<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1996
REGISTRATION NO. 333-13459
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
VIEW TECH, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 6676 77-0312442
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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950 FLYNN ROAD
CAMARILLO, CA 93012
(805) 482-8277
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ROBERT G. HATFIELD
VIEW TECH, INC.
950 FLYNN ROAD
CAMARILLO, CA 93012
(805) 482-8277
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
<TABLE>
<S> <C> <C>
V. JOSEPH STUBBS, ESQ. HOWARD J. KERN, ESQ. ROBERT C. RIVES, JR., ESQ.
THOMAS B. YOUTH, ESQ. LAW OFFICES OF SUSAN M. BARNARD, ESQ
BROBECK, PHLEGER & HARRISON LLP HOWARD J. KERN BURNS & LEVINSON LLP
550 S. Hope Street 4057 Rhodes Avenue 125 Summer Street
Los Angeles, CA 90071-2604 Studio City, CA 91604 Boston, MA 02110-1624
(213) 489-4060 (818) 980-8284 (617) 345-3000
---------------
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
UPON CONSUMMATION OF THE MERGER DESCRIBED HEREIN AND AFTER THE EFFECTIVE DATE
OF THIS REGISTRATION STATEMENT.
If any of 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. [ ]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 2
VIEW TECH, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------ ----------------------
(Information About the Transaction)
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . . . . Facing Page; Cross-Reference Sheet; Outside Front
Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . . . . Inside Front and Outside Back Cover Pages
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information . . . . . . . . . . . . . . . . . . Summary; Summary Financial Data of View Tech;
Summary Financial Data of UST; Unaudited Pro
Forma Combined Summary Financial Data; Pro Forma
Per Share Data; Risk Factors; The Joint Proxy
Proposal--The Merger; The Joint Proxy Proposal--
Terms of the Merger Agreement; The Joint Proxy
Proposal--Summary Financial Data of View Tech;
The Joint Proxy Proposal--View Tech Management's
Discussion and Analysis or Plan of Operations;
The Joint Proxy Proposal--Selected Financial Data
of UST; The Joint Proxy Proposal--UST
Management's Discussion and Analysis or Plan of
Operations; Unaudited View Tech Pro Forma
Condensed Combined Financial Data
4. Terms of the Transaction . . . . . . . . . . . . . . . Summary; The Joint Proxy Proposal--The Merger;
The Joint Proxy Proposal--Terms of the Merger
Agreement; The Joint Proxy Proposal--View Tech
Management's Discussion and Analysis or Plan of
Operations; The Joint Proxy Proposal--Business of
View Tech; The Joint Proxy Proposal--UST
Management's Discussion and Analysis or Plan of
Operations; The Joint Proxy Proposal--Business of
UST; The Joint Proxy Proposal--Comparison of
Rights of Holders of View Tech and UST Common
Stock; The Joint Proxy Proposal--Description of
View Tech Capital Stock
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-4 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------ ----------------------
<S> <C>
5. Pro Forma Financial Information . . . . . . . . . . . Unaudited Pro Forma Combined Summary Financial
Data; Pro Forma Per Share Data; Unaudited View
Tech Pro Forma Condensed Combined Financial Data
6. Material Contacts with the Company Being
Acquired . . . . . . . . . . . . . . . . . . . . . . . Risk Factors; The Joint Proxy Proposal--The
Merger; The Joint Proxy Proposal--Terms of the
Merger Agreement; The Joint Proxy Proposal--UST
Management Continuing After the Merger; The Joint
Proxy Proposal--UST Security Ownership of Certain
Beneficial Owners and Management
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters . . . . *
8. Interests of Named Experts and Counsel . . . . . . . . The Joint Proxy Proposal--The Merger; The Joint
Proxy Proposal--Legal Matters; The Joint Proxy
Proposal--Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities . . . . . . . . . . . . Securities and Exchange Commission Position on
Indemnification for Securities Act Liabilities
(Information about the Registrant)
10. Information with Respect to S-3 Registrants . . . . . Available Information; Incorporation of Certain
Information By Reference; Summary; Risk Factors;
The Meetings, Voting and Proxies; The Joint Proxy
Proposal--The Merger; The Joint Proxy Proposal--
Terms of the Merger Agreement; The Joint Proxy
Proposal--View Tech Management's Discussion and
Analysis or Plan of Operations; The Joint Proxy
Proposal--Business of View Tech; The Joint Proxy
Proposal--Description of View Tech Capital Stock;
View Tech Proxy Proposal 2--View Tech Executive
Compensation; View Tech Proxy Proposal 2--View
Tech Security Ownership of Certain Beneficial
Owners and Management; View Tech Financial
Statements
11. Incorporation of Certain Information by Reference . . *
12. Information with Respect to S-2 or S-3 Registrants . . *
13. Incorporation of Certain Information by Reference . . *
14. Information with Respect to Registrants other than S-2
or S-3 Registrants . . . . . . . . . . . . . . . . . . *
(Information about the Company being Acquired)
15. Information with Respect to S-3 Companies . . . . . . *
16. Information with Respect to S-2 or S-3 Companies . . . *
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
FORM S-4 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------ ----------------------
<S> <C>
17. Information with Respect to Companies other than
S-2 or S-3 Companies . . . . . . . . . . . . . . . . . Available Information; Summary; Risk Factors; The
Meetings, Voting and Proxies; The Joint Proxy
Proposal--The Merger; The Joint Proxy Proposal--
Terms of the Merger Agreement; The Joint Proxy
Proposal--UST Management's Discussion and
Analysis or Plan of Operations; The Joint Proxy
Proposal--Business of UST; The Joint Proxy
Proposal--UST Management Continuing After the
Merger; The Joint Proxy Proposal--UST Executive
Compensation; The Joint Proxy Proposal--
UST Security Ownership of Certain Beneficial
Owners and Management; UST Financial Statements
(Voting and Management Information)
18. Information if Proxies, Consents or Authorizations are
to be Solicited . . . . . . . . . . . . . . . . . . . Summary; The Meetings, Voting and Proxies; The
Joint Proxy Proposal--The Merger; The Joint Proxy
Proposal--Terms of the Merger Agreement; The
Joint Proxy Proposal--Business of View Tech; The
Joint Proxy Proposal--Business of UST; The Joint
Proxy Proposal--UST Management Continuing After
the Merger; The Joint Proxy Proposal--
UST Executive Compensation; The Joint Proxy
Proposal--UST Security Ownership of Certain
Beneficial Owners and Management; View Tech Proxy
Proposal 2--Election of Directors; View Tech
Proxy Proposal 2--View Tech Management; View Tech
Proxy Proposal 2--View Tech Executive
Compensation; View Tech Proxy Proposal 2--View
Tech Security Ownership of Certain Beneficial
Owners and Management
19. Information if Proxies, Consents or Authorizations are
Not to be Solicited or in an Exchange Offer . . . . . *
</TABLE>
_________________
* Not Applicable.
4
<PAGE> 5
VIEW TECH, INC.
950 FLYNN ROAD
CAMARILLO, CA 93012
November 5, 1996
Dear Shareholder:
The Annual Meeting of Shareholders (the "Annual Meeting") of View Tech,
Inc. ("View Tech") will be held on November 26, 1996, at 9:00 a.m., local time,
at The Orchid, located at 816 Camarillo Springs Road, Suite H, Camarillo,
California 93011.
At the Annual Meeting, you will be asked to consider and vote upon the
following:
(1) the approval and adoption of (i) the Agreement and Plan of
Merger, dated as of September 5, 1996, as amended on October 31, 1996 (the
"Merger Agreement"), by and among View Tech, View Tech Acquisition, Inc.,
a Delaware corporation and a wholly-owned subsidiary of View Tech
("VTAI"), and USTeleCenters, Inc., a Massachusetts corporation ("UST"),
pursuant to which, among other things: (A) UST will be merged with and
into VTAI (the "Merger"); (B) each share of UST common stock, $0.01 par
value ("UST Common Stock") (other than dissenters' shares), will be
converted into the right to receive shares of View Tech common stock,
$0.01 par value ("View Tech Common Stock") based on the Conversion Ratio
(as defined below); and (C) View Tech will assume the UST Stock Option
Plan (the "UST Option Plan"), and all UST stock options outstanding as of
the effective time of the Merger (the "UST Options") will be converted
into the right to acquire shares of View Tech Common Stock for each share
of UST Common Stock underlying the UST Options (the "Conversion Options")
based on the Conversion Ratio; and (ii) the Merger (collectively, the
"Joint Proxy Proposal");
(2) a proposal to change View Tech's state of incorporation from
California to Delaware, which also will have the effect, among others, of
(i) increasing the number of shares of common stock authorized for
issuance from 10,000,000 to 20,000,000 and changing the par value of View
Tech's common stock and preferred stock from $0.01 to $0.0001 per share
and (ii) classifying the Board of Directors of View Tech (the "View Tech
Board of Directors") into three different classes ("View Tech Proxy
Proposal 1");
(3) the election of six directors, Calvin A. Carrera, John W.
Hammon, Robert G. Hatfield, Robert F. Leduc, David F. Millet and Franklin
A. Reece, III, to serve until their successors are elected; provided,
however, that if the proposal to reincorporate View Tech in the State of
Delaware (see "View Tech Proxy Proposal 1") is adopted, upon
reincorporation of View Tech in Delaware, the View Tech Board of Directors
will be divided into three classes as follows: (i) Messrs. Carrera and
Leduc will each serve a term of one year; (ii) Messrs. Hammon and Millet
will each serve a term of two years; and (iii) Messrs. Hatfield and Reece
will each serve a term of three years ("View Tech Proxy Proposal 2");
(4) the ratification of the selection of Carpenter Kuhen and
Sprayberry as View Tech's independent accountants for the fiscal year
ending June 30, 1997 ("View Tech Proxy Proposal 3," with View Tech Proxy
Proposal 1 and View Tech Proxy Proposal 2, collectively, the "View Tech
Proxy Proposals");
(5) the approval and adoption of the View Tech, Inc. 1997 Stock
Incentive Plan; and
(6) the transaction of such other business as may properly come
before the Annual Meeting.
The Merger Agreement provides for the issuance of up to 2,500,000 shares
of View Tech Common Stock (the "Merger Shares") (i) in exchange for all
outstanding shares of UST Common Stock (other than dissenters' shares) and (ii)
upon exercise of the Conversion Options. As of October 31, 1996, based upon
the Conversion Ratio and assuming exercise of all of the UST Options, 2,500,000
shares of View Tech Common Stock would be issuable in exchange for 9,884,157
shares of the outstanding shares of UST Common Stock. The number of Merger
Shares to be issued in the Merger has been determined pursuant to a conversion
ratio of 0.25293, to be adjusted by the amount of certain fees of UST's
accountants, attorneys and financial advisor attributable to the Merger and
payable by View Tech (the "Conversion Ratio"), of a share of View Tech Common
Stock for each outstanding share of UST Common Stock and each share of UST
Common Stock otherwise issuable upon exercise of the Conversion Options. See
"THE JOINT PROXY PROPOSAL--TERMS OF THE MERGER AGREEMENT--Calculation of the
Conversion Ratio." The Merger is structured to be a tax-free reorganization in
which neither View Tech and its shareholders nor UST and its shareholders will
recognize taxable gain upon consummation of the Merger, and will be accounted
for as a "pooling of interests" business combination.
The View Tech Board of Directors has unanimously approved the Merger
Agreement, the Merger and the View Tech Proxy Proposals described in the
attached material and the transactions contemplated thereby and has determined
that the Merger is fair to and in the best interests of View Tech and its
shareholders. The View Tech Board of Directors recommends that the
shareholders of View Tech vote in favor of the Merger and the Merger Agreement
and each of the View Tech Proxy Proposals. However, you are urged to carefully
consider all aspects of the Merger discussed in the attached Joint Proxy
Statement/View Tech Proxy Statement/Prospectus, as the Merger will result in
the issuance to the UST shareholders and the holders of the Conversion Options
of up to approximately 42.4% of the total shares of View Tech Common Stock to
be outstanding after the Merger.
Pursuant to Chapter 13 of the California General Corporation Law ("Chapter
13"), holders of View Tech Common Stock may, in certain instances, be entitled
to require View Tech to purchase their shares of View Tech Common Stock for
cash at fair market value as of the day before the first announcement of the
terms of the Merger, excluding any appreciation or depreciation in consequence
of the Merger. The closing bid price of the View Tech
<PAGE> 6
Common Stock on September 4, 1996, the day preceding the first announcement of
the terms of the Merger, was $7.00 per share as reported on The NASDAQ National
Market. See "THE JOINT PROXY PROPOSAL--THE MERGER--Dissenters' Rights" for a
brief summary of the procedures to be followed by holders of View Tech Common
Stock in order to perfect their rights, if any, to payments under Chapter 13.
In the material accompanying this letter, you will find a Notice of Annual
Meeting of Shareholders, a Joint Proxy Statement/View Tech Proxy
Statement/Prospectus relating to, among other things, the actions to be taken
by the View Tech shareholders at the Annual Meeting, and a proxy card. The
Joint Proxy Statement/View Tech Proxy Statement/Prospectus more fully describes
the Merger and includes information about View Tech and UST and also serves as
a Prospectus for View Tech with respect to the Merger Shares.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend the Annual Meeting, it is
very important that you sign, date and return the completed and signed proxy
card as soon as possible; please use the enclosed postage prepaid envelope to
return the executed proxy card. If you attend the Annual Meeting, you may
revoke the proxy at that time by requesting the right to vote in person.
Sincerely,
ROBERT G. HATFIELD
Chairman of the Board of Directors
and Chief Executive Officer
<PAGE> 7
USTELECENTERS, INC.
745 ATLANTIC AVENUE
BOSTON, MASSACHUSETTS 02111
November 5, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
USTeleCenters, Inc. ("UST") to be held at the offices of Burns & Levinson LLP,
125 Summer Street, Boston, Massachusetts 02110, on November 26, 1996, at 2:00
p.m., local time. Enclosed are a Notice of the Special Meeting, a proxy card
and a Joint Proxy Statement/View Tech Proxy Statement/Prospectus containing
information about the matters to be acted upon at the Special Meeting.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt (i) the Agreement and Plan of Merger, dated as of
September 5, 1996, as amended on October 31, 1996 (the "Merger Agreement"), by
and among View Tech, Inc., a California corporation ("View Tech"), View Tech
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of View
Tech ("VTAI"), and UST pursuant to which, among other things: (A) UST will be
merged with and into VTAI (the "Merger"); (B) each share of UST common stock,
$0.01 par value per share ("UST Common Stock") (other than dissenters' shares),
will be converted into the right to receive shares of View Tech Common Stock,
$0.01 par value per share ("View Tech Common Stock") based on the Conversion
Ratio (as defined below); and (C) View Tech will assume the UST Stock Option
Plan (the "UST Option Plan"), and all UST stock options outstanding as of the
effective time of the Merger (the "UST Options") will be converted into the
right to acquire shares of View Tech Common Stock for each share of UST Common
Stock underlying the UST Options (the "Conversion Options") based on the
Conversion Ratio; and (ii) the Merger (collectively, the "Joint Proxy
Proposal").
The Merger Agreement provides for the issuance of up to 2,500,000 shares
of View Tech Common Stock (the "Merger Shares") (i) in exchange for all
outstanding shares of UST Common Stock (other than dissenters' shares) and (ii)
upon exercise of the Conversion Options. As of October 31, 1996, based upon
the Conversion Ratio and assuming exercise of all of the UST Options, 2,500,000
shares of View Tech Common Stock would be issuable in exchange for 9,884,157
shares of UST Common Stock. The number of Merger Shares to be issued in the
Merger has been determined pursuant to a conversion ratio of 0.25293, to be
adjusted by the amount of certain fees of UST's accountants, attorneys and
financial advisor attributable to the Merger and payable by View Tech (the
"Conversion Ratio"), of a share of View Tech Common Stock for each outstanding
share of UST Common Stock and each share of UST Common Stock otherwise issuable
upon exercise of the Conversion Options. See "THE JOINT PROXY PROPOSAL--TERMS
OF THE MERGER AGREEMENT--Calculation of the Conversion Ratio." The Merger is
structured to be a tax-free reorganization in which neither View Tech and its
shareholders nor UST and its shareholders will recognize taxable gain upon
consummation of the Merger, and will be accounted for as a "pooling of
interests" business combination.
AS A PART OF THE MERGER, EACH UST SHAREHOLDER WILL BE ASKED TO SIGN A
LETTER WHICH IS INCLUDED WITH THIS JOINT PROXY STATEMENT/VIEW TECH PROXY
STATEMENT/PROSPECTUS IN WHICH THE UST SHAREHOLDER WILL MAKE CERTAIN
REPRESENTATIONS REGARDING THE DISPOSITION OF THE MERGER SHARES RECEIVED BY THE
SHAREHOLDER. PLEASE CAREFULLY REVIEW THE ENCLOSED UST SHAREHOLDER LETTER
BEFORE SIGNING. YOU MAY INCLUDE THE SIGNED LETTER WITH THE PROXY CARD IN THE
ENCLOSED SELF-ADDRESSED, STAMPED ENVELOPE, OR BRING THE LETTER WITH YOU IF YOU
PLAN TO ATTEND THE SPECIAL MEETING.
After careful consideration, the Board of Directors of UST ("UST Board of
Directors") has approved the Merger Agreement and the Merger and unanimously
recommends that all shareholders vote "FOR" approval and adoption of the Merger
Agreement and the Merger.
All shareholders are invited to attend the Special Meeting in person.
Under Massachusetts law, the affirmative vote of holders of at least two-thirds
of the shares of UST Common Stock outstanding as of the record date will be
necessary for approval and adoption of the Merger, the Merger Agreement and the
transactions contemplated thereby. However, under the Merger Agreement, it is
a condition to the Merger that the Merger and the Merger Agreement be approved
by the affirmative vote of the holders of at least 90% of the shares of UST
Common Stock entitled to vote thereon. Pursuant to Massachusetts law, and as
described in greater detail in the Notice of the Special Meeting and in the
accompanying Joint Proxy Statement/View Tech Proxy Statement/Prospectus,
holders of UST Common Stock will be entitled to appraisal rights in connection
with the Merger. A holder of UST Common Stock who desires to pursue appraisal
rights must (i) file a written objection to the Merger with UST before the
taking of the shareholders' vote on the Merger Agreement and the Merger, (ii)
refrain from voting in favor of the Merger, and (iii) make written demand on
the surviving corporation for payment for the shareholder's shares, all in
accordance with the provisions of Sections 88 to 98, inclusive, of Chapter 156B
of the Massachusetts General Laws.
Shareholders are urged to review carefully the information contained in
the accompanying Joint Proxy Statement/View Tech Proxy Statement/Prospectus,
including in particular the information under the captions "RISK FACTORS" and
"THE MERGER" prior to making any voting decision in connection with their UST
Common Stock.
It is very important that your views be represented whether or not you are
able to attend the Special Meeting. Accordingly, please complete, sign and
date your proxy card and return it in the enclosed envelope as soon as
possible. Failure to return your proxy card or to vote in person at the
Special Meeting will have the effect of a vote
<PAGE> 8
against the Merger. Returning your completed proxy card will not limit your
right to vote in person if you attend the Special Meeting.
Very truly yours,
Franklin A. Reece, III
President and Chairman of the Board
Boston, Massachusetts
YOUR PROXY AND UST SHAREHOLDER LETTER ARE IMPORTANT.
PLEASE VOTE AND MAIL PROMPTLY.
UST SHAREHOLDERS SHOULD NOT SURRENDER OR OTHERWISE ATTEMPT TO EXCHANGE THEIR
UST STOCK CERTIFICATES FOR VIEW TECH STOCK CERTIFICATES UNLESS AND UNTIL THEY
HAVE RECEIVED APPROPRIATE NOTICE AND INSTRUCTIONS FOR EXCHANGE.
<PAGE> 9
VIEW TECH, INC.
950 FLYNN ROAD
CAMARILLO, CALIFORNIA 93012
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 26, 1996
9:00 A.M.
AT
THE ORCHID
816 CAMARILLO SPRINGS ROAD, SUITE H
CAMARILLO, CALIFORNIA 93011
---------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of View Tech, Inc., a California corporation ("View Tech"),
will be held on November 26, 1996 at 9:00 a.m., local time, at The Orchid,
located at 816 Camarillo Springs Road, Suite H, Camarillo, California 93011, to
consider and vote upon the following matters described in the accompanying
Joint Proxy Statement/View Tech Proxy Statement/Prospectus:
(1) the approval and adoption of (i) the Agreement and Plan of Merger,
dated as of September 5, 1996, as amended on October 31, 1996 (the
"Merger Agreement"), by and among View Tech, View Tech Acquisition,
Inc., a Delaware corporation and a wholly-owned subsidiary of View
Tech ("VTAI"), and USTeleCenters, Inc., a Massachusetts corporation
("UST"), pursuant to which, among other things: (A) UST will be merged
with and into VTAI (the "Merger"); (B) each share of UST common stock,
par value $0.01 per share ("UST Common Stock") (other than dissenters'
shares), will be converted into the right to receive 0.25293 (subject
to adjustment pursuant to the Merger Agreement) of a share of View
Tech common stock, $0.01 par value per share ("View Tech Common
Stock"); and (C) View Tech will assume the UST Stock Option Plan (the
"UST Option Plan"), and all UST stock options outstanding as of the
effective time of the Merger (the "UST Options") will be converted
into the right to acquire 0.25293 (subject to adjustment pursuant to
the Merger Agreement) of a share of View Tech Common Stock for each
share of UST Common Stock underlying the UST Options (the "Conversion
Options")(a copy of the Merger Agreement is attached to the
accompanying Joint Proxy Statement/View Tech Proxy
Statement/Prospectus as ANNEX A); and (ii) the Merger (collectively,
the "Joint Proxy Proposal").
(2) a proposal to change View Tech's state of incorporation from
California to Delaware, which also will have the effect, among others,
of (i) increasing the number of shares of common stock authorized for
issuance from 10,000,000 to 20,000,000 and changing the par value of
View Tech's common stock and preferred stock from $0.01 to $0.0001 per
share and (ii) classifying the Board of Directors of View Tech (the
"View Tech Board of Directors") into three different classes ("View
Tech Proxy Proposal 1");
(3) the election of six directors to serve until their successors are
elected; provided, however, that if the proposal to reincorporate View
Tech in the State of Delaware (see "View Tech Proxy Proposal 1") is
adopted, upon reincorporation of View Tech in Delaware, the View Tech
Board of Directors will be divided into three classes as follows: (i)
Calvin A. Carrera and Robert F. Leduc will each serve a term of one
(1) year; (ii) John W. Hammon and David F. Millet will each serve a
term of two (2) years; and (iii) Robert G. Hatfield and Franklin A.
Reece, III will each serve a term of three (3) years;
(4) the ratification of the selection of Carpenter Kuhen and Sprayberry as
View Tech's independent accountants for the fiscal year ending June
30, 1997;
(5) the approval and adoption of the View Tech, Inc. 1997 Stock Incentive
Plan; and
(6) the transaction of such other business as may properly come before the
Annual Meeting.
Pursuant to Chapter 13 of the California General Corporation Law
("Chapter 13"), holders of View Tech Common Stock may, in certain instances, be
entitled to require View Tech to purchase their shares of View Tech Common
Stock for cash at fair market value as of the day before the first announcement
of the terms of the Merger, excluding any appreciation or depreciation in
consequence of the Merger. The closing bid price of the View Tech Common Stock
on September 4, 1996, the day preceding the first announcement of the terms of
the Merger, was $7.00 per share as reported on The NASDAQ National Market. See
"THE JOINT PROXY PROPOSAL--THE MERGER--Dissenters' Rights" for a brief summary
of the procedures to be followed by holders of View Tech Common Stock in order
to perfect their rights, if any, to payments under Chapter 13.
Only View Tech shareholders of record at the close of business on
October 28, 1996 are entitled to notice of, and to vote at, the Annual Meeting,
or at any adjournment or postponement thereof.
By order of the Board of Directors,
William M. McKay
Chief Financial Officer and Secretary
Camarillo, California
November 5, 1996
<PAGE> 10
APPROVAL OF THE ISSUANCE OF VIEW TECH COMMON STOCK REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF VIEW
TECH COMMON STOCK. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH
TO DO SO EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY.
<PAGE> 11
USTELECENTERS, INC.
745 ATLANTIC AVENUE
BOSTON, MASSACHUSETTS 02111
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 26, 1996
2:00 P.M.
AT
BURNS & LEVINSON LLP
125 SUMMER STREET
BOSTON, MASSACHUSETTS 02110
---------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of USTeleCenters, Inc., a Massachusetts corporation ("UST"),
will be held on November 26, 1996 at 2:00 p.m., local time, at the offices of
Burns & Levinson LLP, 125 Summer Street, Boston, Massachusetts 02110, to
consider and vote upon the following matters described in the accompanying
Joint Proxy Statement/View Tech Proxy Statement/Prospectus:
(1) the approval and adoption of (i) the Agreement and Plan of Merger,
dated as of September 5, 1996, as amended on October 31, 1996 (the
"Merger Agreement"), by and among View Tech, Inc., a California
corporation, View Tech Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of View Tech ("VTAI"), and UST, pursuant to
which, among other things: (A) UST will be merged with and into VTAI,
(B) each share of UST common stock, par value $0.01 per share ("UST
Common Stock") (other than dissenters' shares), will be converted into
the right to receive 0.25293 (subject to adjustment pursuant to the
Merger Agreement) of a share of View Tech common stock, $0.01 par
value per share ("View Tech Common Stock"); and (C) View Tech will
assume the UST Stock Option Plan (the "UST Option Plan"), and all UST
stock options outstanding as of the effective time of the Merger (the
"UST Options") will be converted into the right to acquire 0.25293
(subject to adjustment pursuant to the Merger Agreement) of a share of
View Tech Common Stock for each share of UST Common Stock underlying
the UST Options (a copy of the Merger Agreement is attached to the
accompanying Joint Proxy Statement/View Tech Proxy
Statement/Prospectus as ANNEX A); and (ii) the Merger; and
(2) the transaction of such other business as may properly come before the
Special Meeting.
If the Merger and the Merger Agreement are approved by the UST
shareholders at the Special Meeting and effected by UST, any shareholder (1)
who files with UST before the taking of the vote on the approval of such
action, written objection to the proposed action stating that such shareholder
intends to demand payment for such shareholder's shares if the action is taken
and (2) whose shares are not voted in favor of such action has or may have the
right to demand in writing from VTAI (as the surviving corporation), within 20
days after the date of mailing to such shareholder of notice in writing that
the Merger has become effective, payment for such shareholder's shares and an
appraisal of the value thereof. VTAI and any such shareholder shall in such
cases have the rights and duties and shall follow the procedure set forth in
Sections 88 to 98, inclusive, of Chapter 156B of the General Laws of
Massachusetts.
Only UST shareholders of record at the close of business on October
28, 1996 are entitled to notice of, and to vote at, the Special Meeting, or at
any adjournment or postponement thereof.
By order of the Board of Directors,
Traver Clinton Smith, Jr.
Clerk
Boston, Massachusetts
November 5, 1996
UNDER MASSACHUSETTS LAW, APPROVAL AND ADOPTION OF THE MERGER AND THE
MERGER AGREEMENT REQUIRE THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST
TWO-THIRDS OF THE OUTSTANDING SHARES OF UST COMMON STOCK. HOWEVER, UNDER THE
MERGER AGREEMENT, IT IS A CONDITION TO CLOSING THE MERGER THAT THE MERGER AND
THE MERGER AGREEMENT BE APPROVED BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT
LEAST 90% OF THE SHARES OF UST COMMON STOCK ENTITLED TO VOTE THEREON. WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AND UST SHAREHOLDER LETTER AND MAIL THEM PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH
TO DO SO EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY.
<PAGE> 12
VIEW TECH, INC.
AND
USTELECENTERS, INC.
JOINT PROXY STATEMENT
---------------
VIEW TECH, INC. ANNUAL SHAREHOLDERS MEETING
PROXY STATEMENT
---------------
PROSPECTUS OF VIEW TECH, INC.
2,500,000 SHARES OF
COMMON STOCK, PAR VALUE $0.01
This Joint Proxy Statement/View Tech Proxy Statement/Prospectus
relates to the proposed merger (the "Merger") of USTeleCenters, Inc., a
Massachusetts corporation ("UST"), with and into View Tech Acquisition, Inc.
("VTAI"), a Delaware corporation and a wholly-owned subsidiary of View Tech,
Inc., a California corporation ("View Tech"), and the issuance of up to
2,500,000 shares of View Tech, Inc. common stock, $0.01 par value ("View Tech
Common Stock") in connection therewith. Pursuant to the Agreement and Plan of
Merger, dated as of September 5, 1996, as amended on October 31, 1996, (the
"Merger Agreement"), following the Merger, UST will cease to exist and VTAI
will continue to operate the business of UST as a wholly-owned subsidiary of
View Tech. In connection with the Merger, View Tech has filed a Registration
Statement on Form S-4 (the "Registration Statement"), of which this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus forms a part, with the
Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), covering an
aggregate of up to 2,500,000 shares of View Tech Common Stock (the "Merger
Shares"), issuable in the Merger to holders of outstanding shares of UST common
stock, $0.01 par value per share ("UST Common Stock") and upon exercise of the
Conversion Options (as defined below). In connection with the Merger, (i) each
outstanding share of UST Common Stock (other than shares for which the holders
thereof elect appraisal rights under Massachusetts law ("Dissenters' Shares"))
will be exchanged for the right to receive 0.25293 (subject to adjustment
pursuant to the Merger Agreement) of a share of View Tech Common Stock (the
"Conversion Ratio") and (ii) View Tech will assume the UST Stock Option Plan
(the "UST Option Plan"), and all UST stock options outstanding as of the
effective time of the Merger (the "UST Options") will be converted into the
right to acquire 0.25293 (subject to adjustment pursuant to the Merger
Agreement) of a share of View Tech Common Stock for each share of UST Common
Stock underlying the UST Options (the "Conversion Options"). As of October 31,
1996, there were 9,059,157 shares of UST Common Stock outstanding and 825,000
shares of UST Common Stock issuable upon exercise of the UST Options. The (i)
2,500,000 shares of View Tech Common Stock issuable (A) in exchange for all
outstanding shares of UST Common Stock (other than dissenters' shares) and (B)
upon exercise of the Conversion Options and (ii) unadjusted Conversion Ratio of
0.25293 are maximum possible amounts of the Merger Shares and the Conversion
Ratio, respectively, the actual amounts of which will be calculated pursuant to
a formula set forth in the Merger Agreement. See "THE JOINT PROXY
PROPOSAL--TERMS OF THE MERGER AGREEMENT--Calculation of the Conversion Ratio."
This Joint Proxy Statement/View Tech Proxy Statement/Prospectus also
relates to the proposals to (i) change View Tech's state of incorporation from
California to Delaware, which also will have the effect, among others, of (A)
increasing the number of shares of common stock authorized for issuance from
10,000,000 to 20,000,000 and changing the par value of View Tech's common stock
and preferred stock from $0.01 to $0.0001 per share and (B) classifying the
Board of Directors of View Tech (the "View Tech Board of Directors") into three
different classes, (ii) elect six directors to the View Tech Board of
Directors, (iii) ratify the selection of Carpenter Kuhen and Sprayberry as View
Tech's independent accountants and (iv) approve and adopt the View Tech, Inc.
1997 Stock Incentive Plan (collectively, the "View Tech Proxy Proposals").
This Joint Proxy Statement/View Tech Proxy Statement/Prospectus is
being furnished to the holders of View Tech Common Stock in connection with the
solicitation of proxies by the View Tech Board of Directors for use at the
Annual Meeting of Shareholders of View Tech (the "View Tech Annual Meeting") to
be held on November 26, 1996 at The Orchid, located at 816 Camarillo Springs
Road, Suite H, Camarillo, California 93011, commencing at 9:00 a.m., local
time, and at any adjournment or postponement thereof.
This Joint Proxy Statement/View Tech Proxy Statement/Prospectus is
also being furnished to the holders of UST Common Stock in connection with the
solicitation of proxies by the Board of Directors of UST (the "UST Board of
Directors") for use at the Special Meeting of Shareholders of UST (the "UST
Special Meeting") to be held on November 26, 1996, at the offices of Burns &
Levinson LLP located at 125 Summer Street, Boston, Massachusetts 02110,
commencing at 2:00 p.m., local time, and at any adjournment or postponement
thereof.
This Joint Proxy Statement/View Tech Proxy Statement/Prospectus also
constitutes the prospectus of View Tech filed as part of the Registration
Statement relating to the Merger Shares. This Joint Proxy Statement/View Tech
Proxy Statement/Prospectus does not cover any resales of View Tech Common Stock
which will be received by affiliates of UST in connection with the Merger, and
no person is authorized to make use of this Joint Proxy Statement/View Tech
Proxy Statement/Prospectus in connection with any such resales. All
information herein with respect to View Tech has been furnished by View Tech
and all information herein with respect to UST has been furnished by UST. This
Joint Proxy Statement/View Tech Proxy Statement/Prospectus is first being
mailed to shareholders of View Tech and shareholders of UST on or about
November 5, 1996.
<PAGE> 13
The principal executive offices of View Tech are located at 950 Flynn
Road, Camarillo, California 93012, and its telephone number is 805/482-8277.
View Tech's e-mail address is [email protected].
The principal executive offices of UST are located at 745 Atlantic
Avenue, Boston, Massachusetts 02111, and its telephone number is 617/439-9911.
UST's e-mail address is [email protected].
View Tech Common Stock is listed on The NASDAQ National Market under
the trading symbol "VUTK." On September 4, 1996, the day preceding the day of
announcement of the Merger Agreement, the closing bid price of View Tech Common
Stock was $7.00.
---------------
SEE "RISK FACTORS" ON PAGE 25 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY VIEW TECH SHAREHOLDERS AND UST SHAREHOLDERS BEFORE
VOTING ON THE MATTERS MORE FULLY DESCRIBED HEREIN.
---------------
THE SHARES OF VIEW TECH COMMON STOCK TO WHICH THIS JOINT PROXY STATEMENT/VIEW
TECH PROXY STATEMENT/PROSPECTUS RELATES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/VIEW TECH PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
The date of this Joint Proxy Statement/View Tech Proxy Statement/Prospectus is
November 5, 1996.
2
<PAGE> 14
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
JOINT PROXY STATEMENT/VIEW TECH PROXY STATEMENT/PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Joint Proxy Proposal: The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
View Tech Proxy Proposal 1: Reincorporation of View Tech in Delaware and Related Changes to the Rights of
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
View Tech Proxy Proposal 2: Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
View Tech Proxy Proposal 3: Ratification of the Selection of Independent Accountants . . . . . . . . . . . . . . . . 17
View Tech Proxy Proposal 4: Approval and Adoption of the View Tech, Inc. 1997 Stock Incentive Plan . . . . . . . . . 18
SUMMARY FINANCIAL DATA OF VIEW TECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SUMMARY FINANCIAL DATA OF UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SUMMARY FINANCIAL DATA OF UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
UNAUDITED PRO FORMA COMBINED SUMMARY FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PRO FORMA PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Risks Related to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Control by UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Future Financing Requirements; Uncertainty of Additional Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Unascertainable Risks Due to Future Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Limited History of Profitable Operations; Significant Fluctuations in Operating Results; Future Results of Operations
Uncertain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Dependence on Suppliers, Including PictureTel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Rapidly Changing Technology and Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Government Regulation; Uncertainty Relating to the Telecommunications Act of 1996 . . . . . . . . . . . . . . . . . . 28
Dependence Upon Key Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Risks Related to Market Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Possible Fluctuation of Price of View Tech Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Limited Public Market and Volatility of View Tech Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Substantial Number of Shares Eligible for Future Sale in Market; Registration Rights . . . . . . . . . . . . . . . . . 29
Control by Existing Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Substantial Number of Authorized Shares of View Tech Common Stock Available For Future Issuance; Proposed Increase in
Authorized Capital Stock upon Reincorporation in Delaware; Possible Dilutive and Anti-Takeover Effects . . . . . . 30
No Dividends on View Tech Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Limitation of Liability; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
MARKET DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
THE MEETINGS, VOTING AND PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Annual Meeting of Shareholders of View Tech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Special Meeting of Shareholders of UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
THE JOINT PROXY PROPOSAL
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Chronology of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Reasons for the Merger; Recommendations of the Boards of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Certain Federal Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Resale of View Tech Common Stock; Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Management and Operations of the Combined Company Following the Merger . . . . . . . . . . . . . . . . . . . . . . . . 55
TERMS OF THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Calculation of the Conversion Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Manner and Basis of Converting Shares and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
3
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Employee Salary and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Conduct of UST's Business Prior to the Merger; Covenants; No Solicitation . . . . . . . . . . . . . . . . . . . . . . 59
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Representations and Warranties of UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Representations and Warranties of View Tech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Representations of UST Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Termination and Amendment of the Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SUMMARY FINANCIAL DATA OF VIEW TECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
VIEW TECH MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Year Ended June 30, 1995 Compared to the Year Ended June 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
BUSINESS OF VIEW TECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Dependence on PictureTel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Real Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Claims and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SELECTED FINANCIAL DATA OF UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
UST MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . 76
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . 76
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . 77
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
BUSINESS OF UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
The Telecommunications Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Services and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Claims and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
UST MANAGEMENT CONTINUING AFTER THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Directors and Executive Officers Continuing After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
UST EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
UST Summary Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
UST Option Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
UST SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
CERTAIN RELATIONSHIPS OF UST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
DESCRIPTION OF VIEW TECH CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
View Tech Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
View Tech Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Options and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
VIEW TECH DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
COMPARISON OF RIGHTS OF HOLDERS OF VIEW TECH AND UST COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Fiduciary Duties; Indemnification and Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Management; Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Elections; Classified Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Cumulative Voting for Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
</TABLE>
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Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Filling Vacancies on the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Amendments to Articles of Organization, Articles of Incorporation or Certificate of Incorporation . . . . . . . . . . 91
Amendments to Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Special Meetings of Shareholders; Shareholder Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . 91
Approval of Mergers, Reorganizations and Certain Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . 92
Advance Notice Requirement for Shareholder Proposals and Director Nominations . . . . . . . . . . . . . . . . . . . . 93
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Anti-Takeover Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Capitalization; Blank Check Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Liquidity and Marketability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Dividends or Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Right to List of Holders and Inspection of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Shareholder Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Loans to Officers, Directors and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Certain Legal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES . . . . . . . . . . . . . . . 99
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
VIEW TECH PROXY PROPOSAL 1
REINCORPORATION OF VIEW TECH IN DELAWARE AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . 100
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Significant Changes Caused by Reincorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Fiduciary Duties; Indemnification and Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Management; Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Elections; Classified Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Cumulative Voting for Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Filling Vacancies on the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Amendments to Articles of Incorporation or Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . 105
Amendments to Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Special Meetings of Shareholders; Shareholder Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . 106
Approval of Mergers, Reorganizations and Certain Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . 106
Advance Notice Requirement for Shareholder Proposals and Director Nominations . . . . . . . . . . . . . . . . . . . . 107
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Anti-Takeover Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Capitalization; Blank Check Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Liquidity and Marketability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Dividends or Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Right to List of Holders and Inspection of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Shareholder Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Loans to Officers, Directors and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Certain Legal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Application of California Law After Reincorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Federal Income Tax Consequences of the Reincorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
View Tech Board of Directors' Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
VIEW TECH PROXY PROPOSAL 2
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Directors Whose Terms Expire at the 1997 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Directors Whose Terms Expire at the 1998 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Directors Whose Terms Expire at the 1999 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Compliance with Section 16(a) of the Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
VIEW TECH MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Other Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
</TABLE>
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VIEW TECH EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Option Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Aggregate Option Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Employment Contracts; Termination of Employment and Change-In-Control Arrangements . . . . . . . . . . . . . . . . . . 119
Certain Relationships of View Tech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
VIEW TECH SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 122
VIEW TECH PROXY PROPOSAL 3
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
VIEW TECH PROXY PROPOSAL 4
THE VIEW TECH, INC. 1997 STOCK INCENTIVE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Description of the 1997 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Shareholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
ANNEX A: AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
ANNEX B: OPINION OF O'CONOR, WRIGHT WYMAN, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
ANNEX C: CERTIFICATE OF INCORPORATION OF VIEW TECH DELAWARE, INC.,
A DELAWARE CORPORATION
(REGARDING DELAWARE REINCORPORATION) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
ANNEX D: BYLAWS OF VIEW TECH DELAWARE, INC., A DELAWARE CORPORATION
(REGARDING DELAWARE REINCORPORATION) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
ANNEX E: FORM OF AGREEMENT OF MERGER BETWEEN VIEW TECH, INC.,
A CALIFORNIA CORPORATION, AND VIEW TECH DELAWARE, INC.,
A DELAWARE CORPORATION
(REGARDING DELAWARE REINCORPORATION) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
ANNEX F: CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATIONS LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
ANNEX G: SECTIONS 85 TO 98 OF CHAPTER 156B OF THE MASSACHUSETTS BUSINESS CORPORATION LAW . . . . . . . . . . . . . . . G-1
ANNEX H: VIEW TECH, INC. 1997 STOCK INCENTIVE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
</TABLE>
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AVAILABLE INFORMATION
View Tech is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W, Judiciary Plaza, Washington, D.C. 20549 and at certain
regional offices of the Commission located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a
site on the World Wide Web that contains reports, proxy and information
statements and other information regarding View Tech. The address for such
site is http://www.sec.gov.
View Tech has filed a Registration Statement with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of View Tech Common Stock to be issued in connection with the
Merger. This Joint Proxy Statement/View Tech Proxy Statement/Prospectus omits
certain information contained in the Registration Statement and reference is
made to the Registration Statement and the exhibits and schedules thereto for
further information with respect to View Tech, UST and the Merger. Statements
contained herein concerning the provisions of any documents are not necessarily
complete, and in each instance reference is made to the copy of such document
filed as an exhibit to the Registration Statement or incorporated herein by
reference. Each such statement is qualified in its entirety by such reference.
---------------
CERTAIN STATEMENTS CONTAINED IN THIS JOINT PROXY STATEMENT/VIEW TECH
PROXY STATEMENT/PROSPECTUS THAT ARE NOT RELATED TO HISTORICAL RESULTS,
INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING EACH OF VIEW TECH'S AND
UST'S BUSINESS STRATEGY AND OBJECTIVES, FUTURE FINANCIAL POSITION AND ESTIMATED
COST SAVINGS, ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT AND INVOLVE RISKS AND
UNCERTAINTIES. ALTHOUGH EACH OF VIEW TECH AND UST BELIEVES THAT THE
ASSUMPTIONS ON WHICH THESE FORWARD- LOOKING STATEMENTS ARE BASED ARE
REASONABLE, THERE CAN BE NO ASSURANCE THAT SUCH ASSUMPTIONS WILL PROVE TO BE
ACCURATE AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK
FACTORS," "VIEW TECH MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS," "BUSINESS OF VIEW TECH," "UST MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS," AND "BUSINESS OF UST," AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS JOINT PROXY STATEMENT/VIEW TECH PROXY STATEMENT/PROSPECTUS.
ALL FORWARD-LOOKING STATEMENTS CONTAINED IN THIS JOINT PROXY STATEMENT/VIEW
TECH PROXY STATEMENT/PROSPECTUS ARE QUALIFIED IN THEIR ENTIRETY BY THIS
CAUTIONARY STATEMENT.
7
<PAGE> 19
JOINT PROXY STATEMENT/VIEW TECH PROXY STATEMENT/PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements and notes appearing elsewhere in
this Joint Proxy Statement/View Tech Proxy Statement/Prospectus and in the
documents incorporated in this Joint Proxy Statement/View Tech Proxy
Statement/Prospectus by reference and the exhibits hereto. Shareholders of
View Tech and UST should carefully review the matters set forth under "Risk
Factors" before voting upon or consenting to the matters to be considered by
such shareholders.
GENERAL
This Joint Proxy Statement/View Tech Proxy Statement/Prospectus is
being furnished to shareholders of View Tech, Inc., a California corporation
("View Tech"), in connection with solicitation of proxies by the Board of
Directors of View Tech (the "View Tech Board of Directors") for use at the
Annual Meeting of Shareholders of View Tech (the "View Tech Annual Meeting")
which is scheduled to be held on November 26, 1996. This Joint Proxy
Statement/View Tech Proxy Statement/Prospectus is also being furnished to
shareholders of USTeleCenters, Inc., a Massachusetts corporation ("UST"), in
connection with the solicitation of proxies by the Board of Directors of UST
(the "UST Board of Directors"), for use at the Special Meeting of Shareholders
of UST (the "UST Special Meeting") which is scheduled to be held on November
26, 1996. At the View Tech Annual Meeting and the UST Special Meeting, the
shareholders of View Tech and the shareholders of UST will be asked to consider
and vote upon that certain Agreement and Plan of Merger, dated as of September
5, 1996, by and among View Tech, View Tech Acquisition, Inc., a California
corporation and a wholly-owned subsidiary of View Tech ("VTAI-Cal") and UST, as
amended by Amendment No. 1, entered into as of October 31, 1996, by and among
View Tech, VTAI-Cal, UST and View Tech Acquisition, Inc., a Delaware
corporation ("VTAI"), (the "Merger Agreement"), pursuant to which, among other
things, UST will merge (the "Merger") with and into VTAI, and the Merger
(collectively, the "Joint Proxy Proposal"). As a result of the Merger, UST
will cease to exist and VTAI will continue to operate the business of UST as a
wholly-owned subsidiary of View Tech. In connection with the Merger, View Tech
has filed a Registration Statement on Form S-4 (the "Registration Statement")
with the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), covering an
aggregate of up to 2,500,000 shares of common stock (the "Merger Shares"), par
value $0.01 per share, of View Tech ("View Tech Common Stock"), issuable in the
Merger to holders of outstanding shares of UST common stock, $0.01 par value
per share ("UST Common Stock"), and upon exercise by holders of the Conversion
Options (as defined below). In connection with the Merger, (i) each
outstanding share of UST Common Stock (other than dissenters' shares
("Dissenters' Shares")) will be exchanged for the right to receive shares of
View Tech Common Stock based on the Conversion Ratio (as defined below) and
(ii) View Tech will assume the UST Stock Option Plan (the "UST Option Plan"),
and all UST stock options outstanding as of the effective time of the Merger
(the "UST Options") will be exchanged for the right to acquire shares of View
Tech Common Stock based on the Conversion Ratio (as defined below) (the
"Conversion Options"). The number of Merger Shares to be issued in the Merger
has been determined pursuant to a conversion ratio (the "Conversion Ratio") of
0.25293 (subject to adjustment by the amount of certain fees of UST's
accountants, attorneys and financial advisor attributable to the Merger and
payable by View Tech) of a share of View Tech Common Stock for each outstanding
share of UST Common Stock and each share of UST Common Stock otherwise issuable
upon exercise of the Conversion Options. See "THE JOINT PROXY PROPOSAL--TERMS
OF THE MERGER AGREEMENT--Calculation of the Conversion Ratio." This Joint
Proxy Statement/View Tech Proxy Statement/Prospectus constitutes the prospectus
of View Tech with respect to the Merger Shares. All information herein with
respect to View Tech has been furnished by View Tech; and all information
herein with respect to UST has been furnished by UST.
At the View Tech Annual Meeting, the View Tech shareholders will also
be asked to consider and vote upon three other proposals, namely, (i) a
proposal to change View Tech's state of incorporation from California to
Delaware, which also will have the effect, among others, of (A) increasing the
number of shares of common stock authorized for issuance from 10,000,000 to
20,000,000 and changing the par value of View Tech's common stock and preferred
stock from $0.01 to $0.0001 per share and (B) classifying the View Tech Board
of Directors into three different classes, ("View Tech Proxy Proposal 1"), (ii)
a proposal to elect six directors to the View Tech Board of Directors ("View
Tech Proxy Proposal 2"), (iii) a proposal to ratify the selection of Carpenter
Kuhen and Sprayberry as View Tech's independent accountants ("View Tech Proxy
Proposal 3"), and (iv) a proposal to approve and adopt the View Tech, Inc. 1997
Stock Incentive Plan ("View Tech Proxy Proposal 4"). See "THE MEETINGS, VOTING
AND PROXIES--Annual Meeting of Shareholders of View Tech."
THE COMPANIES
VIEW TECH
View Tech, which commenced operations in July 1992, markets and
installs video communications systems and provides continuing services related
to installed systems. Video communications systems, utilizing advanced
technology, enable users at separate locations to engage in face-to-face
discussions with the relative affordability and convenience of using a
telephone. In addition to the use of video conferences as a corporate
communications tool, use of video communications systems is expanding into
numerous additional applications, including (i) teachers providing lectures to
students at multiple locations, (ii) judges conducting criminal arraignment
proceedings while the accused remains incarcerated, (iii) physicians engaging
in consultations utilizing x-rays and other pictographic
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material, (iv) coordination of emergency services by public utilities, (v)
conducting multi-location staff training programs and (vi) engineers at
separate design facilities coordinating the joint development of products. See
"THE JOINT PROXY PROPOSAL--BUSINESS OF VIEW TECH."
View Tech is headquartered in Camarillo, California. Its executive
offices are located at 950 Flynn Road, Camarillo, California 93012. Its
telephone number at that address is 805/482-8277. View Tech's e-mail address
is [email protected].
UST
UST, founded in 1986, designs, sells, manages and supports
telecommunications systems solutions for small and medium-sized businesses
throughout the United States. UST develops and manages sales and customer
service programs on an outsourced basis for (i) certain Regional Bell Operating
Companies ("RBOCs"), (ii) other telecommunications service providers and (iii)
equipment manufacturers under agency and value- added reseller ("VAR")
agreements. In New England and New York, UST also provides systems integration
and on-going account management consulting for middle market customers. On
behalf of its RBOC clients, UST sells high speed data services, internet
access, Centrex network services, local and long distance services, voice mail
and other "enhanced" services, discount calling plans and toll-free services
such as remote-call-forwarding. As a value-added equipment reseller, UST
sells, installs and maintains data transmission products, video conferencing
equipment and telephone systems. See "THE JOINT PROXY PROPOSAL--BUSINESS OF
UST."
UST's principal executive offices are located at 745 Atlantic Avenue,
Boston, Massachusetts 02111-2747. Its telephone number at that address is
617/439-9911. UST's e-mail address is [email protected].
VTAI
VTAI is a Delaware corporation organized by View Tech in October 1996
for the purpose of effecting the Merger. It has no material assets and has not
engaged in any activities except in connection with the Merger. VTAI's
executive offices are located at 950 Flynn Road, Camarillo, California 93012.
Its telephone number at that address is 805/482-8277.
RECENT DEVELOPMENTS
View Tech recently completed two acquisitions of related businesses.
Effective July 1, 1996, View Tech acquired the net assets of VistaTel
International, Inc. ("VistaTel"), a private company located in Boca Raton,
Florida. VistaTel sold and serviced video conferencing systems and provided
network bridging services to businesses for worldwide use. View Tech issued
52,857 shares of View Tech Common Stock, valued at $7.00 per share, to the
shareholders of VistaTel. View Tech currently operates VistaTel's former
operations.
On September 24, 1996, View Tech completed its acquisition of all of
the capital stock of GroupNet, Inc. ("GroupNet") pursuant to an agreement and
plan of merger dated as of August 30, 1996. View Tech (i) agreed to pay
$330,000 in cash, (A) $110,000 of which was paid on the execution date of such
agreement and (B) the balance of which is payable in two equal installments of
$110,000 on October 15, 1996 and December 16, 1996 and (ii) issued 150,000
shares of View Tech Common Stock valued at $7.00 per share. GroupNet was an
authorized PictureTel Select Dealer in video communication product
distribution. PictureTel Corporation ("PictureTel") is one of the largest
manufacturers of video communications equipment and is View Tech's principal
supplier. With the addition of GroupNet, View Tech has added the northeastern
United States region to its marketing territory.
On October 31, 1996, View Tech completed its private placement of
300,281 shares of View Tech Common Stock. The average sales price of the View
Tech Common Stock was approximately $5.00 and View Tech realized net proceeds
of approximately $1,380,000. View Tech used the net proceeds therefrom for
general working capital purposes, including restoring an aggregate of
$1,000,000 advanced during July and August 1996 to UST, $430,000 of which loan
was used to repay certain bank debt of UST due on September 1, 1996.
See "RISK FACTORS--Unascertainable Risks Due to Future Acquisitions,"
"THE JOINT PROXY PROPOSAL--VIEW TECH MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS" and "THE JOINT PROXY PROPOSAL--BUSINESS OF VIEW
TECH--Strategy."
THE MEETINGS
ANNUAL MEETING OF SHAREHOLDERS OF VIEW TECH
The View Tech Annual Meeting will be held on November 26, 1996 at 9:00
a.m. local time at The Orchid, located at 816 Camarillo Springs Road, Suite H,
Camarillo, California 93011. The purpose of the View Tech Meeting is to
consider and vote upon: (i) the approval and adoption of the Merger and the
Merger Agreement, pursuant to which, among other things: (A) UST will be merged
with and into VTAI; (B) each share of UST Common Stock (other than Dissenters'
Shares) will be exchanged for shares of View Tech Common Stock based on the
Conversion Ratio; and (C) View Tech will assume the UST Option Plan, and the
UST Options will be exchanged for the right to acquire shares of View Tech
Common Stock based on the Conversion Ratio; (ii) a proposal to change View
Tech's state of incorporation from California to Delaware, which will also have
the effect,
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among others, of (A) increasing the number of shares of common stock authorized
for issuance from 10,000,000 to 20,000,000 and changing the par value of View
Tech's common stock and preferred stock from $0.01 to $0.0001 per share and (B)
classifying the View Tech Board of Directors into three different classes;
(iii) the election of six directors, Calvin A. Carrera, John W. Hammon, Robert
G. Hatfield, Robert F. Leduc, David F. Millet (a director of UST) and Franklin
A. Reece, III (president and chairman of the Board of Directors of UST), to
serve until their successors are elected; provided, however, that if the
proposal to reincorporate View Tech in the State of Delaware (see "VIEW TECH
PROXY PROPOSAL 1--REINCORPORATION OF VIEW TECH IN DELAWARE AND RELATED CHANGES
TO THE RIGHTS OF SHAREHOLDERS") is adopted, upon reincorporation of View Tech
in Delaware, the View Tech Board of Directors will be divided into three
classes as follows: (A) Messrs. Carrera and Leduc will each serve a term of
one year; (B) Messrs. Hammon and Millet will each serve a term of two years;
and (C) Messrs. Hatfield and Reece will each serve a term of three years; (iv)
the ratification of the selection of Carpenter Kuhen and Sprayberry as View
Tech's independent accountants for the fiscal year ending June 30, 1997
(collectively, the "View Tech Proxy Proposals"); (v) the approval and adoption
of the View Tech, Inc. 1997 Stock Incentive Plan; and (vi) the transaction of
such other business as may properly come before the Annual Meeting.
Only View Tech shareholders of record at the close of business on
October 28, 1996 (the "View Tech Record Date") are entitled to notice of, and
to vote at, the View Tech Annual Meeting, or at any adjournment or postponement
thereof. Under California law, approval of each of the Joint Proxy Proposal
and View Tech Proxy Proposal 1, requires the affirmative vote of the holders of
a majority of the outstanding shares of View Tech Common Stock. Each of View
Tech Proxy Proposal 2 and View Tech Proxy Proposal 3 requires the affirmative
vote of a majority of shares of View Tech Common Stock present in person or
represented by proxy and entitled to vote on each such matter at the View Tech
Annual Meeting. The presence, either in person or by properly executed proxy,
of the holders of a majority of the outstanding shares of View Tech Common
Stock is necessary to constitute a quorum at the View Tech Annual Meeting. If,
however, a majority of shares of View Tech Common Stock is not present or
represented at the View Tech Annual Meeting, the View Tech shareholders
entitled to vote thereat, present in person or by proxy, can adjourn the
meeting from time to time, until a quorum of voting shares is present. Because
the Joint Proxy Proposal and View Tech Proxy Proposal 1 each must be approved
by holders of a majority of outstanding shares entitled to vote on such matter,
abstentions and broker non-votes will have the effect of a negative vote. See
"THE MEETINGS, VOTING AND PROXIES."
SPECIAL MEETING OF SHAREHOLDERS OF UST
The UST Special Meeting will be held on November 26, 1996 at 2:00 p.m.
local time at the offices of Burns & Levinson LLP located at 125 Summer Street,
Boston, Massachusetts. The purpose of the meeting is to consider and vote
upon: (i) the approval and adoption of the Merger Agreement and the Merger; and
(ii) the transaction of such other business as may properly come before the UST
Special Meeting.
Only UST shareholders of record at the close of business on October
28, 1996 (the "UST Record Date") are entitled to notice of, and to vote at, the
UST Special Meeting, or at any adjournment or postponement thereof. Under
Massachusetts law, approval and adoption of the Joint Proxy Proposal requires
the affirmative vote of at least two-thirds of the outstanding shares of UST
Common Stock. Under the Merger Agreement, however, it is a condition to
closing the Merger that the Merger Agreement and the Merger be approved by the
affirmative vote of the holders of at least 90% of the shares of UST Common
Stock entitled to vote thereon. The presence, either in person or by properly
executed proxy, of the holders of a majority of the outstanding shares of UST
Common Stock is necessary to constitute a quorum at the UST Special Meeting.
If, however, a majority of the shares of UST Common Stock is not present or
represented at the UST Special Meeting, the UST shareholders entitled to vote
thereat, present in person or by proxy, can adjourn the meeting from time to
time, until a quorum of voting shares is present. Because the Joint Proxy
Proposal must be approved by holders of at least 90% of the outstanding shares
entitled to vote on such matter, abstentions will have the effect of a negative
vote. See "THE MEETINGS, VOTING AND PROXIES."
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THE JOINT PROXY PROPOSAL:
THE MERGER
TERMS OF THE MERGER
At the time the Merger becomes effective, UST will merge with and into
VTAI, with VTAI remaining as the surviving corporation (the "Surviving
Corporation"), pursuant to the Merger Agreement, a copy of which is attached
hereto as ANNEX A and incorporated herein by this reference. As a result of
the Merger, UST will cease to exist and VTAI will continue to operate the
business of UST as a wholly-owned subsidiary of View Tech. Pursuant to the
Merger Agreement, the Merger Shares will be issued in exchange for all
outstanding shares of UST Common Stock (other than Dissenters' Shares) and all
shares of UST Common Stock otherwise issuable upon exercise of the Conversion
Options. No fractional shares will be issued by View Tech in the Merger. In
lieu of issuing fractional shares, the number of Merger Shares issuable to each
holder of shares of UST Common Stock and Conversion Options will be rounded up
to the next whole number.
CONVERSION OF UST COMMON STOCK INTO VIEW TECH COMMON STOCK
Each outstanding share of UST Common Stock (other than Dissenters'
Shares) on the date of consummation of the Merger will be exchanged for shares
of View Tech Common Stock based on the Conversion Ratio, which is subject to
adjustment under specified circumstances. Based upon the number of shares of
View Tech Common Stock and UST Common Stock outstanding as of October 31, 1996,
immediately after consummation of the Merger, there will be approximately (i)
5,893,438 shares (assuming exercise of all of the UST Options) of View Tech
Common Stock outstanding, of which approximately 42.4% will be held
collectively by the former holders of UST Common Stock or (ii) 5,684,771 shares
(assuming no UST Options are exercised) of View Tech Common Stock outstanding,
of which approximately 40.3% will be held collectively by former holders of UST
Common Stock. See "--Control of View Tech Following the Merger." See "THE
JOINT PROXY PROPOSAL--TERMS OF THE MERGER AGREEMENT--Calculation of the
Conversion Ratio."
