
7
<PAGE>
EXHIBIT 10.22
-------------
STOCKHOLDER AGREEMENT
---------------------
This Stockholder Agreement is entered into this 6/TH/ day of
November, 1997 by and among John J. Hassett, a stockholder of VIALOG
Corporation, and VIALOG Corporation, a Massachusetts corporation (the
"Company").
WHEREAS, John J. Hassett is a principal stockholder of VIALOG
Corporation;
WHEREAS, VIALOG Corporation is proposing to sell $75,000,000
of Senior Notes and Warrants to purchase common stock of VIALOG Corporation to
Jefferies & Company, Inc., as initial purchaser (the "Offering"); and
WHEREAS, as a condition to the Offering, this Agreement is
being executed;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 Except for those terms defined in this Agreement,
each capitalized term used in this Agreement will have the meaning given to such
term in the VIALOG Corporation offering circular dated November 6, 1997, for
$75,000,000 12.75% Senior Notes due 2001 with Warrants to Purchase 750,000
Shares of Common Stock.
ARTICLE II
TERMS OF AGREEMENT
------------------
Section 2.01 While any Notes remain outstanding or any
obligation of the Company or the Subsidiary Guarantors with respect thereto
remains unpaid finally and in full, (i) with respect to all matters submitted to
a vote of the stockholders of the Company regarding the appointment, election or
removal of directors or officers of the Company, John J. Hassett will vote any
shares of voting stock of the Company over which he has direct or indirect
voting power in the same proportion as the votes cast in favor of and against
the particular matter voted upon, by all of the other stockholders of the
Company, and (ii) John J. Hassett will not serve as a director or officer of the
Company or any Subsidiary.
ARTICLE III
GENERAL PROVISIONS
------------------
Section 3.01 Representations and Warranties. John J. Hassett
------------------------------
represents and warrants that (i) this Agreement constitutes his legal, valid and
binding obligation enforceable against him in accordance with its terms, and
(ii) he has been represented by legal counsel of his choosing in the negotiation
and execution of this Agreement. The representations,
<PAGE>
warranties and covenants of John J. Hassett set forth in this Agreement shall
survive the date of signing of this Agreement.
Section 3.02 Further Assurances. Each party agrees from time
------------------
to time, at the request of any other party to execute such documents or ratify
such agreements as may be reasonably necessary to effect the agreements
contained herein.
Section 3.03 Modification. This Agreement shall not be
------------
modified or amended except by an agreement in writing executed by all parties
hereto.
Section 3.04 Applicable Law. This Agreement shall be governed
--------------
under the law of the State of Massachusetts without regard to the principles of
conflicts of law thereof.
Section 3.05 Entire Agreement. This Agreement contains the
----------------
entire and final agreement between the parties with respect to the subject
matter hereof, and no oral statements, assumptions or representations or prior
written matter not contained or referred to in this instrument shall have any
force or effect.
Section 3.06 Counterparts. This Agreement may be executed in
------------
one or more counterparts, each of which shall be deemed an original and all of
which together shall be one and the same instrument.
Section 3.07 Severability. If any provision of this Agreement
------------
or the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 3.08 Waiver. No consent or waiver, express or implied,
------
by any party to or of any breach or default by another party in performance by
the breaching party of its obligations under this Agreement shall be deemed or
construed to be a consent or waiver to or of any breach or default by the
breaching party in the performance by such breaching party of any other
obligations of such breaching party under this Agreement. Failure on the part of
any party to object to or complain of any act or failure to act of any of the
other parties or to declare any of the other parties in default shall not
constitute a waiver of any right or remedy or the ability to object or complain
or to declare any default at any time in the future.
Section 3.09 Specific Performance. The parties agree that any
--------------------
breach of this Agreement by any party would result in irreparable harm for which
the other parties would not have an adequate remedy at law and that the parties
shall each be entitled to injunctive and other equitable relief to enforce
specifically the terms and provisions hereof, in addition to any other rights or
remedies available to such parties.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
/s/ John Hassett
-------------------------------------
John J. Hassett
VIALOG CORPORATION
By: /s/ Glenn D. Bolduc
----------------------------------
Name: Glenn D. Bolduc
Title: President
-3-
<PAGE>
EXHIBIT 10.23
-------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated as of November ___, 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 cash or a
combination of cash and shares of Common Stock, $.01 par value of VIALOG
("VIALOG Stock") pursuant to their respective Merger Agreements.
2. 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:
"Act" means the Securities Act of 1933, as amended.
<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 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
2
<PAGE>
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.
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:
3
<PAGE>
(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 requestedto 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 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
4
<PAGE>
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.
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:
5
<PAGE>
(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 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
6
<PAGE>
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 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 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.
7
<PAGE>
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.
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
<PAGE>
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
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
9
<PAGE>
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 judgement 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:
(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
10
<PAGE>
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.
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.
11
<PAGE>
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:
PARTICIPATING SECURITYHOLDER:
-------------------------------
12
<PAGE>
SCHEDULE I
----------
Securityholders of VIALOG
Glenn D. Bolduc Gary M. MacDonald
7 Springvale Drive 46 Bartlett Parkway
Hollis, NH 03049 Winthrop, MA 02152
Grace Bolduc, Custodian John C. McBride
7 Springvale Drive Rollins Road
Hollis, NH 03049 Marblehead, MA 01945
Thomas M. Cope Alan H. Miller
184 Washington Avenue 231 Bradley Place, Suite 204
Dobbs Ferry, NY 10522 Palm Beach, FL 33480
David R. Czerniejewski Robert Moore
c/o Videolan 66 Margin Street
100 Mallard Creek Road, Suite 250 Cohasset, MA 02025
Louisville, KY 40207
Peter G. Dagher Reynolds E. Moulton
1254 Moore's Hill Road 45 Beacon Street
Laurell Hollow, NY 11791 Marblehead, MA 01945
Jeffrey C. Dill Charles Parkhurst
17112 Hughes Road 100 Carlean Avenue
Poolesville, MD 20837 Larchmont, NY 10
John Dion Michael J. Powell
41 Cypress Street 10 Hooper Street
Newton, MA 02159 Marblehead, MA 01945
Mallory Factor Michael J. Powell, Trustee
c/o Anthony Campbell, POA 10 Hooper Street
237 Park Avenue, Suite 800 Marblehead, MA 01945
New York, NY 10017
Christopher Fitzmaurice Proteus Fund I LP
2 Warren Avenue c/o Tom Cope
SpringLake, NJ 07762 237 Park Avenue, Suite 800
New York, NY 10017
13
<PAGE>
Eugene A. Forcione William Pucci
c/o Mark Lubben 9 Balmoral Road
78 Willow Avenue Boxford, MA 01921
Larchmont, NY 10538
Robert G. Foster Urs Rengle
10 Sea Spray Reach 18 Central Street
Yarmouth, ME 04096 Marblehead, MA 01945
Dwight Grader TDK Partners
84 Beacon Street c/o Lee Twomey
Marblehead, MA 01945 Donaldson, Lufkin & Jenrette
75 State Street, 9th Floor
Boston, MA 02109
John J. Hassett Thomas Tureen
4 Harborview One Monument Way
Marblehead, MA 01945 Portland, ME 04101
Susan Hassett Richard Valentine
4 Harborview 15 Kress Farm Road
Marblehead, MA 01945 Hingham, MA 02043
Peter Hirsch Gary Vilardi
14 Hicks Lane 91 Webster Drive
Sands Point, NY 11050 Wayne, NJ 07470
Joseph N. Katz John Williams
55 North Drive 9910 Ensley Avenue
Great Neck, NY 11021 Leawood, KS 66206
David L. Lougee Meghan A. Young
Ridge Road 22 Union Street
Hardwick, MA 01037 Reading, MA 01867
Mark Lubben
78 Willow Avenue
Larchmont NY, 10538
14
<PAGE>
SCHEDULE II
-----------
Stockholders of Participating Companies
David Lipsky
465 Prospect Street
Glen Rock, NJ 07452
Ropir Industries, Inc.
c/o Mrs. Billie Jo Pirnie
1500 Hunter Loop Road
Montgomery, AL 36108
Patti R. Bisbano
31 Juniper Ridge Drive
Danbury, CT 06811
Maurya Suda
10 Ridge Road
Bethel, CT 06801
Courtney Snyder
3 Lime Street
Marblehead, MA 01945
John Hassett
4 Harborview
Marblehead, MA 01945
Dwight Grader
84 Beacon Street
Marblehead, MA 01945
Thomas Carroll
96 Village Street
Marblehead, MA 01945
Clyde Poland
26 Warren Road
Tewksbury, MA 01876
Charles Grader
c/o Dwight Grader
84 Beacon Street
Marblehead, MA 01945
15
<PAGE>
EXHIBIT 10.24
-------------
OFFICE LEASE
------------
1. PREMISES
Tower Investment Group, (i.e. "OWNER") a Conn. General Partnership, hereby
leases to Patricia Bisbano & Maurya Suda d/b/a Communication Development
--------------------------------------------------------------
Concepts, (i.e. "Tenant"), a Conn. General Partnership, the space being numbered
- --------
Suite 400 together with all pipes, ducts, conduits, wires, and equipment
---
exclusively serving said space (collectively hereinafter called the "Premises")
in OWNER'S building known as the Danbury Executive Tower located in Danbury,
Connecticut (i.e. the "Tower" or the "Building"), together with the right in
common with others to use the common areas and common facilities from time to
time designated and maintained by OWNER (hereinafter the "Common Areas"). OWNER
excepts and reserves to itself from the demise of the Premises (1) the exterior
faces of all exterior Tower Walls, windows and doors, and of all walls, windows
and doors facing common areas; (2) hallways, stairways, shaftways, service
rooms, common toilets, and elevators serving other parts of the Building; (3)
the right to maintain, use, repair, and replace pipes, ducts, wires, meters, and
any other equipment, machinery, apparatus, and fixtures located within or
without the Premises which service the Building or exclusively other parts of
the Building; (4) the right to make changes, alterations, additions, and
reductions to the Premises, Building, common areas, and common facilities
provided the same does not unreasonably structurally change the interior of the
Premises and that reasonably access and service is provided; and (5) the right
to enter the Premises for any of the foregoing purposes.
2. TERM
The term of this lease, unless sooner terminated as hereinafter provided, is
three years commencing on the earlier to occur of (a) February 21, 1990 or (b)
- ----- ----------- ----
the date on which TENANT first occupies the Premises. Construction of the
Premises shall be deemed completed and the Premises available for TENANT'S
occupancy upon written notice thereof from OWNER or TENANT although items of
work or adjustments of equipment which are not necessary to make the Premises
reasonably tenantable are not completed because (1) of the season, (2) they
cannot practically be done at that time, (3) of delays caused by TENANT, (4)
they are being done by persons other than OWNER'S contractors, or (5) good
construction practice stipulates delay until other work is completed. TENANT
agrees to execute a certificate in the form attached hereto as Exhibit B
establishing the commencement date (i.e. "Termination Date" (said dates to be
determined by OWNER as per the terms of this Paragraph 2) of this Lease within
ten (10) days after the date on which this Lease commences.
2.1 Commencement of Rent
--------------------
The first monthly payment of Basic Rent shall be made within five (5) days after
the Commencement Date.
<PAGE>
3. RENT
3.1 Amount
------
TENANT covenants to pay during the first year of the three year term $1,200.00
-----
per month; as basic rent (hereinafter "Basic Rent") in advance and appropriate
fraction of a monthly payment for portions of a month at the beginning or end of
the term to such person and at such place as OWNER may from time to time
designate.
The Basic Rent for subsequent years shall be set forth in Exhibit D annexed
---------
hereto and made a part hereof.
3.2 Security Deposit
----------------
TENANT shall pay to OWNER upon execution of this lease a security deposit in the
amount of $1,200.00 which deposit will be held by OWNER with interest to TENANT
to insure TENANT'S faithful performance of its obligations under this Lease. In
the event of default by TENANT under this Lease, Landlord, at its option, may
apply the deposit so held against any default of TENANT then existing.
3.3 Method of Payment
-----------------
Basic Rent and Additional Rent (as hereinafter defined) shall be due and payable
without notice in advance on the first day of each month during the term of this
Lease. Additional rent shall commence no sooner than March 1, 1991.
3.4 Additional Rent
---------------
TENANT shall pay to OWNER as additional rent (hereinafter "Additional Rent")
when due all amounts payable pursuant to SS4.1-4.6, and SS5.1-5.2 of this Lease.
4. OPERATING COSTS
4.1 Base Year
---------
The term "Base Year" as used herein means 1990.
----
4.2 Pro Rata Share
--------------
The term "Pro Rata Share" as used in this Lease shall be the percentage derived
from dividing the Gross Rentable Area (as herein defined) of the Premises by the
Gross Rentable Area of the Tower. In this case, .019%.
-----
2
<PAGE>
4.3 Operating Costs - Defined
-------------------------
As used herein, the term "Operating Costs" shall mean any and all expenses
incurred by OWNER in providing services to and in operating and in maintaining
the Tower and the Common Areas in the manner deemed by OWNER to be reasonable
and appropriate for the best interest of OWNER and its property, the TENANT and
its property, and other tenants in the Tower consistent with the principles of
sound real estate management of similar office buildings in the area and shall
include by way of illustration only but not be limited to the following; all
costs and expense of administration, operation, repair, lighting, heating,
ventilating, painting, decorating, cleaning, insuring, removing snow, ice and
debris, policing and regulating traffic, maintaining security of the Building,
depreciating machinery and equipment used for such operations, replacing or
repairing of pavement, curbs, walkways, drainage, lighting facilities, and
landscaping (including replanting and replacing flowers and other planting),
management fees, commissions, wages, and salaries of all persons engaged in the
maintenance and operating of the Tower. Such costs and expenses shall not
include work or service performed specially for any tenant at its cost or for
its sole benefit. Anything herein to the contrary notwithstanding, it is the
intention of the parties hereto that the portion of the Operating Costs
applicable to the cost of electric energy at any time shall come as close as is
practicable to approximating the annual cost (including taxes regularly passed
on by said public utility to the consumer) which would have been incurred by
TENANT had TENANT purchased such quantity of electric energy, on a monthly
basis, from said public utility on a direct basis. Notwithstanding anything
contained in the immediately preceding sentence, the portion of the Operating
Costs applicable to TENANT for electric energy at any time shall be no less than
the cost to OWNER to, supply electric energy to TENANT at the Premises.
4.4 Gross Rentable Area
-------------------
TENANT acknowledges and agrees that for the purpose only of allocating Operating
Costs, the area of the Premises measured in accordance with the "Standard Method
of Floor Measurement for Office Buildings of the Real Estate Board of New York,
Inc." effective April 16, 1968, is approximately 1,066.66 square feet (i.e. the
"Gross Rentable Area"). The Gross Rentable Area of the Tower is 55,157 square
feet.
4.5 Operating Year
--------------
The term "Operating Year" shall mean the 12-month period designated by OWNER for
purposes of determining Operating Costs.
4.6 Method of Payment
-----------------
TENANT shall pay in advance as Additional Rent a Pro Rata Share of increases in
estimated Operating Costs over and above such Operating Costs for the Base Year.
This estimate is based solely upon OWNER'S known Operating Costs for the
previous Operating Year and upon OWNER'S present Operating Costs. OWNER
disclaims any representation that the estimated Operating Costs will be the
Operating Costs for any Operating Year. TENANT shall make
3
<PAGE>
payment to OWNER of its estimated Pro Rata Share of the aforesaid increases in
Operating Costs, in monthly installments in such amounts as are estimated and
billed by OWNER commencing and ending on dates designated by OWNER. Within one
hundred twenty (120) days (or such additional time thereafter as is reasonably
under the circumstances), after the end of each Operating Year, OWNER shall
deliver to TENANT a statement of Operating Costs for such Operating Year (or
applicable portions thereof) and the monthly installments paid or payable shall
be adjusted between OWNER and TENANT, both OWNER and TENANT hereby agreeing that
TENANT shall pay OWNER or OWNER shall credit TENANT'S account or (if such
adjustment is at the end of the Term) pay TENANT, as the case may be, within
thirty (30) days of receipt of such statement, such amount as may be necessary
to effect adjustment to the agreed proportionate share for such Operating Year.
Upon reasonable notice, OWNER shall make available for TENANT'S inspection,
during normal business hours, OWNER'S records relating to Operating Costs for
such preceding Operating Year.
In the event this Lease shall terminate on any date other than the last day of a
calendar year, the amount of Additional Rent payable by TENANT during the
calendar year in which this Lease terminates shall be prorated on the basis of
the estimated Operating Costs for that Operating Year and the number of days
which have elapsed from the commencement of said calendar year, to and including
said date on which this Lease terminates.
5. TAXES
5.1 Pro Rata Share of Increases
---------------------------
TENANT shall pay OWNER TENANT'S Pro Rata Share of any increase in real estate
taxes, betterment and special assessments assessed upon or payable in respect to
the Building and land in each year during the Lease term whether resulting from
a change in assessment or rate or both over the amount of such share (or of the
allocated share of the aforesaid payments in lieu of taxes whichever is
applicable) in the Base Year. Payments due in the first and last years of the
Lease term shall be apportioned based on OWNER'S estimate of taxes payable in
those years and the months of the term in which TENANT has the right to occupy
the Premises.
5.2 Method of Payment
-----------------
TENANT shall make payment in advance to OWNER as Additional Rent TENANT's share
of increases in taxes and assessments in monthly installments in such amounts as
are estimated and billed by OWNER at the beginning of each month commencing and
ending on dates designated by OWNER. Within one hundred twenty (120) days (or
such additional time thereafter as is reasonable under the circumstances), after
the end of each such twelve (12) month period designated by OWNER, OWNER shall
deliver to TENANT a statement of Taxes and Assessments for such twelve (12)
month period (or applicable portions thereof) and the monthly installments paid
or payable shall be adjusted between OWNER and TENANT, both OWNER and TENANT
hereby agreeing that TENANT shall pay OWNER or OWNER shall credit TENANT's
account or (if such adjustment is at the end of the Term) pay TENANT, as the
case may be, within thirty (30) days of receipt of such statement, such amount
as may be necessary to
4
<PAGE>
effect adjustment to the agreed share for such twelve (12) month period. Upon
reasonable notice, OWNER shall make available for TENANT's inspection, during
normal business hours, OWNER's records relating to said Statement for such
preceding twelve (120) month period.
6. OWNER'S SERVICES
6.1 Services Furnished
------------------
Subject to Section 7 (INTERRUPTION OF SERVICES) and Section 9 (CASUALTY AND
TAKING), OWNER agrees to furnish the following services as long as TENANT is not
in default under any of the covenant of this Lease:
6.1.1 Furnish air cooling during the months of June, July, August and
September on business weekdays from 9:00 a.m. to 5:00 p.m. when
in the judgment of the LANDLORD it may be required for the
comfortable occupancy of the demised Premises and at other times
during business days and similar hours, ventilate the demised
Premises; and at other times during business days and similar
hours, ventilate the demised Premises;
6.1.2 Provide full elevator facilities on business days from 8:00 a.m.
to 6:00 p.m. and on Saturdays from 8:00 a.m. to 12:00 noon, and
have partial elevator facilities available at all other times;
6.1.3 Furnish heat to the demised Premises when and as required by
law, on business weekdays from 8:00 a.m. to 6:00 p.m. and on
Saturdays from 8:00 a.m. to 12:00 noon;
6.1.4 At LANDLORD'S expense cause the demised Premises to be kept
clean provided the same are kept in order by the TENANT;
6.1.5 Clean and supply the toilet rooms and the janitors closets;
6.1.6 Replace burnt out lamps and tubes and the cost plus reasonable
labor thereof shall be charged to the TENANT;
6.1.7 Maintain and cause to be kept clean the public spaces of the
building;
6.1.8 Clean periodically the windows of the building from the inside
and the outside.
6.2 Additional Services
-------------------
After reasonable notice from TENANT and in compliance with Local, State and
Federal laws, regulations and guidelines, OWNER will furnish reasonable
additional services whether resulting from additional hours, additional
equipment and plumbing of the Building), or otherwise, at rates
5
<PAGE>
which will cover OWNER's full Operating Costs (including a 20% Administration
Fee) and which TENANT covenants to pay upon request.
7. INTERRUPTION OF SERVICES
OWNER shall not be liable to anyone for reduction or cessation of any service
agreed to be rendered under this Lease due to any accident; the making of
repairs, alterations, changes or improvements to the Building; labor
difficulties; governmental rule or regulation; difficulty in obtaining fuel,
electricity, services or supplies from the sources from which they are normally
obtained; nor shall OWNER be liable for any cause beyond OWNER's control.
8. TENANT'S, COVENANTS AND AGREEMENTS
8.1 Agreements
----------
TENANT agrees that TENANT's occupation of the Premises will constitute
acknowledgment that the same is in good and satisfactory order, repair, and
condition, and constructed in accordance with the plans and specifications
therefore.
8.2 Covenants
---------
TENANT covenants that during the Lease term and such further time as TENANT
holds any part of the Premises:
8.2.1 to pay when due Basic Rent, Additional Rent and all other
amounts payable by TENANT as provided herein, all costs of re-
lamping light fixtures, taxes imposed on TENANT's property in
the Premises, and taxes resulting from additions or improvements
made by TENANT;
8.2.1 to keep and promptly make all repairs necessary to keep the
Premises in as good order, repair and condition as the same are
in at the beginning of the Lease term or may be put in
thereafter; to repair and maintain all glass in the Premises
(except for Tower exterior windows) and in perimeter walls and
doors, damage by fire or unavoidable casualty and reasonable use
thereof excepted; and at the expiration or other termination of
this Lease to peaceably yield up the Premises and all keys,
locks, other fixtures in connection with the Premises and all
additions to the Premises in the same good order, repair and
condition first removing all goods and effects except those of
the OWNER and leaving the Premises clean and tenantable;
8.2.3 not to injure, deface, overload or exceed the capacity of the
Premises or Building or the ducts, wires, pipes, conduits, and
equipment servicing the same; not to make any alterations or
additions to the OWNER's prior consent; not to permit in or on
the Premises any auction, tag, sheriff's,
6
<PAGE>
receiver's bankruptcy, moving, relocation or "going out of
business" sale, flammable or explosive fluids or chemicals,
nuisance, objectionable noise, vibration or odor, cooking, coin
operated or other vending machine, public telephone or amusement
device; nor to permit or to suffer the use of the Premises for
any purpose other than normal office use nor to make any use
thereof which is improper, offensive, illegal or which may
damage the reputation of the Building or which disturbs other
tenants in the Building or which is liable to invalidate or
increase premiums for fire, public liability, or any other
insurance carried by anyone on the Building or its contents or
render necessary any repairs, changes, alterations or additions
to the Building; not to permit or suffer any lien for labor,
materials, equipment or otherwise to be filed against the
Premises or the Building, and, if any such lien shall be filed,
to cause the same to be released immediately;
8.2.4 to comply with all requirements of law, ordinances, and public
authority and requests of organizations establishing OWNER's
insurance rates applicable to the Premises except for repairs
provided herein to be done by OWNER;
8.2.5 not to obstruct in any manner any part of the Building not
hereby demised or the sidewalks, approaches to, hallways, common
areas, and common facilities of the Building or any windows or
doors; and to conform to rules now appearing in Exhibit A or
hereafter made by OWNER for the care, cleanliness, safety and
use of the Building, and its facilities, the Tower, the
Premises, and Common Areas and Facilities, the Garage and their
approaches;
8.2.6 not to permit any licensee or any person other than TENANT and
TENANT's employees to occupy the Premises, nor without OWNER's
prior consent, permit the boring, cutting into or stringing of
wires or defacing of any part of the Premises, not to paint or
place any signs, curtains, blinds, shades, aerials, flagpoles or
the like on the exterior, or visible from the exterior, of the
Premises; nor to place anything between the Building standard
drapes supplied by the OWNER and the glass of any exterior
window of the Building nor to remove such drapes;
8.2.7 to save OWNER harmless, indemnified, and exonerated from injury,
loss, claim, demand, or damage, to any person or property and
any expense (including counsel fees) relating to the same and to
the enforcement of this covenant while such person or property
is on the Premises or in transit thereto or therefrom, and to
any person or property anywhere caused by any negligence, fault,
omission, or other misconduct of TENANT or TENANT's employees,
visitors, invitees, or contractors; and without limiting the
generality of the foregoing, to make no claim against OWNER
7
<PAGE>
for any loss or damage to merchandise, furniture, and property
of every kind which may be on the Premises if the whole or any
part thereof be due to fire or water, or to the use, misuse, or
abuse of water, plumbing, heating, electric, gas or elevator
fixtures or equipment, or to leakage or busting of pipes or in
any other way;
8.2.8 to provide OWNER with Comprehensive General Liability Insurance
for the protection of OWNER and TENANT with such limits for
Bodily Injury Coverage and for Property Damage Liability as
OWNER may reasonably require from time to time, and to furnish
OWNER before commencement of the Lease term with certificates of
said insurance which state the limits insured and state that the
policy will not be materially changed or canceled by either
party thereto without thirty days prior written notice to OWNER;
to provide a policy which states that the insurance company
issuing such policy waives all rights of subrogation against the
OWNER in a form satisfactory to OWNER's counsel, and TENANT
hereby waives any right of recovery against OWNER for loss or
injury to the extent TENANT is protected by insurance containing
such waiver of subrogation clause, and agrees that at least ten
days prior to the expiration of any of the foregoing insurance
to furnish OWNER with proper certificates of continuation of
such coverage, and should TENANT fail to comply with the
foregoing, OWNER shall have the right, but not the obligation,
to obtain such insurance for his own account and TENANT shall
pay the cost thereof as Additional Rent.
8.2.9 to permit OWNER to examine the Premises as reasonable times
and, if OWNER elects, OWNER will be permitted to prevent waste
or make such repairs, changes or additions as OWNER deems
necessary; to permit OWNER to remove any alterations, signs,
awnings, curtains, blinds, shades, aerials, flagpoles, or the
like not consented to by OWNER; and to permit OWNER to show the
Premises to prospective or present purchasers, mortgagees, and
tenants;
8.2.10 to use the name Danbury Executive Tower in lieu of a street
address on all of TENANT's stationery used in the Premises and
in all local advertising;
8.2.11 to pay on request all of OWNER's expenses including reasonable
attorney's fees incurred in enforcing any obligations of TENANT
under this Lease with which TENANT has not complied or in OWNER
consenting to any action of TENANT for which this Lease requires
OWNER's consent; but if either party shall bring an action
against the other party to enforce any of the provisions of this
lease, the judicially proven prevailing party shall be entitled
to collect all costs of the action, including a reasonable
attorney's fee, from the other party;
8
<PAGE>
8.2.12 not to permit or suffer any of TENANT's employees, visitors,
guests, invitees or contractors to violate any of the covenants
or obligations of TENANT under this Lease; and
8.2.13 upon 30 days written notice from OWNER to relocate to other
space within the Building of approximately the same number of
square feet as specified and designated by OWNER in said notice;
with all terms, provisions, covenants and conditions of this
Lease to remain and continue in full force and effect except
that a pro rata adjustment of the Basic Rent and Additional Rent
shall be made where the number of square feet in the relocated
space has been increased or decreased, and OWNER shall move
TENANT to the relocated space without cost or charge to TENANT.
8.2.14 Not to allow or permit the use of TENANT's address at the
TOWER, by any other person, corporation or partnership, without
the express written consent of OWNER.
8.2.15 To permit OWNER to cure defaults of TENANT under this Lease
(but OWNER shall have no obligation to cure such defaults) and
charge to TENANT as Additional Rent OWNER's costs and expenses
(including attorneys' fees, if any) of curing such defaults with
interest at the rate of 2% over the Prime Lending Rate of the
First National Bank of Boston.
8.2.15 Not to make any alterations or additions to the Premises or to
perform any work that may be permitted hereunder prior to
TENANT's occupancy of the Premises unless OWNER has (1) approved
the scope of the alterations, additions or work to be performed;
(2) approved the plans and specifications for all such changes
in the Premises and (3) approved all contractors, engineers, and
architects to be used by TENANT in the performance of said
alterations or other work upon the Premises.
9. CASUALTY AND TAKING
Nothing in this Lease to the contrary withstanding, if any part of the Premises
is damaged by fire or casualty or by action of public or other authority in
consequence thereof; or any portion of the Building is so damaged thereby that
OWNER decides to demolish or alter substantially the Tower or Premises; or any
portion of the Building is taken by eminent domain or receives compensable
damage by reason of anything done in pursuance of public or other authority; or
any portion of the Building is so taken or receives such damage that OWNER
decides to demolish or alter the Tower; the Lease shall terminate at OWNER's
election, which may be made whether or not OWNER's entire interest may have been
divested. In case of such taking of part of the Premises, if the remainder is
insufficient for use for TENANT's purposes, or in case of such damage or taking
if the time needed to do the construction work necessary to put the remaining
portion of Premises in proper condition for use and occupation is reasonably
estimated to exceed six months, or OWNER does not commence within sixty days
after the damage or the
9
<PAGE>
surrender of the part taken and proceed with reasonable diligence to do such
work and complete the same within six months after such commencement except for
delays due to governmental regulations, unusual scarcity of or inability to
obtain labor or materials, labor difficulties, or other causes reasonably beyond
OWNER's control, TENANT may by notice to OWNER terminate this Lease within
thirty days after the right to terminate arises. If, in any such case, the
Premises are rendered unfit for use and occupation and the Lease is not so
terminated, a just proportion of the rent according to the nature and extent of
the injury shall be abated until the Premises (or in the case of taking, what
remains thereof), excluding any fixtures or items installed or paid for by
TENANT which TENANT is entitled or required to remove by this Lease shall have
been put by OWNER in proper condition for use and occupation. In case of
termination by TENANT, a like proportion of the rent shall be abated until the
termination. In case of taking which permanently reduces the area of the
Premises, a just proportion of the rent shall be abated for the remainder of the
Lease term. TENANT will promptly notify OWNER of any damage to the Premises from
any cause. Nothing herein contained shall be deemed to obligate the OWNER to
make any repairs or restoration. OWNER reserves and excepts all rights to
damages to the Premises and Building and land on which it stands, and the
leasehold hereby created, accruing by reason of exercise of eminent domain or by
reason of anything done in pursuance of public or other authority. TENANT hereby
grants to OWNER all TENANT's rights to such damages, except damages awarded to
TENANT for TENANT's cost of moving stock and fixtures, and covenants to deliver
such further assignments thereof as OWNER may from time to time request, and
such other documents not imposing additional expense or obligation on TENANT as
the taking authority may require.
10. DEFAULT AND TERMINATION
If the Rent or Additional Rent herein reserved shall not have been paid when due
and shall remain unpaid for fourteen (14) day after written notice thereof is
given by the OWNER to TENANT; or if any of the other covenants, conditions and
obligations of the TENANT under this Lease shall not be performed within thirty
(30) days after written notice thereof is given by the OWNER to the TENANT; or
if the TENANT should be adjudicated a bankrupt or should a permanent receiver in
insolvency or a permanent trustee in bankruptcy of the TENANT be appointed and
said appointment shall not have been vacated within sixty (60) days; or should
the TENANT make an assignment for the benefit of creditors or file a voluntary
petition for reorganization under the Bankruptcy Act; or should the TENANT'S
interest in this Lease be taken on execution or other process of law in any
action against TENANT; or if the Premises are abandoned or vacated for more than
ten (10) days; or should any of the foregoing events occur in regards to any
guarantor of this Lease; then and in each such case the OWNER may, at the
OWNER'S option terminate this Lease without demand or further notice to TENANT;
and thereafter the OWNER may enter the Premises, either with or without process
of law, and repossess the Premises as of the OWNER'S former estate without any
liability for so doing, and without prejudice to any other remedies; and TENANT
shall indemnify OWNER during the remaining period before this Lease would
otherwise expire against all loss or damage suffered by reason of the
termination, the loss or damage, if any, for such Lease month to be paid at the
end thereof. Nothing herein contained shall, however, limit or prejudice the
right of OWNER to prove for an obtain in proceedings for bankruptcy or
insolvency by reason of the termination, an
10
<PAGE>
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 damage referred to above.
11. SUBORDINATION AND ESTOPPEL
This Lease shall be subordinate to any ground lease, mortgage, deed of trust,
easement, or restriction of record hereafter executed of any property which
includes the whole or any part of the Premises if the holder thereof shall by
notice advise TENANT that an entry under the mortgage or deed of trust or an
exercise of the easement or restriction will not disturb TENANT'S right to
possession under this Lease; and in case of such notice TENANT shall upon demand
recognize and acorn to the mortgagee or trustee claiming under an entry or
foreclosure as entitled to enforce the obligations of TENANT thereafter arising
hereunder. Any holder of a mortgage or deed of trust of property which includes
the Premises may at any time subordinate the mortgage or deed of trust to this
Lease, without TENANT'S consent, by notice to TENANT and thereupon this Lease
shall be deemed prior in lien to such mortgage or deed of trust without regard
to their respective dates of execution, delivery and record; and in that event
such holder shall have the same rights with respect to this Lease as though it
had been executed and delivered prior to the execution and delivery of the
mortgage of deed of trust and had been assigned therein to such mortgagee or
trustee. This section is supplementary to and not in derogation of any rights
such a holder may otherwise have. TENANT agrees from time to time, when
reasonable needed for delivery to a prospective real estate purchaser (which
term shall include a prospective ground lessee) or mortgagee or mortgage
assignee upon not less than fifteen days prior request by OWNER, to execute,
acknowledge and deliver to OWNER a statement in writing certifying: (a) that
this Lease is unamended (or, if there have been any amendments stating the
amendments); (b) that it is then in full force and effect if that be the fact;
(c) the last rent rates and service charges determined and the dates to which
paid; and (d) any defenses, offsets and counterclaims which TENANT at the time
of the exection of the statement, has against TENANT'S obligation to pay rent
and to perform its other obligations under this Lease or that there are none, if
that be the fact. Any such statement delivered pursuant to this section may be
relied upon by such prospective purchaser, mortgagee or assignee.
12. MISCELLANEOUS
No consent or waiver, express or implied, by either party to any default by the
other shall be deemed as a consent or waiver of any default of the same nature
or of any other default in the future, and OWNER may assert its rights and
remedies hereunder without further notice to TENANT that OWNER will do so.
Acceptance of rent will not constitute a waiver of any default and acceptance of
checks will be conditional upon the same being honored. Any notice, approval,
consent, assurance, request, or election given pursuant to this Lease shall be
void unless it is written. All communications shall be addressed to TENANT at
the Premises and to OWNER at the place then established for the payment of rent
or such other place as OWNER directs. All communications shall be deemed duly
served if so addressed and either mailed by registered or certified mail return
receipt requested or delivered in hand. The covenants and agreements of the
parties shall run with the land and bind and inure to the benefit of their
11
<PAGE>
respective heirs, executors, administrators, successors, and assigns, but no
covenant or agreement of the OWNER shall be binding upon any person except for
defaults occurring during such person's period of ownership of the fee. No
obligations of this Lease shall be binding individually upon any fiduciary,
shareholder, or any beneficiary of any trust which is a party hereto. If the
TENANT is several persons or a partnership, the TENANT'S obligations are joint
or partnership and also several. TENANT agrees not to record this Lease. Both
TENANT and OWNER agree on request of the other to execute and deliver a Notice
of Lease suitable for recording or registering and TENANT agrees to execute and
deliver an acknowledgment suitable for recording any termination of this Lease
other than by expiration of the Lease term. If TENANT is a corporation,
association, trust, or partnership, TENANT covenants that the person executing
this Lease for it has full authority from it and under TENANT'S By-Laws,
Articles of Partnership, etc. to do so and will continue to have full authority
to execute any notice, consent, receipt, or amendment of this Lease and any
other document pertaining to the Lease or Premises until OWNER receives notice
from TENANT to the contrary.
13. BROKERS
TENANT agrees to defend and hold OWNER harmless from expenses and liability for
any compensation, commission, or charges claimed by any broker or agent with
respect to this Lease or the negotiation hereof.
14. QUIET ENJOYMENT
OWNER represents that it has the right to make this Lease and agrees that during
the term of this Lease so long as TENANT observes the terms and provisions of
this Lease to be observed by TENANT, TENANT shall not be disturbed in the
enjoyment of the Premises by the OWNER or by anyone claiming by the paramount
title, unless this Lease is sooner terminated by the happening of any event
elsewhere mentioned in this Lease.
15. LEASE STATUS
This Lease is governed by the laws of Connecticut, and will be effective only
when executed by both parties and may be amended only by a writing executed by
the parties. The titles to the sections are for convenience only and not to be
considered in construing this Lease. Unless repugnant to the context, "OWNER"
and "TENANT" shall be construed as to each provision of this Lease to mean the
person named in Article I as OWNER and TENANT respectively and their respective
heirs, executors, administrators, successors, permitted assigns and those
claiming through or under any of them but this Article shall not be construed as
permitting any transfer of the whole or any part of the interest of the TENANT
named in Article I.
16. MERGER
This writing is intended by the parties as a final expression of their agreement
and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein. No course of prior dealings between the
12
<PAGE>
parties or their officers, employees, agents or affiliates shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Lease.
Acceptance of, or prior agreement between the parties or their affiliates shall
not be relevant or admissible to determine the meaning of any of the terms of
this Lease. No representations, understandings, or agreements have been made or
relied upon in the making of this Lease other than those specifically set forth
herein. This Lease can only be modified by a writing signed by the parties
against whom the modification is sought to be enforced.
17. ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
17.1 TENANT covenants and agrees for TENANT and its successors, assigns
and legal representatives, that neither this Lease nor the term and estate
hereby granted, nor any part hereof or thereof, will be assigned,
mortgaged, pledged, encumbered or otherwise transferred (whether
voluntarily, involuntarily, by operation or law, or otherwise), and that
neither the Premises, nor any part thereof, will be encumbered in any
manner by reason of any act or omission on the part of TENANT, or will be
used or occupied, or permitted to be used or occupied, or utilized for desk
space or for mailing privileges or as a concession, by anyone other than
TENANT, or for any purpose other than as hereinbefore set forth, or will be
sublet, without the prior written consent of OWNER in every case; except
Tenant may sublet to a subsidiary of Communication Development Concepts
----------------------------------
without written consent of OWNER, however, TENANT will remain primarily
liable to OWNER in the event of a sublet provided, however, that if TENANT
is a corporation, the assignment of transfer of this Lease, and the term
and estate hereby granted, to any corporation into which TENANT is merged
or with which TENANT is consolidated (such corporation being hereinafter in
this Section 17 called "Assignee") without the prior written consent of
OWNER shall not be deemed to be prohibited hereby if, and upon the express
condition that, Assignee shall promptly execute, acknowledge and deliver to
OWNER an agreement in form and substance satisfactory to OWNER whereby
Assignee shall assume and agree to perform and to be personally bound by
and upon, all the covenants, agreements, terms, provisions and conditions
set forth in this Lease on the part of TENANT to be performed and whereby
Assignee shall expressly agree that the provisions of this Section 17
shall, notwithstanding such assignment or transfer, continue to be binding
upon it with respect to all future assignments and transfers. A transfer of
fifty percent or greater interest (whether stock, partnership interest or
otherwise) of TENANT shall be deemed to be an assignment of this Lease,
either in one transaction or in any series of transactions within a
fourteen month period.
17.1.1 Owner hereby consents to an assignment from Maurya Suda and
Patricia Bisbano d/b/a Communication Development Concepts to a
corporation to be formed; provided Maurya Suda and Patricia
Bisbano execute the guaranty which is attached hereto as
Exhibit C.
---------
17.2 Notwithstanding anything hereinbefore contained in Section 17.1
hereof, in the event TENANT desires OWNER'S consent to an assignment or
subletting of all or any part of the Premises, TENANT by notice in writing,
(a) shall notify OWNER of the name
13
<PAGE>
of the proposed assignee or subtenant, such information as to the proposed
assignee's or subtenant's financial responsibility and standing as OWNER
may require, and of the covenants, agreements, terms, provisions and
conditions contained in the proposed assignment or sublease, and (b) shall
offer to vacate the space covered by the proposed area to be subleased
(whether all or part of the Premises) or the entire Premises in the event
of an assignment (as the case may be) and to surrender the same to OWNER as
of a date (the "Surrender Date") specified in said offer which shall be the
last days of any calendar month during the term hereof, provided, however,
that the Surrender Date shall not be earlier than the date occurring 120
days after the giving of such notice nor be earlier than the effective date
of the proposed assignment or the commencement date of the term of the
proposed sublease. OWNER may accept such offer by notice to TENANT given
within 60 days after the receipt of such receipt of such notice from
TENANT. If OWNER accepts such offer TENANT shall surrender to OWNER,
effective as of the Surrender Date, all TENANT'S right, title and interest
in and to the portion of the Premises covered by the proposed sublease, or,
if TENANT proposes to sublet the entire Premises, or assigns this Lease,
all TENANT'S right, title and interest in and to the entire Premises. In
the event of such surrender by TENANT of a portion of the Premises then
effective as of the date immediately following the Surrender Date, the
Basic Rent payable by TENANT under this Lease shall be reduced by an amount
equal to that portion of the Basic Rent payable under this Lease which is
allocable to the space so surrendered and the Additional Rent payable by
TENANT under this Lease shall be equitable adjusted. If the entire Premises
be so surrendered by TENANT, this Lease shall be canceled and terminated as
of the Surrender Date with the same force and effect as if the Surrender
Date were the date hereinbefore specified for the expiration of the full
term of this Lease.
In the event of such surrender by TENANT of a portion of the
Premises, any changes, improvements and alterations to the space
constituting the Premises after the Surrender Date (i.e., the space not so
surrendered by TENANT) or any part thereof (including, but not limited to,
the erection of a demising wall to separate space constituting the Premises
after the Surrender Date from the space so surrendered) made necessary or
desirable by reason of such surrender shall be made by OWNER at TENANT'S
expense. TENANT covenants and agrees that, in the event of such surrender
by TENANT of a portion of the Premises, TENANT, at TENANT'S expense, shall
and will at all times provide and permit reasonably appropriate means of
ingress to and egress from such portion of the Premises so surrendered),
permit the occupant or occupants of such portion the use of the core
facilities on said floor, and permit on said floor reasonably appropriate
directional signs for each occupant or occupants and appropriate
designations in the elevators serving said floor.
In the event of any such surrender by TENANT of the Premises or a
portion thereof, OWNER and TENANT shall, at the request of either party,
execute and deliver an agreement to the effect(s) hereinbefore stated.
14
<PAGE>
17.3 In the event OWNER does not accept such offer of TENANT referred to
in Section 17.2 hereof, OWNER covenants not to unreasonably withhold its
consent to such proposed assignment or subletting by TENANT of such space
to the proposed assignee or subtenant on said covenants, agreement, terms,
provisions and conditions set forth in the notice to OWNER referred to in
clause (a) of the first sentence of Section 17.2 hereof; provided, however,
that OWNER shall not in any event be obligated to consent to any such
proposed assignment or subletting unless:
17.3.1 the proposed assignee, or subtenant is satisfactory to OWNER
of a financial standing and engaged in a business and the
Premises will be used in a manner which is in keeping with
then standard of the Tower and the proposed assignment or
subletting does not violate any negative covenants as to use
contained in any other lease made between OWNER and other
tenant(s) of the Tower;
17.3.2 the proposed assignee or subtenant is a reputable party;
17.3.3 the proposed assignee, or subtenant is not then a tenant or
occupant of any part of the Building or a corporation or
other entity which controls or is controlled by such tenant
or occupant or is under common control with such tenant or
occupant;
17.3.4 OWNER shall have the right upon five (5) days' notice to
TENANT, to require TENANT thereafter to pay to OWNER a sum
equal to (i) any rent or other consideration paid to TENANT
by any subtenant which is in excess of the Basic Rent and
Additional Rent then being paid by TENANT to OWNER pursuant
to the terms of this Lease, and (ii) any such profit or gain
realized by TENANT from any such assignment or subletting;
all sums payable hereunder by TENANT shall be paid to OWNER
as Additional Rent immediately upon receipt thereof by TENANT
and if requested by OWNER, TENANT shall promptly enter into a
written agreement with OWNER setting forth the amount of
Additional Rent to be paid to OWNER pursuant to this Section
17.3.4, (if only part of the Premises is sublet, then the
rent paid therefor by TENANT to OWNER shall be deemed to be
that fraction thereof that the area of said sublet space
bears to the entire Premises);
17.3.5 there shall be no default by TENANT under any of the terms,
covenants and conditions of this Lease at the time that
OWNER'S consent to any such assignment or subletting is
requested and on the effective date of the assignment or the
proposed sublease;
17.3.6 the proposed assignee or subtenant shall not be a government
or any subdivision or agency thereof;
15
<PAGE>
17.3.7 TENANT shall reimburse OWNER for any reasonable expenses that
may be incurred by OWNER in connection with the proposed
assignment or sublease, including without limitation the
reasonable costs of making investigations as to the
acceptability of a proposed assignee or subtenant and
reasonable costs of making investigations as to the
acceptability of a proposed assignee or subtenant and
reasonable legal expenses incurred in connection with the
granting of any requested consent to the assignment or
sublease;
17.3.8 the proposed assignment shall be for a consideration or the
proposed subletting shall be at a rental rate not less than
the rental rates then being charged under leases being
entered into by OWNER for comparable space in the Tower and
for a comparable term and in no event shall TENANT advertise
or list with brokers at such lower rental rate;
17.3.9 the space to be sublet shall be regular in shape with
appropriate means of ingress and egress and suitable for
normal renting purposes.
17.4 Each subletting pursuant to this Section 17 shall be subject to all
the covenants, agreements, terms, provisions and conditions contained in
this Lease. TENANT covenants and agrees that, notwithstanding such
assignment or any such subletting to any subtenant and/or acceptance of
Basic Rent or Additional Rent by OWNER from any subtenant, TENANT shall and
will remain fully liable for the payment of the Basic Rent and Additional
Rent due and to become due hereunder and for the performance of all the
covenants, agreements, terms, provisions and conditions contained in this
Lease on the part of TENANT to be performed. TENANT further covenants and
agrees that notwithstanding any such assignment or subletting, no other
further assignment, underletting or subletting of the Premises or any part
thereof shall or will be made except upon compliance with and subject to
the provisions of this Section 17. TENANT shall promptly furnish to OWNER a
copy of each such sublease.
17.5 If this Lease be assigned, or if the Premises or any part thereof be
sublet or occupied by anybody other than TENANT, OWNER may, after default
by TENANT, collect rent from the assignee, subtenant or occupant, and apply
the net amount collected to the rent herein reserved, but no such
assignment, subletting, occupancy or collection shall be deemed a waiver by
OWNER of any TENANT'S covenants contained in this Section 17 or the
acceptance of the assignee, subtenant or occupant as TENANT, or a release
of TENANT from the further performance by TENANT of covenants on the part
of TENANT herein contained.
18. SEVERALTIES
If any provision of this Lease or the application thereof to either party hereto
or circumstance shall be invalid or unenforceable to any extent, the remainder
of this Lease and the application of
16
<PAGE>
such provisions to either party hereto or circumstance shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
19. LIMITATION ON OWNER'S LIABILITY
Anything in this Lease to the contrary notwithstanding, TENANT agrees that it
shall look solely to the estate and property of OWNER in the land and buildings
comprises the Tower subject to prior rights of any mortgagee or trustee, for the
collection of any judgment or other judicial process requiring the payment of
money by OWNER in the event of any default or breach by OWNER with respect to
any of the terms, covenants and conditions of this Lease to be observed and/or
performed by OWNER, and no other assets of OWNER shall be subject to levy,
execution or other procedures for the satisfaction of TENANT'S remedies. In
event OWNER transfers this Lease, except as collateral security for a loan, upon
such transfer OWNER shall be released from all liability and obligations
hereunder, provided that the transferee assumes the obligations of OWNER under
this Lease.
EXECUTED as a sealed instrument in two or more counterparts on February 23,
1990.
TOWER INVESTMENT GROUP COMMUNICATION DEVELOPMENT
--------------------------
CONCEPTS
--------
By: /s/ Mark J. Nolan By: /s/ Patricia Bisbano
--------------------------- ------------------------------
Its: General Partner Patricia Bisbano
Its:
By: /s/ Maurya Suda
-----------------------------
Maurya Suda
Its:
[SEAL]
If TENANT is a Corporation, the authorized officers must sign on behalf of the
Corporation and by doing so such officers covenant and warrant that TENANT is a
duly constituted corporation qualified to do business in Connecticut, that the
execution of the Lease has been duly authorized by TENANT and that the execution
of the Lease has been duly authorized by TENANT and that the execution of the
Lease and the performance by TENANT of its obligations hereunder do not violate
any provision of the corporate charter or by-laws, or any outstanding agreement
with any other party or entity. The Lease must be executed for TENANT by the
President or a Vice President and must be attested by the Secretary or Assistant
Secretary. A resolution authorizing the execution of the Lease must be
affirmatively voted by the Board of Directors and a certified
17
<PAGE>
copy thereof must be attached hereto. The Corporate Seal of the TENANT, if such
a Seal exists, must be affixed.
18
<PAGE>
EXHIBIT C
GUARANTY
--------
In consideration of and as an inducement to TOWER INVESTMENT GROUP
(hereinafter "Owner" to make the lease referred to below, and all of its
exhibits, with Communication Development Corporation hereinafter "Tenant"), the
undersigned guarantees to OWNER and its successors in title to the building
known as Danbury Executive Tower in Danbury, Connecticut, and OWNER'S assigns,
the full performance and observance of all of the covenants, conditions and
agreements provided in said lease and exhibits to be performed by TENANT without
requiring any notice of non-payment, non-performance, or non-observance, or
proof or notice or demand, whereby to charge the undersigned therefor, all of
which the undersigned hereby expressly waives, and expressly agrees that the
validity of this agreement of guaranty and the obligations of the undersigned
hereunder shall in no wise be terminated, affected or impaired by reason of the
assertion by OWNER against TENANT of any of the rights or remedies reserved to
OWNER pursuant to the provisions of the lease or exhibits. The undersigned
further covenants and agrees that this guaranty shall remain and continue in
full force and effect as to any and all renewals, modifications, or extensions
of the lease or of any exhibit, and during any period when TENANT holds over and
occupies or has the right to so occupy the Premises (as so described in the
lease) without a lease then being in effect, and as to any change in the size of
the Premises or of TENANT'S permitted use thereof or of rent or any other terms,
conditions, or covenants provided in the lease or any exhibits or any
modification thereof to be performed be either OWNER or TENANT to the same
extent as if such change were in effect at the time of execution of this
guaranty and whether or not the undersigned has received any notice thereof
either before, at the time of, or after the same is made (the undersigned hereby
waiving any such notice) and whether or not the undersigned consents or objects
thereto. The undersigned further agrees for said consideration that if more than
one person executes this guaranty or one or more counter parts hereof, their
liability hereunder shall be joint and several, and that the undersigned's
liability hereunder shall remain in full force and effect whether or not anyone
else executes this guaranty or a counter part hereof. The undersigned further
agrees for said consideration that in any action or proceeding brought by either
OWNER or the undersigned against the other by virtue of any matter arising out
of the terms of this guaranty that the undersigned, to the extent permitted by
law, shall and does hereby waive trial by jury.
Executed as a Connecticut sealed instrument this 29 day of April 1993.
/s/ Maurya E. Suda
---------------------------------------
Maurya E. Suda
Witness:
/s/ /s/ Patricia R. Bisbano
- ---------------------------- ---------------------------------------
Patricia R. Bisbano
19
<PAGE>
Residence Address:
-----------------------------------------------
Business Address: 10 Crosby Street
Danbury, CT 06810
Lease Dated: February 23, 1990
----------------------
OWNER: TOWER INVESTMENT GROUP
TENANT: Communication Development Corporation
20
<PAGE>
LEASE MODIFICATION AGREEMENT
THIS AGREEMENT, made this 1st day of January 1993, by and between
Tower Investment Group (hereinafter "LESSOR"), and COMMUNICATIONS DEVELOPMENT
CONCEPT (hereinafter "LESSEE"):
WITNESSETH
WHEREAS, on the 23rd day of February, 1990, LESSOR entered into a
certain Lease Agreement (hereinafter referred to as "AGREEMENT") with LESSEE for
approximately 1,066.66 square feet of office space for a term of three (3) years
in accordance with Section 2 in said Agreement; and
WHEREAS, LESSOR and LESSEE desire to modify the term and certain other
terms, provisions and conditions of said agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the LESSOR and LESSEE hereby agree as follows:
1) The Basic Rent described in Section 3.1 is hereby modified by
deleting $1200.00 and substituting in its place the sum of $2,657.00.
2) The Pro Rata Share of ".019%" described in Section 4.2 is hereby
deleted and substituted in its place is .0413%.
3) The gross rentable area of "approximately 1,066.66 square feet"
enumerated in Section 4.4 is hereby deleted and substituted in its place is
"approximately 2277.60 square feet".
4) The LESSOR agrees that it shall perform for LESSEE certain tenant
improvements to the premises as may be mutually agreed to between LESSOR and
LESSEE.
IN ALL OTHER respects the terms, provisions and conditions of the
Agreement shall remain in full force and effect and are hereby restated and
reaffirmed and the term, provision or condition of said agreement shall be
deemed to have been waived by any prior action or non action.
LESSOR - TOWER INVESTMENT
GROUP
By: /s/
--------------------------------------
LESSEE - COMMUNICATION
DEVELOPMENT CONCEPTS
21
<PAGE>
By: /s/ Patti R. Bisbano
--------------------------------------
22
<PAGE>
LEASE MODIFICATION AND EXTENSION AGREEMENT
------------------------------------------
THIS AGREEMENT, made this 22th day of February 1993, by and between TOWER
INVESTMENT GROUP a Connecticut General Partnership (hereinafter "OWNER"), and
COMMUNICATION DEVELOPMENT CORPORATION a Connecticut Corporation (hereinafter
"TENANT"):
WITNESSETH:
WHEREAS, on the 23rd day of February, 1990, OWNER entered into a
certain Lease Agreement (hereinafter referred to as "AGREEMENT") for
approximately 1,066.66 square feet of office space at 30 Main Street, Danbury,
Connecticut for a term of three (3) years;
WHEREAS, OWNER and TENANT modified said AGREEMENT pursuant to a
certain Lease Modification Agreement dated January 1, 1993, wherein, inter alia,
the gross rentable area was modified to approximately 2,277.60 square feet; and
WHEREAS, OWNER and TENANT wish to extend the term of said Agreement
and further modify certain terms, provisions and conditions contained therein;
and
WHEREAS, except as specifically modified herein, the TENANT and OWNER
wish to continue said Agreement on the terms, provisions and conditions
contained therein;
NOW, THEREFORE, in consideration of ONE DOLLAR ($1.00) and other
valuable consideration and the mutual covenants contained herein, the OWNER, and
TENANT hereby agree as follows:
1) The term of the agreement described in Section 2 therein shall be
extended for an additional period of FIVE (5) years (hereinafter "new five year
term").
2) Section 3.1 of the agreement is hereby deleted and the following
is substituted in its place:
3.1 AMOUNT
TENANT covenants to pay during the first year of the "new five
year term" the sum of $2,657.00 per month as basic rent
(hereinafter "Basic Rent") in advance, and appropriate fractions
of monthly payments for portions of a month at the beginning or
end of the term, to such person and at such place as owner may
from time to time designate.
The Basic Rent for subsequent years shall be as follows:
(a) the annual amount of $32,455.80 for the second year of the new
five year term, in monthly installments of $2,704.65 as "basic
rent".
23
<PAGE>
(b) the annual amount of $33,025.20 for the third year of the new
five year term, in monthly installments of $2,752.10 as "basic
rent".
(c) the annual amount of $33,594.60 for the fourth year of the new
five year term, in monthly installments of $2,799.55 as "basic
rent".
(d) the annual amount of $34,164.00 for the fifth year of the new
five year term, in monthly installments of $2,847.00 as "basic
rent".
IN ALL OTHER respects, the terms, provisions and conditions of the
Agreement shall remain in full force and effect and are hereby restated and
reaffirmed and no term, provision or condition of said agreement shall be deemed
to have been waived by any prior action or non action.
OWNER - TOWER INVESTMENT
GROUP
DATE May 3, 1993 BY: /s/
------------------ ----------------------------
TENANT - COMMUNICATION
DEVELOPMENT CORPORATION
DATE April 29, 1993 BY: /s/ Patricia R. Bisbano
------------------ ----------------------------
Patricia R. Bisbano
Its: President
24
<PAGE>
CONSENT TO ASSIGNMENT
The undersigned Landlord hereby consents to the Assignment of a
certain lease of commercial premises between Communication Development Concepts,
as Tenant and Tower Investment Group, as Landlord dated February 23, 1990, as
modified January 1, 1993 and as it may be further modified to Communication
Development Corporation as Tenant, effective December 31, 1990, hereby
releasing, Patricia Bisbano (a/k/a Patricia R. Bisbano) and Maurya Suda (a/k/a
Maurya E. Suda) from obligations of said lease as Tenant; provided however,
Patricia Bisbano (a/k/a Patricia R. Bisbano) and Maurya Suda (a/k/a Maurya E.
Suda) d/b/a Communications Development Concepts are now Guarantors of the above
referenced lease in accordance with Exhibit C to said lease, a copy of which is
attached to this Consignment To Assignment.
Dated at Danbury, CT
this 1st day of April 1993
- ------------------------------ -------------------------------
TOWER INVESTMENT GROUP
BY: MARK J. NOLAN
A GENERAL PARTNER
- ------------------------------
STATE OF CONNECTICUT)
) ss: DANBURY
COUNTY OF FAIRFIELD )
On this day of April 1993, before me, Dolly A. Marzullo, the
undersigned officer, personally appeared Mark J. Nolan known to me (or
satisfactorily proven) to be the person whose name is subscribed to within
instrument and acknowledged that he executed the same for the purpose therein
contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-------------------------------
Dolly A. Marzullo
Notary Public
My Commission Expires: 11/30/97
25
<PAGE>
THIRD LEASE MODIFICATION
------------------------
THIS AGREEMENT, made this 24th day of August 1994, by and between
TOWER INVESTMENT GROUP a Connecticut General Partnership (hereinafter "OWNER"),
and COMMUNICATIONS DEVELOPMENT CORPORATION acting herein by Patricia Bisbano,
its president, (hereinafter "TENANT"):
WITNESSETH:
WHEREAS, on the 23rd day of February, 1990, OWNER and TENANT entered
into a certain Lease Agreement (hereinafter referred to as "AGREEMENT") for the
rental of office space at 30 Main Street, Danbury, Connecticut for a term of
three (3) years;
WHEREAS, OWNER and TENANT modified said AGREEMENT pursuant to a
certain Lease Modification Agreement dated January 1, 1993, and
WHEREAS, OWNER and TENANT further modified said AGREEMENT pursuant to
a certain LEASE MODIFICATION AND EXTENSION AGREEMENT dated February 22, 1993;
and
WHEREAS, TENANT has requested and OWNER has agreed to provide
additional space, on a best effort basis, in consideration of TENANT paying
additional rent; and
WHEREAS, OWNER and TENANT wish to modify said Agreement to reflect the
terms, provisions and conditions for providing said additional space and payment
of the additional rent; and
WHEREAS, except as specifically modified herein, the OWNER and TENANT
wish to continue said Agreement on the terms, provisions and conditions
contained therein;
NOW, THEREFORE, in consideration of ONE DOLLAR ($1.00) and other
valuable consideration and the mutual covenants contained herein, the OWNER and
TENANT hereby agree as follows:
1) The premises described in paragraph 1 of the Agreement shall be
increased as follows:
a) Commencing on or about September 1, 1994, TENANT shall occupy
1,265 square feet of additional space, adjacent to the premises and now
occupied by Johnson-Stevens-Curran Agency, Inc. (hereinafter Johnson
Space), pursuant to the floor plan attached hereto as Schedule A.
----------
26
<PAGE>
b) Commencing on or about September 1, 1995, TENANT shall occupy
1,265 square feet of additional space, now occupied as the Johnson Space,
pursuant to the floor plan attached hereto as Schedule B.
2) Section 3.1 of the agreement is hereby deleted and the following
is substituted in it's place:
Commencing with TENANT'S occupancy of the 1,265 square feet of
additional space described in paragraph 1a) above, the basic rent
shall increase as follows:
September 1, 1994 to December 31, 1994 the monthly base rent
amount shall be $4,207.00 (space increase only - 3542.60, 2nd
lease year),
January 1, 1995 to August 31, 1995 the monthly base rent amount
shall be $4,281.00 (rate increase only, 3rd lease year),
Commencing with TENANT'S occupancy of 1,265 square feet of additional
space described in paragraph 1b) above, the basic rent shall increase
as follows:
September 1, 1995 to December 31, 1995 the monthly base rent
amount shall be $5,809.00 (space increase only - $4,807.60, 3rd
lease year),
The basic rent for the subsequent years shall be as follows:
January 1, 1996 to December 31, 1996 the monthly base rent amount
shall be $5,909.00 (rate increase only, 4th lease year),
January 1, 1997 to February 28, 1998 the monthly base rent amount
shall be $6,010.00 (rate increase only, 5th lease year),
3) Section 4.2 is modified so that commencing with TENANT'S occupancy
of the additional space described in paragraph 1a) above the pro rata share
shall be .0642.