MARKET PRICE DATA
View Tech Common Stock is traded on The NASDAQ National Market under
the symbol "VUTK." UST Common Stock is not publicly traded. See "MARKET
DATA."
On September 4, 1996, the last trading day prior to the public
announcement of a definitive agreement to effect the Merger, the closing bid
price of View Tech Common Stock as reported on The NASDAQ National Market was
$7.00 per share. Following the Merger, View Tech Common Stock will continue to
be traded on The NASDAQ National Market under the symbol "VUTK." UST
shareholders are urged to obtain current price information for View Tech Common
Stock in connection with their consideration of the Merger Agreement and the
transactions contemplated thereby. See "THE JOINT PROXY PROPOSAL--DESCRIPTION
OF VIEW TECH CAPITAL STOCK."
View Tech has never paid cash dividends on the View Tech Common Stock.
Following the Merger, it is expected that the View Tech Board of Directors will
continue the policy of not paying cash dividends in order to retain earnings
for reinvestment in the business of the combined company (the "Combined
Company"). See "THE JOINT PROXY PROPOSAL--VIEW TECH DIVIDEND POLICY."
REASONS FOR THE MERGER
In discussions that led to the signing of the Merger Agreement, the
respective managements of View Tech and UST identified a number of potential
mutual benefits resulting from the Merger, including, among other things,
greater geographic coverage, diversification of revenue sources, synergies from
the introduction of UST's RBOC and equipment supplier relationships into View
Tech's territories, greater management and operational resources, long-term
administrative efficiencies, increases in market capitalization and the number
of freely-traded shares of common stock and the treatment of the Merger as a
"pooling of interests" and a tax-free reorganization under the Internal Revenue
Code of 1986, as amended (the "Code"). In addition, the View Tech Board of
Directors believes that the Merger will provide, among other things, the
following additional benefits: further expansion into the northeastern United
States region, opportunities resulting from UST's operations and added
management depth to be gained from UST's management. The UST Board of
Directors also believes that the Merger will provide, among other things, the
following benefits: the anticipated participation of senior UST management in
management of the Combined Company, View Tech's experience in marketing
videoconferencing applications in certain target markets, the opportunity for
UST shareholders to obtain a significant percentage ownership of
publicly-traded View Tech Common Stock Tech on a tax-free basis and the
Combined Company's greater access to adequate capital and/or financing. See
"THE JOINT PROXY PROPOSAL--THE MERGER--Reasons for the Merger; Recommendations
of the Boards of Directors."
Recommendation of the View Tech Board of Directors. The View Tech
Board of Directors has unanimously approved the Merger Agreement, the Merger
and the transactions contemplated thereby and has determined that the Merger
Agreement and the Merger are fair and in the best interests of View Tech and
its shareholders. The View Tech Board of Directors recommends that the
shareholders of View Tech vote in favor of approval of the Joint Proxy
Proposal. See "THE JOINT PROXY PROPOSAL--THE MERGER--Reasons for the Merger;
Recommendations of the Boards of Directors."
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Recommendation of the UST Board of Directors. The UST Board of
Directors has unanimously approved the Merger Agreement, the Merger and the
transactions contemplated thereby and has determined that the Merger Agreement
and the Merger are fair and in the best interests of UST and its shareholders.
The UST Board of Directors recommends that the shareholders of UST vote in
favor of the Joint Proxy Proposal. See "THE JOINT PROXY PROPOSAL--THE
MERGER--Reasons for the Merger; Recommendations of the Boards of Directors."
OPINION OF UST'S FINANCIAL ADVISOR
In order to evaluate the fairness of the Merger and consideration for
the Merger (the "Merger Consideration"), from a financial point of view to the
UST shareholders, the UST Board of Directors retained the services of O'Conor,
Wright Wyman, Inc. ("OCWW"). OCWW evaluated the financial terms of the Merger
and the Merger Consideration, but did not serve as financial advisors to UST in
negotiation of the terms of the Merger. OCWW did not determine or recommend
the Merger Consideration, but only undertook the reviews, analyses and
inquiries described in its opinion letter to the UST Board of Directors,
attached hereto as ANNEX B. UST shareholders are urged to, and should, read
such opinion in its entirety for a summary of assumptions made, procedures
followed, other matters considered and limits of the review by OCWW. The
summary of the opinion of OCWW set forth in this Joint Proxy Statement/View
Tech Proxy Statement/Prospectus is qualified in its entirety by reference to
the full text of such opinion. See "THE JOINT PROXY PROPOSAL--THE
MERGER--Opinion of UST's Financial Advisor."
EFFECTIVE TIME
The Merger will become effective (the "Effective Time") upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (the "Agreement of Merger") and the filing of the Articles of Merger
with the Secretary of State of the Commonwealth of Massachusetts (the "Articles
of Merger"). Assuming all conditions to the Merger are met or waived prior
thereto, it is anticipated that the Effective Time will occur on or about
November 30, 1996 (the "Effective Date"), following the UST Special Meeting.
MANNER AND BASIS OF CONVERTING SHARES
Promptly after the Effective Time, View Tech will mail to all holders
of record of UST Common Stock a letter of transmittal with instructions for use
by such holders in surrendering certificates representing shares of UST Common
Stock in exchange for certificates representing the Merger Shares. No
fractional shares will be issued by View Tech in the Merger. In lieu of
issuing fractional shares, the number of Merger Shares issuable to each holder
of shares of UST Common Stock and Conversion Options will be rounded up to the
next whole number. See "THE JOINT PROXY PROPOSAL--TERMS OF THE MERGER
AGREEMENT--Manner and Basis of Converting Shares and Options."
UST OPTIONS
The closing of the Merger will accelerate vesting of all outstanding
unvested UST Options, and the holders thereof may elect to exercise such UST
Options or convert them into the Conversion Options. As of October 31, 1996,
there were 825,000 outstanding UST Options, 687,500 of which were unvested as
of such date. Pursuant to the Merger Agreement, the UST Options not exercised
by the holders thereof will be assumed by View Tech and exchanged for the right
to acquire shares of View Tech Common Stock based on the Conversion Ratio. The
Conversion Options will be fully vested and immediately exercisable.
Otherwise, each Conversion Option shall continue to have, and be subject to,
the same terms and conditions as the UST Options. The per share exercise price
for the shares of View Tech Common Stock issuable upon exercise of each
Conversion Option will be equal to the quotient determined by dividing the
exercise price per share at which such UST Option was exercisable immediately
prior to the Effective Date by the Conversion Ratio. See "THE JOINT PROXY
PROPOSAL--TERMS OF THE MERGER AGREEMENT--Manner and Basis of Converting Shares
and Options."
VIEW TECH OPTIONS
Under the 1995 View Tech Stock Option Plan (the "View Tech Stock
Option Plan"), the closing of the Merger will accelerate vesting of all
outstanding View Tech stock options (the "View Tech Options") held by View Tech
employees if, immediately after consummation of the Merger, the former holders
of UST Common Stock own more than 30% of the then outstanding View Tech Common
Stock. Based upon the number of shares of View Tech Common Stock and UST
Common Stock outstanding as of October 31, 1996, immediately after consummation
of the Merger, there will be approximately (i) 5,893,438 shares (assuming
exercise of all of the UST Options) of View Tech Common Stock outstanding, of
which approximately 42.4% will be held collectively by the former holders of
UST Common Stock or (ii) 5,684,771 shares (assuming no UST Options are
exercised) of View Tech Common Stock outstanding, of which approximately 40.3%
will be held collectively by former holders of UST Common Stock, thereby
accelerating vesting of the View Tech Options. As of October 31, 1996, there
were 848,100 outstanding View Tech Options, 700,625 of which were unvested as
of such date.
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CONDITIONS TO THE MERGER; TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT;
REPRESENTATIONS AND WARRANTIES
Consummation of the Merger is subject to the satisfaction or waiver of
various conditions which, if not fulfilled or waived, permit termination of the
Merger Agreement. The Merger Agreement provides that it may be terminated at
any time prior to the Effective Time, whether before or after the approval of
the Merger and the Merger Agreement by the shareholders of UST and View Tech:
(i) by either View Tech or UST (A) by mutual consent, (B) if the Merger is not
consummated by November 30, 1996, (C) if approval of View Tech's shareholders
is not obtained at the View Tech Annual Meeting or any adjournment thereof, or
(D) if approval of UST's shareholders is not obtained at the UST Special
Meeting or any adjournment thereof; (ii) by UST, if (A) View Tech has breached
any representation, warranty or covenant contained in the Merger Agreement in
any material respect, and UST has notified View Tech of this breach, in
writing, and the breach has continued without cure for a period of five
business days after the written notice of breach, or (B) View Tech issues or
commits to issue over 500,000 shares of View Tech Common Stock without the
consent of UST; or (iii) by View Tech, if UST has breached any representation,
warranty or covenant contained in the Merger Agreement in any material respect,
and View Tech has notified UST of this breach, in writing, and the breach has
continued without cure for a period of five business days after the written
notice of breach. See "THE JOINT PROXY PROPOSAL--TERMS OF THE MERGER
AGREEMENT--Conditions to the Merger" and "--Termination and Amendment of the
Merger Agreement."
In addition to the foregoing conditions, the refinancing of UST's
revolving and lease lines of credit with its primary lender, securing the
consent of UST's primary lender to the Merger and the release of Messrs. Reece,
and Millet, Mr. Traver Clinton Smith, Jr., and Mr. Colin M. Cunningham, Jr.,
directors of UST, from their guarantees of such lines of credit are conditions
to consummation of the Merger. As of October 31, 1996, UST owed approximately
$2,500,000 to its primary lender under such lines of credit. As of October 31,
1996, Messrs. Reece, Millet, Smith and Cunningham had guaranteed an aggregate
of up to $430,000 of UST's debt obligations to its primary lender. Absent the
Merger, the loans are due on January 2, 1997. See "THE JOINT PROXY
PROPOSAL--THE MERGER--Interests of Certain Persons in the Merger."
The Merger Agreement may be amended by the parties thereto, provided
such amendment is in writing, at any time before or after the approval and
adoption of the Merger Agreement and the Merger by the shareholders of UST and
the shareholders of View Tech. After such shareholder approval and adoption
has been obtained, no amendment of any of the agreements executed in connection
with the Merger may be made which by law requires the further approval of the
shareholders, without obtaining such further approval. See "THE JOINT PROXY
PROPOSAL--TERMS OF THE MERGER AGREEMENT--Termination and Amendment of the
Merger Agreement."
Each of View Tech and UST has provided in the Merger Agreement
representations and warranties that are typical and standard for transactions
of the type contemplated by the Merger Agreement. See "THE JOINT PROXY
PROPOSAL--TERMS OF THE MERGER AGREEMENT--Representations and Warranties of View
Tech" and "--Representations and Warranties of UST."
EFFECTS OF TERMINATION
Under the terms of the Merger Agreement, if any party terminates the
Merger Agreement pursuant to the provisions concerning termination therein, all
rights and obligations of the parties thereunder shall terminate without any
liability of any party to any other party (except for any liability of any
party then in breach of any covenant of the Merger Agreement); provided,
however, that the confidentiality provisions contained therein and the terms
and conditions of the Confidentiality and Non-Disclosure Agreement executed by
View Tech, shall survive any such termination; provided, further, that any such
termination will have no effect on amounts that UST currently owes or may owe
in the future to View Tech. The Merger Agreement specifically provides that
termination is the sole and exclusive remedy for the breach of any
representation or warranty made by the party in the Merger Agreement. See "THE
JOINT PROXY PROPOSAL--TERMS OF THE MERGER AGREEMENT--Termination and Amendment
of the Merger Agreement."
COMPARISON OF RIGHTS UNDER APPLICABLE LAW
Currently, the rights of shareholders of UST are governed by
applicable Massachusetts law, the UST Articles of Organization, as amended (the
"UST Articles of Organization"), and the UST Bylaws (the "UST Bylaws").
Holders of UST Common Stock immediately prior to the Effective Time (other than
Dissenters' Shares) will become shareholders of View Tech and from and after
the Effective Time, their rights as shareholders of View Tech will be governed
by applicable California law, the View Tech Restated Articles of Incorporation
(the "View Tech Articles of Incorporation") and the Bylaws of View Tech (the
"View Tech Bylaws"); provided, however, that if View Tech Proxy Proposal 1 is
approved, upon reincorporation in Delaware, the rights of shareholders of View
Tech, including former shareholders of UST, will be governed by Delaware law.
There are certain differences among the rights of shareholders of View Tech and
shareholders of UST under Delaware, California and Massachusetts law and under
the UST Articles of Organization and the UST Bylaws, the View Tech Articles of
Incorporation and the View Tech Bylaws and the Certificate of Incorporation
(the "Delaware Certificate") of View Tech Delaware, Inc., a Delaware
corporation ("View Tech Delaware") (the wholly-owned subsidiary of View Tech
into which View Tech will merge to effect the reincorporation in Delaware and
the name of which will be changed to "View Tech, Inc." following such
reincorporation), and the Bylaws of View Tech Delaware (the "Delaware
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Bylaws"), copies of which are attached hereto as ANNEX C and ANNEX D,
respectively. Following reincorporation in Delaware, View Tech will be subject
to the Delaware General Corporation Law ("DGCL"). The Agreement and Plan of
Merger between View Tech and View Tech Delaware effecting such reincorporation
in Delaware is attached as ANNEX E to this Joint Proxy Statement/View Tech
Proxy Statement/Prospectus. See "THE JOINT PROXY PROPOSAL--COMPARISON OF
RIGHTS OF HOLDERS OF VIEW TECH AND UST COMMON STOCK" and "VIEW TECH PROXY
PROPOSAL 1--REINCORPORATION OF VIEW TECH IN DELAWARE AND RELATED CHANGES TO THE
RIGHTS OF SHAREHOLDERS."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
At the Effective Time and upon adoption of View Tech Proxy Proposal 2
(see "VIEW TECH PROXY PROPOSAL 2--ELECTION OF DIRECTORS"), the View Tech Board
of Directors will be comprised of the following six individuals: Messrs.
Carrera, Hammon, Hatfield, Leduc, Millet and Reece. If the proposal to
reincorporate View Tech in the State of Delaware (see "VIEW TECH PROXY PROPOSAL
1--REINCORPORATION OF VIEW TECH IN DELAWARE AND RELATED CHANGES TO THE RIGHTS
OF SHAREHOLDERS") is adopted, upon reincorporation of View Tech in Delaware,
the View Tech Board of Directors will be divided into three classes as follows:
(i) Messrs. Carrera and Leduc will each serve a term of one year; (ii) Messrs.
Hammon and Millet will each serve a term of two years; and (iii) Messrs.
Hatfield and Reece will each serve a term of three years. If either Messrs.
Reece or Millet (the "UST Director Designees") is unable or unwilling to serve
as a director of View Tech at the Effective Time, such individual or
individuals shall be replaced by an individual or individuals designated by the
surviving individuals who were members of the UST Board of Directors
immediately prior to the Effective Time (the "Former UST Directors"), provided
that such designees are approved by the View Tech Board of Directors.
Following the Effective Time and continuing through the respective initial
terms of the UST Director Designees, if any vacancy on the View Tech Board of
Directors arises with respect to the UST Director Designees (or any other
individual or individuals selected by the Former UST Directors as replacement
directors), such individual or individuals shall be replaced by an individual
or individuals designated by the Former UST Directors provided that such
designees are approved by the View Tech Board of Directors.
If the Joint Proxy Proposal is adopted, upon the Effective Date,
Messrs. Reece and Millet will be elected to the Board of Directors of VTAI (the
"VTAI Board of Directors"). Mr. Reece will also serve as president and chief
executive officer of VTAI. In the event that the Joint Proxy Proposal is not
adopted, Messrs. Reece and Millet will be deemed to resign automatically from
their positions as View Tech directors. View Tech will be deemed to accept
automatically their resignations. View Tech's executive officers and
management will otherwise remain unchanged. See "THE JOINT PROXY PROPOSAL--THE
MERGER--Management and Operations of the Combined Company Following the
Merger."
CONTROL OF VIEW TECH FOLLOWING THE MERGER
Based upon the number of shares of View Tech Common Stock outstanding
as of October 31, 1996 and the number of shares of UST Common Stock outstanding
and issuable upon exercise of UST Options as of October 31, 1996, immediately
after consummation of the Merger, there will be approximately (i) 5,893,438
shares (assuming exercise of all of the UST Options) of View Tech Common Stock
outstanding, of which approximately 42.4% will be held collectively by the
former holders of UST Common Stock or (ii) 5,684,771 shares (assuming no UST
Options are exercised) of View Tech Common Stock outstanding, of which
approximately 40.3% will be held collectively by former holders of UST Common
Stock; the current executive officers and directors of View Tech will own
collectively approximately 26.3% (assuming exercise of all View Tech Options)
or 20.5% (assuming no View Tech Options are exercised) of the shares of View
Tech Common Stock after the Merger.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a "pooling of interests" business
combination for financial reporting purposes. See "THE JOINT PROXY
PROPOSAL--THE MERGER--Accounting Treatment."
CERTAIN FEDERAL TAX CONSEQUENCES
Subject to the limitations and qualifications described in the
discussion of the Merger below, including the rendering of the opinion to the
UST shareholders by Burns & Levinson LLP, counsel to UST, treatment of the
Merger for federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a)(2)(D) of the Code, will generally have the following
consequences for federal income tax purposes: (i) no gain or loss will be
recognized by holders of UST Common Stock upon their receipt in the Merger
solely of View Tech Common Stock in exchange therefor; (ii) the aggregate basis
for tax purposes of the View Tech Common Stock received in the Merger by
holders of UST Common Stock will be the same as the aggregate basis of the UST
Common Stock surrendered in exchange therefor; and (iii) the holding period of
the View Tech Common Stock received in the Merger by holders of UST Common
Stock will include the period for which the UST Common Stock surrendered in
exchange therefor was held, provided that the UST Common Stock is held as a
capital asset as of the Effective Date. The conversion of the UST Options
granted in connection with the performance of services into the Conversion
Options will not result in the recognition of income, gain or loss for federal
income tax purposes by the holders of the UST Options. See "THE JOINT PROXY
PROPOSAL--THE MERGER--Certain Federal Tax Consequences."
14
<PAGE> 26
Notwithstanding the delivery of the Burns & Levinson LLP opinion, a
successful challenge by the Internal Revenue Service ("IRS") to such tax-free
reorganization status of the Merger would result in the UST shareholders
recognizing taxable gain or loss with respect to each share of UST Common Stock
surrendered in the Merger equal to the difference between the holder's basis in
such shares of UST Common Stock surrendered and the fair market value of the
View Tech Common Stock received in the Merger. In such event, a holder's
aggregate tax basis in the View Tech Common Stock so received would equal its
fair market value and the holding period for such share of View Tech Common
Stock would begin the day after the Merger. Furthermore, a successful
challenge to the tax status of the Merger could cause taxable gain to be
recognized by UST, measured by the excess of the fair market value of the View
Tech Common Stock transferred and the liabilities of UST being assumed, over
UST's aggregate tax basis in its assets. See "THE JOINT PROXY PROPOSAL--THE
MERGER--Certain Federal Tax Consequences." Each holder of UST Common Stock is
urged to consult a qualified tax advisor to determine the specific tax
consequences of the Merger to such holder.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the View Tech Board of Directors
and the UST Board of Directors with respect to the Merger Agreement, the Merger
and the transactions contemplated thereby, shareholders of View Tech and
shareholders of UST should be aware that certain members of View Tech
management, UST management, the View Tech Board of Directors and the UST Board
of Directors, among others, have interests in the Merger that are in addition
to the interests of the shareholders.
Mr. Reece, president and chairman of the Board of Directors of UST,
and Mr. Angelo P. Gentile, chief financial officer and treasurer of UST, will
enter into employment agreements with View Tech prior to the Merger, pursuant
to which Mr. Reece will be an executive officer of View Tech and Mr. Gentile
will be an officer of View Tech following the Merger. In addition, Mr. Reece
will be chief executive officer and president of VTAI and Mr. Gentile will be
an officer of VTAI following the Merger.
Upon consummation of the Merger, Messrs. Reece and Millet, a member of
the UST Board of Directors, will become members of the View Tech and VTAI
Boards of Directors. Following the Merger, the members of the View Tech Board
of Directors and the executive officers of View Tech will be covered by View
Tech's directors and officers liability insurance policy.
Furthermore, Messrs. Reece, Millet, Smith and Cunningham, members of
the UST Board of Directors, are guarantors in the aggregate of up to $430,000
of UST's debt obligations to UST's primary lender. It is a condition to
consummation of the Merger that Messrs. Reece, Millet, Cunningham and Smith be
released from their guaranty obligations. In addition, Mr. Smith is also a
partner in Burns & Levinson LLP, the law firm representing UST in connection
with the Merger.
The closing of the Merger will accelerate vesting of all outstanding
unvested UST Options, and holders of the UST Options may elect to exercise such
UST Options or convert them into the Conversion Options. As of October 31,
1996, there were 825,000 (exercisable into 208,667 shares of View Tech Common
Stock, assuming a conversion ratio of 0.25293 and subject to adjustment
pursuant to the Merger Agreement), outstanding UST Options, 687,500
(exercisable into 173,889 shares of View Tech Common Stock, assuming a
conversion ratio of 0.25293 and subject to adjustment pursuant to the Merger
Agreement) of which were unvested as of such date. In addition, under the View
Tech Stock Option Plan, the closing of the Merger will accelerate vesting of
all outstanding View Tech Options held by View Tech employees if, immediately
after consummation of the Merger, the former holders of UST Common Stock own
more than 30% of the then outstanding View Tech Common Stock. Based upon the
number of shares of View Tech Common Stock and UST Common Stock outstanding as
of October 31, 1996, immediately after consummation of the Merger, there will
be approximately (i) 5,893,438 shares (assuming exercise of all of the UST
Options) of View Tech Common Stock outstanding, of which approximately 42.4%
will be held collectively by the former holders of UST Common Stock or (ii)
5,684,771 shares (assuming no UST Options are exercised) of View Tech Common
Stock outstanding, of which approximately 40.3% will be held collectively by
former holders of UST Common Stock, thereby accelerating vesting of the View
Tech Options. As of October 31, 1996, there were 848,100 outstanding View Tech
Options, 700,625 of which were unvested as of such date.
View Tech's financial advisor, Kenny Securities Corp. ("KSC"), will be
paid a fee of approximately $367,000. Another View Tech financial advisor,
Windermere Holdings, Inc. ("WHI"), was to receive, as compensation, options to
acquire shares of View Tech Common Stock equal to 5% of the shares of View Tech
Common Stock being issued to the UST shareholders at 100% of the closing bid
price of the View Tech Common Stock on The NASDAQ National Market on the
Effective Date. Pursuant to an amendment to such agreement, View Tech instead
will pay WHI $175,000 in cash and will issue to WHI 30,000 shares of View Tech
Common Stock as follows: (i) $50,000 upon the filing with the Commission of the
registration statement of which this Joint Proxy Statement.View Tech Proxy
Statement/Proposal forms a part; (ii) $50,000 on November 1, 1996; and (iii)
$75,000 and 30,000 shares of View Tech Common Stock on the Effective Date. All
payments made to WHI prior to the Effective Date are subject to repayment by
WHI if the Merger is not consummated. A View Tech director has loaned the two
principals of WHI an aggregate of $400,000. The loan is unsecured and there is
no agreement that the loan will be repaid out of the amount paid by View Tech
to WHI. See "THE JOINT PROXY PROPOSAL--THE MERGER--Reasons for the Merger;
Recommendations of the Boards of Directors--Agreement and Services
15
<PAGE> 27
of WHI." Pursuant to a fee arrangement with UST, UST's financial advisor,
Concord Partners, Ltd. ("Concord"), will be paid approximately $450,000 by View
Tech, with $180,000 of such amount to be paid in the form of View Tech Common
Stock valued at $7.34 per share (approximately 25,000 shares of View Tech
Common Stock). UST's legal and accounting advisors will be paid at the
Effective Time by View Tech. Pursuant to the Merger Agreement, two-thirds of
the fees paid to Concord plus all of the UST legal and accounting fees
associated with the Merger paid by View Tech will reduce the aggregate
valuation of UST and thereby reduce the Conversion Ratio and the number of
Merger Shares. See "THE JOINT PROXY PROPOSAL--TERMS OF THE MERGER
AGREEMENT--Calculation of the Conversion Ratio."
See "THE JOINT PROXY PROPOSAL--THE MERGER--Interests of Certain Persons in the
Merger."
DISSENTERS' RIGHTS
Pursuant to Chapter 13 of the California General Corporation Law
("CGCL"), the relevant sections of which are attached hereto as ANNEX F,
holders of shares of View Tech Common Stock may be entitled to rights of
dissent and appraisal of the value of their shares of View Tech Common Stock in
connection with the Merger. The failure of a dissenting shareholder to follow
the appropriate procedures in connection with the Merger may result in the
termination or waiver of such dissenters' rights.
Under the Massachusetts Business Corporation Law ("MBCL"), the
relevant sections of which are attached hereto as ANNEX G, holders of shares of
UST Common Stock are entitled to rights of dissent and appraisal of the value
of their shares of UST Common Stock in connection with the Merger. The failure
of a dissenting shareholder to follow the appropriate procedures in connection
with the Merger may result in the termination or waiver of such dissenters'
rights.
See "THE JOINT PROXY PROPOSAL--THE MERGER--Dissenters' Rights."
RISK FACTORS
In considering whether to approve the Merger, the Merger Agreement and
the transactions contemplated thereby, View Tech shareholders and UST
shareholders should consider, among other things, the following risks related
to the Merger: (i) control of View Tech by UST following the Merger; (ii)
future financing requirements and the uncertainty of additional financing for
the combined company after the Merger (the "Combined Company"); (iii)
unascertainable risks due to future acquisitions; (iv) View Tech and UST's
limited history of profitable operations, the significant fluctuations in
operating results and the uncertainties of future results; (v) the significant
debt and lease obligations of the Combined Company; (vi) interests of certain
persons in the Merger; (vii) the dependence of the Combined Company on a few
suppliers, including PictureTel; (viii) competition in the video communications
and telecommunications industries; (ix) the rapidly changing technology and the
possibility of obsolescence; (x) government regulation and the uncertainty
relating to the Telecommunications Act of 1996 (the "Telecommunications Act");
and (xi) View Tech and UST's dependence on certain key members of their
personnel.
In addition, in considering whether to approve the Merger, the Merger
Agreement and the transactions contemplated thereby, View Tech shareholders and
UST shareholders should consider, among other things, the following risks
related to market conditions: (i) the possible fluctuation of the price of View
Tech Common Stock; (ii) the limited public market and volatility of View Tech
Common Stock; (iii) the substantial number of shares eligible for future sale
in the public market and the registration rights; (iv) the amount and level of
control by existing shareholders; (v) the substantial number of authorized
shares available for future issuance and the proposed increase in the
authorized capital stock upon View Tech's reincorporation in Delaware, both of
which include possible dilutive and anti-takeover effects; (vi) the fact that
View Tech has never paid dividends on View Tech Common Stock; and (vii) the
limitation of directors' potential liabilities and the indemnification of
officers and directors under certain circumstances.
For more information on all of the above risks, see "RISK FACTORS."
REGULATORY MATTERS
View Tech and UST are not aware of any governmental or regulatory
requirement for consummation of the Merger other than compliance with
applicable state corporate laws and federal and state securities laws.
16
<PAGE> 28
VIEW TECH ANNUAL SHAREHOLDERS' MEETING PROPOSALS
VIEW TECH PROXY PROPOSAL 1:
REINCORPORATION OF VIEW TECH IN DELAWARE AND
RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS
View Tech Proxy Proposal 1, if adopted, would authorize View Tech to
effect a reincorporation in Delaware.
View Tech Proxy Proposal 1 is being submitted to the View Tech
shareholders because it is a condition to closing the Merger that View Tech
have a classified board of directors consisting of three classes, each
containing two directors, after the Merger. California law, however,
prohibits, among other things, classification of a company's board of directors
into three classes unless there are a minimum of nine directors. View Tech
initially will have six directors although the number of directors may increase
in the future. In addition, the View Tech Board of Directors believes that
reincorporation will enhance View Tech's ability to attract and retain
qualified members of the View Tech Board of Directors as well as encourage
directors to continue to make independent decisions in good faith on behalf of
View Tech.
View Tech believes that the more favorable corporate environment
afforded by Delaware will enable it to compete more effectively with other
public companies, most of which are incorporated in Delaware, attract new
directors and retain its current directors. Reincorporation in Delaware will
allow View Tech the increased flexibility and predictability afforded by
Delaware law.
In connection with reincorporation in Delaware, View Tech Proxy
Proposal 1 will also have the effect, among others, of (i) increasing the
number of shares of common stock authorized for issuance from 10,000,000 to
20,000,000 and changing the par value of the common stock ("View Tech Delaware
Common Stock") and the preferred stock ("View Tech Delaware Preferred Stock")
from $0.01 to $0.0001 per share and (ii) dividing the View Tech Board of
Directors into three different classes. See "VIEW TECH PROXY PROPOSAL
1--REINCORPORATION OF VIEW TECH IN DELAWARE AND RELATED CHANGES TO THE RIGHTS
OF SHAREHOLDERS."
The View Tech Board of Directors has unanimously approved the proposal
to reincorporate View Tech in Delaware and has determined that reincorporation
is in the best interests of View Tech and its shareholders. The View Tech
Board of Directors recommends that the shareholders of View Tech vote in favor
of approval of View Tech Proxy Proposal 1.
VIEW TECH PROXY PROPOSAL 2:
ELECTION OF DIRECTORS
As of October 31, 1996, the authorized number of directors
constituting the View Tech Board of Directors is seven, of which four are
currently serving and all of whom are elected to one-year terms. At the View
Tech Annual Meeting, the View Tech shareholders are asked to consider and vote
on the election of six directors to serve until their successors are elected.
The nominees are Messrs. Carrera, Hammon, Hatfield, Leduc, Millet and Reece.
If the proposal to reincorporate View Tech in the State of Delaware is adopted
(see "VIEW TECH PROXY PROPOSAL 1--REINCORPORATION OF VIEW TECH IN DELAWARE AND
RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS") and assuming the nominees are
all elected to the View Tech Board of Directors, the composition of the View
Tech Board of Directors will be as follows: Messrs. Carrera and Leduc will
serve a term expiring at the View Tech 1997 Annual Meeting, Messrs. Hammon and
Millet will serve a term expiring at the View Tech 1998 Annual Meeting and
Messrs. Hatfield and Reece will serve a term expiring at the View Tech 1999
Annual Meeting and, in each case, until their successors are duly elected and
qualified. At each View Tech annual meeting after 1996, directors will be
elected to succeed those directors whose terms then expire, and each person so
elected will serve for a three-year term. See "VIEW TECH PROXY PROPOSAL
2--ELECTION OF DIRECTORS."
The View Tech Board of Directors has unanimously approved the election
of the six named nominees to the View Tech Board of Directors and has
determined that the election of said nominees is in the best interests of View
Tech and its shareholders. The View Tech Board of Directors recommends that
the shareholders of View Tech vote in favor of approval of View Tech Proxy
Proposal 2.
VIEW TECH PROXY PROPOSAL 3:
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The View Tech Board of Directors has selected Carpenter Kuhen and
Sprayberry as View Tech's independent accountants for the fiscal year ending
June 30, 1997 and has further directed that management submit the selection of
independent accountants for ratification by the shareholders at the View Tech
Annual Meeting. Carpenter Kuhen and Sprayberry has audited View Tech's
financial statements since inception of View Tech in 1992. Representatives of
Carpenter Kuhen and Sprayberry are expected to be present at the Annual
Meeting, will
17
<PAGE> 29
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions. See "VIEW TECH PROXY PROPOSAL
3--RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS."
The View Tech Board of Directors has unanimously approved the
selection of the independent accountants and has determined that the selection
of Carpenter Kuhen and Sprayberry is in the best interests of View Tech and its
shareholders. The View Tech Board of Directors recommends that the
shareholders of View Tech vote in favor of approval of View Tech Proxy Proposal
3.
VIEW TECH PROXY PROPOSAL 4:
APPROVAL AND ADOPTION OF THE VIEW TECH, INC. 1997 STOCK INCENTIVE PLAN
The View Tech Board of Directors has unanimously approved the adoption
of the View Tech, Inc. 1997 Stock Incentive Plan, which would reserve 300,000
shares of View Tech Common Stock for issuance to View Tech officers, employees,
consultants and directors. The View Tech, Inc. 1997 Stock Incentive Plan is
attached hereto as ANNEX H. See "VIEW TECH PROXY PROPOSAL 4--APPROVAL AND
ADOPTION OF THE VIEW TECH, INC. 1997 STOCK INCENTIVE PLAN." The View Tech
Board of Directors recommends that the shareholders approve and adopt the View
Tech, Inc. 1997 Stock Incentive Plan.
18
<PAGE> 30
SUMMARY FINANCIAL DATA OF
VIEW TECH
The following table presents summarized historical statements of
operations and balance sheet data of View Tech. The balance sheet data
presented below as of June 30, 1996 and 1995 and the statements of operations
data presented below for each fiscal year are derived from View Tech's audited
financial statements. The summarized historical financial data should be read
in conjunction with the financial statements and related notes thereto for View
Tech included elsewhere herein and in "View Tech Management's Discussion and
Analysis or Plan of Operations."
<TABLE>
<CAPTION>
Years Ended
June 30,
----------------------------------
1996 1995
----------- ----------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $13,346,103 $6,963,487
Cost of revenues . . . . . . . . . . . . . . . . . . . . . 9,042,922 4,327,679
----------- ----------
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . 4,303,181 2,635,808
----------- ----------
Operating expenses:
Selling expenses . . . . . . . . . . . . . . . . . . . . 1,706,626 685,428
General and administrative expenses . . . . . . . . . . 3,491,509 1,209,982
----------- ----------
5,198,135 1,895,410
----------- ----------
Income (loss) from operations . . . . . . . . . . . . . . . (894,954) 740,398
Other income (expense) . . . . . . . . . . . . . . . . . . (153,222) 12,575
----------- ----------
Income (loss) before income taxes . . . . . . . . . . . . . (1,048,176) 752,973
Provision for income taxes . . . . . . . . . . . . . . . . 352,116 (294,083)
----------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ (696,060) $ 458,890
=========== ==========
Earnings per share . . . . . . . . . . . . . . . . . . . . $ (.24) $ .26
=========== ==========
Weighted average shares outstanding 2,870,242 1,761,550
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
June 30,
----------------------------------
1996 1995
----------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 1,463,199 $4,987,939
Other current assets . . . . . . . . . . . . . . . . . . . 6,534,510 2,910,852
Property and equipment, net . . . . . . . . . . . . . . . . 820,411 141,556
Other assets, net . . . . . . . . . . . . . . . . . . . . . 31,001 18,483
----------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . $ 8,849,121 $8,058,830
=========== ==========
Current liabilities . . . . . . . . . . . . . . . . . . . . $ 3,755,933 $2,475,591
Long-term liabilities . . . . . . . . . . . . . . . . . . . 242,283 4,356
Total stockholders' equity . . . . . . . . . . . . . . . . 4,850,905 5,578,883
----------- ----------
Total Liabilities and Stockholders' Equity . . . . . . . $ 8,849,121 $8,058,830
=========== ==========
</TABLE>
19
<PAGE> 31
SUMMARY FINANCIAL DATA OF
UST
The following tables present summarized historical statements of operations
and balance sheet data of UST. The balance sheet data presented below as of
December 31, 1995 and 1994 and the statements of operations data presented
below for the years ended December 31, 1995 and 1994 are derived from audited
financial statements. The balance sheet data presented below as of June 30,
1996 and 1995 and the statements of operations data presented below for the six
months ended June 30, 1996 and 1995 are derived from unaudited financial
statements. Such unaudited financial statements of UST, in the opinion of
UST's management contain all adjustments necessary for a fair presentation of
the financial position and results of operations for these periods.
The summarized historical financial data set forth below should be read in
conjunction with the audited and unaudited financial statements and related
notes thereto for UST and "UST Management's Discussion and Analysis or Plan of
Operations" included elsewhere in this Joint Proxy Statement/View Tech Proxy
Statement/Prospectus.
STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
--------------------------- -------------------------
UNAUDITED
---------
1995 1994 1996 1995
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . $19,974,593 $22,033,697 $8,388,853 $10,915,813
----------- ----------- ---------- -----------
Costs and Expenses:
Cost of goods sold . . . . . . . . . 4,650,121 2,938,910 2,424,129 1,848,064
----------- ----------- ---------- -----------
Selling expenses . . . . . . . . . . 11,418,695 15,805,023 3,647,860 7,119,836
General and administrative expenses 2,938,277 4,105,086 1,583,015 1,765,016
----------- ----------- ---------- -----------
19,007,093 22,849,019 7,655,004 10,732,916
----------- ----------- ---------- -----------
Income (loss) from operations . . . . . 967,500 (815,322) 733,849 182,897
Interest and other expense . . . . . . (607,700) (325,900) (248,981) (350,645)
Loss on sublease including shutdown of
offices. . . . . . . . . . . . (994,900) (318,000) - (994,900)
----------- ----------- ---------- -----------
Income (loss) before income taxes . . . (635,100) (1,459,222) 484,868 (1,162,648)
State tax provision . . . . . . . . . . (33,300) - (59,000) -
----------- ----------- ---------- -----------
Net income (loss) . . . . . . . . . . . $(668,400) $(1,459,222) $425,868 $(1,162,648)
=========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
--------------------------- -------------------------
BALANCE SHEET DATA: 1995 1994 1996 1995
----------- ----------- ---------- -----------
UNAUDITED
---------
<S> <C> <C> <C> <C>
Cash and cash equivalents . . . . . . . $ - $ - $ 2,000 $ -
Other current assets . . . . . . . . . 3,659,684 4,464,118 4,037,950 4,268,700
Property and equipment, net . . . . . . 2,121,250 2,747,719 1,900,011 2,442,900
Other assets, net . . . . . . . . . . . 56,214 93,957 52,007 84,377
----------- ----------- ---------- -----------
Total Assets . . . . . . . . . . . . $ 5,837,148 $ 7,305,794 $5,991,968 $ 6,795,977
=========== =========== ========== ===========
Current liabilities . . . . . . . . . . $ 4,773,188 $ 3,938,151 $5,918,800 $ 7,141,732
Long-term liabilities . . . . . . . . . 2,119,200 4,180,813 702,540 1,630,063
Total shareholders' deficit . . . . . . (1,055,240) (813,170) (629,372) (1,975,818)
----------- ----------- ---------- -----------
Total Liabilities and Shareholders'
Deficit . . . . . . . . . . . $ 5,837,148 $ 7,305,794 $5,991,968 $ 6,795,977
=========== =========== ========== ===========
</TABLE>
20
<PAGE> 32
SUMMARY FINANCIAL DATA OF
UST
The statements of operations data of UST for the twelve months ended
June 30, 1996 and 1995 have been recast to conform with View Tech's fiscal
years ended June 30, 1996 and 1995 and are provided for informational purposes
only. Such statements should be read in conjunction with the unaudited Pro
Forma Condensed Combined financial statements and the notes thereto included
elsewhere in this Joint Proxy Statement/View Tech Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------
June 30,
UNAUDITED
---------
STATEMENTS OF OPERATIONS DATA: 1996 1995
----------- -----------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . $17,447,633 $21,734,482
Costs and expenses:
Costs of goods sold . . . . . . . . . 5,226,186 3,291,091
Selling expenses . . . . . . . . . . . 7,946,719 14,880,174
General and administrative expenses . 2,756,276 3,780,590
----------- -----------
15,929,181 21,951,855
----------- -----------
Income (loss) from operations . . . . . . 1,518,452 (217,373)
Interest and other expense . . . . . . . (506,036) (605,428)
Loss on sublease including shutdown of
offices. . . . . . . . . . . . . . - (1,312,900)
----------- -----------
Income (loss) before income taxes . . . . 1,012,416 (2,135,701)
----------- -----------
State tax provision . . . . . . . . . . . (92,300) -
----------- -----------
Net income (loss) . . . . . . . . . . . . $ 920,116 $(2,135,701)
=========== ===========
</TABLE>
21
<PAGE> 33
UNAUDITED PRO FORMA COMBINED SUMMARY FINANCIAL DATA
The following table presents summarized pro forma combined historical
statements of operation and balance sheet data for View Tech and UST as of June
30, 1996 and 1995 and for each fiscal year then ended and the combined
historical statements of operations and balance sheet data for VistaTel and
GroupNet as of June 30, 1996 and for the twelve months then ended. Such pro
forma combined historical statements of operations and balance sheet data were
derived from: (i) the audited financial statements of View Tech as of and for
the fiscal years ended June 30, 1996 and 1995; (ii) the unaudited financial
statements of UST as of June 30, 1996 and 1995 and for the twelve months ended
June 30, 1996 and 1995 and (iii) the unaudited financial statements of VistaTel
and GroupNet as of June 30, 1996 and for the twelve months ended June 30, 1996.
Such unaudited financial statements of UST, VistaTel and GroupNet, in the
opinion of each company's respective management, contain all adjustments
necessary for a fair presentation of the financial position and results of
operations as of such dates and for such periods.
The pro forma data are not necessarily indicative of the results of
operations or financial condition that would have been reported had the
acquisitions of VistaTel and GroupNet been completed and had the Merger been in
effect as of the dates and during the periods indicated below, or that may be
reported in the future.
See "THE JOINT PROXY PROPOSAL--VIEW TECH MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS," "THE JOINT PROXY PROPOSAL--UST MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS," the financial statements of
View Tech and notes thereto, the financial statements of UST and notes thereto
and the financial statements of GroupNet and the notes thereto and the pro
forma condensed combined financial data, all of which are contained elsewhere
herein. The financial statements for VistaTel are not included herein since
such statements are not required under Item 310(b) of Regulation S-B.
<TABLE>
<CAPTION>
Fiscal Years Ended
June 30,
---------------------------------
1996 1995
------------- -------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 33,684,577 $ 28,697,969
Operating Expenses . . . . . . . . . . . . . . . . . . 33,143,537 28,174,943
Income from operations . . . . . . . . . . . . . . . . 541,040 523,026
Net income (loss) . . . . . . . . . . . . . . . . . . . 16,889 (972,984)
(Loss) per share . . . . . . . . . . . . . . . . . . . -0- (.23)
Weighted average shares outstanding(1) . . . . . . . . 5,873,099 4,261,550
</TABLE>
<TABLE>
<CAPTION>
June 30,
---------------------------------
1996 1995
------------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . . . . . . $ 2,395,350 $ 1,470,168
Total assets . . . . . . . . . . . . . . . . . . . . . 17,232,901 14,854,807
Long-term liabilities . . . . . . . . . . . . . . . . . 1,004,538 1,634,419
Stockholders' equity(2) . . . . . . . . . . . . . . . . 5,941,533 2,523,065
- ---------------
</TABLE>
(1) For 1996, the weighted average shares outstanding include the actual
weighted average number of shares outstanding for View Tech for the
fiscal year ended June 30, 1996, the shares issued in connection with
the acquisitions of Vista Tel and GroupNet, the completion of the
private placement of shares of View Tech Common Stock and the effects
of the Merger. For 1995, the weighted average number of shares
include actual weighted average number of shares of View Tech Common
Stock outstanding for the fiscal year ended June 30, 1995 and the
effects of the Merger.
(2) Stockholders' equity as of June 30, 1996 and 1995, includes the pro
forma after-tax write off of estimated costs of $1,080,000 ($1,800,000
pre-tax) related to the Merger.
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<PAGE> 34
PRO FORMA PER SHARE DATA
The following unaudited information reflects certain comparative per share
data related to book value per share and net income (loss) per share for each
of View Tech, View Tech Pro Forma, Pro Forma Combined and UST. The View Tech
Pro Forma information reflects the acquisitions of VistaTel and GroupNet as of
June 30, 1996 and for the fiscal year then ended. The information set forth
below is presented (i) on a historical and View Tech Pro Forma basis for View
Tech; (ii) on a Pro Forma Combined basis consisting of the View Tech Pro Forma
amounts and UST, assuming consummation of the Merger; and (iii) on an
equivalent pro forma basis per share assuming consummation of the Merger. The
UST equivalent pro forma data are presented below in the same table as the View
Tech historical and pro forma data because, due to the changes to UST
historical data required in order to conform such data to View Tech's fiscal
year end, UST historical data would not be readily comparable to the UST
equivalent pro forma data. The equivalent pro forma per share data for UST has
been computed by multiplying the Pro Forma Combined amounts by the assumed
Conversion Ratio of 0.25293 (subject to adjustment pursuant to the Merger
Agreement) provided for in connection with the Merger. View Tech has never
paid dividends on the View Tech Common Stock.
The information shown below should be read in conjunction with (i) the
financial statements and notes thereto of View Tech, (ii) the financial
statements and notes thereto of UST, (iii) the unaudited financial statements
and notes thereto of GroupNet and (iv) the pro forma condensed combined
financial statements, each of which is contained in this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus.
The pro forma data are not necessarily indicative of the results of
operations or financial conditions that would have been reported had the
acquisitions of Vistatel and GroupNet been completed and had the Merger been in
effect as of the dates and during the periods as of the dates indicated below
or that may be reported in the future.
See "THE JOINT PROXY PROPOSAL--VIEW TECH MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS," "THE JOINT PROXY PROPOSAL--UST MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS," the financial statements of
View Tech and notes thereto, the financial statements of UST and notes thereto,
the financial statements of GroupNet and notes thereto and the pro forma
condensed combined financial data.
<TABLE>
<CAPTION>
UST
View Tech View Tech Pro Forma Equivalent
Historical Pro Forma(3) Combined(4) Pro Forma
------------ ---------- -------- -----------
<S> <C> <C> <C> <C>
Net income (loss) per share:
Year ended June 30, 1996 . . . . . . . . . . $(.24) $(.24) $ -0- $ -0-
Year ended June 30, 1995 . . . . . . . . . . $ .26 N/A $(.23) $(.06)
Book Value per share:(1)
June 30, 1996 . . . . . . . . . . . . . . . . $1.68 $2.03 $1.01 $ .26
June 30, 1995 . . . . . . . . . . . . . . . . $1.95 N/A $ .47 $ .12
</TABLE>
<TABLE>
<CAPTION>
UST
Historical(2)
-------------
<S> <C>
Net income (loss) per share:
Six months ended June 30, 1996 . . . . . . . $ .12
Year ended December 31, 1995 . . . . . . . . $(.28)
Year ended December 31, 1994 . . . . . . . . $(.35)
Book Value per share:
June 30, 1996 . . . . . . . . . . . . . . . . $(.25)
December 31, 1995 . . . . . . . . . . . . . . $(.42)
December 31, 1994 . . . . . . . . . . . . . . $(.25)
</TABLE>
_______________
(1) Book value per share was calculated using stockholders' equity as
reflected in the historical and pro forma financial statements divided by
the actual number of shares of common stock outstanding and assuming
completion of the VistaTel and GroupNet acquisitions and completion of the
Merger (assuming 2,500,000 shares issued in connection with the Merger).
(2) Net income (loss) per share and book value per share for UST are derived
by dividing net income (loss) for the periods indicated by the number of
View Tech Common Stock (assuming issuance of 2,500,000 shares) issuable to
holders of UST Common Stock in connection with the Merger. In addition,
net income (loss) is derived by giving effect to a pro forma provision
(benefit) for income taxes as a result of UST's conversion to a C
corporation upon consummation of the Merger. For the six months ended
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<PAGE> 35
June 30, 1996 and for the years ended December 31, 1995 and 1994 the
actual weighted average number of shares of UST Common Stock outstanding
was 8,994,657, 3,581,866 and 867,250, respectively.
(3) The View Tech Pro Forma is derived assuming that View Tech had acquired
VistaTel and GroupNet as of July 1, 1995. The book value per share
information reflects the balance sheet effects of such acquisitions as of
June 30, 1996. The net income (loss) per share data for 1996 is based on
View Tech's historical operating results for the year ended June 30, 1996
and VistaTel and GroupNet's operating results for the twelve months ended
June 30, 1996. The pro forma information for 1995 does not include the
VistaTel or GroupNet acquisitions, which were not effective until July and
August 1996, respectively.
(4) The combined pro forma information is based on the historical financial
statements of View Tech and the effects of the Merger as of June 30, 1996
and 1995 and for the fiscal years then ended. The combined pro forma
information for 1996 also gives effect to the acquisition of VistaTel and
GroupNet as of June 30, 1996 and includes their respective operating
results for the twelve months then ended.
24
<PAGE> 36
RISK FACTORS
RISKS RELATED TO THE MERGER
CONTROL BY UST
As of October 31, 1996, View Tech executive officers beneficially
owned an aggregate of 36.1% of the issued and outstanding shares of View Tech
Common Stock. Upon consummation of the Merger and assuming no change in View
Tech's management's beneficial ownership, View Tech's current executive
officers will beneficially own approximately 26.3% (assuming all options held
by executive officers are exercised) of the View Tech Common Stock compared to
an aggregate of approximately (i) 42.4% which will be held collectively by the
former holders of UST Common Stock and UST Options (assuming all UST Options
are exercised) or (ii) 40.3% which will be held by the former holders of UST
Common Stock (assuming no UST Options are exercised). Holders of more than 50%
of the outstanding shares of View Tech Common Stock have the ability to elect
all of the directors. If the former holders of UST Common Stock act
collectively after the Merger, assuming they continue to own all their shares
and are able to obtain the proxies of approximately 450,000 additional shares
of View Tech Common Stock, such holders would be able to elect all of the
directors of View Tech and determine the outcome of all corporate actions
requiring the approval of the holders of the majority of shares, such as
mergers and acquisitions. See "THE JOINT PROXY PROPOSAL--TERMS OF THE
MERGER--Control of View Tech Following the Merger."
FUTURE FINANCING REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING
Financing Requirements of the Combined Entity. The combined assets of
View Tech and UST will be insufficient to meet the cash requirements of the
Combined Company for the 12 months following the consummation of the Merger.
The amount of financing required is dependent upon the ability of the
management of UST and View Tech to renegotiate the terms of UST's indebtedness
of approximately $3,000,000 to its primary lender, which is a condition to
consummation of the Merger. There can be no assurance, however, that the
management of View Tech and UST will be able to renegotiate the terms of UST's
indebtedness to its primary lender. Additionally, at the Effective Time, View
Tech will also have to pay an aggregate of approximately $1,800,000, of which
$1,412,000 will be cash payments consisting of approximately $542,000 to its
financial advisors, approximately $270,000 to UST's financial advisor and
approximately $600,000 to UST's and View Tech's attorneys and accountants for
services relating to the Merger.
After the Merger, View Tech intends to raise approximately $7,000,000
in either the form of a private placement of its securities or traditional bank
financing, or a combination of both. Management of both UST and View Tech
believe that such additional financing will be sufficient to meet the operating
needs and capital requirements of the Combined Company over the next 12 months.
There can be no assurance, however, that View Tech will be able to raise the
additional financing necessary to meet the operating needs and capital
requirements of the Combined Company. The failure to renegotiate UST's
indebtedness with its primary lender, raise additional capital or obtain a line
of credit, or any one of these, will have a material adverse effect on the
Combined Company's business, financial conditions and results of operations.
There can be no assurance that the Combined Company will be able to obtain
adequate additional financing or that such financing, if available, will be on
terms acceptable to the Combined Company. The failure to do so will have a
material adverse effect on UST's business, financial condition and results of
operations. To the extent that the Combined Company raises additional capital
by issuing equity securities, ownership dilution to current shareholders of the
Combined Company will result. See "THE JOINT PROXY PROPOSAL--VIEW TECH
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" and "THE JOINT
PROXY PROPOSAL--UST MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS."
Additional Capital Requirements of UST. If the Merger is not
consummated, UST believes that its cash balances as of October 31, 1996,
combined with anticipated operating cash flow and borrowings under existing
credit facilities, will be adequate to meet its on-going capital requirements
through January 2, 1997. If the Merger is not consummated, however, UST will
be required to repay its primary lender approximately $3,000,000 under its
revolving and lease lines of credit on January 2, 1997 and, on June 15, 1997,
an aggregate of $1,000,000 (and accrued interest thereon) advanced to UST by
View Tech during July and August, 1996. UST's ability to meet its future
capital requirements beyond January 2, 1997 will depend on obtaining additional
financing. There can be no assurance that UST will be able to obtain adequate
additional financing or that such financing, if available, will be on terms
acceptable to UST. The failure to do so will have a material adverse effect on
UST's business, financial condition and results of operations. See "THE JOINT
PROXY PROPOSAL--UST MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS."
Additional Capital Requirements of View Tech. If the Merger is not
consummated, it is likely that additional financing will be required to fund
further growth in View Tech's business beyond the next 12 months. View Tech's
actual capital requirements will depend upon many factors, including View
Tech's internal expansion into new territories and capital requirements related
to View Tech's acquisition of certain entities. See "--Unascertainable Risks
Due to Current and Future Acquisitions." To the extent that View Tech
25
<PAGE> 37
raises additional capital by issuing equity securities, ownership dilution to
current shareholders of View Tech will result. There can be no assurance that
sources of such financing will be available or, if available, will be on terms
acceptable to View Tech. The inability to obtain additional financing may have
a material adverse effect on View Tech's marketing ability or its ability to
operate efficiently or expand its operations and, consequently, a material
adverse effect on View Tech's business, operations or financial condition. See
"VIEW TECH MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS."
UNASCERTAINABLE RISKS DUE TO FUTURE ACQUISITIONS
The management of both View Tech and UST anticipate that the Combined
Company will continue to grow not only through internal expansion and the
opening of additional offices in new territories but also through acquisitions
of other entities. Since July 1992, View Tech, by virtue of its expansion
activity, has grown from two employees in one location to 70 employees in 13
locations at October 31, 1996. Since June 30, 1996, View Tech has acquired two
businesses and has hired 18 new employees. With the addition of the UST
personnel, the Combined Company will have approximately 212 employees. By
virtue of rapid internal growth and external growth through acquisitions, the
Combined Company will be subject to the uncertainties and risks associated with
any expanding business. Certain future acquisitions may have the effect of
substantially increasing the size of the Combined Company and diversifying the
products and services it offers. In light of the potential significance of
these changes and the absence of a history of combined operations of View Tech
or UST with another entity, it is possible that the Combined Company will
encounter difficulties, such as integration of operations, inefficiencies due
to duplicative functions, management and administrative differences and
overlapping, competing or incompatible areas of business and operations, that
cannot presently be ascertained. There can be no assurance that the Merger or
future acquisitions will not have a material adverse effect upon the Combined
Company's business, operations or financial condition, particularly in quarters
immediately following the consummation of such transactions due to operational
disruptions, unexpected expenses and accounting charges which may be associated
with the integration of such acquisitions. In addition, there can be no
assurance that the Combined Company will achieve the anticipated benefits of
such acquisitions, and it is possible that such acquisitions could place
significant demands on the Combined Company's financial resources and
management and cause disruption of the Combined Company's operations due to the
need for the management of the Combined Company and such other entities to
devote significant time and attention to integrating their operations. See
"VIEW TECH MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS."
LIMITED HISTORY OF PROFITABLE OPERATIONS; SIGNIFICANT FLUCTUATIONS IN OPERATING
RESULTS; FUTURE RESULTS OF OPERATIONS UNCERTAIN
View Tech has operated since July 1992, and incurred net losses for
the fiscal year ended June 30, 1993. Although View Tech achieved revenue
growth and profitability during fiscal 1994 and reported net income for fiscal
1995, it reported a net loss for fiscal 1996 of $696,060. In the future, View
Tech may experience significant fluctuations in operating results as a result
of a number of factors, including delays in product enhancements and new
product introductions by its suppliers, market acceptance of new products and
services and reduction in demand for existing products and services as a result
of introductions of new products and services by its competitors or by
competitors of its suppliers. In addition, View Tech's gross profit percentage
may vary significantly depending on the mix of products and services
contributing to revenues in any period. There can be no assurance that View
Tech will achieve revenue growth or will be profitable on a quarterly or annual
basis. See "THE JOINT PROXY PROPOSAL--VIEW TECH MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS" and "--BUSINESS OF VIEW TECH."
UST began operations in 1987 and has incurred net losses in the past
two years: a net loss of $1,459,222 in the year ended December 31, 1994 and a
net loss of $668,400 in the year ended December 31, 1995. Although UST has
reported $425,868 in net income (unaudited) for the six months ended June 30,
1996, there can be no assurance that this return to profitability will
continue. In the future, UST may experience significant fluctuations in
operating results due to such factors as changes in the commission rates and
structures in its agency agreements, the general uncertainties surrounding the
Telecommunications Act, other changes in governmental regulations and increased
competition. Other factors which could significantly impact operating results
include (i) delays in product enhancements and new products introductions by
its suppliers, and services, (ii) market acceptance of new products and (iii)
reduction in demand for existing products and services as a result of
introductions of new products and services by its competitors or by competitors
of its suppliers. In addition, UST's gross profit percentage may vary
significantly depending on the mix of products and services contributing to
revenue in any period. There can be no assurance that UST will achieve revenue
growth or will be profitable on a quarterly or annual basis. SEE "THE JOINT
PROXY PROPOSAL--UST MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS"
and "BUSINESS OF UST."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management and the boards of directors of UST and
View Tech have interests in the Merger that are in addition to and potentially
conflict with the interests of the View Tech and UST shareholders generally.
Messrs. Reece and Gentile will enter into employment agreements with View Tech,
and Messrs. Reece and Millet will become members of the Boards of Directors of
View Tech and VTAI. In
26
<PAGE> 38
addition, Messrs. Reece, Millet, Cunningham and Smith, directors of UST, are
guarantors in the aggregate amount of up to $430,000 with respect to certain
loans made by UST's primary lender to UST, the release of which guaranty
obligations is a condition to consummation of the Merger. Mr. Smith is also a
partner in Burns & Levinson LLP, the law firm representing UST in connection
with the Merger. Furthermore, all UST Options outstanding at the Effective
Time will become fully vested and immediately exercisable as a result of the
Merger. As of October 31, 1996, there were 825,000 (exercisable into 208,667
shares of View Tech Common Stock, assuming a conversion ratio of 0.25293 and
subject to adjustment pursuant to the Merger Agreement) outstanding UST
Options, 687,500 (exercisable into 173,889 shares of View Tech Common Stock,
assuming a conversion ratio of 0.25293 and subject to adjustment pursuant to
the Merger Agreement) of which were unvested as of such date and 575,000
(exercisable into 145,435 shares of View Tech Common Stock, assuming a
conversion ratio of 0.25293 and subject to adjustment pursuant to the Merger
Agreement) of which were held by executive officers and directors of UST as of
such date. In addition, under the View Tech Stock Option Plan, the
consummation of the Merger will accelerate vesting of all outstanding unvested
View Tech Options if, immediately after consummation of the Merger, the former
holders of UST Common Stock own more than 30% of the then outstanding View Tech
Common Stock. Based upon the number of shares of View Tech Common Stock and
UST Common Stock outstanding as of October 31, 1996, immediately after
consummation of the Merger, there will be approximately (i) 5,893,438 shares
(assuming exercise of all of the UST Options) of View Tech Common Stock
outstanding, of which approximately 42.4% will be held collectively by the
former holders of UST Common Stock or (ii) 5,684,771 shares (assuming no UST
Options are exercised) of View Tech Common Stock outstanding, of which
approximately 40.3% will be held collectively by former holders of UST Common
Stock, thereby accelerating vesting of the View Tech Options. As of October
31, 1996, there were 848,100 outstanding View Tech Options, 700,625 of which
were unvested as of such date. As of October 31, 1996, executive officers and
directors of View Tech held options exercisable for 454,300 shares of View Tech
Common Stock, 355,600 of which were unvested as of such date. See "THE JOINT
PROXY PROPOSAL--THE MERGER--Interests of Certain Persons in the Merger."