- Commencing with TENANT'S occupancy of the additional space
described in paragraph 1b) above, the pro rata share shall be
.0871
4) Section 4.4 is modified so that the area of the premises is
increased to 3,542.60 for the period commencing September 1, 1994 and concluding
on August 31, 1995. The area of the premises shall be increased to 4807.60
commencing on September 1, 1995 and continuing to February 28, 1998.
5) The OWNER agrees that it shall perform for TENANT certain tenant
improvements to the premises as may be mutually agreed to between OWNER and
TENANT.
27
<PAGE>
6) The OWNER and TENANT agree that occupancy, as used in paragraph 1
of this third modification agreement, shall mean the date established pursuant
to the Term Commencement Certificate which shall be substantially in the same
form as Schedule C attached hereto, made part hereof and incorporated herein by
reference. Occupancy to take place providing work is completed shall be on or
before October 15, 1994.
IN ALL OTHER respects, the terms, provisions and conditions of the
Agreement shall remain in full force and effect and are hereby restated and
reaffirmed and no term, provision or condition of said agreement shall be deemed
to have been waived by any prior action or non action.
OWNER - TOWER INVESTMENT GROUP
DATE: 8/24/94 BY /s/ Mark J. Nolan
------------------- ------------------------------
TENANT - COMMUNICATION
DEVELOPMENT CORPORATION
DATE: 8/24/94 BY /s/ Patti K. Bisbano
------------------- ------------------------------
It's President
DATE: 8/24/94 GUARANTOR(S)
-------------------
/s/ Patti K. Bisbano
------------------------------
28
<PAGE>
EXHIBIT 10.25
-------------
LEASE AGREEMENT
BY AND BETWEEN
680-690 KINDERKAMACK ROAD, L.P.
- and -
AMERICAN CONFERENCING COMPANY, INC.
- for -
690 KINDERKAMACK ROAD
ORADELL, NEW JERSEY
-------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DESCRIPTION.............................................................................. 1
2. TERM..................................................................................... 1
3. BASIC RENT............................................................................... 1
4. USE AND OCCUPANCY........................................................................ 2
5. CARE AND REPAIR OF PREMISES/ENVIRONMENTAL................................................ 2
6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS................................................... 3
7. ACTIVITIES INCREASING FIRE INSURANCE RATES............................................... 3
8. ABANDONMENT.............................................................................. 3
9. ASSIGNMENT AND SUBLEASE.................................................................. 3
10. COMPLIANCE WITH RULES AND REGULATIONS.................................................... 6
11. DAMAGES TO BUILDING/WAIVER OF SUBROGATION................................................ 6
12. EMINENT DOMAIN........................................................................... 7
13. INSOLVENCY OF LESSEE..................................................................... 7
14. LESSOR'S REMEDIES ON DEFAULT............................................................. 7
15. DEFICIENCY............................................................................... 7
16. SUBORDINATION OF LEASE................................................................... 8
17. SECURITY DEPOSIT......................................................................... 9
18. RIGHT TO CURE LESSEE'S BREACH............................................................ 10
19. MECHANIC'S LIENS......................................................................... 10
20. RIGHT TO INSPECT AND REPAIR.............................................................. 10
21. SERVICES TO BE PROVIDED BY LESSOR/LESSOR'S EXCULPATION................................... 11
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
22. BUILDING STANDARD OFFICE ELECTRICAL SERVICES............................................. 11
23. ADDITIONAL RENT - ESCALATIONS............................................................ 14
(A) Operating Cost Escalation......................................................... 14
(B) Fuel, Utilities and Electric Cost Escalation...................................... 15
(C) Tax Escalation.................................................................... 15
(D) Lease Year........................................................................ 16
(E) Payment........................................................................... 16
(F) Books and Records................................................................. 16
(G) Right of Review................................................................... 17
24. INTERRUPTION OF SERVICES OR USE.......................................................... 17
25. LESSEE'S ESTOPPEL........................................................................ 17
26. HOLDOVER TENANCY......................................................................... 17
27. RIGHT TO SHOW PREMISES................................................................... 18
28. WAIVER OF TRIAL BY JURY.................................................................. 18
29. LATE CHARGE.............................................................................. 18
30. NO OTHER REPRESENTATIONS................................................................. 18
31. QUIET ENJOYMENT.......................................................................... 18
32. LESSEE'S INSURANCE....................................................................... 18
33. SECTION HEADINGS......................................................................... 19
34. APPLICABILITY TO HEIRS AND ASSIGNS....................................................... 19
35. PARKING SPACES........................................................................... 19
36. LESSOR'S LIABILITY FOR LOSS OF PROPERTY.................................................. 19
37. BROKER................................................................................... 19
38. PERSONAL LIABILITY....................................................................... 19
39. NO OPTION................................................................................ 20
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
40. DEFINITIONS.............................................................................. 20
(A) Proportionate Share............................................................... 20
(B) Common Facilities................................................................. 20
(C) Force Majeure..................................................................... 20
(D) Building Hours.................................................................... 21
(E) Additional Rent................................................................... 21
(F) Commencement Date................................................................. 21
41. RENEWAL OPTION........................................................................... 21
42. NOTICES.................................................................................. 22
43. MORTGAGEE'S NOTICE AND OPPORTUNITY TO CURE............................................... 22
44. ACCORD AND SATISFACTION.................................................................. 22
45. EFFECT OF WAIVERS........................................................................ 23
46. NUMBER AND GENDER........................................................................ 23
47. LESSOR'S RESERVED RIGHT.................................................................. 23
48. CORPORATE AUTHORITY...................................................................... 23
49. RELOCATION............................................................................... 23
</TABLE>
<PAGE>
LEASE, made the __________ day of June 1997 between 680-690 KINDERKAMACK
ROAD, L.P., a New Jersey Limited Partnership, whose address is 690 Kinderkamack
Road, Oradell, New Jersey 07649 (hereinafter referred to as "Lessor") and
AMERICAN CONFERENCING COMPANY, INC., a New Jersey Corporation, whose address is
67 East Ridgewood Avenue, Ridgewood, New Jersey 07450 (hereinafter referred to
as "Lessee").
1. DESCRIPTION. Lessor hereby leases to Lessee and Lessee hereby hires
from Lessor, the following space: Approximately 11,088 gross rentable square
feet in suite 400 on the third floor (hereinafter referred to as "Demised
Premises" or "Premises") approximately as shown on the plan or plans, initialed
by the parties hereto, marked as "Exhibit A" and made a part of this Lease,
which includes an allocable share of the Common Facilities, in the building of
55,318 square feet known as and located at 690 Kinderkamack Road, Oradell, New
Jersey 07649 (hereinafter referred to as "Building"), which is situated on that
certain parcel of land (hereinafter referred to as "Office Building Area"), as
described on Exhibit A-1 attached hereto and made a part of this Lease, together
with the right to use in common with other lessees of the Building, their
invitees, customers and employees, those public areas of the Common Facilities
as hereinafter defined. Provided Lessee shall not be in default in accordance
with the terms and provisions of this Lease, Lessor agrees to provide to Lessee
first notice to lease office space available for lease by Lessor in the Building
upon the same terms and conditions as such space is offered at such time. In the
event that the Lessee fails to lease such space within fifteen (15) days of
receipt of the first written notice thereof, the Lessee's right to lease any
space in the Building shall expire and be of no further force and effect.
2. TERM. The Premises are leased for a term of ten (10) years and nine
(9) months to commence on the first day of September, 1997, and to end at 12:00
midnight on May 31, 2008, unless extended pursuant to any options contained
herein.
3. BASIC RENT. The Lessee shall pay to the Lessor during the term basic
rent in the amount of Two Million One Hundred Forty Four Thousand Six Hundred
Fifty One and 33/100 ($2,144,651.33) Dollars (hereinafter referred to as "rent"
or "basic rent") payable in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. The basic rent during the term shall accrue at the
yearly rate set forth below and shall be payable in advance on the first day of
each calendar month in equal monthly installments as indicated below. Lessee
shall pay basic rent, and any Additional Rent as hereinafter provided, to John
M. Mavroudis & Co., Inc., as agent for Lessor, at Lessor's above-stated address,
or to such other agent as Lessor may designate in writing, without demand and
without counterclaim, deduction or setoff.
<PAGE>
The basic rent payable during the aforesaid period of time, yearly rate and
monthly installment, respectively, shall be as follows:
<TABLE>
<CAPTION>
Period from to Yearly Rate Monthly Installment
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
09/01/97 12/31/97 n/a $ 7,395.83
01/01/98 12/31/98 $150,875.00 12,572.92
01/01/99 05/31/03 196,812.00 16,401.00
06/01/03 05/31/08 218,988.00 18,249.00
</TABLE>
4. USE AND OCCUPANCY. Lessee shall use and occupy the premises as
general offices, audio, video and data conferencing center and other uses
incidental thereto and for no other purpose. Lessees use of the premises shall
require an equipment room and the extension of commercial and fiber wiring to
the Building.
5. CARE AND REPAIR OF PREMISES/ENVIRONMENTAL. Lessee covenants to
commit no act of waste and to take good care of the Premises and the fixtures
and appurtenances therein, and shall, in the use and occupancy of the Premises,
comply with all laws, orders and regulations of the federal, state and municipal
governments or any of their departments affecting the premises and with any and
all environmental requirements resulting from the Lessee's use of the Premises,
this covenant to survive the expiration or sooner termination of the Lease.
Lessor shall make all necessary repairs to the Premises. Lessor shall make all
necessary repairs to the Common Facilities and to the parking areas, if any, the
same to be included as an Operating Cost, except where the repair has been made
necessary by misuse or neglect by Lessee, in which event Lessor shall
nevertheless make the repair but Lessee shall pay to Lessor, as Additional Rent,
upon thirty (30) day demand the reasonable costs therefor. All improvements made
by Lessee to the Premises, which are so attached to the Premises that they
cannot be removed without material injury to the Premises, shall become the
property of Lessor excluding the audio, video and data conferencing equipment of
the Lessee which shall be removed by Lessee at the end of the term. Not later
than ten (10) days following the last day of the term, Lessee shall, at Lessee's
expense, remove all Lessee's personal property and those improvements made by
Lessee which have not become the property of Lessor, including trade fixtures,
cabinetwork, movable paneling, partitions and the like; repair all injury done
by or in connection with the installation or removal of said property and
improvements; and surrender the Premises in as good condition as they were at
the beginning of the term, reasonable wear and damage by fire, the elements,
casualty, or other cause not due to the misuse or neglect by Lessee, Lessee's
agents, servants, visitors or licensees excepted. All other property of Lessee
remaining on the Premises ten (10) days after the last day of the term of this
Lease shall be conclusively deemed abandoned and may be removed by Lessor, and
Lessee shall reimburse Lessor for the cost of such removal. Lessor may have any
such property stored at Lessee's risk and expense.
<PAGE>
Lessee acknowledges the existence of environmental laws, rules and
regulations (the "Environmental Laws").
Lessee hereby agrees to execute such documents as Lessor reasonably deems
necessary and to make such applications as Lessor reasonably requires to assure
compliance with all Environmental Laws. Lessee shall bear all costs and
expenses incurred by Lessor associated with any required Environmental Laws
compliance resulting from Lessee's use of the Demised Premises including but not
limited to state agency fees, engineering fees, clean-up costs, filing fees and
suretyship expenses. As used in this Lease, such compliance shall include
applications for determinations of nonapplicability by the appropriate
governmental authority. The foregoing undertaking shall survive the termination
or sooner expiration of the Lease and surrender of the Demised Premises and
shall also survive sale, or lease or assignment of the Demised Premises by
Lessor. Lessee agrees to indemnify and hold Lessor harmless from any violation
of Environmental Laws occasioned by Lessee's use of the Demised Premises. The
Lessee shall immediately provide the Lessor with copies of all correspondence,
reports, notices, orders, findings, declarations and other materials pertinent
to the Lessee's compliance and the requirements of the New Jersey Department of
Environmental Protection and Energy ("NJDEPE") under any Environmental Laws as
they are issued or received by the Lessee.
Lessee agrees not to generate, store, manufacture, refine, transport,
treat, dispose of, any Hazardous Substances. As used herein, Hazardous
Substances shall be defined as any "hazardous chemical," "hazardous substance"
or similar term as defined in the Comprehensive Environmental Responsibility
Compensation and Liability Act, as amended (42 U.S.C.9601, et seq., the New
-- ---
Jersey Spill Compensation and Control Act, as amended, N.J.S.A.58:10-23.11b, et
--
seq., any rules or regulations promulgated thereunder, or in any other
- ----
applicable federal, state or local law, rule or regulation dealing with
environmental protection. It is understood and agreed that the provisions
contained in this Section shall be applicable notwithstanding the fact that any
substance shall not be deemed to be a Hazardous Substance at the time of its use
by the Lessee but shall thereafter be deemed to be a Hazardous Substance.
Lessee agrees to indemnify and hold harmless the Lessor and each mortgagee
of the Premises from and against any and all liabilities, damages, claims
losses, judgments, causes of action, costs and expenses (including the
reasonable fees and expenses of counsel) which may be incurred by the Lessor or
any such mortgagee or threatened against the Lessor or such mortgagee, relating
to or arising out of any breach by Lessee of the undertakings set forth in this
Section, said indemnity to survive the Lease expiration or sooner termination.
Lessor represents that there are no current violations of Environmental Laws.
6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS. Lessee shall not, without
first obtaining the written consent of Lessor, make any alterations, additions
or improvements in, to or about the Premises. The written consent of Lessor to
any such nonstructural alterations, additions or improvements shall not be
unreasonably withheld, conditioned or delayed.
<PAGE>
7. ACTIVITIES INCREASING FIRE INSURANCE RATES. Lessee shall not do or
suffer anything to be done on the Premises which will increase the rate of fire
insurance on the Building.
8. ABANDONMENT. Lessee shall not, without first obtaining the written
consent of Lessor, which shall not be unreasonably withheld, conditioned, or
delayed, abandon the Premises or allow the Premises to become vacant or
deserted.
9. ASSIGNMENT AND SUBLEASE. Lessee may assign or sublease the within
Lease to any party subject to the following:
(A) In the event that Lessee desires to sublease the entire premise
or assign the within lease to any other party, the terms and conditions of
such sublease or assignment shall be communicated to Lessor in writing
prior to the effective date of any such sublease or assignment, and, prior
to such effective date, Lessor shall have the option, exercisable in
writing to Lessee, to recapture the within Lease so that such prospective
sublessee or assignee shall then become the sole lessee of Lessor hereunder
or alternatively to recapture said space and the within Lessee shall be
fully released from any and all obligations hereunder.
(B) In the event that Lessor elects not to recapture the Lease as
hereinabove provided, Lessee may nevertheless assign this Lease or sublet
the Premises, or Lessee may sublet a portion of the Premises, subject to
Lessor's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed, and subject to the consent of any
mortgagee, trust deed holder or ground lessor, on the basis of the
following terms and conditions:
(1) The Lessee shall provide to Lessor the name and address
of the assignee or sublessee.
(2) The assignee or sublessee shall assume, by written
instrument, all of the obligations of this Lease, and a copy of such
assumption agreement shall be furnished to Lessor within ten (10)
days of its execution. Any sublease shall expressly acknowledge that
said sublessee's rights against the Lessor shall be no greater than
those of the Lessee.
(3) The Lessee and each assignee shall be and remain liable
for the observance of all the covenants and provisions of this Lease,
including, but not limited to, the payment of rent reserved herein,
through the entire term of this Lease, as the same may be renewed,
extended or otherwise modified.
(4) The Lessee and any assignee shall promptly pay to Lessor
fifty (50%) percent of any consideration received for any assignment
or fifty (50%) percent of all of the rent, as and when received, in
excess of the rent required to be paid by Lessee for the area sublet,
computed on the basis of an average square foot
<PAGE>
rent for the gross square footage Lessee has leased, less brokerage
commissions, buildout costs and reasonable attorney fees.
(5) In any event, the acceptance by Lessor of any rent from
the assignee or from any of the subtenants or the failure of Lessor
to insist upon a strict performance of any of the terms, conditions
and covenants herein shall not release Lessee herein, nor any
assignee assuming this Lease, from any and all of the obligations
herein during and for the entire term of this Lease.
(C) Any sublet or assignment to an affiliated company shall not be
subject to the provisions of Subsections 9(A), 9(B)(4) or 9(B)(6) hereof
and shall not require Lessor's prior written consent, but all other
provisions of this Section shall apply.
(D) In the event that any or all of Lessee's interest in the
Premises and/or this Lease is transferred by operation of law to any
trustee, receiver, or other representative or agent of Lessee, or to Lessee
as a debtor in possession, and subsequently any or all of Lessee's interest
in the Premises and/or this Lease is offered or to be offered by Lessee or
any trustee, receiver, or other representative or agent of Lessee as to its
estate or property (such person, firm or entity being hereinafter referred
to as the "Grantor"), for assignment, conveyance, lease, or other
disposition to a person, firm or entity other than Lessor (each such
transaction being hereinafter referred to as a "Disposition"), it is agreed
that Lessor has and shall have a right of first refusal to purchase, take,
or otherwise acquire, the same upon the same terms and conditions as the
grantor thereof shall accept upon such Disposition to such other person,
firm, or entity; and as to each such Disposition the Grantor shall give
written notice to Lessor in reasonable detail of all of the terms and
conditions of such Disposition within twenty (20) days next following its
determination to accept the same but prior to accepting the same, and
Grantor shall not make the Disposition until and unless Lessor has failed
or refused to accept such right of first refusal as to the Disposition, as
set forth herein.
Lessor shall have sixty (60) days next following its receipt of the
written notice as to such Disposition in which to exercise the option to
acquire Lessee's interest by such Disposition, and the exercise of the
option by Lessor shall be effected by notice to that effect sent to the
Grantor; but nothing herein shall require Lessor to accept a particular
disposition or any Disposition, nor does the rejection of any one such
offer of first refusal constitute a waiver or release of the obligation of
the Grantor to submit other offers hereunder to Lessor. In the event
Lessor accepts such offer of first refusal, the transaction shall be
consummated pursuant to the terms and conditions of the Disposition
described in the notice to Lessor. In the event Lessor rejects such offer
of first refusal, Grantor may consummate the Disposition with such other
person, firm, or entity; but any decrease in price of more than two (2%)
percent of the price sought from Lessor or any change in the terms of
payment for such Disposition shall constitute a new transaction requiring a
further option of first refusal to be given to Lessee hereunder.
<PAGE>
(E) Without limiting any of the provisions of Sections 13 and 14,
if pursuant to the Federal Bankruptcy Code (herein the "Code") or any
similar law hereafter enacted having the same general purpose, Lessee is
permitted to assign this Lease notwithstanding the restrictions contained
in this Lease, adequate assurance of future performance by an assignee
expressly permitted under such Code shall be deemed to mean the deposit of
case security in an amount equal to the sum of one (1) year's basic rent
plus an amount equal to the Additional Rent for the calendar year preceding
the year in which such assignment is intended to become effective, which
deposit shall be held by Lessor for the balance of the term, without
interest, as security for the full performance of all of Lessee's
obligations under this Lease, to be held and applied in the manner
specified for security in Section 17.
(F) Except as specifically set forth above, no portion of the
Demised Premises or of Lessee's interest in this Lease may be acquired by
any other person or entity, whether by assignment, mortgage, sublease,
transfer, operation of law or act of the Lessee, nor shall Lessee pledge
its interest in this Lease or in any security deposit required hereunder.
10. COMPLIANCE WITH RULES AND REGULATIONS. Lessee shall observe and
comply with the rules and regulations hereinafter set forth in Exhibit B
attached hereto and made a part hereof and with such further reasonable rules
and regulations (the "changes") as Lessor may prescribe, on written notice to
Lessee, for the safety, care and cleanliness of the Building and the comfort,
quiet and convenience of other occupants of the Building provided that any
changes made by Lessor shall not materially alter the terms and conditions of
the Lease. Lessee shall not place a load upon any floor of the Demised Premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Lessor reserves the right to prescribe the weight and
position of all safes, heavy machines and equipment. Such installations shall be
placed and maintained by Lessee, at Lessee's expense, in settings sufficient, in
Lessor's judgment, to absorb and prevent vibration, noise and annoyance.
11. DAMAGES TO BUILDING/WAIVER OF SUBROGATION. If the Building is
damaged by fire or any other cause to such extent that the cost of restoration
as reasonably estimated by Lessor, will equal or exceed twenty-five (25%)
percent of the replacement value of the Building (exclusive of foundations) just
prior to the occurrence of the damage, then Lessor may, no later than the
thirtieth (30th) day following the damage, give Lessee a notice of election to
terminate this Lease; or if the cost of restoration of the Building will equal
or exceed fifty (50%) percent of such replacement value or if the Premises shall
not be reasonably usable for the purpose for which they are leased hereunder,
then Lessee may, no later than the fifteenth (15) day following the damage, give
Lessor a notice of election to terminate this Lease. In either said event of
election, this Lease shall be deemed to terminate on the thirtieth (30th) day
after the giving of said notice, and Lessee shall surrender possession of the
Premises within a reasonable time thereafter and the basic rent, and any
Additional Rent, shall be apportioned as of the date of said surrender and any
basic or Additional Rent paid for any period beyond said date shall be repaid to
Lessee. If the cost of restoration shall not entitle Lessor to terminate this
Lease, or if despite the cost, Lessor does not elect to terminate this Lease,
Lessor shall restore the Building and the Premises with reasonable promptness,
subject to Force Majeure, as hereinafter defined,
<PAGE>
and except as stated above, Lessee shall have no right to terminate this Lease.
Lessor need not restore fixtures and improvements owned by Lessee.
In any case in which use of the Premises is affected by any damage to the
Building, there shall be either an abatement or an equitable reduction in basic
rent and an equitable reduction in the Base Period Costs as established in
Section 23 depending on the period for which and the extent to which the
Premises are not reasonably usable for the purpose for which they are leased
hereunder. The words "restoration" and "restore" as used in this Section 11
shall include repairs. If the damage results from the fault of the Lessee, or
Lessee's agents, servants, visitors or licensees, Lessee shall not be entitled
to any abatement or reduction in basic rent, except to the extent of any rent
insurance received by Lessor.
12. EMINENT DOMAIN. If Lessee's use of the Premises is materially
affected due to the taking by eminent domain of (a) the Premises or any part
thereof or any estate therein; or (b) any other part of the Building; then, in
either event, this Lease shall terminate on the date when title vests pursuant
to such taking. The rent, and any Additional Rent, shall be apportioned as of
said termination date and any basic and Additional Rent paid for any period
beyond said date shall be repaid to Lessee. Lessee shall not be entitled to any
part of the award for such taking or any payment in lieu thereof, but Lessee may
file a separate claim for any taking of fixtures and improvements owned by
Lessee which have not become the Lessor's property, and for moving expenses,
provided the same shall in no way affect or diminish Lessor's award. In the
event of a partial taking which does not effect a termination of this Lease but
does deprive Lessee of the use of a portion of the Demised Premises, there shall
either be an abatement or an equitable reduction of the basic rent, and an
equitable adjustment reducing the Base Period Costs as hereinafter defined
depending on the period for which and the extent to which the Premises so taken
are not reasonably usable for the purpose for which they are leased hereunder.
13. INSOLVENCY OF LESSEE. Either (a) the appointment of a receiver to
take possession of all or substantially all of the assets of Lessee, or (b) a
general assignment by Lessee for the benefit of creditors, or (c) any action
taken or suffered by Lessee under any insolvency or bankruptcy act, shall
constitute a default of this Lease by Lessee, and Lessor may terminate this
Lease forthwith and upon notice of such termination Lessee's right to possession
of the Demised Premises shall cease, and Lessee shall then quit and surrender
the Premises to Lessor but Lessee shall remain liable as hereinafter provided in
Section 15 hereof.
14. LESSOR'S REMEDIES ON DEFAULT. If Lessee defaults in the payment of
basic rent, or any Additional Rent, or defaults in the performance of any of the
other covenants and conditions hereof or permits the Premises to become
deserted, abandoned or vacated, Lessor may give Lessee notice of such default,
and if Lessee does not cure any basic rent or Additional Rent default within
five (5) days of the giving of such notice or other default within thirty (30)
days after giving of such notice [or if such other default is of such nature
that it cannot be completely cured within such period, if Lessee does not
commence such curing within such thirty (30) days and thereafter proceed with
reasonable diligence and in good faith to cure such default], then Lessor may
terminate this Lease on not less than ten (10) days' notice to Lessee, and on
the date specified in said notice, Lessee's right to possession of the Demised
Premises shall cease, and Lessee shall then quit and surrender the Premises to
Lessor, but Lessee shall remain liable as
<PAGE>
hereinafter provided. If this Lease shall have been so terminated by Lessor
pursuant to Sections 13 or 14 hereof, Lessor may at any time thereafter resume
possession of the Premises by any lawful means and remove Lessee or other
occupants and their effects.
15. DEFICIENCY. In any case where Lessor has recovered possession of the
Premises by reason of Lessee's default, Lessor may, at Lessor's option, occupy
the Premises or cause the Premises to be redecorated, altered, divided,
consolidated with other adjoining premises, or otherwise changed or prepared for
reletting, and may relet the Premises or any part thereof as agent of Lessee or
otherwise, for a term or terms to expire prior to, at the same time as, or
subsequent to, the original expiration date of this Lease, at Lessor's option,
and receive the rent therefor. Rent so received shall be applied first to the
payment of such expenses as Lessor may have incurred in connection with the
recovery of possession, redecorating, altering, dividing, consolidating with
other adjoining premises, or otherwise changing or preparing for reletting, and
the reletting, including brokerage and reasonable attorney's fees, and then to
the payment of damages in amounts equal to the rent hereunder and to the costs
and expenses of performance of the other covenants of Lessee as herein provided.
Lessee agrees, in any such case, whether or not Lessor has relet, to pay to
Lessor damages equal to the basic and Additional Rent and other sums herein
agreed to be paid by Lessee, as and when due, less the net proceeds of the
reletting, if any, as ascertained from time to time, as of the due date, and the
same shall be payable by Lessee on the several rent days above specified.
Lessee shall not be entitled to any surplus accruing as a result of any such
reletting, nor shall any surplus be applied to offset the damages referred to in
the preceding sentence. In reletting the Premises as aforesaid, Lessor may
grant rent concessions, and Lessee shall not be credited therewith. No such
reletting shall constitute a surrender and acceptance or be deemed evidence
thereof. If Lessor elects, pursuant hereto, actually to occupy and use the
Premises or any part thereof during any part of the balance of the term as
originally fixed or since extended, there shall be allowed against Lessee's
obligation for rent or damages as herein defined, during the period of Lessor's
occupancy, the reasonable value of such occupancy, not to exceed in any event
the basic and Additional Rent herein reserved and such occupancy shall not be
construed as a release of Lessee's liability hereunder.
Alternatively, in any case where Lessor has recovered possession of the
Premises by reason of Lessee's default, Lessor may at Lessor's option, and at
any time thereafter, and without notice or other action by Lessor, and without
prejudice to any other rights or remedies it might have hereunder or at law or
equity, become entitled to recover from Lessee, as damages for such breach, in
addition to such other sums herein agreed to be paid by Lessee, to the date of
re-entry, expiration and/or dispossess, an amount equal to the difference
between the rent and Additional Rent reserved in this Lease from the date of
such default to the date of expiration of the term demised and the then fair and
reasonable rental value of the Premises for the same period. Said damages shall
become due and payable to Lessor immediately upon such breach of this Lease and
without regard to whether this Lease be terminated or not, and if this Lease be
terminated, without regard to the manner in which it is terminated. In the
computation of such damages, the difference between any installments of rent
(basic and Additional) thereafter becoming due and the fair and reasonable
rental value of the Premises for the period for which such installment was
payable shall be discounted to the date of such default at the rate of not more
than four (4%) percent per annum.
<PAGE>
Lessee hereby waives all right of redemption to which Lessee or any person
under Lessee might be entitled by any law now or hereafter in force.
Lessor's remedies hereunder are in addition to any remedy allowed by law.
Lessee agrees to pay, as Additional Rent, all reasonable attorney's fees
and other expenses incurred by the Lessor in enforcing any of the obligations
under this Lease, this covenant to survive the expiration or sooner termination
of this Lease.
16. SUBORDINATION OF LEASE. This Lease shall, at Lessor's option, or at
the option of any holder of any underlying lease or holder of any first mortgage
or deed of trust, be subject and subordinate to any such underlying leases and
to any such first mortgage and/or trust deed which now affects the real property
of which the Premises form a part, and also to all renewals, modifications,
consolidations and replacements of said underlying leases and said first
mortgage or trust deed. With respect to future underlying leases, mortgages or
trust deeds, this Lease shall only be subordinate thereto if the underlying
lessor, mortgagee or beneficiary named in such lease, mortgage or deed of trust
shall first agree in writing:
(a) that the lessor under any such lease or the holder of any such
mortgage or trust deed shall not be entitled to terminate this Lease, including
such amendments as may be entered into from time to time hereafter by the
parties hereto, by foreclosure or other means, so long as Tenant or its
successors or assigns are not in default under any obligation hereunder beyond
any period herein given to Tenant to cure such default;
(b) that the lien of such mortgage or trust deed shall not encumber
any of Tenant's equipment, fixtures, alterations, improvements or other property
which, by the terms of this Lease, Tenant is permitted to remove from the
Premises; and
(c) that in the event of a termination of such lease by the lessor
or a foreclosure of such mortgage or trust deed, the lessor, mortgagee or any
purchaser at a foreclosure sale, or their respective successors and assigns,
shall recognize and be bound by the terms of this Lease, but not bound by any
earlier defaults of Landlord;
and the Tenant covenants and agrees that each holder of any said instrument and
each lessor under any said lease, provided such holder or lessor shall have
delivered such an agreement to Tenant, and anyone claiming by, through or under
such holder or lessor, shall not:
(i) be liable for any act or omission of any prior landlord
(including Landlord) under the Lease; or
(ii) be subject to any offsets or defenses which Tenant might have
against any prior landlord (including Landlord) under the Lease; or
(iii) be bound by any prepayment of fixed rent or additional rent or
other charges under the Lease which Tenant might have paid more than one month
in advance; or
<PAGE>
(iv) be bound by any amendment, modification, surrender or
cancellation of the Lease made without the consent of said holder or lessors.