DEPENDENCE ON SUPPLIERS, INCLUDING PICTURETEL
Approximately 58% of View Tech's revenues for the 1996 fiscal year was
attributable to the sale of equipment manufactured by PictureTel. Termination
or change of View Tech's business relationship with PictureTel or another
supplier, disruption in supply, failure of PictureTel or another supplier to
remain competitive in quality, function or price or a determination by
PictureTel or another supplier to reduce reliance on independent providers such
as View Tech could have a material adverse effect on View Tech. View Tech is a
party to agreements with PictureTel authorizing it to serve as PictureTel's
non-exclusive dealer in certain geographic territories. These agreements
expire in August 2000, and can be terminated without cause upon 60 days'
written notice by PictureTel. There can be no assurance that such agreements
will not be terminated, or that they will be renewed on terms acceptable to
View Tech, by PictureTel, which has no other affiliation with View Tech and is
a competitor of View Tech. While there are other suppliers of the video
communications equipment that View Tech purchases from PictureTel, termination
of the relationship with PictureTel could have a material adverse effect on
View Tech. See "THE JOINT PROXY PROPOSAL--VIEW TECH MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATIONS" and "THE JOINT PROXY PROPOSAL--BUSINESS OF
VIEW TECH."
Approximately 76% of UST's revenues for the year ended December 31,
1995 were attributable to (i) the sale of equipment manufactured by PictureTel
(17%) and (ii) the network products and services provided by (A) NYNEX (33%)
and (B) GTE (26%). For the six months ended June 30, 1996, approximately 77%
of UST's revenues were attributable to the sale of equipment manufactured by
PictureTel (20%), and the network products and services provided by NYNEX (33%)
and Bell Atlantic (24%). Termination or change in UST's business relationship
with these suppliers and/or other suppliers, disruption in supply, failure of a
supplier to remain competitive in quality, function or price, or a
determination by one or more of UST's suppliers to reduce reliance on
independent providers such as UST could have a material adverse effect on UST.
UST is a party to agreements with PictureTel, NYNEX, Bell Atlantic, GTE and
other suppliers authorizing it to serve as a non-exclusive dealer in certain
geographic territories. The dates of expiration of these agreements range from
December 31, 1996 to December 31, 1997. Furthermore, these agreements can be
terminated without cause upon 30 to 60 days' written notice by the suppliers.
There can be no assurance that the agreements will not be terminated, or that
they will be renewed on terms acceptable to UST. These suppliers have no
affiliation with UST and are competitors of UST. See "THE JOINT PROXY
PROPOSAL--UST MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" and
"THE JOINT PROXY PROPOSAL--BUSINESS OF UST."
COMPETITION
The video communications industry is highly competitive. View Tech
competes with manufacturers of video and other communications equipment,
including PictureTel, its principal supplier, and their networks of dealers and
distributors. It also competes with telecommunications carriers, such as AT&T,
MCI Communications Corporation, SPRINT and other large corporations entering
the video communications market including Apple Computers, Inc., IBM, Intel
Corporation, NEC, Microsoft, Inc., Mitsubishi Ltd., Sony Corporation,
Matsushita/Panasonic, Hitachi and British Telecom. View Tech also competes
with large accounting and consulting firms that provide communications
services, as well as other independent distributors
27
<PAGE> 39
and communications service providers. Many of these organizations have
substantially greater name recognition and financial, technical, manufacturing,
marketing, distribution and other resources than View Tech and, therefore,
represent significant competition. In addition, View Tech management believes
that as the demand for video communications systems and other communications
products and services continues to increase, additional competitors, many of
which also will have greater resources than View Tech, will enter the markets
which View Tech currently serves. There can be no assurance that the current
and future competitors of View Tech or, if the Merger is consummated, the
Combined Company will not succeed in developing technologies and products that
are more widely accepted in the marketplace or that will render View Tech's
technology and products obsolete or noncompetitive. In addition, certain of
such current and future competitors of View Tech or the Combined Company may be
able to undertake more extensive marketing campaigns or adopt more aggressive
pricing policies than View Tech. There can be no assurance that View Tech or
the Combined Company will have the resources required to respond effectively to
market or technological changes or to compete successfully with current or
future competitors or that competitive pressures will not have a material
adverse effect View Tech's or the Combined Company' business, financial
condition and results of operations. See "THE JOINT PROXY PROPOSAL-- VIEW TECH
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS."
The telecommunications industry is also highly competitive. UST
competes with many other companies which have substantially greater financial
and other resources than UST, selling both the same and similar services.
UST's competitors in the sale of network services include RBOCs such as NYNEX,
Bell Atlantic, Southwestern Bell and GTE, long distance carriers such as AT&T,
MCI and Sprint, other long distance companies, by-pass companies and other
agents. If the Merger is consummated, the Combined Company will compete
against many if not all of the same competitors of UST. There can be no
assurance that the Combined Company will be able to compete successfully
against such companies. See "THE JOINT PROXY PROPOSAL--UST MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" and "THE JOINT PROXY
PROPOSAL--BUSINESS OF UST."
RAPIDLY CHANGING TECHNOLOGY AND OBSOLESCENCE
The market for communications products and services is characterized
by rapidly changing technology, evolving industry standards and the frequent
introduction of new products and services. View Tech's and UST's or, if the
Merger is consummated, the Combined Company's future performance will depend in
significant part upon their or its ability to respond effectively to these
developments. New products and services are generally characterized by
improved quality and function and are frequently offered at lower prices than
the products and services they are intended to replace. The introduction of
products embodying new technologies and the emergence of new industry standards
can render View Tech's and UST's existing products obsolete, unmarketable or
noncompetitive. View Tech's and UST's or, if the Merger is consummated, the
Combined Company's ability to implement its growth strategies and remain
competitive will depend upon its ability successfully to (i) maintain and
develop relationships with manufacturers of new and enhanced products that
include new technology, (ii) achieve levels of quality, functionality and price
acceptability to the market and (iii) maintain a high level of expertise
relating to new products and the latest in communications systems technology.
There can be no assurance, however, that either View Tech, UST's or, if the
Merger is consummated, the Combined Company will be able to implement its
growth strategies or remain competitive. See "--THE JOINT PROXY
PROPOSAL--BUSINESS OF VIEW TECH."
GOVERNMENT REGULATION; UNCERTAINTY RELATING TO THE TELECOMMUNICATIONS ACT OF
1996
The federal government and certain states in which View Tech and UST
operate regulate various aspects of their respective businesses. On February
8, 1996, the Telecommunications Act was enacted into law. This comprehensive
federal legislation will affect many sectors of the telecommunications
industry. Included in the new statute are provisions relating to, subject to
certain limitations, the opening up of local telephone markets to competition
and the elimination of restrictions on certain local carriers' entry into the
long distance telecommunications market. It is unknown as of the date of this
Joint Proxy Proposal/View Tech Proxy Statement/Prospectus what impact the
Telecommunications Act will have on View Tech, UST or the Combined Company;
however, it is likely that the business of View Tech, UST and the Combined
Company will face significant additional competition from entities with greater
financial and managerial resources. Furthermore, in September 1996, the United
States Court of Appeals for the Eighth Circuit granted a stay of implementation
of the Telecommunications Act in response to lawsuits filed by local telephone
companies and state officials claiming that the new federal rules are arbitrary
and usurp states' rights. There can be no assurance that the delay in
implementation of the Telecommunications Act will not have a material adverse
effect on the ability of View Tech, UST or the Combined Company to compete in
the local telephone markets. See "--Competition" and "THE JOINT PROXY
PROPOSAL--BUSINESS OF UST--The Telecommunications Industry."
DEPENDENCE UPON KEY PERSONNEL
View Tech depends to a considerable degree on the continued services
of Mr. Hatfield, its chairman and chief executive officer, and Mr. Hammon, its
president and chief operating officer, as well as on a number of highly trained
technical personnel. UST depends to a considerable degree on the continued
services of Mr. Reece, its president and chairman. The loss of any of Messrs.
Hatfield, Hammon or Reece could have a
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<PAGE> 40
material adverse effect on the Combined Company. In addition, the loss of
other key management or technical personnel or the failure to attract and
retain such personnel could have a material adverse effect on the Combined
Company's business, operations or financial condition. See "VIEW TECH PROXY
PROPOSAL 2--VIEW TECH EXECUTIVE COMPENSATION--Employment Contracts; Termination
of Employment and Change-In-Control Arrangements."
RISKS RELATED TO MARKET CONDITIONS
POSSIBLE FLUCTUATION OF PRICE OF VIEW TECH COMMON STOCK
Upon consummation of the Merger up to 2,500,000 shares of View Tech
Common Stock will be issued to (i) the former holders of UST Common Stock
(other than dissenting shareholders) in exchange for their UST Common Stock and
(ii) the former holders of the UST Options upon exercise of the Conversion
Options. Pursuant to the terms of the Merger Agreement, UST is valued at
$20,000,000 based upon an assumed $8.00 price per share of View Tech Common
Stock. The Merger Agreement provides for an adjustment to the value of UST
based upon the average closing bid price per share of View Tech Common Stock
(the "Average Closing Bid Price") for the sixteen business day period
commencing on the tenth business day prior to the publication of the terms of
the Merger Agreement and the Merger and ending on the fifth business day
following such public announcement (the "Determination Period"). However,
because the Average Closing Bid Price during the Determination Period was
$7.34375 per share, which was between the $7.00 and $9.00 per share collar
agreed to by UST and View Tech; there was, and there will be, no adjustment in
the number of shares issuable to the UST shareholders, based on the market
price of View Tech Common Stock. Because the maximum number of shares that
View Tech will have to issue to the UST shareholders is 2,500,000, it is
possible that the View Tech Common Stock received by the UST shareholders will
be worth more or less than the original $20,000,000 valuation. Based upon the
Average Closing Bid Price, and assuming 2,500,000 shares of View Tech Common
Stock are issued to the UST shareholders and the holders of UST Options, UST
would be valued at $18,359,375, compared to $15,937,500 based upon the closing
bid price per share of the View Tech Common Stock of $6.375 on October 31,
1996, or $20,000,000, based upon an $8.00 per share price of the View Tech
Common Stock provided in the Merger Agreement. Accordingly, changes in the
price per share of View Tech Common Stock will affect the value, but not the
number of shares, of the View Tech Common Stock received by UST shareholders
and the former holders of UST Options upon exercise of their Conversion
Options.
There can be no assurance that the value of the View Tech Common Stock
issuable to UST shareholders and the former holders of UST Options will not
increase or decrease from the value as set forth in this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus because of changes in the market
price of View Tech Common Stock. See "--Limited Public Market and Volatility
of View Tech Common Stock."
LIMITED PUBLIC MARKET AND VOLATILITY OF VIEW TECH COMMON STOCK
There has been only a limited public market for, and limited public
trading in, View Tech Common Stock which is traded on The NASDAQ National
Market. Continued qualification to trade on The NASDAQ National Market is
subject to certain minimum stock price levels and financial requirements.
There can be no assurance that View Tech will continue to satisfy these
requirements. In addition, from time to time, there has been and there again
may be, significant volatility in the public market for View Tech Common Stock.
There can be no assurance that a stable or active market for View Tech Common
Stock will exist or be sustained following the Merger. Although certain
broker-dealers presently make a market in View Tech Common Stock, none is
obligated to do so, and there can be no assurance that there will continue to
be broker-dealers willing to make a market in View Tech Common Stock. In the
event that the market makers and specialists cease to function as such, public
trading of the View Tech Common Stock will be adversely affected or may cease
entirely. See "MARKET DATA."
SUBSTANTIAL NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE IN MARKET; REGISTRATION
RIGHTS
A substantial number of shares of View Tech Common Stock and shares of
View Tech Common Stock underlying options and warrants are or will become
eligible for future sale in the public market. As of October 31, 1996, there
were approximately 1,906,638 outstanding shares of View Tech Common Stock that
are "restricted shares" as defined in Rule 144 promulgated under the Securities
Act, of which 1,384,500 currently are eligible for public sale pursuant to Rule
144. However, holders of 1,337,500 shares of View Tech Common Stock have
agreed not to sell shares of View Tech Common Stock prior to December 15, 1996
without the prior approval of the designated representative of the underwriters
of View Tech's initial public offering (the "View Tech IPO"). Based upon the
number of shares of View Tech Common Stock and UST Common Stock outstanding as
of October 31, 1996, immediately after consummation of the Merger there will be
5,893,438 shares of View Tech Common Stock (assuming conversion of the
Conversion Options), of which approximately 42.4% will be held by the former
holders of UST Common Stock. Upon consummation of the Merger, assuming
exercise of all outstanding options (including Conversion Options) and warrants
exercisable for View Tech Common Stock as of October 31, 1996, there will be
7,991,991 shares of View Tech Common Stock outstanding, of which approximately
31.3% will be held by the former holders of UST Common Stock and holders of
Conversion Options. Following consummation of the Merger, there will be a
total of up to 1,960,000 shares of View Tech Common Stock eligible for sale
under Rule 144, excluding shares of View
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<PAGE> 41
Tech Common Stock issuable upon exercise of View Tech Stock Options or
warrants, or issued to advisors in connection with the Merger. In addition,
holders of 503,138 shares of View Tech Common Stock presently have the right to
require View Tech, under certain circumstances, to register their shares under
the Securities Act, which would, under certain circumstances, permit such
holders to resell their shares of View Tech Common Stock without complying with
Rule 144. Sales of substantial amounts of View Tech Common Stock in the public
market pursuant to Rule 144 or otherwise, and the potential for such sales,
could adversely affect the prevailing market price for View Tech Common Stock,
including the shares of View Tech Common Stock to be received by UST
shareholders in the Merger, and impair View Tech's ability to raise additional
capital through the sale of equity securities. See "THE JOINT PROXY
PROPOSAL--DESCRIPTION OF CAPITAL STOCK."
CONTROL BY EXISTING SHAREHOLDERS
Assuming the issuance of up to 2,500,000 shares of View Tech Common
Stock to the former holders of UST Common Stock and holders of the Conversion
Options in connection with the Merger, View Tech's executive officers and
directors, including Messrs. Reece and Millet, will beneficially own an
aggregate of approximately 38.9% of the outstanding shares of View Tech Common
Stock, including stock issuable upon the exercise of vested employee stock
options (including the Conversion Options), following the Merger. Accordingly,
it is likely that such officers and directors, if acting in concert, will be
able to elect all of the View Tech directors and determine the outcome of all
corporate actions requiring shareholder approval, such as mergers and
acquisitions.
SUBSTANTIAL NUMBER OF AUTHORIZED SHARES OF VIEW TECH COMMON STOCK AVAILABLE FOR
FUTURE ISSUANCE; PROPOSED INCREASE IN AUTHORIZED CAPITAL STOCK UPON
REINCORPORATION IN DELAWARE; POSSIBLE DILUTIVE AND ANTI-TAKEOVER EFFECTS
The View Tech Articles of Incorporation authorize the issuance of
10,000,000 shares of View Tech Common Stock. As of October 31, 1996, there
were approximately 4,560,562 authorized but unissued and unreserved shares of
View Tech Common Stock available for issuance. Following consummation of the
Merger and the approval of View Tech Proxy Proposal 1, which will have the
effect, among other things, of increasing the number of shares of View Tech's
common stock available for issuance from 10,000,000 to 20,000,000, there will
be approximately 12,008,009 shares of View Tech Delaware Common Stock
authorized but unissued and unreserved. The View Tech Board of Directors has
the power to issue substantial amounts of additional shares without shareholder
approval. Although View Tech currently has no commitments to issue any shares
of View Tech Common Stock other than as described in this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus, it may issue a substantial
number of additional shares in connection with future financings or
acquisitions. To the extent that additional shares of View Tech Common Stock
are issued, dilution of the interests of View Tech's shareholders will occur.
The View Tech Articles of Incorporation, and the proposed Certificate
of Incorporation of View Tech Delaware, authorize the issuance of 5,000,000
shares of preferred stock, par value $0.0001 per share, with such designations,
rights and preferences as may be determined from time to time by the View Tech
Board of Directors. The View Tech Board of Directors is empowered, without
shareholder approval, to issue the View Tech Preferred Stock with dividend,
liquidation, conversion, voting or other rights, which could adversely affect
the voting power or other rights of the holders of the View Tech Common Stock.
In addition, the issuance of View Tech Preferred Stock and View Tech Common
Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of View Tech.
Although View Tech currently has no commitments to issue any shares of the View
Tech Preferred Stock or View Tech Common Stock, there can be no assurance that
View Tech will not do so in the future. If View Tech Proxy Proposal 1 is
approved, upon reincorporation in Delaware, View Tech will have the authority
to issue preferred stock as discussed above. See "THE JOINT PROXY
PROPOSAL--COMPARISON OF RIGHTS OF HOLDERS OF VIEW TECH AND UST COMMON
STOCK--Anti-Takeover Measures; --Capitalization; Blank Check Preferred Stock."
NO DIVIDENDS ON VIEW TECH COMMON STOCK
View Tech has never paid dividends on the View Tech Common Stock and
anticipates that for the foreseeable future all earnings, if any, will be
retained for ongoing operations and general corporate purposes. Accordingly,
View Tech does not expect to pay dividends on View Tech Common Stock in the
foreseeable future. See "THE JOINT PROXY PROPOSAL--VIEW TECH DIVIDEND POLICY."
LIMITATION OF LIABILITY; INDEMNIFICATION
Each of View Tech's Articles of Incorporation and Bylaws and the
Certificate of Incorporation and Bylaws of View Tech following its
reincorporation in Delaware, if such reincorporation is approved by the
shareholders of View Tech, contains provisions that limit the liability of
directors for monetary damages and provide for indemnification of officers and
directors under certain circumstances. Such provisions may discourage
shareholders from bringing a lawsuit against directors for breaches of
fiduciary duty and may also have the effect of reducing the likelihood of
derivative litigation against directors and officers even though such action,
if successful, might otherwise have benefitted View Tech and its shareholders.
In addition, a
30
<PAGE> 42
shareholder's investment in View Tech may be adversely affected to the extent
that costs of settlement and damage awards against View Tech's officers or
directors are paid by View Tech pursuant to such provisions. See "THE JOINT
PROXY PROPOSAL--COMPARISON OF RIGHTS OF HOLDERS OF VIEW TECH AND UST COMMON
STOCK--Indemnification and Limitation of Liability."
31
<PAGE> 43
MARKET DATA
The View Tech Common Stock is traded on The NASDAQ National Market
under the symbol "VUTK", and has been so traded since November 18, 1995. Prior
to such date, the shares were traded on The NASDAQ SmallCap Market and also the
Pacific Stock Exchange under the symbols of "VUTK" and "VWK," respectively,
since View Tech's initial public offering on June 15, 1995. Prior to the
offering, there was no public trading market for View Tech's equity securities.
In addition, warrants (the "Warrants") to purchase up to 575,000 shares of View
Tech's common stock are traded on The NASDAQ National Market and prior to
November 18, 1995 the Warrants traded on The NASDAQ SmallCap Market and the
Pacific Stock Exchange under the symbols "VUTKW" and "VWK WS," respectively.
The terms of the Warrants provide that one warrant plus $5.00 are required to
purchase one additional share of View Tech Common Stock. The Warrants are
redeemable at View Tech's option commencing June 15, 1996 upon 30 days' notice
to the warrantholders at $0.25 per share if the closing bid of the View Tech
Common Stock has been at least $8.00 for a period of 30 consecutive trading
days ending within 10 days of the date the notice of redemption is mailed. The
Warrants expire June 15, 1998.
The following table sets forth the quarterly high and low bids for
View Tech's Common Stock for the quarters indicated.
<TABLE>
<CAPTION>
BIDS
--------------------
HIGH LOW
-------- ---------
<S> <C> <C>
FISCAL 1995
Fourth Quarter June 30, 1995
(since June 16) . . . . . . . . . . . . . . . . . . . . . . . . . $6.88 $6.50
FISCAL 1996
First Quarter ended
September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . $8.88 $6.50
Second Quarter ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . $8.75 $7.00
Third Quarter ended
March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . $8.00 $6.63
Fourth Quarter ended
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . $8.25 $6.25
FISCAL 1997
First Quarter ended
September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . $8.25 $6.25
</TABLE>
On October 31, 1996, the closing bid price for View Tech Common Stock
and the Warrants on The NASDAQ National Market was $5.75 and $1.50,
respectively. As of October 28, 1996, there were 50 holders of record of View
Tech Common Stock and five holders of record of the Warrants.
UST Common Stock is not publicly traded. As of October 31, 1996,
there were 29 shareholders of record of UST Common Stock. UST generally makes
quarterly cash distributions to its shareholders in amounts necessary for such
shareholders to pay federal and state income taxes resulting from UST's status
as a Subchapter S corporation. On one occasion, in June 1994, UST paid a cash
dividend equal to $0.20 per share. Otherwise, UST has not paid, nor does it
have an intention to pay, cash dividends to its shareholders, except in regard
to tax distributions on account of UST's election to be taxed under Subchapter
S of the Code. Furthermore, under UST's revolving and lease lines of credit
with its primary lender, UST is restricted from paying cash distributions on
UST Common Stock except for amounts necessary for UST shareholders to pay
federal and state income taxes resulting from UST's election to be taxed under
Subchapter S of the Code. Upon consummation of the Merger, UST will no longer
be a Subchapter S corporation.
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<PAGE> 44
CAPITALIZATION
The following table sets forth, as of June 30, 1996, the consolidated
short-term debt, long-term debt and capitalization of View Tech (i) on an
historical basis, (ii) on a View Tech Pro Forma basis giving effect to the
acquisitions of VistaTel and GroupNet and (iii) on a pro forma combined basis
after giving effect to the Merger.
<TABLE>
<CAPTION>
View Tech View Tech UST Pro Forma Pro Forma
Historical Pro Forma Historical Adjustments (2) Combined
---------- --------- ---------- --------------- --------
<S> <C> <C> <C> <C> <C>
Short-term debt:
Notes payable and current portion
of long-term debt . . . . . . . . . $ 91,986 $ 104,486 $ 3,406,053 $ (430,000) $ 3,080,539
============= ============= ============== =============== ===========
Long-term debt (less current portion) . . . . 242,283 301,998 610,500 -- 912,498
============= ============ ============= =============== ===========
Stockholders' equity:
Preferred Stock, par value $.01 per
share, 5,000,000 shares authorized
but none issued and outstanding . . -- -- -- -- --
Common Stock, par value $.01 per
share; (10,000,000 shares authorized;
2,890,300 issued and outstanding
(5,893,438 on a combined pro forma
basis at June 30, 1996)(1) . . . . . 28,902 30,931 89,842 (61,842) 58,931
Paid-in-capital . . . . . . . . . . . . 5,253,234 6,671,205 1,348,415 1,441,842 9,461,462
Retained (deficit) . . . . . . . . . . (431,231) (431,231) (2,067,629) (1,080,000) (3,578,860)
------------- ------------- -------------- --------------- -----------
Total shareholders' equity (deficit) . . 4,850,905 6,270,905 (629,372) 300,000 5,941,533
------------- ------------- -------------- --------------- -----------
Total capitalization . . . . . . . . . . $ 5,185,174 $ 6,677,389 $ 3,387,181 $ (130,000) $ 9,934,570
============= ============= ============== =============== ===========
</TABLE>
____________________
(1) Assumes the issuance of (i) 52,857 shares of View Tech Common Stock in
connection with the VistaTel acquisition, (ii) 150,000 shares of View Tech
Common Stock in connection with the GroupNet merger and (iii) 300,281
shares of View Tech Common Stock in connection with a private placement of
View Tech Common Stock. However, the pro forma shares outstanding do not
include (i) 816,100 shares of View Tech Common Stock reserved for issuance
under the View Tech Stock Option Plan; (ii) 170,000 warrants to purchase
shares of View Tech Common Stock held by the underwriter which managed the
View Tech IPO in June 1995; (iii) 575,000 warrants to purchase Common Stock
sold in the public stock offering in June 1995 and (iv) 346,000 options to
purchase View Tech Common Stock issued to various consultants and advisors
as of June 30, 1996.
(2) The pro forma adjustments reflect the effects of the Merger, including the
pro forma after-tax write off of estimated Merger costs of $1,080,000
($1,800,000 pre-tax) and the net proceeds of $1,380,000 received by View
Tech subsequent to June 30, 1996 in connection with the private placement
of 300,281 shares of View Tech Common Stock and the paydown of $430,000 of
notes payable and current posting of long-term debt using proceeds from the
private placement. See "View Tech Management's Discussion and Analysis or
Plan of Operations" and "View Tech Notes to Financial Statements".
33
<PAGE> 45
THE MEETINGS, VOTING AND PROXIES
ANNUAL MEETING OF SHAREHOLDERS OF VIEW TECH
Date, Time and Place of View Tech Annual Meeting. The View Tech Annual
Meeting will be held at The Orchid, located at 816 Camarillo Springs Road,
Suite H, Camarillo, California 93011 at 9:00 a.m. local time on November 26,
1996.
Purpose of the Meeting. The purpose of the View Tech Annual Meeting is to
consider and vote upon: (i) the approval and adoption of the Merger and the
Merger Agreement pursuant to which, among other things (A) UST will be merged
with and into VTAI, (B) each share of UST Common Stock will be exchanged for
the right to receive shares of View Tech Common Stock based on the Conversion
Ratio and (C) View Tech will assume the UST Option Plan and the outstanding UST
Options at the Effective Time will be converted into Conversion Options (see
"THE JOINT PROXY PROPOSAL--THE MERGER"); (ii) a proposal to change View Tech's
state of incorporation from California to Delaware, which will also have the
effect, among others, of (A) increasing the number of shares of View Tech's
common stock authorized for issuance from 10,000,000 to 20,000,000 and changing
the par value of the View Tech common stock and the View Tech's preferred stock
from $0.01 to $0.0001 per share, and (B) classifying the View Tech Board of
Directors into three different classes; (iii) the election of six directors to
serve until their successors are elected; provided, however, that if the
proposal to reincorporate View Tech in the State of Delaware (see "VIEW TECH
PROXY PROPOSAL 1-- REINCORPORATION OF VIEW TECH IN DELAWARE AND RELATED CHANGES
TO THE RIGHTS OF SHAREHOLDERS") is adopted, upon reincorporation of View Tech
in Delaware, the View Tech Board of Directors will be divided into three
classes as follows: (A) Messrs. Carrera and Leduc will each serve a term of
one year; (B) Messrs. Hammon and Millet will each serve a term of two years;
and (C) Messrs. Hatfield and Reece will each serve a term of three years (see
"VIEW TECH PROXY PROPOSAL 2--ELECTION OF DIRECTORS"); (iv) the ratification of
the selection of Carpenter Kuhen and Sprayberry as View Tech's independent
accountants for the fiscal year ending June 30, 1997 (see "VIEW TECH PROXY
PROPOSAL 3--RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS"); (v) the
approval and adoption of the View Tech, Inc. 1997 Stock Incentive Plan (see
"VIEW TECH PROXY PROPOSAL 4-- APPROVAL AND ADOPTION OF VIEW TECH, INC. 1997
STOCK INCENTIVE PLAN"); and (vi) such other business as may properly come
before the View Tech Annual Meeting.
Record Date and Outstanding Shares. Shareholders of record at the close of
business on the View Tech Record Date are entitled to notice of, and to vote
at, the View Tech Annual Meeting, or at any adjournment or postponement
thereof. As of the View Tech Record Date, there were approximately 50 holders
of record of View Tech Common Stock, and 3,093,157 shares of View Tech Common
Stock issued and outstanding. Except for the shareholders identified in View
Tech's June 30, 1996 Annual Report on Form 10-KSB, incorporated herein by
reference, there were no other persons known to the management of View Tech to
be the beneficial owners of more than 5% of the issued and outstanding View
Tech Common Stock.
The holders of View Tech Common Stock are entitled to one vote per share on
all matters to be voted upon by the shareholders.
Voting of Proxies. All properly executed proxies that are not revoked will
be voted at the View Tech Annual Meeting in accordance with the instructions
contained therein. Proxies returned and containing no instructions regarding
the View Tech Proxy Proposals will be voted "for" each of the View Tech Proxy
Proposals in accordance with the recommendation of the View Tech Board of
Directors. A View Tech shareholder who has executed and returned a proxy may
revoke it at any time before it is voted at the View Tech Annual Meeting by
executing and returning a proxy bearing a later date, by filing written notice
of such revocation with the Secretary of View Tech stating that the proxy is
revoked or by attending the View Tech Annual Meeting and voting in person.
Vote Required. The View Tech Board of Directors is soliciting the
affirmative vote of the holders of a majority of the outstanding shares of View
Tech Common Stock for approval of each of the Joint Proxy Proposal and View
Tech Proxy Proposal 1. The View Tech Board of Directors is soliciting the
affirmative vote of a majority of shares of View Tech Common Stock present in
person or represented by proxy and entitled to vote on each such matter at the
View Tech Annual Meeting for approval of View Tech Proxy Proposals 2 and 3.
The presence, either in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of View Tech Common Stock is necessary to
constitute a quorum at the View Tech Annual Meeting.
Abstentions and broker non-votes (i.e., shares of View Tech Common Stock
held in record name by brokers or nominees as to which (i) instructions have
not been received from the beneficial owners or persons entitled to vote, (ii)
the broker or nominee does not have discretionary voting power under applicable
Commission rules or the instrument under which it serves in such capacity or
(iii) the record holder has indicated on the proxy card or otherwise notified
View Tech that such record holder does not have authority to vote on that
matter) are counted
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<PAGE> 46
for purposes of determining the existence of a quorum for the transaction of
business and will have the effect of a vote against a proposal.
As of the View Tech Record Date, the officers and directors of View Tech
holding an aggregate of 1,162,500 shares of View Tech Common Stock,
representing approximately 34.3% of the outstanding shares of View Tech Common
Stock, have indicated an intention to vote in favor the View Tech Proxy
Proposals at the View Tech Annual Meeting.
Expenses; Solicitation of Proxies. In addition to solicitation by use of
the mails, proxies may be solicited by directors, officers and employees of
View Tech in person or by telephone or other means of communication. Such
directors, officers and employees will not be additionally compensated, but may
be reimbursed for out-of-pocket expenses incurred in connection with such
solicitation. Arrangements will also be made with custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and View Tech will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
SPECIAL MEETING OF SHAREHOLDERS OF UST
Date, Time and Place of UST Special Meeting. The UST Special Meeting will
be held at the offices of Burns & Levinson LLP located at 125 Summer Street,
Boston, Massachusetts at 2:00 p.m. local time on November 26, 1996.
Purpose of the UST Meeting. The purpose of the meeting is to consider and
vote upon: (i) the approval and adoption of the Merger and the Merger
Agreement; and (ii) the transaction of such other business as may properly come
before the UST Special Meeting.
Record Date and Outstanding Shares. Shareholders of record at the close of
business on the UST Record Date are entitled to notice of, and to vote at, the
UST Special Meeting, or at any adjournment or postponement thereof. As of the
UST Record Date, there were approximately 29 holders of record of UST Common
Stock, and approximately 9,059,157 shares of UST Common Stock issued and
outstanding.
The holders of UST Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders.
Voting of Proxies. All properly executed proxies that are not revoked will
be voted at the UST Special Meeting in accordance with the instructions
contained therein. Proxies returned and containing no instructions regarding
the UST Proposal will be voted "for" the UST Proposal in accordance with the
recommendation of the UST Board of Directors. A UST shareholder who has
executed and returned a proxy may revoke it at any time before it is voted at
the UST Special Meeting by executing and returning a proxy bearing a later
date, by filing written notice of such revocation with the Clerk of UST stating
that the proxy is revoked or by attending the UST Special Meeting and voting in
person.
Vote Required. The UST Board of Directors is soliciting the affirmative
vote of the holders of at least 90% of the shares of UST Common Stock entitled
to vote thereon for approval of the Joint Proxy Proposal. The presence, either
in person or by properly executed proxy, of the holders of a majority of the
outstanding shares of UST Common Stock is necessary to constitute a quorum at
the UST Special Meeting.
Abstentions are counted for purposes of determining the existence of a
quorum for the transaction of business and will have the effect of a vote
against a proposal.
As of the UST Record Date, the officers and directors of UST holding an
aggregate of 4,810,391 shares of UST Common Stock, representing approximately
53.1% of the outstanding shares of UST Common Stock, have indicated an
intention to vote in favor the UST Proposal at the UST Special Meeting.
Expenses; Solicitation of Proxies. In addition to solicitation by use of
the mails, proxies may be solicited by directors, officers and employees of UST
in person or by telephone or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for out-of-pocket expenses incurred in connection with such
solicitation. Arrangements will also be made with custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and UST will reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
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<PAGE> 47
THE JOINT PROXY PROPOSAL
THE MERGER
Pursuant to the Merger Agreement, UST will merge with and into VTAI, which
is and will remain a wholly-owned subsidiary of View Tech. At the Effective
Time, as a result of the Merger, shareholders of UST will be granted the right
to receive shares of View Tech Common Stock based on the Conversion Ratio
(subject to adjustment pursuant to the Merger Agreement), as described below,
for each share of UST Common Stock outstanding immediately prior to the Merger
and each share of UST Common Stock otherwise issuable upon exercise of the
Conversion Options. Fractional shares of View Tech Common Stock will not be
issued in connection with the Merger, and in lieu of issuing fractional shares,
the number of Merger Shares issuable to each holder of shares of UST Common
Stock and Conversion Options will be rounded up to the next whole number. See
"--TERMS OF THE MERGER AGREEMENT--Manner and Basis of Converting Shares and
Options."
BACKGROUND OF THE MERGER
Since the completion of the View Tech IPO in June 1995, View Tech has grown
from a regional company with approximately 22 full-time employees in two
offices in southern California and revenues of $6,963,487 for the fiscal year
ended June 30, 1995, to a national company with approximately 52 full-time
employees in eight offices in five states and revenues of $13,346,103 for the
fiscal year ended June 30, 1996.
View Tech's growth in the 1996 fiscal year resulted primarily from
strategic hiring practices and the placement of key personnel in areas outside
of southern California. In fiscal 1996, View Tech opened six new regional
headquarters and hired approximately 30 new full-time employees. Although the
management of View Tech considered the possibility of growth through
acquisitions, during the first half of fiscal 1996, View Tech did not identify
any attractive acquisition candidates and concentrated instead on internal
growth. View Tech management did consider the acquisition of Power-Data
Services, Inc. ("PDS"), which designed and implemented solutions to customer
data and video communications needs. During the course of their due diligence
review, however, both View Tech and PDS determined that an acquisition would
not be in the best interests of their respective shareholders.
Since July 1996, View Tech has been able to identify several suitable
acquisition candidates and has completed two acquisitions. See "-- VIEW TECH
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS." On July 10, 1996,
View Tech completed its acquisition of substantially all of the assets of
VistaTel, and on September 24, 1996, View Tech completed the merger of GroupNet
with and into View Tech pursuant to a merger agreement dated as of August 30,
1996. The VistaTel and GroupNet acquisitions resulted in the expansion of View
Tech's operations into Florida and the northeastern United States region,
respectively. As of the date of this Joint Proxy Statement/View Tech Proxy
Statement/Prospectus, the Merger is the largest acquisition or merger that View
Tech has contemplated. View Tech management believes the Merger is an integral
part of View Tech's long-term growth strategy. See "RISK FACTORS--Risks
Related to the Merger."
In connection with its strategy to grow in part through acquisitions,
pursuant to an agreement effective as of September 1, 1994, View Tech retained
WHI, a consulting firm, to serve as, among other things, its financial advisor
in connection with potential acquisitions and to assist View Tech in raising
additional capital.
View Tech also entered into a financial advisory agreement with KSC in June
1996. KSC agreed to serve as View Tech's financial advisor with respect to
potential acquisitions and to assist View Tech in raising additional capital.
KSC is an investment banking firm and NASD broker-dealer whose research
department and management team have experience working with small,
emerging-growth companies. WHI's chairman, Mr. Robert E. Yaw II, introduced
View Tech to KSC and to Barron Chase Securities, which served as underwriter in
the View Tech IPO, and recommended that View Tech use KSC for the foregoing
purposes.
UST interviewed several financial advisors in late 1995, and on December
19, 1995, engaged Concord to identify potential sources of capital and merger
candidates and to render financial advisory services in connection with these
matters.
CHRONOLOGY OF EVENTS
In May 1996, View Tech's management was contacted by UST's financial
advisor, Concord, with respect to the possible combination of the two
companies. View Tech and UST were aware that each was a dealer for a mutual
client, PictureTel. View Tech was first introduced to UST when the two
companies worked together to install remote video hardware for a UST customer
located in California in 1993. View Tech had also received positive references
about UST from PictureTel, View Tech's principal supplier.
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In May 1996, initial discussions took place among View Tech and UST's
financial advisor. Based on discussions with Concord about the potential
synergies between the two companies, among other things, View Tech's
management decided to review and consider the possibility of a business
combination with UST. On May 24, 1996, View Tech entered into a non-disclosure
agreement with UST and received certain confidential information about UST and
its business. View Tech then commenced a due diligence review of UST and its
business, operations and financial condition. Members of View Tech's
management, consisting of Mr. Hatfield, chairman of the View Tech Board of
Directors, and Mr. Hammon, president, chief operating officer and a director of
View Tech, advised the other View Tech officers of their belief that View Tech
should pursue discussions with UST about a possible business combination. In
this same time period, UST received public information about View Tech
including, but not limited to, View Tech's 1995 Annual Report, the View Tech
IPO prospectus and product literature.
On June 10, 1996, three UST representatives, Mr. Reece, UST's president and
chairman of the UST Board of Directors, Mr. Gentile, UST's chief financial
officer, and UST's financial advisor, participated in a video conference call
with Messrs. Hatfield and McKay. They discussed the goals of their respective
companies and decided that the companies and their respective advisors would
meet in Boston to discuss further a possible business combination between the
companies. On June 17, 1996, Messrs. Hatfield, Hammon, Yaw and Kenny, KSC's
chairman, and the attorney of one of View Tech's financial advisors met certain
members of UST's management and David F. Millet, a member of UST's Board of
Directors, at UST's offices in Boston. The representatives of each company
continued their due diligence review of the other company and discussed
business synergies and potential risks associated with a business combination.
On June 18, 1996, Messrs. Hatfield, Hammon, Yaw and Kenny and the attorney of
one of View Tech's financial advisors met with additional members of UST's
management and the remainder of the UST Board of Directors and discussed the
general outline of a possible business combination. Mr. Millet was unable to
attend the meeting. These preliminary meetings in Boston were followed by
additional meetings between members of View Tech's and UST's management and
their respective advisors. A series of meetings and telephone conferences
ensued, and the companies continued to pursue their respective due diligence
activities.
In mid-July, representatives of the two companies began to negotiate the
terms of a letter of intent in connection with the Merger. Messrs. Hatfield,
Hammon, McKay, Reece, Millet and Gentile and their respective financial
advisors participated in these negotiations. Also present was a representative
of View Tech's independent public accountants, and one of View Tech's regular
outside counsel also participated via telephone during certain negotiations.
Messrs. Yaw and Kenny also were requested to provide general consultation and
financial advice to View Tech's management and to the View Tech Board of
Directors concerning the respective values of View Tech, UST and the Combined
Company.
The UST Board of Directors met on July 11, 19 and 20, 1996 to review in
detail the ongoing due diligence process and the opportunity for a business
combination with View Tech. On July 20, 1996, the UST Board of Directors met
with representatives of Concord for the specific purpose of finalizing the
process of identifying potential sources of capital and merger candidates and
discussing details of a "no shop" arrangement with View Tech. The UST Board of
Directors authorized Concord and UST's management to enter into a letter of
intent with View Tech if an appropriate arrangement could be made whereby View
Tech would advance working capital funds to UST, which would allow management
to focus on a single due diligence process, thereby allowing both companies to
work toward a definitive merger agreement. At a special meeting on July 23,
1996 and at the invitation of Mr. Hatfield, Mr. Yaw advised the View Tech Board
of Directors of, among other things, the principal terms and conditions of the
proposed business combination with UST, View Tech's ongoing due diligence
review and the status of negotiations with UST. Mr. Reece was introduced to
the View Tech Board of Directors at the special meeting via video conference
call. In addition to all of the View Tech directors, Mr. McKay and a
representative of View Tech's regular outside counsel also attended the special
meeting.
At the July 23, 1996 special meeting of the View Tech Board of Directors,
Mr. Reece expressed his interest in the prospect of a business combination of
the two companies. Mr. Reece stated his belief that View Tech's management
team, geographic scope and access to greater financial resources could allow
UST to prosper and that the Combined Company could develop the appropriate
critical mass to improve the respective operating results of each of View Tech
and UST. Mr. Reece explained to the View Tech Board of Directors that UST had
been considering two other potential business relationships but were inclined
toward a transaction with View Tech. He also stated that UST's management was
impressed by the commitment to due diligence of View Tech's management, its
growth strategy, recent revenue growth of View Tech and market opportunities
for the Combined Company. Mr. Reece then disconnected from the video
conference, and Messrs. Hatfield and Yaw reviewed with the View Tech Board of
Directors in detail not only the proposed parameters of the terms of the
prospective merger with UST, but also the parameters of View Tech's overall
mergers and acquisitions strategic objectives. Following extensive discussion,
the View Tech Board of Directors authorized Messrs. Hatfield, Hammon and McKay
to
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negotiate with the appropriate representatives of UST and to finalize and
execute a definitive letter of intent with respect to the Merger. The draft
letter of intent provided for the loan of $1,000,000 to UST on or about July
26, 1996 to be used to repay a portion of UST's outstanding indebtedness to its
primary lender and for general working capital purposes.
On July 25, 1996, the View Tech Board of Directors authorized the officers
of View Tech to make the proposed loan to UST, and further authorized such
officers to proceed with a private placement of View Tech Common Stock through
KSC in order to replace working capital used to fund the loan to UST.
The parties entered into the definitive letter of intent on July 26, 1996
(the "Letter of Intent"). The Letter of Intent provided, among other things,
that View Tech would loan $1,000,000 to UST. The loan was to be made in two
installments, one on July 26, 1996 and the other on August 15, 1996. View Tech
advanced UST the first $500,000 installment on July 29, 1996, and the second
$500,000 installment on August 19, 1996. The Letter of Intent also called for
the negotiation of a definitive merger agreement by August 15, 1996.
On August 6, 1996, View Tech held another special meeting of the View Tech
Board of Directors in Camarillo, California. All of the View Tech directors
were present along with Messrs. McKay, Reece, Millet and Yaw and
representatives of View Tech's regular outside counsel. Mr. Reece summarized
the business history of UST for the View Tech Board of Directors by describing
UST's organization in 1986 as a franchise of a company which sold a broad range
of telecommunications equipment to small and medium-sized businesses. Mr.
Reece reviewed in detail UST's start-up phase, its transition to independent
status upon the bankruptcy of the franchisor, its development of agency
relationships with certain RBOCs, the streamlining of its equipment product
lines to focus primarily on voice, video and data equipment and its initiation
of "800" telephone number sales through telemarketing. Mr. Reece then outlined
UST's business, including its focus on market segmentation, its
single-point-of-contact strategy, its value-added consultative sales approach
and an account management philosophy supported by its partnership with NYNEX.
Mr. Reece also reviewed the rise and fall of UST's telemarketing business,
which had been heavily dependent on sales of "800" numbers to small businesses
nationwide. Mr. Reece acknowledged that rapid growth of this revenue stream
during the 1992 and 1993 period was outside the scope of UST's core business
strategy and, as of 1994, UST was in need of restructuring.
Mr. Reece provided the View Tech Board of Directors with an overview of,
among other things, (i) resolution by UST in 1994 of certain revenue
recognition issues related to charge backs from "800" number clients, (ii)
UST's transition from its "800" number line of business and (iii) its
restructuring, which began in early 1995 when Mr. Reece, who was chief
executive officer of UST, resumed the role of president (in which capacity he
previously served from 1986 through January 1992) with responsibility for the
day-to-day operations of UST. During this time, UST closed two telemarketing
offices, consolidated its principal places of operation, laid-off approximately
200 employees and focused its remaining 150 employees and sales and service
organizations on building value-added relationships with UST's clients.
Messrs. Reece and Millet expressed their belief to the View Tech Board of
Directors that the strength of UST's relationships with clients such as NYNEX,
GTE, Bell Atlantic, Northern Telecom and PictureTel, among others, had improved
since the restructuring. Mr. Reece expressed his hope that a business alliance
with View Tech could be developed which would provide additional working
capital, management depth, market expansion and an opportunity for liquidity
for UST's shareholders. Mr. Millet and Mr. Reece then left the meeting. Mr.
Reece subsequently traveled to Atlanta for due diligence discussions with View
Tech's sales and service management in that regional office.
After Mr. Reece's presentation at the August 6, 1996 special meeting and
careful consideration of the proposed transaction and related matters,
including a report by Mr. Hatfield that WHI and KSC tentatively had concluded
that UST had a value of approximately $20,000,000 based on a comparative
company analysis and that the reasonable value of View Tech Common Stock
proposed to be issued to the shareholders of UST in connection with the Merger
was appropriately $8.00 per share, the View Tech Board of Directors authorized
the View Tech officers to continue their due diligence review of UST and to
begin negotiations toward a definitive merger agreement.
During the period from August 14 through August 16, 1996, Messrs. Hatfield,
Hammon and McKay and representatives from both companies' regular counsel and
financial advisors met in Boston at the offices of UST's regular counsel, with
the management and certain members of the UST Board of Directors.
Representatives of the two companies, including Messrs. Gentile, Millet and
Reece, negotiated the terms of the Merger Agreement, including, among other
things, the terms and conditions of the Merger, the Conversion Ratio and
adjustments thereto in the event UST failed to meet certain financial
projections, the rights of UST shareholders following the Merger and the
payment of fees of UST's financial advisor, attorneys and accountants.
On August 29, 1996, Messrs. Millet and Reece traveled to California to meet
with the members of the View Tech Board of Directors. All of the View Tech
directors were present at the meeting with Messrs. Reece and Millet, and Mr.
Yaw also was present. The View Tech directors and Messrs. Reece, Millet and
Yaw discussed
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the broad implications of the Merger, including steps required for executing
the definitive Merger Agreement, the timing of filing the joint proxy statement
in connection with the Merger, the management of the Combined Company and the
opportunities that would be available to the Combined Company that were not
then currently available to either UST or View Tech. Detailed questions were
presented by View Tech's outside directors for discussion with Messrs. Reece
and Millet. Mr. Reece described the broad array of services and products of
the Combined Company.
After Messrs. Reece and Millet left the meeting, Mr. Hatfield advised the
View Tech directors of the specific terms and conditions of the Merger and the
Merger Agreement, including, the relative values of UST and View Tech
preliminarily determined by WHI and KSC, the potential adjustments to the
Conversion Ratio based on UST's financial performance, the adjustments to the
Conversion Ratio as a result of View Tech's payment of UST's legal and
accounting fees and the closing condition of UST relating to the repayment of
UST's outstanding indebtedness of $3,000,000 to its primary lender. Mr.
Hatfield also noted that a condition precedent to View Tech's obligation to
effect the Merger is completion of satisfactory due diligence, including
financial and operational due diligence, with respect to UST. He further noted
his intention to request that WHI and KSC provide the View Tech Board of
Directors with a more complete and thorough analysis of the relative values of
UST and View Tech. The View Tech directors also discussed the election of
Messrs. Reece and Millet to the View Tech Board of Directors and the amendment
to the View Tech Bylaws to provide for a classified board of directors in
connection with the Merger. Following such discussions, the View Tech
directors formally authorized and directed View Tech's chairman, president and
chief financial officer to execute the definitive Merger Agreement.
On September 4, 1996, the UST Board of Directors met with its legal counsel
and a representative of Concord to review the final terms of the Merger
Agreement and to consider, in detail, the Merger. At the meeting, the UST
Board of Directors authorized UST's management to engage an independent third
party to review and assess the fairness of the Merger from the financial point
of view of the UST shareholders. The UST Board of Directors considered, among
other things, the conditions precedent to effecting the Merger as set forth in
the Merger Agreement, including the delivery of a favorable fairness opinion
and completion of satisfactory due diligence with respect to View Tech. After
discussion and deliberations, the UST Board of Directors voted unanimously to
authorize the management of UST to execute the definitive Merger Agreement.
On September 5, 1996, UST and View Tech signed the Merger Agreement and
announced the Merger Agreement.
On September 20, 1996, the View Tech Board of Directors held a special
telephonic meeting, at which all the directors were present, to discuss the
status of the Merger. The directors were again apprised of the particular
terms and conditions of the Merger and the Merger Agreement and were given the
opportunity to further consider their authorization of the Merger and the
Merger Agreement. After careful deliberation, the View Tech Board of Directors
unanimously approved of the Merger and the Merger Agreement and ratified all
actions previously taken by the officers of View Tech in connection with the
consummation of the Merger.
On September 25, 1996, UST engaged OCWW for the purpose of rendering a
fairness opinion.
On September 30, 1996, the View Tech Board of Directors held another
special telephonic meeting, at which all directors were present, to discuss the
status of due diligence in connection with the Merger. The directors
specifically examined the nature and extent of shareholder dilution that will
result from the consummation of the Merger, and the impact of cumulative
voting. Although the directors acknowledged that as much as 42.4% of the View
Tech Common Stock may be issued to the shareholders of UST in the Merger,
assuming exercise of all UST Options, the directors believed that the benefits
to the View Tech shareholders resulting from the acquisition of UST outweighed
any uncertainty arising out of the transfer of a substantial block of View Tech
Common Stock to a small group of investors. The chairman also informed the
directors that he anticipated that WHI and KSC would deliver their respective
financial analyses and presentations to the View Tech Board of Directors prior
to the effective date of the registration statement of which this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus forms a part.
On October 17, 1996 the UST Board of Directors met with its legal counsel,
its independent auditors, representatives of Concord and a representative of
OCWW. The UST Board of Directors received a draft report on the due diligence
performed at View Tech by a team from UST and UST's independent auditors.
UST's legal counsel then reported on the steps required before the UST
shareholders meeting and the consummation of the Merger and reviewed the
responsibilities of various parties. The representative of OCWW discussed the
methodology utilized in its fairness opinion and reviewed the preliminary
results of the fairness study with the UST Board of Directors. The preliminary
report from OCWW was that the transaction as of this date was fair to the UST
shareholders from a financial point of view. The UST Board of Directors
discussed the details of this analysis and requested that OCWW complete its due
diligence and report to the UST Board of Directors at its next meeting.
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On October 24, 1996, the View Tech Board of Directors held a special
meeting at View Tech's offices in Camarillo, California. Present at the
meeting were all of the members of the View Tech Board of Directors, Mr. McKay,
Mr. Yaw of WHI, Mr. Kenny of KSC and representatives of View Tech's legal
counsel and independent accountants. The purpose of the meeting was to receive
a presentation by Messrs. Yaw and Kenny with respect to the results of their
due diligence review of UST and their financial analyses in connection with UST
and the Merger.
Before calling the meeting to order, View Tech's legal counsel summarized
for the directors the nature and extent of their fiduciary responsibilities in
the context of the Merger. View Tech's legal counsel also noted the material
impact that the Merger would have on View Tech's business. Counsel then
pointed out to the directors that, following the Merger, a large block of View
Tech Common Stock would be held by the former shareholders of UST, and that
former directors of UST would have two seats on the View Tech Board of
Directors. Accordingly, counsel noted that under such circumstances former
shareholders of UST would have a substantial interest in View Tech and would be
in a position to influence the management and direction of View Tech.
Mr. Kenny then described the background and expertise of KSC, and
specifically focused on KSC's knowledge and experience in the
telecommunications industry. He also described his involvement in negotiating
the terms of the Merger Agreement, and in determining a valuation for UST for
purposes of establishing the Conversion Ratio. Mr. Kenny also expressed his
confidence in UST's management team, including Messrs. Reece and Gentile, and
suggested that UST's executive officers could add depth to View Tech's
management team following the Merger.
Messrs. Kenny and Yaw then described the financial diligence they had
performed and the method they had employed in determining a valuation for UST.
Mr. Kenny advised that companies in growth industries, such as UST, are valued
based upon multiples of revenues and/or earnings, and that in his view the
value of UST most properly would be based on a multiple of revenues. He stated
that companies comparable to UST were difficult to identify due to the nature
of UST's business. However, he indicated that KSC had prepared a comparable
company analysis with respect to 31 companies in the telephony resale,
teleconferencing and systems integration industries, which either are publicly
traded or which are in the process of effecting a public offering. He went on
to explain that the stock of such companies generally trade at prices ranging
between 1.4 and 1.7 times revenues.
Messrs. Kenny and Yaw then specifically addressed the financial condition
of UST in view of the foregoing analyses, and advised that a valuation discount
would be appropriate, among other reasons, due to the lack of a public market
for UST's stock and the fact that UST's financial performance was not at the
level of the companies included in KSC's comparable company analysis. Mr. Yaw
explained that at the time negotiations with respect to the Merger were taking
place two additional proposals for the acquisition of UST were being considered
by the UST Board of Directors, each of which included a cash component and
involved total consideration reflecting a valuation approximating 1.0 times
revenues. Based on the foregoing, Messrs. Kenny and Yaw concluded that a
valuation of 1.0 times revenues for UST for purposes of the Conversion Ratio
was reasonably favorable and appropriate.
At the end of the presentation by Messrs. Yaw and Kenny, the directors
requested that WHI and KSC prepare a written report summarizing their analyses
and conclusions. The directors then affirmed their earlier decision to proceed
with the Merger, and stated that they were comfortable with the valuation of
UST based upon WHI's and KSC's oral presentation.
The October 24, 1996 meeting was continued to October 28, 1996. Present at
the continued meeting were all the directors, Mr. McKay and a representative of
View Tech's legal counsel. At such meeting, the directors further discussed
Messrs. Yaw's and Kenny's oral presentation and the status of the written
report.
On October 28, 1996, the UST Board of Directors met again with the
representative of OCWW. The representative of OCWW presented OCWW's draft
written opinion and discussed the opinion and the summary of the methodology
utilized in its review. The draft opinion concluded that the proposed
transaction as of this date was fair to the UST shareholders from a financial
point of view. The UST Board of Directors discussed the details of this
analysis and requested that OCWW be prepared to revisit and revise its opinion
based on current information at the appropriate time to allow for the timely
filing of the amendment to the Registration Statement on Form S-4.
On October 30, 1996, the View Tech Board of Directors received a written
report from KSC. The report was consistent with Messrs. Yaw's and Kenny's
earlier statements to the View Tech Board of Directors with respect to the
valuation of UST.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Joint Reasons for the Merger. The boards of directors and management of
each of View Tech and UST have independently concluded that a business
combination is in the best interests of their respective corporate strategies
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and shareholders.
New technology introduction and competitive pricing combined with a
dramatic reduction in regulatory restrictions has created a burgeoning market
for the products and services offered to the marketplace by both View Tech and
UST. Each company is a value-added provider of sophisticated
telecommunications and video conferencing equipment and services. UST also
provides local and long distance services to link the sophisticated equipment
into wide area networks provided by local and interexchange carriers. The
Combined Company will allow for a "bundling" of products and services to the
end-user customer not generally available in the market today. See "RISK
FACTORS--Government Regulation; Uncertainty Relating to the Telecommunications
Act of 1996."
View Tech and UST management each believes that in order to take advantage
of these significant changes in the telecommunications industry, their
companies must grow efficiently in both human and capital resources and
increase the diversity of their product lines and services. View Tech and UST
believe that the Merger between the companies will best enable them to
accomplish their goals of integrating telecommunications solutions for business
customers nationwide.
In approving the Merger Agreement, the View Tech Board of Directors and the
UST Board of Directors considered, among other things, the following factors:
- - The Combined Company's greater geographic scope and diversification of
revenue sources.
- - The Combined Company's more extensive product line to fulfill a wider range
of customer requirements.
- - The Combined Company's greater management and operational resources.
- - The Combined Company's anticipated long-term administrative efficiencies.
- - The strengthened management and technical staffs of the Combined Company
that will help accelerate the development and expansion of new products and
services.
- - The Combined Company's increased market capitalization and the number of
freely-traded shares of the Combined Company's common stock which are
intended to provide shareholders of the Combined Company increased
liquidity and enhanced market visibility.
- - The Merger is intended to be treated as a "pooling of interests"
transaction for accounting purposes and as a tax-free reorganization under
the Code.
View Tech's Reasons for the Merger. The View Tech Board of Directors
believes that the Merger is a significant strategic opportunity for View Tech
in several ways:
- - The Merger fits View Tech's strategy of acquiring companies which serve
geographic regions not served by View Tech. Although View Tech acquired
GroupNet, which also operates in the northeastern United States, GroupNet
was a relatively new company without a developed infrastructure. View Tech
management believes that the northeastern United States region presents
additional important market opportunities that can be served by a
full-service office which can operate independently of the California
principal executive offices.
- - The Merger will enable View Tech to market its services to UST's existing
clients. UST has a highly-developed telemarketing operation which
principally targets small and medium-sized businesses. View Tech believes
that the addition of UST's expertise in these areas will ultimately allow
View Tech to market its products and services to the home user or the
telecommuter/video-commuter.
- - UST markets local access telephone connections for NYNEX and other RBOCs.
Although View Tech markets local access telephone connections for Pacific
Bell, it does not derive material revenues from this function. UST, on the
other hand, derives significant revenue through marketing network services
and processing orders. View Tech believes that UST can play a vital role
in maximizing View Tech's revenues attainable through marketing network
services.
- - View Tech management sees opportunities to re-sell and provide billing
services for telephone carriers. UST's management has initiated
investigations into this area; View Tech believes that the Combined Company
holds the promise of effectively pursuing these opportunities.
- - View Tech deemed the strength of the UST management team to be an important
component of the value of UST to View Tech.
In approving the Merger Agreement and the transactions contemplated
thereby, and in recommending that View
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Tech's shareholders approve the Merger, the View Tech Board of Directors
consulted with View Tech's management, as well as its financial and legal
advisors, and also considered, among other things: (i) View Tech's and UST's
business and management expertise, business strategy, prospects and competitive
position in the video conferencing and telecommunications industries; (ii)
historical, current and projected financial conditions and results of
operations of View Tech (without giving effect to the Merger) and of the
Combined Company (after giving effect to the Merger); (iii) the proposed
structure of the Merger and provisions relating to corporate governance of the
Combined Company; (iv) the Conversion Ratio and other terms of the Merger
Agreement; (v) the financial presentations of KSC and WHI, as View Tech's
financial advisors; and (vi) general economic and stock market conditions.
The View Tech Board of Directors considered a number of potentially
negative factors in its deliberations concerning the Merger, including (i)
unascertainable risks relating to the organization of the business and
operations of UST and View Tech, (ii) UST's financial condition and need for
additional capital and (iii) the transaction costs associated with completing
the Merger. In the view of the View Tech Board of Directors, these
considerations did not outweigh, individually or collectively, the anticipated
benefits associated with the Merger to View Tech and its shareholders.
Due to the breadth of factors considered in the evaluation of the Merger,
the View Tech Board of Directors did not find it practicable to quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the View
Tech Board of Directors may have given different weights to different factors.
Agreement and Services of KSC. KSC was retained by View Tech to assist in
the strengthening of its financial condition, as well as evaluating and
advising on the structure of acquisitions. View Tech's management utilized KSC
to provide financial consulting and advice in connection with the Merger and
the relative values of View Tech and UST. Mr. Kenny participated in several
meetings in which the terms of the Merger Agreement were negotiated and
reviewed various financial data with respect to UST. KSC prepared an analysis
of 32 public companies comparable in varying degrees to UST. Based upon such
analysis, KSC determined, on a preliminary basis, that the value of UST, based
on an analysis of comparable public companies, could range from approximately
1.4 to 1.7 times UST's projected annual revenue. Based on additional financial
and operational information, including financial projections, provided by UST
and View Tech, KSC then determined, on a preliminary basis that the value of
UST was approximately $20,000,000, which View Tech's management used in
connection with negotiations with UST. View Tech's management expects KSC to
provide continuing financial consulting advice to the View Tech Board of
Directors as a part of View Tech's due diligence up to the Effective Date.
KSC's fees in connection with the Merger are estimated to be $367,000. In
addition, KSC acted as placement agent for View Tech in connection with a
private placement of 300,281 shares of View Tech Common Stock for which KSC
received fees of approximately $120,000 and a warrant to purchase 15,000 shares
of View Tech Common Stock at an exercise price of $6.25 per share. In
connection with any future transactions in which KSC participates, View Tech
has agreed to pay KSC (i) 2% of the transaction value of any merger or
acquisition ("M&A") transaction and (ii) 8% of the amount raised in any private
placement plus warrants to acquire 5% of the securities sold thereunder. In
addition to the amounts described above, KSC has received a warrant to purchase
110,000 shares of View Tech Common Stock at an exercise price of $7.15 and View
Tech's agreement to pay a total of $85,000 between June 1996 and May 1, 1997.
Agreement and Services of WHI. View Tech retained WHI effective as of
September 1, 1994 to provide general management and consulting services. Such
services have included, among other things, assistance with the View Tech IPO
and management of View Tech's capital requirements and resources. WHI
introduced View Tech to both Barron Chase Securities, the managing underwriter
for the View Tech IPO, and KSC. An officer of WHI served as a director of View
Tech from September 1994 through June 24, 1996. From July through September
1996, View Tech has paid WHI $15,000 in connection with such services,
excluding reimbursement for expenses, and approximately $11,000 to WHI's legal
advisors in connection with negotiation of the Letter of Intent. The agreement
in effect between View Tech and WHI provided for the issuance of options to WHI
equal to 5% of the aggregate transaction value of any M&A transaction for which
WHI provides financial advice. In connection with such agreement, View Tech
issued 55,000 options to Mr. Yaw on June 27, 1996 and 55,000 options to an
officer of WHI (who also is a former director of View Tech) on August 22, 1996.
In October 1996, the agreement was amended to provide that WHI will be
compensated on mutually agreed terms in the event View Tech uses the services
of WHI. View Tech currently contemplates using the services of WHI to obtain
$7,000,000 in convertible preferred stock from institutional investors
following the Merger. It is anticipated that View Tech will pay an aggregate
of 6.5% of the amount of such financing to WHI and any other investment banker
or finder to which fees are owed. In connection with the Merger, View Tech
agreed to issue to WHI 30,000 shares of View Tech Common Stock on the Effective
Date and pay WHI $175,000 in cash as follows: (i) $50,000 on or about October
1, 1996;
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(ii) $50,000 on November 1, 1996; and (iii) $75,000 on the Effective Date. All
payments made to WHI prior to the Effective Date are subject to repayment by
WHI if the Merger is not consummated.
View Tech's management has utilized WHI to provide financial consulting and
advice in connection with the Merger and the relative values of View Tech and
UST. Mr. Yaw participated in several meetings in which the terms of the Merger
Agreement were negotiated and reviewed various financial data with respect to
UST. Mr. Yaw also has advised the View Tech Board of Directors with respect to
the $20,000,000 valuation of UST and the $8.00 valuation of View Tech Common
Stock in connection with the determination of the Conversion Ratio.
Mr. Hammon loaned (i) $50,000 to a managing director of WHI in February
1996, (ii) $250,000 to Mr. Yaw in February 1996, and (iii) $100,000 to Mr. Yaw
in July 1996, for various purposes unrelated to the business of View Tech and
WHI. The specific dates for repayment have not been established by Mr. Hammon.
WHI has worked and will continue to work closely with View Tech's
management in connection with the Merger. WHI also has worked with KSC and
expects to address the View Tech Board of Directors concerning UST following
receipt of UST's financial results for the nine months ended September 30,
1996.
Availability of KSC and WHI Reports. As of the date of this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus, View Tech has not received a
report from WHI; however, copies of each of KSC's and WHI's reports to View
Tech (when available) shall be made available for inspection and copying at the
principal executive offices of View Tech. Copies of KSC's and WHI's reports
will be transmitted by View Tech to any interested View Tech shareholder upon
written request and at the expense of such requesting shareholder.
View Tech's Board Recommendation. The View Tech Board of Directors has
unanimously approved the Merger Agreement and the Merger and the transactions
contemplated thereby and has determined that the Merger Agreement and the
Merger are in the best interests of View Tech and its shareholders. After
careful consideration, the View Tech Board of Directors recommends that the
shareholders of View Tech vote in favor of the Merger Agreement, the Merger and
the transactions contemplated thereby.
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THE VIEW TECH BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF THE MERGER AGREEMENT AND THE MERGER
UST's Reasons for the Merger. In addition to the anticipated joint
benefits described above, the UST Board of Directors believes that the
following are additional reasons for its shareholders to vote for approval of
the Merger Agreement and the Merger:
- - In light of the representation on the View Tech Board of Directors to be
afforded to two appointees of the UST Board of Directors and the
anticipated continued participation of most members of senior UST
management in the management of the Combined Company, UST shareholders will
continue to benefit from the strategic and operational management talents
of its current management team.
- - It is anticipated that View Tech's experience and ability to effectively
market videoconferencing applications in certain industry-specific vertical
markets such as medicine, higher education and finance, will enhance UST's
sales and service productivity in the New England region in those sectors.
- - The Merger will result in UST shareholders owning a significant percentage
of the outstanding View Tech Common Stock following the Merger, which
should provide UST shareholders with a meaningful voice in the election of
directors and other matters brought to a vote of the shareholders of the
Combined Company.
- - By owning shares in a public company, UST shareholders will enjoy liquidity
that they did not have as shareholders of a private corporation, electing
to be taxed under Subchapter S of the Code.
- - The opportunity for UST shareholders to receive, on a tax-free basis, View
Tech Common Stock.
- - The belief that the greater resources available to the Combined Company
will enable it to provide improved customer service and a more effective
response to changes in technology, government regulation and market
conditions and generally to compete more effectively.
- - If the Merger is not consummated, UST will need to raise additional capital
due to the January 2, 1997 maturity date of its primary lender's revolving
and lease lines of credit and the June 15, 1997 maturity date of its
$1,000,000 loan from View Tech.
- - The Merger will afford UST's management the opportunity to negotiate for
new product agreements with existing RBOC clients who required a presence
in their geographical region for sale of these certain products.
Negotiations with potential clients will be facilitated by the Combined
Company's larger geographic scope.
In approving the Merger, the Merger Agreement and the transactions
contemplated thereby, and in recommending that UST shareholders approve the
Merger and the Merger Agreement, the UST Board of Directors consulted with
UST's management, as well as financial and legal advisors, and also considered,
among other things: (i) UST's and View Tech's business, management expertise,
business strategy, prospects and competitive position in the telecommunications
industry; (ii) historical, current and projected financial condition and
results of operations of UST (without giving effect to the Merger) and of the
Combined Company (after giving effect to the Merger); (iii) the proposed
structure of the Merger and provisions relating to corporate governance of the
Combined Company; (iv) the Conversion Ratio and other terms of the Merger
Agreement; (v) View Tech Common Stock being publicly traded; and (vi) general
economic and stock market conditions. The UST directors also considered that
the UST financial advisors had contacted and had discussions with certain other
groups regarding the possibility of a business combination or other strategic
transaction with UST and that the View Tech combination offered UST the
greatest possibility of reaping future benefits of the Combined Company.
The UST Board of Directors also considered a number of potentially negative
factors in its deliberations concerning the Merger, including: (i) the
irreversible nature of the decision and the consequent loss of independence;
(ii) the possible change in certain existing UST corporate policies and
strategies following the Merger; (iii) the potential for post-Merger dilution
of earnings per share for the Combined Company; (iv) the risk that the
contemplated benefits of the Merger will not be realized; (v) the significant
costs and expenses associated with the Merger; and (vi) the risks inherent in
the ownership of View Tech Common Stock. In the view of the UST Board of
Directors, these considerations did not outweigh, individually or collectively,
the advantages of the Merger to UST.
Due to the wide variety of factors considered in connection with the
evaluation of the Merger, the UST Board of Directors did not find it
practicable to and did not quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the UST Board of Directors may have given
different weights to different factors.
UST's Board Recommendation. The UST Board of Directors has unanimously
approved the Merger, the Merger
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Agreement and the transactions contemplated thereby and has determined that the
Merger Agreement and the Merger are in the best interests of UST and its
shareholders. After careful consideration, the UST Board of Directors
recommends that the shareholders of UST vote in favor of approval of the Merger
Agreement, the Merger and the transactions contemplated thereby.
THE UST BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE MERGER AGREEMENT
AND THE MERGER
OPINIONS OF FINANCIAL ADVISORS
Opinion of View Tech's Financial Advisor. On June 3, 1996, KSC was
retained by View Tech to provide financial advisory services with respect to
certain transactions, including mergers and acquisitions, capital raising and
other financial advisory services as View Tech may from time to time request.
Shortly thereafter, View Tech requested financial advisory services regarding
the proposed Merger with UST. The engagement with respect to the UST Merger
did not request a fairness opinion, and as such the results of KSC's financial
advisory services related to this proposed Merger should not be construed to be
a fairness opinion.
The scope of KSC's investigation was limited to the following: (i)
reviewing publicly available financial data and stock market performance of
over 31 public companies which KSC deemed to be reasonably comparable to View
Tech and/or UST; (ii) reviewing publicly available data disclosing the terms of
recent mergers involving public companies whose businesses were believed by KSC
to be reasonably comparable to that of View Tech and UST; (iii) reviewing
certain business and financial information relating to View Tech which was
internally prepared and provided by View Tech; (iv) reviewing certain business
and financial information relating to UST that was internally prepared and
provided by UST; (v) reviewing certain financial projections set forth for View
Tech and UST which were internally prepared and provided by View Tech and UST,
respectively; and (vi) reviewing publicly available information relating to the
telecommunications industry. KSC assumed and relied upon the accuracy and
completeness of the information derived from public reports filed with the
Securities and Exchange Commission, as well as all information supplied by View
Tech's and UST's management and did not assume any responsibility for
independent verification of such information. With respect to View Tech's and
UST's financial projections, KSC assumed that they had been reasonably prepared
on the bases reflecting the best currently available estimates and judgments of
View Tech's and UST's management and KSC expressed no opinion with respect to
such forecasts or assumptions on which they were based. Mr. Kenny participated
in several meetings in which the Merger Agreement was negotiated and reviewed
various financial data with respect to UST. Such comparable companies examined
included: ACC Corp.; Americonnect, Inc.; Frontier; Incomnet, Inc.; LCI
International, Inc.; Computer Telephone, Inc.; MFS Communications Company,
Inc.; Network Long Distance, Inc.; Phoenix Network, Inc.; SA Telecom; Shared
Technologies - Fairchild; Total-Tel USA Communications, Inc.; USTel, Inc.; US
Long Distance Corp.; U.S. Wats; WinStar Communications, Inc.; WordCom, Inc.;
Midcom Communications, Inc.; and TelSave Holdings, Inc., among others. KSC
review and analyzed 14 companies which reported net losses for the most recent
fiscal year and 16 companies which reported losses for the most recent quarter.
The respective multiples of those companies were between the following ranges:
(1) most recent fiscal year end revenues: .15x to 36.7x with a mean of 7.71x
and a median of 1.60x; and (2) most recent reported quarterly revenues: .19x
to 16.35x, with a mean of 4.20x and a median of 1.20x. KSC compared market
capitalization to most recent fiscal year end and quarterly revenues. The
respective multiples of the long distance reseller companies were between the
following ranges: (1) most recent fiscal year end revenues: .77x to 5.00; and
(2) most recent reported quarterly revenues: .57x to 3.75. The respective
multiples of the telecommunications systems companies were between the
following ranges: (1) most recent fiscal year end revenues: 6.8x to 127.4x;
and (2) most recent reported quarterly revenues: 4.11x to 18.31x. The
precedent transactions analysis examines various financial multiples that were
paid in selected merger and acquisition transactions involving companies in a
comparable industry as the target. These multiples are then applied to the
financial statistics of the target company to arrive at a value range for the
target company in the context of an arms-length negotiated transaction. KSC
analyzed the implied multiples paid in relation to revenues and earnings before
income taxes, depreciation and amortization ("EBITDA"), of the selected mergers
and acquisitions. KSC compared these multiples with the implied multiples
under the terms of the Merger. KSC deemed the only material precedent
transaction valuation parameters to be implied multiples paid in relation to
revenues and EBITDA. Among the precedent transactions that KSC reviewed were
the acquisition of ITC, Inc. by U.S. Long Distance Corp., the acquisition of
Corporate Telemanagement Group by LCI International, Inc., the acquisition of
Enhanced Telemanagement, Inc. by Frontier Corp., the acquisition of WCT
Communications, Inc. by Rochester Telephone Corp., the acquisition of RealCom
Office Communications by MFS Communications Company, Inc., the acquisition of
Centex Telemanagement, Inc. by MFS Communications Company, Inc., the
acquisition of Telcom USA, Inc. by MCI Communications Corporation. The
multiples of revenues and EBITDA were between the following ranges: (1)
revenues: 0.7x to 2.2x, with a mean of 1.3x and a median of 1.2x; and (2)
EBITDA: 9.3x to 13.0x, with a mean of 11.3x and a median of 11.6x.
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Based upon a complex analysis of industry data and information provided by
View Tech and UST, KSC believes that it was reasonable to value UST in the
range of 1.4 to 1.7 times 1996 projected revenues. The results of KSC's
financial advisory services should not be considered a recommendation to any
holder of View Tech's or UST's securities as how such holder should vote with
respect to the Merger. KSC's financial advisory services do not imply any
conclusions as to the likely trading range for the View Tech Common Stock
following the consummation of the Merger, which may vary depending on, among
other factors, changes in government legislation, changes in interest rates,
competitive forces, market conditions and other factors that generally
influence the price of securities. View Tech's management expects KSC to
provide continuing financial consulting advice to View Tech's Board of
Directors as part of View Tech's due diligence up to the Effective Date.
Opinion of UST's Financial Advisor. On September 25, 1996, UST engaged
OCWW for the purpose of rendering an opinion as to the fairness, from a
financial point of view, to the shareholders of UST of the Merger and of the
Merger Consideration offered to the UST Shareholders pursuant to the Merger
Agreement. On October 17, 1996, OCWW made an oral presentation to the UST
Board with regard to the purpose and scope of the fairness opinion engagement
and the methodology of OCWW's analysis and provided a preliminary summary of
the results of its analysis. On October 28, 1996, OCWW met again with the UST
Board and delivered to the UST Board its draft written opinion to the effect
that, as of the date of such draft opinion, the Merger and the Merger
Consideration were fair, from a financial point of view, to the shareholders of
UST. On November 1, 1996, OCWW delivered to the UST Board its written opinion
to the effect that, as of November 1, 1996, the Merger and the Merger
Consideration were fair, from a financial point of view, to the shareholders of
UST.
OCWW was selected by UST on the basis of its qualifications and expertise
in the valuation of businesses and their securities in connection with mergers
and acquisitions and for corporate and other purposes, as well as its
reputation as an investment banking firm. Although OCWW evaluated the
financial terms of the Merger and the Merger Consideration, OCWW did not serve
as financial advisors to UST in negotiation of the terms of the Merger and did
not determine or recommend the Merger Consideration, but only undertook the
reviews, analyses and inquiries described in the opinion letter in order to
arrive at its opinion. The Merger Consideration was determined by negotiation
between UST and View Tech.
The full text of the opinion of OCWW, dated November 1, 1996, is attached
hereto as ANNEX B. UST shareholders are urged to, and should, read such
opinion in its entirety for a summary of assumptions made, procedures followed,
other matters considered and limits of the review by OCWW. The summary of the
opinion of OCWW set forth in this Joint Proxy Statement/View Tech Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion. OCWW's opinion was prepared for the UST Board and may not be
relied upon by parties other than the UST Board and the UST shareholders.
OCWW's opinion is directed only to the fairness, from a financial point of
view, of the Merger and the Merger Consideration offered to the UST
shareholders and does not constitute a recommendation to any UST shareholder as
to how such UST shareholder should vote with respect to the Merger.
In arriving at its opinion, OCWW, among other things;
(a) reviewed the Merger Agreement dated as of September 5, 1996 and
Amendment No. 1 to the Merger Agreement dated as of October 31, 1996;
(b) reviewed the Form S-4 Registration Statement of View Tech, Inc. filed
with the Securities and Exchange Commission on October 4, 1996 (the
"Registration Statement") and certain changes proposed for
incorporation into a prospective amendment thereto;
(c) reviewed certain historical financial statements and information
relating to UST, including (i) audited financial statements for the
years ended December 31, 1992 through 1995; (ii) unaudited summary
financial statements for the six months ended June 30, 1995 and 1996
and for the nine months ended September 30, 1996; and (iii) unaudited
condensed pro forma financial statements for the twelve mouths ended
June 30, 1995 and 1996, as presented in the Pro Forma Combined
Financial Statements included in the Registration Statement and
referenced below;
(d) reviewed the UST Confidential Information Memorandum prepared by
Concord Partners, Ltd. ("Concord"), financial advisors to UST with
respect to the sale of UST and to the Merger; reviewed with members of
UST's senior management and with Concord, an Acquisition Summary
prepared by Concord; and reviewed the View Tech Letter of Intent and
Term Sheet dated July 23, 1996, agreed to and accepted by UST on July
26, 1996;
(e) reviewed and discussed with members of UST's senior management and
UST's Board of Directors (i) UST's historical and current operations,
financial condition and future prospects; (ii) certain internal
financial information and forecasts prepared by management of UST; and
(iii) UST's reasons for the Merger and factors
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considered by the UST Board of Directors in approving the Merger, as
well as potentially negative risk factors considered by the UST Board
of Directors in its deliberations concerning the Merger;
(f) reviewed certain historical financial statements and public filings of
View Tech, including: (i) audited financial statements for the fiscal
years ended June 30, 1993 through 1996; (ii) Prospectus dated June 15,
1995; (iii) Annual Report for the fiscal year ended June 30, 1995;
(iv) Form 10-KSB for the fiscal year ended June 30, 1996; (v)
unaudited draft summary financial statements for the three months
ended September 30, 1996 and 1995; (vi) the Unaudited Pro Forma
Condensed Combined Financial Statements of View Tech for the year
ended June 30, 1996 (reflecting, on a pro forma basis, the Merger and
the July 1, 1996 acquisition of VistaTel, Inc. and the September 24,
1996 acquisition of GroupNet, Inc.) and for the year ended June 30,
1995 (reflecting, on a pro forma basis, the Merger) (the "Pro Forum
Combined Financial Statements"); met with the Chief Executive Officer
of View Tech to discuss View Tech's historical and current operations,
financial condition and future prospects; reviewed certain forecasts
prepared by View Tech; and reviewed the historical stock prices and
trading volumes of View Tech Common Stock including stock prices
reflected in certain View Tech financing transactions;
(g) computed certain valuation ratios for UST based upon the aggregate
value of the Merger Consideration and compared such valuation ratios
for UST with similar information for certain publicly-traded companies
which OCWW deemed comparable and with valuation ratios prevailing in
certain recent merger and acquisition transactions in the
telecommunications industry; and
(h) performed such other analyses and investigations and considered such
other factors as OCWW deemed appropriate.
OCWW relied, without assuming any responsibility for the independent
verification of such information, upon the accuracy, completeness and
reasonableness of all information, including financial forecasts, whether
provided to OCWW by UST and View Tech and their outside professional advisors,
or otherwise publicly available. OCWW further relied upon the assurance of
management of UST and of View Tech that they are unaware of any facts that
would make the information they provided to OCWW incomplete or misleading in
any material respect. In arriving at its opinion, OCWW neither performed nor
obtained any independent valuation or appraisal of the assets of UST. OCWW's
opinion is necessarily based upon economic, market and other conditions and
circumstances existing and disclosed to OCWW that could be evaluated as of the
date of the opinion.
OCWW assumed that the Merger will be consummated on the terms and
conditions provided for in the Merger Agreement, without material modification
thereof, and that the aggregate Merger Consideration will be based upon a
Conversion Ratio of up to 0.25293 (subject to downward adjustment only for
certain fees of the attorneys, accountants and financial advisor of UST to be
paid by View Tech on the effective date of the Merger). OCWW assumed that,
based upon the closing price of $5.75 per share for View Tech Common Stock in
public trading on The NASDAQ National Market on October 31, 1996, the last
trading day prior to issuance of its opinion, and upon the Conversion Ratio of
0.25293 (exclusive of the above-referenced adjustment), the aggregate value of
the 2,500,000 shares of View Tech Common Stock (the "Merger Consideration")
issuable in exchange for 9,884,157 shares of UST Common Stock was approximately
$14.4 million. OCWW assumed that, if the amount of the total fees adjustment
was approximately $600,000, the effective Conversion Ratio would be reduced to
approximately 0.2453421 and net Merger Consideration after adjustment would be
reduced to approximately $13.8 million. OCWW indicated that there can be no
assurance that the value of the View Tech Common Stock issuable to UST
shareholders and former holders of UST Options, and thus the aggregate and net
adjusted value of the Merger Consideration, will not increase or decrease prior
to the effective date of the Merger, or thereafter.
OCWW further assumed that the Merger and the transactions contemplated
thereby will qualify as a tax-free reorganization under applicable sections of
the Internal Revenue Code and will quality for pooling of interests accounting
treatment under Accounting Principles Board Opinion No. 16.
The following presentation summarizes certain financial analyses performed
by OCWW in arriving at its opinion dated November 1, 1996, which analyses OCWW
discussed with the UST Board.
Selected Companies Analysis. OCWW reviewed and compared certain financial
information relating to UST to corresponding financial information, ratios and
public market valuations and multiples for four publicly traded
telecommunications companies: Computer Telephone Corp. (now named CTC
Communications Corp.), Phoenix Network, Inc., Norstan, Inc., and C-Tec Corp.
All four of the selected publicly traded companies were larger than UST in
terms of revenues and market valuations, even though Phoenix Network, Inc.
recorded a loss for its last twelve months reporting period. Though CTC
Communications Corp. is a principal competitor in UST's network businesses,
none of the four companies were directly comparable to UST in all respects.
Nevertheless, as a group, the four companies provided a meaningful basis for
comparative analysis. For these companies used as
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comparables, an analysis of September 27, 1996 public market valuations to last
twelve months revenues yielded a range of 0.4 to 3.5 times and a mean,
excluding high and low, of 1.6 times, compared to 0.8 times for UST in the
Merger. An analysis of public market prices to last twelve months earnings per
share yielded a range of 16.8 to 49.5 times earnings, with a mean, excluding
high and low, of 25.0 times, compared to 18.9 times pro forma twelve months
June 30, 1996 earnings for UST in the Merger. A comparative analysis of public
market valuations to net book value was not meaningful because of UST's
unaudited pro forma negative net book value as of June 30, 1996. OCWW
indicated that the multiples for UST based upon the financial terms of the
Merger were within the range of multiples of the comparable publicly traded
companies and, given the larger size of the publicly traded companies analyzed,
reasonably favorable to UST. OCWW confirmed that the multiples for UST based
upon the financial terms of the Merger were also within the range of more
recent multiples of the publicly traded companies based upon more recent public
market valuations of such companies.
Analysis of Selected Telecommunications Acquisitions. OCWW reviewed the
terms of eleven merger and acquisition transactions involving
telecommunications services providers or equipment manufacturers which were
announced from January 1, 1994 through October 2, 1996 and which reflected
total transaction value of not less than $5.0 million and not greater than
$100.0 million. In certain cases, complete financial information was not
publicly available and only partial information was used in these instances.
Certain other announced transactions were excluded because of extreme or
unavailable ratios. In examining these announced transactions, OCWW analyzed
certain income statement parameters of the target companies relative to
transaction value. Analysis of transaction value to sales yielded a range of
0.3 to 2.2 times, with a mean, excluding high and low, of 1.4 times, compared
to 0.8 times (excluding debt assumed) and 1.0 times (including debt assumed on
an unaudited June 30, 1996 pro forma basis) for UST in the Merger. Analysis of
transaction value to net income yielded a range of 10.4 times to 39.4 times,
with a mean, excluding high and low, of 28.4 times, compared to 18.9 times
(excluding debt assumed) and 24.0 times (including debt assumed) for UST on a
pro forma basis in the Merger. Analysis of transaction value to earnings
before interest and tax ("EBIT") yielded a range of 2.4 to 41.0 times, with a
mean, excluding high and low, of 16.0 times, compared to 9.5 times (excluding
debt assumed) and 12.1 (including debt assumed) for UST in the Merger. OCWW
indicated that the multiples for UST based upon the financial terms of the
Merger were within the range of multiples of the publicly announced
transactions, and given the wide range of transaction values and multiples
reported in the analyzed sample and the necessity of including both service
providers and equipment manufacturers to obtain sufficient statistical data,
reasonably favorable to UST.
Pro Forma Merger Analysis. OCWW considered that the unaudited pro forma
combined financial statements of the Combined Company for the twelve months
ended June 30, 1996 (after giving effect to the Merger) indicated that whereas
UST had an unaudited pro forma negative net book value of approximately
$629,000 (a negative $0.25 per UST equivalent share on the basis of the maximum
2,500,000 View Tech shares to be received by UST shareholders, excluding
adjustment to the Conversion Ratio for certain UST professional fees) the
Combined Company had an unaudited pro forma positive net book value, after
reflecting all estimated transaction fees to be incurred by UST and View Tech
in the Merger, of approximately $5,942,000 (a positive $1.01 per View Tech
share on the basis of approximately 5,893,438 View Tech shares outstanding,
including a maximum of 2,500,000 shares to be received by UST shareholders and
excluding the additional View Tech shares issuable upon exercise of outstanding
View Tech warrants and options). As a result of the Merger, the unaudited pro
forma net book value of a UST equivalent share as of June 30, 1996 would thus
increase by approximately $1.26 per Share. The UST shareholders' aggregate
maximum proportional share of the unaudited pro forma net book value of the
Combined Company (after giving effect to the Merger) would be up to 42.4% of
$5,942,000, or approximately $2,500,000. Assuming issuance of a total of
approximately 2,098,553 additional View Tech shares upon exercise of all
outstanding View Tech warrants and options, the maximum proportional share of
the Combined Company's shares held by the UST shareholders would be up to 31.3%
(2,500,000 / 7,991,991). Assuming that the total UST professional fees
adjustment is approximately $600,000, the specified adjustment to the
Conversion Ratio would reduce the number of View Tech shares to be received by
UST shareholders by approximately 75,000 shares, or 3.0%, thus reducing the UST
shareholders' aggregate proportional holding in the Combined Company to as low
as approximately 41.1% on a pro forma basis at June 30, 1996 and to as low as
approximately 30.4% assuming exercise of all outstanding View Tech warrants and
options.
While the foregoing summary describes all analyses and examinations that
OCWW deems material to its opinion, it is not a comprehensive description of
all analyses and examinations actually performed by OCWW in connection with its
fairness opinion. The preparation of a fairness opinion is a complex process
and involves various subjective business determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. Therefore, such an opinion is
not susceptible to partial analysis or summary description. Accordingly,
notwithstanding the separate factors summarized above, OCWW believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and factors could create an incomplete and misleading view of the
evaluation process underlying its opinion. With respect to comparable
companies analyses and comparable transactions analyses, a particular analysis
performed by OCWW is not
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necessarily indicative of actual values, which may be significantly higher or
lower than suggested by such analyses. The analyses are not appraisals and do
not necessarily reflect the prices for which businesses actually could be sold
or actual values of future results that might be achieved. OCWW's analyses
were prepared exclusively as part of OCWW's review of the fairness, from a
financial point of view, to the shareholders of UST of the Merger and the
Merger consideration, in connection with OCWW's delivery of its opinion. In
addition, OCWW's opinion and presentation to the UST Board was only one of many
factors taken into consideration by the UST Board in its determinations with
regard to the Merger.
Pursuant to the terms of the engagement of OCWW for the purpose of
rendering its fairness opinion, UST has paid OCWW in full in the amounts of
$24,000 for OCWW's services rendered and $1,000 for reimbursement of OCWW's
reasonable out-of-pocket expenses in connection with the engagement. UST's
obligation for payment of OCWW's fees and for reimbursement for OCWW's
reasonable out-of-pocket expenses was not contingent upon OCWW's issuance of a
favorable opinion letter or upon completion of the proposed Merger. UST has
also agreed to indemnify and hold harmless OCWW and certain related parties
from and against certain liabilities, including liabilities under the federal
securities laws, in connection with its engagement. No limitations were
imposed by UST on the scope of OCWW's investigation with regard to its
engagement for the purpose of rendering its fairness opinion. Neither OCWW nor
the individuals involved with OCWW's opinion have any present or contemplated
future interest in UST, View Tech or the transactions contemplated by the
Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the View Tech Board of Directors and
the UST Board of Directors with respect to the Merger Agreement, the Merger and
the transactions contemplated thereby, the shareholders of View Tech and the
shareholders of UST should be aware that certain members of management of View
Tech and UST, the View Tech Board of Directors and the UST Board of Directors
have interests in the Merger that are in addition to the interests of the
shareholders of View Tech and UST generally.
Employment Agreements. Messrs. Reece, president and chairman of the board
of the UST Board of Directors, and Gentile, chief financial officer and
treasurer of UST, will enter into employment agreements with View Tech prior to
the Merger. Mr. Reece will be chief executive officer of VTAI and an executive
officer of View Tech, and Mr. Gentile will be an officer of VTAI and of View
Tech.
Loan Guaranty. Messrs. Reece, Millet, Smith and Cunningham, members of the
UST Board of Directors, are guarantors in the aggregate of up to $430,000 of
UST's debt obligations to UST's primary lender. It is a condition to
consummation of the Merger that Messrs. Reece, Millet, Cunningham and Smith be
released from their guaranty obligations and that such lender grant its consent
to the Merger. Absent the Merger, the loans are due on January 2, 1997.
UST Options. As provided in the Merger Agreement, the UST Options
outstanding at the Effective Time, whether or not then exercisable, will be
assumed by View Tech and become fully vested and immediately exercisable for
shares of View Tech Common Stock based upon the Conversion Ratio. Each UST
Option assumed by View Tech will be exercisable upon the same terms and
conditions as under the UST Option Plan (with appropriate adjustments to the
number of shares to reflect the Conversion Ratio) and for applicable option
agreements, and View Tech will assume the UST Option Plan and such option
agreements for such purposes. Pursuant to the Merger Agreement, at and after
the Effective Time: (i) each UST Option assumed by View Tech may be exercised
solely for View Tech Common Stock; (ii) the number of shares of View Tech
Common Stock subject to each UST Option will be equal to the product of (A) the
number of shares of UST Common Stock subject to the original UST Option
immediately prior to the Effective Time and (B) the Conversion Ratio; and (iii)
the per share exercise price for the shares of View Tech Common Stock issuable
upon exercise of each Conversion Option will be equal to the quotient
determined by dividing the exercise price per share at which such UST Option
was exercisable immediately prior to the Effective Date by the Conversion
Ratio.
As of October 31, 1996, employees and directors of UST held UST Options to
purchase an aggregate of 825,000 shares of UST Common Stock at a weighted
average price of $0.08 per share (at exercise prices ranging from $0.07 to
$0.10 per share), 687,500 of which were unvested as of such date. Approval of
the Merger and the Merger Agreement by the shareholders of View Tech will
constitute shareholder approval of the assumption by View Tech of the rights
and obligations of UST under the UST Options and the UST Option Plan and of the
amendment of the UST Option Plan to provide for, among other things, the
conversion at the Effective Time of the outstanding UST Options into options to
purchase shares of View Tech Common Stock at the Conversion Ratio. See
"--TERMS OF THE MERGER AGREEMENT--Manner and Basis of Converting Shares and
Options."
Board of Directors of the Combined Company. Pursuant to the Merger
Agreement and provided that the Joint Proxy Proposal and View Tech Proxy
Proposal 1 are adopted, View Tech has agreed, upon the Effective Date, to
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cause the View Tech Board of Directors and the VTAI Board of Directors to
include Messrs. Reece and Millet. If either of the UST Director Designees is
unable or unwilling to serve as a director of either View Tech or VTAI at the
Effective Time, such individual or individuals shall be replaced by an
individual or individuals designated by the members of the UST Board of
Directors (immediately prior to the Effective Time) provided that such nominees
are approved by the View Tech Board of Directors. Following the Effective Time
and continuing through the initial respective terms of the UST Director
Designees, if any vacancy on the View Tech Board of Directors or the VTAI Board
of Directors arises with respect to the UST Director Designees (or any other
individual or individuals selected by the Former UST Directors as replacement
directors), any nominee selected to fill such vacancy shall be nominated on
behalf of the View Tech Board of Directors or the VTAI Board of Directors,
respectively, by the Former UST Directors provided that any such nominee is
approved by the View Tech Board of Directors. Following the Merger, the
members of the View Tech Board of Directors and the executive officers of View
Tech will be covered by View Tech's directors and officers liability insurance
policy.
In the event that the Joint Proxy Proposal is not adopted, Messrs. Reece
and Millet will be deemed to resign automatically from their positions as View
Tech directors. View Tech will be deemed to accept automatically their
resignations. View Tech's executive officers and management will otherwise
remain unchanged. See "--THE MERGER--Management and Operations of the Combined
Company Following the Merger."
View Tech Stock Option Plan. As a result of the Merger and the percentage
ownership that former holders of UST Common Stock will have in View Tech
following the Merger, the View Tech Options issued and outstanding under the
View Tech Stock Option Plan at the Effective Time, whether or not then
exercisable, will become immediately exercisable pursuant to a provision in the
View Tech Stock Option Plan providing that all View Tech Options become
immediately exercisable if there is a "change in control" of View Tech which
includes the issuance of 30% or more of View Tech Common Stock to one group.
As of October 31, 1996, employees, consultants and directors of View Tech
held View Tech Options to purchase as an aggregate of 848,100 shares of View
Tech Common Stock at a weighted average price of $5.83 per share (at exercise
prices ranging from $0.25 to $7.75 per share). Consummation of the Merger
Agreement by the shareholders of View Tech will cause all of the View Tech
Options to become immediately exercisable if, immediately after consummation of
the Merger, the former holders of UST Common Stock own more than 30% of the
then outstanding View Tech Common Stock. Based upon the number of shares of
View Tech Common Stock and UST Common Stock outstanding as of October 31, 1996,
immediately after consummation of the Merger, there will be approximately (i)
5,893,438 shares (assuming exercise of all of the UST Options) of View Tech
Common Stock outstanding, of which approximately 42.4% will be held
collectively by the former holders of UST Common Stock or (ii) 5,684,771 shares
(assuming no UST Options are exercised) of View Tech Common Stock outstanding,
of which approximately 40.3% will be held collectively by former holders of UST
Common Stock, thereby accelerating vesting of the View Tech Options.
If adopted by the View Tech shareholders, the View Tech, Inc. 1997 Stock
Incentive Plan will not be affected by the closing of the Merger.
View Tech's Financial Advisors. View Tech has an agreement to pay KSC a
fee equal to 2% of the transaction value of any acquisition upon which KSC
advises. In connection with the Merger, KSC's fee would be approximately
$367,000. View Tech also had an agreement to grant WHI compensation in the
form of options to acquire shares of View Tech Common Stock equal to 5% of the
aggregate value of shares of View Tech Common Stock being issued to the UST
shareholders at 100% of the closing bid price of the View Tech Common Stock on
The NASDAQ National Market on the Effective Date. Pursuant to an amendment to
such agreement, View Tech instead will pay WHI $175,000 in cash and will issue
to WHI 30,000 shares of View Tech Common Stock as follows: (i) $50,000 upon the
filing with the Commission of the registration statement of which this Joint
Proxy Statement/ View Tech Proxy Statement/Proposal forms a part; (ii) $50,000
on November 1, 1996; and (iii) $75,000 and 30,000 shares of View Tech Common
Stock on the Effective Date. All payments made to WHI prior to the Effective
Date are subject to repayment by WHI if the Merger is not consummated.
UST's Financial Advisors. UST has agreed to pay Concord a fee, subject to
a minimum fee of $150,000, equal to the following percentages of the total
consideration paid in connection with the Merger: (i) 2.0% of the
consideration paid below $10,000,000, plus (ii) 3.0% of the consideration paid
above $10,000,000 but below $20,000,000, plus (iii) 4.0% of the consideration
paid above $20,000,000. View Tech has agreed to pay at the Effective Date
Concord's fee, 40% of which may be paid in the form of shares of View Tech
Common Stock and the balance of which will be paid in cash. View Tech has
agreed to file a registration statement with the Commission registering, among
others, shares of View Tech Common Stock issuable to Concord in connection with
the payment of such financial advisory fees. As of the date of this Joint
Proxy Statement/View Tech Proxy Statement/Prospectus, 40% of Concord's fees
equals approximately 25,000 shares of View Tech Common Stock. Two-thirds of
Concord's fee paid by View Tech will reduce the Conversion Ratio and the number
of shares of View
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Tech Common Stock issuable to the UST shareholders and holders of the UST
Options in connection with the Merger.
UST's Legal and Accounting Advisors. View Tech has agreed to pay the fees
associated with the Merger of UST's attorneys and accountants at the Effective
Time, thereby further reducing the number of shares of View Tech Common Stock
issuable to the UST shareholders and upon exercise of the Conversion Options.
Mr. Smith, one of UST's directors, is also a partner in Burns & Levinson LLP,
the law firm that represented UST in connection with the Merger.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a "pooling of interests" business
combination for financial reporting purposes. Consummation of the Merger is
contingent upon View Tech receiving an opinion from View Tech's independent
accountants, Carpenter Kuhen & Sprayberry, that the Merger, if consummated in
accordance with the terms of the Merger Agreement, will qualify as a "pooling
of interests" for financial reporting purposes in accordance with generally
accepted accounting principles. Under the "pooling of interests" accounting
method, (i) the recorded historical cost basis of the assets, liabilities and
shareholders' equity of both View Tech and UST will be carried forward and
combined to become the reported values of the Combined Company and (ii)
financial statements of View Tech issued subsequent to the consummation of the
Merger will be restated to include the combined financial position, results of
operations and cash flows for Combined Company for all periods presented
therein, using historical balances. Certain events, including certain
transactions with respect to View Tech Common Stock or UST Common Stock by
affiliates of View Tech or UST, respectively, may prevent the Merger from
qualifying as a pooling of interests for accounting and financial presentation
purposes. As of October 31, 1996 neither View Tech nor UST was aware of any
events or transactions which could prevent the Merger from qualifying as a
pooling of interests for accounting and financial presentation purposes.
CERTAIN FEDERAL TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the exchange of shares of UST Common Stock for
Merger Shares and the assumption by View Tech of the UST Option Plan and the
UST Options and conversion thereof into the Conversion Options. In particular,
this discussion addresses the tax consequences of the Merger generally
applicable to holders of UST Common Stock and to the holders of UST Options.
This discussion does not deal with all federal income tax considerations that
may be relevant to particular holders of UST Common Stock and to holders of
each UST Option in light of their particular circumstances, such as holders who
do not hold their shares of UST Common Stock as capital assets, foreign persons
or persons who acquired their shares in compensatory transactions. In
addition, the following discussion does not address the tax consequences of
transactions effectuated prior or subsequent to, or concurrently with, the
Merger (whether or not such transactions are undertaken in connection with the
Merger), including, without limitation, any transaction in which either shares
of UST Common Stock are acquired or any shares of View Tech Common Stock are
disposed of. Further, no foreign, state or local tax considerations are
addressed herein. ACCORDINGLY, HOLDERS OF UST COMMON STOCK AND HOLDERS OF EACH
OUTSTANDING OPTION TO ACQUIRE UST COMMON STOCK ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
MERGER.
This discussion is consistent with the opinion of Burns & Levinson LLP,
counsel to UST, which is expected to be delivered as a condition precedent to
the consummation of the Merger (the "Exhibit Opinion"). The Exhibit Opinion,
the form of which is attached as Exhibit 8.1 to the Registration Statement of
which this Joint Proxy Statement/View Tech Proxy Statement/Prospectus is a
part, will be based on and will be subject to certain qualifications and
assumptions as noted therein. UST shareholders should be aware that this
discussion and the Exhibit Opinion will be based upon counsel's interpretation
of the Code, applicable Treasury regulations, judicial authority and
administrative rulings and practices, all as of the date hereof. There can be
no assurance that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the statements and
conclusions set forth herein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the Merger.
The Exhibit Opinion is expected to include opinions that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, that each of View Tech,
VTAI and UST will be a party to the reorganization within the meaning of
Section 368(b) of the Code and that no gain or loss will be recognized by a
shareholder of UST as a result of the Merger with respect to the UST Common
Stock converted solely into View Tech Common Stock. Subject to the limitations
and qualifications referred to herein, the Merger's treatment for federal
income tax purposes as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code will generally have the following
consequences for federal income tax purposes:
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(a) no gain or loss will be recognized by holders of UST Common Stock
upon their receipt in the Merger solely of View Tech Common Stock in
exchange therefor;
(b) the aggregate basis for tax purposes of the View Tech Common Stock
received in the Merger will be the same as the aggregate basis of the UST
Common Stock surrendered in exchange therefor; and
(c) the holding period of the View Tech Common Stock received in the
Merger will include the period for which the UST Common Stock surrendered
in exchange therefor was held, provided that the UST Common Stock is held
as a capital asset as of the Effective Date.
Even if the Merger is treated for federal income tax purposes as a
reorganization, a recipient of View Tech Common Stock could recognize gain to
the extent that such common stock was considered by the IRS to be received in
exchange for property or services (other than solely UST Common Stock). All or
a portion of such gain may be taxable as ordinary income. Gain could also have
to be recognized to the extent that a holder of UST Common Stock was treated by
the IRS as receiving (directly or indirectly) consideration in addition to View
Tech Common Stock in exchange for his UST Common Stock. Such gain or loss will
be capital gain or loss if UST Common Stock is held by the holder as a capital
asset as of the Effective Time.
Holders of UST Common Stock should be aware that the Exhibit Opinion will
not bind the IRS and that the IRS is therefore not precluded from successfully
asserting a contrary opinion. In addition, as noted earlier, all of the tax
opinions in the Exhibit Opinion are subject to certain assumptions including,
but not limited to, the accuracy of certain representations made by View Tech
and UST and their affiliates.
Pursuant to Treasury Regulations promulgated under Section 368 of the Code,
a reorganization under Sections 368(a)(1)(A)and 368(a)(2)(D) requires a
continuing interest in the enterprise on the part of the persons who, directly
or indirectly, were the owners of the enterprise prior to the reorganization.
To satisfy the continuity of interest requirement, UST shareholders must not,
pursuant to a plan or intent existing on or prior to the Effective Date,
dispose of or transfer so much of either (i) their UST Common Stock in
anticipation of the Merger or (ii) the View Tech Common Stock to be received in
the Merger (collectively "Planned Dispositions"), such that UST shareholders,
as a group, would no longer have a significant equity interest in the UST
business being conducted by View Tech after the Merger. UST shareholders will
generally be regarded as having a significant equity interest as long as the
number of shares of View Tech Common Stock received in the Merger less the
number of shares subject to Planned Dispositions (if any) represents, in the
aggregate, a substantial portion of the entire consideration received by the
UST shareholders in the Merger.
The conversion incident to the Merger of the UST Options granted in
connection with the performance of services into the Conversion Options will
not result in the recognition of income, gain or loss for federal income tax
purposes by the holders of the UST Options.
A successful IRS challenge to the tax-free reorganization treatment of the
Merger (as a result of a failure of the continuity of interest or otherwise)
would result in the UST shareholders recognizing taxable gain or loss with
respect to each share of UST Common Stock surrendered equal to the difference
between the shareholder's basis in such share and the fair market value, as of
the Effective Date, of the View Tech Common Stock received in exchange
therefor. In such event, a shareholder's basis in the View Tech Common Stock
so received would equal its fair market value and the holding period for such
stock would begin the day after the Effective Date.
Pursuant to the Merger Agreement and as a condition to the Merger, UST will
use its reasonable best efforts to obtain from each of the UST shareholders his
written representation and warranty that such UST shareholder, as of the
Effective Date, does not have any present plan, intention or arrangement to
dispose of any of the View Tech Common Stock received in the Merger within two
years of the Effective Date if such disposition would reduce the fair value of
the View Tech Common Stock measured as of the Effective Date to an amount less
than fifty percent of the fair value of the UST Common Stock held by such
shareholder immediately before the Effective Date.
RESALE OF VIEW TECH COMMON STOCK; AFFILIATES
The View Tech Common Stock to be issued to the UST shareholders pursuant to
the Merger Agreement will be freely transferable under the Securities Act,
except for shares issued to any person who may be deemed an "affiliate" of UST
or View Tech within the meaning of Rule 145 promulgated under the Securities
Act. Shares of View Tech Common Stock received by persons who are deemed to be
View Tech or UST affiliates may be resold by such persons only in transactions
permitted by the resale provisions of Rule 145 (permitting limited sales under
certain circumstances) or as otherwise permitted under the Securities Act.
Persons who may be deemed to be affiliates of UST or View Tech generally
include individuals or entities that, directly or indirectly through one or
more intermediaries, control, are controlled by or are under common control
with View Tech or UST and may include certain officers, directors and principal
shareholders of View Tech or UST.
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It is a condition to View Tech's obligation to consummate the Merger that
View Tech receive a letter from each affiliate of UST prior to the Effective
Time (each, an "Affiliate Letter"), pursuant to which Affiliate Letter each
such UST affiliate shall undertake not to sell, exchange, transfer, pledge,
dispose of or otherwise reduce his risk relative to shares of View Tech Common
Stock until such time as financial results covering at least 30 days of
combined operations of View Tech and UST after the Effective Date of the Merger
have been published by View Tech. The certificates evidencing View Tech Common
Stock issued to affiliates pursuant to the Merger Agreement will bear a legend
summarizing the foregoing restrictions unless the affiliate has furnished to
View Tech an affidavit to the effect that such affiliate meets certain
exemptive provisions of Rule 145 promulgated under the Securities Act.
Persons who are not affiliates of View Tech or UST may sell their View Tech
Common Stock without restrictions and without the need to deliver this Joint
Proxy Statement/View Tech Proxy Statement/Prospectus.
DISSENTERS' RIGHTS
View Tech Shareholders. Pursuant to Chapter 13 of the CGCL ("Chapter 13"),
shareholders of View Tech Common Stock may, in certain instances, be entitled
to require View Tech to purchase their shares for cash at fair market value as
of the day before the first announcement of the terms of the Merger, excluding
any appreciation or depreciation in consequence of the Merger. The general
terms of the Merger Agreement were first announced on September 5, 1996. The
closing bid price of the View Tech Common Stock on September 4, 1996 was $7.00
per share as reported on The NASDAQ National Market. The following is a brief
summary of the procedures to be followed by holders of View Tech Common Stock
in order to perfect their rights, if any, to payments under Chapter 13 and is
qualified in its entirety by reference to the text of Chapter 13 attached to
this Joint Proxy Statement/View Tech Proxy Statement/Prospectus as ANNEX F, to
which reference is hereby made for a definitive statement of the rights of
dissenting shareholders ("Dissenting Shareholders") and the procedures to be
followed.
Shares of View Tech Common Stock will qualify as dissenting shares under
Chapter 13 ("Dissenting Shares") only if demands for payment are filed with
respect to 5% or more of the outstanding shares of such Common Stock. In
addition, holders of shares that are not freely transferable, or "restricted"
shares, of View Tech Common Stock and shares underlying certain warrants and
options are able to require View Tech to purchase their shares for cash, and
any such demands will be counted toward the 5% minimum for such dissenters'
rights to exist.
A Dissenting Shareholder who wishes to require View Tech to purchase his
shares of View Tech Common Stock must:
(1) vote the shares of View Tech Common Stock against the Merger
(shares of View Tech Common Stock not voted are not considered to be voted
against the Merger and will not be counted toward the 5% minimum for
Dissenters' Rights to exist); provided, however, that if a View Tech
shareholder votes part of his shares entitled to vote in favor of the
Merger, and fails to specify the number of shares voted affirmatively, it
will be conclusively presumed that such shareholder's approving vote is
with respect to all the shares entitled to vote;
(2) make written demand upon View Tech or its transfer agent at the
addresses listed below, which must be received not later than the date of
the View Tech Annual Meeting, setting forth the number of shares of View
Tech Common Stock held of record and demanded to be purchased and a
statement as to the claimed fair market value of such shares at September
4, 1996; and
(3) submit for endorsement, within 30 days after the date on which
the notice of the approval of the outstanding shares described below is
mailed to such shareholders, to View Tech or its transfer agent at the
addresses listed below, the certificates representing the shares of View
Tech Common Stock, in regard to which demand for purchase is being made, to
be stamped or endorsed with a statement that the shares are Dissenting
Shares or to be exchanged for certificates of appropriate denominations so
stamped or endorsed.
The statement of claimed fair market value in clause (2) above will
constitute an offer by the Dissenting Shareholder to sell his shares at the
price stated in such demand. Neither a vote against approval of the Merger and
the Merger Agreement nor the giving of a proxy directing a negative vote will
be sufficient to constitute the demand described in clause (2) above. A proxy
that fails to include instructions with respect to approval of the Merger and
the Merger Agreement will be voted in favor of the Merger. Accordingly, shares
covered by such a proxy will not be Dissenting Shares. In addition, a vote in
favor of the Merger, or a failure to vote at all, will nullify any previously
filed written demand for payment as to those shares.
If the holders of 5% or more of the outstanding shares of View Tech Common
Stock have made demands for payment on or prior to the date of the View Tech
Annual Meeting and have voted against the Merger at such meeting, within ten
days after the date of the approval of the outstanding shares, View Tech will
mail to each Dissenting Shareholder who holds View Tech Common Stock a notice
of such approval together with a statement of the price determined by View Tech
to represent the fair market value of Dissenting Shares, which is expected
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to be the closing bid price per share as reported on The NASDAQ National Market
on September 4, 1996, the trading day prior to the first public announcement of
the Merger, a copy of certain sections of Chapter 13, and a brief description
of the procedure to be followed if the shareholder desires to exercise
Dissenter's Rights. The statement of price will constitute an offer by View
Tech to purchase the Dissenting Shares at the price stated therein. It is,
however, a condition to closing the Merger that View Tech shall have received
from its independent accountants an opinion dated as of the Effective Date, in
form and substance reasonably satisfactory to View Tech, that the Merger
qualifies for pooling of interests accounting treatment under Accounting
Principles Board Opinion No. 16. In the event that the Merger does not qualify
for pooling of interests accounting treatment for any reason, including demands
for cash payment made by Dissenting Shareholders, View Tech will not consummate
the Merger. See "--TERMS OF THE MERGER AGREEMENT--Conditions to the Merger."
If View Tech and the Dissenting Shareholder agree that any shares of View
Tech Common Stock are Dissenting Shares, and agree upon the price of such
shares, the Dissenting Shareholder will be entitled to the agreed price plus
interest thereon at the legal rate on judgments from the date of such
agreement. Payment of the fair market value of the Dissenting Shares will be
made within 30 days after such agreement or within 30 days after any statutory
or contractual conditions to the Merger are satisfied, whichever is later, upon
the surrender of the certificates representing such Dissenting Shares to View
Tech. If View Tech denies that the shares are Dissenting Shares or if View
Tech and the Dissenting Shareholder fail to agree upon the fair market value of
the shares, then the Dissenting Shareholder, within six months after the date
on which notice of the approval of the outstanding shares is mailed to such
shareholder, and not thereafter, may file a complaint in the Superior Court of
Ventura County, California, asking the court to determine whether the shares
are Dissenting Shares or to determine the fair market value of the Dissenting
Shares, or both, or may intervene in any action pending on such a complaint.
The court will proceed to determine whether the shares are Dissenting
Shares or determine, or appoint an appraiser to determine, the fair market
value of any Dissenting Shares. If judgment is rendered against View Tech, the
court will direct payments of the appraised value of such shares, together with
interest thereon at the legal rate on judgments from the date on which the
judgment was entered, by View Tech to the Dissenting Shareholder upon the
surrender of the certificates representing such shares. The costs of any such
proceeding shall be apportioned as the court considers equitable, but if the
appraisal exceeds the price offered by View Tech, View Tech shall pay such
costs, and if the appraisal is more than 125% of the price offered by View
Tech, View Tech also may be required to pay attorneys' and other fees and
interest at the legal rate on judgments from the date the Dissenting
Shareholder complied with Sections 1300-1302 of Chapter 13.
A Dissenting Shareholder may not withdraw demand for purchase of Dissenting
Shares without the consent of View Tech. Written demands for payment and
submissions for endorsement must be addressed to Ms. Teri Brath, View Tech,
Inc., 950 Flynn Road, Camarillo, California 93012, or to the transfer agent for
View Tech, Henry Artaza, U.S. Stock Transfer Corporation, 1745 Gardena Avenue,
Glendale, California 91204-2991.
Any reference to "Dissenting Shareholder" in this section means the
recordholder of Dissenting Shares and includes a transferee of record.
UST Shareholders. If the Merger becomes effective, a holder of UST Common
Stock who does not vote in favor of the Merger and who follows the procedures
prescribed under Massachusetts law may require VTAI as the surviving
corporation to pay the "fair value," determined as provided under the MBCL, for
the shares held by such shareholder. The following is a summary of certain
features of the relevant sections of the MBCL, the provisions of which are set
forth in full in ANNEX G hereto, and such summary is subject to and qualified
in its entirety by reference to such law. In order to exercise such statutory
appraisal rights, strict adherence to the statutory provisions is required, and
each shareholder who may desire to exercise such rights should carefully review
and adhere to such provisions.
A holder of UST Common Stock who desires to pursue the appraisal rights
available to such shareholder must: (i) file a written objection to the Merger
with UST pursuant to Section 86 of the MBCL before the taking of the
shareholders' vote on the Merger Agreement, stating the intention of such
shareholder to demand payment for shares owned by such shareholder if the
Merger and the Merger Agreement are approved and the Merger is consummated;
(ii) refrain from voting in favor of the Merger and (iii) make written demand
(the "Demand") to VTAI as the Surviving Corporation for payment for said
shareholder's shares within twenty days of the date of mailing of a notice by
VTAI to objecting shareholders that the Merger has become effective (which
notice will be sent within ten days of the Effective Date). The written
objection described in clause (i) above should be delivered to UST, 745
Atlantic Avenue, Boston, Massachusetts 02111, Attention: Angelo P. Gentile,
Treasurer. It is recommended that such objection be sent by registered or
certified mail, return receipt requested.
A shareholder who files the required written objection with UST prior to
the shareholder vote need not vote against the Merger, but a vote in favor of
the Merger will constitute a waiver of such shareholder's statutory
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appraisal rights. If a shareholder returns a proxy which is signed but on
which no vote is specified as to the proposal on the Merger Agreement, and
thereafter does not revoke such proxy, it will be voted for the Merger, and the
shareholder will have waived his appraisal rights. In addition, a vote against
the Merger does not, alone, constitute a written objection.
The value of the UST Common Stock will be determined initially by VTAI as
the Surviving Corporation and the dissenting shareholder. If, during the
period of 30 days after the expiration of the period during which the Demand
may be made, VTAI and the dissenting shareholder fail to agree on the value of
the UST Common Stock, either of them may file a bill in equity in the Superior
Court of Suffolk County, Massachusetts, asking that the Court determine the
value. The bill in equity must be filed within four months after the date of
expiration of the foregoing 30-day period. If the bill in equity is timely
filed, the Court or an appointed special master will hold a hearing. After the
hearing, the Court shall enter a decree determining the fair value of the UST
Common Stock and shall order VTAI to make payment of such value, with interest,
from the date of the vote approving the Merger and the Merger Agreement, if
any, to the shareholders entitled to said payment, upon transfer by them to
VTAI of the certificates representing the UST Common stock held by said
shareholders. The "fair value" of the UST Common stock could be more than, the
same as or less than the Merger consideration.
For appraisal proceeding purposes, value is determined as of the day before
the approval of the Merger and the Merger Agreement by the shareholders,
excluding any element of value arising from the expectation or accomplishment
of the Merger.
The enforcement by a shareholder of his request to receive payment for
shares of UST Common Stock as provided under the applicable statutory
provisions is an exclusive remedy except that such remedy does not exclude the
right of shareholders to bring or maintain an appropriate proceeding to obtain
relief on the ground that said corporate action will be or is illegal or
fraudulent as to said shareholder. In Coggins v. New England Patriots Football
Club, Inc., 397 Mass. 525 (1986), however, the Massachusetts Supreme Judicial
Court held that dissenting shareholders are not limited to the statutory remedy
of judicial appraisal where violations of fiduciary duty exist.
A final judgment by the court or a special master determining the fair
value of the UST Common Stock could be binding on and enforceable by UST
shareholders who have perfected their statutory appraisal rights, even if such
fair value were determined to be less than the Merger consideration. A
shareholder who perfects his rights as a dissenting shareholder will not, after
the Effective Date, be entitled to notices of meetings, to vote or to receive
dividends.
Each share of UST Common Stock held by shareholders who seek to exercise
appraisal rights and, after the Effective Time, fail to perfect or lose any
such right to appraisal, shall be treated as a share that had been converted as
of the Effective Time into the right to receive View Tech Common Stock as
provided in the Merger Agreement.
MANAGEMENT AND OPERATIONS OF THE COMBINED COMPANY FOLLOWING THE MERGER
General. After the consummation of the Merger, UST will cease to exist as
a corporation, and all of the business, assets, liabilities and obligations of
UST will be merged into VTAI with VTAI remaining as the Surviving Corporation.