Upon delivery of the aforesaid agreement from any holder of said instruments or
any lessor under said underlying leases, Tenant agrees to attorn to said holder
or lessor and recognize this Lease as a direct lease between Tenant and said
holder or lessor in the event that said holder should become the owner of the
Premises or said lessor should terminate said underlying lease. Although no
instrument or act on the part of Tenant shall be necessary to effectuate such
subordination, Tenant shall, nevertheless, execute and deliver such further
instruments confirming such subordination of this Lease as may be desired by the
holders of said mortgage or trust deeds or by any lessor under such underlying
lease.
Landlord shall obtain within thirty (30) days, on behalf of Tenant, from
the holders of any mortgage or trust deeds which, as of the date hereof,
encumber the Building or the real property of which it forms a part, a non-
disturbance and attornment agreement containing language similar to that
contained in clauses (a), (b) and (c) above.
17. SECURITY DEPOSIT. Lessee shall deposit with Lessor on the signing of
this Lease the sum of Forty Nine Thousand Two Hundred Three and 00/100
------------------------------------------------
($49,203.00) Dollars as security for the performance of Lessee's obligations
- ------------
under this Lease, including without limitation, the surrender of possession of
the Premises to Lessor as herein provided. If Lessor applies any part of said
deposit to cure any default of Lessee, Lessee shall on demand deposit with
Lessor the amount so applied so that Lessor shall have the full deposit on hand
at all times during the term of this Lease. In the event of a bona fide sale,
subject to this Lease, Lessor shall have the right to transfer the security to
the vendee, and Lessor shall be considered released by Lessee from all liability
for the return of such security; and Lessee agrees to look solely to the new
lessor for the return of the said security, and it is agreed that this shall
apply to every transfer or assignment made of the security to a new lessor. The
security deposited as provided for herein shall not be mortgaged, assigned or
encumbered by Lessee without the written consent of Lessor. Provided the lessee
shall not be in default under the terms of the Lease, Lessee shall have the
right to apply such security deposit to the basic rent and additional rent
payable for the last remaining months of the terms of the Lease, including the
months remaining in the event of an election by Lessee to terminate the Lease in
accordance with Paragraph 42 hereof.
In the event of the insolvency of Lessee, or in the event of the entry of a
judgment in bankruptcy in any court against Lessee which is not discharged
within thirty days (30) days after entry, or in the event a petition is filed by
or against Lessee or under any chapter of the bankruptcy laws of the State of
New Jersey or the United States of America, then in such event, Lessor may
require the Lessee to deposit additional security in an amount equal to twelve
(12) months rent to assure Lessee's performance of all of its obligations under
this Lease including all payments subsequently accruing. Failure of Lessee to
deposit the security required by this Section within ten (10) days after
Lessor's written demand shall constitute a material breach of this Lease by
Lessee.
Provided Lessee shall not be in default under the terms of the Lease, the
security paid to the Lessor under this Lease shall be (i) refunded to Lessee one
hundred twenty (120) days
<PAGE>
following the assignment and assumption of this Lease by Vialog Corporation
("Vialog") and the initial public offering of common stock of Vialog
substantially in accordance with Form S-1 as filed with the Securities Exchange
Commission on February 28, 1997, or (ii) refunded to Lessee in three (3) equal
annual installments commencing September 1, 1999 and annually thereafter on the
first day of January until the entire security is repaid to the Lessee.
18. RIGHT TO CURE LESSEE'S BREACH. If Lessee breaches any covenant or
condition of this Lease, Lessor may, on reasonable notice to Lessee (except that
no notice need be given in case of emergency), cure such breach at the expense
of Lessee and the reasonable amount of all expenses, including reasonable
attorney's fees, incurred by Lessor in so doing (whether paid by Lessor or not)
shall be deemed Additional Rent payable on demand.
19. MECHANIC'S LIENS. Lessee shall, within thirty (30) days after notice
from Lessor, discharge or satisfy by bonding or otherwise any mechanic's liens
for materials or labor claimed to have been furnished to the Premises on
Lessee's behalf. Lessee shall not permit any Notice of Intentions to be filed
against the Premises or Building or Office Building Area as a result of Lessee's
acts and shall cause any such filings to be terminated within three (3) days.
The provision shall not apply to any mechanics liens for materials or labor
furnished to the Lessor.
20. RIGHT TO INSPECT AND REPAIR. Lessor may enter the Premises but shall
not be obligated to do so (except as required by any specific provision of this
Lease) at any reasonable time, provided reasonable notice is given to Lessee
(except that no notice need be given in case of emergency), for the purpose of
inspection or the making of such repairs, replacement or additions, in, to, on
and about the Premises or the Building, as Lessor deems necessary or desirable.
Lessee shall have no claims or cause of action against Lessor by reason thereof.
In no event shall Lessee have any claim against Lessor for interruption to
Lessee's business, however occurring, except interruptions arising from the
gross negligence or intentional acts of Lessor, its agents, servants or
invitees, or from defects, errors or omissions in the construction or design of
the Demised Premises and/or the Building, including the structural and
nonstructural portions thereof.
21. SERVICES TO BE PROVIDED BY LESSOR/LESSOR'S EXCULPATION. While Lessee
is not in default under any of the provisions of this Lease, Lessor agrees to
furnish, except on holidays as set forth on Exhibit E attached hereto and made a
part hereof:
(A) The cleaning services, as set forth on Exhibit D attached
hereto and made a part hereof, and subject to the conditions therein
stated. Except as set forth on Exhibit D, Lessee shall pay the cost of all
other cleaning services required by Lessee.
(B) Heating, ventilating and air conditioning (herein "HVAC"),
meeting minimum standards for a first class office building as appropriate
for the season and as set forth on Exhibit C attached hereto and made a
part hereof. Lessor shall further provide Common Facilities lighting and
electric energy all during "Building Hours," as hereinafter defined,
subject to the provisions of paragraph 22 of this Lease.
<PAGE>
(C) Notwithstanding the requirements of Exhibit C or D (as to HVAC)
or any other provision of this Lease, Lessor shall not be liable for
failure to furnish any of the aforesaid services when such failure is due
to Force Majeure, as hereinafter defined.
22. BUILDING STANDARD OFFICE ELECTRICAL SERVICES.
(A) For so long as Lessee is not in default with respect to this
Lease, Lessor agrees to redistribute Building Standard Office Electrical
Service (as hereinafter defined), to the Premises in accordance with the
present electrical capacity at the Premises upon the following terms and
condition:
(i) Lessor shall furnish "Building Standard Office Electrical
Service" to the Lessor and Lessee shall, within ten (10) days of
receipt of Lessor's bill, pay to Lessor the amount so consumed as
determined in accordance with the provisions of this paragraph. The
Lessor and Lessee agree that there shall be no separate charge to
Lessee for such Building Standard Office Electrical Service by way of
measuring the same on a meter, but the value of such electric energy
shall be billed to and paid by the Lessee as additional basic rent as
hereinafter provided. Upon the commencement of this lease the
additional basic rent to be charged for Building Standard Office
Electrical Service shall be computed on the basis of One and 25/100
($1.25) Dollar per annum per gross rental square feet of the Demised
Premises except that an adjustment of the gross rental square feet
shall be made during the first two (2) months of the Term to reflect
the space actually occupied by the Tenant. Such amount shall be
billed monthly in equal monthly installments. The said amount shall
be subject to redetermination as provided in parts (ii) and (iii)
below.
(ii) Upon the request of the Lessee, Lessor shall cause an
inspection, survey, and evaluation to be made of Lessee's electrical
equipment and installations in the Demised Premises by a reputable
independent electrical engineer or consultant (hereinafter the
"Engineer") selected by Lessor and to be paid equally by Lessor and
Lessee. The Engineer's report of his inspection, survey and
evaluation (the "Engineers Report") shall contain a determination of
the value, on an annual basis, of the Building Standard Office
Electrical Service (hereinafter sometimes the "electric service") to
be furnished to the Demised Premises. Such value shall be calculated
in accordance with B.O.M.A. standards by applying to the electrical
demand and consumption indicated in the Engineer's Report for the
Demised Premises, the public utility basic rate schedule applicable
to Lessor for purchase of electricity for the Building but without
regard for the electricity used in the rest of the Building. The
amount of the value so determined by the Engineer shall be
substituted for and incorporated in the basic rent reserved hereunder
with respect to the Demised Premises, in place of the amount provided
for in Part (i) above, effective as of the Commencement Date. Any
resulting overpayment for the period between the Commencement Date
and the date of determination shall be refunded by the Lessor or paid
by Lessee, as the case may be, on demand.
<PAGE>
(iii) If at any time or times after the determination of the
value of the electric service to the Demised Premises, described in
Part (ii) above, Lessee shall wish to connect any additional
fixtures, appliances or equipment (other than ordinary lamps
typewriters and other small office machines) to the Building electric
distribution system or otherwise to substantially increase its use of
electricity in the Demised Premises, Lessee shall first request
Lessors consent therefor, which consent shall not be unreasonably
withheld, and shall not proceed without such consent. However, as a
condition to such consent Lessor may require Lessee to agree to an
increase in the fixed rent by an amount which will reflect the value
of such additional electricity to be furnished by Lessor. If the
parties cannot agree on the amount of such rent increase within 10
days after Lessor shall have granted such consent, such amount shall
be determined by Engineer, selected by Lessor and to be paid equally
by both parties who shall determine the value of the additional
electric service in the same manner as provided in part (ii) above
for determination of the original electric service, and said amount
shall be added to an incorporated in the basic rent reserved
hereunder, effective from the date such additional risers or other
electrical conductors or equipment required to provide any increase
in electric service to the Demised Premises shall be provided by
Lessor and the cost thereof shall be paid by Lessee on Lessor's
demand.
(iv) Lessor shall not be liable in any way to Lessee for any
loss, damage or expense which Lessee may sustain or incur as a result
of any failure, defect or change in the quantity or character of
electrical energy available for redistribution to the Premises
pursuant to this Section nor for any interruption in supply, and
Lessee agrees that such supply may be interrupted for inspection,
repairs and replacement and in emergencies. In any event, the full
interruption in the supply due to Lessor's acts or omissions shall be
an abatement of rent. In no event shall Lessor by liable for any
business interruption suffered by Lessee except interruptions arising
from the gross negligence or intentional acts of Lessor.
(v) Lessee shall make no alteration to the existing
electrical risers, wiring and other conductors or outlets, without
Lessor's consent. Should Lessor consent, all such alterations shall
be provided by Lessor and the cost therefore paid for by Lessee upon
demand as additional rent.
(vi) Lessee shall have the right to install a generator on the
Office Building Area as a source of secondary power provided that (i)
Lessee shall first obtain the written consent of the Lessor to the
size, location and screening of the generator, which shall not be
unreasonably withheld, conditioned or delayed, (iii) the generator
shall be located at a location which shall not unreasonably interfere
with the use and occupancy of the Building, and (iii) Lessee shall
obtain all necessary municipal approvals for the installation and
maintenance and pay all annual fees in connection therewith, (iv) the
cost of purchase, installation, electrical wiring and screening of
the generator and all related equipment shall be at the Lessee's sole
cost and expense, (v) the generator shall be removed at the end
<PAGE>
of the Term and the premises restored to the existing condition at
the time of this Lease.
(B) In the event the public utility company that furnishes electric
energy to Lessor for redistribution to Lessee, declines, without fault on
the part of the Lessor, to continue furnishing electric energy for that
purpose, Lessor reserves the right to discontinue distributing Building
Standard Office Electric Service to Lessee at any time upon reasonable
notice to Lessee. If Lessor exercises such right to termination, this Lease
shall continue in full force and effect and shall be unaffected thereby,
except only that, from and after the effective date of such termination,
Lessee shall not be obligated to pay Lessor for said Building Standard
Office Electrical Service.
(C) For purposes of this Section 22, "Building Standard Office
Electrical Service" shall mean all of the electrical energy and like
utilities furnished to the Demised Premises by Public Service Electric and
Gas Company, its successors or assigns, used or consumed in, upon or about
the Demised Premises to provide the lighting and operate office equipment
such as typewriters, computers, calculators, copiers, any computer
installation or data processing equipment, or any other equipment or use,
which energy shall be provided at all times during the term of this Lease.
23. ADDITIONAL RENT - ESCALATIONS. It is expressly agreed that Lessee
will pay in addition to the basic rent, provided in Section 3 above, an
additional rental to cover Lessee's Proportionate Share, as hereinafter defined,
of the increased cost to Lessor, for each of the categories enumerated herein,
over the "Base Period Costs" (as hereinafter defined) for each of said
categories.
(A) Operating Cost Escalation. If during the Lease term the
Operating Costs incurred for the Building in which the Demised Premises are
located and Office Building Area for any Lease Year or proportionate part
thereof if the Lease term expires prior to the expiration of a Lease Year
(herein the "Comparison Period") shall be greater than the Base Operating
Costs (adjusted proportionately if the Comparison Period is less than a
Lease Year), then Lessee shall pay to Lessor, as Additional Rent, its
Proportionate Share, as hereinafter defined, of all such excess Operating
Costs. Operating Costs shall include, by way of illustration and not of
limitation: personal property taxes; management fees not in excess of 5% of
the gross rental income; labor including all wages and salaries, social
security taxes, and other taxes which may be levied against Lessor upon
such wages and salaries; supplies; repairs and maintenance; maintenance and
service contracts; painting; wall and window washing; laundry and towel
service; tools and equipment; fire and other insurance; trash removal; lawn
care; snow removal and all other items properly constituting direct
operating costs according to standard accounting practices whether or not
the same shall be enumerated as part of the services or obligations of
Lessor hereunder (hereinafter collectively referred to as the "Operating
Costs", but not including: depreciation of Building or equipment; interest;
income or excess profits taxes; costs of maintaining the Lessor's corporate
existence; franchise taxes and not including the items set forth in Exhibit
C-1 attached hereto and made a part hereof. As used in this Subsection 23,
the Base Period Costs for Operating Costs, herein the Base Operating
<PAGE>
Costs, shall be those costs incurred during the Lease Year commencing
September 1, 1997.
(B) Fuel, Utilities and Electric Cost Escalation (hereinafter
"Utility and Energy Costs"). If during the Lease term the Utility and
Energy Costs, including any fuel surcharges or adjustments with respect
thereto, incurred for water, sewer, and other utilities for the Building to
include all leased and leasable areas (not constituting Basic Rent pursuant
to paragraph 22 of this Lease which are separately billed or metered within
the Building) and Common Facilities electric, lighting, water, sewer and
other utilities for the Building and Office Building Area, for any
Comparison Period shall be greater than the Base Utility and Energy Costs
(adjusted proportionately if the Comparison Period is less than a Lease
Year), then Lessee shall pay to Lessor as Additional Rent and without
regard to the fact that Lessor has agreed to provide said service, its
Proportionate Share, as hereinafter defined, of all such excess Utility and
Energy Costs. As used in this Subsection 23(B), the Base Period Costs for
Fuel, Utilities and Electric, herein the Base Utility and Energy Costs,
shall be those costs determined by multiplying the usage incurred for the
Building and Office Building Area during the Lease Year commencing
September 1, 1997 by the average of the rates in effect (including
surcharges and/or adjustments) during the period from September 1, 1997
through August 31, 1998 (herein "Base Utility Rate").
(C) Tax Escalation. If during the Lease term the Real Estate Taxes
for the Building and Office Building Area at which the Demised Premises are
located for any Comparison Period shall be greater than the Base Real
Estate Taxes (adjusted proportionately if the Comparison Period is less
than a Lease Year), then Lessee shall pay to Lessor as Additional Rent, its
Proportionate Share, as hereinafter defined, of all such excess Real Estate
Taxes.
As used in this Subsection 23(C), the words and terms
which follow mean and include the following:
(i) The Base Period Costs for Real Estate Taxes, herein the
"Base Real Estate Taxes," shall be those costs assessed against the
Building and Office Building Area during the Lease Year commencing
September 1, 1997 which shall be inclusive of any additional
assessments for improvements proposed by Lessor to the common areas
of the Building.
(ii) "Real Estate Taxes" shall mean the property taxes and
assessments imposed upon the Building and Office Building Area, or
upon the rent, as such, payable to Lessor, including, but not limited
to, real estate, city, county, village, school and transit taxes, or
taxes, assessments or charges levied, imposed or assessed against the
Building and Office Building Area by any other taxing authority,
whether general or specific, ordinary or extraordinary, foreseen or
unforeseen. If, due to a future change in the method of taxation, any
franchise, income or profit tax shall be levied against Lessor in
substitution for, or in lieu of, any tax which would otherwise
constitute a Real Estate Tax, such franchise,
<PAGE>
income or profit tax shall be deemed to be a Real Estate Tax for the
purposes hereof; conversely, any additional real estate tax hereafter
imposed in substitution for, or in lieu of, any franchise, income or
profit tax (which is not in substitution for, or in lieu of, a Real
Estate Tax as hereinbefore provided) shall not be deemed a Real
Estate Tax for the purposes hereof.
(D) Lease Year. As used in this Lease, Lease Year shall mean the
twelve (12) month period commencing on September 1, 1997 and each twelve
(12) month period thereafter. Once the Base Period Costs are established,
in the event any lease period is less than twelve (12) months, then the
Base Period Costs for the categories listed above shall be adjusted to
equal the proportion that said period bears to twelve (12) months, and
Lessee shall pay to Lessor as Additional Rent for such period, an amount
equal to Lessee's Proportionate Share, as hereinafter defined, of the
excess for said period over the adjusted base with respect to each of the
aforesaid categories.
(E) Payment. At any time, and from time to time, after the
establishment of the Base Period Costs for each of the categories referred
to above, Lessor shall advise Lessee in writing of Lessee's Proportionate
Share with respect to each of the categories as estimated for the current
Lease Year [and for each succeeding Lease Year or proportionate part
thereof if the last period prior to the Lease's termination is less than
twelve (12) months] as then known to Lessor, and thereafter, Lessee shall
pay as Additional Rent, its Proportionate Share, as hereinafter defined, of
the excess of these costs over the Base Period Costs for the then current
period affected by such advice (as the same may be periodically revised by
Lessor as additional costs are incurred) in equal monthly installments on
the first day of each month, such new rates being applied to any months for
which the rental shall have already been paid which are affected by the
Operating Cost Escalation and/or Utility and Energy Cost Escalation, and/or
Tax Escalation Costs above referred to, as well as the unexpired months of
the current period, the adjustment for the then expired months to be made
at the payment of the next succeeding monthly rental, all subject to final
adjustment at the expiration of each Lease Year as defined in Subsection
23(D) hereof [or proportionate part thereof, if the last period prior to
the Lease's termination is less then twelve (12) months].
In the event the last period prior to the Lease's termination
is less than twelve (12) months, the Base Period Costs during such said
period shall be proportionately reduced to correspond to the duration of
said final period.
(F) Books and Records. For the protection of Lessee, Lessor shall
maintain books of account which shall be open to Lessee and its
representatives, at all reasonable times so that Lessee can determine that
such Operating, Utility, Energy and Tax Costs have, in fact, been paid or
incurred. Any disagreement with respect to any one or more of said charges
if not satisfactorily settled between Lessor and Lessee shall be referred
by either party to an independent certified public accountant to be
mutually agreed upon, and if such an accountant cannot be agreed upon, the
American Arbitration Association may be asked by either party to select an
arbitrator, whose decision on the dispute will be final and binding upon
both parties, who shall jointly share any cost of such arbitration.
<PAGE>
Pending resolution of said dispute, Lessee shall pay to Lessor the sum so
billed by Lessor subject to its ultimate resolution as aforesaid.
(G) Right of Review. Once Lessor shall have finally determined said
Operating, Utility and Energy or Tax Costs at the expiration of a Lease
Year, then as to the item so established, Lessee shall only be entitled to
dispute said charge as finally established for a period of nine (9) months
after such charge is finally established, and Lessee specifically waives
any right to dispute any such charge at the expiration of said nine (9)
month period.
24. INTERRUPTION OF SERVICES OR USE. Interruption or curtailment of any
service maintained in the Building or at the Office Building Area, if caused by
Force Majeure, as hereinafter defined, shall not entitle Lessee to any claim
against Lessor or to any abatement in rent, and shall not constitute a
constructive or partial eviction, unless Lessor fails to take measures as may be
reasonable under the circumstances to restore the service without undue delay.
If the Premises are rendered untenantable by the interruption of use or services
in whole or in part, for a period of five (5) consecutive business days, by the
making of repairs, replacements or additions, other than those made with
Lessee's consent or caused by misuse or neglect by Lessee, or Lessee's agents,
servants, visitors or licensees, there shall be a proportionate abatement of
rent from and after said five (5) consecutive business day and continuing for
the period of such untenantability. In no event shall Lessee be entitled to
claim a constructive eviction from the Premises unless Lessee shall first have
notified Lessor in writing of the condition or conditions giving rise thereto,
and, if the complaints be justified, unless Lessor shall have failed within a
reasonable time after receipt of such notice to remedy, or commence and proceed
with due diligence to remedy, such condition or conditions, all subject to Force
Majeure, as hereinafter defined.
25. LESSEE'S ESTOPPEL. Lessee shall, from time to time, within ten (10)
days of Lessor's written request, execute, acknowledge and deliver to Lessor a
written statement certifying that the Lease is unmodified and in full force and
effect, or that the Lease is in full force and effect as modified and listing
the instruments of modification; the dates to which the rents and charges have
been paid; to the best of lessee's knowledge, whether or not Lessor is in
default hereunder, and, if so, specifying the nature of the default; and any
other information which Lessor shall reasonably request. It is intended that any
such statement delivered pursuant to this Section 25 may be relied on by a
prospective purchaser of Lessor's interest or mortgagee of Lessor's interest or
assignee of any mortgage of Lessor's interest.
26. HOLDOVER TENANCY. If Lessee holds possession of the Premises after
the term of this Lease, Lessee shall become a tenant from month to month under
the provisions herein provided, but at a monthly basic rental equal to one-
hundred fifty (150%) percent of the basic rent then in effect and without the
requirement for demand or notice by Lessor to Lessee demanding delivery of
possession of said Premises (but Additional Rent shall continue as provided in
this Lease), which sum shall be payable in advance on the first day of each
month, and such tenancy shall continue until terminated by Lessor, or until
Lessee shall have given to Lessor, at least sixty (60) days prior to the
intended date of termination, a written notice of intent to terminate such
tenancy, which termination date must be as of the end of a calendar month. This
paragraph shall
<PAGE>
not apply in the event the term of the lease is extended in accordance with the
options to renew set forth in the Lease or other written agreement of the Lessor
and Lessee.
27. RIGHT TO SHOW PREMISES. Lessor may show the Premises to prospective
purchasers and mortgagees; and, during the six (6) months prior to termination
of this Lease, to prospective tenants, during business hours on reasonable
notice to Lessee.
28. WAIVER OF TRIAL BY JURY. It is mutually agreed by and between Lessor
and Lessee that the respective parties hereto shall and they hereby do waive
trial by jury in any action or proceeding brought by either of the parties
hereto against the other in any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Lessor and Lessee, Lessee's use
or occupancy of the Demised Premises, and/or any claim of injury or damage, and
any emergency statutory or any other statutory remedy. Should Lessor or Lessee
seek recourse to equity to enforce any of its rights under this Lease, the other
party agrees to waive any defense which it might otherwise have that such party
has any adequate remedy at law. In the event of a trial of a dispute between the
Lessor and Lessee, the losing party shall pay reasonable attorney's fees to the
winning party.
29. LATE CHARGE. Anything in this Lease to the contrary notwithstanding,
at Lessor's option, Lessee shall pay a "Late Charge" of five (5%) percent of any
installment of rent or Additional Rent paid more than five (5) days after the
due date thereof, to cover the extra expense involved in handling delinquent
payments provided five (5) days written notice of such delinquent payment is
given to Lessee prior to the imposition of such late charge.
30. NO OTHER REPRESENTATIONS. No representations or promises shall be
binding on the parties hereto except those representations and promises
contained herein or in some future writing signed by the party making such
representation(s) or promise(s).
31. QUIET ENJOYMENT. Lessor covenants that if, and so long as, Lessee
pays the rent, and any Additional Rent as herein provided, and performs the
covenants hereof, Lessee may peaceably and quietly have, hold and enjoy the
Premises for the term herein mentioned, subject to the provisions of this Lease.
32. LESSEE'S INSURANCE.
(A) Lessee covenants to provide on or before the Commencement Date
a comprehensive policy of general liability insurance naming Lessor as an
additional named insured, insuring Lessee and Lessor against any liability
commonly insured against and occasioned by accident resulting from any act
or omission on or about the Premises and any appurtenances thereto. Such
policy is to be written by an insurance company qualified to do business in
the State of New Jersey reasonably satisfactory to Lessor. The policy shall
be with limits not less than One Million and 00/100 ($1,000,000.00) Dollars
in respect of any one person, in respect of any one accident, and in
respect of property damage. Said limits shall be subject to periodic review
and Lessor reserves the right to increase said coverage limits, if in the
reasonable opinion of Lessor, said coverage becomes inadequate and is less
than that commonly maintained by tenants in similar
<PAGE>
buildings in the area by tenants making similar uses. At least fifteen (15)
days prior to the expiration or termination date of any policy, Lessee
shall deliver a renewal or replacement policy with proof of the payment of
the premium therefor.
(B) Lessee covenants and represents, said representation being
specifically designed to induce Lessor to execute this Lease, that Lessee's
personal property and fixtures and any other items which Lessee may bring
to the Premises or which may be under Lessee's care, custody and control
which may be subject to any claim for damages or destruction due to
Lessor's negligence shall be fully insured by a policy of insurance
covering all risks which policy shall specifically provide for a waiver of
subrogation for Lessor and all Building tenants without regard to whether
or not same shall cost an additional premium and notwithstanding anything
to the contrary contained in this Lease. Should Lessee fail to maintain
said all risk insurance with the required waiver of subrogation, or fail to
maintain the liability insurance, naming Lessor as an additional named
insured, then lessee shall be in default hereunder and shall be deemed to
have breached its covenants as set forth herein.
33. SECTION HEADINGS. The Section headings in this Lease and position of
its provisions are intended for convenience only and shall not be taken into
consideration in any construction or interpretation of this Lease or any of its
provisions.
34. APPLICABILITY TO HEIRS AND ASSIGNS. The provisions of this Lease
shall apply to, bind and inure to the benefit of Lessor and Lessee, and their
respective heirs, successors, legal representatives and assigns. It is
understood that the term "Lessor" as used in this Lease means only the owner, a
mortgagee in possession or a term lessee of the Building, so that in the event
of any sale of the Building or of any lease thereof, or if a mortgagee shall
take possession of the Premises, Lessor named herein shall be and hereby is
entirely freed and relieved of all covenants and obligations of Lessor hereunder
accruing thereafter, and it shall be deemed without further agreement that the
purchaser, the term lessee of the Building, or the Mortgagee in possession has
assumed and agreed to carry out any and all covenants and obligations of Lessor
hereunder.
35. PARKING SPACES. Lessee's occupancy of the Demised Premises shall
include the use of forty-four (44) parking spaces only Eleven (11) of these
parking spaces shall be specifically reserved by Lessor in a location reasonably
convenient to the entry lobby of the Building, and thirty-three (33) shall be
unassigned. Lessor reserves the right to reassign assigned parking to comparable
facilities in connection with any modification to the Building or Office
Building Area permitted pursuant to this Lease.
36. LESSOR'S LIABILITY FOR LOSS OF PROPERTY. Lessor shall not be liable
for any loss of property from any cause whatsoever, including but not limited to
theft or burglary from the Demised Premises, except only any such loss arising
from the gross negligence or intentional acts of Lessor, its agents, servants or
invitees, or from defects, errors or omissions in the construction or design of
the Demised Premises and/or the Building including the structural and
nonstructural portions thereof.
<PAGE>
37. BROKER. Each party represents and warrants to the other that it has
not dealt with any broker in negotiation and bringing about this Lease except
Associated Realty and Edward S. Gordon of New Jersey, Inc. and each party agrees
to indemnify and hold harmless the other party from any and all claims of any
other brokers and expenses in connection therewith arising out of or in
connection with the negotiation of or the entering into this Lease by such
party. Lessor agrees to pay the fees and commissions of the aforesaid brokers
pursuant to a separate agreement.
38. PERSONAL LIABILITY. Notwithstanding anything to the contrary provided
in this Lease, its is specifically understood and agreed, such agreement being a
primary consideration for the execution of this Lease by Lessor, that there
shall be absolutely no personal liability on the part of Lessor, its constituent
members, (to include but not be limited to officers, directors, partners and
trustees), their respective successors, assigns or any mortgagee in possession
(for the purposes of this Section, collectively referred to as "Lessor"), with
respect to any of the terms, covenants and conditions of this Lease, and that
Lessee shall look solely to the equity of Lessor in the building for the
satisfaction of each and every remedy of Lessee in the event of any breach by
Lessor of any of the terms, covenants and conditions of this Lease to be
performed by Lessor, such exculpation of liability to be absolute and without
any exceptions whatsoever. All of the provisions provided in Paragraph 38 herein
shall apply to the Lessee as well and no representative of the Lessee shall bear
any personal responsibility or liability with respect to any of the terms and
conditions of this Lease.
39. NO OPTION. The submission of this Lease Agreement for examination
does not constitute a reservation of, or option for, the Premises, and this
Lease Agreement becomes effective as a Lease Agreement only upon execution and
delivery thereof by Lessor and Lessee.
40. DEFINITIONS.
(A) Proportionate Share. Lessee's Proportionate Share, wherever
that phrase is used, shall be 20.0441 percent, which the parties agree
reflects and will be continually adjusted to reflect the sum arrived at by
dividing the gross square feet of the area rented to Lessee (including an
allocable share of all Common Facilities) as set forth in Section 1[the
numerator], plus any additional gross square footage leased from time to
time pursuant to this Lease, by the total number of gross square feet of
the entire Building (or additional buildings that may be constructed within
the Office Building Area), [the denominator], measured outside wall to
outside wall but excluding therefrom any storage areas. Lessor shall have
the right to make changes or revisions in the Common Facilities of the
Building so as to provide additional leasing area. Lessor shall also have
the right to construct additional buildings in the Office Building Area for
such purposes as Lessor may deem appropriate and subdivide the lands for
that purpose if necessary, and upon doing so, the Office Building Area
shall become the subdivided lot on which the Building in which the Demised
Premises is located. If any service provided for in Subsection 23(A) or any
utility provided for in Subsection 23(B) is separately billed or separately
metered within the Building, then the square footage so billed or metered
shall be deemed vacant and if applicable subject to the Occupancy
Adjustment set forth in Subsection 23(H). Lessee understands that as a
result of changes in the layout of the Common Facilities from time to
<PAGE>
time occurring due to, by way of example and not by way of limitation, the
rearrangement of corridors, the aggregate of all Building tenant
proportionate shares may be equal to, less than or greater than one hundred
(100%) percent.