As soon as practicable after the Effective Date, VTAI will change its name to
"USTeleCenters, Inc." Pursuant to the Merger Agreement, the Certificate of
Incorporation and the Bylaws of VTAI will become the Certificate of
Incorporation and Bylaws of the Surviving Corporation. Except as stated below,
the directors of VTAI in office immediately prior to the Effective Date will
remain the directors of VTAI immediately following the Merger. Except as
stated below, the officers of VTAI in office immediately prior to the Effective
Date will remain the officers.
It is intended that, upon consummation of the Merger, all of the officers
of UST will continue as officers of VTAI. In addition, pursuant to the Merger
Agreement, VTAI will employ each UST employee on an at-will basis as of the
first business day after the Effective Date, provide comparable benefits and
salary to such employees and credit such employees for their respective years
of service with UST for calculating applicable employee benefits. The
integration of View Tech and UST may result in the consolidation of certain
facilities or changes in the operations of the Combined Company following the
Effective Time, although there are no specific plans to effect any such changes
at the present time.
Board of Directors After the Merger. Pursuant to the Merger Agreement and
provided that the Joint Proxy Proposal and View Tech Proxy Proposal 1 are
adopted, View Tech has agreed, upon the Effective Date, to cause the View Tech
Board of Directors and the VTAI Board of Directors to include Messrs. Reece and
Millet. If either of the UST Director Designees is unable or unwilling to
serve as a director of either View Tech or VTAI at the Effective Time, such
individual or individuals shall be replaced by an individual or individuals
designated by the UST Board of Directors as is in existence immediately prior
to the Effective Time provided that such nominees are
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approved by the View Tech Board of Directors. Following the Effective Time and
continuing through the initial respective terms of the UST Director Designees,
if any vacancy on the View Tech Board of Directors or the VTAI Board of
Directors arises with respect to the UST Director Designees (or any other
individual or individuals selected by the Former UST Directors as replacement
directors), any nominee selected to fill such vacancy shall be nominated on
behalf of the View Tech Board of Directors or the VTAI Board of Directors,
respectively, by the Former UST Directors provided that any such nominee is
approved by the View Tech Board of Directors.
If the proposal to reincorporate View Tech in the State of Delaware is
adopted, upon reincorporation of View Tech in Delaware, the View Tech Board of
Directors will be divided into three classes as follows: (i) Messrs. Carrera
and Leduc will each serve a term of one year; (ii) Messrs. Hammon and Millet
will each serve a term of two years; and (iii) Messrs. Hatfield and Reece will
each serve a term of three years. The VTAI Board of Directors, which will also
be classified into three classes, will consist of the same six directors who
will each serve in the same respective classes and for the same respective
terms as on the View Tech Board of Directors.
In the event that the Joint Proxy Proposal is not adopted, Messrs. Reece
and Millet will be deemed to resign automatically from their positions as View
Tech directors. View Tech will be deemed to accept automatically their
resignations. View Tech's executive officers and management will otherwise
remain unchanged.
For additional biographical information with respect to the current and
proposed additional directors and executive officers of View Tech, see "VIEW
TECH PROXY PROPOSAL 2--VIEW TECH MANAGEMENT--Directors; --Other Executive
Officers" and "--UST MANAGEMENT CONTINUING AFTER THE MERGER--Directors and
Executive Officers Continuing After the Merger."
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TERMS OF THE MERGER AGREEMENT
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that the Merger will become effective upon
the filing of the Agreement of Merger and the Articles of Merger with the
Secretary of State of the State of Delaware and the Secretary of State of the
Commonwealth of Massachusetts, respectively, in accordance with the applicable
state corporation laws. It is anticipated that if the Merger and the Merger
Agreement are approved and adopted at the View Tech Annual Meeting and the UST
Special Meeting and all other conditions of the Merger have been fulfilled or
waived, the Effective Time will occur at the time of filing the Agreement of
Merger and the Articles of Merger with the Secretary of State of the State of
Delaware and with the Secretary of State of the Commonwealth of Massachusetts,
respectively, or at such other time as View Tech and UST shall have agreed upon
and designated in such filing as the Effective Time.
Upon consummation of the Merger, VTAI, as a wholly-owned subsidiary of View
Tech, will for the foreseeable future continue to operate the business of UST
as a separate company using "USTeleCenters, Inc." as its corporate name.
CALCULATION OF THE CONVERSION RATIO
The Merger Agreement provides for a Conversion Ratio of 0.25293 (subject to
adjustment pursuant to the Merger Agreement). This ratio is based upon an
assumed valuation for UST of $20,000,000 and an assumed price for View Tech
Common Stock of $8.00 per share. The Conversion Ratio further assumes that
there are a total 9,884,157 shares of UST Common Stock, including the UST
Common Stock otherwise issuable upon exercise of the UST Options. The
Conversion Ratio is determined by dividing the $20,000,000 valuation of UST by
$8.00 and dividing such quotient (i.e., 2,500,000) by 9,884,157, the number of
shares of UST Common Stock assumed to be outstanding on a fully diluted basis
as of the Effective Date. Excluding provisions that are not applicable, the
Merger Agreement provides that the Conversion Ratio is subject to adjustment
based upon the following events:
- - The Conversion Ratio shall be adjusted upward or downward, as
applicable, to reflect any increases or decreases following the date
of the Merger Agreement in the number of shares of UST Common Stock
outstanding or issuable upon exercise of the UST Options.
- - The Conversion Ratio shall be adjusted downward by the greater of the
percentage that Initial Closing Statement Revenues of UST (as defined
in the Merger Agreement) or Initial Closing Statement Income of UST
(as defined in the Merger Agreement) are less than 80% of the Target
Projected Revenues of UST (as defined in the Merger Agreement) and
Target Projected Income of UST (as defined in the Merger Agreement),
respectively. For example, if the Initial Closing Statement Revenues
of UST and the Initial Closing Statement Income of UST are 15% and 20%
less than 80% of the Target Projected Revenues of UST and the Target
Projected Income of UST, respectively, then the Conversion Ratio shall
be reduced by 20% to 0.202344, which will provide a valuation of
$16,000,000. As of the date of this Joint Proxy Statement/View Tech
Proxy Statement/Prospectus, it did not appear that there would be an
adjustment based on UST's September 30, 1996 financial results.
- - The Conversion Ratio shall also be adjusted downward so that UST's
valuation, which is assumed to be $20,000,000, is reduced by the sum
of (1) two-thirds of the fee payable to UST's financial advisor,
Concord and (2) 100% of the legal and accounting expenses of UST
incurred in connection with the Merger, both of which are payable by
View Tech on the Effective Date. The sum of (1) and (2) above are
collectively referred to herein as the "Transaction Fees." Assuming
that there are no adjustments related to UST's financial performance
as discussed above and that the number of shares of UST Common Stock
outstanding as of the Effective Date remains at 9,884,157, and further
assuming that the Transaction Fees are approximately $600,000, then
the UST's valuation shall be reduced to $19,400,000, reducing the
Conversion Ratio to 0.2453421. This adjusted Conversion Ratio is
arrived at by taking the net value of UST (i.e., $19,400,000),
dividing it by $8.00, which quotient of 2,425,000 equals the total
number of shares of View Tech Common Stock to be issued pursuant to
the Merger Agreement, and dividing such quotient by the number of
outstanding shares of UST Common Stock (i.e., 9,884,157).
The actual Conversion Ratio due to the foregoing adjustments will not be able
to be determined until or near the time of the View Tech Annual Meeting.
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MANNER AND BASIS OF CONVERTING SHARES AND OPTIONS
CONVERSION OF UST COMMON STOCK INTO VIEW TECH COMMON STOCK
At the Effective Time, all outstanding shares of UST Common Stock (other
than Dissenters' Shares) will be converted into the right to receive an
aggregate of approximately 2,291,333 shares of View Tech Common Stock, assuming
a Conversion Ratio of 0.25293 (subject to adjustment pursuant to the Merger
Agreement).
Based upon the number of shares of View Tech Common Stock outstanding as of
October 31, 1996, immediately after consummation of the Merger, there will be
approximately (i) 5,893,438 shares (assuming exercise of all of the UST
Options) of View Tech Common Stock outstanding, of which approximately 42.4%
will be held collectively by the former holders of UST Common Stock or (ii)
5,684,771 shares (assuming no UST Options are exercised) of View Tech Common
Stock outstanding, of which approximately 40.3% will be held collectively by
former holders of UST Common Stock.
No fractional shares of View Tech Common Stock will be issued. In lieu of
issuing fractional shares, the number of Merger Shares issuable to each holder
of shares of UST Common Stock and Conversion Options will be rounded up to the
next whole number.
UST OPTIONS
Pursuant to the Merger Agreement, the UST Options remaining unexercised
after the Effective Time will be assumed by View Tech and exchanged for the
right to acquire shares of View Tech Common Stock based on the Conversion
Ratio. After the Effective Time, all such unexercised options shall be fully
vested and exercisable. Otherwise each Conversion Option shall continue to
have, and be subject to, the same terms and conditions set forth in the UST
Option from which it was converted. The per share exercise price for the
shares of View Tech Common Stock issuable upon exercise of each Conversion
Option will be equal to the quotient determined by dividing the exercise price
per share at which such UST Option was exercisable immediately prior to the
Effective Date by the Conversion Ratio.
As of October 31, 1996, employees and directors of UST held UST Options to
purchase an aggregate of 825,000 shares of UST Common Stock at a weighted
average price of $0.08 per share (at exercise prices ranging from $0.07 to
$0.10 per share), 687,500 of which were unvested as of such date. Approval of
the Merger and the Merger Agreement by the shareholders of View Tech will
constitute shareholder approval of the assumption by View Tech of the rights
and obligations of UST under the UST Option Plan and the conversion at the
Effective Time of each outstanding UST Option into an option to purchase shares
of View Tech.
EXCHANGE OF CERTIFICATES
At the Effective Time, by virtue of the Merger and without any action on
the part of any party, each share of UST Common Stock outstanding immediately
prior to the Effective Time (other than Dissenters' Shares) will be converted
into the right to receive and become exchangeable for, shares of View Tech
Common Stock based on the Conversion Ratio, which is subject to adjustment
pursuant to the Merger Agreement.
Promptly after the Effective Date, the Exchange Agent will cause to be
mailed to all holders of record of UST Common Stock a letter of transmittal
with instructions to be used by the UST shareholders in surrendering
certificates which, prior to the Merger, represented shares of UST Common Stock
in exchange for certificates representing Merger Shares.
Upon the surrender of a certificate or instrument representing shares of
UST Common Stock to the Exchange Agent together with a duly executed letter of
transmittal, the holder of such certificate will be entitled to receive in
exchange therefor the whole number of Merger Shares (rounded up to the next
whole number) to which such holder of UST Common Stock is entitled pursuant to
the provisions of the Merger Agreement. In the event of a transfer of
ownership of shares of UST Common Stock that are not registered on the transfer
records of UST, the appropriate number of Merger Shares may be delivered to a
transferee if the certificate evidencing such shares is presented to the
Exchange Agent, together with the related letter of transmittal, and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable transfer taxes have been paid.
Until a certificate representing shares of UST Common Stock has been
surrendered to View Tech, each such certificate will be deemed at any time
after the Effective Time to represent only the right to receive upon surrender
the number of Merger Shares to which the holder of such certificate is entitled
under the Merger Agreement. Some certificates representing UST Common Stock
may be in the name of New England Telecenters, Inc., UST's former name. These
certificates, along with the certificates in the name of UST, should be
surrendered to the Exchange Agent with the letter of transmittal.
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REGISTRATION RIGHTS
In connection with the Merger, View Tech has granted "piggyback"
registration rights to the former holders of UST Common Stock covering all of
the shares of View Tech Common Stock exchanged therefor pursuant to a
registration rights agreement between View Tech and the holders of such
securities which has a three and a half year term expiring in the forty-second
month following the Effective Date. See "--DESCRIPTION OF VIEW TECH CAPITAL
STOCK--Registration Rights."
EMPLOYEE SALARY AND BENEFITS
Pursuant to the Merger Agreement, VTAI will employ each UST employee on an
at-will basis as of the first business day after the Effective Date, provide
comparable benefits and salary to such employees and credit such employees for
their respective years of service with UST for calculating applicable employee
benefits.
CONDUCT OF UST'S BUSINESS PRIOR TO THE MERGER; COVENANTS; NO SOLICITATION
UST and View Tech have agreed that until the Effective Date, or the earlier
termination of the Merger Agreement pursuant to the terms thereof, UST will
not, without the prior written consent of View Tech, (i) authorize or effect
any change in its charter or bylaws, (ii) grant any options, warrants or other
rights to purchase or obtain any of its capital stock or issue, sell or
otherwise dispose of any of its capital stock (except upon the conversion or
exercise of options, warrants and other rights outstanding as of September 5,
1996), (iii) except as required in connection with its status as an electing
corporation under Subchapter S of the Code and as required in connection with
tax payments on income earned for the present tax year, declare, set aside or
pay any dividend or distribution with respect to its capital stock (whether in
cash or in kind), or redeem, repurchase or otherwise acquire any of its capital
stock, in either case outside the ordinary course of its business, (iv) issue
any note, bond or other debt security or create, incur, assume or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside the
ordinary course of its business, (v) impose any security interest upon any of
its assets outside the ordinary course of its business, (vi) make any capital
investment in, make any loan to or acquire the securities or assets of any
other entity outside the ordinary course of its business, (vii) initiate any
changes in employment terms for any of its directors, officers and employees
outside the ordinary course of its business or (viii) commit to any of the
foregoing.
UST and View Tech have each covenanted to (i) give notice to third parties
of the Merger and use their reasonable best efforts to obtain any third party
consents, (ii) give any notices to, make any filings with and use its
respective reasonable best efforts to obtain any authorizations, consents and
approvals of governments and governmental agencies, (iii) permit
representatives of the other company to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the constituent companies, to all premises, properties,
personnel, books, records (including tax records), contracts and documents of
or pertaining to each of them, provided that they treat and hold as such any
confidential information they receive in the course of such reviews and will
not use any of such confidential information except in connection with the
Merger Agreement, and, if the Merger Agreement is terminated for any reason
whatsoever, agree to return to the other party all tangible embodiments (and
all copies) thereof which are in their respective possession, (iv) give prompt
written notice to the other company of the occurrence of any event that would
constitute a breach of any of its own representations and warranties the Merger
Agreement and (v) use their reasonable best efforts to take such actions in
order to provide that the Merger and the transactions contemplated by the
Merger Agreement satisfy the requirements of a business combination under Rule
145 promulgated under the Securities Act.
UST has agreed not to solicit, initiate or encourage the submission of any
proposal or offer, and not to entertain, pursue, consider or accept any
proposal or offer from any person or entity relating to the acquisition of all
or substantially all of its capital stock or assets (including any acquisition
structured as a merger, consolidation, or share exchange). UST also agreed to
notify View Tech immediately if any person or entity makes any proposal, offer,
inquiry or contact with respect to any of the foregoing or relating to merger,
consolidation, share exchange, business combination or similar transaction and
to provide View Tech with a written copy of any such proposal, offer, inquiry
or contact.
CONDITIONS TO THE MERGER
View Tech's Conditions to the Merger. The obligation of View Tech to
consummate the transactions to be performed by it in connection with the
consummation of the Merger is subject to satisfaction of the following
conditions: (i) the Merger and the Merger Agreement shall have been approved by
the holders of at least 90% of the shares of UST Common Stock entitled to vote
thereon; (ii) UST shall have procured all required third party consents; (iii)
each representation and warranty of UST in the Merger Agreement shall be true
and correct in all material respects at and as of the Effective Date, subject
to any amendments thereto as permitted thereunder; (iv)
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UST shall have performed and complied with all of its covenants under the
Merger Agreement through the Effective Date; (v) no action, suit or proceeding
shall be pending or threatened before any court or quasijudicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling or charge could (A) prevent consummation of any of the
transactions contemplated by the Merger Agreement, (B) cause any of the
transactions contemplated by the Merger Agreement to be rescinded following
consummation or (C) materially and adversely affect the right of the Surviving
Corporation to own the former assets and to operate the former businesses of
UST, and (D) and no such injunction, judgement, order, decree, ruling or charge
shall be in effect; (vi) UST shall have delivered to View Tech a certificate to
the effect that each of the conditions to View Tech's closing the Merger is
satisfied; (vii) the Merger and the Merger Agreement shall have been approved
by the holders of a majority of the shares of View Tech Common Stock entitled
to vote thereon; (viii) the Registration Statement of which this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus forms a part and any applicable
state securities filings and registrations shall be effective under the
Securities Act and any applicable state securities laws or regulations at and
as of the Effective Time, and no stop order shall have been issued by the
Commission or any state regulatory agency; (ix) the Merger Shares shall have
been approved for listing on The NASDAQ National Market, subject to official
notice of issuance; (x) View Tech, VTAI and UST shall have received all
required authorizations, consents, and approvals of governments and
governmental agencies; (xi) View Tech shall have received from counsel to UST
an opinion relating to certain corporate matters; (xii) View Tech shall have
received the resignations, effective as of the Effective Date, of each director
and officer of UST other than those whom View Tech shall have specified in
writing at least three business days prior to the Effective Date; (xiii) View
Tech shall have received from UST's independent accountants their consent to
the use by View Tech of such auditors' audit report in the Registration
Statement of which this Joint Proxy Statement/View Tech Proxy
Statement/Prospectus forms a part and their agreement to provide such consent
in any other filing by View Tech that may require reference to UST's audited
financial statements; (xiv) View Tech shall have received from its independent
accountants an opinion dated as of the Effective Date, in form and substance
reasonably satisfactory to View Tech, that the Merger Agreement and the
transactions contemplated thereby qualify for pooling of interests accounting
treatment under Accounting Principles Board Opinion No. 16; (xv) View Tech
shall have completed its due diligence and all outstanding issues relating
thereto shall have been satisfactorily resolved by View Tech and UST; (xvi)
View Tech shall have received from each holder of UST Common Stock a written
agreement that: (A) if such holder was an officer, director or the holder of
10% or more of the issued and outstanding shares of UST Common Stock
immediately prior to the Merger, he will not sell or arrange for the sale of
any shares of View Tech Common Stock until the first day following publication
of financial reporting not less than 30 days of combined operations of View
Tech and UST; and (B) he does not intend to take any actions that will
jeopardize the tax-free nature of the Merger; (xvii) View Tech shall have
received from Messrs. Reece and Gentile executed employment agreements; (xviii)
UST shall have delivered estoppel certificates executed by the lessors of
certain real properties leased by UST; (xix) View Tech shall have obtained
directors and officers insurance coverage in accordance with the provisions of
the Merger Agreement; (xx) UST shall have canceled all outstanding or
authorized options (other than the Conversion Options), warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other
contracts or commitments that could require UST to issue, sell or otherwise
cause to become outstanding any of its capital stock; (xxi) all actions to be
taken by UST in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to View Tech; and (xxii) from the date of the Merger
Agreement through the Effective Time, there shall have been no material adverse
change (or developments involving a prospective material adverse change) in the
business, condition (financial or otherwise), operations, properties or
prospects of UST.
UST's Conditions to the Merger. The obligation of UST to consummate the
transactions to be performed by it in connection with the Merger is subject to
satisfaction of the following conditions: (i) the Merger and the Merger
Agreement shall have been approved by the holders of a majority of the shares
of View Tech Common Stock entitled to vote thereon and View Tech as the sole
shareholder of VTAI; (ii) the Registration Statement of which this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus forms a part and any applicable
state securities filings and registrations shall be effective under the
Securities Act and any applicable state securities laws or regulations at and
as of the Effective Time, and no stop order shall have been issued by the SEC
or any state regulatory agency; (iii) the Merger Shares shall have been
approved for listing on The NASDAQ National Market, subject to official notice
of issuance; (iv) each representation and warranty of View Tech in the Merger
Agreement shall be true and correct in all material respects at and as of the
Effective Date; (v) View Tech shall have performed and complied with all of its
covenants under the Merger Agreement through the Effective Date; (vi) no
action, suit, or proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge could (A) prevent consummation of
any of the transactions contemplated by the Merger Agreement, (B) cause any of
the transactions contemplated by the Merger Agreement to be rescinded
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following consummation, or (C) materially and adversely affect the right of
VTAI to own the former assets and to operate the former businesses of UST, and
(D) no such injunction, judgement, order, decree, ruling or charge shall be in
effect; (vii) View Tech shall have delivered to UST a certificate to the effect
that each of the conditions to UST's closing the Merger is satisfied; (viii)
the Merger and the Merger Agreement shall have been approved by the holders of
at least 90% of the shares of UST Common Stock entitled to vote thereon; (ix)
the UST Director Designees shall be elected directors of View Tech at the View
Tech Annual Meeting for terms of two and three years, respectively, contingent
only upon the consummation of the Merger, and the bylaws of View Tech, and any
other appropriate charter documents of View Tech, shall be amended to provide
for staggered terms of directors; (x) View Tech and UST shall have received all
required authorizations, consents and approvals of governments and governmental
agencies; (xi) UST shall have received from counsel to View Tech an opinion
relating to certain corporate matters; (xii) UST shall have received from its
counsel an opinion dated as of the Effective Date that the Merger and the
transactions contemplated thereby qualify as a tax-free reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code; (xiii) the UST Director
Designees shall be elected directors of VTAI, prior to the Effective Date, for
terms of three and two years, respectively, from the date of their election;
(xiv) View Tech and each of the holders of UST Common Stock shall have entered
into a registration rights agreement; (xv) View Tech shall have received from
Messrs. Reece and Gentile executed employment agreements on mutually acceptable
terms; (xvi) UST shall have completed its due diligence and all outstanding
issues relating thereto shall have been satisfactorily resolved by View Tech
and UST; (xvii) View Tech shall have procured all of the required third party
consents; (xviii) UST shall have received an opinion from an investment banker
of its choice that the Merger and the consideration offered to the holders of
UST Common Stock therefor is fair from a financial point of view to such
holders; (xix) View Tech shall have obtained directors and officers liability
insurance in accordance with the Merger Agreement; (xx) the Merger and the
transactions contemplated thereby shall qualify as a business combination under
Rule 145 promulgated under the Securities Act; (xxi) UST shall have received
from View Tech's independent accountants their consent to the use by UST of
such auditors' audit report in the Registration Statement of which this Joint
Proxy Statement/View Tech Proxy Statement/Prospectus forms a part and their
agreement to provide such consent in any other filing and/or mailing by UST
that may require reference to View Tech's audited financial statements; (xxii)
all actions to be taken by View Tech in connection with consummation of the
transactions contemplated by the Merger Agreement and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
UST; and (xxiii) from the date of the Merger Agreement through the Effective
Time, there shall have been no material adverse change (or developments
involving a prospective material adverse change) in the business, condition
(financial or otherwise), operations, properties or prospects of View Tech.
Refinancing of UST's Revolving and Lease Lines of Credit. In addition to
the foregoing conditions, the refinancing of UST's revolving and lease lines of
credit with its primary lender and the release of Messrs. Reece, Millet, Smith
and Cunningham from their guarantees of such lines of credit are conditions to
consummation of the Merger. As of October 31, 1996, UST owed approximately
$2,500,000 to its primary lender under such lines of credit. As of October 31,
1996, Messrs. Reece, Millet, Smith and Cunningham had guaranteed an aggregate
of up to $430,000 of UST's debt obligations to its primary lender.
REPRESENTATIONS AND WARRANTIES OF UST
In the Merger Agreement, UST makes certain representations and
warranties to View Tech relating to, among other things, the following matters:
(i) UST's organization, qualification and corporate power; (ii) UST's
capitalization; (iii) authorization of the Merger; (iv) noncontravention; (v)
title to assets; (vi) subsidiaries; (vii) financial statements; (viii) events
subsequent to June 30, 1996; (ix) undisclosed liabilities; (x) legal
compliance; (xi) tax matters; (xii) real property; (xiii) intellectual
property; (xiv) tangible assets; (xv) inventory; (xvi) contracts; (xvii) notes
and accounts receivable; (xviii) powers of attorney; (xix) insurance; (xx)
litigation; (xxi) product warranty; (xxii) employees; (xxiii) employee
benefits; (xxiv) guarantees; (xxv) environmental, health and safety; (xxvi)
certain business relationships with UST; (xxvii) broker's fees; (xxviii)
continuity of business enterprise; (xxix) substantial customers, brokers and
suppliers; and (xxx) disclosure.
REPRESENTATIONS AND WARRANTIES OF VIEW TECH
In the Merger Agreement, View Tech makes certain representations and
warranties to UST relating to, among other things, the following matters: (i)
View Tech's organization, qualification and corporate power; (ii) View Tech's
capitalization; (iii) authorization of the Merger; (iv) financial statements;
(v) events subsequent to View Tech's most recent fiscal year end; (vi)
undisclosed liabilities; (vii) legal compliance; (viii) noncontravention; (ix)
tax matters; (x) intellectual property; (xi) contracts; (xii) litigation;
(xiii) product warranty; (xiv) employee benefits; (xv) environmental, health
and safety; (xvi) advisory fees; (xvii) continuity of business enterprise;
(xviii) disclosure; (xix) real property; (xx) subsidiaries; and (xxi) filings
with the Commission.
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REPRESENTATIONS OF UST SHAREHOLDERS
Pursuant to the Merger Agreement and as a condition to the Merger, UST will
use its reasonable best efforts to obtain from each of the UST shareholders his
written representation and warranty that such UST shareholder, as of the
Effective Date, does not have any present plan, intention or arrangement to
dispose of any of the View Tech Common Stock received in the Merger within two
years of the Effective Date if such disposition would reduce the fair value of
the View Tech Common Stock measured as of the Effective Date to an amount less
than fifty percent of the fair value of the UST Common Stock held by such
shareholder immediately before the Effective Date.
REGULATORY REQUIREMENTS
The Merger Agreement provides that in order to close the Merger, (i) View
Tech, VTAI and UST shall have received all required authorizations, consents
and approvals of governments and governmental agencies, (ii) the Registration
Statement of which this Joint Proxy Statement/View Tech Proxy
Statement/Prospectus forms a part and any applicable state securities filings
and registrations shall be effective under the Securities Act and any
applicable state securities laws or regulations at and as of the Effective
Time, and no stop order shall have been issued by the Commission or any state
regulatory agency and (iii) the Merger Shares shall have been approved for
listing on The NASDAQ National Market, subject to official notice of issuance.
View Tech and UST are not aware of any governmental approvals or compliance
with laws or regulations that are required for consummation of the Merger other
than those described above. Should any other approval or action be required,
it is contemplated that such approval or action would be sought. There can be
no assurance that any such approval or action, if needed, could be obtained
and, if any such approval or action is obtained, there can be no assurance as
to the timing thereof. The Merger cannot proceed in the absence of all
requisite regulatory approvals. See "--Conditions to the Merger."
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
Termination. The Merger Agreement provides that it may be terminated at
any time prior to the Effective Time, whether before or after the approval of
the Merger and the Merger Agreement by the shareholders of View Tech and UST,
(i) by either View Tech or UST (A) by mutual consent, (B) if the Merger is not
consummated by November 30, 1996, (C) if approval of View Tech's shareholders
is not obtained at the View Tech Annual Meeting or any adjournment thereof, (D)
if approval of UST's shareholders is not obtained at the UST Special Meeting or
any adjournment thereof; (ii) by UST, if (A) View Tech has breached any
representation, warranty or covenant contained in the Merger Agreement in any
material respect, and UST has notified View Tech of this breach, in writing,
and the breach has continued without cure for a period of five business days
after the written notice of breach, or (B) View Tech issues or commits to issue
over 500,000 shares of View Tech Common Stock over the objection of UST; or
(iii) by View Tech, if UST has breached any representation, warranty or
covenant contained in the Merger Agreement in any material respect, and View
Tech has notified UST of this breach, in writing, and the breach has continued
without cure for a period of five business days after the written notice of
breach.
Effects of Termination. Under the terms of the Merger Agreement, if any
party terminates the Merger Agreement pursuant to the provisions concerning
termination therein, all rights and obligations of the parties thereunder shall
terminate without any liability of any party to any other party (except for any
liability of any party then in breach of any covenant of the Merger Agreement);
provided, however, that certain confidentiality provisions contained therein
and the Confidentiality and Non-Disclosure Agreement referenced therein will
survive any such termination; provided further, however, that any such
termination will have no effect on amounts that UST currently owes or may owe
in the future to View Tech. The Merger Agreement specifically provides that
termination is the sole and exclusive remedy for the breach of any
representation or warranty made by the party in the Merger Agreement.
Amendments. The Merger Agreement may be further amended by the parties
thereto, provided such amendment is in writing, at any time before or after the
approval and adoption of the Merger and the Merger Agreement by the
shareholders of View Tech and UST. After such shareholder approval and
adoption has been obtained, no amendment of any of the agreements executed in
connection with the Merger may be made which by law requires the further
approval of the shareholders, without obtaining such further approval. In
accordance with the foregoing, the Merger Agreement was amended on October 31,
1996 by View Tech, UST and VTAI to provide for, among other things, VTAI to be
a Delaware corporation.
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SUMMARY FINANCIAL DATA OF VIEW TECH
The following table presents summarized historical statements of operations
and balance sheet data of View Tech. The balance sheet data presented below as
of June 30, 1996 and 1995 and the statements of operations data presented below
for each fiscal year are derived from View Tech's audited financial statements.
The summarized historical financial data should be read in conjunction with the
financial statements and related notes thereto for View Tech included elsewhere
herein and in "View Tech Management's Discussion and Analysis or Plan of
Operations."
<TABLE>
<CAPTION>
Years Ended
June 30,
----------------------------------------------
1996 1995
---- ----
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 13,346,103 $ 6,963,487
Cost of revenues . . . . . . . . . . . . . . . . . . . 9,042,922 4,327,679
------------- -------------
Gross profit . . . . . . . . . . . . . . . . . . . . . 4,303,181 2,635,808
------------- -------------
Operating expenses:
Selling expenses . . . . . . . . . . . . . . . . . . . 1,706,626 685,428
General and administrative expenses . . . . . . . . . . 3,491,509 1,209,982
------------- -------------
5,198,135 1,895,410
------------- -------------
Income (loss) from operations . . . . . . . . . . . . . (894,954) 740,398
Other income (expense) . . . . . . . . . . . . . . . . (153,222) 12,575
------------- --------------
Other income (loss) before income taxes . . . . . . . . (1,048,176) 752,973
Provision for income taxes . . . . . . . . . . . . . . 352,116 294,083
------------- -------------
Net income (loss) . . . . . . . . . . . . . . . . . . . $ (696,060) $ 458,890
============= =============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 1,463,199 $ 4,987,939
Other current assets . . . . . . . . . . . . . . . . . 6,534,510 2,910,852
Property and equipment, net . . . . . . . . . . . . . . 820,411 141,556
Other assets, net . . . . . . . . . . . . . . . . . . . 31,001 18,483
------------- -------------
$ 8,849,121 $ 8,058,830
============= =============
Current liabilities . . . . . . . . . . . . . . . . . . $ 3,755,933 $ 2,475,591
Long-term liabilities . . . . . . . . . . . . . . . . . 242,283 4,356
Total stockholders' equity . . . . . . . . . . . . . . 4,850,905 5,578,883
------------- -------------
$ 8,849,121 $ 8,058,830
============= =============
</TABLE>
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VIEW TECH MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with the View
Tech financial statements and the notes thereto appearing elsewhere in this
Joint Proxy Statement/View Tech Proxy Statement/Prospectus. Certain statements
contained in this Joint Proxy Statement/View Tech Proxy Statement/Prospectus
that are not related to historical results, including, without limitation,
statements regarding View Tech's business strategy and objectives, future
financial position and estimated cost savings, are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act and involve risks and uncertainties. Although View Tech believes
that the assumptions on which these forward-looking statements are based are
reasonable, there can be no assurance that such assumptions will prove to be
accurate and actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed under "RISK
FACTORS," "VIEW TECH MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS" and "BUSINESS OF VIEW TECH," as well as those discussed elsewhere
in this Joint Proxy Statement/View Tech Proxy Statement/Prospectus. All
forward-looking statements contained in this Joint Proxy Statement/View Tech
Proxy Statement/Prospectus are qualified in their entirety by this cautionary
statement.
GENERAL
View Tech markets and installs video communications systems and
provides continuing services relating to installed systems. Revenue from the
sale of equipment is recognized when title passes to the customer. Revenue
from services is derived primarily from engineering, installation, training and
warranty services. Service revenue is recognized at the time of installation,
when rendered in connection with sales of new systems, and at the time the
majority of such services are rendered, when related to previously installed
equipment. View Tech establishes reserves for the estimated future costs of
the warranty portion of the services. See the financial statements of View
Tech and Note 2 of the notes thereto.
View Tech also earns commission income with respect to sales of
systems to its domestic customers for delivery at locations outside the United
States.
Upon completion of its initial public offering of common stock in June
1995, View Tech began utilizing the funds raised in the offering, in part, to
finance its growth in existing markets and to expand its operations into new
geographical regions.
In August 1995 and May 1996, View Tech amended its sales and service
agreement with its primary supplier, PictureTel. The amended agreement has a
term of five years and substantially expands the scope of View Tech's business
and its existing sales territory to include the states of Alabama, Arkansas,
Arizona, Colorado, Georgia, Louisiana, Mississippi, Montana, New Mexico,
Tennessee, Texas, Utah and Wyoming, as well as northern California. Prior to
August 1995, View Tech operated under a sales and service dealer agreement
covering most of southern California.
In connection with its new agreement, during fiscal 1996, View Tech
established full-service offices in Atlanta, Georgia, Denver, Colorado, and
Dallas, Texas and established sales offices in Nashville, Tennessee and San
Jose, California. In addition, View Tech's headcount increased from 22 to 52
employees at June 30, 1995 and 1996, respectively.
View Tech's 91.7% increase in revenues compared to fiscal 1995 was
primarily related to increased marketing efforts, including expansion of the
sales force to 16 representatives compared to seven people at June 30, 1995 and
the opening of three regional and two sales offices in 1996. In addition,
overall operating costs and expenses have increased 174% from $1,895,410 in
1995 to $5,198,135 in 1996. Income (loss) from operations decreased from
income of $740,398 for 1995 to a loss of $(894,954) in 1996. Such operating
losses relate primarily to View Tech's rapid expansion activities whereby
expenses have been incurred in advance of revenues, particularly, in the new
expanded territories. In addition, View Tech wrote off acquisition expenses of
$191,388 relating to the termination of the acquisition of PDS.
View Tech intends to continue its expansion activities in fiscal 1997.
As of October 31, 1996, View Tech is in the process of opening offices in
Phoenix, Arizona and Salt Lake City, Utah. In addition, View Tech is expanding
its operations into the State of Florida and into the northeastern United
States in connection with its acquisitions of VistaTel and GroupNet,
respectively. Also, View Tech has signed a definitive agreement to merge with
UST, which is headquartered in Boston, Massachusetts. See the financial
statements of View Tech and Note 18 of the notes thereto. Although management
anticipates that the revenues generated by its existing offices, as well as the
offices acquired through acquisition or expansion, will exceed such operating
costs for the year ending June 30, 1997, there can be no assurance that such
results will be achieved. To the extent that such costs exceed such
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<PAGE> 76
revenues, View Tech's operating income will be adversely affected.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from View Tech's financial statements expressed as a percentage of View
Tech's revenues:
<TABLE>
<CAPTION>
Years Ended
June 30
--------------------------------
1996 1995
------ ------
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of revenues 67.8 62.1
---- ----
Gross profit 32.2 37.9
---- ----
Operating expenses:
Selling expenses 12.8 9.9
General and administrative expenses 26.2 17.4
---- ----
Total operating expenses 39.0 27.3
---- ----
Income (loss) from operations (6.8) 10.6
Other income (expense) (1.1) 0.2
----- ---
Income (loss) before income taxes (7.9) 10.8
Provision for income taxes 2.7 (4.2)
--- -----
Net income (5.2)% 6.6%
===== =====
</TABLE>
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
Revenues for 1996 increased $6,382,616 or 91.7% to $13,346,103 from
$6,963,487 in 1995. The increase in revenue was primarily related to increased
marketing efforts, including expansion of the sales force to 16 representatives
compared to seven people at June 30, 1995 and the opening of three regional and
two sales offices in 1996.
Gross profit for 1996 increased $1,667,373 or 63.3% to $4,303,181 from
$2,635,808 in 1995. Gross profit as a percentage of revenues, or gross margin,
decreased to 32.2% in 1996 from 37.9% in 1995. The decrease in gross margin is
directly related to a decrease of approximately 3.0% in profit margin on
equipment sales, increases in salaries and related expenses of $438,929 for
technical services personnel and freight costs of $83,760 for 1996. The
decrease in profit margin on equipment sales primarily relates to increased
competitive pressures within the industry and sales to various state-funded
organizations, resulting in lower selling prices. The technical services and
training staff increased from eight at June 30, 1995 to 17 at June 30, 1996.
In addition, technical service costs increased at a greater rate than technical
service revenues during the period. Service and other revenues, as a
percentage of total revenues, decreased from 17.0% in 1995 to 15.6% in 1996.
Selling expenses increased $1,021,198 or 149% to $1,706,626 in 1996
from $685,428 in 1995. Selling expenses as a percentage of revenues increased
from 9.9% in 1995 to 12.8% in 1995. The dollar increase in selling expenses is
primarily due to the increase in the number of sales personnel from seven at
June 30, 1995 to 16 at June 30, 1996, resulting in increased salaries and
commission expenses associated with higher levels of sales. The increase in
selling expenses as a percentage of revenues is due to the fact that selling
expenses grew at a greater rate than View Tech's revenues.
General and administrative expenses increased $2,281,527 or 188.6% to
$3,491,509 in 1996 from $1,209,982 in 1995. General and administrative
expenses as a percentage of total revenues increased to 26.2% in 1996 from
17.4% in 1995. The dollar increase in general and administrative expenses was
primarily attributable to increases in administrative salaries and related
costs of $574,965, office and equipment rents of $326,280, telephone and
electronic communications costs of $258,629, professional fees of $210,131 and
an overall increase in other general office expenses, primarily related to View
Tech's expansion program and to higher sales volume. These expenses increased
as a percentage of revenues because the rate of increase in such expenses was
greater than the rate of increase in revenues primarily as a result of View
Tech's expansion program discussed above.
Income (loss) from operations decreased $1,635,352 to a loss of
$(894,954) in 1996 compared to operating income of $740,398 in 1995. Income
(loss) from operations as a percentage of revenues decreased to (6.8)% for 1996
compared to 10.6% for 1995. The overall decrease in income from operations for
1996 is primarily attributable to the increase in expenses related to View
Tech's expansion program and the write- off of acquisition expenses as
discussed above.
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<PAGE> 77
Other income (expense) decreased $165,797 to $(153,222) in 1996 from
$12,575 in 1995. The decrease was primarily due to the write-off of a note
receivable of $265,000 from PDS in connection with the termination of the PDS
acquisition in May 1996, offset by an increase in net interest income of
$136,571 related to investments in short-term securities during 1996.
Provision for income tax expense decreased $646,199 to a tax benefit
of $352,116 in 1996 from a tax expense of $(294,083) for 1995. The decrease in
income tax expense relates to the pre-tax loss of $1,048,176 for 1996. View
Tech has reduced the loss for fiscal 1996 to a loss of $(696,060) because it
expects to fully realize the $352,116 tax benefit in future periods. View Tech
will utilize approximately 51% of such benefit through carryback of the current
year's net operating loss.
Net income (loss) decreased $1,154,950 to a loss of $(696,060) in 1996
from net income of $458,890 for 1995. Net income as a percentage of revenues
decreased to (5.2)% for 1996 compared to net income of 6.6% for 1995. Net
income (loss) per share decreased to $(0.24) for 1996 compared to net income
per share of $0.26 for 1995. The weighted average number of shares outstanding
increased to 2,870,242 for 1996 from 1,761,550 in 1995.
YEAR ENDED JUNE 30, 1995 COMPARED TO THE YEAR ENDED JUNE 30, 1994
Revenues for 1995 increased $2,865,065 or 69.9% to $6,963,487 from
$4,098,422 in 1994. The increase in revenue was primarily related to increased
marketing efforts, including expansion of the sales force to seven
representatives compared to three at June 30, 1995 and the opening of an
additional sales office.
Gross profit for 1995 increased $1,227,247 or 87.1% to $2,635,808 from
$1,408,561 in 1994. Gross profit as a percentage of revenues, or gross margin,
increased to 37.9% in 1995 from 34.4% in 1994. Gross margin increased as a
result of an increase in the margin on equipment sales due to volume discounts
and correspondingly lower units costs, as well as an increase in service
revenues as a percentage of total revenues. Service revenues, which increased
from 15% to 17% of total revenues, generally provide a higher profit margin
than equipment revenues.
Selling expenses increased $207,077 or 43.3% to $685,428 in 1995 from
$478,351 in 1994. Selling expenses as a percentage of revenues declined to
9.9% in 1995 from 11.7% in 1994. The dollar increase in selling expenses is
primarily due to the increase in the number of sales personnel, resulting in
increased salary expense, and to commission expense associated with higher
levels of sales. The decrease in selling expenses as a percentage of revenues
is due to the fact that revenues grew at a greater rate than selling expenses.
General and administrative expenses increased $291,741 or 31.8% to
$1,209,982 in 1995 from $918,241 in 1994. General and administrative expenses
as a percentage of total revenues declined to 17.4% for 1995 compared to 22.4%
for 1994. The dollar increase in general and administrative expenses was
primarily attributable to increases in salaries for administrative personnel
and increases in office expenses to support View Tech's sales growth. These
expenses declined as a percentage of revenues because the rate of increase in
revenues was greater than the rate of increase in these expenses.
Income from operations increased $728,429 to $740,398 in 1995 compared
to $11,969 in 1994. Income from operations as a percentage of revenues
increased to 10.6% for 1995 compared to 0.3% for 1994. The overall improvement
in income from operations for 1995 is attributable to the increase in revenues
discussed above.
Other income (expense) increased $32,998 to $12,575 in 1995 from
($20,423) in 1994. The increase was primarily due to an increase in equipment
rental income of approximately $55,000 during 1995.
Provision for income tax expense increased $337,965 to ($294,083) in
1995 from a tax benefit of $43,882 for 1994. The increase in income tax
expense relates to an increase in pre-tax income of $761,427 during 1995 and to
the fact that View Tech had greater net operating loss carryforwards available
in 1994 than in 1995.
Net income increased $423,462 to $458,890 in 1995 from $35,428 for
1994. Net income as a percentage of revenues increased to 6.6% for 1995
compared to 0.9% for 1994. Net income per share increased to $0.26 for 1995
compared to $0.02 for 1994. The weighted average number of shares outstanding
increased to 1,761,550 in 1995 from 1,714,960 for 1994.
ACQUISITIONS
VistaTel
Effective July 1, 1996, View Tech acquired the net assets of VistaTel,
a private company based in Boca Raton, Florida, which is a primary supplier of
video conferencing products and services within the state of Florida
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and one of PictureTel's national re-sellers. View Tech issued 52,857 shares of
View Tech Common Stock, valued at $7.00 per share, to the sole shareholder of
VistaTel. The excess of the acquisition price of $339,000 over the net assets
acquired will be accounted for as goodwill and amortized over 15 years.
VistaTel sells and services video conferencing systems and provides network
bridging services for businesses to use worldwide.
GroupNet
Pursuant to a merger agreement dated August 30, 1996, View Tech
acquired GroupNet for cash and View Tech Common Stock valued at $1,380,000.
The purchase price consisted of 150,000 shares of View Tech Common Stock valued
at $7.00 per share or $1,050,000 in the aggregate and $330,000 in cash, of
which $110,000 was paid on August 30, 1996 upon execution of the agreement and
$220,000 is payable in equal installments of $110,000 due on October 15, 1996
and December 16, 1996, respectively. The excess of the acquisition price over
the net assets acquired of approximately $1,330,000 will be accounted for as
goodwill and amortized over 15 years. GroupNet, based in Boston,
Massachusetts, was an authorized PictureTel Select Dealer in video
communication product distribution in the northeastern United States. View
Tech will continue to operate GroupNet's former business in Boston and New
York. With the addition of GroupNet, View Tech has added the northeastern
United States to its marketing territory.
UST
On September 5, 1996, View Tech announced a definitive agreement of
merger with UST, one of the oldest and largest authorized sales agents for a
few of the regional bell operating companies. The Merger is valued at
approximately $18,500,000 and is subject to the approval of the shareholders of
View Tech and UST, as well as satisfactory completion of due diligence and
certain conditions precedent. As of October 31, 1996, UST owed its primary
lender (and such lender's affiliate) approximately $2,500,000 which is to be
paid in full or appropriately refinanced at the close of the Merger. The
Merger will be accounted for as a pooling of interests in which the UST
shareholders will exchange all of their outstanding UST shares and the UST
Options for View Tech Common Stock and options, respectively. The transaction
is expected to be completed on or about November 30, 1996. It is anticipated
that UST shareholders and optionholders (upon exercise of their options) will
receive up to 2,500,000 shares of View Tech Common Stock.
View Tech has advanced UST $1,000,000 evidenced by a promissory note
secured by all assets of UST. View Tech's security interest in UST assets is
subordinated to the debt obligations owed by UST to its primary lender (and
such lender's affiliate). Interest accrues at 10% on the unpaid principal
balance. Quarterly interest payments commenced on September 30, 1996, and the
entire unpaid balance of principal and accrued interest is due June 15, 1997.
View Tech executed an agreement with the UST's primary lender which restricts
View Tech's ability to bring an action to collect the $1,000,000 promissory
note if UST defaults. Presently, without additional financing, UST does not
have sufficient financing available to repay the note in full when due.
LIQUIDITY AND CAPITAL RESOURCES
View Tech has financed its operations and expansion activities during
fiscal 1996 with the proceeds from its initial public offering completed in
June 1995 and vendor credit arrangements.
Net cash used for operating activities in 1996 and 1995 was $2,356,610
and $327,912, respectively. The primary uses of cash in 1996 were increases in
accounts receivable, inventories and prepaids and other assets of $2,399,474,
$612,479 and $647,979, respectively, and a decrease in accrued liabilities of
$106,912. The uses of cash reflect View Tech's higher sales volume and funds
used to expand View Tech's operations during 1996 compared to 1995. Sources of
cash from operating activities were related to an increase in accounts payable
of $1,646,739.
Net cash used for investing activities in 1996 was $719,215, relating
to the purchase of office furniture and computer equipment for $457,695 and a
short-term working capital loan of $265,000 to PDS which was written off by
View Tech in connection with the termination of the acquisition of PDS in May
1996. As of October 31, 1996 View Tech anticipated that its capital
expenditures for fiscal 1997 would range from $700,000 to $900,000, principally
for demonstration equipment and office furniture and equipment.
Net cash used for financing activities in 1996 was $448,915, primarily
representing the repayment of debt and capital lease obligations of $416,997
and the payment of additional costs of $43,430 related to View Tech's initial
public offering completed in June 1995.
View Tech maintains a $500,000 credit facility (the "Note") to assist
in meeting its working capital needs, if required. The Note expires on
November 1, 1996 and provides for interest at the prime rate plus one and
one-half percent per year. Funds available under the Note are reduced by
certain outstanding standby letters of credit
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issued on behalf of View Tech. No amounts were outstanding under the Note at
June 30, 1996, although View Tech has as of June 30, 1996, five outstanding
standby letters of credits aggregating $300,000. Four of such standby letters
of credit were issued in favor of one leasing company in connection with
certain capital lease transactions relating to the purchase of computer
equipment and furniture and one is issued to a surety company in connection
with its issuance of a performance bond on behalf of View Tech. The letter of
credit holders may draw against the letters of credit if View Tech fails to
make timely payments or meet certain other conditions. As a result of issuing
the five standby letters of credit, the balance available under the Note has
been reduced to $200,000. As of June 30, 1996, View Tech was in technical
default on two of its loan covenants for which it has received a waiver of
default from the lender.
View Tech's primary supplier, PictureTel, provides View Tech with a
purchasing line of credit and requires View Tech to maintain a letter of credit
for $250,000 in favor of PictureTel in connection with this arrangement. The
$250,000 letter of credit is collateralized by cash deposits of $150,000 and
the assets of View Tech.
During July and August 1996, View Tech advanced an aggregate of
$1,000,000 to UST for working capital purposes and in order for UST to repay
certain bank debt due on September 1, 1996. The $1,000,000 advanced is
evidenced by a note which is subordinated to UST's debt obligations to its
primary lender (and such lender's affiliate). The promissory note evidencing
UST's indebtedness provides for interest at 10%, payable quarterly commencing
on September 30, 1996. The principal and accrued interest are due on June 15,
1997.
On October 31, 1996, View Tech completed a private placement of
300,281 shares of View Tech Common Stock. The Common Stock was sold for
approximately $1,500,000 resulting in net proceeds to View Tech of
approximately $1,380,000. View Tech used the net proceeds for general working
capital purposes, including restoring working capital loans made to UST in
connection with the Merger.
As of October 31, 1996, View Tech was seeking bank financing, private
debt and/or equity financing for purposes of meeting anticipated cash needs
related to the Merger with UST. On or before the Effective Date, View Tech is
required to either refinance or repay certain debt and lease obligations of
approximately $3,000,000 to UST's primary lender (and such lender's affiliate)
and is required to pay in cash certain merger costs of approximately
$1,412,000, primarily consisting of advisory fees and legal and accounting
costs. In addition, View Tech will require additional working capital to
efficiently operate the Combined Company during the months following the
Merger.
Exclusive of the cash required in connection with the Merger, View
Tech believes that its existing cash balances, combined with the proceeds from
its private placement of View Tech Common Stock, anticipated operating cash
flow and borrowings under existing and anticipated credit facilities will be
adequate to meet View Tech's on-going cash needs for the next twelve months.
There can be no assurance that View Tech will be able to raise additional
financing on favorable terms, if at all, or that it will be able to do so on a
timely basis. The inability to obtain required additional financing could
limit View Tech's ability to complete its business combination with UST and/or
to efficiently operate the Combined Company.
BUSINESS OF VIEW TECH
GENERAL
View Tech, which commenced operations in July 1992, markets and
installs video communications systems and provides continuing services related
to installed systems. Video communications systems, utilizing advanced
technology, enable users at separate locations to engage in face-to-face
discussions with the relative affordability and convenience of using a
telephone. In addition to the use of video conferences as a corporate
communications tool, use of video communications systems is expanding into
numerous additional applications, including (i) teachers providing lectures to
students at multiple locations, (ii) judges conducting criminal arraignment
proceedings while the accused remains incarcerated, (iii) physicians engaging
in consultations utilizing x-rays and other pictographic material, (iv)
coordination of emergency services by public utilities, (v) conducting
multi-location staff training programs and (vi) engineers at separate design
facilities coordinating the joint development of products.
View Tech's high-quality color video communications systems
incorporate superior audio and data-sharing capabilities, enabling participants
to share and annotate high-resolution images of documents and other objects and
present information to each other using a large writing surface. The systems
expand users' ability to conduct business in person while substantially
reducing or eliminating travel costs, particularly airfare, lodging and meals,
and non-productive travel time. They also increase productivity by improving
timely communication flow, encouraging well-informed and accelerated
decisionmaking, reducing or eliminating travel fatigue and improving the
quality of life of those whose work requires frequent meetings with persons at
different locations. The resulting increased productivity can contribute to
improved products and customer service, shorter timetables for bringing
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new products and services to market and more efficient utilization of limited
resources.
As of October 31, 1996, View Tech operated from 13 offices located
throughout the United States. View Tech (i) provides its customers with
components produced by PictureTel, one of the largest manufacturers of video
communications equipment, and several other manufacturers, (ii) selects and
integrates those components into complete systems designed to suit each
customer's particular communications requirements and (iii) provides personnel
training and other continuing services designed to insure that its customers
fully and efficiently utilize their systems and receive maximum returns on
their investments. In August 1995, and again in May 1996, View Tech and
PictureTel agreed to expand the territories in which View Tech markets and
services the PictureTel products from southern California to include Alabama,
Arizona, Arkansas, Colorado, Georgia, Louisiana, Mississippi, Montana, New
Mexico, Oklahoma, Tennessee, Texas, Utah and Wyoming as well as northern
California. The agreement has a term of five years subject to annual reviews
and PictureTel's right to terminate without cause upon 60 days' written notice.
INDUSTRY OVERVIEW
Video communication entails the transmission of video and audio
signals and computerized data between two or more locations through a digital
telecommunication network. Video communications systems were first introduced
in the late 1970s in the form of specialized dedicated conference rooms
outfitted with expensive electronic equipment and requiring trained operators.
Signals were transmitted over dedicated transmission lines established between
fixed locations. Market acceptance of early systems was limited because of the
low quality of the video output, as well as the high hardware and transmission
costs and limited availability of transmission facilities.
During the 1980s, a series of technological developments resulted in a
dramatic increase in the quality of video communication, as well as a
substantial reduction in its cost. The proliferation of switched digital
networks, which transmit digital, as opposed to analog signals, eliminated the
requirement of dedicated transmission lines. Advances in data compression and
decompression technology, and the introduction of devices for separating and
distributing digital signals over several channels simultaneously and
recombining them after transmission, resulted in products with substantially
improved video and audio quality and further reduced hardware costs.
Competition among telecommunications carriers during the past decade, together
with the expanded use of fiber optic technology, have further contributed to
reduced transmission costs.
As of October 31, 1996, there were three U.S. manufacturers of the
equipment representing the core technology of conference room or "roll-about"
video communications systems: PictureTel; Compression Labs, Incorporated; and
VTEL Corporation. This equipment, together with required peripheral equipment
manufactured by others, is marketed directly by these three manufacturers, by
telecommunications companies such as AT&T and SPRINT and by independent
distributors such as View Tech. PictureTel, View Tech's primary supplier, has
shown consistent growth in revenues over the past several years. PictureTel
reported revenues of $346,800,000 for the year ended December 31, 1995, up from
$255,200,000 and $176,300,000 for the years ended December 31, 1994 and 1993,
respectively.
STRATEGY
View Tech focuses its marketing efforts upon industries that it
believes will achieve significant benefits through utilization of video
communications, acquires a complete understanding of the operations of such
industries, and then identifies the particular communications needs of the
industry and integrates the system components that will most effectively
satisfy those needs. View Tech believes that this industry focus, together
with an emphasis on providing comprehensive, high-quality service to its
customers, enables View Tech to market video communications systems more
effectively than the video communications equipment manufacturers and
telecommunications carriers that are its principal competitors, since such
companies concentrate on their core businesses rather than on providing the
level of customer service provided by View Tech. In addition to its current
expansion activities related to the new PictureTel agreement, View Tech intends
to continue broadening its marketing focus and to expand its activities into
additional geographic markets by entering into additional strategic alliances
with manufacturers and others, acquiring companies in the video communications
and related businesses and establishing additional sales offices.
PRODUCTS
View Tech offers three types of video communications systems:
integrated roll-about systems, custom-built conference rooms and desktop
computer systems. Roll-about systems may be moved conveniently from office to
office and placed into operation quickly, while custom-built video conference
rooms are permanent installations typically designed for specific applications.
Desktop computer systems involve multi- purpose personal computers
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with video communications capabilities, and are generally used for one-on-one
personal communications, or when one person is presenting information to a
group. Roll-about systems, custom installations, and desktop systems accounted
for approximately 58%, 2% and 5% of View Tech's revenues, respectively, for the
fiscal year ended June 30, 1996, while sales of certain products integrated
into such systems accounted for approximately 20% of View Tech's revenues for
such period.
Apart from peripheral components manufactured by others, View Tech
exclusively sells systems manufactured by PictureTel. PictureTel is one of the
largest manufacturers of video communications equipment (in terms of revenues),
and View Tech is PictureTel's U.S. Dealer of the Year for 1995 and has been
recognized by PictureTel as such for the last three consecutive years. View
Tech is one of five PictureTel "elite dealers" worldwide that carry the entire
PictureTel line of products. Management believes that PictureTel's equipment
provides its customers with superior quality audio and video communications
capabilities at a reasonable price, and that user interface with PictureTel
equipment is more intuitive, thereby requiring less training, than that of the
equipment produced by its competitors.
The prices of the complete systems sold by View Tech range from $1,500
for a video communications enhancement kit for a desktop computer, to $60,000
for a roll-about system for a single location, to as much as $200,000 for a
custom-built conference room installation. Roll-about and custom-built systems
generally contain the following components:
Monitor. The monitor is a television set that is used at each
participating location for viewing persons and objects involved in the
communication. The screen of the monitor generally includes a window, or
inset, that may be used to duplicate the image shown by a monitor located at
another site, or to view documents or other graphic images related to the
discussion. Some systems include dual monitors, providing full-sized
simultaneous views of both graphic images and meeting participants.
Video Camera. The video camera is similar to a camcorder and is
generally located on top of the monitor. The video cameras included in View
Tech's systems record full-color images and have pan, tilt and zoom
capabilities. Some systems include auxiliary video cameras to provide
additional camera angles or to view various locations within a room.
Codec. The coding-decoding device, known as the "codec," is the heart
of a video communications system. Because video images have high information
content, their transmission requires significantly greater bandwidth (capacity)
than is required to transmit audio signals or computer data. One codec
converts analog signals into digital signals and compresses the digital
signals, enabling them to be transmitted over conventional data networks, while
a second codec decompresses and reconstitutes the signals into their analog
form at the receiving location. The signals transmitted by codecs are
bi-directional, enabling each codec simultaneously to send and receive signals.
The compression- decompression process is accomplished using algorithms, or
mathematical formulae, that are embedded in the codec.
Inverse Multiplier. Because video signals (even after digital
compression) require greater bandwidth than is available in most telephone
lines, an inverse multiplexer is used to distribute the signals to several
lines prior to transmission. The distributed signals are then simultaneously
transmitted over the different lines, and a receiving inverse multiplexer
recombines them to their original format.
Multi-point Control Unit. A multi-point control unit, known as an
"MCU" or "bridge," is a device that enables persons at more than two locations
to participate simultaneously in video communication. The MCU is required at
only one of the participating locations.
Document Camera. The document camera may be used to display
documents, photographs and small three-dimensional objects in color. Because
the document camera produces "freeze-frame" images, enhanced resolution of the
recorded item is possible.
Videoscan Converter. The videoscan converter facilitates the
transmission of computerized data.
Keypad. The keypad, one of which is required at each participating
location, is the device used to control the video cameras, monitors and other
aspects of the system.
Speakerphone. Each participating site has a speakerphone, which
provides near-high-fidelity audio communications.
Videocassette Recorder. Videocassette recorders are generally
installed at each location in order to provide a permanent record of the
communication.
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Annotations Slate and White Board. An annotations slate allows a
participant to draw, annotate and point to the high-resolution graphics
recorded by a document camera, while a white board allows a participant to make
a presentation using a large two dimensional writing surface similar to a
grease board.
The foregoing components included in View Tech's systems are purchased
by View Tech from PictureTel, except the inverse multiplexers, which it
purchases from either of two manufacturers, Teleos Communications, Inc. or
Ascend Communications, Inc., and the monitors, document cameras, videoscan
converters, videocassette recorders and white boards, which it acquires from
various sources, depending upon price and quality.
Although View Tech's desktop-computer systems involve different
components, the desktop system has many of the capabilities of the
conference-room and roll-about systems. View Tech's desktop video
communications equipment is also manufactured by PictureTel.
View Tech intends to continue providing its customers with additional
product selections in the future to the extent they compliment and enhance such
customers' video communications capabilities.
SERVICES
View Tech believes that the quality and depth of its services are
critical factors in its ability to compete successfully. Because of the
technical expertise and experience of its management and employees, View Tech
is able to offer its customers the convenience of single- vendor sourcing for
every aspect of their video communications needs and to develop customized
systems designed to provide efficient responses to each customer's unique
needs.
View Tech provides each of its customers with a full complement of
video communications services to ensure customer satisfaction and optimal
utilization of the system by the customer. Prior to the sale of its systems
and services, View Tech provides consulting services that include an assessment
of its customer's needs and existing communications equipment, as well as
cost-justification and return-on-investment analyses.
Once View Tech has made recommendations with respect to the most
effective method to achieve its customer's objectives and the customer has
ordered a system, View Tech delivers, installs and tests the video
communications equipment. When the equipment is functional, View Tech provides
training to all levels of its customer's organization, including executives,
managers, management-information-systems and data- processing administrators,
technical staff and end users. Training includes instruction in system
operation, as well as planning and administration meetings. Additionally, View
Tech assists its customers in internal "marketing" to ensure that managers
throughout the organization are aware that they have access to the system. By
means of thorough training, View Tech ensures that its customers achieve a
significant return on their investment in the systems and services provided by
View Tech.
View Tech provides one-year parts and service warranty contracts to
each customer, as well as customer support for every aspect of the equipment
provided, its integration and operator error following the sale of the
equipment. View Tech's suppliers, in turn, provide View Tech with
parts-replacement warranties ranging from 90 days for PictureTel equipment to
between one and three years for other manufacturers' equipment. View Tech's
customers can call View Tech's toll-free technical support hotline 24 hours a
day, 365 days a year. Customers may also obtain answers to questions or
follow-up training through video conferencing, telephone, facsimile, e-mail or
through the mail. View Tech also provides onsite support and maintenance.
Charges for engineering, installation, and training services, and the one-year
warranty contract, comprise approximately 10% to 12% of View Tech's total
charges for newly installed systems.
View Tech's service personnel maintain periodic contact with
customers. Prior to the expiration of the one-year warranty contract, View
Tech offers to perform an engineering study of each customer's equipment, to
recommend the installation of replacement parts or equipment if appropriate and
to provide an additional one-year warranty contract. At this time, View Tech
also offers training programs for new users, refresher and advanced training
programs for experienced users and consulting services related to new equipment
that has recently become available and systems expansion and upgrades. Charges
for the engineering study, training programs, consulting services and
additional one- year warranty contract are generally comparable to the cost of
services provided to the customer at the time its video communications
equipment is installed. Services provided by View Tech accounted for
approximately 15% of View Tech's revenues for the fiscal year ended June 30,
1996.
In addition, View Tech offers its customers telecommunications carrier
services, which it purchases from AT&T and Pacific Bell at high- usage
discounts and resells at rates that are more favorable than could be obtained
by View Tech's customers directly from the carrier. View Tech intends to
pursue opportunities for providing such services to its customers with
additional carriers, as they provide View Tech with recurring revenues based
upon customer video communications systems use. To date, the revenues
attributable to such services have not been material.
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During 1996, View Tech started providing MCU, or bridge, services to
its customers. Since bridges cost between $65,000 and $150,000 per unit, View
Tech's customers typically elect to utilize such services when more than two
locations participate simultaneously in video communication. Bridging revenues
for the fiscal year ended June 30, 1996 were not material.
CUSTOMERS
While View Tech has installed video communications systems for a
diversified customer base, including Southern California Edison, UNOCAL and
Loma Linda University, it has attempted to focus its marketing efforts on
specific industries. See "--Strategy." Among the industries in which View
Tech believes it has acquired substantial expertise are health care and
distance-education. During 1996, View Tech organized its Telemedicine Group to
focus directly on the health care industry. The health care market includes
HMOs, hospitals, insurers and other health care providers, whose personnel
utilize video communications systems to interview patients, transfer medical
records (including x-rays and other pictographic material) and to confer on a
variety of professional and administrative matters. View Tech has provided
systems to customers in the health care industry including Allergan, Blue Cross
of California, Catholic Healthcare West, Friendly Hills Hospital Group and
PacifiCare.
The distance-education market includes universities, community
colleges and primary and secondary schools. Educators utilize video
communications systems to enable teachers to lead classes meeting at multiple
locations to obtain presentations by off-site lecturers, facilitate teaching of
hearing-impaired students and hold institutional staff meetings. View Tech has
installed systems at the University of California's San Bernardino campus, Loma
Linda University and Cal Tech.
No single customer accounted for more than 10% of View Tech's revenues
for the fiscal year ended June 30, 1996.
View Tech maintains a small inventory of equipment and spare parts,
but orders most of its equipment on a project-by-project basis based upon firm
orders by, and for delivery to, its customers. Substantially all of the video
communications systems sold to the customers named above were integrated
roll-about systems. To date, View Tech has not experienced difficulty
associated with the timely delivery of equipment by its manufacturers.
SALES AND MARKETING
View Tech has a number of programs in place for promoting its products
and services. Representatives of View Tech regularly attend video
communications and advanced technology trade shows. View Tech hosts seminars
and provides potential customers with the opportunity to learn more about View
Tech's products and services using video communications demonstration
facilities located in each of View Tech's offices. View Tech also places
advertisements aimed at selected markets in industry trade publications and
utilizes limited and selective direct mail advertising.
In addition, View Tech has an agreement with a telemarketing firm to
provide View Tech with information regarding organizations that may be
interested in purchasing View Tech's products and services. Management has
worked closely with the firm to develop approaches that it believes will enable
the firm effectively to identify individuals within organizations who are
likely to be interested in learning of the advantages of video communications.
PictureTel and other suppliers also provide View Tech with sales leads.
View Tech also maintains relationships with previous customers and
attempts to provide for their continuing hardware and service needs, including
continuing engineering, training and warranty services. See "--Services." For
the year ended June 30, 1996, approximately 50% of View Tech's total revenues
were derived from existing customers.
DEPENDENCE ON PICTURETEL
Approximately 77% of View Tech's revenues which are attributable to
the sale of equipment (and approximately 58% of View Tech's overall revenues)
is derived from equipment manufactured by PictureTel, with the balance supplied
by approximately seven other manufacturers. Termination or change of View
Tech's business relationship with PictureTel or another supplier, disruption in
supply, failure of a supplier to remain competitive in quality, function or
price, or a determination by one or more of View Tech's suppliers to reduce
reliance on independent distributors such as View Tech could have a material
adverse effect on View Tech. See "--Competition" and "RISK FACTORS--Dependence
on Suppliers, including PictureTel."
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COMPETITION
The video communications industry is highly competitive. View Tech
competes with manufacturers of video communications equipment and their
networks of dealers and distributors, telecommunications carriers and other
large corporations, as well as other independent distributors.
Telecommunications carriers and other large corporations that have recently
entered the video communications market include Apple Computers, Inc., AT&T,
MCI Communications Corporation, SPRINT, some of the RBOCs, IBM, Intel
Corporation, Nippon Electric Corporation, MicroSoft, Inc., Mitsubishi Ltd.,
Fujitsu Ltd., Sony Corporation, Matsushita/Panasonic, Hitachi and British
Telecom. Many of these organizations have substantially greater financial and
other resources than View Tech, furnish many of the same products and services
provided by View Tech and have established relationships with major corporate
customers that have policies of purchasing directly from them. Management
believes that as the demand for video communications systems continues to
increase, additional competitors, many of which will have greater resources
than View Tech, will enter the video communications market.
A specific manufacturer's network of dealers and distributors
typically involves discreet territories that are defined geographically, in
terms of vertical market, or by application (e.g., project management or
government procurement). View Tech's current agreement with PictureTel
authorizes View Tech to distribute PictureTel products in the following states:
Alabama, Arizona, Arkansas, California, Colorado, Georgia, Louisiana,
Mississippi, Montana, New Mexico, Oklahoma, Tennessee, Texas, Utah and Wyoming.
Because the agreement is non-exclusive, however, View Tech is subject to
competition within these territories by other PictureTel dealers, whose
customers elsewhere may have branch facilities in these territories, and by
PictureTel itself, which directly markets its products to certain large
national corporate accounts. The agreement expires in August 2000 and can be
terminated without cause upon 60 days' written notice by PictureTel. There can
be no assurance that the agreement will not be terminated, or that it will be
renewed by PictureTel, which has no other affiliation with View Tech and is a
competitor of View Tech. While there are suppliers of video communications
equipment other than PictureTel, termination of View Tech's relationship with
PictureTel could have a material adverse effect on View Tech.
View Tech believes that customer purchase decisions are influenced by
several factors, including cost of equipment and services, video communication
system features, connectivity and compatibility, a system's capacity for
expansion and upgrade, ease of use and services provided by a vendor.
Management believes that its comprehensive knowledge of the operations of the
industries it has targeted, the quality of the equipment that View Tech sells,
the quality and depth of its services, its nationwide presence and ability to
provide its customers with all of the equipment and services necessary to
ensure the successful implementation and utilization of its video
communications system enable View Tech to compete successfully in the industry.
EMPLOYEES
At October 31, 1996, View Tech had 70 full-time employees and a
network of consultants who are available on an as-needed basis to provide
technical and marketing support. As of October 31, 1996, View Tech had 27
full-time employees engaged in marketing and sales, 22 in technical services
and 15 in finance, administration and operations. None of View Tech's
employees is represented by a labor union. View Tech believes that its
relations with its employees are good.
REAL PROPERTIES
View Tech leases office facilities in Camarillo, Irvine and San Diego,
California, Atlanta, Georgia, Dallas, Texas, Englewood, Colorado, and
Nashville, Tennessee. Its executive offices are located in Camarillo and
consist of a total of approximately 6,700 square feet. View Tech's other
facilities house sales, technical and administrative personnel and consist of
aggregate square footage of approximately 13,500 square feet. The leases on
those facilities expire at various dates through October 2000. In August and
September 1996, View Tech entered into two new office leases aggregating
approximately 2,700 square feet in Boca Raton, Florida and Phoenix, Arizona
with terms of five and two years, respectively. View Tech may require
additional space during the next 12 months to house its operations in Camarillo
and Irvine, California and Atlanta, Georgia. View Tech believes that it can
find suitable additional space on reasonable terms.
CLAIMS AND LITIGATION
View Tech is not party to any legal proceedings. It is anticipated
that from time to time it will be subject to claims that arise in the ordinary
course of its business.
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SELECTED FINANCIAL DATA OF UST
The following tables present summarized historical statements of
operations and balance sheet data of UST. The balance sheet data presented
below as of December 31, 1995 and 1994 and the statements of operations data
presented below for the years ended December 31, 1995 and 1994 are derived from
audited financial statements. The balance sheet data presented below as of
June 30, 1996 and 1995 and the statements of operations data presented below
for the six months ended June 30, 1996 and 1995 are derived from unaudited
financial statements. Such unaudited financial statements of UST, in the
opinion of UST's management, contain all adjustments necessary for a fair
presentation of the financial position and results of operations for these
periods.
The selected historical financial data related to December 31, 1995
and 1994 should be read in conjunction with the audited financial statements
and related notes thereto for UST included elsewhere in this Joint Proxy
Proposal/View Tech Proxy Proposal/Prospectus and "UST Management's Discussion
and Analysis or Plan of Operations." The selected historical data related to
June 30, 1996 and 1995 should be read in conjunction with UST Management's
Discussion and Analysis or Plan of Operations and the unaudited financial
statements, and related notes thereto, for UST included elsewhere in this Joint
Proxy Proposal/View Tech Proxy Proposal/Prospectus and UST Management's
Discussion and Analysis or Plan of Operations.
<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
----------------------------- ---------------------------
UNAUDITED
---------
1995 1994 1996 1995
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Agency commissions . . . . . . . . . . . . $14,175,993 $18,114,987 $5,579,355 $ 8,641,998
System and other product sales . . . . . . 5,798,600 3,918,710 2,809,498 2,273,815
----------- ----------- ---------- -----------
Total revenues . . . . . . . . . . . . . . 19,974,593 22,033,697 8,388,853 10,915,813
----------- ----------- ---------- -----------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . 4,650,121 2,938,910 2,424,129 1,848,064
----------- ----------- ---------- -----------
Selling expenses . . . . . . . . . . . . . 11,418,695 15,805,023 3,647,860 7,119,836
General and administrative expenses . . . 2,938,277 4,105,086 1,583,015 1,765,016
----------- ----------- ---------- -----------
19,007,093 22,849,019 7,655,004 10,732,916
----------- ----------- ---------- -----------
Income (loss) from operations . . . . . . . . . . . 967,500 (815,322) 733,849 182,897
Interest and other expense . . . . . . . . . . . . (607,700) (325,900) (248,981) (350,645)
Loss on sublease, including
shutdown of office . . . . . . . . . . . . . . . (994,900) (318,000) - (994,900)
----------- ----------- ---------- -----------
Income (loss) before income taxes . . . . . . . . . (635,100) (1,459,222) 484,868 (1,162,648)
State tax provision . . . . . . . . . . . . . . . . (33,300) - (59,000) -
----------- ----------- ---------- -----------
Net income (loss) . . . . . . . . . . . . . . . . . $ (668,400) $(1,459,222) $ 425,868 $(1,162,648)
=========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
---------------------------- ---------------------------
1995 1994 1996 1995
----------- ----------- ---------- ----------
UNAUDITED
---------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . . . . . . $ - $ - $ 2,000 $ -
Other current assets . . . . . . . . . . . . . . . 3,659,684 4,464,118 4,037,950 4,268,700
Property and equipment net . . . . . . . . . . . . 2,121,250 2,747,719 1,900,011 2,442,900
Other assets, net . . . . . . . . . . . . . . . . . 56,214 93,957 52,007 84,377
----------- ----------- ---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . $5,837,148 $7,305,794 $5,991,968 $6,795,977
=========== =========== ========== ==========
Current liabilities . . . . . . . . . . . . . . . . $4,773,188 $3,938,151 $5,918,800 $7,141,732
Long-term liabilities . . . . . . . . . . . . . . . 2,119,200 4,180,813 702,540 1,630,063
Total shareholders' deficit . . . . . . . . . . . . (1,055,240) (813,170) (629,372) (1,975,818)
----------- ----------- ---------- ----------
Total Liabilities and Shareholders' Deficit . . $5,837,148 $7,305,794 $5,991,968 $6,795,977
=========== =========== ========== ==========
</TABLE>
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UST MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes thereto appearing elsewhere in this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus. Certain statements contained
in this Joint Proxy Statement/View Tech Proxy Statement/Prospectus that are not
related to historical results, including, without limitation, statements
regarding UST's business strategy and objectives, future financial position and
estimated cost savings, are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act and
involve risks and uncertainties. Although UST believes that the assumptions on
which these forward-looking statements are based are reasonable, there can be
no assurance that such assumptions will prove to be accurate and actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed under "RISK FACTORS," "UST MANAGEMENT S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATIONS" and "BUSINESS OF UST," as well as those
discussed elsewhere in this Joint Proxy Statement/View Tech Proxy
Statement/Prospectus. All forward-looking statements contained in this Joint
Proxy Statement/View Tech Proxy Statement/Prospectus are qualified in their
entirety by this cautionary statement.
GENERAL
UST designs, sells, manages and supports telecommunications systems
solutions for small and medium-sized businesses throughout the United States.
UST develops and manages sales and customer service programs on an outsourced
basis for (i) certain RBOCs, (ii) other telecommunications service providers
and (iii) equipment manufacturers under agency and VAR agreements. In New
England and New York, UST also provides systems integration and on-going
account management consulting for middle market customers. On behalf of its
RBOC clients, UST sells high speed data services, internet access, Centrex
network services, local and long distance services, voice mail and other
"enhanced" services, discount calling plans and toll-free services such as
remote-call-forwarding. As a value-added equipment reseller, UST sells,
installs and maintains data transmission products, video conferencing equipment
and telephone systems.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from UST's financial statements expressed as a percentage of UST's
revenues.
<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
------------------ ----------------
UNAUDITED
---------
1995 1994 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Agency Commissions . . . . . . . . . . 71.0 82.2 66.5 79.2
System and Other Product Sales . . . . 29.0 17.8 33.5 20.8
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs and Expenses:
Cost of goods sold . . . . . . . . . . 23.3 13.3 28.9 16.9
Selling expenses . . . . . . . . . . . 57.2 71.7 43.5 65.2
General and administrative expenses . 14.7 18.7 18.9 16.2
----- ----- ----- -----
Total operating expenses . . . . . . . . 95.20 103.7 81.3 98.3
----- ----- ----- -----
Income (loss) from operations . . . . . . 4.8 (3.7) 8.7 1.7
Other income (expense) . . . . . . . . . (2.9) (1.5) (2.9) (3.2)
Loss on sublease including shutdown of
offices . . . . . . . . . . . . . . . . . (5.0) (1.4) - (9.1)
----- ----- ----- -----
Income (loss) before income taxes . . . . (3.1) (6.6) 5.8 (10.7)
Provision for income taxes . . . . . . . (0.2) - (0.7) -
Net income . . . . . . . . . . . . . . . (3.3)% (6.6)% 5.1% (10.7)%
===== ===== ===== =====
</TABLE>
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YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Total revenues for 1995 decreased by $2,059,104 or 9.3% to $19,974,593 from
$22,033,697 in 1994.
Agency commissions in 1995 decreased by $3,938,994 or 21.7% to $14,175,993
from $18,114,987 in 1994. The decrease in agency commissions was due primarily
to UST's significant restructuring of its business in 1995. Toward the end of
1994 and into early 1995, regulatory changes, shifts in market conditions and
the exhaustion of available 800 numbers caused the highly profitable 800 number
business to deteriorate rapidly. In late 1994 and early 1995, UST curtailed
its sales activities in the 800 number market and terminated its unprofitable
relationships with USWest and PacBell. In late 1994 and in 1995, to adjust to
changing business conditions, UST closed its satellite office in San Francisco,
consolidated its Boston locations and dramatically reduced the size of its
telemarketing staff from an average of 286 employees in 1994 to an average of
147 employees in 1995.
System and other product revenues increased by $1,879,890 or $48% to
$5,798,600 in 1995 from $3,918,710 in 1994. The increase was primarily related
to increased sales and marketing efforts, including increased staffing in UST's
videoconferencing sales division.
Cost of goods sold for 1995 increased by $1,711,211 or 58.2% to $4,650,121
from $2,938,910. Cost of goods sold as a percentage of revenues increased to
23.3% in 1995 from 13.3% in 1994. The increase in costs of goods sold is
primarily related to the decrease in agency commissions from telemarketing in
which UST is paid a commission from carriers such as Bell Atlantic and GTE and
incurs no cost of goods sold related to these commissions.
Selling expenses for 1995 decreased by $4,386,328 or 27.8% to $11,418,695
from $15,805,023 in 1994. The decrease was due primarily to lower sales
compensation as a result of lower revenues, reductions in sales personnel and
personnel related expenses, and the closing and consolidation of UST's sales
offices.
General and administrative expenses for 1995 decreased by $1,166,809 or
28.4% to $2,938,277 from $4,105,086 in 1994. The decrease was due primarily to
reductions in administrative personnel and personnel related expenses and the
consolidation of UST's administrative offices.
Income (loss) from operations in 1995 increased by $1,782,822 to $967,500
from a loss of $815,322 in 1994. The increase was due primarily to the
reductions in selling and general administrative expenses as a result of the
restructuring of the business.
Other expense in 1995 increased by $281,800 or 86.5% to $607,700 from
$325,900 in 1994. The increase was due primarily to interest charges related
to increased debt in the form of a term note. On December 9, 1994, UST
borrowed $1,500,000 from its primary lender in the form of a term note. Under
the term note, UST was required to make principal payments in 20 equal,
consecutive monthly payments of $75,000 beginning on April 30, 1995. Interest
under this note accrued at the bank's base rate (8.5% at December 31, 1994)
plus 2.5% until March 31, 1995, and thereafter at the bank's base rate plus
4.5%.
Loss on sublease, including shutdown of offices (including severance and
related expense) in 1995 increased by $676,900 to $994,900 from $318,000 in
1994. During 1994, UST closed its sales office in San Francisco and during
1995 UST closed a larger sales office in Boston and significantly consolidated
its sales and administrative operations.
UST's State tax provision in 1995 increased to $33,300 from $0 in 1994, as
UST incurred net taxable income in 1995 and net taxable losses in 1994. UST
has elected to be treated as an S corporation for Federal and Massachusetts
income tax purposes pursuant to Section 1362(a) of the Code. As an S
corporation, all items of income or loss are passed through to the UST
shareholders and are reportable on their individual income tax returns. UST
has elected to be treated as a C corporation in California and New York. As a
C corporation, UST is responsible for paying taxes on income allocable to these
states.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Total revenues for 1994 increased by $3,996,097 or 22.2% to $22,033,697 from
$18,037,600 in 1993.
Agency commissions in 1994 increased by $4,934,287 or 37.4% to $18,114,987
from $13,180,700 in 1993. The increase in agency commissions was primarily
related to increased sales and marketing efforts, including increased staffing
and the first full year of operations in the three sales offices (Yarmouth, MA,
San Francisco, CA and New York, NY) opened during 1993.
System and other product revenues decreased by $938,190 or 19.3% to
$3,918,710 in 1994 from $4,856,900 in 1993. The decrease was primarily related
to UST's increasing its focus and sales and marketing efforts in the
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<PAGE> 88
agency commission business.
Cost of goods sold for 1994 decreased by $554,490 or 18.9% to $2,938,910
from $3,493,400. Cost of goods sold as a percentage of revenues decreased to
13.3% in 1994 from 19.4% in 1993. The decrease in cost of goods sold is
primarily related to the increase in agency commissions from telemarketing in
which UST is paid a commission from carriers such as Bell Atlantic and GTE and
incurs no cost of goods sold related to these commissions.
Selling expenses for 1994 increased by $5,570,823 or 54.4% to $15,805,023
from $10,234,200 in 1993. The increase was due primarily to increased sales
compensation as a result of increased revenues, increases in sales personnel
and personnel related expenses and the costs of operating the additional sales
offices.
General and administrative expenses for 1994 increased by $1,595,640 or
63.6% to $4,105,086 from $2,509,446 in 1993. The increase was due primarily to
increases in management and administrative personnel and personnel related
expenses and investments in the infrastructure of the business.
Income (loss) from operations in 1994 decreased by $2,615,876 to a loss of
$815,322 from income of $1,800,554 in 1993. The decrease was due primarily to
increases in selling and general administrative expenses used to enhance the
infrastructure of the business and the incremental costs of operating the
additional sales offices.
Other expense in 1994 increased by $225,100 or 223.3% to $325,900 from
$100,800 in 1993. The increase was due primarily to interest charges related
to increased borrowings under both the revolving line of credit and lease line
of credit with UST's primary lender.
Loss on sublease, including shutdown of offices (including severance and
related expenses) in 1994 decreased by $79,200 to $318,000. During 1994, UST
recorded a one-time charge related to the closing of its sales office in San
Francisco. During 1994 UST recorded a one-time charge related to a sublease
agreement for its previously occupied facility upon its move to a larger
facility. During 1993, UST recorded a liability of $397,200 which represented
the net future amounts due to the former landlord.
No state tax provision was required in 1994 as UST incurred net taxable
losses. UST has elected to be treated as an S corporation for Federal and
Massachusetts income tax purposes pursuant to Section 1362(a) of the Code. As
an S corporation, all items of income or loss are passed through to the UST
shareholders and are reportable on their individual income tax returns. UST
has elected to be treated as a C corporation in California and New York. As a
C corporation, UST is responsible for paying taxes on income allocable to these
states.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Total revenues for 1996 decreased by $2,526,960 or 23.1% to $8,388,853 from
$10,915,813 in 1995.
Agency commissions in 1996 decreased by $3,062,643 or 35.4% to $5,579,355
from $8,641,998 in 1995. The decrease in revenues was due primarily to UST's
significant restructuring of its business in 1995. Toward the end of 1994 and
into early 1995, regulatory changes, shifts in market conditions and the
exhaustion of available 800 telephone numbers caused the highly profitable 800
number business to deteriorate rapidly. In late 1994 and early 1995, UST
curtailed its sales activities in the 800 number market and terminated its
unprofitable relationships with USWest and PacBell. In late 1994 and in 1995,
to adjust to changing business conditions, UST closed its satellite office in
San Francisco, consolidated its Boston locations and dramatically reduced the
size of its telemarketing staff from an average of 206 employees in 1995 to an
average of 63 employees in 1996.
System and other product revenues increased by $535,683 or 23.6% to
$2,809,498 in 1996 from $2,273,815 in 1995. The increase was primarily related
to increased sales and marketing efforts, including increased staffing in UST's
video conferencing sales division.
Cost of goods sold for 1996 increased by $576,065 or 31.2% to $2,424,129
from $1,848,064. Cost of goods sold as a percentage of revenues increased to
28.9% in 1996 from 16.9% in 1995. The increase in cost of good sold is
primarily related to the decrease in agency commissions from telemarketing in
which UST is paid a commission from carriers such as Bell Atlantic and GTE and
incurs no cost of goods sold related to these commissions.
Selling expenses for 1996 decreased by $3,471,976 or 48.8% to $3,647,860
from $7,119,836 in 1995. The decrease was due primarily to lower sales
compensation as a result of lower revenues, reductions in sales personnel and
personnel related expenses and the closing and consolidation of UST's sales
offices.
General and administrative expenses for 1996 decreased by $182,001 or 10.3%
to $1,583,015 from $1,765,016 in 1995. The decrease was due primarily to
reductions in administrative personnel and personnel related expenses
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<PAGE> 89
and the consolidation of UST's administrative offices.
Income from operations in 1996 increased by $550,952 or 301.2% to $733,849
from $182,897 in 1995. The increase was due primarily to the reductions in
selling and general administrative expenses as a result of the restructuring of
UST's business.
Other expense in 1996 decreased by $101,664 or 29.0% to $248,981 from
$350,645 in 1995. The decrease was due primarily to lower interest charges
related to reduced debt.
Loss on sublease, including shutdown of offices (including severance and
related expenses) in 1996 decreased from $994,900 in 1995 to $0. During 1995
UST closed a sales office in Boston and significantly consolidated its sales
and administrative operations.
UST's State tax provision in 1996 increased to $59,000 from $0 in 1995 as
UST incurred net taxable income in 1996 and net taxable losses in 1995. UST
has elected to be treated as an S corporation for Federal and Massachusetts
income tax purposes pursuant to Section 1362(a) of the Code. As an S
corporation, all items of income or loss are passed through to the UST
shareholders and are reportable on their individual income tax returns. UST
has elected to be treated as a C corporation in California and New York. As a
C corporation, UST is responsible for paying taxes on income allocable to these
states.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the year ended December 31,
1995 was $1,247,618. The cash requirement was offset by a noncash charge
relating to the closing of offices of $360,847. The primary sources of cash
were decreases in accounts receivable of $904,598 and increases in accounts
payable of $169,357. The primary uses of cash were increases in inventories
and other current assets of $142,497 and $25,589, respectively, and decreases
in customers' deposits and deferred rent of $64,636 and $35,856, respectively.
Net cash used in investing activities for the year ended December 31, 1995
was $206,595, consisting primarily of purchases of property and improvements.
Net cash used in financing activities for the year ended December 31, 1995
was $1,041,023. The primary uses of cash were the result of net borrowings on
the line of credit, payments of long-term debt and payments on amounts due to
former landlords of $1,073,311, $845,000 and $249,394, respectively. The
primary sources of cash were the conversion of a $700,352 account payable to
PictureTel to a note payable and $426,330 which consisted of the net proceeds
from the issuance of UST Common Stock in August 1995.
Net cash used in operating activities for the six-month period ended June
30, 1996 was $153,950. The primary uses of cash were increases in accounts
receivable and inventories of $297,145 and $84,810, respectively, and decreases
in accounts payable, notes payable, accrued expenses and other current
liabilities of $52,247, $262,600, $232,198 and $50,965, respectively.
Net cash used in investing activities for the six-month period ended June
30, 1996 was $170,999, consisting primarily of purchases of property and
improvements.
Net cash provided for financing activities of $326,949 for the six-month
period ended June 30, 1996 was the result of net borrowings on the line of
credit of $501,890 net of payments on note payable to its primary lender of
$174,941.
On June 3, 1996, UST amended its revolving line of credit and forbearance
agreement with its primary lender. The revolving line of credit and
forbearance agreement were extended to January 2, 1997. The amended revolving
line of credit provides for monthly reductions in the borrowing base of $50,000
from July to September 1996 and $100,000 in October. In addition, the term
note agreement was amended to be due and payable on September 1, 1996 and was
paid prior to such date, in part, with aggregate borrowings in the amount of
$1,000,000 from View Tech. The prior agreement called for consecutive monthly
payments from January through August 1996. On June 3, 1996, certain directors
of UST guaranteed all outstanding borrowings under the revolving credit, lease
line of credit and term note agreements up to $430,000. Absent the Merger, the
loans are due on January 2, 1997.
On January 19, 1996, UST converted a $700,352 account payable to PictureTel
to a note payable due in equal monthly payments through November 1996 at a 9%
per annum interest rate.
On July 26, 1996, as part of the letter of intent to merge between UST and
View Tech, UST executed a promissory note for $1,000,000 payable to View Tech
which was used to pay the $430,000 term note due to its primary lender and to
meet current obligations. In the event that the Merger is not consummated, UST
is obliged to make quarterly interest payments to View Tech and the entire
unpaid balance owed to View Tech is due and
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payable on June 15, 1997, subject to subordination.
UST believes that its existing cash balances, combined with anticipated
operating cash flow and borrowings under existing credit facilities will be
adequate to meet its on-going cash needs through January 2, 1997. If the
Merger is not consummated, UST is required to repay to its primary lender
borrowings of approximately $3,000,000 under its revolving line of credit and
lease line of credit on January 2, 1997 and the principal and accrued interest
on its $1,000,000 promissory note to View Tech on June 15, 1997. Its ability
to meet its future liquidity requirements would be dependent on arranging
additional financing. There can be no assurance that sources of such financing
will be available, or will be available on terms acceptable to UST.
UST does not believe that its business is subject to any material adverse
impacts as the result of inflation.
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BUSINESS OF UST
GENERAL
UST, founded in 1986, designs, sells, manages and supports
telecommunications systems solutions for small and medium-sized businesses
throughout the United States. UST develops and manages sales and customer
service programs on an outsourced basis under agency and VAR agreements for (i)
certain RBOCs, (ii) other telecommunications service providers and (iii)
equipment manufacturers. In New England and New York, UST also provides
systems integration and on-going account management consulting for middle
market customers. On behalf of its RBOC clients, UST sells high speed data
services, internet access, Centrex network services, local and long distance
services, voice mail and other "enhanced" services, discount calling plans and
toll-free services such as remote-call-forwarding. As a value-added equipment
reseller, UST sells, installs and maintains data transmission products,
videoconferencing equipment and telephone systems. UST is the largest revenue-
producing sales agent for Bell Atlantic, the second largest agent for NYNEX,
among the two largest agents for GTE and has agency or VAR agreements with
Southwestern Bell, Sprint, Northern Telecom, Ascend and PictureTel. UST
generates revenue from commission sales, distributor mark-up and account
management and after-sales revenue fees.
UST utilizes a number of sales and marketing techniques, including outside
sales (or face-to-face) and inside sales (or telemarketing).
Outside Sales. UST's outside sales activities are generally focused on
medium-sized businesses in New England and New York where UST maintains
offices. Face-to-face sales are especially effective in selling more expensive
and technologically advanced services and equipment such as NYNEX's Centrex
network services and PictureTel's videoconferencing products. On-going account
management stimulates repeat business while protecting market share and
generating recurring revenue from certain clients such as NYNEX.
Inside Sales. UST's inside sales group sells a broad range of services over
the telephone. In addition, the inside sales and service departments generate
leads, and in some instances, provide back-up support to outside sales
associates. The advantages of telemarketing include high response rates, low
transaction costs, direct interaction with customers and on-line access to
detailed customer or product information. UST's telemarketing clients include
BellAtlantic, GTE, Southwestern Bell, Sprint and others.
Service. UST provides on-going after-sales services to its customers as a
crucial component of its mission. Installation, maintenance, user training and
network order-processing are some of the services provided by UST to its
end-user customers. Repeat business from existing customers has contributed to
UST's growth in the past.
THE TELECOMMUNICATIONS INDUSTRY
Since the break-up of AT&T in 1984, the telephone industry has become
increasingly competitive. MCI was among the first to challenge AT&T's market
dominance, and subsequently has grown and prospered in the long-distance arena.
Over the past ten years, MCI and Sprint, among others, have invested vast sums
in building long-distance infrastructures. Additionally, smaller companies
have entered the long-distance business as resellers. Rather than invest in
extensive networks, resellers purchase time on a wholesale basis from such
companies as AT&T and MCI, and invest heavily in sales and marketing
activities. Wholesale initiatives will most likely be taken by local providers
in the near future. As a result of enhanced competition throughout the
marketplace, customer retention has become the key to revenue growth and
profitability. In addition to the current competitors in the long-distance
arena, the RBOCs have emerged as strong future competitors to AT&T and MCI,
bringing with them inherent cost efficiencies due to their ownership of
underlying local transmission and switching facilities. As of October 31,
1996, UST was a significant distribution channel for several of these RBOCs
which are prepared to compete for the long-distance market.
On February 8, 1996, the Telecommunications Act was enacted into law. This
comprehensive federal legislation will affect many sectors of the
telecommunications industry. Included in the new statute are provisions
relating to, subject to certain limitations, the opening up of local telephone
markets to competition and the elimination of restrictions on certain local
carriers' entry into the long distance telecommunications market. It is
unknown at this time what impact the Telecommunications Act will have on View
Tech, UST or the Combined Company; however, it is likely that the business of
View Tech, UST and the Combined Company will face significant additional
competition from entities with greater financial and managerial resources.
Furthermore, in September 1996, the United States Court of Appeals for the
Eighth Circuit granted a stay of implementation of the Telecommunications Act
in response to lawsuits filed by local telephone companies and state officials
claiming that the new federal rules are arbitrary and usurp states' rights.
There can be no assurance that the delay in implementation of the
Telecommunications Act will not have a material adverse effect on the ability
of View Tech, UST of the Combined Company to compete in the local telephone
markets.
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SERVICES AND EQUIPMENT
Telecommunications Services. On behalf of its clients, UST sells a wide
range of telecommunications services including, high speed data connection,
internet access, local and long distance services, voice mail and other
"enhanced" services, discount calling plans and toll-free services. In
addition, UST provides Account Management for NYNEX under which it serves as
the as the primary interface between NYNEX and certain of its business
customers. Under this program, UST's outside sales personnel provide a
single-point-of-contact and coordination for all of the customer's
telecommunications needs. UST will provide systems integration services,
process so called "moves, adds, and changes" on the telephone network,
coordinate repairs, do network analysis, manage billing issues and provide
other customer services.
Telecommunications Equipment. UST sells telecommunications equipment from
such manufacturers as Ascent (data transmission products), PictureTel
(videoconferencing equipment) and Northern Telecom (telephone systems). UST is
one of the largest PictureTel dealers in the United States and the largest
dealer in New England. Future plans call for increased product
offerings,including desk-top video, wireless communications devices, data
products and entertainment components for the work-at-home and residential
markets.
After Sale Customer Relationship. UST prides itself in the on-going
after-sale relationship with its customers. Installation, training,
maintenance, remote diagnostic, billing inquiry management, network order
processing, new product introduction and system enhancements creating
multipurpose solutions distinguish UST from its competition. Customer
retention combined with repeat sales and residual revenue from active customers
are a key to UST's success.
Revenue Sources. UST provides services to several of the RBOCs: including
NYNEX, Bell Atlantic and Southwestern Bell; other telecommunications providers,
including GTE and Sprint; and equipment manufacturers, including Northern
Telecom, Ascend and PictureTel. UST typically has renewable annual contracts
with its clients, under which it receives commissions based on sales. In some
instances, such as the Account Management Program with NYNEX and long-distance
services, UST receives a recurring fee. With respect to equipment sales, UST
purchases the equipment at its dealer discount and resells the products to its
customers at list price, or at a discount from list price.
UST's principal executive offices are located at 745 Atlantic Avenue,
Boston, Massachusetts 02111-2747. Its telephone number at that address is
617/439-9911.
CLAIMS AND LITIGATION
In July 1995, UST received a demand letter from CompuServe, Inc.
("CompuServe"), in which CompuServe asserted claims against UST arising from
the establishment of a telecommunications facility for CompuServe in Boston in
October 1994. UST denied CompuServe's claims and rejected its demand for
payment of $72,000. In December 1995, CompuServe reiterated its claims and
demand. In March 1996, UST responded and again denied liability. On September
20, 1996, CompuServe offered to compromise the matter for $45,000. This offer
remains under consideration by UST and its legal advisors.
UST MANAGEMENT CONTINUING AFTER THE MERGER
DIRECTORS AND EXECUTIVE OFFICERS CONTINUING AFTER THE MERGER
The directors and executive officers of UST who will be officers and/or
directors of View Tech and VTAI are as follows:
<TABLE>
<CAPTION>
Name Age View Tech Position VTAI Position
---- --- ------------------ -------------
<S> <C> <C> <C>
Franklin A. Reece, III(1) . . 50 Executive Officer and Officer and Director
Director
David F. Millet(2) . . . . . 52 Director Director
Angelo P. Gentile . . . . . . 37 Officer Officer
- -------------------------
</TABLE>
(1) Mr. Reece is nominated to serve a three-year term on the View Tech and
VTAI Boards of Directors if the Joint Proxy Proposal, View Tech Proxy
Proposal 1 and View Tech Proxy Proposal 2 are approved. See "--THE
MERGER," "VIEW TECH PROXY PROPOSAL 1--REINCORPORATION OF VIEW TECH IN
DELAWARE AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS" and "VIEW
TECH PROXY PROPOSAL 2--ELECTION OF DIRECTORS."
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(2) Mr. Millet is nominated to serve a two-year term on the View Tech and
VTAI Boards of Directors if the Joint Proxy Proposal, View Tech Proxy
Proposal 1 and View Tech Proxy Proposal 2 are approved. See "--THE
MERGER," "VIEW TECH PROXY PROPOSAL 1-- REINCORPORATION OF VIEW TECH IN
DELAWARE AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS" and "VIEW
TECH PROXY PROPOSAL 2--ELECTION OF DIRECTORS."
Franklin A. Reece, III founded UST in 1986. From 1986 through the present,
Mr. Reece has served as chairman of the UST Board of Directors and, from 1986
to 1995, as chief executive officer of UST. He also served as president from
1986 until January, 1992. He was again elected president in March, 1995 and
continues to serve in such capacity. Prior to founding UST, Mr. Reece was
Director of Manufacturing of Zymark Corporation, a manufacturer of robotic
systems for laboratory automation. Prior to Zymark Corporation, he was General
Manager of Sales for The Reece Corporation, a manufacturer of specialized
automatic equipment for the apparel industry. A graduate of Harvard College,
Mr. Reece has extensive international and domestic sales, distribution and
management experience. Mr. Reece serves on the board of several Boston based
non- profit organizations.
David F. Millet, a founder of UST, has been a director of UST since its
inception in 1986. He is president of Chatham Venture Corporation, a private
investment firm. Mr. Millet, a graduate of Harvard College, is also a director
of Wall Data, Inc. and Natural Microsystems Inc., a general partner of Gateway
Partners, LP, a director of Mohawk Metal Products and president and a director
of Thomas Emery & Sons, LLC, an investment company.
Angelo P. Gentile joined UST in August 1989 and has been the treasurer of
UST since August 1991, and its chief financial officer from 1992 to July 1994.
He was again appointed to be UST's chief financial officer in May 1995. Prior
to coming to UST, Mr. Gentile served as a Senior Auditor and Consultant with
Arthur Andersen LLP's entrepreneurial and emerging business group. Mr. Gentile
is a certified public accountant in Massachusetts and a member of both the
American Institute of Certified Public Accountants and the Massachusetts
Society of Certified Public Accountants. Mr. Gentile received a B.S. in
business administration from Northeastern University.
UST EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for the executive officers
of UST whose individual remuneration exceeded $100,000 during the year ended
December 31, 1995.
UST SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------
Long-Term
Name and Compensation
Principal Position Year Salary($) Bonus($) Options(1)
------------------ ------- ------ ----- -------
<S> <C> <C> <C> <C>
Franklin A. Reece, III 1995 $120,000 $37,992 300,000
Chairman and
President
Angelo P. Gentile 1995 85,000 43,304 200,000
Chief Financial
Officer and
Treasurer
- --------------------------
</TABLE>
(1) All options are incentive stock options and were granted under the UST
Option Plan.
Mr. David F. Millet, a member of the UST Board of Directors, received $1,500
in directors' fees in 1995. In addition, in 1995 he received 50,000
nonqualified UST Stock Options, exercisable at $0.07 per share. By their terms
all of Mr. Millet's options vest 25% on the grant date and on each anniversary
date thereafter; provided, however, upon consummation of the Merger all of such
options immediately vest. Mr. Millet exercised options for 12,500 shares on
each of August 21, 1996 and September 13, 1996.
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UST OPTION GRANTS
The following table sets forth information regarding stock option grants to
each of the UST executive officers named in the foregoing UST Summary
Compensation Table during the year ended December 31, 1995.
<TABLE>
<CAPTION>
Individual Grants
% of Total Options
Number of Shares Granted to Exercise
Underlying Options Employees Price Expiration
Name Granted in Fiscal Year ($/Sh) Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Franklin A. Reece, III 300,000(1) 40% $0.10 9/12/00
Angelo P. Gentile 200,000(2) 26.6% $0.07 9/12/05
</TABLE>
______________
(1) Under their terms, 150,000 of such stock options vest after June 12,
2000, 37,500 of such options vested on September 13, 1996 and an
additional 37,500 vest on each of September 13, 1997, 1998 and 1999,
respectively; provided, however, that all of such options become
immediately exercisable upon consummation of the Merger.
(2) Under their terms, 50,000 of such options vested on September 13,
1995, 12,500 of such options vested on September 13, 1996, an
additional 12,500 options vest on each of September 13, 1997, 1998 and
1999, respectively, an additional 50,000 options vest on September 13,
2000, and the remaining 50,000 shares vest on September 13, 2002;
provided, however, that all of such options become immediately
exercisable upon consummation of the Merger.
See "--THE MERGER--Interests of Certain Persons in the Merger" for a
description of certain employment agreements to be entered into by Messrs.
Reece and Gentile with View Tech immediately prior to the Merger.
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UST SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of UST Common Stock, as of October 31, 1996, by (i) each
shareholder who, based upon UST's books and records, beneficially owned more
than five (5%) percent of the outstanding UST Common Stock as of such date,
(ii) each director of UST; (iii) each executive officer named in the UST
Summary Compensation Table and (iv) all executive officers and directors as a
group. Except as otherwise indicated, UST believes that the beneficial owners
of UST Common Stock listed below, based on information furnished by such
owners, have sole investment and voting powers with respect to such shares,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owners Beneficial Ownership Class(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Brian A. Bogosian 866,812 9.57%
297 Commonwealth Ave., Apt. #2
Boston, MA 02115
Wayne J. Colahan(2) 113,451 1.25%
Colin M. Cunningham, Jr.(2) 489,050 5.40%
c/o Salt Water Sportsman
77 Water Street, 10th Floor
Boston, MA 02110
Angelo P. Gentile 113,705 (3) 1.25%
Daniel L. Larson, Jr.(2) 304,664 3.36%
David F. Millet(2) & Christina M. Millet 866,246 (4) 9.56%
623 Chestnut St.
Needham, MA 02192
Franklin A. Reece, III(2) 2,030,900 (5) 22.33%
c/o USTeleCenters, Inc.
745 Atlantic Avenue
Boston, MA 02111
Traver Clinton Smith, Jr.(2) 992,375 10.95%
c/o Burn & Levinson LLP
125 Summer Street
Boston, MA 02110
All directors and executive officers 4,910,391 53.61%
as a group (7 persons)
</TABLE>
_____________
(1) Includes shares issuable upon the exercise of options or warrants that
are exercisable within 60 days of September 20, 1996. The shares
underlying such options are deemed to be outstanding for the purpose
of computing the percentage of outstanding stock owned by such persons
individually and by each group of which they are a member, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Director of UST.
(3) Includes 62,500 incentive stock options which are exercisable within
60 days of September 20, 1996.
(4) Mr. Millet shares voting and investment power with his wife with
respect to all of these shares.
(5) Includes 37,500 incentive stock options which are exercisable within
60 days of September 20, 1996; with respect to 1,993,400 of such
shares, Mr. Reece shares voting and investment power with his wife,
Ms. Joyce R. Reece.
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CERTAIN RELATIONSHIPS OF UST
Messrs. Reece, Millet, Smith and Cunningham are guarantors of certain
loans made by UST's primary lender up to $430,000. It is a condition to
consummation of the Merger that Messrs. Reece, Millet, Smith and Cunningham be
released from their guaranty obligations.
Mr. Smith is also a partner in the law firm of Burns & Levinson LLP,
the attorneys for UST. The Merger Agreement provides that Burns & Levinson LLP
will be paid its legal fees on the Effective Date. As of August 31, 1996, UST
is approximately $140,000 in arrears to Burns & Levinson LLP, the oldest
portion of which is over 11 months old.
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DESCRIPTION OF VIEW TECH CAPITAL STOCK
GENERAL
View Tech is authorized to issue up to 10,000,000 shares of View Tech
Common Stock, par value $0.01 per share, 3,393,438 shares of which were issued
and outstanding at October 31, 1996 and, at October 31, 1996 owned by
approximately 50 holders of record. In addition, View Tech is authorized to
issue up to 5,000,000 shares of View Tech Preferred Stock, $0.01 par value. As
of October 31, 1996, there were no shares of View Tech Preferred Stock
outstanding. If View Tech Proxy Proposal 1 is approved, View Tech will be
authorized to issue up to 20,000,000 shares of common stock, par value $0.0001
per share, and up to 5,000,000 shares of preferred stock, par value $0.0001 per
share. See "VIEW TECH PROXY PROPOSAL 1--REINCORPORATION OF VIEW TECH IN
DELAWARE AND RELATED CHANGES IN THE RIGHTS OF SHAREHOLDERS."
VIEW TECH COMMON STOCK
The holders of View Tech Common Stock are entitled to one vote per
share on all matters to be voted upon by the shareholders. Subject to the
rights of holders of View Tech Preferred Stock (if there are any shares
outstanding), the holders of View Tech Common Stock are entitled to receive
such dividends as may be declared from time to time by the View Tech Board of
Directors out of funds legally available therefor and in the event of
liquidation, dissolution or winding-up of View Tech, to share ratably in all
assets remaining after payment of all liabilities. The holders of View Tech
Common Stock have no preemptive or conversion rights and are not subject to
further calls or assessments by View Tech. There are no redemption or sinking
fund provisions applicable to the View Tech Common Stock. This description of
View Tech Common Stock will apply to the common stock, par value $0.0001 per
share, of View Tech Delaware if View Tech is reincorporated in Delaware.
VIEW TECH PREFERRED STOCK
The View Tech Articles of Incorporation provide that the View Tech
Board of Directors may issue an aggregate of 5,000,000 shares of View Tech
Preferred Stock from time to time in one or more series. As of October 31,
1996, there were no shares of View Tech Preferred Stock outstanding. This
description of View Tech Preferred Stock will apply to the common stock, par
value $0.0001 per share, of View Tech Delaware if View Tech is reincorporated
in Delaware.
The View Tech Board of Directors is authorized to determine, among
other things, with respect to each series of View Tech Preferred Stock which
may be issued: (i) the dividend rate, conditions and preferences, if any; (ii)
whether dividends will be cumulative and, if so, the date from which dividends
will accumulate; (iii) whether, and to what extent, the holders of a series
will enjoy voting rights, if any, in addition to those prescribed by law; (iv)
whether and upon what terms, a series will be convertible into or exchangeable
for shares of any other class of capital stock or other series of View Tech
Preferred Stock; (v) whether, and upon what terms, a series will be redeemable;
(vi) whether a sinking fund will be provided for the redemption of a series
and, if so, the terms and conditions of the sinking fund; and (vii) the
preference if any, to which a series will be entitled on voluntary or
involuntary liquidation, dissolution or winding up of View Tech. With regard
to dividends, redemption and liquidation preference, any particular series of
View Tech Preferred Stock may rank junior to, on a parity with, or senior to
any other series of View Tech Preferred Stock and View Tech Common Stock. The
View Tech Board of Directors, without shareholder approval, can issue View Tech
Preferred Stock with voting and conversion rights which could adversely affect
the voting power of the holders of View Tech Common Stock. The issuance of
View Tech Preferred Stock under certain circumstances could have the effect of
delaying or preventing a change of control of View Tech or other corporate
action.
OPTIONS AND WARRANTS
At October 31, 1996, 1,139,100 options, including 848,100 options
outstanding under the View Tech Stock Option Plan, covering an aggregate of
848,100 shares of View Tech Common Stock, of which 700,250 options were
unvested, and warrants covering an aggregate of 870,000 shares of View Tech
Common Stock were outstanding. The options and warrants have exercise prices
ranging from $0.25 per share to $7.75 per share, with a weighted average
exercise price of $5.53 per share, and expiration dates ranging from March 21,
1998 to September 1, 2006. In addition, under the View Tech Stock Option Plan,
the closing of the Merger will accelerate vesting of all outstanding View Tech
Options held by View Tech employees if, immediately after consummation of the
Merger, the former holders of UST Common Stock own more than 30% of the then
outstanding View Tech Common Stock. Based upon the number of shares of View
Tech Common Stock and UST Common Stock outstanding as of October 31, 1996,
immediately after consummation of the Merger, there will be approximately (i)
5,893,438 shares (assuming exercise of all of the UST Options) of View Tech
Common Stock outstanding, of which approximately 42.4% will be held
collectively by the former holders of UST Common Stock or (ii) 5,684,771 shares
(assuming
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no UST Options are exercised) of View Tech Common Stock outstanding, of which
approximately 40.3% will be held collectively by former holders of UST Common
Stock, thereby accelerating vesting of the View Tech Options.
REGISTRATION RIGHTS In addition to the registration rights granted to former
holders of UST Common Stock in connection with the Merger, View Tech has granted
"piggyback" registration rights to the holders of approximately 745,000
warrants, 291,000 options and 503,138 shares of View Tech Common Stock pursuant
to certain registration rights agreements between View Tech and the holders of
such securities. The registration rights expire at various times from September
1997 through June 1999. See "--TERMS OF THE MERGER AGREEMENT--Registration
Rights."
VIEW TECH DIVIDEND POLICY
View Tech has never paid any cash dividends on its View Tech Common
Stock. As of October 31, 1996, it intends to retain earnings and capital for
use in its business and does not expect to pay any dividends within the
foreseeable future. Any payment of cash dividends in the future on the View
Tech Common Stock will be dependent on View Tech's financial condition, results
of operations, current and anticipated cash requirements, plans for expansion,
restrictions, if any, under debt obligations, as well as other factors that the
View Tech Board of Directors deems relevant.
COMPARISON OF RIGHTS OF HOLDERS
OF VIEW TECH AND UST COMMON STOCK
The following is a summary of material differences between the rights
of holders of View Tech Common Stock and the rights of holders of UST Common
Stock. Since View Tech is organized under the laws of the State of California,
but will be reincorporated in Delaware if View Tech Proxy Proposal 1 is
adopted, and UST is organized under the laws of the Commonwealth of
Massachusetts, these differences arise from variations among state laws, as
well as differences between the respective charter documents of each of UST,
View Tech and View Tech Delaware. This summary is qualified in its entirety by
the description of View Tech Common Stock under "DESCRIPTION OF THE VIEW TECH
CAPITAL STOCK." See "VIEW TECH PROXY PROPOSAL 1--REINCORPORATION OF VIEW TECH
IN DELAWARE AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS"
FIDUCIARY DUTIES; INDEMNIFICATION AND LIMITATION OF LIABILITY
UST Common Stock. Massachusetts law permits, and the UST Articles of
Organization provide, that no director shall be personally liable to UST, or
its shareholders for monetary damages for breaches of fiduciary duty except
where such exculpation is expressly prohibited by law. The circumstances under
which exculpation is prohibited are substantially similar in Delaware and
Massachusetts, except that in Massachusetts, a director is not exculpated from
liability under provisions of Massachusetts law relating to unauthorized
distributions and loans to insiders, while in Delaware, a director is not
exculpated from liability under provisions of Delaware law relating to unlawful
payments of dividends, any unlawful stock purchases or redemptions.
The UST Articles of Organization do not eliminate the liability of
directors to the extent that such liability is provided by applicable law, (i)
for any breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Sections 61
and 62 of MBCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
Massachusetts law generally permits indemnification of directors and
officers for expenses incurred by them by reason of their position with the
corporation, if the director or officer has acted in good faith and with the
reasonable belief that his conduct was in the best interests of the
corporation. Massachusetts law also permits a corporation to indemnify persons
against judgments in actions brought by or in the right of the corporation.
The UST Bylaws provide for indemnification to the maximum extent legally
permissible of its directors and officers.
View Tech Common Stock. The View Tech Articles of Incorporation
eliminate the liability of directors for money damages to the corporation to
the fullest extent permissible under California law. California law does not
permit the elimination of monetary liability where such liability is based on:
(a) intentional misconduct or knowing and culpable violation of law; (b) acts
or omissions that a director believes to be contrary to the best interests of
the corporation or its shareholders, or that involve the absence of good faith
on the part of the director; (c) receipt of an improper personal benefit; (d)
acts or omissions that show reckless disregard for the director's duty to the
corporation or its shareholders, where the director in the ordinary course of
performing a director's duties should be aware of a risk of serious injury to
the corporation or its shareholders; (e) acts or omissions that constitute an
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unexcused pattern of inattention that amounts to an abdication of the
director's duty to the corporation and its shareholders; (f) interested
transactions between the corporation and a director in which a director has a
material financial interest; and (g) liability for improper distributions,
loans or guarantees. The requisite standards of conduct are determined by a
majority vote of a disinterested quorum of the directors, independent legal
counsel (if a quorum of independent directors is not obtainable), a majority
vote of a quorum of the shareholders (excluding shares owned by the indemnified
party) or the court handling the action.
California law permits indemnification of expenses incurred in
derivative or third-party actions, except that with respect to derivative
actions (a) no indemnification may be made without court approval when a person
is adjudged liable to the corporation in the performance of that person's duty
to the corporation and its shareholders, unless a court determines such person
is entitled to indemnity for expenses, and then such indemnification may be
made only to the extent that such court shall determine and (b) no
indemnification may be made under California law, without court approval in
respect of amounts paid or expenses incurred in settling or otherwise disposing
of a threatened or pending action or amounts incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
California corporations may include in their articles of incorporation
a provision which permits the corporation to expand the scope of
indemnification through agreements, bylaws or other corporate action beyond
that specifically authorized by statute. The View Tech Articles of
Incorporation include such a provision.
View Tech Delaware Common Stock. The Delaware Certificate also
eliminates the liability of directors to the fullest extent permissible under
Delaware law, as such law exists currently or as it may be amended in the
future. Under Delaware law, such provision may not eliminate or limit director
monetary liability for (a) breaches of the director's duty of loyalty to the
corporation or its stockholders; (b) acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law; (c) the payment
of unlawful dividends or unlawful stock repurchases or redemptions; or (d)
transactions in which the director received an improper personal benefit. Such
limitation of liability provision also may not limit director's liability for
violation of' or otherwise relieve View Tech Delaware or its directors from the
necessity of complying with, federal or state securities laws or affect the
availability of non-monetary remedies such as injunctive relief or rescission.
Delaware law generally permits indemnification of expenses incurred in
the defense or settlement of a derivative or third-party action, provided there
is a determination by a disinterested quorum of the directors, by independent
legal counsel or by a majority vote of a quorum of the stockholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in or (in contrast to California law) not opposed to the best
interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of
his or her duty to the corporation. Delaware law permits indemnification of
expenses when the individual being indemnified has successfully defended the
action on the merits or otherwise. A provision of Delaware law states that the
indemnification provided by statute shall not be deemed exclusive of any other
rights under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
MANAGEMENT; NUMBER OF DIRECTORS
UST Common Stock. The business and affairs of UST are managed by or
under the direction of the UST Board of Directors. Under Massachusetts law, a
corporation must have at least three directors if the corporation has three or
more shareholders. Under Massachusetts law the number of directors shall be
fixed or determined in the manner determined in the bylaws. The UST Bylaws
provide that the number of directors shall be not less than three nor more than
fifteen, as shall be fixed by the shareholders. Under the UST Bylaws, the
number of Board members may be increased by one or more additional directors
elected at a special meeting of shareholders or by a majority vote of the
directors. As of October 31, 1996, UST has six directors.
View Tech Common Stock. The business and affairs of View Tech are
managed by or under the direction of the board of directors. California law
allows the number of persons constituting the board of directors of a
corporation to be fixed by the bylaws or the articles of incorporation, or
permits the bylaws to provide that the number of directors may vary within a
specified range, the exact number to be determined by the corporation's board
of directors. California law further provides that, in the case of a variable
board, the maximum number of directors may not exceed two times the minimum
number minus one. The View Tech Bylaws provide for a board of directors
comprised of seven members, unless there are fewer than three shareholders in
which case the number of directors shall equal the number of shareholders.
California law also requires that any change in a fixed number of directors and
any change in the range of a variable board of directors specified in the
articles and bylaws must be approved by a majority in interest of the
outstanding shares entitled to vote (or such greater proportion of the
outstanding shares as may be required by the articles of incorporation). The
View Tech Bylaws require the vote of a majority in interest of the outstanding
shares to change the range of the variable View Tech Board of Directors,
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provided, however, that an amendment reducing the number of directors to less
than five cannot be adopted if the holders of more than 16 2/3 percent of
shares entitled to vote, vote against the amendment or do not consent to it.
View Tech Delaware Common Stock. The business and affairs of View
Tech Delaware shall be managed by or under the direction of the board of
directors. Delaware law permits a board of directors to change the authorized
number of directors by amendment to the bylaws unless the number of directors
is fixed in the certificate of incorporation or the manner of fixing the number
of directors is set forth in the certificate of incorporation, in which case
the number of directors may be changed only by amendment of the certificate of
incorporation or consistent with the manner specified in the certificate of
incorporation, as the case may be. The Delaware Certificate provides that the
exact number of directors shall be fixed from time to time exclusively by the
View Tech Board of Directors by resolution.
ELECTIONS; CLASSIFIED BOARD OF DIRECTORS
UST Common Stock. Directors are elected annually by the UST
shareholders. Massachusetts law permits classification of a corporation's
board of directors, but in the case of a public company, Massachusetts law
requires classification into three classes and imposes certain requirements
unless the corporation makes an election not to be governed by the statutory
provisions. The UST Articles of Organization do not require the division of
directors into classes, and the UST Bylaws provide that directors hold office
until the next annual meeting of shareholders and until their respective
successors are chosen and qualified.