(B) Common Facilities. Common Facilities shall mean the nonassigned
parking areas; lobby; elevators(s); fire stairs; public hallways; public
lavatories; and all other general Building facilities that service all
Building tenants; air conditioning rooms; fan rooms; janitors' closets;
electrical closets; telephone closets; elevator shafts and machine rooms;
flues; stacks; pipe shafts and vertical ducts with their enclosing walls.
Lessor may at any time close temporarily, any Common Facilities to make
repairs or changes therein or to effect construction, repairs or changes
within the Building or Office Building Area, or to discourage non-tenant
parking, and may do such other acts in and to the Common Facilities as in
its judgment may be desirable to improve the convenience thereof but shall
always in connection therewith endeavor to minimize any inconvenience to
Lessee.
(C) Force Majeure. Force Majeure shall mean and include those
situations beyond Lessor's control, including by way of example and not by
way of limitation, acts of God; accidents; repairs; strikes; shortages of
labor, supplies or materials; inclement weather; or, where applicable, the
passage of time while waiting for an adjustment of insurance proceeds. Any
time limits required to be met by either party hereunder, whether
specifically made subject to Force Majeure or not, except those related to
the payment of rent or Additional Rent, shall, unless specifically stated
to the contrary elsewhere in this Lease, be automatically extended by the
number of days by which any performance called for is delayed due to Force
Majeure.
(D) Building Hours. As used in this Lease the Building Hours shall
be Monday through Friday, 8:00 a.m. to 6:00 p.m., and Saturday, 8:00 a.m.
to 1:00 p.m., excluding those holidays as set forth on Exhibit E attached
hereto and made a part hereof, except that Common Facilities lighting in
the Building and Office Building Area shall be maintained for such
additional hours as, in Lessor's sole judgment, is necessary or desirable
to insure proper operation of the Building and Office Building Area.
Notwithstanding the Building Hours established by Lessor, Lessee shall have
access to the Demised Premises during all reasonable business hours.
(E) Additional Rent. As used in this Lease, Additional Rent shall
mean all sums in addition to basic rent payable by Lessee to Lessor
pursuant to the provisions of this Lease.
(F) Commencement Date. As used in this Lease, Commencement Date
shall mean September 1, 1997.
41. RENEWAL OPTIONS. Lessee is hereby granted two (2) successive options
to renew this Lease upon the following terms and conditions:
(A) At the time of the exercise of the option to renew and at the
time of the said renewal, the Lessee shall not be in monetary or other
substantial non-monetary
<PAGE>
default in accordance with the terms and provisions of this Lease, for
which non-monetary default Lessor has provided notice to Lessee, and shall
be in possession of the Premises pursuant to this Lease.
(B) Notice of the exercise of the option shall be sent to the
Lessor in writing at least nine (9) months before the expiration of the
original term of this Lease.
(C) Each renewal term shall be for the previous term of Five (5)
years, to commence at the expiration of the term of this Lease, and all of
the terms and conditions of this Lease, other than the rent, shall apply
during the renewal term.
(D) The annual basic rent to be paid during each renewal term shall
not be less than that paid for the Demised Premises during the last year of
the original term of the Lease or the previous term, respectively. However,
if the fair rental value per square foot at the commencement of each
renewal term shall exceed the rent as established in the preceding
sentence, the Lessee shall pay rent equal to ninety-five percent (95%) of
the fair rental value. For purposes of Additional Rent during the renewal
term pursuant to paragraph 23 of the Lease, the Base Year for Operating
Cost Escalations, fuel, Utilities and Electric Cost Escalation and Tax
Escalation shall be the cost incurred during the Lease Year commencing on
June 1, 2008 and June 1, 2013, respectively. In determining the fair rental
value, the Lessor shall notify Lessee of the fair rental value as
established by Lessor. Lessor shall furnish Lessee with a copy of the
appraisal rendered to the Lessor. Should Lessee dispute Lessor's
determination, then the Lessee shall be free to, at the Lessee's sole cost
and expense, employ the services of an appraiser familiar with office
buildings located within the Oradell, New Jersey area comparable to the
Building, who shall be a member of MAI and who shall render an appraisal.
If the Lessor and the Lessee's appraiser cannot agree on the fair rental
value, or in such case, on an independent appraiser acceptable to both,
either party may request the American Arbitration Association of Bergen,
New Jersey to appoint such independent appraiser who shall be a member of
MAI familiar with office buildings in the area of the Building and in such
event the judgment of a majority of the three appraisers shall be final and
binding upon the parties. The parties shall share equally in the cost of
any such independent appraiser. Pending resolution of the issue of fair
rental value, the Lessee shall pay Lessor as of commencement of the first
renewal term, the basic rent as established by Lessor, subject to
retroactive adjustment upon final determination of this issue.
42. NOTICES. Any notice by either party to the other shall be in writing
and shall be deemed to have been duly given only if delivered personally or sent
by registered mail or certified mail in a postpaid envelope addressed, if to
Lessee, at the above described Building; if to Lessor, at Lessor's address as
set forth above; or, to either at such other address as Lessee or Lessor,
respectively, may designate in writing. Notice shall be deemed to have been duly
given, if delivered personally, on delivery thereof, and if mailed, upon the
fifth (5th) day after the mailing thereof.
<PAGE>
43. MORTGAGEE'S NOTICE AND OPPORTUNITY TO CURE. Lessee agrees to give any
mortgagees and/or trust deed holders, by registered mail, a copy of any notice
of default served upon Lessor, provided that, prior to such notice, lessee has
been notified in writing (by way of notice of assignment of rents and leases or
otherwise) of the address of such mortgagees and/or trust deed holders. Lessee
further agrees that, if Lessor shall have failed to cure such default within the
time provided for in this Lease, then the mortgagees and/or trust deed holders
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 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.
44. ACCORD AND SATISFACTION. No payment by Lessee or receipt by Lessor of
a lesser amount than the rent and additional charges payable hereunder shall be
deemed to be other than a payment on account of the earliest stipulated basic
rent and Additional Rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment for rent or Additional Rent be
deemed an accord and satisfaction, and Lessor may accept such check or payment
without prejudice to Lessor's right to recover the balance of such rent and
Additional Rent or pursue any other remedy provided herein or by law.
45. EFFECT OF WAIVERS. No failure by Lessor or Lessee to insist upon the
strict performance of any covenant, agreement, term or condition of this Lease
or to exercise any right or remedy consequent upon a breach thereof, and no
acceptance of full or partial rent during the continuance of any such breach,
shall constitute a waiver of any such breach or of such covenant, agreement,
term or condition. No consent or waiver, express or implied, by Lessor or
Lessee to or of any breach of any covenant, condition or duty under this Lease
shall be construed as a consent or waiver to or of any other breach of the same
or any other covenant, condition or duty, unless in writing signed by Lessor or
Lessee, respectively.
46. NUMBER AND GENDER. The terms "Lessor" and "Lessee" wherever used
herein shall be applicable to one or more persons, as the case may be, and the
singular shall include the plural and neuter shall include the masculine and/or
feminine, and if there be more than one, the obligations hereof shall be joint
and several.
47. LESSOR'S RESERVED RIGHT. Lessor and Lessee acknowledge that the
Premises are in a Building which is not open to the general public. Access to
the Building is restricted to Lessor, Lessee, their agents, employees and
contractors and to their invited visitors. In the event of a labor dispute
including a strike, picketing, informational or associational activities
directed at Lessee or any other tenant, Lessor reserves the right unilaterally
to alter Lessee's ingress and egress to the Building or make any other change in
operating conditions to restrict pedestrian, vehicular or delivery ingress and
egress to a particular location.
48. CORPORATE AUTHORITY. If Lessee is a corporation, Lessee represents
and warrants that this Lease and the undersigned's execution of this Lease has
been duly authorized
<PAGE>
and approved by the corporation's Board of Directors. The undersigned officers
and representatives of the corporation executing this Lease on behalf of the
corporation represent and warrant that they are officers of the corporation with
authority to execute this Lease on behalf of the corporation, and within fifteen
(15) days of execution hereof, Lessee will provide Lessor with a corporate
resolution confirming the aforesaid.
49. RELOCATION. At any time during the Term hereof, Lessor shall have the
right, with ninety (90) days written notice, to move Lessee to substitute
premises located within the Building provided that the substitute premises:
(i) contain approximately the same square footage as the Premises; (ii) contain
comparable tenant improvements, (iii) contain comparable HVAC equipment and
abilities; (iv) contain the same views as the current space; and (v) are made
available to Lessee at the same rental rate for such space (per rentable square
foot) as the rental rate specified herein. Lessor hereby agrees to pay all
expenses resulting from such relocation of Lessee including, but not limited to,
movers and moving equipment, cabling and installation for computers and
telephones and stationery replacement. In keeping with Paragraph 19 of the
Building Rules and Regulations (included as Exhibit B of this Lease), Lessor
will conduct such a move on a Saturday between the hours of 9:00 a.m. and
3:00 p.m.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first above written.
680-690 KINDERKAMACK ROAD, L.P.
Lessor
BY: 680-690 CORP.
General Partner
By: /s/ John M. Mavroudis
----------------------------
JOHN M. MAVROUDIS, PRESIDENT
AMERICAN CONFERENCING
COMPANY, INC.
Lessee
By: /s/ David Lipsky
----------------------------
DAVID LIPSKY, PRESIDENT
<PAGE>
EXHIBIT A
PLANS OF DEMISED PREMISES
-------------------------
<PAGE>
EXHIBIT A-1
PLAN OF OFFICE BUILDING AREA
----------------------------
<PAGE>
EXHIBIT "C"
"TO FOLLOW"
<PAGE>
EXHIBIT B
---------
RULES AND REGULATIONS
---------------------
1. OBSTRUCTION OF PASSAGEWAYS: The sidewalks, entrances, passages, courts,
elevators, vestibules, stairways, corridors and public parts of the building
shall not be obstructed or encumbered by Lessee, its visitors, agents, servants,
employees, customers, contractors, licensees or used by Lessee for any purpose
other than egress and egress to and from the premises.
2. WINDOWS: Windows in the premises shall not be covered or obstructed by
Lessee. No bottles, parcels, or other articles shall be placed on the
windowsills, in the halls, or in any other part of the building other than the
leased premises. No article shall be thrown out of the doors or windows of the
premises.
3. PROJECTIONS FROM BUILDING: No awnings, air conditioning units, or other
fixtures shall be attached to the outside walls or the windowsills of the
building or otherwise affixed so as to project from the building, without the
prior written consent of Lessor.
4. SIGNS: No sign or lettering shall be affixed by Lessee to any part of the
outside of the premises, or any part of the inside of the premises so as to be
clearly visible from the outside of the premises, without the prior written
consent of the Lessor. However, Lessee shall have the right to place its name
on any door leading into the premises, the size, color and style thereof to be
subject to the Lessor's approval.
Lessor shall place Lessee's name on the directory in the lobby of the building.
Lessee shall not have the right to have additional names placed on the directory
without Lessor's prior written consent.
5. FLOOR COVERING: Lessee shall not lay any hard surface flooring so that the
same shall come in direct contact with the floor of the premises. If linoleum
or other similar floor covering is desired to be used, an interlining of
builder's deadening felt first shall be fixed to the floor by a paste or other
similar adhesive material being expressly prohibited. Lessee shall reimburse
Lessor for the cost of any sound insulation required in the premises below the
hard surface flooring area.
6. INTERFERENCE WITH OCCUPANTS OF BUILDING. Lessee shall not make, or permit
to be made, any unseemly or disturbing noises and shall not interfere with other
tenants or those having business with them. Lessee will keep all mechanical
apparatus in the premises free of vibration and noise which may be transmitted
beyond the limits of the leased premises.
7. LOCKS, KEYS: No additional locks or bolts of any kind shall be placed on
any of the doors or windows by Lessee nor shall any changes be made in existing
locks or the mechanism thereof. Lessee shall, on the termination of Lessee's
tenancy, deliver to Lessor, all keys to any
<PAGE>
space within the building, either furnished to or otherwise, procured by Lessee,
and in the event of the loss of any keys furnished, Lessee shall pay to Lessor
the cost thereof. Lessee, before closing and leaving the premises, shall ensure
that all windows are closed and entrance doors locked.
8. CONTRACTORS: No contract of any kind with any supplier of towels, water,
ice, toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
papers, rubbish or garbage, or other like, service shall be entered into by
Lessee, nor shall any vending machine of any kind be installed in Office
Building or the Office Building Area without the prior written consent of
Lessor. Lessee shall not employ any person or persons other than Lessor's
janitors for the purpose of cleaning the premises, without prior written consent
of Lessor. Lessor shall not be responsible to Lessee for any loss of property
from the premises, however occurring, or for any damage done to the effects of
Lessee by such janitors or any of its employees, or by any other person or any
other cause.
9. PROHIBITED ON PREMISES: Lessee shall not conduct, or permit any other
person to conduct, any auction upon the premises, manufacture or store goods,
wares or merchandise upon the premises, without the prior written approval of
Lessor, except the storage of usual supplies and inventory to be used for
gambling; make any unusual noises in the building, permit to be played any
musical instrument on the premises, permit to be played any radio, television,
recorded or wired music in such a loud manner as to disturb or annoy other
tenants, or permit any unusual odors to be produced upon the premises. Lessee
shall not permit any portion of the premises to be occupied as an office for a
public stenographer or typewriter, or for the storage, manufacture, or sale of
intoxicating beverages, narcotics, tobacco in any form, or as barber or manicure
shop. Canvassing, soliciting and peddling in the Office Building and the Office
Building Area are prohibited, and Lessee shall cooperate to prevent the same.
No bicycles, vehicles or animals of any kind shall be brought into or kept in or
about the premises.
10. MECHANICAL, PLUMBING, ELECTRIC, LIFE SAFETY OR TELEPHONE WORK: Lessee
shall at no time perform any alteration, additions, or repairs to the air
conditioning, heating, ventilating, plumbing, fire protection, or electrical
systems servicing the premises or the building, without obtaining the prior
written consent of Lessor. Lessor reserves the right through the use of its own
contractors, to perform all work on these above-referenced systems through the
use of Lessor's approved contractors. All telephone work shall be performed by
Lessee in accordance with all applicable building codes and regulations and
shall be installed so as not to interfere with the operation of any fire
dampers, or fire separation systems. All penetrations shall be sealed to
maintain the integrity of the fire separation walls. Lessee shall remove all
telephone wiring at the termination of the lease. Lessor shall backcharge
Lessee for all restoration work required that is not performed by Lessee as
outlined above. The location of all plumbing, electrical, HVAC and telephone
work which is to be installed shall be subject to the Lessor's approval which
shall include a review of the number of appliances and their location. Plumbing
facilities shall not be used for any purpose other than those for which they
were constructed; and no sweepings, rubbish, ashes, newspaper or other
substances of any kind shall be thrown into them. Waste and excessive or
unusual amounts of electricity or water is prohibited. When electric wiring of
any kind is introduced, it must be connected as directed by Lessor, and no
stringing or cutting of wires will be allowed, except by prior written consent
of Lessor, and shall
<PAGE>
be done by contractors approved by Lessor. The number and locations of
telephones, telegraph instruments, electrical appliances, call boxes, etc.,
shall be subject to Lessor's approval.
11. MOVEMENT OF FURNITURE, FREIGHT, OF BULKY MATTER: The carrying in or out of
safes, freight, furniture, or bulky matter of any description must take place
during such hours as Lessor may from time to time reasonably determine and only
after advance notice to the superintendent of the building. The persons
employed by Lessee for such work must be reasonably acceptable to the Lessor.
Lessee may, subject to Lessor's prior approval, move freight, furniture, bulky
matter, and other material into or out of the premises on Saturdays between the
hours of 9:00 a.m., and 3:00 p.m., provided Lessee pays additional costs, if
any, incurred by Lessor for elevator operators or security guards, and for any
other expenses occasioned by such activity of Lessee. If, at least three days
prior to such activity, Lessor requests that Lessee deposit with lessor, as
security for Lessee's obligation to pay such additional cost, a sum of which
Lessor reasonably estimates to be the amount of such additional cost, the Lessee
shall deposit such sum with Lessor as security for such cost. There shall not
be used in the Office Building or premises, either by Lessee or by others in the
delivery or receipt of merchandise, any hand trucks except those equipped with
rubber tires and side guards, and no hand trucks will be allowed in the
elevators without the consent of the superintendent of the building. Lessee
shall be responsible for the cost of removal of all boxes, garbage and debris
caused by the movement of the furniture, freight or delivery of materials.
Lessee shall notify the superintendent of the building at least 24 hours in
advance of any anticipated deliveries which will require the removal of debris.
12. SAFES AND OTHER HEAVY EQUIPMENT: Lessor reserves the right to prescribe
the maximum weight and position of all safes and other heavy equipment so as to
distribute properly the weight thereof and to prevent any unsafe condition from
arising. The cost of additional reinforcing, if required, shall be the
responsibility of the Lessee.
13. ADVERTISING: Lessor shall have he right to prohibit any advertising by
Lessee which in Lessor's reasonable opinion tends to impair the reputation of
the Office Building or its desirability as a building for offices, and upon
written notice from Lessor, Lessee shall refrain from or discontinue such
advertising.
14. NON-OBSERVANCE OR VIOLATION OF RULES BY OTHER TENANTS: Lessor shall not be
liable to Lessee for any violation or non-observance of the rules and
regulations by any other Lessee, its servants, employees, agents, visitors,
invitees, sublessees, or licensees, nor is Lessor obligated to enforce the rules
and regulations or the terms, covenants, or conditions in any other lease
against any other Lessee.
15. AFTER HOURS USE: Lessor reserves the right to exclude from the building
between the hours of 6:00 p.m., and 8:00 a.m., on Monday to Friday inclusive,
and between the hours of 1:00 p.m., on Saturday and 8:00 a.m., on the following
Monday, as well as legal holidays any visitor not authorized by tenant to have
access. Each Lessee shall be responsible for any after-hours utilization of the
premises by its personnel and visitor not authorized by tenant to have access.
<PAGE>
Each Lessee shall be responsible for any after-hours utilization of the premises
by its personnel and visitors and shall be liable to the Lessor for the acts of
such persons.
16. PARKING: Lessee and its employees shall park their cars only in those
portions of the parking area not designated for use by other tenants or
visitors.
17. Lessor hereby reserves to itself any and all rights not granted to Lessee
hereunder, including, but not limited to, the following rights which are
reserved to a Lessor for its purposes in operating the Office Building:
(a) the exclusive right to the use of the name of the Office
Building for all purposes, except that Lessee may use the
name as its business address and for no other purposes;
(b) the right to change the name or address of the Office
Building, without incurring any liability to Lessee for
doing so;
(c) the right to install and maintain a sign on the exterior of
the Office Building;
(d) the exclusive right to use or dispose of the use of the roof
of the Office Building;
(e) the right to limit the space on the directory of the Office
Building to be allotted to Lessee although Lessee shall have
at least three line spaces on directory at all times;
(f) the right to grant to anyone the right to conduct any
particular business or undertaking in the Office Building.
<PAGE>
EXHIBIT C
---------
LANDLORD'S HVAC SERVICES
------------------------
The proposed AMERICAN CONFERENCING COMPANY, INC., located on the Third
Floor and will occupy approximately 11,088 square feet. The space would be
served by three separate multi-zone units the roof, which are equipped with hot
air furnaces fired by natural gas. The three units shall be new units of equal
or better quality to the units installed on the balance of the Third Floor of
the Building and shall be zoned into five zones covering the Demised Premises.
Subject to the provisions of paragraph 22 of this Lease, the HVAC services shall
be provided to Premises with controls by the Lessee for use during all business
hours of the Lessee.
The ratio of watts/square feet of cooling energy available is estimated to
be approximately 3.5 watts per square foot which is adequate for office
buildings.
Lessor shall provide heating, ventilating and air conditioning to the
Premises through a system designed to maintain temperatures within tolerances
normal in first class office buildings but in any case capable of maintaining
interior space conditions of 70 degrees F dry bulb, when the outside temperature
is 91 degrees F dry bulb provided that:
(1) In any given room or area of the premises the occupancy does
not exceed 1 person for each 100 square feet; and
(2) The total connected electrical load in the premises for all
purposes including equipment and lighting does not exceed 4
watts per square foot. During the heating season the system
will be capable of maintaining a minimal temperature of 70
degrees F dry bulb when the outside temperature is 13
degrees F dry bulb.
<PAGE>
EXHIBIT C-1
-----------
ITEMS EXCLUDED FROM
OPERATING COST ESCALATIONS
1. Costs of alterations in connection with the original construction of the
Building or in connection with any major change in the Building, such as
adding or deleting floors;
2. Cost of alterations or improvements, other that maintenance items, to the
Leased Premises or the Leased Premises of other tenants;
3. Interest and principal payments on mortgages, and other debt costs, if any;
4. Costs of correcting defects in or inadequacy of the initial design or
construction of the Building;
5. Expenses directly resulting from the negligence of the Landlord, its
agents, servants or employees or another tenant;
6. Legal fees, space planners' fees, real estate brokers' leasing commissions,
and advertising expenses incurred in connection with the original
development or original leasing of the Building or future leasing of the
Building;
7. Costs which are reimbursable by any tenant or occupant of the Building or
by insurance by its carrier or any tenant's carrier or by anyone else;
8. Any bad debt loss, rent loss, or reserves for bad debt or rent loss;
9. The expenses of extraordinary services provided to other tenants in the
Building which are made available to Tenant at cost or for which Tenant is
separately charged;
10. Cost associated with the operation of the business of the partnership or
entity which constitutes the landlord, as the same are distinguished from
the costs of operation of the Building, including partnership accounting
and legal matters, cost of defending any lawsuits with any mortgage, cost
of selling, syndicating, financing, mortgaging or hypothecating any of the
Landlord's interest in the Building, costs (including attorney fees and
costs of settlement judgments and payments in lieu thereof) arising from
claims, disputes or potential disputes in connection with potential or
actual claims, litigation or arbitrations pertaining to Landlord and/or the
building and/or the site upon which the Building is situated;
11. The wages and benefits of any employee who does not devote substantially
---------------------------------
all of his or her time to the Building;
---
12. Fines, penalties and interest;
<PAGE>
13. Any amounts paid as ground rental by Landlord;
14. Any Operating Cost in connection with the ground floor or any other floor
in the Building devoted to retail operation unless such square footage is
included in the computation of tenant's proportionate share;
15. Any recalculation of or additional Operating Costs actually incurred more
than one (1) year prior to the year in which Landlord proposes that such
costs be included;
16. Handicap or other subsequent government code regulations;
17. Capital expenditures to comply with applicable laws including costs arising
from the presence of hazardous materials or substances in or about the
Building, or the site upon which the Building is situated;
18. Costs incurred by Landlord with respect to goods and services (including
utilities sold and supplied to tenants and occupants of the Building) to
the extent that Landlord would be entitled to reimbursements for such costs
if incurred by Tenant pursuant to this Lease;
19. Costs, including permits, license and inspection costs, incurred with
respect to the installation of tenant improvements made for new tenants in
the Building or incurred in renovating or otherwise improving, decorating,
painting or redecorating vacant space for tenants or other occupants of the
Building;
20. Cost incurred by Landlord for alterations which are considered capital
improvements and replacements under generally accepted accounting
principals, consistently applied;
21. Cost of capital nature, including, without limitation, capital improvements
and replacements under generally accepted accounting principles,
consistently applied;
22. Expenses in connection with services or other benefits which are not
provided to Tenant or for which Tenant is charged directly but which are
provided to another Tenant or occupant of the Building without a separate
charge;
23. Amounts paid to Landlord or to subsidiaries or affiliates of Landlord for
services rendered by unaffiliated third parties on a competitive basis;
24. Any compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord;
25. Rentals and other related expenses incurred in leasing air conditioning
systems, elevators or other equipment ordinarily considered to be of a
capital nature if purchased;
26. All items and services for which Tenant or any other Tenant in the Building
reimburses Landlord for which Landlord provides selectively to one or more
Tenants (other than Tenant) without reimbursement;
<PAGE>
27. Electric power costs for which any Tenant directly contracts with the local
public service company;
28. Costs arising from Landlord's political or charitable contributions;
29. Costs arising from latent defects in the Base Building, or shell or core of
the Building or improvements installed by Landlord or repair thereof;
30. Costs, other than those incurred in ordinary maintenance, for sculpture,
paintings or other objects of art;
31. Costs for which Landlord has been compensated by management fee, including
property manager and property management office and all expenses relating
thereto;
32. Tax penalties or interest incurred as a result of Landlord's negligence,
inability or unwillingness to make payments when due;
33. Costs arising from the negligence of Landlord or its agents, or any
vendors, contractors, or providers of material or services selected, hired
or engaged by Landlord or its agents including, without limitation, the
selection of building material;
34. Costs incurred by Landlord due to the violation by Landlord or any tenant
of the terms and conditions of any lease of space in the Building.
<PAGE>
EXHIBIT D
---------
GENERAL CLEANING SPECIFICATION
------------------------------
NIGHTLY
- -------
Between the hours of 6:00 p.m. and 6:00 a.m., Monday through Friday (legal
holidays excepted).
PUBLIC AREAS
------------
LOBBIES, CORRIDORS & VESTIBULES
-------------------------------
<TABLE>
<CAPTION>
SERVICE INTERVAL
------- --------
<S> <C> <C>
Glass Doors and Partitions Remove spots Nightly
Flooring (hard surface) Damp mop Twice Weekly
Damp mop and spray buff Twice Weekly
Strip and refinish As Necessary
Carpet Vacuum Nightly
Spot cleaned As Necessary
Shampoo Annually
Light Fixtures on Multiple Dust and/or wash As Necessary
Tenancy Public Corridors
</TABLE>
ENTRANCE LOBBIES
- ----------------
<TABLE>
<CAPTION>
Flooring
- --------
<S> <C> <C>
Stone Wash Nightly
Marble Damp mop Twice Weekly
Quarry Tile Damp mop and spray buff As Necessary
Strip and refinish
Carpet Vacuum Nightly
Spot clean As Necessary
Shampoo As Necessary
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Walls, Light, Globes and Clean As Necessary
Fixtures
ELEVATORS
- ---------
Rugs Vacuum and spot clean As Necessary
Shampoo Monthly
Walls, Ceilings, Paneled Damp wipe Nightly
Surfaces
Metal Finishes, Saddles Clean Nightly
Light Fixtures:
- --------------
Reflectors Damp wipe As Necessary
Diffusers Dust/Vacuum As Necessary
TENANT AREAS
- ------------
Carpet Vacuum all carpets Nightly
Shampoo Annually
Resilient Flooring Dust mop, using chemically Nightly
treated dust system-spot clean
spills
Doors and Frames Remove all finger marks and Nightly
smudges from doors,
partitions, woodwork, window
ledges, window mullions and
light switches
Door Saddles (Metal) Polish Monthly
Glass Tops Damp wipe Nightly
Bookcases, Filing Cabinets, Dust As Necessary
Chairs, Furniture, Shelves,
and Other Dust-Collecting
Surfaces
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Window Sills/Ledges Dust As Necessary
Ash Trays Empty and damp wipe Nightly
Smoking Stands Remove refuse, damp wipe dry Nightly
polish exterior
Replace sand
Drinking Fountains Damp wipe, clean and polish Nightly
with disinfectant and water
Umbrella Racks Dust Nightly
Waste Paper Baskets Empty and damp wipe Nightly
Partition Glass and Glass Spot Clean Nightly
Doors
Ceiling Air Distribution, Vacuum clean Monthly
Return Air Grills &
Surrounding Areas
Fabric Partitions Brush Monthly
Light Fixtures: Lenses Damp Wipe Annually
Interior and Exterior
Fire Extinguisher Cabinets Dust and wipe glass As Necessary
Refuse Remove to designated area Nightly
dumpster or compactor
High Dusting Pictures, frames, charts, and Monthly
similar wall hangings not
reached in nightly cleaning,
exterior of light fixtures,
overhead pipes, venetian
blinds, window frames, files,
shelves, bookcases, and
vertical surfaces - such as
partitions, ventilating
louvers, etc. not reached in
nightly cleaning.
</TABLE>
<PAGE>
TOILETS, LOCKER ROOMS, SHOWER ROOMS AND POWDER ROOMS
----------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Tile Floor Sweep Nightly
Wash with germicidal detergent Nightly
Machine scrub
Metal Partitions, Doors, Spot clean As Necessary
Horizontal Surfaces Damp wash with germicidal Monthly
detergent and water
Tile Walls Spot clean As Necessary
Wash with germicidal solution Monthly
in water
Basins, Toilet Bowls, Urinals Wash with germicidal solution Nightly
and Toilet Seats Nightly
Mirrors and Frames Wash and polish mirrors, Nightly
powder shelves, bright work,
including flushometers, piping
and toilet seat hinges
Soap Dispensers Refill As Required
Sanitary Product Dispensers Refill As Required
Handsoap, toilet tissues, hand
towels
Wastepaper Baskets Empty Nightly
Towel and Sanitary Damp wash with germicidal Weekly
Disposal Receptacles solution
Light Fixtures: Lenses Wash Semi-Annually
</TABLE>
CAFETERIA, VENDING AREAS, LUNCH ROOMS
-------------------------------------
Basic Cleaning specifications shall apply to all walls, floors and ceilings.
In buildings where there are kitchens and serving areas, the contractor shall be
responsible only for the areas in front of the serving counter.
<PAGE>
WINDOWS
- -------
All perimeter windows including atriums will be washed inside and outside two
(2) times per year.
All exterior metal will be wiped clean and polished, if necessary, at the same
time windows are washed.
SNOW REMOVAL AND LANDSCAPING
- ----------------------------
Keep sidewalks and parking areas clean and free of snow and rubbish.
Remove snow during day of ingress and egress, if necessary.
Keep lawn and landscaping properly maintained, if applicable.
SERVICES EXCLUDED
- -----------------
The following services are not included for building standard cleaning but can
be provided at additional costs.
Additional service by way of illustration and not limitation:
1. Furniture polishing
2. Furniture waxing
3. All cleaning pertaining to the computer room shall be charged
directly to the tenant as an extra. Computer room is defined as
space with a "Raised" or "Floating" floor.
<PAGE>
EXHIBIT E
---------
HOLIDAY SCHEDULE
----------------
New Years Day
Washington's Birthday
Good Friday
Memorial Day
Fourth of July
Labor Day
Election Day (Presidential Only)
Thanksgiving Day
Christmas Day
<PAGE>
SUPPLEMENTAL AGREEMENT
AGREEMENT made this 5th day of June, 1997, by and between 680-690
Kinderkamack Road, L.P., a New Jersey Limited Partnership, located at 690
Kinderkamack Road, Oradell, New Jersey 07649 (hereinafter "Lessor") and The
American Conferencing Company, Inc. located at 67 East Ridgewood Avenue,
Ridgewood, Paramus, New Jersey 07652 (hereinafter "Lessee").