View Tech Common Stock. California law generally requires that
directors be elected annually by the shareholders, by written consent or vote
at a meeting, but does permit a "classified" board of directors if (i) a
corporation is listed on a national stock exchange or (ii) the corporation's
shares are traded on The NASDAQ National Market and are held beneficially or of
record by at least 800 shareholders. As of the 1995 View Tech Annual Meeting,
shares of the View Tech Common Stock were beneficially held by more than 800
shareholders. California law also allows the election of one or more directors
by the holders of a particular class or series of shares. As of October 31,
1996, the View Tech Articles of Incorporation do not provide for a classified
board of directors, nor will such provision be made until reincorporation in
Delaware is effected.
View Tech Delaware Common Stock. Delaware law requires that an annual
meeting of the stockholders will be held for the election of directors.
Delaware law permits, but does not require, the adoption of a classified board
of directors with staggered terms. A maximum of three classes of directors is
permitted by Delaware law, with members of one class to be elected each year
for a maximum term of three years. The Delaware Certificate and the Delaware
Bylaws do provide for such a classified board of directors with the three
classes of directors serving in staggered terms.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting permits the holder of each share of stock entitled
to vote in the election of directors to cast that number of votes which equal
the number of directors to be elected multiplied by the number of shares held.
The holder may allocate all votes represented by his shares to a single
candidate or may allocate those votes among as many candidates as he chooses.
Thus, a shareholder with a significant minority percentage of the outstanding
shares may be able to elect one or more directors if voting is cumulative.
UST Common Stock. Massachusetts law has no cumulative voting
provision. The UST Articles of Organization do not provide for cumulative
voting
View Tech Common Stock. California law permits a corporation with
equity securities listed on a national exchange, or on The NASDAQ National
Market, when the corporation has at least 800 equity security holders,
beneficially or of record, to eliminate cumulative voting. As of the 1995 View
Tech Annual Meeting, shares of the View Tech Common Stock were beneficially
held by more than 800 shareholders. The View Tech Articles of Incorporation
eliminated cumulative voting when View Tech's shares were listed on a national
stock exchange or traded on The NASDAQ National Market and were held by at
least 800 equity security holders.
View Tech Delaware Common Stock. Cumulative voting is not available
under Delaware law unless so provided in the corporation's certificate of
incorporation. The Delaware Certificate does not provide for cumulative
voting.
REMOVAL OF DIRECTORS
UST Common Stock. Under Massachusetts law, except as otherwise
provided in a corporation's articles of organization or bylaws, directors may
be removed from office with or without cause by vote of the holders of a
majority of the shares entitled to vote in the election of directors, and
directors may be removed with cause by
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vote of a majority of the directors then in office. The UST Bylaws provide
that a director may be removed from office with or without cause by vote of a
majority of the shareholders entitled to vote in the election of directors or
for cause by vote of a majority of the directors then in office.
View Tech Common Stock. Sections 303 and 304 of the CGCL provide that
(i) directors may be removed by the remainder of the board, without cause, upon
approval by the holders of a majority of the outstanding shares of common stock
entitled to vote (subject to certain limitations which prevent any such removal
where the removal is opposed by a number of votes sufficient to elect a
director, if the corporation's board were elected by a cumulative vote) and
(ii) directors may be removed for fraudulent or dishonest acts or gross abuses
of authority or discretion following a suit brought by shareholders holding at
least 10% of the outstanding shares of any class of capital stock. In
addition, Section 302 of the CGCL permits a corporation's board to remove
directors declared of unsound mind by a court or convicted of a felony. The
View Tech Bylaws are governed by these provisions of CGCL.
View Tech Delaware Common Stock. The DGCL provides that a
corporation's directors may be removed with or without cause by the affirmative
vote of the holders of a majority of the combined voting power of the then
outstanding shares of capital stock of View Tech Delaware entitled to vote
generally in the election of directors. However, unless the Delaware
Certificate otherwise provides, when View Tech Delaware's Board of Directors is
classified (see "--Elections; Classified Board of Directors"), stockholders may
only effect such removal for cause. The Delaware Certificate does not alter
this statutory provision. The term "cause" with respect to the removal of
directors is not defined in the DGCL and its meaning has not been precisely
delineated by the Delaware courts.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
UST Common Stock. Under Massachusetts law, unless otherwise provided
in the articles of organization or bylaws, vacancies in the board of directors
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by the remaining directors. The UST Bylaws
provide that any vacancy on the UST Board of Directors may be filled by a
majority of the directors then in office or by the shareholders entitled to
vote thereon, at a special meeting called at least in part for the purpose.
View Tech Common Stock. Vacancies in the View Tech Board of Directors
may be filled at a meeting by a majority of the remaining directors, though
less than a quorum, by the unanimous written consent of the directors then in
office or by a sole remaining director, or if such vacancy is not filled by the
directors, by a vote of or written consent by a majority of shares entitled to
vote for the election of directors, except that a vacancy created by the
removal of a director by the vote or written consent of the holders of a
majority of the outstanding shares entitled to vote or by court order may be
filled only by (i) the vote of a majority of the shares entitled to vote
represented at a duly noticed meeting at which a quorum is present, or (ii) the
unanimous written consent of holders of the outstanding shares entitled to
vote. Each director so elected shall hold office until the next annual meeting
of the shareholders and until a successor has been elected and qualified.
View Tech Delaware Common Stock. Under the DGCL and the Delaware
Bylaws, vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filed by a majority of the
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are not directors in office, then an election of
directors may be held at a meeting of the stockholders, as provided by statute.
If, at the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
VOTING RIGHTS
UST Common Stock. Massachusetts law and the UST Bylaws provide that
holders of UST Common Stock are entitled to one vote per share, and a
fractional vote for each fractional share owned, on all matters to be voted on
by shareholders.
View Tech Common Stock. Both the CGCL and the View Tech Bylaws
provide that holders of View Tech Common Stock are entitled to one vote per
share on all matters to be voted on by shareholders.
View Tech Delaware Common Stock. Under the DGCL and the View Tech
Delaware Certificate, the holders of View Tech Delaware Common Stock are
entitled to one vote per share on all matters to be voted on by stockholders.
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AMENDMENTS TO ARTICLES OF ORGANIZATION, ARTICLES OF INCORPORATION OR
CERTIFICATE OF INCORPORATION
UST Common Stock. Under Massachusetts law, amendments to a
corporation's articles of organization relating to certain changes in capital
or in the corporate name require the vote of at least a majority of each class
of stock outstanding and entitled to vote thereon. Amendments relating to
other matters require a vote of at least two-thirds of each class outstanding
and entitled to vote thereon or, if the articles of organization so provide, a
greater or lesser proportion but not less than a majority of the outstanding
shares of each class. Under Massachusetts law, the articles of organization or
bylaws may provide that all outstanding classes of stock shall vote as a single
class, but the separate vote of any class of stock the rights of which would be
adversely affected by the amendment is also required. Neither the UST Articles
of Organization nor the UST Bylaws contain substantive provisions relating to
amendments to the UST Articles of Organization.
View Tech Common Stock. Neither the View Tech Articles of
Incorporation nor the View Tech Bylaws contain substantive provisions relating
to amendments to the View Tech Articles of Incorporation. However, California
law and the View Tech Bylaws provide that, procedurally, no vote of the
shareholders on an amendment to the View Tech Articles of Incorporation will be
valid unless the shareholders receive special notification of the amendment in
a notice of meeting to the shareholders or a written waiver of notice. The
CGCL provides that, generally, the View Tech Articles of Incorporation may be
amended with the approval of the View Tech Board of Directors and the approval
either before or after of the holders of a majority the outstanding shares
entitled to vote. The separate vote of any class of stock the rights of which
would be adversely affected by the amendment is also required.
View Tech Delaware Common Stock. Delaware law provides that the
certificate of incorporation of a Delaware corporation may be amended by
resolution of the board of directors and subsequent approval by a majority of
outstanding shares upon due notice. The separate vote of any class of stock
the rights of which would be adversely affected by the amendment is also
required.
AMENDMENTS TO BYLAWS
UST Common Stock. Under Massachusetts law, the power to make, amend
or repeal bylaws lies in the shareholders, provided that if authorized by the
articles of organization, the bylaws may provide that the directors may also
make, amend or repeal the bylaws, except with respect to any provision which by
law, the articles of organization or the bylaws requires action by the
shareholders. The UST Bylaws provide that its Bylaws may be amended by an
affirmative vote of at least a majority of shareholders present at a meeting
and entitled to vote, provided that notice of the proposed amendment was given
in the notice of the meeting. The UST Articles of Organization and the UST
Bylaws also provide that the directors may make, amend or repeal the Bylaws in
whole or in part, except with respect to any provision thereof which by law,
the articles or organization or the bylaws require action by the shareholders.
View Tech Common Stock. The View Tech Bylaws may be amended or
repealed or new bylaws may be adopted by either the View Tech Board of
Directors or by the holders of View Tech Common Stock entitled to exercise a
majority of the voting power of the corporation, provided that (i) any
amendment to the bylaws reducing the fixed number of directors to less than
five shall not be effective if the holders of more than 16 2/3 percent of the
outstanding shares of all classes of View Tech capital stock entitled to vote
cast votes against such amendment, and (ii) the authority of the View Tech
Board of Directors to amended or repeal bylaws or adopt new bylaws is subject
to the authority of the View Tech shareholders.
View Tech Delaware Common Stock. The View Tech Delaware Bylaws may be
altered, amended or repealed by a vote of the majority of outstanding shares or
by a vote of a majority of the Board of Directors, when such power is conferred
upon the Board of Directors by the Certificate of Incorporation. The Delaware
Certificate does confer this power to alter, amend or repeal bylaws. This
power does not divest or limit the power of the stockholders to adopt, amend,
or repeal bylaws.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
UST Common Stock. Pursuant to the UST Bylaws, special meetings of the
UST shareholders may be called at any time by the president, or a majority of
the Directors, and shall be called by the Clerk, or in the case of the death,
absence, incapacity or refusal of the Clerk, by any other officer, upon written
application of holders of at least 10% of the UST Common Stock entitled to vote
at the meeting. The UST Bylaws further provide that any action to be taken by
shareholders may be taken without a meeting if all shareholders entitled to
vote on the matter consent to the action by a writing filed with the records of
the meeting of shareholders.
View Tech Common Stock. Pursuant to the View Tech Bylaws, special
meetings of View Tech shareholders may be called at any time by the View Tech
Board of Directors, the chairman, the president or shareholders holding
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at least 10% of the voting power of the corporation. The CGCL does not provide
for a right of any other person or entity to call such a special meeting. The
View Tech Bylaws permit the View Tech shareholders to act by the written
consent of holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which holders of all shares entitled to vote thereon were present
and voted, provided that in acting to fill a vacancy on the View Tech Board of
Directors created by the removal of a director, such action must be by
unanimous written consent of all holders of shares entitled to vote for the
election of directors. The View Tech Bylaws permit the View Tech shareholders
to act by written consent of the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which holders of all shares entitled to vote
thereon were present and voted, provided that in acting to fill a vacancy on
the View Tech Board of Directors created by the removal of a director, such
action must be by unanimous written consent of all holders of shares entitled
to vote for the election of directors.
View Tech Delaware Common Stock. Under the DGCL, a special meeting of
stockholders may be called by the board of directors or by any other person
authorized to do so in the certificate of incorporation or the bylaws. The
Delaware Bylaws provide that such a meeting may be called by the View Tech
Delaware Board of Directors, the president or holders of a majority of the
outstanding voting stock. Pursuant to the Delaware Bylaws, written notice of a
special meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called, shall be given not fewer than ten
(10) nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting. Unless otherwise provided in the
certificate of incorporation, stockholders may take any action by written
consent that they may take by voting at a meeting, except that elections of
directors must take place at an annual meeting of stockholders.
APPROVAL OF MERGERS, REORGANIZATIONS AND CERTAIN BUSINESS COMBINATIONS
UST Common Stock. Massachusetts law provides that a vote of at least
two-thirds of the shares of each class of stock outstanding and entitled to
vote thereon is required to authorize the sale, lease or exchange of all or
substantially all of a corporation's property and assets or a merger or
consolidation of the corporation into any other corporation, except that the
articles of organization may provide that the vote of a greater or lesser
proportion, but not less than a majority of the outstanding shares of each
class, is required. Under Massachusetts law, the articles of organization or
bylaws may provide that all outstanding classes of stock shall vote as a single
class, but, in the case of a merger or consolidation, the separate vote of all
classes of stock, the rights of which would be adversely affected by the
transaction, is also required. Neither the UST Articles of Organization nor
UST Bylaws contain substantive provisions relating to the shareholder approval
requirements of mergers, reorganizations or other business combinations.
View Tech Common Stock. The CGCL generally requires that the holders
of a majority of each class of shares outstanding of both the acquiring and
target corporations approve statutory mergers, reorganizations, certain sales
of assets and similar transactions. The CGCL contains an exception to its
voting requirements for reorganizations of corporations whose shareholders
immediately prior to the reorganization, or the corporation itself, or both,
will, immediately after the reorganization, own equity securities constituting
more than five-sixths of the voting power of the surviving or acquiring
corporation or its parent entity. However, such reorganizations require
approval by a majority of outstanding shares if, as a result of such
reorganization, shareholders will receive shares with different rights,
preferences or privileges than those shares surrendered. Shares of a foreign
(i.e., non-California) corporation are deemed to have such different rights,
preferences or privileges. The CGCL also requires that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the voting shares of the corporation transferring such assets.
The CGCL also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction.
This provision of the CGCL may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish.
View Tech Delaware Common Stock. Under the DGCL, the affirmative vote
of a majority of the shares of stock outstanding and entitled to vote is
necessary to approve most mergers or asset sales. However, under certain
circumstances, Delaware law does permit a corporation to merge without
stockholder approval with a subsidiary of which at least 90 percent of the
outstanding shares of each class of stock is owned by the parent.
Delaware law generally does not require separate class voting for such
transactions, except in certain situations involving an amendment to the
certificate of incorporation which adversely affects a specific class of
shares. In addition, Delaware law has no comparable provision to the
above-described provision requiring holders of nonredeemable common stock to
receive nonredeemable common stock in a merger of a corporation with the
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holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to such transaction.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
UST Common Stock. There is no specific statutory requirement under
Massachusetts law with regard to advance notice of director nominations or
shareholder proposals, and the UST Bylaws do not provide any such advance
notice requirements.
View Tech Common Stock. Under the View Tech Bylaws, and in conformity
with California law, shareholder approvals as to the following matters require
advance notice in a duly-delivered notice of meeting or mention in a written
waiver of notice: transactions between the corporation and any of its
directors, or entities in which any of its directors have material interests;
amendment of articles of incorporation; approval of the principal terms of a
corporate reorganization; election to voluntarily wind up and dissolve the
corporation; and approval of any plan of distribution of shares as part of the
winding up of the corporation. Federal securities laws generally provide that
shareholder proposals which the proponent wishes to include in View Tech's
proxy materials must be received not less than 120 days in advance of the date
of the proxy statement.
View Tech Delaware Common Stock. There is no specific statutory
requirement under Delaware law with regard to advance notice of director
nominations and stockholder proposals. Accordingly, View Tech Delaware shall
not require such advance notice in its charter documents. Absent a bylaw
restriction, director nominations and stockholder proposals may be made without
advance notice at an annual meeting. The Delaware Bylaws provide no such
restriction. However, federal securities laws generally provide that
stockholder proposals which the proponent wishes to include in View Tech
Delaware's proxy materials must be received not less than 120 days in advance
of the date of the proxy statement.
DISSENTERS' RIGHTS
UST Common Stock. Under Massachusetts law, a properly dissenting
shareholder is entitled to receive the appraised value of his or her shares in
lieu of the consideration he would otherwise have received in the transaction
when the corporation votes (i) to sell, lease or exchange all or substantially
all of its property and assets, (ii) to adopt an amendment to its articles of
organization which adversely affects the rights of the shareholder, or (iii) to
merge or consolidate with another corporation, and the transaction described
above becomes effective.
View Tech Common Stock. Pursuant to the CGCL, a shareholder of a
corporation participating in certain transactions may, under certain
circumstances, receive the fair value of his shares in cash, in lieu of the
consideration he would otherwise have received in the transaction. The CGCL
recognizes such dissenters' rights in connection with certain reorganizations,
including without limitation merger reorganizations, exchange reorganizations
(for the acquiring corporation), sale-of-assets reorganizations and share
exchange tender offers (for the acquiring corporation) for which those
shareholders of the corporation immediately prior to the reorganization
subsequently hold five-sixths or less of the voting power of the surviving or
acquiring corporation or parent party after the reorganization. Dissenters'
rights are only available when, among other conditions: (i) the shares of the
corporation are not either (A) listed on any national securities exchange or
(B) listed on the list of OTC margin stocks issued by the Board of Governors of
the Federal Reserve System, and proper notice is given to shareholders;
provided that this provision (i) does not apply to any shares with respect to
which there exists any restriction on transfer imposed by the corporation or by
any law or regulation; and provided further that this provision does not apply
to any class of shares described above in (A) or (B) if demands for payment are
filed with respect to 5% or more of the outstanding shares of that class; and
(ii) the shares were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (x) were not voted in
favor of the reorganization or, (y) if described in subpart (A) or (B) of
provision (i) above (without regard to the provisos therein), were voted
against the reorganization, or were held of record on the effective date of a
short form merger; provided, however, that subpart (A) rather than subpart (B)
of this subsection (ii) applies in any case in which approval was sought by
written consent rather than at a meeting.
View Tech Delaware Common Stock. Under Delaware law, a stockholder of
a corporation participating in certain mergers and reorganizations may be
entitled to receive cash in the amount of the "fair value" of his or her
shares, as determined by a court, in lieu of the consideration he would
otherwise receive in the transaction. Under Delaware law appraisal rights are
not available to stockholders with respect to a merger or consolidation by a
corporation, the shares of which are either listed on a national securities
exchange or designated as a national market system security or an interdealer
quotation system security by the National Association of Securities Dealers,
Inc., or are held of record by more than 2,000 holders if the stockholders
receive shares of the surviving corporation or shares of any other corporation
which are similarly listed or dispersed, and the stockholders do not receive
any other property in exchange for their shares except cash for fractional
shares. Appraisal rights are also
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unavailable under Delaware law to stockholders of a corporation surviving a
merger if no vote of those stockholders is required to approve the merger
because, among other things, the number of shares to be issued in the merger
does not exceed 20% of the shares of the surviving corporation outstanding
immediately before the merger and certain other conditions are met. Delaware
law does not provide stockholders with voting or appraisal rights when a
corporation acquires another business through the issuance of its stock,
whether in exchange for assets or stock or in a merger with a subsidiary.
ANTI-TAKEOVER MEASURES
UST Common Stock. Under the Massachusetts Business Combination
Statute, if a person acquires 5% or more of the stock of a Massachusetts
corporation without the approval of the board of directors of that corporation
(an "interested shareholder"), he may not engage in certain transactions with
the corporation for a period of three years. The Massachusetts statute
includes certain exceptions to this prohibition; for example, if the board of
directors approves the acquisition of stock or the transaction prior to the
time that the person became an interested shareholder, or if the interested
shareholder acquires at least 90% of the voting stock of the corporation
(excluding voting stock owned by directors who are also officers and certain
employee stock plans) in one transaction, or if the transaction is approved by
the board of directors and by the affirmative vote of two-thirds of the
outstanding voting stock which is not owned by the interested shareholder. The
Massachusetts Business Combination Statute applies generally to corporations
having at least 200 shareholders, and therefore, as of October 31, 1996, UST is
not subject to such statute.
Under the Massachusetts Control Share Acquisition Statute, a person
(hereinafter, the "acquirer") who makes a bona fide offer to acquire, or
acquires, shares of stock of a corporation that, when combined with shares
already owned, would increase the acquirer's ownership to at least 20%, 33 1/3%
or a majority of the voting stock of the corporation, must obtain the approval
of a majority of shares held by all shareholders except the acquirer and the
officers and inside directors of the corporation, in order to vote the shares
acquired. The statute does not require the acquirer to consummate the purchase
before the shareholder vote is taken. The Control Share Acquisition Statute is
applicable only to certain public corporations having at least 200
shareholders, and, therefore, as of October 31, 1996, UST is not subject to the
Massachusetts Control Share Acquisition Statute.
Massachusetts law permits the adoption of shareholder rights plans by
Massachusetts corporations and for such plans to include an adverse person
provision. Under an adverse person provision, a board of directors may trigger
a shareholder rights plan based on the "nature or identity of a shareholder" if
the directors determine that such action is reasonable and in the best
interests of the corporation.
Massachusetts law expressly provides that in determining what a
director reasonably believes to be in the best interests of the corporation, he
may consider the interests of the corporation's employees, suppliers, creditors
and customers; the economy of the state, region and nation; community and
societal considerations; and the long-term as well as short-term interests of
the corporation and its shareholders, including the possibility that these
interests may be best served by the continued independence of the corporation.
Thus, these interests could be considered even in connection with a decision to
sell a company. The UST Articles of Organization and UST Bylaws do not discuss
the consideration of societal factors.
View Tech Common Stock. California has not adopted statutes aimed
specifically at impeding corporate takeovers. The CGCL's requirement that
holders of nonredeemable common stock receive nonredeemable common stock in a
merger of the corporation with the holder of more than 50% but less than 90% of
such common stock or its affiliate, unless all of the holders of such common
stock consent to the transaction, has been seen as inhibiting takeovers. (see
"--Approval of Mergers, Reorganizations and Certain Business Combinations").
This provision of the CGCL may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish. The reservation in the
View Tech Articles of Incorporation to the board of directors of authority to
fix the voting rights of the View Tech Preferred Stock can also serve to impede
a hostile takeover.
View Tech Delaware Common Stock. The establishment by the Delaware
Certificate and the Delaware Bylaws of a classified board of directors, and the
Delaware Bylaws' provision that only the holders of a majority of shares of
outstanding capital stock may call special stockholders' meetings, may be
construed as anti-takeover measures. In addition, certain types of "poison
pill" defenses (such as shareholder rights plans) have been upheld by Delaware
courts, while California courts have yet to decide on the validity of such
defenses, thus rendering their effectiveness in California less certain.
The existence of a classified board of directors may deter so-called
"creeping acquisitions" in which a person or group seeks to acquire: (i) a
controlling position without paying a normal control premium to the selling
shareholders: (ii) a position sufficient to exert control over View Tech
through a proxy contest or otherwise; or (iii) a block of stock with a view
toward attempting to promote a sale or liquidation or a repurchase by View Tech
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of the block at a premium, or an exchange of the block for assets of View Tech.
Faced with a classified View Tech Board of Directors (See "-- Elections;
Classified Board of Directors"), such a person or group would have to assess
carefully its ability to control or influence View Tech. If free of the
necessity to act in response to an immediately threatened change in control,
the View Tech Board of Directors can act in a more careful and deliberative
manner to make and implement appropriate business judgments in response to a
creeping acquisition.
A Delaware statute regulates tender offers, which statute is intended
to limit coercive takeovers of companies incorporated in that state.
California has no comparable statute. The Delaware law provides that a
corporation may not engage in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless (i) prior to the date the
stockholder became an interested stockholder the board of directors approved
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, or (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock,
or (iii) the business combination is approved by the board of directors and
authorized by 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. Consequently, the Delaware law would not apply to the
former holders of UST Common Stock because the View Tech Board of Directors has
approved the Merger. An interested stockholder means any person who is the
owner of 15% or more of the outstanding voting stock, however, the statute
provides for certain exceptions to parties who otherwise would be designated
interested stockholders, including an exception for parties that held 15% or
more of the outstanding voting stock as of December 23, 1987. Any corporation
may decide to opt out of the statute in its original certificate of
incorporation or, at any time, by action of its stockholders. View Tech has no
present intention of opting out of the statute.
The voting rights to be accorded to any unissued series of View Tech
Delaware Preferred Stock remain to be fixed by the Delaware View Tech Board of
Directors. Accordingly, if the Delaware View Tech Board of Directors so
authorizes, the holders of View Tech Delaware Preferred Stock may be entitled
to vote separately as a class in connection with approval of certain
extraordinary corporate transactions in circumstances where Delaware law does
not ordinarily require such a class vote, or might be given a
disproportionately large number of votes. Such View Tech Delaware Preferred
Stock could also be convertible into a large number of shares of Common Stock
of View Tech Delaware under certain circumstances or have other terms which
might make acquisition of a controlling interest in View Tech Delaware more
difficult or more costly, including the right to elect additional directors to
the Delaware View Tech Board of Directors. Potentially, the View Tech Delaware
Preferred Stock could be used to create voting impediments or to frustrate
persons seeking to effect a merger or otherwise to gain control of View Tech
Delaware. Also, the View Tech Delaware Preferred Stock could be privately
placed with purchasers who might side with the management of View Tech Delaware
in opposing a hostile tender offer or other attempt to obtain control.
The View Tech Board of Directors may also authorize the issuance of
View Tech Delaware Preferred Stock in connection with various corporate
transactions, including corporate partnering arrangements. The View Tech
Delaware Board of Directors may also authorize the issuance of View Tech
Delaware Preferred Stock for the purpose of adopting a shareholder rights plan.
However, future issuances of View Tech Delaware Preferred Stock as an
anti-takeover device might preclude shareholders from taking advantage of a
situation which might otherwise be favorable to their interests.
CAPITALIZATION; BLANK CHECK PREFERRED STOCK
UST Common Stock. The entire authorized capital stock of UST consists
of 11,000,000 shares of UST Common Stock, $0.01 par value per share of which
9,059,157 shares of UST Common Stock were issued and outstanding as of October
31, 1996, with no shares held in treasury. All of the issued and outstanding
shares of UST Common Stock have been duly authorized and are validly issued,
fully paid and nonassessable. There are also outstanding options for the
purchase of 825,000 shares of UST Common Stock, excluding 15,000 options
cancelled as of September 19, 1996. Except for these options, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require UST to issue, sell, or otherwise cause to become outstanding
any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with
respect to UST.
View Tech Common Stock. View Tech's capital stock consists of
10,000,000 authorized shares of View Tech Common Stock, $0.01 par value per
share, of which 3,393,438 shares issued and outstanding as of October 31, 1996,
and (b) 5,000,000 authorized shares of View Tech Preferred Stock, $0.01 par
value per share, of which none are issued and outstanding as of October 31,
1996.
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View Tech Delaware Common Stock. Upon the effectiveness of the
reincorporation, View Tech Delaware will have the same number of outstanding
shares of Common Stock that View Tech had outstanding immediately prior to the
reincorporation.
The capitalization of View Tech Delaware will be 20,000,000 shares of
View Tech Delaware Common Stock, $0.0001 par value per share, and 5,000,000
shares of View Tech Delaware Preferred Stock, $0.0001 par value per share.
View Tech Delaware's authorized but unissued shares of View Tech Delaware
Preferred Stock will be available for future issuance.
Under the Delaware Certificate, as under the View Tech Articles of
Incorporation, the View Tech Board of Directors has the authority to determine
or alter the rights, preferences, privileges and restrictions to be granted to
or imposed upon any wholly unissued series of View Tech Delaware Preferred
Stock and to fix the number of shares constituting any such series and to
determine the designation thereof. See "-- Anti-Takeover Measures."
The View Tech Board of Directors may authorize the issuance of View
Tech Delaware Preferred Stock in connection with various corporate
transactions, including corporate partnering arrangements. The View Tech Board
of Directors may also authorize the issuance of View Tech Delaware Preferred
Stock for the purpose of adopting a shareholder rights plan. If the
reincorporation is approved, it is not the present intention of the View Tech
Board of Directors to seek shareholder approval prior to any issuance of View
Tech Delaware Preferred Stock, except as required by law or regulation.
LIQUIDITY AND MARKETABILITY
UST Common Stock. UST is a privately-held company. No established
market exists for trading of the UST Common Stock. In addition, shares of UST
Common Stock are subject to certain restrictions on transfer contained in the
UST Bylaws. These restrictions prohibit transfers which might jeopardize the
subchapter S qualification of UST, and grant UST a right of first refusal in
connection with certain proposed transfers of shares.
View Tech Common Stock. As of October 31, 1996, all of the 3,393,438
shares of View Tech Common Stock issued and outstanding are freely tradeable
except for 1,906,638 shares which may only be sold pursuant to an effective
registration statement under the Securities Act or in compliance with Rule 144
or another applicable exemption from the registration requirements of the
Securities Act. Of such 1,906,638 restricted shares, 1,162,500 shares are
beneficially owned by "affiliates" of View Tech as such term is defined in Rule
144 promulgated under the Securities Act.
View Tech Delaware Common Stock. Upon reincorporation in Delaware,
each share of View Tech Common Stock shall be exchanged for one share of View
Tech Delaware Common Stock.
DIVIDENDS OR OTHER DISTRIBUTIONS
UST Common Stock. Under Massachusetts law, the payment of dividends
and the repurchase of a corporation's stock are generally permissible if such
actions are not taken when the corporation is insolvent, do not render the
corporation insolvent, and do not violate the corporation's articles of
organization. UST, generally, pays dividends to its shareholders in connection
with taxes payable by such shareholders resulting from UST's S Corporation
election.
View Tech Common Stock. Under California law, any dividends or other
distributions to shareholders, such as redemptions, are limited to the greater
of (i) retained earnings or (ii) an amount which would leave the corporation
with assets (excluding certain intangible assets) equal to at least 125% of its
liabilities (excluding certain deferred items) and current assets equal to at
least 100% (or, in certain circumstances, 125%) of its current liabilities.
View Tech Delaware Common Stock. Delaware law allows the payment of
dividends and redemption of stock out of surplus (including paid- in and earned
surplus) or out of net profits for the current and immediately preceding fiscal
years. Whether dividends are paid in the future will depend upon View Tech's
earnings, financial position, restrictions in connection with other classes or
series of capital stock of View Tech, restrictive covenants that may be imposed
under any loan agreement and any other relevant factors. View Tech has never
paid cash dividends on the View Tech Common Stock and has no present plans to
do so.
ASSESSMENTS
UST Common Stock. All outstanding shares of UST Common Stock are
fully paid and nonassessable.
View Tech Common Stock. All outstanding shares of View Tech Common
Stock are fully paid and nonassessable.
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View Tech Delaware Common Stock. Upon reincorporation in Delaware,
all outstanding shares of View Tech Delaware Common Stock will be fully paid
and nonassessable.
RIGHT TO LIST OF HOLDERS AND INSPECTION OF BOOKS AND RECORDS
UST Common Stock. Under Massachusetts law, a corporation's
shareholders have the right for a proper purpose to inspect the corporation's
articles of organization, bylaws, records of all meetings of incorporators and
shareholders and stock and transfer records, including the shareholder list.
The UST Bylaws parallel the statutory requirements but also provide that access
to corporate records will not be granted for the purpose of receiving a list of
shareholders in order to sell such list or for using such list for a purpose
other than in the interest of the shareholder relative to the affairs of the
corporation. In addition, shareholders of a Massachusetts business corporation
have a qualified common law right under certain circumstances to inspect other
books and records of the corporation.
View Tech Common Stock. Pursuant to the View Tech Bylaws and the
CGCL, the record of shareholders, the accounting books and records, and minutes
of proceedings of the shareholders and the View Tech Board of Directors and
committees of the View Tech Board of Directors, are open to inspection upon
written demand to View Tech by a shareholder of View Tech at any reasonable
time during usual business hours, for a purpose reasonably related to such
holder's interest as a shareholder. In addition, a shareholder or shareholders
holding at least five percent in the aggregate of the outstanding voting shares
of View Tech, or who hold at least one percent of such voting shares and have
filed a Schedule 14B with the Commission relating to the election of directors
of View Tech have an absolute right to (1) inspect and copy the record of
shareholders during usual business hours upon five business days prior written
demand to View Tech, and/or (2) receive from View Tech's transfer agent (at
normal costs) the record of shareholders on or before five business days after
written demand for such is received by such agent.
View Tech Delaware Common Stock. Delaware law does not provide an
absolute right of stockholder inspection. However, Delaware law does permit
any stockholder of record to inspect the stockholder list for any purpose
reasonably related to that person's interest as a stockholder. If the
corporation, or an officer or agent thereof, refuses to permit an inspection or
does not respond within five business days to a request for an inspection, the
stockholder may apply to the Court of Chancery for an order to compel such
inspection. The Court of Chancery is vested with exclusive jurisdiction to
determine whether such inspection is warranted.
SHAREHOLDER LIABILITY
UST Common Stock. UST shareholders are not personally liable for the
obligations of UST.
View Tech Common Stock. View Tech shareholders are not personally
liable for the obligations of View Tech.
View Tech Delaware Common Stock. View Tech Delaware stockholders
would not be personally liable for the obligations of View Tech Delaware.
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
UST Common Stock. Massachusetts law provides that with respect to
loans made by a corporation to its directors or officers, directors who vote
for such a loan and officers who knowingly participate in such a loan are
jointly and severally liable to the corporation to the extent any portion of
the loan is unpaid, unless a majority of the disinterested directors or the
holders of a disinterested majority of the stock of the corporation approve or
ratify the loan. In either case the loan must be reasonably expected to
benefit the corporation.
View Tech Common Stock. California law provides that any loan or
guaranty (other than loans to permit the purchase of shares under certain stock
purchase plans) for the benefit of any officer or director, or any employee
benefit plan authorizing such loan or guaranty (except certain employee stock
purchase plans), must be approved by the shareholders of a California
corporation. In addition, under the CGCL, shareholders of any corporation with
100 or more shareholders of record may approve a bylaw authorizing the board of
directors alone to approve a loan or a guaranty to or on behalf of an officer
(whether or not a director) if the board determines that such a loan or a
guaranty may reasonably be expected to benefit the corporation. View Tech's
shareholders have not adopted such a bylaw provision.
View Tech Delaware Common Stock. Under Delaware law, a corporation
may make loans to, or guarantee the obligations of, officers or other employees
when, in the judgment of the board of directors, the loan or guaranty may
reasonably be expected to benefit the corporation. Both California law and
Delaware law permit such loans or guarantees to be unsecured and without
interest.
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REPORTING REQUIREMENTS
UST Common Stock. UST is not subject to the reporting requirements of
the Exchange Act, and does not file annual or quarterly financial reports with
the Commission or any other securities agency.
View Tech Common Stock. View Tech is a reporting company under the
Exchange Act and files annual and quarterly financial reports with the
Commission and The NASDAQ National Market.
View Tech Delaware Common Stock. Upon reincorporation in Delaware,
View Tech will continue to be a reporting company under the Exchange Act and
file annual and quarterly financial reports with the Commission and the
National Association of Securities Dealers.
CERTAIN LEGAL RIGHTS
UST Common Stock. In accordance with Massachusetts law, no
shareholder derivative action may be instituted or maintained in the right of
UST by any holder of UST shares unless the plaintiff alleges in the pleading
(1) that the plaintiff is a shareholder and was a shareholder at the time of
the conduct complained of and (2) that demand has been made on the directors
and shareholders of the corporation, or allege particularized facts showing
why, in each case, the demand is excused. Further, the shareholder derivative
suit, although instituted on behalf of the corporation, must name the
corporation as a nominal defendant and the derivative pleading must be
verified. Massachusetts law also requires that the derivative plaintiff fairly
and adequately represent the interests of the shareholders similarly situated
in enforcing the right of the corporation.
View Tech Common Stock. In accordance with CGCL, no action may be
instituted or maintained in right of View Tech (a shareholder derivative
action) by any holder of View Tech shares unless the plaintiff alleges in the
complaint (1) that the plaintiff was (a) a View Tech shareholder, of record or
beneficially, at the time of the transaction or any part thereof of which the
plaintiff complains, or that the plaintiff's shares thereafter devolved upon
plaintiff by operation of law from a holder who was a holder at the time of the
transaction or any part thereof complained of, or (b) a shareholder who does
not meet the aforementioned requirements, upon a determination by a court
pursuant to the CGCL, and (2) plaintiff's efforts, with particularity, to
secure from the View Tech Board of Directors such action as plaintiff desires,
or the reasons for not making such effort, and alleges further that plaintiff
has either informed View Tech or the View Tech Board of Directors in writing of
the ultimate facts of each cause of action against each defendant or delivered
to View Tech or the View Tech Board of Directors a true copy of the complaint
which plaintiff proposes to file. In connection with the foregoing, a
plaintiff may be required to post a bond, in the determination of the court, in
an aggregate amount not to exceed $50,000.
View Tech Delaware Common Stock. In accordance with Delaware law, a
derivative suit may only be instituted by a plaintiff who was a stockholder of
the corporation at the time of the transaction complained of or that the stock
thereafter devolved upon the plaintiff by operation of law. A plaintiff may
show that demand upon the corporation would be futile by raising a reasonable
doubt as to either director dishonesty or independence or whether the directors
exercised proper business judgment in approving the challenged transaction.
TAXATION
UST Common Stock. UST is a subchapter S corporation for federal and
Massachusetts tax purposes and is not generally taxed on its income or entitled
to the deductions allowed under the Code. A sale of shares of UST Common Stock
will normally result in a capital gain or loss for federal income tax purposes.
Shareholders of UST who receive dividends are expected to receive a copy of
Form 1120S and Schedule K-1 filed with the IRS.
View Tech Common Stock. View Tech is a taxable entity under the Code
and is taxed on its income and entitled to the deductions allowed under the
Code. A sale of shares of View Tech Common Stock will normally result in a
capital gain or loss for federal income tax purposes. Shareholders of View
Tech who receive dividends are expected to receive a copy of Form 1099 filed
with the IRS prior to January 31 of the following year.
View Tech Delaware Common Stock. View Tech Delaware will be a taxable
entity under the Code and is taxed on its income and entitled to the deductions
allowed under the Code. A sale of shares of View Tech Delaware Common Stock
will normally result in a capital gain or loss for federal income tax purposes.
Stockholders of View Tech Delaware who receive dividends are expected to
receive a copy of Form 1099 filed with the IRS prior to January 31 of the
following year.
The reincorporation provided for in the Merger Agreement is intended
to be a tax-free reorganization under the Code. Assuming the reincorporation
qualifies as a reorganization, no gain or loss will be recognized to the
holders of capital stock of View Tech as a result of consummation of the
reincorporation, and no gain or loss will be recognized by View Tech or View
Tech Delaware. Each former holder of capital stock of View Tech will have
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the same basis in the capital stock of View Tech Delaware received by such
holder pursuant to the reincorporation as such holder has in the capital stock
of View Tech held by such holder at the time of consummation of the
reincorporation. Each stockholder's holding period with respect to View Tech
Delaware's capital stock will include the period during which such holder held
the corresponding company capital stock, provided the latter was held by such
holder as a capital asset at the time of consummation of the reincorporation.
View Tech has not obtained a ruling from the IRS or an opinion of legal or tax
counsel with respect to the consequences of the reincorporation.
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the provisions of the registrant's Articles of
Incorporation, Bylaws, or other documents, the registrant has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
LEGAL MATTERS
The Merger Agreement provides, as a condition to UST's obligation to
consummate the Merger, that UST receive the opinion of Burns & Levinson LLP,
Boston, Massachusetts, counsel to UST, substantially to the effect that the
Merger will constitute a tax-free "reorganization" under Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code.
Certain legal matters with respect to the legality of the issuance of
the shares of View Tech Common Stock offered hereby will be passed upon for
View Tech by Brobeck, Phleger & Harrison LLP, Los Angeles, California.
EXPERTS
The financial statements of View Tech, as of June 30, 1996 and 1995,
have been included herein in reliance upon the report of Carpenter Kuhen &
Sprayberry, independent accountants, dated September 24, 1996, appearing
elsewhere herein, and upon the authority of said firm as experts in auditing
and accounting. The financial statements of UST included in this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus and Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their report with respect thereto and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
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VIEW TECH PROXY PROPOSAL 1
REINCORPORATION OF VIEW TECH IN DELAWARE
AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS
GENERAL
The View Tech Board of Directors has unanimously approved a proposal
to change View Tech's state of incorporation from California to Delaware. This
proposal is being submitted to the View Tech shareholders because, among other
things, it is a condition to closing the Merger that View Tech have a
classified board of directors consisting of three classes, each containing two
directors, after the Merger. California law, however, prohibits, among other
things, classification of a company's board of directors into three classes
unless there are a minimum of nine directors (i.e., three directors per class).
In addition, the View Tech Board of Directors believes the change in domicile
to be in the best interests of View Tech and its shareholders for several
reasons. Principally, the View Tech Board of Directors believes that
reincorporation will enhance View Tech's ability to attract and retain
qualified members of View Tech's Board of Directors as well as encourage
directors to continue to make independent decisions in good faith on behalf of
View Tech. View Tech believes that the more favorable corporate environment
afforded by Delaware will enable it to compete more effectively with other
public companies, most of which are incorporated in Delaware, to attract new
directors and to retain its current directors. Reincorporation in Delaware
will allow View Tech the increased flexibility and predictability afforded by
Delaware law.
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. For the reasons
explained below, View Tech believes it is beneficial and important that View
Tech likewise avail itself of Delaware law.
For many years Delaware has followed a policy of encouraging
incorporation in that state. In furtherance of that policy, Delaware has
adopted comprehensive corporate laws which are revised regularly to meet
changing business circumstances. The Delaware Legislature is particularly
sensitive to issues regarding corporate law and is especially responsive to
developments in modern corporate law. The Delaware courts have developed
considerable expertise in dealing with corporate issues as well as a
substantial body of case law construing Delaware's corporate law. As a result
of these factors, it is anticipated that Delaware law will provide greater
predictability in View Tech's legal affairs than is available under California
law as of October 31, 1996.
In 1986, Delaware amended its corporate law to allow corporations to
limit the personal monetary liability of its directors for their conduct as
directors under certain circumstances. The directors have elected to adopt
such a provision in the Delaware Certificate and in the Delaware Bylaws. It
should be noted that Delaware law does not permit a Delaware corporation to
limit or eliminate the liability of its directors for intentional misconduct,
bad faith conduct or any transaction from which the director derives an
improper personal benefit or for violations of federal laws such as the federal
securities laws. The View Tech Board of Directors believes that Delaware
reincorporation will enhance View Tech's ability to recruit and retain
directors in the future. However, the shareholders should be aware that such a
provision inures to the benefit of the directors, and the interest of the View
Tech Board of Directors in recommending the reincorporation may therefore be in
conflict with the interests of the shareholders.
In 1987, California amended its corporate law in a manner similar to
Delaware to permit a California corporation to limit the personal monetary
liability of its directors for their conduct as directors under certain
circumstances. The View Tech Articles of Incorporation and the View Tech
Bylaws take advantage of these changes in California law. Nonetheless, the
View Tech Board of Directors believes that the protection from liability for
directors is somewhat greater under the Delaware law than under the California
law and therefore that View Tech's objectives in adopting this type of
provision can be better achieved by reincorporation in Delaware. The View Tech
Board of Directors has included such a provision in the Delaware charter and
bylaws. Shareholders should be aware that, because such provision inures to
the benefit of the directors, there is a potential conflict in the View Tech
Board of Director's support of such a provision. See "--Fiduciary Duties;
Indemnification and Limitation of Liability" for a more complete discussion of
these issues.
The interests of the View Tech Board of Directors, management and
affiliated shareholders in voting on the reincorporation proposal may not be
the same as those of unaffiliated shareholders. Delaware law does not afford
minority stockholders some of the rights and protections available under
California law. Reincorporation of View Tech in Delaware may make it more
difficult for minority stockholders to elect directors and influence company
policies. A discussion of the principal differences between California and
Delaware law as they affect shareholders is included in this section of this
Joint Proxy Statement/View Tech Proxy Statement/Prospectus.
In addition, portions of View Tech Proxy Proposal 1 may have the
effect of deterring hostile takeover attempts. A hostile takeover attempt may
have a positive or a negative effect on View Tech and its shareholders,
depending on the circumstances surrounding a particular takeover attempt.
Takeover attempts that have not been
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negotiated or approved by the board of directors of a corporation can seriously
disrupt the business and management of a corporation and generally present to
the shareholders the risk of terms which may be less than favorable to all of
the shareholders than would be available in a board-approved transaction.
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
The View Tech Board of Directors recognizes that hostile takeover
attempts do not always have the unfavorable consequences or effects described
above and may frequently be beneficial to the shareholders, providing all of
the shareholders with considerable value for their shares. However, the View
Tech Board of Directors believes that the potential disadvantages of unapproved
takeover attempts are sufficiently great such that prudent steps to reduce the
likelihood of such takeover attempts are in the best interests of View Tech and
its shareholders.
Notwithstanding the belief of the View Tech Board of Directors as to
the benefits to shareholders of the changes, shareholders should recognize that
one of the effects of such changes may be to discourage a future attempt to
acquire control of View Tech which is not presented to and approved by the View
Tech Board of Directors, but which a substantial number and perhaps even a
majority of View Tech's shareholders might believe to be in their best
interests or in which shareholders might receive a substantial premium for
their shares over the current market prices. As a result, shareholders who
might desire to participate in such a transaction may not have an opportunity
to do so.
In considering the proposals, shareholders should be aware that the
overall effect of certain of the proposed changes is to make it more difficult
for holders of a majority of the outstanding shares of common stock to change
the composition of the View Tech Board of Directors and to remove existing
management in circumstances where a majority of the shareholders may be
dissatisfied with the performance of the incumbent directors or otherwise
desire to make changes.
The new provisions in View Tech Delaware's charter documents could
make a proxy contest a less effective means of removing or replacing existing
directors or could make it more difficult to make a change in control of View
Tech which is opposed by the View Tech Board of Directors. This strengthened
tenure and authority of the View Tech Board of Directors could enable the View
Tech Delaware Board of Directors to resist change and otherwise thwart the
desires of a majority of the shareholders. Because this provision may have the
effect of continuing the tenure of the current View Tech Board of Directors,
the View Tech Board of Directors has recognized that the individual directors
have a personal interest in this provision that may differ from those of the
shareholders. However, the View Tech Board of Directors believes that these
provisions' primary purpose is to ensure that the View Tech Delaware Board of
Directors will have sufficient time to consider fully any proposed takeover
attempt in light of the short and long-term benefits and other opportunities
available to View Tech and to the extent the View Tech Board of Directors
determines to proceed with the takeover, to effectively negotiate terms that
would maximize the benefits to View Tech and its shareholders.
The View Tech Board of Directors has considered the potential
disadvantages and believes that the potential benefits of the provisions
included in the proposed charter documents outweigh the possible disadvantages.
In particular, the View Tech Board of Directors believes that the benefits
associated with attracting and retaining skilled and experienced outside
directors and with enabling the View Tech Board of Directors to fully consider
and negotiate proposed takeover attempts, as well as the greater
sophistication, breadth and certainty of Delaware law, make the proposed
reincorporation beneficial to View Tech, its management and its shareholders.
The proposal to include these anti-takeover provisions in the proposed
reincorporation does not reflect knowledge on the part of the View Tech Board
of Directors or management of any proposed takeover or other attempt to acquire
control of View Tech. Management may in the future propose other measures
designed to discourage takeovers apart from those proposed in this Joint Proxy
Statement/View Tech Proxy Statement/Prospectus, if warranted from time to time
in the judgment of the View Tech Board of Directors.
If approved, the proposed reincorporation would be accomplished by
merging View Tech into a newly formed Delaware corporation, View Tech Delaware,
which, just before the merger, will be a wholly owned subsidiary of View Tech
pursuant to an Agreement and Plan of Merger (the "Reincorporation Merger
Agreement"). See ANNEX E. Upon the effective date of the merger, View Tech
Delaware's name will remain View Tech, Inc. The reincorporation will not
result in any change in View Tech's business, assets or liabilities, will not
cause its corporate headquarters to be moved and will not result in any
relocation of management or other employees.
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Following the effectiveness of the proposed reincorporation, each
outstanding share of View Tech Common Stock, including the Merger Shares, will
automatically convert into one share of View Tech Delaware Common Stock and
shareholders of View Tech will automatically become stockholders of View Tech
Delaware. On the effective date of the reincorporation, the number of
outstanding shares of View Tech Delaware Common Stock will be equal to the
number of shares of View Tech Common Stock outstanding immediately prior to the
effective date of the reincorporation. In addition, each outstanding View Tech
Option or right to acquire shares of View Tech Common Stock, including the
Conversion Options, will be converted into an option or right to acquire an
equal number of shares of View Tech Delaware Common Stock, under the same terms
and conditions as the original options or rights. All of View Tech's employee
benefit plans, including the View Tech Stock Option Plan, will be continued by
View Tech Delaware following the reincorporation. Shareholders should
recognize that approval of the proposed reincorporation will constitute
approval of the adoption and assumption of those plans by View Tech Delaware.
No action need be taken by shareholders to exchange their stock
certificates now; this will be accomplished at the time of the next transfer by
the shareholder. Certificates for shares in View Tech will automatically
represent an equal number of shares in View Tech Delaware upon completion of
the merger.
Under the View Tech Articles of Incorporation and the View Tech
Bylaws, the affirmative vote of at least a majority of the outstanding shares
of View Tech Common Stock is required for approval of the reincorporation. If
approved by the View Tech shareholders, it is anticipated that the
reincorporation would be completed as soon thereafter as practicable following
the Merger such that all outstanding shares of View Tech Common Stock,including
the Merger Shares, will be converted into shares of View Tech Delaware Common
Stock. The reincorporation may be abandoned or the Reincorporation Merger
Agreement may be amended (with certain exceptions), either before or after
shareholder approval has been obtained, if in the opinion of the View Tech
Board of Directors, circumstances arise that make such action advisable.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, View Tech's corporate affairs are governed at present by
the corporate law of California, View Tech's state of incorporation, and by the
View Tech Articles of Incorporation and the View Tech Bylaws, which have been
adopted pursuant to California law. The View Tech Articles of Incorporation
and View Tech Bylaws are available for inspection during business hours at the
principal executive offices of View Tech. In addition, copies may be obtained
by writing to View Tech at View Tech, Inc., 950 Flynn Road, Camarillo,
California, 93012, Attention: Corporate Secretary.
If the reincorporation proposal is adopted, View Tech will merge into,
and its business will be continued by, View Tech Delaware. Following the
merger, issues of corporate governance and control would be controlled by
Delaware, rather than California law (see "-- Application of California Law
After Reincorporation"). The View Tech Articles of Incorporation and View Tech
Bylaws will, in effect, be replaced by the Delaware Certificate and the
Delaware Bylaws. See ANNEX C and ANNEX D. Accordingly, the differences among
these documents and between Delaware and California law are relevant to your
decision whether to approve the reincorporation proposal.
FIDUCIARY DUTIES; INDEMNIFICATION AND LIMITATION OF LIABILITY
California and Delaware have similar laws respecting indemnification
by a corporation of its officers, directors, employees and other agents. The
laws of both states also permit corporations to adopt a provision in their
articles of incorporation eliminating the liability of a director to the
corporation or its shareholders for monetary damage for breach of the
director's fiduciary duty of care. There are nonetheless certain differences
between the laws of the two states respecting indemnification and limitation of
liability.
The View Tech Articles of Incorporation eliminate the liability of
directors to the corporation to the fullest extent permissible under California
law. California law does not permit the elimination of monetary liability
where such liability is based on: (a) intentional misconduct or knowing and
culpable violation of law; (b) acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders, or that
involve the absence of good faith on the part of the director; (c) receipt of
an improper personal benefit; (d) acts or omissions that show reckless
disregard for the director's duty to the corporation or its shareholders, where
the director in the ordinary course of performing a director's duties should be
aware of a risk of serious injury to the corporation or its shareholders; (e)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders; (f) interested transactions between the corporation and a
director in which a director has a material financial interest; and (g)
liability for improper distributions, loans or guarantees.
The Delaware Certificate also eliminates the liability of directors to
the fullest extent permissible under
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Delaware law, as such law exists currently or as it may be amended in the
future. Under Delaware law, such provision may not eliminate or limit director
monetary liability for (a) breaches of the director's duty of loyalty to the
corporation or its stockholders; (b) acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law; (c) the payment
of unlawful dividends or unlawful stock repurchases or redemptions; or (d)
transactions in which the director received an improper personal benefit. Such
limitation of liability provision also may not limit directors' liability for
violation of, or otherwise relieve View Tech Delaware or its directors from the
necessity of complying with, federal or state securities laws or affect the
availability of non-monetary remedies such as injunctive relief or rescission.
California law permits indemnification of expenses incurred in
derivative or third-party actions, except that with respect to derivative
actions (a) no indemnification may be made without court approval when a person
is adjudged liable to the corporation in the performance of that person's duty
to the corporation and its shareholders, unless a court determines such person
is entitled to indemnity for expenses, and then such indemnification may be
made only to the extent that such court shall determine and (b) no
indemnification may be made under California law, without court approval in
respect of amounts paid or expenses incurred in settling or otherwise disposing
of a threatened or pending action or amounts incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
Delaware allows indemnification of such expenses without court approval.
Indemnification is permitted by both California and Delaware law
providing the requisite standard of conduct is met, as determined by a majority
vote of a disinterested quorum of the directors, independent legal counsel (if
a quorum of independent directors is not obtainable), a majority vote of a
quorum of the stockholders (excluding shares owned by the indemnified party) or
the court handling the action.
Delaware law generally permits indemnification of expenses incurred in
the defense or settlement of a derivative or third-party action, provided there
is a determination by a disinterested quorum of the directors, by independent
legal counsel or by a majority vote of a quorum of the stockholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in or (in contrast to California law) not opposed to the best
interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of
his or her duty to the corporation. Delaware law permits indemnification of
expenses when the individual being indemnified has successfully defended the
action on the merits or otherwise.
California corporations may include in their articles of incorporation
a provision which permits the corporation to expand the scope of
indemnification through agreements, bylaws or other corporate action beyond
that specifically authorized by statute. The View Tech Articles of
Incorporation include such a provision.
A provision of Delaware law states that the indemnification provided
by statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
The indemnification and limitation of liability provisions of
California law, and not Delaware law, will apply to actions of the directors
and officers of View Tech made prior to the proposed reincorporation.
Nevertheless, the View Tech Board of Directors has recognized in considering
this reincorporation proposal that the individual directors have a personal
interest in obtaining the application of Delaware law to such indemnity and
limitation of liability issues affecting them and View Tech in the event they
arise from a potential future case, and that the application of Delaware law,
to the extent that any director or officer is actually indemnified in
circumstances where indemnification would not be available under California
law, would result in expense to View Tech which View Tech would not incur if
View Tech were not reincorporated. The View Tech Board of Directors believes,
however, that the overall effect of reincorporation is to provide a corporate
legal environment that enhances View Tech's ability to attract and retain high
quality outside directors and thus benefits the interests of View Tech and its
shareholders.
MANAGEMENT; NUMBER OF DIRECTORS
The business and affairs of View Tech are managed by or under the
direction of View Tech's Board of Directors. California law allows the number
of persons constituting the board of directors of a corporation to be fixed by
the bylaws or the articles of incorporation, or permits the bylaws to provide
that the number of directors may vary within a specified range, the exact
number to be determined by the corporation's board of directors. California
law further provides that, in the case of a variable board, the maximum number
of directors may not exceed two times the minimum number minus one. The View
Tech Bylaws provide for a board of directors comprised of seven members, unless
there are fewer than three shareholders in which case the number of directors
shall equal the number of shareholders. California law also requires that any
change in a fixed number of directors and any change in the range of a variable
board of directors specified in the articles and bylaws must be approved
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by a majority in interest of the outstanding shares entitled to vote (or such
greater proportion of the outstanding shares as may be required by the articles
of incorporation). The View Tech Bylaws require the vote of a majority in
interest of the outstanding shares to change the range of the variable View
Tech Board of Directors, provided, however, that an amendment reducing the
number of directors to less than five cannot be adopted if the holders of more
than 16 2/3 percent of shares entitled to vote against the amendment or do not
consent to it.
The business and affairs of View Tech Delaware shall be managed by or
under the direction of the board of directors. Delaware law permits a board of
directors to change the authorized number of directors by amendment to the
bylaws unless the number of directors is fixed in the certificate of
incorporation or the manner of fixing the number of directors is set forth in
the certificate of incorporation, in which case the number of directors may be
changed only by amendment of the certificate of incorporation or consistent
with the manner specified in the certificate of incorporation, as the case may
be. The Delaware Certificate provides that the exact number of directors shall
be fixed from time to time exclusively by the View Tech Board of Directors by
resolution.
ELECTIONS; CLASSIFIED BOARD OF DIRECTORS
California law generally requires that directors be elected annually
by the shareholders, by written consent or vote at a meeting, but does permit a
"classified" board of directors if (i) a corporation is listed on a national
stock exchange or (ii) the corporation's shares are traded on The NASDAQ
National Market and are held, beneficially or of record, by at least 800
shareholders. As of the 1995 View Tech Annual Meeting, shares of the View Tech
Common Stock were beneficially held by more than 800 equity security holders.
California law also allows the election of one or more directors by the holders
of a particular class or series of shares. The View Tech Articles of
Incorporation currently do not provide for a classified board of directors, nor
will such provision be made until reincorporation in Delaware is effected.
Delaware law requires that an annual meeting of the stockholders be
held for the election of directors. Delaware law permits, but does not
require, the adoption of a classified board of directors with staggered terms.
A maximum of three classes of directors is permitted by Delaware law, with
members of one class to be elected each year for a maximum term of three years.
The Delaware Certificate and the Delaware Bylaws do provide for such a
classified board of directors with three classes of directors serving in
staggered terms.
By approving View Tech Proxy Proposal 1, shareholders will be
approving the election of the same directors as would be elected to the View
Tech Board of Directors in the event View Tech Proxy Proposal 2 is approved by
the shareholders.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting permits the holder shares of stock entitled to vote
in the election of directors to cast that number of votes which equal the
number of directors to be elected multiplied by the number of shares held. The
holder may allocate all votes represented by his shares to a single candidate
or may allocate those votes among as many candidates as he chooses. Thus, a
shareholder with a significant minority percentage of the outstanding shares
may be able to elect one or more directors if voting is cumulative.
California law permits a company with equity securities listed on a
national exchange, or on The NASDAQ National Market if the corporation has at
least 800 holders, beneficially or of record, of equity securities, to
eliminate cumulative voting. As of the 1995 View Tech Annual Meeting, shares
of the View Tech Common Stock were beneficially held by more than 800 equity
security holders. Accordingly, the View Tech Articles of Incorporation
eliminated cumulative voting when View Tech's shares were listed on a national
stock exchange or traded on The NASDAQ National Market and were held by at
least 800 equity security holders.
Cumulative voting is not available under Delaware law unless so
provided in the corporation's certificate of incorporation. The Delaware
Certificate does not provide for cumulative voting.
REMOVAL OF DIRECTORS
Sections 303 and 304 of the CGCL provide that (i) directors may be
removed by the remainder of the board, without cause, upon approval by the
holders of a majority of the outstanding shares of common stock entitled to
vote (subject to certain limitations which prevent any such removal where the
removal is opposed by a number of votes sufficient to elect a director, if the
corporation's board were elected by a cumulative vote) and (ii) directors may
be removed for fraudulent or dishonest acts or gross abuses of authority or
discretion following a suit brought by shareholders holding at least 10% of the
outstanding shares of any class of capital stock. In addition, Section 302 of
the CGCL permits a corporation's board to remove directors declared of unsound
mind by a court or convicted of a felony. The View Tech Bylaws are governed by
these provisions of CGCL.