WHEREAS, the Lessor and Lessee desire to execute a lease for approximately
11,088 square feet on the third floor, suite 400, in the building owned by
Lessor located at 690 Kinderkamack Road, Oradell, New Jersey; and
WHEREAS, in consideration of Lessee executing such lease the Lessor has
agreed to make certain alterations, and improvements to the portion of the
premises to be occupied by Lessee, subject to the terms and conditions herein.
NOW, THEREFORE, the parties agree as follows:
1. Alterations by Lessor. Lessor at its own cost and expense shall make
the alterations, improvements, installations and renovations to the Demised
Premises (hereinafter "alterations") shown on the plan annexed hereto as
Schedule "A" in accordance with the building standard and other specifications
annexed hereto as Schedule "A". Lessor shall provide three new air conditioning
units with a cooling capacity of 42.5 tons identical to the units already
installed by Lessor covering the remaining portion of the third floor, suite
300. Lessor will comply at its own expense with all present and future
governmental requirements arising out of, in connection with, or necessitated by
such alterations.
2. Completion of Work. Lessor shall commence construction of the
alterations not later than twenty (20) days after receipt of written approval of
the plans by the Lessee. The alterations shall be complete and a certificate of
continued occupancy of the Demised Premises shall be issued by the Borough of
Oradell prior to September 1, 1997. All work shall be done in a good and
workmanlike manner. All manners, equipment and other items furnished in
connection with the alterations shall be free from any defects. Lessor will
furnish and install a dedicated 200 amp service panel in telephone room of the
demised premises to be used exclusively for Lessee's requirements.
3. Approval of Plans. Prior to commencing such alterations, Lessor shall
submit to Lessee or its agent for written approval (such approval shall not be
unreasonably withheld or delayed) the plans and specifications for such
alterations. No work shall be commenced thereunder without such written
approval and all work to be done by Lessor shall be performed in strict
accordance with said approved plans and specifications without any deviation
therefrom, unless first approved in writing be Lessee.
4. Preconditions. Prior to the commencement of any work or installing
any equipment, the parties agree that each shall respectively:
<PAGE>
(A) Permits. Lessor shall obtain the necessary consents,
authorizations, and licenses from authorities having jurisdiction over the
work to be done.
(B) Subcontracts. Lessor shall enter into a contract with their
respective contractors and/or persons who will do the work and install the
equipment or improvements referred to, which contract will provide that the
contractor will look solely to the Lessor for payment and will hold the
other party hereto and the Demised Premises free from all liens and claims
of all persons furnishing labor or materials therefor, or both.
(C) Indemnification. Lessor shall indemnify and save harmless Lessee
against any and all bills for labor performed and equipment, fixtures and
materials furnished to Lessor in connection with said work and any liens,
bills or claims therefor or against the Demised Premised or the Buildings,
and from and against all loss, damages, costs, expenses, suits, claims and
demands whatsoever except as provided in this Agreement.
(D) Laws, Insurance. Lessor or any contractors employed by Lessor or
any other person who will do work or install the equipment as aforesaid
shall be fully covered by workman's compensation insurance and the
certificate therefore shall be furnished to the parties hereto before
commencement of any work by any contractor or persons. Lessor agrees to
indemnify and hold harmless the Lessee from any and all claims for personal
injury, death, or property damage occasioned during the progress or as a
result of any or all of the work done as aforesaid in, or about the Demised
Premises or Buildings.
(E) Lessors Payment. Lessor shall cause to be paid the entire cost of
such alterations in accordance with the plans and specifications. Any
upgrades, additional work or special finished, shall be at the sole cost of
the Lessee unless otherwise agreed to by the parties in writing. Lessee
shall keep, maintain and operate, full, true and accurate books of account
and full, true and complete records with respect to such alterations.
Lessee or its representatives shall have the right of access at any and all
times during regular business hours to inspect the progress of the
alterations.
5. Ownership. Any such alterations, additions and improvements to the
demised Premises and the Building shall immediately become the property of the
Lessor.
6. Maintenance. Lessee and Lessor shall not permit the accumulation of
building supplies, equipment, waste material or rubbish outside the Demised
Premises and during construction. Upon completion, Lessor shall cause all
rubbish, implements, materials, and equipment to be removed from the demised
Premises and the Office Building Area. At no time, shall the sidewalks,
adjacent office entrances, or public areas be blocked or interfered with, and
Lessee shall maintain continuous protection of the Demised Premises. Should any
damage be done to any other portions of the Buildings, Lessor, at its own cost
and expense, shall repair and/or replace same, in a manner reasonably
satisfactory to the Lessor, to the condition existing prior to the commencement
of the work.
<PAGE>
7. Rent Concessions. Provided Lessee is not in default under any of the
terms and provisions of the Lease, Lessor agrees to modify the rent payable by
Lessee in accordance Alternative "A" set forth in a letter dated May 8, 1997
annexed hereto as Schedule "B".
8. Possession. Lessor agrees to expedite the construction of a portion
of the Premises shown on Schedule "B" for immediate occupancy by Lessee. In
addition, Lessor shall make available for temporary use two (2) offices and
secretarial areas in Lessor's suite immediately adjoining the premises. Lessees
shall occupy the same rent free until a Certificate of Continued Occupancy is
issued for the Premises.
Upon issuance of such certificate the Lease shall govern the occupancy
of the premises by the Lessee.
9. Miscellaneous.
(A) Plans. Lessor shall at its own expense arrange for spare planning
and construction drawings by architects designated by the Lessor for the
Demised Premises.
10. Structural. No alterations of any kind shall be made which would
change the general design, character, or structure of the building, or
materially reduce or impair the value, rental, rental value, rentability, or
usefulness of the Demised Premises or any part thereof.
11. Terms. The terms used herein shall have the same meanings as set
forth in the leases of even date between the parties hereto.
12. Binding. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first above written.
680-690 KINDERKAMACK ROAD, L.P.
Lessor
BY: 680-690 CORP.
General Partner
By:/s/ John M. Mavroudis
---------------------
JOHN M. MAVROUDIS, President
AMERICAN CONFERENCING COMPANY, INC
Lessee
By:/s/ David Lipsky
----------------
DAVID LIPSKY, President
<PAGE>
EXHIBIT 10.26
-------------
LEASE
-----
1. PARTIES. ROBERT A. JONES and K. GEORGE NAJARIAN, Trustees of OLD
-------
CAMBRIDGE REALTY TRUST, under a Declaration of Trust dated December, 1992,
recorded with Middlesex South District Registry of Deeds at Book 14828, Page
324, also filed with the Middlesex South Registry District of the Land Court as
Document No. 632431, and not individually, and ROBERT A. JONES and K. GEORGE
NAJARIAN, Trustees of OLD KENDALL REALTY TRUST, under a Declaration of Trust
dated March, 1984, recorded with Middlesex South District Registry of Deeds at
Book 15564, Page 086, also filed with the Middlesex South Registry District of
the Land Court as Document No. 660209, and not individually, (jointly referred
to as "LESSOR"), which expression shall include their successors and assigns
where the context so permits, do hereby lease to TELECONVERSANT, LTD., a
Massachusetts corporation, ("LESSEE"), which expression shall include its
successors and assigns, and the LESSEE hereby leases and shall peaceably hold
and enjoy the following described premises.
1A. LESSEE acknowledges that OLD CAMBRIDGE REALTY TRUST owns the Building
400 (2843 RSF) portion of the Leased Premises described below and that OLD
KENDALL REALTY TRUST owns the Building 600 (1730 RSF) portion of the Leased
Premises. LESSOR (defined as both OLD CAMBRIDGE REALTY TRUST and OLD KENDALL
REALTY TRUST) and LESSEE acknowledge and agree that, although LESSOR shall
endeavor to treat lease and LESSEE as one sole tenancy, (i.e., LESSEE will have
only one (1) lease), the LESSOR entities will keep track of lease separately and
bear responsibility only for their portion of the Leased Premises. Each LESSOR
----
will bill LESSEE for its charges due
<PAGE>
under Paragraphs 5 and 6 below. LESSEE may at its option pay any amounts due
with one payment to either LESSOR, and LESSOR shall account for the pro-rata
amounts itself. LESSEE acknowledges that OLD CAMBRIDGE REALTY TRUST and OLD
KENDALL REALTY TRUST's obligations under this lease are distinct from each other
and that their obligations pertain solely to their portion of the Leased
Premises on the buildings they own.
2. LEASED PREMISES.
---------------
On the Commencement Date, or such earlier date as LESSEE shall take
occupancy thereof, the "Leased Premises" shall consist of that portion of the
first floor in Building No. 400 and Building No. 600 (the "Building") located at
One Kendall Square, Cambridge, Massachusetts, located in the mixed use retail
and office complex known as "One Kendall Square" (the "Complex") which first
floor space contains four thousand five hundred and seventy-three (4,573)
rentable square feet of space, more or less, and outlined on the sketch
contained in Exhibits A1-1 and A1-2 (herein called the "Leased Premises").
The Leased Premises shall have as appurtenant thereto: (a) the right to
use in common with others entitled thereto, the entrances, lobbies, hallways,
stairways, walkways, sidewalks, driveways, loading docks, elevators and other
common facilities in the building containing any portion of the Leased Premises
and on the land constituting the Lot more particularly described in Exhibit B
hereto (herein called the "Lot") necessary for access to and enjoyment of the
Leased Premises, or portion, and (b) the pipes, conduits, wires, and appurtenant
equipment serving the Leased Premises, or portion thereof, in common with other
portions of the Building containing any part of the Leased Premises, subject,
however, to the following rights which are expressly excepted and reserved by
LESSOR: (i) the right, from time to time, to install, maintain, use, repair,
relocate, place and replace utility lines, pipes, ducts, conduits, wires, gas,
electric, or any
2
<PAGE>
other meters and fixtures located on or passing through any portion of the
Leased Premises to serve other portions of the LESSOR's property of which the
Leased Premises, or a portion thereof, are a part; (ii) the right to enter into,
upon and across any portion of the Leased Premises to exercise any reserved
right of LESSOR hereunder or to complete LESSOR's construction of the Leased
Premises, or part thereof, and the Building; and (iii) the right from time to
time to make alterations or additions to the Building and to construct other
buildings or improvements on the Lot and to make additions to such buildings or
improvements, and to permit others to do so from time to time all as LESSOR may
determine in its sole discretion, and without LESSEE's consent in any instance;
any such alterations or additions or construction of other buildings or
improvements on the Lot, being performed to the greatest possible extent in a
manner so as not unreasonably to interfere with the LESSEE's use and occupancy
of the Leased Premises, and so as not to obstruct the LESSEE's access to the
Leased Premises.
Subject to LESSOR's reserved rights specified above, there shall be
appurtenant to the Leased Premises the right, but not an obligation to part ten
(10) passenger motor vehicles in the parking garage appurtenant to the Lot, (on
an "as needed" basis with LESSEE giving LESSOR one month's prior notice)
commonly referred to as the OKS Garage. LESSOR reserves the right to designate
the locations of the spaces to be utilized for such parking rights by written
notice to LESSEE, and to change the location of any or all of such spaces by
notice to LESSEE at any time and from time to time as LESSOR shall solely
determine. The parking spaces provided hereunder need not be contiguous.
3
<PAGE>
3.1 TERM. The term (the "term") of this Lease shall be for a period of
----
five (5) years following the "Commencement Date". The "Commencement Date" shall
be the date of the later to occur of:
(a) The date upon which the Leased Premises are "ready for occupancy"
(as defined in Paragraph 3.2 below) or
(b) March 15, 1996.
As soon as may be convenient after the Commencement Date has been
determined, the LESSOR and the LESSEE agree to join with each other in the
execution, in recordable form, of a written declaration in which the
Commencement Date shall be stated.
3.1.1. PHASED OCCUPANCY. In the event a portion of the Leased Premises
----------------
are substantially completed and ready for occupancy, and LESSOR shall have given
notice to LESSEE thereof, then LESSEE shall have the right to commence use and
occupancy of such portion of the Leased Premises subject to the terms and
conditions of this Lease. During the period of such partial use and occupancy,
Base Rent and additional rent payable under Paragraphs 4 and 5 hereof shall be
payable on a pro rata basis in the same proportion as the square footage of the
space being used and occupied bears to the total square footage of the Leased
Premises, and LESSEE shall perform, comply with and abide by all of its
obligations, undertakings and covenants as if, and to the same extent, as though
the term had commenced.
3.2 COMPLETION OF IMPROVEMENTS. The Leased Premises shall be
--------------------------
considered "ready for occupancy" on the date upon which the improvements
described in Exhibit C hereto to be constructed by LESSOR with respect to the
Leased Premises are substantially completed, and LESSEE is given a copy of a
certificate of occupancy issued by the City of Cambridge Building Department
covering the Leased Premises. The Leased Premises
4
<PAGE>
shall be deemed substantially completed notwithstanding that completion of work
and adjustment of equipment and fixtures or minor items of uncompleted work (so-
called "punch list" work items) remain to be done, if such work can be completed
after occupancy has been taken without causing unreasonable interference with
LESSEE's use of the Leased Premises. Except for the latent defects and except to
the extent to which the LESSEE shall have given the LESSOR written notice, not
later than thirty (30) days after the Commencement Date, of matters or items as
to which the LESSOR has not properly performed its obligations with respect to
the construction and installation of the improvements called for under the
Lease, the LESSEE shall have no claim that the LESSOR has failed to perform such
obligations, and LESSEE's taking possession shall be conclusive evidence as
against LESSEE that said space and improvements were in good order and
satisfactory condition when LESSEE took possession. The LESSOR shall complete
all items of work not properly performed as to which the LESSEE shall have given
the LESSOR such timely written notice as soon as conditions practicably permit
thereafter in such a manner as not to unreasonably disturb the LESSEE or its
business operations carried out in the Leased Premises.
5
<PAGE>
4. RENT. LESSEE covenants and agrees to pay to LESSOR annual base rent
----
("Base Rent") in the amounts set forth or provided for below, by equal payments
of one-twelfth of such annual rate on the first day of each calendar month in
advance, the first monthly payment to be made on the Commencement Date, and by
payment in advance of a pro-rata portion of a monthly payment for any portion of
a month at the beginning or end of the term; all payments to be made to LESSOR
or such agent, and at such place, as LESSOR shall from time to time in writing
designate, the following being now so designated:
OLD CAMBRIDGE REALTY TRUST
THE ATHENAEUM GROUP
215 First Street
Cambridge, MA 02142-1268
(In the case of all Base Rent, rent adjustment and utility (if applicable)
payments, the designated LESSOR for receipt of such payments shall be Old
Cambridge Realty Trust and both parties hereby agree and acknowledge that if
sufficient payments as due herein shall be paid solely to Old Cambridge Realty
Trust, LESSEE shall not be put into default for failure to pay Old Kendall
Realty Trust.)
The annual Base Rent during the Term is according to the following
schedule.
<TABLE>
<CAPTION>
<S> <C> <C>
(i) Year 1 - $59,449.00
Year 2 - 64,022.00
Year 3 - 68,595.00
Year 4 - 73,168.00
Year 5 - 77,741.00
</TABLE>
6
<PAGE>
(ii) the annual fair rental value of LESSEE's parking spaces (currently
$115 per month per space) in the parking garage available to LESSEE,
all to be reasonably determined by LESSOR ("Garage Parking").
5. RENT ADJUSTMENTS.
----------------
5.1 RENT ADJUSTMENTS - COMMON AREA OPERATING EXPENSES FOR THE LOT.
-------------------------------------------------------------
Commencing as of the Commencement Date and with respect to any calendar year or
any fraction of a calendar year thereafter falling within the Term, the LESSEE
shall pay to the LESSOR as additional rent, the "LESSEE's Proportionate CAO Lot
Share" (defined below) of all costs and expenses incurred by the LESSOR in
connection with the insurance, maintenance, repair, upkeep, and cleaning of
those common areas and facilities of the Lot delineated or described in Exhibit
B hereto, which LESSEE has the right to use in common with others such as but
not limited to common walkways, accessways and parking facilities and the costs
of insurance, heating and electricity, snow-plowing and snow and ice removal,
trash removal services, janitorial and security services, landscaping and lawn
care services, walkway, driveway, parking, and common entryway upkeep and paving
costs, and all other costs reasonably incurred by or for LESSOR in connection
with the insurance, maintenance and operation of the common areas and facilities
of the Lot to keep the same in safe, secure and first-class order and condition
(hereinafter called "CAO Lot"), but specifically excluding all expenses which
would be considered to be "capital expenses" or management fees under generally
accepted accounting principals.
LESSEE's Proportionate CAO Lot Share means that percentage which is equal
to the ratio of the square footage of space constituting the Leased Premises to
the aggregate square footage of space within the Complex which is completed and
as to which a Certificate of
7
<PAGE>
Occupancy has issued. As additional buildings are completed within the Complex,
LESSEE's Proportionate CAO Lot Share shall be adjusted to that percentage which
is equal to the ratio of the square footage constituting the Leased Premises to
the aggregate square footage of space within the Complex which is completed and
as to which a certificate of occupancy has issued. As of the date hereof, the
parties have agreed that LESSEE's Proportionate CAO Lot Share shall initially be
47/100 (.47%) percent for the space in Building No. 400 and 28/100 (.28%)
percent for the space in Building No. 600.
5.2 RENT ADJUSTMENT - COMMON AREA OPERATING EXPENSES FOR THE BUILDING.
---------------
Commencing as of the Commencement Date and with respect to any calendar year
falling within the Term, or fraction of a calendar year at the beginning or end
of the Term, the LESSEE shall pay to the LESSOR, as additional rent, the
"LESSEE's Proportionate Building Share" (defined below) of operating expenses
attributable to the Building ("CAO Building") CAO Building shall include, but is
not limited to, the following: all costs and expenses incurred by the LESSOR in
connection with the insurance, operation, repair, maintenance and cleaning of or
for the Building and heating, plumbing, elevators, electrical, air-conditioning
and other systems thereof, trash removal, janitorial services, security systems
and general expenses incurred by the LESSOR in connection with the insurance,
operation and maintenance of the Building, to keep the same in safe, secure and
first-class order and condition, but specifically excluding all expenses which
would be considered to be "capital expenses" or management fees under generally
accepted accounting principles.
LESSEE's Proportionate Building Share shall be that percentage, which
is equal to the ratio of the square footage of space constituting the Leased
Premises to the aggregate square footage of space in the Building.
8
<PAGE>
The LESSEE's Proportionate Building Share with respect to the Leased
Premises is 17 and 65/100 (17.65%) percent for the space in Building No. 400 and
7 and 67/100 (7.67%) percent for the space in Building No. 600.
5.3 MONTHLY PAYMENTS. Beginning on the Commencement Date, and in
----------------
subsequent years during the Term of this Lease, the LESSEE shall pay to the
LESSOR pro rata monthly installments of amounts due under Paragraphs 5.1 and 5.2
on account of projected CAO Lot and CAO Building for such year, calculated by
the LESSOR on the basis of the best and most recent budget or data available.
Appropriate adjustments of estimated amounts shall be made between LESSOR and
LESSEE promptly after the close of each calendar year to account for actual CAO
Lot and CAO Building for such year, except that LESSOR may at its option, credit
any amounts due from it to LESSEE as provided above against any sums then due
from LESSEE to LESSOR under this Lease. The balance of any amounts due shall be
paid within twenty (20) days after written notice thereof.
5.4 RENT ADJUSTMENT - TAXES.
-----------------------
5.4.1. LESSOR TO PAY TAXES. The LESSOR shall be responsible for the
-------------------
payment, before the same becomes delinquent, of all general and special taxes of
every kind and nature, including assessments for local improvements, and other
governmental charges which may be lawfully charged, assessed or imposed (herein
collectively called the "Taxes") upon the Building and the Lot.
If at any time during the Term the present system of ad valorem
taxation of real property shall be changed to that in lieu of the whole or any
part of the ad valorem tax on real property, there shall be assessed on LESSOR a
capital levy or other tax on the gross rents received with respect to the Lot or
the Building or a federal, state, county, municipal, or other local income,
9
<PAGE>
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
"Taxes" but only to the extent that the same would be payable if the Lot and the
Building were the only property of LESSOR.
5.4.2. LESSEE's SHARE OF TAXES. The LESSEE shall pay to the LESSOR,
-----------------------
as additional rent, the LESSEE's Proportionate Building share of that portion of
the Taxes attributable to the Building and LESSEE's Proportionate CAO Lot Share
of that portion of the Taxes attributable to the land which constitutes the Lot.
5.4.3. RENT ADJUSTMENT-PAYMENT. Beginning on the Commencement Date,
-----------------------
and in subsequent years during the Term of this Lease, LESSEE shall pay to the
LESSOR monthly installments of one-twelfth of the amounts due to LESSOR under
Paragraphs 5.4.1 and 5.4.2 on account of projected Taxes for such year,
calculated by the LESSOR on the basis of the best and most recent data available
as set forth in a statement from LESSOR (and, when available, based upon the
real estate tax bill covering any such period). Appropriate adjustments of
estimated amounts shall be made between LESSOR and LESSEE promptly after LESSOR
shall have received the tax bill covering any such period.
5.4.4. TAX ADJUSTMENT. If the LESSOR or any other tenant (excluding
--------------
LESSEE) in the Building shall construct an addition to the Building, or
construct improvements within the Building of unusual value so as to result in
an increase in Taxes over the Taxes which would have been assessed to that
Building but for such construction, there shall not be included in Taxes for
purposes of this Lease the amount of such increase in Taxes unless such
additions or improvements directly benefit the LESSEE. If the LESSEE, or the
LESSOR at the direction of
10
<PAGE>
the LESSEE, shall construct improvements within the Leased Premises, or any part
thereof, of unusual value so as to result in an increase in Taxes over the Taxes
which would have been assessed to the Building, or part, but for such unusually
valuable improvements, the LESSEE shall be responsible for the payment of the
full amount of such increase.
6. UTILITIES AND OTHER SERVICES.
----------------------------
(a) The LESSEE shall pay charges for all gas, heat, air-conditioning
and electricity, and all other utilities separately metered or sub-metered
to the Leased Premises. LESSEE shall be responsible for all utility company
deposits applicable to the supply of such services to the Leased Premises.
LESSEE shall also be responsible for the payment of its proportionate share of
all water and sewer use and utilities not separately metered or sub-metered to
the Leased Premises all as reasonably determined by LESSOR. Upon request by the
LESSOR, the LESSEE shall provide the LESSOR with evidence of any direct payment
of such charges. LESSEE shall defend, indemnify and hold LESSOR harmless from
and against any claim or liability arising for such charges which LESSEE is
responsible for.
(b) LESSOR agrees to furnish reasonable heat to the stairways,
elevators and other common areas in the Building, or portions thereof, as
necessary for comfortable occupancy during and to provide lighting to
passageways and stairways and all parking areas and walkways providing access
from the Building to the parking area in the evening during customary business
hours on regular business days, and to furnish ordinary repairs and cleaning of
the common areas and facilities of the Complex and removal of snow and ice
reasonably promptly after snow fall and ice accumulation have ended to all
walkways, accessways and approaches to the Building and the parking facility as
is customary in or about similar buildings in Cambridge. LESSOR shall not be
liable to LESSEE for any compensation or reduction of rent by reason of
11
<PAGE>
inconvenience or annoyance or for loss of business arising from the necessity of
LESSOR or its agents entering the Leased Premises, or for LESSEE's repairing the
Leased Premises if such repair is not performed by LESSOR, or for making repairs
or renovations to any portion of the Building, however, the necessity may occur.
In case LESSOR is prevented or delayed from making any such repairs or
alterations, or supplying the utilities or services provided for herein, or
performing any other covenant or duty to be performed on LESSOR's part, by
reason of any cause beyond LESSOR's control, LESSOR shall not be liable to
LESSEE therefor, nor shall LESSEE be entitled to any abatement or reduction of
rent by reason thereof, nor shall the same give rise to a claim in LESSEE's
favor that such failure constitutes actual or constructive, total or partial,
eviction from the Leased Premises, or any portion thereof. LESSOR reserves the
right to stop any service or utility system, when necessary by reason of
accident or emergency, or until necessary repairs have been completed.
(c) To the extent there are separate meters for any utilities including
heat, electricity, water and sewer, and air conditioning, the LESSEE shall pay
its utility charges directly to the suppliers of such utility services and at
least before the same become delinquent. If there are not separate meters, then
LESSEE shall pay its pro rata share of the utility cost, as billed by LESSOR.
The LESSEE and LESSOR shall have the right to audit said charges and payments
upon reasonable notice.
7. USE OF LEASED PREMISES. The LESSEE may use the Leased Premises
----------------------
only for the purpose of offices in connection with its communications sales and
services business [including consumer sales use related thereto (/s/ CPS, KGN,
RAJ)].
8. COMPLIANCE WITH LAWS. The LESSEE acknowledges that no trade or
--------------------
occupation shall be conducted in the Leased Premises or use made thereof which
shall be
12
<PAGE>
unlawful, improper, noisy or offensive, or be contrary to any law or
any municipal by-law or ordinance in force in the City of Cambridge. LESSEE
shall keep the Leased Premises equipped with all safety appliances and shall
procure and keep in force all licenses and permits required by law or ordinance
of any public authority because of the uses made of the Leased Premises by
LESSEE and shall maintain in good condition on the Leased Premises all safety
and fire protection devices required by the Board of Fire Underwriters, or other
body having similar functions, and of every insurance company and policy by
which LESSOR or LESSEE is insured. If any use of the Leased Premises results in
the cancellation of any insurances carried by LESSOR, or increases the cost
thereof, the LESSEE shall on demand reimburse the LESSOR all extra insurance
premiums incurred as a result of such use of the Leased Premises by the LESSEE.
9. RISK OF LOSS OF PERSONAL EFFECTS. LESSEE acknowledges and agrees
--------------------------------
that all of the furnishings, equipment, effects and property of LESSEE and of
all persons claiming by, through or under LESSEE which may be on the Leased
Premises or elsewhere in any building in the Complex, shall be at the sole risk
and hazard of LESSEE 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 be charged to or to be borne by LESSOR, except that
LESSOR shall in no event be indemnified or held harmless or exonerated from any
liability to LESSEE or to any other person, arising from any injury, loss,
damage or liability caused by LESSOR's negligence.
9A. INSURANCE - WAIVER OF SUBROGATION. LESSOR agrees to keep the
---------------------------------
Building and LESSEE agrees to keep the Leased Premises, and all equipment,
machinery and fixtures therein insured in amounts equal to the actual cash value
of the same, against fire and
13
<PAGE>
other perils included in a standard extended coverage endorsement, and against
breakdown of boilers and other machinery and equipment, and LESSEE agrees to
procure and keep in force comprehensive general liability insurance indemnifying
LESSOR against all claims and damages for any injury to or death of person or
damage to property which may be claimed to have occurred upon or to have been
caused by activities or conditions within the Leased Premises and indemnifying
LESSOR to the extent any such claims and demands are the responsibility or
obligation of LESSEE pursuant to this lease or as a matter of law, in amounts
not less than One Million ($1,000,000) Dollars for property damage, Five Hundred
Thousand ($500,000) Dollars for injury or death of more than one person in a
single accident.
All insurance required hereunder shall be written by insurance
carriers qualified to do business and in good standing in Massachusetts and
approved by LESSOR, which approval shall not be unreasonably withheld. All
policies of insurance shall name LESSOR and LESSEE as the insured parties. Each
required policy of insurance shall provide that, notwithstanding any act or
omission of LESSEE which might otherwise result in forfeiture of said insurance:
(A) it shall not be canceled nor its coverage reduced without at least ten (10)
days prior written notice to each insured named therein, and (B) any proceeds
(other than for LESSEE's personal property insurance) shall be first payable to
LESSOR or to the holder of any mortgage encumbering the Leased Premises, as
their respective interests may appear.
As of the commencement of the term hereof, and thereafter not less
than fifteen (15) days prior to the expiration dates of the expiring policies,
the original policies to be obtained by LESSEE hereto issued by the respective
insurers or certificates thereof including photocopies of the original policies,
shall be delivered to LESSOR.
14
<PAGE>
Any insurance carried by either party with respect to the Leased
Premises or 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 the occurrence 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 of
loss due to hazards covered by such insurance to the extent of the
indemnification received thereunder.
10. MAINTENANCE OF LEASED PREMISES. The LESSEE agrees to maintain
------------------------------
the Leased Premises in the same condition as they are at the commencement of the
Term or as they may be put in during the Term of this Lease, reasonable wear and
tear, damage by fire, other casualty and eminent domain, and matters for which
the LESSOR is responsible hereunder only excepted, to provide its own interior
janitorial service, to install and maintain its own security system as it
considers appropriate and, whenever necessary, to replace plate glass and other
glass therein with that of the same quality as that damaged or injured. LESSOR
shall maintain and LESSEE shall pay its proportionate share of the maintenance
of the HVAC System servicing the Leased Premises, but LESSEE shall be
responsible for all repairs and replacements to said system if the same is
caused by any act or omission of LESSEE or its agents. The LESSEE shall not
permit the Leased Premises to be overloaded, damaged, stripped, or defaced, nor
suffer any waste. LESSEE shall obtain written consent of LESSOR before erecting
any sign on or about the Leased Premises, which consent shall not be
unreasonably withheld or delayed. LESSEE further covenants and agrees: to take
all reasonably necessary actions to insure that smoke, fumes, vapors and odors
will not permeate any building containing the Leased Premises and will be
removed only through the exhaust and ventilating system servicing the Leased
Premises; to keep the Leased Premises free of pests, roaches and vermin; to keep
all trash garbage and debris
15
<PAGE>
stored on the Leased Premises (and not in any other portions of the Lot or the
Building) in adequate covered containers, approved by LESSOR and placed in
locations or areas approved by LESSOR in writing and to arrange for the regular
removal thereof once each day; to provide for frequent and adequate cleaning of
the Leased Premises and all walls, floors, fixtures and equipment therein
consistent with its use. LESSOR shall maintain in good condition the structural
elements and the roof of the Building, the mechanics equipment and systems in
the Building (other than such equipment and systems which are located within or
exclusively serve the Leased Premises, and other than LESSEE's maintenance
obligations otherwise provided herein), and the common areas of the Building.
LESSEE shall pay its proportionate share for these expenses and services as set
out in Paragraph 5 above.
11. ALTERATIONS - ADDITIONS. The LESSEE shall not make structural
-----------------------
alterations or additions to the Leased Premises, but may make nonstructural
alterations and improvement, provided the LESSOR consents thereto in advance in
writing in each instance, which consent shall not be unreasonably withheld or
delayed provided that LESSOR is furnished with detailed plans and specifications
reasonably approved by LESSOR. All such allowed alterations or additions shall
be at LESSEE's expense and shall be in quality at least equal to the present
construction. LESSEE shall not permit any mechanics' liens, or similar liens,
to remain upon the Leased Premises for labor and materials furnished to LESSEE
or claimed to have been furnished to LESSEE in connection with the work of any
character performed or claimed to have been performed at the direction of
LESSEE, and shall cause any such lien to be released of record forthwith without
cost to LESSOR. Any alterations, additions or improvements made by the LESSEE,
except for moveable partitions and furnishings, installed at the LESSEE's cost,
shall become the property of the LESSOR at the termination of the Lease as
provided herein.
16
<PAGE>
With respect to all such LESSEE work, LESSEE further agrees as
follows: that such work shall commence only after all required municipal and
other governmental permits and authorizations have been obtained (the LESSOR
agreeing to join in any application therefor at the LESSEE's expense, whenever
necessary) and all such work shall be done in a good and workmanlike manner in
compliance with building and zoning laws and with all other laws, ordinances,
regulations and requirements of all federal, state and municipal agencies, and
in accordance with the requirements and policies issued by any insurer of LESSOR
or LESSEE; that all such work shall be prosecuted with reasonable dispatch to
completion; that at all times when any such work is in progress, LESSEE shall
maintain or cause to be maintained adequate workers' compensation insurance for
those employed in connection therewith with respect to whom death or injury
claims could be asserted against LESSOR, the LESSEE or the Leased Premises and
comprehensive general liability or builder's risk insurance (for mutual benefit
of LESSEE and LESSOR) in coverages reasonably approved by LESSOR: and that all
such work of LESSEE shall be coordinated with any work being performed by LESSOR
and other tenants of the building in which the work is taking place in such
manner as to maintain harmonious labor relations and not to interfere with the
operation of the Building or the Complex or the construction work of others.
12. ASSIGNMENT - SUBLETTING. The LESSEE shall not assign or sublet
-----------------------
the whole or any part of the Leased Premises without the LESSOR's prior written
consent, which consent shall not be unreasonably withheld or delayed.
Notwithstanding such consent, LESSEE shall remain liable to LESSOR for the
payment of all rent and for the full performance of the covenants and conditions
of this Lease (which following assignment shall be joint and several with
assignee).
17
<PAGE>
12A. QUIET ENJOYMENT, COVENANT OF TITLE. The LESSEE, on paying the
----------------------------------
rent and other charges hereunder, as and when the same shall become due and
payable and observing and performing the covenants, conditions and agreements
contained in this Lease on the part of the LESSEE to be observed and performed,
all as herein provided, shall and may lawfully, peaceably and quietly have, hold
and enjoy the Leased Premises during the Term, subject to all of the terms and
provisions hereof, without hindrance, ejection or disturbance by the LESSOR or
by any person or persons claiming by, through or under the LESSOR or by anyone
claiming paramount title.
13. SUBORDINATION. The Lease and LESSEE's interest hereunder,
-------------
subject to the provisions of this Paragraph 13, shall be subordinate to the lien
of any present or future mortgage or mortgages upon the Leased Premises or any
property of which the Leased Premises are a part, irrespective of the time of
execution or the time of recording of any such mortgage or mortgages, and to
each advance made or to be made thereunder and to all renewals, modifications,
consolidations, and extensions thereof, and all substitutions therefor. Any
subordination of this Lease pursuant to the provisions of this Paragraph 13 is
made and granted upon the condition that, in the event of any entry by the
holder of any such mortgage to foreclose, a default under any such mortgage, a
foreclosure of any such mortgage of LESSOR's interest under this Lease or in the
Leased Premises through foreclosure or otherwise, the LESSEE shall (provided the
LESSEE is not then in default beyond any applicable cure period) peaceably hold
and enjoy the Leased Premises as a lessee of such holder, during the term upon
the terms, covenants and conditions as set forth in this Lease without any
hindrance or interruption from such holder. In the event of such entry,
foreclosure, acquisition or other action by such holder, LESSEE shall recognize
the holder of the mortgage with respect to which such action is taken as the
LESSOR
18
<PAGE>
under this Lease. As used in this Paragraph 13, the word "holder" includes any
person claiming through or under any such mortgage, including any purchaser at a
foreclosure sale, and the word "LESSEE" shall include LESSEE's successors and
assigns. The word "mortgage" as used in this Paragraph shall mean mortgages,
deeds of trust, and other similar instruments held by any institutional lender
and all modifications, extensions, renewals and replacements thereof. This
Paragraph 13 is self-operative, and no further instrument of subordination shall
be required.
Notwithstanding the self-operative effect of this Paragraph 13, the
LESSEE agrees to execute such further documents in recordable form as the LESSOR
or any lender may reasonably require, consistent with the terms of this
Paragraph 13 and 21. Should the LESSEE fail to execute and deliver to the
LESSOR any such document within ten (10) days of a written notice requesting the
LESSEE to execute and deliver such document, LESSEE shall pay to LESSOR (as
liquidated damages and not as a penalty) the sum of Five Hundred ($500.00)
Dollars per day for each day after such tenth (10th) day during which such
failure to deliver such instrument continues, unless such failure is due to the
neglect of the LESSOR or its lenders.
LESSOR agrees to use its best efforts to cause any holder of any
mortgage or mortgages upon the Leased Premises or any property of which the
Leased Premises are a part to execute and deliver to LESSEE, within thirty (30)
days following the date of the execution of the Lease, a Non-Disturbance
Agreement regarding LESSEE's tenancy under this Lease. In addition LESSOR shall
use its best efforts to cause any future holder of any mortgage or mortgages
upon the Leased Premises or any property of which the Leased Premises are a part
to execute and deliver to LESSEE a Non-Disturbance Agreement regarding LESSEE's
tenancy under this Lease.
19
<PAGE>
14. LESSOR'S ACCESS. The LESSOR or agents of the LESSOR may, at
---------------
reasonable times and upon reasonable prior notice to the LESSEE, enter to view
the Leased Premises or any part thereof and may remove placards and signs not
approved and affixed as herein provided, and make repairs and alterations which
LESSOR may deem necessary or desirable and, at LESSEE's expense, to remove any
alterations, additions, signs, or other improvements made by LESSEE, and not
consented to by LESSOR; to show the Leased Premises to others with reasonable
prior notice, in a manner so as not to unreasonably interfere with the normal
conduct of the LESSEE'S business, at any time within the four (4) month period
prior to the expiration of the Term; to affix to any suitable part of the Leased
Premises a notice for letting or selling the Leased Premises or property of
which the Leased Premises are a part and keep the same so affixed without
hindrances or molestation.
15. INDEMNIFICATION AND LIABILITY. The LESSEE shall defend, save
-----------------------------
harmless and indemnify LESSOR from any claims of liability for injury, loss,
accident or damage to any person or property while on the Leased Premises, if
not due to the negligence of LESSOR, or LESSOR's employees or agents, and to any
person or property anywhere occasioned by any omission, fault, negligence or
other misconduct of LESSEE and persons for whose conduct LESSEE is legally
responsible.
16. HOLDING OVER. LESSEE agrees to pay to LESSOR one and one-half
------------
(1 1/2) times the total of the Base Rent set forth in Paragraph 4 in effect for
the period immediately prior to LESSEE's holding over and one and one-half times
the additional rent provided for under this Lease then applicable for each month
or portion thereof LESSEE shall retain possession of the Leased Premises or any
part thereof after the termination of this Lease, whether by lapse of time or
otherwise, and also to pay all damages sustained by LESSOR on account thereof;
the
20
<PAGE>
provisions of this Paragraph shall not operate as a waiver by LESSOR of any
right of re-entry provided in this lease.
16A. FURTHER LESSEE COVENANTS. LESSEE further covenants and agrees
------------------------
during the Term and such further time as LESSEE holds any part of the Leased
Premises:
(a) to pay when due all rent and other sums herein specified, without
offset, deduction set off or counterclaim except as otherwise specifically
provided in this Lease;
(b) not to obstruct in any manner any portion of any building not
hereby leased or the sidewalks or approaches to such building or any inside
windows or doors;
(c) that neither the original LESSOR nor any successor LESSOR who or
which is a trustee or a partnership, nor any beneficiary of the original LESSOR
or any successor LESSOR nor any partner, general or limited, of such partnership
shall be personally liable under any term, condition, covenant, obligation or
agreement expressed herein or implied hereunder or for any claim or damage or
cause at law or in equity arising out of the occupancy of the Leased Premises or
the use or maintenance of the Building and LESSEE specifically agrees to look
solely to the LESSOR's interest in the Complex for the recovery of any judgment
against LESSOR; and
(d) if any payment of rent or other sums due hereunder is not paid
when due, LESSEE shall pay to LESSOR a late charge equal to five (5%) percent of
the unpaid amount per month, or part thereof, that such amount remains unpaid.
17. FIRE, CASUALTY.
--------------
17.1 DEFINITION OF "SUBSTANTIAL DAMAGE" AND "PARTIAL DAMAGE". The
-------------------------------------------------------
term "substantial damage", as used herein, shall refer to damage which is of
such a character that the same cannot, in ordinary course, be expected to be
repaired within ninety (90) calendar days from the time that such repair work
would commence. Any damage which is not
21
<PAGE>
"substantial damage" is "partial damage." In the event of substantial damage to
the Building, the LESSOR shall notify the LESSEE as soon as is practicable and
in no event later than thirty (30) days after such damage of LESSOR's estimated
time for repair of such damage.
17.2. PARTIAL DAMAGE TO THE BUILDING. If during the Lease Term there
------------------------------
shall be partial damage to The Building by fire or other casualty and if such
damage shall materially interfere with the LESSEE's use of the Leased Premises
as contemplated by this Lease, the LESSOR shall, to the extent insurance
proceeds are available to LESSOR, promptly proceed to restore the Building to
substantially the condition in which it was immediately prior to the occurrence
of such damage. Notwithstanding the foregoing, if there shall be partial damage
to the Building, and if such damage shall materially interfere with the LESSEE's
use of the Leased Premises as contemplated by this Lease occurring during the
last twelve (12) months of the Lease Term of such a character that the same
cannot, in ordinary course, be expected to be repaired within thirty (30) days
from the time such repair work would begin, the LESSOR may, within ten (10) days
of the date of such damage, elect to terminate this Lease. If such election is
not made, the LESSOR shall promptly proceed with such restoration.
17.3. SUBSTANTIAL DAMAGE TO THE BUILDING. If during the Lease Term
----------------------------------
there shall be substantial damage to the Building by fire or other casualty and
if such damage shall materially interfere with the LESSEE's use of the Leased
Premises as contemplated by this Lease, the LESSOR shall, to the extent
insurance proceeds are available to LESSOR, promptly restore the Building to an
architectural until that is not less suitable than that which existed prior to
such fire or casualty, unless the LESSOR or the LESSEE, within forty-five (45)
days after the occurrence of such damage, shall give notice to the other of its
election to terminate this Lease. If at any time during such forty-five - (45)
day period the LESSOR notifies the LESSEE of its
22
<PAGE>
intention to restore the Building, the LESSEE must then give notice to the
Lessor, within ten (10) days of its receipt of the LESSOR's notice of intention
to restore the Building, as to whether the LESSEE will elect to terminate the
Lease. Should the LESSEE fail to elect to terminate the Lease within such ten -
(10) day period, the LESSEE's right to terminate under this Paragraph 17.3 shall
expire. If the LESSOR proceeds with the restoration of the Building and if such
damage shall not have been repaired to the extent necessary for the LESSEE to
resume its normal business operations at the Leased Premises by the end of the
180th day following the date of such fire or casualty, or if the LESSOR shall
fail diligently to cause such repair and restoration work to be performed then
the LESSEE may, at any time thereafter while the damage remains unrepaired,
terminate this Lease upon notice to the LESSOR. If the LESSOR or the LESSEE
shall give such notice of termination, then this Lease shall terminate as of the
date of such notice with the same force and effect as if such date were the date
originally established as the expiration date hereof.
17.4. ABATEMENT OF RENT. If during the Lease Term the Building shall
-----------------
be damaged by fire or casualty and if such damage shall materially interfere
with the LESSEE's use of the Leased Premises as contemplated by this Lease, a
just proportionate amount of the rent and other charges payable by the LESSEE
hereunder shall abate proportionately for the period in which, by reason of such
damage, there is such interference with the LESSEE's use of the Leased Premises.
17A. EMINENT DOMAIN. If the Building is totally taken by
--------------
condemnation or right of eminent domain, this Lease shall terminate as of the
date of such taking. If the Building, or such portion thereof as to render the
balance (if reconstructed to the maximum extent practicable in the
circumstances) physically unsuitable in the LESSEE's reasonable judgment for the
23
<PAGE>
LESSEE's purposes, shall be taken by condemnation or right of eminent domain
(including a temporary taking in excess of 180 days), the LESSEE or the LESSOR
shall have the right to terminate this Lease by notice to the other of its
desire to do so, provided that such notice is given not later than ten (10) days
after the LESSEE has been deprived of possession.
Should any part of the Building be so taken or condemned or receive
such damage and should this Lease not be terminated in accordance with the
foregoing provisions, the LESSOR shall, to the extent condemnation proceeds are
available to LESSOR, promptly restore the Leased Premises to an architectural
unit that is suitable to the uses of the LESSEE permitted hereunder.
In the event of a taking described in this Paragraph 17A, the rent and
other charges payable hereunder, or a fair and just proportion thereof according
to the nature and extent of the loss of use shall be suspended or abated.
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights
which the LESSEE may have for damages or injury to the Leased Premises for any
taking by eminent domain, except for damage to the LESSEE's trade fixtures,
personal property or equipment, if any, the LESSEE's right to relocation
expenses, if any, and the LESSEE's right for business interruption, if any.
18. DEFAULT AND BANKRUPTCY. In the event that:
----------------------
(a) The LESSEE, or any guarantor of LESSEE's obligations
hereunder, shall default in the payment of any installment of rent [within 5
days of the date the same is due (/s/ RAJ KGN CPS) or other sum herein
specified; or
(b) The LESSEE shall default in the observance or performance of
the LESSEE's covenants, agreements, or obligations hereunder (except as provided
in
24
<PAGE>
Paragraph 18(a) above) and the LESSEE shall not cure such default within thirty
(30) days after written notice thereof or if such default cannot be cured within
thirty (30) days, then if LESSEE shall not commence to cure the same within
thirty (30) days and diligently pursue the curing of the same; or
(c) LESSEE makes any assignment for the benefit of creditors,
commits any act of bankruptcy or files a petition under any bankruptcy or
insolvency law; or if such a petition is filed against LESSEE and is not
dismissed within ninety (90) days; or if a receiver or similar officer becomes
entitled to LESSEE's leasehold hereunder and it is not returned to LESSEE within
ninety (90) days, or if such leasehold is taken on execution or other process of
law in any action against LESSEE;
then in any such case the LESSOR shall have the right thereafter,
while such default continues, to re-enter and take complete possession of the
Leased Premises, to declare the Term of this Lease ended, and remove the
LESSEE's effects at LESSEE's sole cost and expense, without prejudice to any
remedies which might be otherwise used for arrears of rent or other default.
The LESSEE shall indemnify the LESSOR against all loss and reasonable payment of
rent and other payments which the LESSOR may incur by reason of such termination
during the residue of the Term. In the event of default, LESSOR shall use its
reasonable efforts to re-let the Leased Premises so as to mitigate any damages
to the LESSEE hereunder. If LESSEE re-lets the Leased Premises, LESSEE may
offset its payable rent by the amount of rent received by LESSOR.
If the LESSEE shall default, after written notice thereof as
provided herein, in the observance or performance of any conditions or covenants
on its part to be observed or performed under or by virtue of any of the
provisions of this Lease and after the expiration of any
25
<PAGE>
period within which the LESSEE is entitled to cure such default as is provided
above in this Paragraph 18, the LESSOR, without being under any obligation to do
so and without thereby waiving such default, may remedy such default for the
account and at the expense of the LESSEE. If the LESSOR makes any expenditures
or incurs any obligations for the payment of money in connection therewith,
including, but not limited to, reasonable attorney's fees (except for
unsuccessful suits against the LESSEE) in instituting, prosecuting or defending
any action or proceeding, such sums paid or obligations incurred, with interest
at the rate of twelve (12%) percent per annum and costs, shall be paid to the
LESSOR by the LESSEE as additional rent.
Nothing contained in this Lease shall limit or prejudice the right of
LESSOR to claim and obtain in proceedings for bankruptcy, insolvency or like
proceedings 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 claimed or proved,
whether or not the amount be greater, equal to, or less than the amount of the
loss or damages referred to above.
18A. DEFAULT OF LANDLORD AND MORTGAGE RIGHTS. LESSOR shall in no
---------------------------------------
event be in default in the performance of any of LESSOR's obligations hereunder
unless and until LESSOR shall have failed to perform such obligations within
thirty (30) days, or such additional time as is reasonably required to correct
any such default, after receipt of written notice by LESSEE to LESSOR properly
specifying wherein LESSOR has failed to perform any such obligation. LESSEE
agrees to give any mortgagee, by registered mail, a copy of any notice of
default served upon the LESSOR, provided that prior to such notice the LESSEE
has been notified in writing of the identity and address (by way of Notice of
Assignment of Rents and Leases, or otherwise) of the address of such mortgagee.
The LESSEE further agrees that if the
26
<PAGE>
LESSOR shall have failed to cure such default within the time provided for in
this Lease, then the mortgagee shall have an additional sixty (60) 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 sixty (60) days the
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 this Lease shall
not be terminated while such remedies are being so diligently pursued.
18B. BANKRUPTCY OR INSOLVENCY.
------------------------
(a) LESSEE's INTEREST NOT TRANSFERABLE. Neither LESSEE's
----------------------------------
interest in this Lease nor any estate hereby created in LESSEE nor any interest
herein or therein shall pass to any trustee, except as may specifically be
provided pursuant to the Bankruptcy Code (11 USC Sec. 101, et seq.) or to any
-- ---
receiver or assignee for the benefit of creditors or otherwise by operation of
law.
(b) TERMINATION OF LEASE. Notwithstanding anything to the
--------------------
contrary contained in this Lease, in the event the interest or estate created in
LESSEE hereby shall be taken in execution or by other process of law or if
LESSEE or LESSEE's executors, administrators or assigns, if any, shall be
adjudicated insolvent or bankrupt pursuant to the provisions of any state law or
an order for the relief of such entity shall be entered pursuant to the
Bankruptcy Code, or if a receiver or trustee of the property of LESSEE shall be
appointed by reason of the insolvency or inability of LESSEE to pay its debits
or if any assignment shall be made of the property of LESSEE or LESSEE's
guarantor, if any, for the benefit of creditors, then and in any such events
this Lease and all rights of LESSEE hereunder shall automatically cease and
terminate with the same force and effect as though the date of such event were
the date
27
<PAGE>
originally established herein and fixed for the expiration of the Term and
LESSEE shall vacate and surrender the Leased Premises but shall remain liable as
herein provided.
(c) LESSEE's OBLIGATION TO AVOID CREDITORS' PROCEEDINGS. LESSEE shall
---------------------------------------------------
not cause or give cause for the appointment of a trustee or receiver of the
assets of LESSEE and shall not make any assignment for the benefit of creditors
or become or be adjudicated insolvent. The allowance of any petition under any
insolvency law, except under the Bankruptcy Code or the appointment of a trustee
or receiver of LESSEE or LESSEE's guarantor, if any, or of the assets of either
of them, shall be conclusive evidence that LESSEE caused or gave cause therefor,
unless such allowance of the petition or the appointment of a trustee or
receiver is vacated within ninety (90) days after such allowance or appointment.
Any act described in this Paragraph shall be deemed a material breach of
LESSEE's obligations hereunder and this Lease shall thereupon automatically
terminate. LESSEE does, in addition, reserve any and all other remedies
provided in this Lease or in law.
(d) RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY CODE. Upon the filing
------------------------------------------------
of a petition by or against LESSEE under the Bankruptcy Code, LESSEE, as debtor
and as debtor-in-possession, and any trustee who may be appointed agree as
follows: (i) to perform each and every obligation of LESSEE under this Lease
including, but not limited to, the manner of operation of this Lease, until such
time as this Lease is either rejected or assumed by order of the United States
Bankruptcy Court; (ii) to pay monthly in advance, on the first day of each
month, as reasonable compensation for use and occupancy of the Leased Premises,
an amount equal to all fixed annual Base Rent, additional rent and other charges
otherwise due pursuant to this Lease; (iii) to reject or assume this Lease
within sixty (60) days of the appointment of such trustee under Chapter 7 of the
Bankruptcy Code or within one hundred
28
<PAGE>
twenty (120) days (or such shorter Term as LESSOR, in its sole discretion, may
deem reasonable, so long as notice of such period is given) of the filing of a
petition under any other chapter; (iv) to give LESSOR at lease forty five (45)
days' prior written notice of any proceeding relating to any assumption of this
Lease; (v) to give at least thirty (30) days' prior written notice of any
abandonment of the Leased Premises, with any such abandonment to be deemed a
rejection of this Lease and an abandonment of any property not previously
removed from the Leased Premises; (vi) to do all other things of benefit to
LESSOR otherwise required under the Bankruptcy Code; (vii) to be deemed to have
rejected this Lease in the event of the failure to comply with any of the above;
and (viii) to have consent to the entry of any order by an appropriate United
States Bankruptcy Court providing all of the above, waiving notice and hearing
of the entry of same.
No default of this Lease by LESSEE, either prior to or subsequent to
the filing of such a petition, shall be deemed to have been waived unless
expressly done so in writing by LESSOR.
Included within and in addition to any other conditions or obligations
imposed upon LESSEE or its successor in the event of assumption and/or
assignment are the following: (i) the cure of any monetary defaults and the
reimbursement of pecuniary loss immediately upon entry of a court order
providing for assumption and/or assignment; (ii) the deposit of an additional
sum equal to three (3) months' rent to be held as a security deposit; (iii) the
use of the Leased Premises as set forth in the Paragraph 7 of this Lease; (iv)
the payment of any sums which may then be due or which may thereafter become due
under the provisions of this Lease; (v) the debtor, debtor-in-possession,
trustee or assignee of such entity demonstrates in writing that it has
sufficient background, including but not limited to, substantial commercial
experience in buildings of comparable size and financial ability to operate a
commercial establishment out of
29
<PAGE>
the Leased premises in the manner contemplated in this Lease, and meets all
other reasonable criteria of LESSOR as did LESSEE upon execution of this Lease;
(vi) the prior written consent of any mortgagee to which this Lease has been
assigned as collateral security; and (vii) the Leased Premises at all times
remains a single store (if retail) and no physical changes of any kind may be
made to the Leased Premises unless in compliance with the applicable provisions
of this Lease.
Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall, upon demand, execute and
deliver to LESSOR an instrument confirming such assumption in accordance with
the terms of Paragraph 21 hereof.
19. RULES AND REGULATIONS. The LESSOR shall have the right to
---------------------
institute and to change from time to time, rules and regulations for the use of
the Building and the Lot by commercial office lessees, and by commercial retail
lessees, which shall be reasonable in all instances and shall be uniformly
applicable to all commercial lessees in the Building and the LESSEE agrees to
abide thereby.
19A. PARAGRAPH HEADINGS. The paragraph headings throughout this
------------------
instrument are for convenience and reference only, and the words contained
therein shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the provisions of this Lease.
20. BROKER. The LESSOR and LESSEE each represent and warrant to the
------
other that each has had no dealings with any Brokers concerning this Lease,
except ROBERT A.
30
<PAGE>
JONES AND COMPANY and each party agrees to indemnify and hold the other harmless
for any damages occasioned to the other by reason of a breach of this
representation and warranty.
21. ESTOPPEL CERTIFICATE. LESSOR and LESSEE each agree at any time
--------------------
from time to time, upon not less than ten (10) days prior notice to execute,
acknowledge and deliver to the other, a statement in writing, certifying to the
extent possible that this Lease is unmodified and in full force and effect, or
if there have been modifications, that the same is in full force and effect as
modified and stating such modifications, and otherwise certifying if there
exists any default under the terms of this Lease and such other information as
may be reasonably requested concerning this Lease by the other party or any
other third party with a bona fide interest. Should either party fail to
deliver to the other party any such statement within ten (10) days of receipt of
a written notice requesting any such statement, the party failing to deliver any
such statement shall pay to the requesting party, the sum of Five Hundred
($500.00) Dollars per day (as liquidated damages and not as a penalty), for each
day after such tenth (10th) day during which such failure continues.
22. NOTICE. Any notice from the LESSOR to the LESSEE relating to the
------
Leased Premises or to the occupancy thereof shall be deemed duly served, if in
writing and mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to the LESSEE,
COURTNEY P. SNYDER, PRESIDENT
TELECONVERSANT, LTD.
One Kendall Square - Building 400
Cambridge, Massachusetts 02139
Any notice from the LESSEE to the LESSOR relating to the Leased Premises or to
the occupancy thereof, shall be deemed duly served, if in writing and mailed to
the LESSOR by registered or certified mail, return receipt requested, postage
prepaid, addressed to the LESSOR
31
<PAGE>
at such address as the LESSOR may from time to time advise in writing, the
following now being designated:
OLD CAMBRIDGE REALTY TRUST
The Athenaeum Group
215 First Street
Cambridge, Massachusetts 02142-1268
and
Old Kendall Realty Trust
The Athenaeum Group
215 First Street
Cambridge, Massachusetts 02142-1268
23. SURRENDER. The LESSEE shall at the expiration or other
---------
termination of this Lease yield up and peaceably surrender all portions of the
Leased Premises to LESSOR and shall remove all LESSEE's goods and effects
therefrom (including, without hereby limiting the generality of the foregoing,
all signs and lettering affixed or painted by the LESSEE, either inside or
outside the Leased Premises). LESSEE shall deliver to the LESSOR the Leased
Premises and all keys, locks thereto, and all fixtures, alterations and
additions made to or upon the Leased Premises, except for moveable partitions
and furnishings installed at the LESSEE's expense, in the same condition as they
were at the commencement of the Term, or as they were put in during the Term
hereof, reasonable wear and tear and damage by fire, other casualty or eminent
domain and matters for which the LESSOR is responsible hereunder only excepted.
All moveable partitions and furnishings, installed in the Leased Premises at the
LESSEE's expense prior to or during the Term of the Lease may be removed by the
LESSEE at the expiration or other termination of the Lease. The LESSEE shall,
at its expense, promptly repair any and all damage to the Leased Premises
resulting from such removal. In the event of the LESSEE's failure to remove any
of the LESSEE's property from the Leased Premises, LESSOR is hereby authorized,
upon fifteen (15) days written notice to the LESSEE without liability to LESSEE
for
32
<PAGE>
loss or damage thereto, and at the sole risk of LESSEE, to remove and store
and/or sell any of the property at LESSEE's sole cost and expense.
24. OPTION TO EXTEND. If the LESSEE is not then in default, LESSOR
----------------
does hereby grant to LESSEE the option to extend this Lease for one (1)
additional five (5) year term, commencing on the expiration of the Initial Term
upon the same terms and conditions as herein contained except the annual Base
Rent set forth in Paragraph 4 hereof shall be at the rate set forth below. The
option shall be exercised by written notice from LESSEE and received by LESSOR
at least six (6) months prior to the expiration of the Initial Term. The annual
Base Rent for the Extended Term shall be adjusted at the commencement of the
Extended Term and shall be at the annual Base Rent of the Initial Term increased
by One Dollar per rentable square foot per year for each year of the Extended
Term.
25. TERMINATION OF PRIOR LEASE. Upon Commencement of this Lease, or,
--------------------------
if LESSEE has not yet vacated its space in Building 300, upon two (2) weeks
written notice from LESSEE to LESSOR of LESSEE's intent to terminate the
Building 300 Lease, the Prior Lease between TELECONVERSANT, LTD., and OLD
CAMBRIDGE REALTY TRUST dated February 23, 1987 (First Addendum to Lease dated
July 11, 1990, Second Addendum to Lease dated September 21, 1992, Third Addendum
to Lease dated March 29, 1993, Fourth Addendum to lease dated January 24, 1994,
and Fifth Addendum to lease dated June 19, 1995) shall automatically be
terminated. Upon this Termination Date the LESSEE shall vacate the Building 300
space occupied via the Prior Lease and all future obligations on the part of
either party with regard to the Prior Lease shall cease. Any outstanding
charges due as of this date shall be paid simultaneous with the execution of
this Lease.
33
<PAGE>
26. MISCELLANEOUS.
-------------
(a) If LESSEE has not provided them to LESSOR prior to the
execution of this Lease, LESSEE shall submit annual financial statements to the
LESSOR containing statements of cash flows. If the LESSEE is a publicly traded
corporation it shall supply LESSOR, on a quarterly basis, with its 10Q filings.
If such information has been heretofore provided, then this annual provision
will not be required.
(b) The LESSOR reserves the right to assign or transfer any and
all of its right, title and interest under the Lease, including but not limited
to the benefit of all covenants of the LESSEE hereunder. Notwithstanding
anything contained in this Lease to the contrary, it is specifically understood
and agreed that the obligations imposed upon the LESSOR hereunder shall be
binding upon the LESSOR and LESSOR's successors in interest only with respect to
breaches occurring during LESSOR's and LESSOR's successors' ownership of
LESSOR's interest hereunder and LESSOR and its successors in interest shall not
be liable for acts and occurrences arising from and after the transfer of their
interest as LESSOR hereunder.
(c) This Lease shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, as the same may from time to
time exist.
(d) This Lease contains all of the agreements of the parties with
respect to the subject matter thereof and supersedes all prior oral and written
negotiations and dealings between them with respect to such subject matter. The
agreement of the parties contained in this Lease shall not be modified or
amended unless such modification or amendment is in writing and signed by the
parties.
34
<PAGE>
(e) The LESSEE acknowledges that LESSEE has not been influenced
to enter into this Lease nor has it relied upon any warranties or
representations not set forth or incorporated in this Lease or previously made
in writing.
The undersigned Trustees of OLD CAMBRIDGE REALTY TRUST do hereby
certify that they each were authorized by all of the beneficiaries of said Trust
to execute and acknowledge the within Lease on behalf of the Trust.
35
<PAGE>
IN WITNESS WHEREOF, the LESSOR AND LESSEE have hereunto set their
hands and common seals this 15th day of February 1996.
OLD CAMBRIDGE REALTY TRUST
/s/ Robert A. Jones /s/ Allan R.
- ------------------------------ ------------------------------
ROBERT A. JONES, Trustee WITNESS
/s/ K. George Najarian /s/ Allan P.
- ------------------------------ ------------------------------
K. GEORGE NAJARIAN, Trustee WITNESS
TELECONVERSANT, LTD.
(LESSEE)
By: /s/ CP Snyder /s/ Mark S. Pashow
--------------------------- ------------------------------
President, duly authorized WITNESS
By: /s/ DJ /s/ Paul B
--------------------------- ------------------------------
Treasurer, duly authorized WITNESS
OLD KENDALL REALTY TRUST
/s/ Robert A. Jones /s/ Allan P.
- ------------------------------ ------------------------------
ROBERT A. JONES, TRUSTEE WITNESS
/s/ K. George Najarian /s/ Elaine M. Gilis
- ------------------------------ ------------------------------
K. GEORGE NAJARIAN, TRUSTEE WITNESS
36
<PAGE>
EXHIBIT 10.27
-------------
Approximately 4345 square feet
STATE OF ALABAMA
MONTGOMERY COUNTY
THIS LEASE AND CONTRACT, made by and between Ropir Communications, a
division of Ropir Industries, Inc. hereinafter called LESSOR and Call Points,
Inc. hereinafter called LESSEE.
WITNESSETH:
1. The Lessor hereby rents and leases to the Lessee the building at 1500
Hunter Loop Road, in the City of Montgomery, in Montgomery County, Alabama, to
be used by the lessee as offices and for no other use or purpose whatsoever, for
and during the term dated from the 1st day of May 1995 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 Four thousand Five
------------------
hundred and No/100 ($4500.00) Dollars on the first day of each month in advance
- -----------------------------
during said term, being at the rate of Fifty-four Thousand and No/100
------------------------------
($54000.00) Dollars per annum.
- -----------
3. The Lessee agrees to comply with all the City laws in regard to
nuisances insofar as the premises hereby leased are concerned, and by no act
render the Lessor liable therefor. The Lessee agrees to comply with reasonable
rules and regulations as may hereafter be substituted or adopted by Lessor, and
Lessee agrees that lessee will cause all employees and other persons using or
about the leased premises to comply with all rules and regulations for said
building.
4. The Lessee hereby acknowledges that said leased premises are received
in good condition, and agrees to pay the cost of replacing all glass broken by
the Lessee or agents or employees of Lessee, and to further maintain such leased
premises 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 make good to the Lessor upon demand any damage to the heating, air
conditioning, or fixtures or appurtenances due to the act of negligence of the
Lessee, or the agent or employees of the Lessee and to permit no waste of the
leased premises 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 premises in like good order as
at the commencement of said term, normal wear and tear excepted.
<PAGE>
5. It is agreed that Lessee shall not have the right or power to
sublease said leased premises or any part thereof or to transfer or assign this
Lease or permit the use of any part of said leased premises by others without
the written consent of the Lessor hereon endorsed; the Lessee shall not use or
permit to be used the leased premises for any other purpose than as herein
leased premises without the written consent of Lessor and all additions,
fixtures and improvements which may be made in and become and be the property of
Lessor and shall remain upon and be surrendered with the leased premises and as
a part thereof at the expiration of said term, except as may be otherwise agreed
in writing.
6. The Lessee covenants with the Lessor that the furniture, goods and
effects with which said leased premises are furnished shall be owned by Lessee
in lessee's own right (except for furnishings, including carpeting, drapery and
other items provided by Lessor) and that the same shall not be encumbered except
as subject to the lien and right of the Lessor. In addition, Lessee agrees
during the term of this lease, at its own cost and expense to keep all
furniture, fixtures and equipment, whether supplied or owned by Lessee or by
Lessor, and in addition all glass forming a part of the leased premises,
including but not limited to plate glass insured to the extent of eighty (80%)
per cent of its full insurable value thereof against loss or damage by fire or
other casualty, with extended coverage. Lessee agrees that said insurance and
all other insurance carried by Lessee shall contain a waiver of subrogation
against Lessor. Lessee further agrees to carry at its own expense, comprehensive
public liability insurance coverage on the leased premises, with contractual
liability endorsement in a company qualified to transact business in Alabama.
7. 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 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.
8. The Lessee is responsible for all clerks, employees or other persons
whom the Lessee permits to be in or about the leased premises, and is liable for
any injury or damage done by them the same as if done by the Lessee.
9. 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).
<PAGE>
IN WITNESS WHEREOF, the Lessor and Lessee have hereunto executed this Lease
on the day and year first above written.
LESSOR:
Ropir Communications, a division of Ropir
Industries, Inc.
/s/ Billie Pirnie
-----------------------------------------
Billie Pirnie, President
LESSEE:
Call Points, Inc.
/s/ Larry C. Grogan
-----------------------------------------
Larry C. Grogan, Executive Vice President
<PAGE>
EXHIBIT 10.28
-------------
Amendment to Lease
between
Ropir Communications, a division of Ropir Industries, Inc. and Call Points, Inc.
with original term beginning May 1, 1995
As of November 12, 1997, the Lessor, Lessee and Assignee agree to the terms
and provisions set forth herein:
1. All terms shall have the meaning set forth in the Lease, unless otherwise
indicated. The parties hereto ratify and confirm the terms of the existing
lease, expect as may be amended by this amendment. This amendment shall be
effective as of the Effective Time (as defined in the Agreement).
2. Lessee has entered into an Agreement with Call Points Acquisition
Corporation (the "Assignee) dated October 17, 1997 (the "Agreement") relating
to the purchase of certain assets of Call Points, Inc.
3. Lessor makes and confirms to Assignee and Lessee as of the date hereof,
that Lessor is the owner of the Leased Premises and that the following facts as
to said lease are true and correct.
a. The lease is in full force and effect and Lessee is not in default.
b. The next rental payment is due on November 1, 1997, and is in the
amount of $5,400.
c. Lessee is not in arrears in payment of rent.
d. The aforesaid lease has not been modified, altered or amended except
as set forth in this amendment.
e. Other than the obligations contained in said lease as it maybe amended
by this amendment (the "Lease Obligations"), Lessee has executed no promissory
note, security agreement, purchase agreement running in favor of Lessor.
f. Lessee is not in default on the Lease Obligations.
<PAGE>
4. The Lessor, Lessee and Assignee agree that the existing lease is amended as
follows:
a. That the Lessor or Assignee may terminate the lease upon sixty (60)
days written notice to the Assignee or Lessor, as the case maybe.
b. That Lessor shall have Six (6) Months to remove miscellaneous
equipment and records stored in the rear warehouse portion of the leased
premises.
5. Lessor consents to the assignment by Call Points to Call Points Acquisition
Corporation of the lease and the assumption by Call Points Acquisition
Corporation of the Lease Obligations.
6. Assignee as of the closing date set forth in the Agreement does hereby
assume the Lease Obligations.
7. Lessor does hereby release Call Points from the Lease Obligations.
ROPIR INDUSTRIES, INC. CALL POINTS ACQUISITION
CORPORATION
By: \s\Billie Pirnie By:\s\Glenn D. Bolduc
----------------------- --------------------------
Its President Its President
Date: Date:
-------------- ---------------
CALL POINTS, INC.
By: \s\Billie Pirnie
----------------------
Its President
Date:
--------------
<PAGE>
EXHIBIT 10.29
-------------
WASCO FUNDING CORP.
150 East 58th Street
New York, NY 10156
TEL: (212) 751-3673
FAX: (212) 753-4784
MASTER LEASE SCHEDULE NO. 16723.1 to Equipment Lease No. 16723 dated
_________________________, between WASCO FUNDING CORP. ("Lessor") and KENDALL
SQUARE TELECONFERENCING, INC. ("Lessee").
LESSEE'S NAME AND ADDRESS: LOCATION OF EQUIPMENT IF
OTHER THAN AT LESSEE'S ADDRESS:
Kendall Square Teleconferencing, Inc.
1 Kendall Square Bldg. 600
Cambridge, MA 02139
EQUIPMENT DESCRIPTION: (Describe fully.)
1 - Multilink system 70 Audio Teleconferencing system with 96 port configuration
TERM: 48 months
RENTAL: $3,464.94 per month
USE TAX: $ 173.25 per month
TOTAL PAYMENT: $3,638.18 per month
ADVANCE RENTALS: $7,276.36, payable at the time of signing this lease to
be applied to the first and the last one month Rental payments.
LESSOR HEREBY AGREES TO LEASE TO LESSEE, AND LESSEE HEREBY AGREES TO LEASE FROM
LESSOR, THE EQUIPMENT LISTED ABOVE OR ON ANY EXHIBIT HERETO, FOR THE TERM AND AT
THE RENTAL SET FORTH ABOVE, ALL SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN
THE LEASE.
LESSOR: WASCO FUNDING CORP. LESSEE: Kendall Square
Teleconferencing, Inc.
BY: /s/ David McKay, Mgr. BY: /s/ Courtney Snyder
------------------------- ---------------------------
Accepted: July 31, 1997 Dated: July 23, 1997
<PAGE>
EXHIBIT 10.30
-------------
SUBLEASE
--------
THIS SUBLEASE made as of the 20th day of August, 1997 by and between Eisai
Research Institute of Boston, Inc., a Massachusetts corporation (hereinafter
called "Sublessor"), and Vialog Corporation, a Massachusetts corporation
(hereinafter called "Sublessee").
WHEREAS, Sublessor is the tenant under a certain Lease dated as of July 2nd,
1996 (the "Prime Lease") wherein Connecticut General Life Insurance Company on
behalf of its Separate Account R (the "Prime Landlord") is the landlord with
respect to the premises being 2623 rentable square feet of space on the third
(3rd) floor of the building known and numbered as 10 New England Business
Center, Andover, Massachusetts (the "Building") which premises are shown on the
floor plan attached to the Prime Lease (hereinafter referred to as the "Demised
Premises"); and
WHEREAS, the parties desire to enter into a sublease of the Demised Premises
upon the terms, provisions and conditions herein contained.
NOW, THEREFORE, it is agreed as follows:
1. Sublessor does hereby lease and demise to Sublessee the Demised Premises
together with all the rights and benefits of the Sublessor under the Prime
Lease.
2. Sublessee shall pay to Sublessor Annual Base Rent in the amount of Forty-
Nine Thousand Eight Hundred Thirty-Seven and No/100 Dollars ($49,837.00)
per annum (Nineteen and No/100 Dollars [$19.00] per square foot of Rentable
Floor Area of the Demised Premises).
Said Annual Base Rent shall be paid in equal monthly installments, payable
in advance on the first day of each and every month, or prorated for any
partial month, commencing on the Commencement Date (as hereinafter
defined).
3. The term of this Sublease shall commence on September 1, 1997 (the
"Commencement Date") and shall expire on May 31, 1999, unless sooner
terminated as herein provided.
4. The Sublessee hereby agrees to perform each and every obligation on the
part of the Sublessor contained in the Prime Lease, insofar as the same
relates to the Demised Premises. Sublessee shall deliver to Sublessor
certificates of insurance listing Sublessor as an additional insured at the
time Sublessor is required under the Prime Lease to deliver policies or
certificates of insurance to Prime Landlord.
5. The Sublessee agrees to do nothing that would violate any term, provision
and condition of said Prime Lease.
<PAGE>
6. In the event of any default hereunder by the Sublessee, or in the event of
any default under said Prime Lease caused by the act or omission of said
Sublessee and, if any of such defaults shall continue for a period of
fifteen (15) days or more (or such shorter period, but not less than five
[5] days, as shall remain before the expiration of the cure period provided
under the Prime Lease), after written notice from the Sublessor to the
Sublessee designating the nature of the default complained of; or , in the
event of any bankruptcy or insolvency of the Sublessee, or the commencement
of any proceeding by the Sublessee under any such bankruptcy or insolvency
law, State or Federal, now or hereinafter enacted; or, in the event of any
involuntary proceeding brought against the Sublessee under any such
bankruptcy or insolvency laws, if such proceeding is not dismissed within
forty-five (45) days of its filings; or, in the event that the Sublessee
shall make an assignment for the benefit of creditors by way of trust
mortgage or otherwise, or if any attachment shall be made of this leasehold
by mesne process which shall not be discharged within thirty (30) days
after written notice from Sublessor to the Sublessee, then and in any such
case, the Sublessor may terminate this sublease by giving notice of
termination to the Sublessee and this sublease shall thereupon determine on
the third day after the date of such notice and the Sublessee covenants to
indemnify and hold harmless the Sublessor from and against all loss of rent
or other payments which the Sublessor may incur by reason of such
termination including reasonable attorney's fees, from time to time upon
demand of the Sublessor.
During the term hereof said Sublessee shall maintain the Subleased Premises
and at the expiration or prior termination of said term, yield the same up
in good repair, order and condition in all respects, reasonable wear and
use, damage by fire and casualty only excepted.
Sublessee shall have responsibility to maintain the heating, ventilation,
air-conditioning, plumbing and electrical systems serving the Demised
Premises to the same extent as the Sublessor is required to so maintain the
same under the Prime Lease.
Sublessee agrees that all of its goods and effects are on the Demised
Premises at its sole risk and expense and the Sublessor shall not be liable
for any loss of such goods or effects for any reason whatsoever.
7. If said Prime Lease shall terminate for any reason whatsoever, this
Sublease shall terminate without liability on the part of the Prime
Landlord or Sublessor. Sublessor agrees not to enter into a voluntary
termination of said Prime Lease.
8. The Sublessor shall have no obligation to provide any services, utilities
or the like. All of the same shall be provided by the Prime Landlord as
provided in the Prime Lease or by the Sublessee. Sublessee shall pay for
certain services as provided in Paragraph 14 hereof.
9. It is expressly understood and agreed that the Sublessee may not assign
this Sublease or sublet all or any portion of the Demised Premises or
permit any person, firm or corporation to occupy any portion of the Demised
Premises as licensee or in any other fashion without the prior written
consent of the Sublessor. Sublessor agrees not to
2
<PAGE>
unreasonably withhold its consent to an assignment of this Sublease or a
sublease of a portion of the Demised Premises provided that: (a) Sublessee
is not in default of any obligation hereunder; (b) Sublessor determined in
its sole discretion that the proposed assignee or sublessee (i) is a first-
class office establishment and would use the Demised Premises solely for
the uses permitted under the Prime Lease, and (ii) has a financial standing
acceptable to Sublessor as evidenced by financial statements in scope and
substance satisfactory to Sublessor and in conformity with generally
accepted accounting principles and, if requested by Sublessor, certified by
a certified public accountant acceptable to Sublessor; and (c) the rent
charged by Sublessee on a square footage basis shall not be less than the
Annual Base Rent and additional rent due hereunder, on a square footage
basis. In the case of an assignment, the proposed assignee must
specifically assume and agree in writing to be bound by all of the
obligations of the Sublessee hereunder.
10. The Sublessee agrees to hold harmless and indemnify the Sublessor of and
from all damages, costs and expenses and losses which the Sublessor may
incur under the Prime Lease or for which Sublessor may be liable to Prime
Landlord by reason of the Sublessee's default hereunder which are the
subject matter of any indemnity or hold harmless of Sublessor to Prime
Landlord under the Prime Lease or which would constitute a default on the
part of the Sublessor under said Prime Lease. The Sublessor agrees to hold
harmless and indemnify the Sublessee of and from all damages, costs and
expenses which the Sublessee may incur under the Prime Lease or for which
Sublessee may be liable to Prime Landlord by reason of Sublessor's default
hereunder which are the subject matter of any indemnity or hold harmless of
Sublessor to Prime Landlord under the Prime Lease would constitute a
default of the Sublessor under the Prime Lease.
11. The Sublessee shall indemnify and hold harmless the Sublessor from and
against the claims and demands of all persons on account of injury to
person, including death and including employees of the said Sublessee or
damage to property occurring on or in the Demised Premises unless such
injury or damage shall be due solely to the act of the Sublessor or its
employees.
12. Sublessee shall pay for any additional insurance premiums which shall be
charged to Sublessor by reason of Sublessee's occupancy of the Subleased
Premises.
13. The Sublessee agrees that Sublessee has inspected the Demised Premises,
found the same to be acceptable in all respects, and acknowledges that
neither of Prime Landlord nor Sublessor shall have any responsibility to
make repairs or improvements to comply with Sublessor's obligations to
deliver the Subleased Premises to the Sublessee. Any alterations or
additions to the Demised Premises shall be at the sole expense of the
Sublessee and shall require the approval of the Sublessor (and the Prime
Landlord if required under the terms of the Prime Lease). By acceptance of
this Sublease, Sublessor agrees that any alterations or additions approved
by Prime Landlord and Sublessor need not be removed at the termination of
the Prime Lease or Sublease unless such removal is made a condition of such
approval. Sublessee has advised Sublessor that it intends to subdivide the
existing conference room in the Demised Premises to create two individual
3
<PAGE>
offices by installing a non-structural partition wall. Subject to
Sublessor's review and approval of architectural plans therefore, and
reserving it rights to condition its approval on the subsequent restoration
of the Demised Premises, the Sublessor acknowledges that it has no
objection to Sublessee's proposed alterations as aforesaid.
14. Without limiting the generality of Section 4 of this Sublease, Sublessee
agrees to pay to the Sublessor the following:
(a) all charges for electricity as set forth in Section 4.4 of the Prime
Lease;
(b) Tenant's Share of Premises Expenses as set forth in Section 4.2 of the
Prime Lease, including any Estimated Premises Expense Payments
required under Section 4.3 of the Prime Lease.
All of the foregoing payments shall be made by the Sublessee at the time
and in the manner required of Sublessor under the Prime Lease.
15. Sublessee shall pay to Sublessor a security deposit of Eight Thousand Three
Hundred Six and 16/100 Dollars ($8,306.16) (the "Deposit") which Deposit
shall be held by Sublessor without interest as security for the faithful
performance by Sublessee of all of the terms of this Sublease by Sublessee
to be observed and performed. If Sublessee defaults and said default is
not cured within any applicable cure period under any of the terms of this
Sublease, Sublessor may, at its option and without prejudice to any other
remedy, apply all or any portion of the Deposit to the loss suffered by
Sublessor as a result of such default and Sublessee shall forthwith upon
demand restore the Deposit to the original sum deposited. If Sublessee
elects to so apply all or any portion of the Deposit as aforesaid, it shall
notify Sublessee of such application within a reasonable period of time
thereafter. Should Sublessee comply with all of the terms of this
Sublease, the Deposit will be returned to Sublessee at the end of the term
of this Sublease.
16. Sublessor and Sublessee each represent to the other that no broker was
involved in the transaction reflected by this Sublease except Trammel Crow
Company, and each of Sublessor and Sublessee agree to indemnify the other
party against any loss resulting from breach of this representation.
Sublessor shall be responsible for the commission to be paid to Trammel
Crow Company in connection with this Sublease in the amount of Six Thousand
Five Hundred and Fifty-Seven and 50/100 Dollars ($6,557.50).
17. This Sublease is subject and subordinate to the Prime Lease. Whenever any
obligation on the part of Sublessor under this Sublease is, in fact, an
obligation to be performed by the Prime Landlord under the Prime Lease,
Sublessor's liability herein shall be to use reasonable efforts to obtain
performance by such party. If, notwithstanding Sublessor's reasonable
efforts, such party shall fail to perform any of its obligations as
aforesaid, Sublessee may, in Sublessor's name but at Sublessee's expense,
seek to enforce such party's obligations. Sublessor agrees to use
reasonable efforts to arrange for Sublessee's name to be added by Prime
Landlord to the Tenant directory in the Main Lobby of the
4
<PAGE>
Building and at the entranceway door to the Demised Premises. Any
reasonable costs associated therewith shall be borne by Sublessor.
18. No oral agreement or prior written matter shall have any force or effect.
Sublessee agrees that it is not relying on any representations or
agreements other than those contained in this Sublease. This Sublease
shall not be modified or cancelled except by a writing executed by
Sublessor and Sublessee.
19. All notices required or permitted hereunder shall be given to the parties
in the manner provided in the Prime Lease addressed as follows:
if addressed to Sublessor:
Eisai Research Institute of Boston, Inc.
One Corporate Drive
Andover, MA 01810
Attn: President
with a copy to:
Yutaka Ishizaka, Director
Lampert-Ishizaka Associates
79 Miller Avenue
Tarrytown, NY 10591
further with a copy to:
Jonathan L. Moll, Esq.
Jeffrey L. Musman, Esq.
Goldstein & Manello, P.C.
265 Franklin Street
Boston, MA 02110
if addressed to Sublessee:
Vialog Corporation
10 New England Business Center, Suite 302
Andover, MA 01810 until the
Commencement Date and, thereafter, at
the Demised Premises
5
<PAGE>
with a copy to:
Jeffrey L. Donaldson, Esq.
Mirick, O'Connell, DeMallie & Lougee
1700 Bank of Boston Tower
Worcester, MA 01608
Sublessor and Sublessee agree promptly to deliver a copy to the other of
any notice, demand, request consent or approval from such party to Prime
Landlord or received from Prime Landlord.
20. Sublessee, subject to the terms and provisions of the Sublease and on
payment of the rent and observing, keeping and performing all of the terms
and provisions of this Sublease on its part to be observed, kept and
performed, shall lawfully, peaceably and quietly have, hold, occupy and
enjoy the Demised Premises during the term hereof without hindrance or
ejection by any persons lawfully claiming under Sublessor.
21. Sublessor represents to Sublessee to its knowledge that:
(a) the Prime Lease is, as of the date hereof, in full force and effect;
and
(b) no event of default has occurred under the Prime Lease and no event
has occurred and is continuing which would constitute an event of
default but for the requirement of the giving of notice and/or the
expiration of the period of time to cure.
22. This Sublease shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts.
23. This Sublease and the obligations of the parties herewith are expressly
conditioned upon Sublessor's obtaining prior written consent hereto by
Prime Landlord. Sublessee shall promptly deliver to Sublessor any
information reasonably requested by Prime Landlord in connection with its
approval of this Sublease.
It is expressly understood and agreed that no shareholder, officer or
director of the Sublessor shall ever be personally or individually liable
for the obligation of the Sublessor hereunder.
6
<PAGE>
EXECUTED under seal the day and year first above written.
EISAI RESEARCH INSTITUTE
OF BOSTON, INC.
By:/S/
-----------------------------------
VIALOG CORPORATION
By:/S/ Glenn D. Bolduc
-----------------------------------
President & CEO
CONSENT
-------
The undersigned, Connecticut General Life Insurance Company, on behalf of its
Separate Account R, being the landlord under the Prime Lease above referenced,
hereby grants its consent to this Sublease, subject to the following terms,
conditions, provisions and agreements:
(1) Neither the Sublease, nor this consent thereto, shall:
(a) Release or discharge Sublessor from any liability, whether past,
present or future, under the Prime Lease.
(b) Be construed to modify, waive or affect any of the terms, covenants,
conditions, provisions or agreements of the Prime Lease, or any of our
rights thereunder, or to enlarge or increase our obligations
thereunder.
(c) Be construed as a consent by us to any further subletting by either
Sublessor or Sublessee or to any assignment by the Sublessee of the
Sublease, whether or not the Sublease purports to permit the same and,
without limiting the generality of the foregoing, both Sublessor and
the Sublessee agree that the Sublessee has no right whatsoever to
assign, mortgage or encumber the Sublease; nor to sublet any portion
of the Demised Premises or permit any portion of the Demised Premises
to be used or occupied by any other party; in connection therewith,
both Sublessor and the Sublessee agree that an assignment by operation
of law or a transfer of control of Sublessee (including, but not
limited to, transfer of the controlling interest of the stock of
Sublessee, if Sublessee is a corporation) shall be deemed to a
prohibited assignment hereunder.
(2) In the event of Sublessor's default under the provisions of the Prime
Lease, the rent due from the Sublessee under the Sublease shall be deemed
assigned to us; and we shall have the right, under such default, at any
time, at our option, to give notice of such assignment
7
<PAGE>
to the Sublessee. *We shall credit Sublessor with any rent received by us
under such assignment but the acceptance of any payment on account of rent
from the Sublessee as the result of any such default shall in no manner
whatsoever be deemed an attornment by the Sublessee to us **in the absence
of a specific written agreement signed by us to such an effect, or serve to
release Sublessor from any liability under the terms, covenants,
conditions, provisions or agreements under the Prime Lease.
(3) Sublessor and Sublessee agree and acknowledge that our consent herein shall
not create nor be deemed to be the basis of creating any covenant,
representation, or warranty, express or implied, on our part with respect
to the terms of the Sublease, Sublessee's use and enjoyment of the Demised
Premises, or any other matter arising out of or in connection with the
Sublease.
(4) This consent is not assignable; nor shall this consent be a consent to any
amendment, or modification of the Sublease, without our prior written
consent.
(5) Notwithstanding the provisions of the Prime Lease to the contrary, the
undersigned (i) waives its rights under Section 6.1.6 of the Prime Lease to
terminate the Prime Lease and (ii) agrees that any amounts received by
Sublessor from Sublessee in excess of Annual Base Rent and additional rent
under the Prime Lease need only by paid by Sublessor to Prime Landlord at
the end of each lease year of the Term of the Prime Lease.
(6) To the undersigned's knowledge the Prime Lease is, as of the date hereof,
in full force and effect and no event of default has occurred under the
Prime Lease and no event has occurred and is continuing which would
constitute an event of default but for the requirement of the giving of
notice and/or the expiration of the period of time to cure.
8
<PAGE>
(7) Sublessee has advised Sublessor and Prime Landlord that it intends to
subdivide the existing conference room in the Demised Premises to create
two (2) individual offices by installing a nonstructural partition wall.
Subject to Prime Landlord's review and approval of architectural plans,
therefore, and reserving its rights to condition its approval on the
subsequent restoration of the Demised Premises, the Prime Landlord
acknowledges that it has no objection to Sublessee's proposed alteration,
as aforesaid.
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
on behalf of its Separate Account R
By: CIGNA Investments, Inc.
By:/S/ James H. Rogers
----------------------------------------
James H. Rogers
Managing Director
*Upon such notice and until further notice, Sublessee shall pay all rent and
other amounts owing hereunder directly to us as instructed in such notice.
**or our recognition of Sublessee as the successor to Sublessor as tenant under
the Prime Lease.
9
<PAGE>
EXHIBIT 12.1
VIALOG CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF
EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
Unaudited Proforma Combined
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, 1996 September 30, 1997
- --------------------------------------------------------------------------------
<S> <C>
FIXED CHARGES AS DEFINED:
(1) Interest on long-term debt
$12,637 $9,596
- --------------------------------------------------------------------------------
(2) Total Fixed Charges
$12,637 $9,596
================================================================================
EARNINGS AS DEFINED:
(3) Loss from continuing operations
($10,844) ($9,683)
(4) Income taxes for continuing
operations
(540) --
(5) Total Fixed Charges
12,637 9,596
- --------------------------------------------------------------------------------
(6) Income From Continuing
Operations Before Income
$1,253 (87)
Taxes and Fixed Charges
================================================================================
RATIO OF EARNINGS TO FIXED CHARGES
(line 6 divided by line 2) (a)
0.10 N/A
================================================================================
COVERAGE DEFICIENCY:
($11,384) ($9,683)
================================================================================
(a) Earnings are inadequate to cover
fixed charges
</TABLE>
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Company
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Name State of d/b/a Name
Incorporation
- ---------------------------------------------------------------------------------------
<S> <C> <C>
* 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, Inc. Delaware None
</TABLE>
<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.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
January 8, 1998
<PAGE>
EXHIBIT 25.1
------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
VIALOG CORPORATION
(Exact name of obligor as specified in its charter)
MASSACHUSETTS 04-3305282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 New England Business Center, Suite 302
Andover, MA 01810
(Address of principal executive offices) (Zip Code)
Senior Notes
(Title of indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents specified
in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 6th day of January, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Roland S. Gustafsen
---------------------------------------
NAME: Roland S. Gustafsen
TITLE: Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Vialog
Corporation of its Senior Notes, we hereby consent that reports of examination
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Roland S. Gustafsen
----------------------------------------
NAME: Roland S. Gustafsen
TITLE: Assistant Vice President
Dated: January 6, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1997,
------------------
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............... 1,380,475
Interest-bearing balances ........................................ 8,821,855
Securities ................................................................ 10,461,989
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary .............................. 6,085,138
Loans and lease financing receivables:
Loans and leases, net of unearned income ......................... 5,597,831
Allowance for loan and lease losses .............................. 79,416
Allocated transfer risk reserve .................................. 0
Loans and leases, net of unearned income and allowances .......... 5,518,415
Assets held in trading accounts ........................................... 917,895
Premises and fixed assets ................................................. 390,028
Other real estate owned ................................................... 779
Investments in unconsolidated subsidiaries ................................ 34,278
Customers' liability to this bank on acceptances outstanding .............. 83,470
Intangible assets ......................................................... 227,659
Other assets .............................................................. 1,969,514
--------------
Total assets .............................................................. 35,891,495
==============
LIABILITIES
Deposits:
In domestic offices .............................................. 8,095,559
Noninterest-bearing ..................................... 5,962,025
Interest-bearing ........................................ 2,133,534
In foreign offices and Edge subsidiary ........................... 14,399,173
Noninterest-bearing ..................................... 86,798
Interest-bearing ........................................ 14,312,375
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .............................. 7,660,881
Demand notes issued to the U.S. Treasury and Trading Liabilities .......... 1,107,552
Other borrowed money ...................................................... 589,733
Subordinated notes and debentures ......................................... 0
Bank's liability on acceptances executed and outstanding .................. 85,600
Other liabilities ......................................................... 1,830,593
Total liabilities ......................................................... 33,769,091
--------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus.............................. 0
Common stock .............................................................. 29,931
Surplus ................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains
(losses) ................................................................. 1,660,158
Cumulative foreign currency translation adjustments........................ (4,868)
Total equity capital....................................................... 2,122,404
--------------
Total liabilities and equity capital ...................................... 35,891,495
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is
in default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary,
to reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 6th day of January, 1998.
STATE STREET BANK AND TRUST COMPANY
By: Roland S. Gustafsen
------------------------------------
NAME: Roland S. Gustafsen
TITLE: Assistant Vice President
6
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VIALOG
CORPORATION FINANCIAL STATEMENTS FOR THE YEAR END DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> SEP-30-1996 SEP-30-1997
<CASH> 337 76
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 727 162
<PP&E> 7 30
<DEPRECIATION> 0 (5)
<TOTAL-ASSETS> 1,263 996
<CURRENT-LIABILITIES> 976 4,586
<BONDS> 0 0
0 0
0 0
<COMMON> 28 28
<OTHER-SE> 259 (3,618)
<TOTAL-LIABILITY-AND-EQUITY> 1,263 996
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 1,308 3,898
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1) 110
<INCOME-PRETAX> (1,307) (4,008)
<INCOME-TAX> 522 0
<INCOME-CONTINUING> (785) (4,008)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (785) (4,008)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