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The DGCL and the Delaware Bylaws provide that View Tech Delaware's
directors may be removed with or without cause by the affirmative vote of the
holders of a majority of the combined voting power of the then outstanding
shares of capital stock of the View Tech Delaware entitled to vote generally in
the election of directors. However, unless the Delaware Certificate otherwise
provides, when View Tech Delaware's Board of Directors is classified (see
"--Elections; Classified Board of Directors"), stockholders may only effect
such removal for cause. The Delaware Certificate does not alter this statutory
provision. The term "cause" with respect to the removal of directors is not
defined in the Delaware General Corporation Law and its meaning has not been
precisely delineated by the Delaware courts.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Vacancies in the View Tech Board of Directors may be filled at a
meeting by a majority of the remaining directors, though less than a quorum, by
the unanimous written consent of the directors then in office or by a sole
remaining director, or if such vacancy is not filled by the directors, by a
vote of or written consent by a majority of shares entitled to vote for the
election of directors, except that a vacancy created by the removal of a
director by the vote or written consent of the holders of a majority of the
outstanding shares entitled to vote or by court order may be filled only by (i)
the vote of a majority of the shares entitled to vote represented at a duly
noticed meeting at which a quorum is present, or (ii) the unanimous written
consent of holders of the outstanding shares entitled to vote. Each director
so elected shall hold office until the next annual meeting of the shareholders
and until a successor has been elected and qualified.
Under Delaware law and the Delaware Bylaws, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filed by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced. If
there are not directors in office, then an election of directors may be held at
a meeting of the stockholders, as provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
VOTING RIGHTS
Both the CGCL and the View Tech Articles of Incorporation provide that
holders of View Tech Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders.
Under Delaware law and the View Tech Delaware Certificate, the holders
of View Tech Delaware Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders.
AMENDMENTS TO ARTICLES OF INCORPORATION OR CERTIFICATE OF INCORPORATION
Neither the View Tech Articles of Incorporation nor the View Tech
Bylaws contain substantive provisions relating to amendments to the View Tech
Articles of Incorporation. However, California law and the View Tech Bylaws
provide that, procedurally, no vote of the shareholders on an amendment to the
View Tech Articles of Incorporation will be valid unless the shareholders
receive special notification of the amendment in a notice of meeting to the
shareholders or a written waiver of notice. The CGCL provides that,
generally, the View Tech Articles of Incorporation may be amended with the
approval of the View Tech Board of Directors and the approval either before or
after of the holders of a majority the outstanding shares entitled to vote.
The separate vote of any class of stock the rights of which would be adversely
affected by the amendment is also required.
Delaware law provides that the certificate of incorporation of a
Delaware corporation may be amended by resolution of the board of directors and
subsequent approval by a majority of outstanding shares upon due notice. The
separate vote of any class of stock the rights of which would be adversely
affected by the amendment is also required.
AMENDMENTS TO BYLAWS
The View Tech Bylaws may be amended or repealed or new bylaws may be
adopted by either the View Tech Board of Directors or by the holders of View
Tech Common Stock entitled to exercise a majority of the voting power of the
corporation, provided that (i) any amendment to the bylaws reducing the fixed
number of directors to less than five shall not be effective if the holders of
more than 16 2/3 percent of the outstanding shares of all classes of View Tech
capital stock entitled to vote cast votes against such amendment, and (ii) the
authority of the
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View Tech Board of Directors to amended or repeal bylaws or adopt new bylaws is
subject to the authority of the View Tech shareholders.
The View Tech Delaware Bylaws may be altered, amended or repealed by a
vote of the majority of outstanding shares or by a vote of a majority of the
Board of Directors, when such power is conferred upon the Board of Directors by
the Certificate of Incorporation. The Delaware Certificate does confer this
power to alter, amend or repeal bylaws. This power does not divest or limit
the power of the stockholders to adopt, amend, or repeal bylaws.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
Pursuant to the View Tech Bylaws, special meetings of View Tech
shareholders may be called at any time by the View Tech Board of Directors, the
chairman, the president or shareholders holding at least 10% of the voting
power of the corporation. The CGCL does not provide for a right of any other
person or entity to call such a special meeting. The View Tech Bylaws permit
the View Tech shareholders to act by the written consent of holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which holders of
all shares entitled to vote thereon were present and voted, provided that in
acting to fill a vacancy on the View Tech Board of Directors created by the
removal of a director, such action must be by unanimous written consent of all
holders of shares entitled to vote for the election of directors. The View
Tech Bylaws permit the View Tech shareholders to act by written consent of the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
holders of all shares entitled to vote thereon were present and voted, provided
that in acting to fill a vacancy on the View Tech Board of Directors created by
the removal of a director, such action must be by unanimous written consent of
all holders of shares entitled to vote for the election of directors.
Under Delaware law, a special meeting of stockholders may be called by
the board of directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws. The Delaware Bylaws provide that
such a meeting may be called by the View Tech Delaware Board of Directors, the
president or holders of a majority of the outstanding voting stock. Pursuant
to the Delaware Bylaws, written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting. Under Delaware law, stockholders may execute an action by written
consent in lieu of a stockholder meeting. Under Delaware law, however,
stockholders may not act by written consent in lieu of an annual stockholders
meeting for the election of directors. Delaware law permits a corporation to
eliminate such actions by written consent in its charter. Neither the Delaware
Certificate nor the Delaware Bylaws so eliminates actions by written consent.
APPROVAL OF MERGERS, REORGANIZATIONS AND CERTAIN BUSINESS COMBINATIONS
The CGCL generally requires that a majority of each class of shares
outstanding of both the acquiring and target corporations approve statutory
mergers, reorganizations, certain sales of assets and similar transactions.
The CGCL contains an exception to its voting requirements for reorganizations
of corporations whose shareholders immediately prior to the reorganization, or
the corporation itself, or both, will, immediately after the reorganization,
own equity securities constituting more than five-sixths of the voting power of
the surviving or acquiring corporation or its parent entity. However, such
reorganizations require approval by a majority of outstanding shares if, as a
result of such reorganization, shareholders will receive shares with different
rights, preferences or privileges than those shares surrendered. Shares of a
foreign (i.e., non-California) corporation are deemed to have such different
rights, preferences or privileges. The CGCL also requires that a sale of all
or substantially all of the assets of a corporation be approved by a majority
of the voting shares of the corporation transferring such assets.
The CGCL also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction.
This provision of the CGCL may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish.
Under Delaware law, the affirmative vote of a majority of the shares
of stock outstanding and entitled to vote is necessary to approve most mergers
or asset sales. However, under certain circumstances, Delaware law does permit
a corporation to merge without stockholder approval with a subsidiary of which
at least 90 percent of the outstanding shares of each class of stock is owned
by the parent.
Delaware law generally does not require separate class voting for such
transactions, except in certain situations involving an amendment to the
certificate of incorporation which adversely affects a specific class of
shares. In addition, Delaware law has no comparable provision to the
above-described provision requiring holders
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of nonredeemable common stock to receive nonredeemable common stock in a merger
of a corporation with the holder of more than 50% but less than 90% of such
common stock or its affiliate unless all of the holders of such common stock
consent to such transaction.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Under the View Tech Bylaws, and in conformity with California law,
shareholder approvals as to the following matters require advance notice in a
duly-delivered notice of meeting or mention in a written waiver of notice:
transactions between the corporation and any of its directors, or entities in
which any of its directors have material interests; amendment of articles of
incorporation; approval of the principal terms of a corporate reorganization;
election to voluntarily wind up and dissolve the corporation; and approval of
any plan of distribution of shares as part of the winding up of the
corporation. Federal securities laws generally provide that shareholder
proposals which the proponent wishes to include in View Tech's proxy materials
must be received not less than 120 days in advance of the date of the proxy
statement.
There is no specific statutory requirement under Delaware law with
regard to advance notice of director nominations and shareholder proposals.
Accordingly, View Tech Delaware shall not require such advance notice in its
charter documents. Absent a bylaw restriction, director nominations and
shareholder proposals may be made without advance notice at an annual meeting.
The Delaware Bylaws contain no such restriction. However, federal securities
laws generally provide that shareholder proposals which the proponent wishes to
include in View Tech Delaware's proxy materials must be received not less than
120 days in advance of the date of the proxy statement.
DISSENTERS' RIGHTS
Pursuant to the CGCL, a shareholder of a corporation participating in
certain transactions may, under certain circumstances, receive the fair value
of his shares in cash, in lieu of the consideration he would otherwise have
received in the transaction. The CGCL recognizes such dissenters' rights in
connection with certain reorganizations, including without limitation merger
reorganizations, exchange reorganizations (for the acquiring corporation),
sale-of-assets reorganizations and share exchange tender offers (for the
acquiring corporation) for which those shareholders of the corporation
immediately prior to the reorganization subsequently hold five-sixths or less
of the voting power of the surviving or acquiring corporation or parent party
after the reorganization. Dissenters' rights are only available when, among
other conditions: (i) the shares of the corporation are not either (A) listed
on any national securities exchange or (B) listed on the list of OTC margin
stocks issued by the Board of Governors of the Federal Reserve System, and
proper notice is given to shareholders; provided that this provision (i) does
not apply to any shares with respect to which there exists any restriction on
transfer imposed by the corporation or by any law or regulation; and provided
further that this provision does not apply to any class of shares described
above in (A) or (B) if demands for payment are filed with respect to 5% or more
of the outstanding shares of that class; and (ii) the shares were outstanding
on the date for the determination of shareholders entitled to vote on the
reorganization and (x) were not voted in favor of the reorganization or, (y) if
described in subpart (A) or (B) of provision (i) above (without regard to the
provisos therein), were voted against the reorganization, or were held of
record on the effective date of a short form merger; provided, however, that
subpart (A) rather than subpart (B) of this subsection (ii) applies in any case
in which approval was sought by written consent rather than at a meeting.
Under Delaware law, a stockholder of a corporation participating in
certain mergers and reorganizations may be entitled to receive cash in the
amount of the "fair value" of his shares, as determined by a court, in lieu of
the consideration he would otherwise receive in the transaction. Under
Delaware law appraisal rights are not available to stockholders with respect to
a merger or consolidation by a corporation, the shares of which are either
listed on a national securities exchange or designated as a national market
system security or an interdealer quotation system security by the National
Association of Securities Dealers, Inc., or are held of record by more than
2,000 holders if the stockholders receive shares of the surviving corporation
or shares of any other corporation which are similarly listed or dispersed, and
the stockholders do not receive any other property in exchange for their shares
except cash for fractional shares. Appraisal rights are also unavailable under
Delaware law to stockholders of a corporation surviving a merger if no vote of
those stockholders is required to approve the merger because, among other
things, the number of shares to be issued in the merger does not exceed 20% of
the shares of the surviving corporation outstanding immediately before the
merger and certain other conditions are met. Delaware law does not provide
stockholders with voting or appraisal rights when a corporation acquires
another business through the issuance of its stock, whether in exchange for
assets or stock or in a merger with a subsidiary.
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ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states, including
California. In particular, Delaware law permits a corporation to adopt a
number of measures designed to reduce a corporation's vulnerability to hostile
takeover attempts. As of October 31, 1996, such measures are either not
permitted or are more narrowly drawn under California law.
California has not adopted statutes aimed specifically at impeding
corporate takeovers. The CGCL's requirement that holders of nonredeemable
common stock receive nonredeemable common stock in a merger of the corporation
with the holder of more than 50% but less than 90% of such common stock or its
affiliate, unless all of the holders of such common stock consent to the
transaction, has been seen as inhibiting takeovers. (see "--Approval of
Mergers, Reorganizations and Certain Business Combinations"). This provision
of the CGCL may have the effect of making a "cash-out" merger by a majority
shareholder more difficult to accomplish. The reservation in the View Tech
Articles of Incorporation to the board of directors of authority to fix the
voting rights of the View Tech Preferred Stock can also serve to impede a
hostile takeover.
As discussed herein, certain provisions of the Delaware Certificate
and the Delaware Bylaws could be considered to be anti-takeover measures. The
establishment by the Delaware Certificate and the Delaware Bylaws of a
classified board of directors, and the Delaware Bylaws' provisions that only
the holders of a majority of shares of outstanding capital stock may call
special stockholders' meetings, may be construed as anti-takeover measures. In
addition, certain types of "poison pill" defenses (such as shareholder rights
plans) have been upheld by Delaware courts, while California courts have yet to
decide on the validity of such defenses, thus rendering their effectiveness in
California less certain.
The existence of a classified board of directors may deter so-called
"creeping acquisitions" in which a person or group seeks to acquire: (i) a
controlling position without paying a normal control premium to the selling
shareholders: (ii) a position sufficient to exert control over View Tech
through a proxy contest or otherwise; or (iii) a block of stock with a view
toward attempting to promote a sale or liquidation or a repurchase by View Tech
of the block at a premium, or an exchange of the block for assets of View Tech.
Faced with a classified View Tech Board of Directors (See "--Elections;
Classified Board of Directors"), such a person or group would have to assess
carefully its ability to control or influence View Tech. If free of the
necessity to act in response to an immediately threatened change in control,
the View Tech Board of Directors can act in a more careful and deliberative
manner to make and implement appropriate business judgments in response to a
creeping acquisition. See "VIEW TECH PROXY PROPOSAL 2--ELECTION OF DIRECTORS."
View Tech does not have any present intention of adopting any further
anti-takeover measures (such as a stockholder rights plan), nor does the View
Tech Board of Directors have knowledge that any attempt to gain control of View
Tech is being contemplated. However, numerous differences between California
and Delaware law, effective without additional action by View Tech Delaware,
could have a bearing on unapproved takeover attempts.
One such difference is the existence of a Delaware statute regulating
tender offers, which statute is intended to limit coercive takeovers of
companies incorporated in that state. California has no comparable statute.
The Delaware law provides that a corporation may not engage in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder,
unless (i) prior to the date the stockholder became an interested stockholder
the board of directors approved the business combination or the transaction
which resulted in the stockholder becoming an interested shareholder, or (ii)
upon consummation of the transaction which resulted in the stockholder becoming
an interested shareholder, the interested stockholder owned at least 85% of the
voting stock, or (iii) the business combination is approved by the board of
directors and authorized by 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. Consequently, the Delaware law would
not apply to the former holders of UST Common Stock because the View Tech Board
of Directors has approved the Merger. An interested stockholder means any
person who is the owner of 15% or more of the outstanding Voting Stock,
however, the statute provides for certain exceptions to parties who otherwise
would be designated interested stockholders, including an exception for parties
that held 15% or more of the outstanding Voting Stock as of December 23, 1987.
Any corporation may decide to opt out of the statute in its original
certificate of incorporation or, at any time, by action of its shareholders.
View Tech has no present intention of opting out of the statute.
There can be no assurance that the View Tech Board of Directors would
not adopt any further anti-takeover measures available under Delaware law (some
of which may not require stockholder approval). Moreover, the availability of
such measures under Delaware law, whether or not implemented, may have the
effect of discouraging a future takeover attempt which a majority of View Tech
Delaware's stockholders may deem to be in their best interests or in which
stockholders may receive a premium for their shares over then current market
prices. As a
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result, stockholders who might desire to participate in such transactions may
not have the opportunity to do so. Shareholders should recognize that, if
adopted, the effect of such measures, along with the possibility of
discouraging takeover attempts, may be to limit in certain respects the rights
of stockholders of View Tech Delaware compared with the rights of stockholders
of View Tech.
The View Tech Board of Directors recognizes that hostile takeover
attempts do not always have the unfavorable consequences or effects described
above and may frequently be beneficial to the shareholders, providing all of
the shareholders with considerable value for their shares. However, the View
Tech Board of Directors believes that the potential disadvantages of unapproved
takeover attempts (such as disruption of View Tech's business and the
possibility of terms which may be less than favorable to all of the
shareholders than would be available in a board-approved transaction) are
sufficiently great such that prudent steps to reduce the likelihood of such
takeover attempts and to enable the View Tech Board of Directors to consider
fully the proposed takeover attempt and negotiate actively its terms are in the
best interests of View Tech and its shareholders.
In addition to the various anti-takeover measures that would be
available to View Tech Delaware after the reincorporation due to the
application of Delaware law, View Tech Delaware would retain the rights
available to View Tech under California law as of October 31, 1996 to issue
shares of its authorized but unissued capital stock. Following the
effectiveness of the proposed reincorporation, shares of authorized and
unissued View Tech Delaware Common Stock and View Tech Delaware Preferred Stock
could (within the limits imposed by applicable law) be issued in one or more
transactions, or View Tech Delaware Preferred Stock could be issued with terms,
provisions and rights which would make more difficult and, therefore, less
likely, a takeover of View Tech Delaware. Any such issuance of additional
stock could have the effect of diluting the earnings per share and book value
per share of existing shares of common stock and preferred stock, and such
additional shares could be used to dilute the stock ownership of persons
seeking to obtain control of View Tech Delaware.
It should be noted that the voting rights to be accorded to any
unissued series of View Tech Delaware Preferred Stock remain to be fixed by the
Delaware View Tech Board of Directors. Accordingly, if the Delaware View Tech
Board of Directors so authorizes, the holders of View Tech Delaware Preferred
Stock may be entitled to vote separately as a class in connection with approval
of certain extraordinary corporate transactions in circumstances where Delaware
law does not ordinarily require such a class vote, or might be given a
disproportionately large number of votes. Such View Tech Delaware Preferred
Stock could also be convertible into a large number of shares of Common Stock
of View Tech Delaware under certain circumstances or have other terms which
might make acquisition of a controlling interest in View Tech Delaware more
difficult or more costly, including the right to elect additional directors to
the Delaware View Tech Board of Directors. Potentially, the View Tech Delaware
Preferred Stock could be used to create voting impediments or to frustrate
persons seeking to effect a merger or otherwise to gain control of View Tech
Delaware. Also, the View Tech Delaware Preferred Stock could be privately
placed with purchasers who might side with the management of View Tech Delaware
in opposing a hostile tender offer or other attempt to obtain control.
The View Tech Board of Directors may also authorize the issuance of
View Tech Delaware Preferred Stock in connection with various corporate
transactions, including corporate partnering arrangements. The View Tech Board
of Directors may also authorize the issuance of View Tech Delaware Preferred
Stock for the purpose of adopting a shareholder rights plan. However, future
issuances of View Tech Delaware Preferred Stock as an anti-takeover device
might preclude shareholders from taking advantage of a situation which might
otherwise be favorable to their interests.
IF THE REINCORPORATION IS APPROVED IT IS NOT THE PRESENT INTENTION OF
THE VIEW TECH BOARD OF DIRECTORS TO SEEK STOCKHOLDER APPROVAL PRIOR TO ANY
ISSUANCE OF THE VIEW TECH DELAWARE PREFERRED STOCK OR VIEW TECH DELAWARE COMMON
STOCK, EXCEPT AS REQUIRED BY LAW OR REGULATION. Frequently, opportunities
arise that require prompt action, and it is the belief of the View Tech Board
of Directors that the delay necessary for shareholder approval of a specific
issuance would be a detriment to View Tech Delaware and its shareholders. The
View Tech Board of Directors does not intend to issue any View Tech Delaware
Preferred Stock except on terms which the View Tech Board of Directors deems to
be in the best interests of View Tech Delaware and its then existing
shareholders.
CAPITALIZATION; BLANK CHECK PREFERRED
View Tech's capital stock consists of 10,000,000 authorized shares of
common stock, $0.01 par value per share, of which 3,393,438 shares issued and
outstanding as of October 31, 1996, and (b) 5,000,000 authorized shares of
preferred stock, $0.01 par value per share, of which none are issued and
outstanding as of October 31, 1996.
Upon the effectiveness of the reincorporation, View Tech Delaware will
have the same number of
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outstanding shares of common stock that View Tech had outstanding immediately
prior to the reincorporation.
The capitalization of View Tech Delaware will be 20,000,000 shares of
common stock, $0.0001 par value per share, and 5,000,000 shares of preferred
stock, $0.0001 par value per share. View Tech Delaware's authorized but
unissued shares of View Tech Delaware Preferred Stock will be available for
future issuance.
Under the Delaware Certificate, as under the View Tech Articles of
Incorporation, the View Tech Board of Directors has the authority to determine
or alter the rights, preferences, privileges and restrictions to be granted to
or imposed upon any wholly unissued series of View Tech Delaware Preferred
Stock and to fix the number of shares constituting any such series and to
determine the designation thereof. See "-- Anti-Takeover Measures."
The View Tech Board of Directors may authorize the issuance of View
Tech Delaware Preferred Stock in connection with various corporate
transactions, including corporate partnering arrangements. The View Tech Board
of Directors may also authorize the issuance of View Tech Delaware Preferred
Stock for the purpose of adopting a shareholder rights plan. IF THE
REINCORPORATION IS APPROVED, IT IS NOT THE PRESENT INTENTION OF THE VIEW TECH
BOARD OF DIRECTORS TO SEEK SHAREHOLDER APPROVAL PRIOR TO ANY ISSUANCE OF VIEW
TECH DELAWARE PREFERRED STOCK, EXCEPT AS REQUIRED BY LAW OR REGULATION.
LIQUIDITY AND MARKETABILITY
As of October 31, 1996, all of the 3,393,438 shares of View Tech
Common Stock issued and outstanding are freely tradeable except for 1,906,638
shares which may only be sold pursuant to an effective registration statement
under the Securities Act or in compliance with Rule 144 or another applicable
exemption from the registration requirements of the Securities Act. Of such
1,906,638 restricted shares, 1,162,500 shares are beneficially owned by
"affiliates" of View Tech as such term is defined in Rule 144 promulgated under
the Securities Act.
Upon reincorporation in Delaware, each share of View Tech Common Stock
shall be exchanged for one share of View Tech Delaware Common Stock.
DIVIDENDS OR OTHER DISTRIBUTIONS
Under California law, any dividends or other distributions to
shareholders, such as redemptions, are limited to the greater of (i) retained
earnings or (ii) an amount which would leave the corporation with assets
(excluding certain intangible assets) equal to at least 125% of its liabilities
(excluding certain deferred items) and current assets equal to at least 100%
(or, in certain circumstances, 125%) of its current liabilities.
Delaware law allows the payment of dividends and redemption of stock
out of surplus (including paid-in and earned surplus) or out of net profits for
the current and immediately preceding fiscal years. Whether dividends are paid
in the future will depend upon View Tech's earnings, financial position,
restrictions in connection with other classes or series of capital stock of
View Tech, restrictive covenants that may be imposed under any loan agreement
and any other relevant factors. View Tech has never paid cash dividends on the
View Tech Common Stock and has no present plans to do so.
ASSESSMENTS
All shares of View Tech Common Stock are fully paid and nonassessable.
Upon reincorporation in Delaware, all shares of View Tech Delaware
Common Stock will be fully paid and nonassessable.
RIGHT TO LIST OF HOLDERS AND INSPECTION OF BOOKS AND RECORDS
Pursuant to the View Tech Bylaws and the CGCL, the record of
shareholders, the accounting books and records, and minutes of proceedings of
the shareholders and the View Tech Board of Directors and committees of the
View Tech Board of Directors, are open to inspection upon written demand to
View Tech by a shareholder of View Tech at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interest as a
shareholder. In addition, a shareholder or shareholders holding at least five
percent in the aggregate of the outstanding voting shares of View Tech, or who
hold at least one percent of such voting shares and have filed a Schedule 14B
with the Commission relating to the election of directors of View Tech have an
absolute right to (1) inspect and copy the record of shareholders during usual
business hours upon five business days prior written demand to View Tech,
and/or (2) receive from View Tech's transfer agent (at normal costs) the record
of shareholders on or before five business days after written demand for such
is received by such agent.
The DGCL does not provide an absolute right of stockholder inspection.
However, Delaware law does
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permit any stockholder of record to inspect the stockholder list for any
purpose reasonably related to that person's interest as a stockholder. If the
corporation, or an officer or agent thereof, refuses to permit an inspection or
does not respond within five business days to a request for an inspection, the
stockholder may apply to the Court of Chancery for an order to compel such
inspection. The Court of Chancery is vested with exclusive jurisdiction to
determine whether such inspection is warranted.
SHAREHOLDER LIABILITY
View Tech shareholders are not personally liable for the obligations
of View Tech. View Tech Delaware stockholders would not be personally liable
for the obligations of View Tech Delaware.
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
California law provides that any loan or guaranty (other than loans to
permit the purchase of shares under certain stock purchase plans) for the
benefit of any officer or director, or any employee benefit plan authorizing
such loan or guaranty (except certain employee stock purchase plans), must be
approved by the shareholders of a California corporation. In addition, under
the CGCL, shareholders of any corporation with 100 or more shareholders of
record may approve a bylaw authorizing the board of directors alone to approve
a loan or guaranty to or on behalf of an officer (whether or not a director) if
the board determines that such loan or guaranty may reasonably be expected to
benefit the corporation. View Tech's shareholders have not adopted such a
bylaw provision.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when, in the judgment of the board
of directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both California law and Delaware law permit such loans or
guarantees to be unsecured and without interest.
REPORTING REQUIREMENTS
View Tech is a reporting company under the Exchange Act and files
annual and quarterly financial reports with the Commission and The NASDAQ
National Market.
Upon reincorporation in Delaware, View Tech will continue to be a
reporting company under the Exchange Act and file annual and quarterly
financial reports with the Commission and The NASDAQ National Market.
CERTAIN LEGAL RIGHTS
In accordance with CGCL, no action may be instituted or maintained in
right of View Tech (a shareholder derivative action) by any holder of View Tech
shares unless the plaintiff alleges in the complaint (1) that the plaintiff was
(a) a View Tech shareholder, of record or beneficially, at the time of the
transaction or any part thereof of which the plaintiff complains, or that the
plaintiff's shares thereafter devolved upon plaintiff by operation of law from
a holder who was a holder at the time of the transaction or any part thereof
complained of, or (b) a shareholder who does not meet the aforementioned
requirements, upon a determination by a court pursuant to the CGCL, and (2)
plaintiff's efforts, with particularity, to secure from the View Tech Board of
Directors such action as plaintiff desires, or the reasons for not making such
effort, and alleges further that plaintiff has either informed View Tech or the
View Tech Board of Directors in writing of the ultimate facts of each cause of
action against each defendant or delivered to View Tech or the View Tech Board
of Directors a true copy of the complaint which plaintiff proposes to file. In
connection with the foregoing, a plaintiff may be required to post a bond, in
the determination of the court, in an aggregate amount not to exceed $50,000.
In accordance with Delaware law, a derivative suit may only be
instituted by a plaintiff who was a stockholder of the corporation at the time
of the transaction complained of or that the stock thereafter devolved upon the
plaintiff by operation of law. A plaintiff may show that demand upon the
corporation would be futile by raising a reasonable doubt as to either director
dishonesty or independence or whether the directors exercised proper business
judgment in approving the challenged transaction.
APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION
California law provides that if (i) the average of certain property,
payroll and sales factors results in a finding that more than 50% of View Tech
Delaware's business is conducted in California, and in a particular fiscal year
more than 50% of View Tech Delaware's outstanding voting securities are held of
record by persons having addresses in California, and (ii) View Tech's shares
are traded on The NASDAQ National Market and are held beneficially or of record
by fewer than 800 equity security holders, as of its most recent annual meeting
of shareholders, then View Tech Delaware would become subject to certain
provisions of California law regardless
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of its state of incorporation.
Because View Tech's common stock is traded on The NASDAQ National
Market and View Tech's shares are beneficially held by at least 800 equity
security holders, as of its most recent annual meeting of shareholders,
California law will not initially apply to View Tech Delaware if the
reincorporation is approved. View Tech would not be subject to California law
as long as it continued to meet both of these requirements.
If View Tech Delaware were to become subject to the provisions of
California law referred to above, and such provisions were enforced by
California courts in a particular case, many of the Delaware laws described in
this Joint Proxy Statement/View Tech Proxy Statement/Prospectus would not apply
to View Tech Delaware. Instead, View Tech Delaware could be governed by
certain California laws, including those regarding liability of directors for
breaches of the duty of care, indemnification of directors, dissenters' rights
of appraisal, removal of directors as well as certain other provisions
discussed above, to the exclusion of Delaware law. The effects of applying
both Delaware and California laws to a Delaware corporation whose principal
operations are based in California have not yet been determined.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended
to be a tax-free reorganization under the Code. Assuming the reincorporation
qualifies as a reorganization, no gain or loss will be recognized to the
holders of capital stock of View Tech as a result of consummation of the
reincorporation, and no gain or loss will be recognized by View Tech or View
Tech Delaware. Each former holder of capital stock of View Tech will have the
same basis in the capital stock of View Tech Delaware received by such holder
pursuant to the reincorporation as such holder has in the capital stock of View
Tech held by such holder at the time of consummation of the reincorporation.
Each stockholder's holding period with respect to View Tech Delaware's capital
stock will include the period during which such holder held the corresponding
Company capital stock, provided the latter was held by such holder as a capital
asset at the time of consummation of the reincorporation. View Tech has not
obtained a ruling from the IRS or an opinion of legal or tax counsel with
respect to the consequences of the reincorporation.
The foregoing is only a summary of certain federal income tax
consequences. Shareholders should consult their own tax advisers regarding the
specific tax consequences to them of the merger, including the applicability of
the laws of any state or other jurisdiction.
VIEW TECH BOARD OF DIRECTORS' RECOMMENDATION
The foregoing discussion is an attempt to summarize the more important
differences in the corporation laws of Delaware and California and does not
purport to be an exhaustive discussion of all of the differences. Such
differences can be determined in full by reference to the California
Corporations Code and to the Delaware General Corporation Law. In addition,
both California and Delaware law provide that some of the statutory provisions
as they affect various rights of holders of shares may be modified by
provisions in the charter or bylaws of the corporation.
A vote for the reincorporation proposal will constitute approval of
the merger to effectuate the reincorporation in Delaware, the Delaware
Certificate, the Delaware Bylaws, the adoption and assumption by View Tech
Delaware of, among other things, each of View Tech's stock option and employee
benefit plans and all other aspects of View Tech Proxy Proposal 1.
THE VIEW TECH BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF REINCORPORATION IN DELAWARE
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VIEW TECH PROXY PROPOSAL 2
ELECTION OF DIRECTORS
The View Tech Bylaws provide that there shall be a Board of Directors
of seven members. As of October 31, 1996, all of the persons listed below,
with the exception of Messrs. Reece and Millet, were members of the View Tech
Board of Directors. After the election of the directors at the Annual Meeting,
there will be one vacancy on the View Tech Board of Directors. For additional
biographical information about each of the nominees, see "THE JOINT PROXY
PROPOSAL--VIEW TECH MANAGEMENT--Directors and Executive Officers."
The six persons listed below have been nominated by the View Tech
Board of Directors to serve as directors of View Tech.
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Robert G. Hatfield(1) . . . . . 52 Chairman of the Board
John W. Hammon(2) . . . . . . . 44 Director
Franklin A. Reece, III(3) . . . 50 Director
Calvin A. Carrera(4) . . . . . 51 Director
Robert F. Leduc(5) . . . . . . 51 Director
David F. Millet(6) . . . . . . 52 Director
</TABLE>
________________________
(1) Mr. Hatfield is nominated to serve a term ending on June 30, 1999,
provided View Tech Proxy Proposal 1 is adopted.
(2) Mr. Hammon is nominated to serve a term ending on June 30, 1998,
provided View Tech Proxy Proposal 1 is adopted.
(3) Mr. Reece is nominated to serve a term ending on June 30, 1999,
provided View Tech Proxy Proposal 1 is adopted.
(4) Mr. Carrera is nominated to serve a term ending on June 30, 1997,
provided View Tech Proxy Proposal 1 is adopted.
(5) Mr. Leduc is nominated to serve a term ending on June 30, 1997,
provided View Tech Proxy Proposal 1 is adopted.
(6) Mr. Millet is nominated to serve a term ending on June 30, 1998,
provided View Tech Proxy Proposal 1 is adopted.
If the proposal to reincorporate View Tech in the State of Delaware is
adopted (see "VIEW TECH PROXY PROPOSAL 1--REINCORPORATION OF VIEW TECH IN
DELAWARE AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS"), the View Tech
Board of Directors will be divided into three classes. This Meeting will be
the first election of directors after the creation of the classified board.
Accordingly, if View Tech Proxy Proposal 1 is adopted, upon reincorporation,
two directors will be elected for a term expiring at View Tech's 1997 Annual
Meeting, two directors for terms expiring at the 1998 Annual Meeting and two
directors for a term expiring at the 1999 Annual Meeting and, in each case,
until their successors are duly elected and qualified. At each Annual Meeting
after 1996, directors will be elected to succeed those directors whose terms
then expire, and each person so elected will serve for a three-year term. In
the event that the Joint Proxy Proposal is not adopted, Messrs. Reece and
Millet will be deemed to resign automatically from their positions as View Tech
directors. View Tech will be deemed to accept automatically their
resignations.
If the proposal to reincorporate View Tech in the State of Delaware is
not approved, directors elected at the meeting will serve one- year terms until
the 1997 Annual Meeting and until their successors are duly elected and
qualified.
It is the intention of the persons named in the accompanying form of
proxy to vote such proxy for the election as directors of the foregoing
nominees. In the event that any nominee is unable to serve or will not serve
as a director, it is intended that the proxies solicited hereby will be voted
for such other person or persons as may be nominated by management. Vacancies
in the View Tech Board of Directors may be filled by the View Tech Board of
Directors and, assuming shareholder approval of View Tech Proxy Proposal 1, any
director chosen to fill a vacancy would hold office until the next election of
the class for which such director had been chosen. Assuming shareholders do
not approve View Tech Proxy Proposal 1, any director chosen to fill a vacancy
would hold office until the next election of directors.
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<PAGE> 125
DIRECTORS WHOSE TERMS EXPIRE AT THE 1997 ANNUAL MEETING
Messrs. Carrera and Leduc are nominated for terms expiring at the 1997
Annual Meeting. See "--VIEW TECH MANAGEMENT--Directors; Other Executive
Officers" for additional biographical information on Messrs. Carrera and Leduc.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING
Messrs. Hammon and Millet are nominated for terms expiring at the 1998
Annual Meeting. See "--VIEW TECH MANAGEMENT--Directors; Other Executive
Officers" and "THE JOINT PROXY PROPOSAL--UST MANAGEMENT CONTINUING AFTER THE
MERGER--Directors and Executive Officers Continuing After the Merger" for
additional biographical information on Messrs. Hammon and Millet.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING
Messrs. Hatfield and Reece are nominated for terms expiring at the
1999 Annual Meeting. See "--VIEW TECH MANAGEMENT--Directors; Other Executive
Officers" and "THE JOINT PROXY PROPOSAL--UST MANAGEMENT CONTINUING AFTER THE
MERGER--Directors and Executive Officers Continuing After the Merger" for
additional biographical information on Messrs. Hatfield and Reece.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires View Tech's executive
officers and directors, and persons who beneficially own more than 10% of a
registered class of the View Tech Common Stock to file initial reports of
ownership and reports of changes in ownership with the SEC. Such officers,
directors and shareholders are required by SEC regulations to furnish View Tech
with copies of all such reports that they file.
Based solely upon a review of copies of such reports furnished to View
Tech during and with respect to its fiscal year ended June 30, 1996, and based
on written representations received by View Tech from directors, officers and
beneficial owners of more than 10% of the View Tech Common Stock ("reporting
persons") that no other reports were required, View Tech believes that, during
View Tech's 1996 fiscal year, View Tech's reporting persons complied with all
applicable Section 16(a) filing requirements.
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<PAGE> 126
VIEW TECH MANAGEMENT
The directors and executive officers of View Tech are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Robert G. Hatfield . . . . . Chairman, Chief Executive Officer and Director
John W. Hammon . . . . . . . President, Chief Operating Officer and Director
William M. McKay . . . . . . Chief Financial Officer, Treasurer and Secretary
Tom Bailey . . . . . . . . . Vice President - Technical Services
Calvin A. Carrera . . . . . . Director
Robert F. Leduc . . . . . . . Director
</TABLE>
DIRECTORS
Robert G. Hatfield, age 52, co-founded View Tech in 1992, and has
since served as its chairman and chief executive officer. From 1977 to
December 1991, Mr. Hatfield was Executive Vice President of Delphi Information
Systems, Inc. ("Delphi"), a provider of data processing systems for the
distribution portion of the property and casualty insurance industry. During
Mr. Hatfield's 14 years with Delphi, the firm grew from $100,000 in annual
revenues and six employees, to $50,000,000 in annual revenues and 350
employees. Mr. Hatfield's education includes a B.B.A. from California Western
University and an M.B.A. from Thunderbird: American Institute for Foreign
Trade.
John W. Hammon, age 44, is Mr. Hatfield's brother. Mr. Hammon
co-founded View Tech in 1992 and since then has served as a director, chief
operating officer and president. He also served as secretary of View Tech
until May 1, 1995. Mr. Hammon has over 14 years of experience in the computer
industry, including the marketing of advanced software and hardware products.
From 1987 to December 1991, he was Western Regional Director of PictureTel
Corporation. Prior to joining PictureTel, he held positions in field sales,
customer service and regional sales management with ADP, EDS and Tandem
Computers. Mr. Hammon's educational background includes a B.S. in Finance from
California State University - Los Angeles.
Calvin A. Carrera, age 51, has been a director of View Tech since
September 1994. Mr. Carrera is Director of Advanced Programs for Engineering
Management Concepts ("EMC"), a firm which specializes in professional
engineering and management services for government and industry clients. He is
responsible for advanced program development and execution and has been with
EMC since April 1995. From July 1994 to April 1995, he was Director of Western
Operations for APEX Technologies, Inc., a privately-held company which provides
professional engineering and training services for the federal and state
governments. Prior to joining APEX, Mr. Carrera served 15 years as General
Manager of Veda Incorporated, a privately-held firm which provides professional
engineering services for a diverse client base. Since 1991, he has been
president of the Defense Services Industry Executive Association, a non-profit
corporation with 43 member companies dedicated to improving communications
within the defense services industry and between the industry and government.
Mr. Carrera holds a B.S. in Electrical Engineering from the University of Utah
and an M.S. in Electrical Engineering from the University of Southern
California, where he has also completed classroom work for a doctoral degree.
Robert F. Leduc, age 51, has been a director of View Tech since
September 1994. From January 1992 to the present, he has been president and
chief executive officer of EconomicsAmerica of California, a California-based
not-for-profit funding organization that promotes education in economics. From
January 1990 to January 1992, he was president of Foundation Group, another
non-profit organization. Mr. Leduc has also been a visiting professor at the
L.B.J. School of Public Affairs at the University of Texas at Austin since
1990, and was previously a visiting professor or lecturer at the Kennedy School
of Public Administration at Harvard University, the University of Alberta and
Rutgers University. Mr. Leduc has specialized in providing consulting services
to not-for-profit organizations since 1972, and served as executive director of
a charitable foundation from 1982 to 1985 and a trade association from 1985 to
1988. Mr. Leduc has an M.B.A. from Wayne State University and is completing
the requirements for a Ph.D. in Public Administration from the University of
Colorado.
OTHER EXECUTIVE OFFICERS
Tom Bailey, age 37, has been vice president - technical services of
View Tech since January 1993. Prior to joining View Tech, Mr. Bailey was a
product manager, service executive and lead software engineer for Delphi, where
he was employed from 1988 to January 1993. During his six years with Delphi,
Mr. Bailey was responsible for coordination of more than 200 installations of
minicomputer and LAN-based information systems, as well as support, service and
technical research. Mr. Bailey's education includes a B.A. in mathematics and
computer
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<PAGE> 127
science from California Lutheran University, as well as training in TCP/IP,
Unix, Novell and switched digital network designations.
William M. McKay, age 41, has been chief financial officer and
secretary of View Tech since May 1, 1995. From October 1992 through April
1995, he was an independent consultant and principal of MK Associates, a firm
that provides financial and operational consulting services to businesses.
From January 1991 to October 1992, Mr. McKay was senior vice president and
chief financial officer of Kennedy-Wilson, Inc., a real estate brokerage
concern. Prior to his service with Kennedy-Wilson, Mr. McKay was vice
president and controller of HSM Group, a real estate investment company that is
affiliated with Kennedy-Wilson with interests in partnerships owning
residential and commercial properties. Mr. McKay also has ten years of public
accounting experience with Deloitte & Touche, most recently as a senior manager
in its audit department. Mr. McKay is a member of the American Institute of
Certified Public Accountants, and has a B.S. in business administration with an
emphasis in accounting from the University of Southern California - Los
Angeles.
For information with respect to securities ownership of View Tech
Common Stock by the directors, executive officers and beneficial owners of more
than 5% of View Tech Common Stock, see "--VIEW TECH SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
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<PAGE> 128
VIEW TECH EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for the chief
executive officer and each of the most highly compensated executive officers
whose individual remuneration exceeded $100,000 for the fiscal year ended June
30, 1996 (the "Named Executives"):
VIEW TECH SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------ All Other
Name and Principal Position Year Salary Options (1) Compensation (2)
- --------------------------- ---- -------- ------------ ----------------
<S> <C> <C> <C> <C>
Robert G. Hatfield 1996 $168,000 100,000 $28,175
Chairman and Chief 1995 160,000 50,000 41,986
Executive Officer 1994 126,000 -- 29,053
John W. Hammon 1996 168,000 100,000 19,642
President and 1995 160,000 50,000 17,989
Chief Operating Officer 1994 126,000 -- 20,269
William M. McKay 1996 118,216 25,000 6,000
Secretary and Chief 1995 17,914 72,800 1,000
Financial Officer(3)
</TABLE>
________________
(1) All stock options were granted under the View Tech Stock Option Plan.
(2) For fiscal 1996, the amount listed includes: for Mr. Hatfield (a)
country club dues and expenses of $13,698, (b) automobile expenses of
$12,812, and (c) 401(k) Retirement Savings Plan contributions of
$1,665; for Mr. Hammon (a) country club dues and expenses of $2,577,
(b) automobile expenses of $15,400, and (c) 401(k) Retirement Savings
Plan contributions of $1,665; and for Mr. McKay, an automobile
allowance of $500 per month. Itemized disclosure of other
compensation in 1995 and 1994, is not required.
(3) Mr. McKay was not employed by View Tech prior to its 1995 fiscal year.
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<PAGE> 129
OPTION GRANTS
The following table sets forth information regarding stock option
grants to each of the Named Executives during the fiscal year ended June 30,
1996.
OPTION GRANTS
IN THE FISCAL YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------------
Number of Percent of Total
Shares Underlying Options Granted to
Options Employees in Exercise Price
Name Granted Fiscal Year ($/Share) Expiration Date
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert G. Hatfield 50,000(1)(2) 10.0% $6.375 6/12/06
50,000(1)(3) 10.0% $6.625 7/17/05
John W. Hammon 50,000(1)(2) 10.0% $6.375 6/12/06
50,000(1)(3) 10.0% $6.625 7/17/05
William M. McKay 25,000(1)(4) 5.0% $6.375 6/12/06
- ---------------------
</TABLE>
(1) Under the View Tech Stock Option Plan, the closing of the Merger will
accelerate vesting of these outstanding View Tech Options if,
immediately after consummation of the Merger, the former holders of
UST Common Stock and the holders of the Conversion Options own more
than 30% of the then outstanding View Tech Common Stock. Based upon
the number of shares of View Tech Common Stock and UST Common Stock
outstanding as of October 31, 1996, immediately after consummation of
the Merger, there will be approximately (i) 5,893,438 shares (assuming
exercise of all of the UST Options) of View Tech Common Stock
outstanding, of which approximately 42.4% will be held collectively by
the former holders of UST Common Stock or (ii) 5,684,771 shares
(assuming no UST Options are exercised) of View Tech Common Stock
outstanding, of which approximately 40.3% will be held collectively by
former holders of UST Common Stock, thereby accelerating vesting of
the View Tech Options.
(2) 12,500 vest on each of June 12, 1997, 1998, 1999 and 2000,
respectively.
(3) 12,500 vest on each of July 17, 1996, 1997, 1998 and 1999,
respectively.
(4) 6,250 vest on each of June 12, 1997, 1998, 1999 and 2000,
respectively.
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<PAGE> 130
AGGREGATE OPTION EXERCISES
The following table sets forth information regarding unexercised options held
by the Named Executives.
AGGREGATE OPTION EXERCISES
IN THE FISCAL YEAR ENDED JUNE 30, 1996 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised "In-the-Money"
Shares Options at Fiscal Year-End Options at Fiscal Year-End
Acquired on --------------------------- ---------------------------
Name Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Hatfield N/A N/A 12,500 137,500 $ 87,500 $350,000
John W. Hammon N/A N/A 12,500 137,500 87,500 350,000
William M. McKay 12,500 $82,737 5,700 79,600 13,538 328,113
</TABLE>
DIRECTOR COMPENSATION
Outside directors receive $1,000 for each board meeting attended.
Directors receive no compensation for telephone meetings. Outside directors
who are members of either the stock option and compensation committee or the
audit committee receive $1,000 per meeting attended as well. However, if the
committee meets on the same day that the board is meeting, the outside director
will only receive a single payment of $1,000 for all meetings attended on the
same day. Outside directors are also reimbursed for their travel expenses.
Outside directors also receive a monthly director fee of $1,000 per month.
In addition to the per diem, outside directors receive options to acquire
10,000 shares of View Tech Common Stock on the day they are elected to the View
Tech Board of Directors. Additionally, outside directors who have served on
the board for a full year receive options to acquire an additional 2,000 shares
of View Tech Common Stock on the fifth business day following the annual
meeting of shareholders. The exercise price of the stock options is equal to
the last reported bid price of the View Tech Common Stock on The NASDAQ
National Market.
Members of the View Tech Board of Directors who are also employees of View
Tech do not receive any additional compensation for service on the View Tech
Board of Directors. No member of the View Tech Board of Directors received any
other compensation for his services as a director.
EMPLOYMENT CONTRACTS; TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Employment Agreements. View Tech has entered into employment agreements
with each of the Named Executives. The agreements, which have one-year terms
and may be renewed for one additional year at the option of View Tech, provide
for annual base salaries during the initial and renewal periods in the
following amounts: Mr. Hatfield, $168,000; Mr. Hammon, $168,000; and Mr. McKay,
$115,000. The agreements also provide for bonuses at the discretion of the
View Tech Board of Directors, as well as customary benefits. Other than the
agreement with Mr. McKay, which commenced May 1, 1995, the terms of each of the
agreements commenced March 30, 1995. The agreements with Messrs. Hatfield and
Hammon are now in their respective renewal terms and expire on March 30, 1997,
and May 30, 1997 for Mr. McKay. Effective July 1, 1997, Messrs. Hatfield's and
Hammon's salaries were each increased to $220,000 per year. Effective May 1,
1996, Mr. McKay's salary was increased to $136,000 per year.
In addition to the employment agreements, each of the Named Executives
received options under the View Tech Stock Option Plan. The View Tech Stock
Option Plan provides for four year vesting from the date of issuance. However,
if there is a "change of control," the options vest immediately. The View Tech
Stock Option Plan provides that:
"A 'Change of Control' shall be deemed to have taken place if (i) any
Person (including any individual, firm, corporation, partnership or other
entity except View Tech or any employee benefit plan of View Tech or of any
Affiliate or Associate, both as defined in Rule 12b-2 of the General Rules
and Regulations promulgated under the Securities Exchange Act of 1934, as
amended, any Person or any entity organized, appointed or established by
View Tech for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become
the beneficial owner in the aggregate of 30% or more of the common stock of
View Tech then outstanding; provided, however, that no "Change of Control"
shall be deemed to occur during any period in which any such Person, and
its
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<PAGE> 131
Affiliates and Associates, are bound by the terms of a standstill agreement
under which such parties have agreed not to acquire more than 30% of the
common stock of View Tech then outstanding or to solicit proxies, or (ii)
on the first date within any period of 24 consecutive months or less on
which there is effected a change in the composition of the Board by reason
of a contested election such that a majority of the Board members (rounded
up to the next whole number) cease to be comprised of individuals who
either (1) have been members of the Board continuously since the beginning
of such period or (2) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (1) who were still in office at the time such election
or nomination was approved by the Board."
Based upon the number of shares of View Tech Common Stock and UST Common Stock
outstanding as of October 31, 1996, immediately after consummation of the
Merger, there will be approximately (i) 5,893,438 shares (assuming exercise of
all of the UST Options) of View Tech Common Stock outstanding, of which
approximately 42.4% will be held collectively by the former holders of UST
Common Stock or (ii) 5,684,771 shares (assuming no UST Options are exercised)
of View Tech Common Stock outstanding, of which approximately 40.3% will be
held collectively by former holders of UST Common Stock, thereby accelerating
vesting of the View Tech Options. See "THE JOINT PROXY PROPOSAL--VIEW TECH
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" and the financial
statements of View Tech and Note 18 of the notes thereto for a discussion of
the Merger.
If the Joint Proxy Proposal is approved, View Tech will enter into an
employment agreements with Messrs. Reece and Gentile under terms mutually
agreed upon by the parties. See "THE JOINT PROXY PROPOSAL--THE
MERGER--Interests of Certain Persons in the Merger."
CERTAIN RELATIONSHIPS OF VIEW TECH
Transactions with View Tech's Founders. In connection with View Tech's
organization in 1992, View Tech sold 738,000 shares of View Tech Common Stock
to each of its founders, Messrs. Hatfield and Hammon, for approximately $0.007
per share. On October 3, 1994, July 17, 1995 and June 12, 1996, View Tech
granted options to purchase an aggregate of 150,000 shares (50,000 shares each
grant) of View Tech Common Stock to each of Messrs. Hatfield and Hammon. The
options, which have exercise prices of $0.375, $6.625 and $6.375 per share,
respectively, vest in equal amounts annually over four-year periods from the
respective date of grant.
Messrs. Hatfield and Hammon had guaranteed the repayment of $638,000 of
View Tech's indebtedness, all of which was repaid with a portion of the
proceeds from the View Tech IPO in June 1995.
Transactions with WHI. View Tech entered into a management services
agreement with WHI effective as of September 1, 1994 (the "WHI Agreement").
The WHI Agreement provided that WHI would assist View Tech with respect to View
Tech's management requirements, strategic initiatives, marketing strategies,
contract negotiation, investor relations, organizational structure, retention
of public relations advisors, board structure and committees and executive
compensation.
The WHI Agreement expired September 30, 1995. Pursuant to the terms of the
WHI Agreement, View Tech paid WHI $25,000 in July 1995 and a monthly retainer
of $2,500, and reimbursed WHI's reasonable expenses. Pursuant to the WHI
Agreement, View Tech also agreed to issue to WHI options to purchase 150,000
shares of View Tech Common Stock on October 1, 1995, if the agreement was then
in effect, which options would be exercisable immediately and would have an
exercise price equal to the fair market value per share of View Tech Common
Stock on that date. The WHI Agreement also provided for certain registration
rights with respect to View Tech Common Stock issuable upon the exercise of
such options. On September 13, 1995, the WHI Agreement was amended so that (i)
75,000 options were issued to each of Rolf N. Hufnagel, a former director of
View Tech and managing director of WHI, and Robert E. Yaw II, chairman of WHI,
with an exercise price equal to $7.375, which was the closing bid price of the
View Tech Common Stock on The NASDAQ SmallCap Market on September 13, 1995 and
(ii) View Tech was no longer obligated to pay WHI a monthly retainer.
On November 1, 1995, View Tech entered into a subsequent agreement with WHI
which provided for a payment of $5,000 per month through June 30, 1996. View
Tech also made a short-term loan to Mr. Hufnagel of approximately $22,000 at a
10% interest rate in April 1996. The loan was repaid in June 1996 with
interest.
Subsequent to Mr. Hufnagel's resignation, View Tech entered into a new
agreement with WHI that provided for (i) a monthly retainer of $5,000 from July
to September 1996; (ii) the issuance of options to purchase 55,000 shares of
View Tech Common Stock to one of WHI's principals, which were issued on June
27, 1996 and (iii) the issuance of options to purchase 55,000 shares of View
Tech Common Stock to Mr. Hufnagel, which were issued on August 22, 1996. The
agreement provides that such options be issued at the market price as of the
date of
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<PAGE> 132
issuance. The agreement further provided for the issuance of options
exercisable for View Tech Common Stock equal to 5% of the "Transaction Value"
of any mergers and acquisitions ("M&A") transactions for which WHI provided
advice. Pursuant to an amendment to such agreement entered into in October
1996, instead of issuing WHI options equal to 5% of the Transaction Value of
the Merger, View Tech will pay WHI $175,000 in cash and will issue to WHI
30,000 shares of View Tech Common Stock as follows: (i) $50,000 upon the filing
with the Commission of the registration statement of which this Joint Proxy
Statement.View Tech Proxy Statement/Proposal forms a part; (ii) $50,000 on
November 1, 1996; and (iii) $75,000 and 30,000 shares of View Tech Common Stock
on the Effective Date. All payments made to WHI prior to the Effective Date
are subject to repayment by WHI if the Merger is not consummated.
During fiscal 1996, View Tech made a total of $72,500 payments to WHI,
excluding payments made for reimbursement of expenses. Effective June 24,
1996, Mr. Hufnagel resigned as a director of View Tech.
Mr. Hammon, the president, chief operating officer and a director of View
Tech, loaned a managing director of WHI $50,000 in February 1996 and loaned Mr.
Yaw, the chairman of WHI, $350,000 in July 1996. The loans are not evidenced
by a promissory note, are unsecured and do not bear interest. There is no
understanding between Mr. Hammon and WHI that the loans will be repaid out of
payments made to WHI in connection with its services to View Tech. WHI does
not have any employees other than the managing director and Mr. Yaw. Mr.
Hammon, in his capacity as a director, approved the agreements between WHI and
View Tech.
Transactions with Coffin o KCSA. View Tech entered into a consulting
agreement with Coffin o KCSA ("Coffin") under which Coffin provided assistance
to View Tech with respect to View Tech's investor relations, board structure
and committees, and executive compensation. The agreement, effective December
1, 1994, was for an indefinite term and could be terminated by either party
upon 30 days' written notice. View Tech paid Coffin $25,000 in July 1996, and
paid Coffin a monthly retainer and reimbursed Coffin's reasonable expenses.
The monthly retainer was originally $2,500 and was raised to $4,000 per month
following the View Tech IPO in June 1995. William F. Coffin, a former director
of View Tech, is a partner in Coffin. During fiscal 1996, View Tech paid
Coffin a total of $65,000, excluding payments made for reimbursement of
expenses. Effective June 12, 1996, Mr. Coffin resigned as a director of View
Tech.
Transactions with EconomicsAmerica of California. In December 1994, View
Tech sold video conferencing equipment to EconomicsAmerica of California for
$175,578, at prices and on terms generally available to View Tech's customers.
Mr. Leduc, chief executive officer and a director of EconomicsAmerica, is also
a director of View Tech. Mr. William F. Coffin, a director of
EconomicsAmerica, is a former director of View Tech.
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VIEW TECH SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with respect to (i) each
director of View Tech, (ii) the Named Executives, (iii) all directors and
executive officers of View Tech as a group at October 31, 1996, including the
number of shares of View Tech Common Stock beneficially owned by each of them,
(iv) each person known by View Tech to own beneficially or of record more than
5% of the outstanding shares of View Tech Common Stock and (v) each nominee to
be a director of View Tech. Unless otherwise indicated below, the business
address of each individual is the same as the address of View Tech's principal
executive offices.
<TABLE>
<CAPTION>
Prior to the Merger After the Merger
---------------------------- ---------------------------
Number of Number of
Shares Shares
Beneficially Beneficially
Beneficial Owner Owned(1) Percentage Owned(1)(2) Percentage
---------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Robert G. Hatfield . . . . . . . . . 595,000 (3) 17.6% 720,000 (3) 12.3%
John W. Hammon . . . . . . . . . . . 475,000 (4) 13.9% 600,000 (4) 10.3%
Calvin Carrera . . . . . . . . . . . 22,000 (5) * 22,000 (5) *
Robert F. Leduc . . . . . . . . . . . 12,000 (6) * 12,000 (6) *
Franklin A. Reece, III (7) . . . . . - - 580,070 (8) 10.1%
David F. Millet (7) . . . . . . . . . - - 225,423 (9) 4.0%
William M. McKay . . . . . . . . . . 18,200(10) * 85,300(10) 1.5%
Executive Officers and
Directors as a Group (6 persons) 1,261,200 39.5% N/A N/A
Executive Officers and
Directors as a Group (8 persons) N/A N/A 1,485,830(11) 38.3%
</TABLE>
__________________
* Less than one percent.
(1) Based on 3,393,438 shares outstanding and, in addition, shares
issuable upon the exercise of options or warrants that are exercisable
within 60 days of October 31, 1996, which are deemed to be outstanding
for the purpose of computing the percentage of outstanding stock owned
by such persons individually and by each group of which they are a
member, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Includes
shares issuable upon exercise of options for Mr. Hatfield, 25,000
shares, for Mr. Hammon, 25,000 shares, for Mr. McKay, 18,200 shares,
and for another View Tech executive officer, 6,500 shares.
(2) Assumes the issuance of 2,291,333 shares to UST shareholders and
includes additional shares issuable upon exercise of options for Mr.
Hatfield, 125,000 shares, for Mr. Hammon, 125,000 shares, for Mr.
Reece, 75,879 shares, for Mr. Millet, 6,324 shares, for Mr. McKay,
67,100 shares, and for another View Tech executive officer, 38,500
shares. These options will vest as a result of the Merger.
(3) Chief executive officer and chairman of View Tech. Also includes
120,000 shares held in an irrevocable trust established for the
benefit of Mr. Hammon's minor children, of which Mr. Hatfield is
trustee. Mr. Hatfield has sole investment and voting power with
respect to such shares.
(4) President and chief operating officer of View Tech. Mr. Hammon's
address is 101 Pacifica, Suite 100, Irvine, California 92718.
(5) Includes 12,000 shares issuable upon exercise of View Tech Options.
Mr. Carrera's address is 10550 Summer View Circle, Camarillo,
California 93012.
(6) Consists of 10,000 shares issuable upon exercise of View Tech Options.
Mr. Leduc's address is 26 Thorn Oak, Trabuco Canyon, California 92679.
(7) Excludes shares of View Tech Common Stock issuable to any other person
in connection with the Merger.
(8) View Tech director nominee, president and chairman of UST. Includes
75,879 shares issuable upon exercise of UST Options assuming a
Conversion Ratio of 0.25293. Mr. Reece's address is 745 Atlantic
Avenue, Boston, Massachusetts 02111-2747.
(9) View Tech director nominee and director of UST. Includes 6,324 shares
issuable upon exercise of UST Options assuming a Conversion Ratio of
0.25293. Mr. Millet's address is 623 Chestnut Street, Needham,
Massachusetts 02192.
(10) Chief financial officer of View Tech.
(11) Includes shares owned by the current View Tech executive officers and
shares that will be beneficially owned by Messrs. Reece and Millet,
each of whom will be a director and/or executive officer of View Tech
upon consummation of the Merger.
122
<PAGE> 134
THE VIEW TECH BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF EACH NAMED NOMINEE
123
<PAGE> 135
VIEW TECH PROXY PROPOSAL 3
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The View Tech Board of Directors has selected Carpenter Kuhen and
Sprayberry as View Tech's independent accountants for the fiscal year ending
June 30, 1997, and has further directed that management submit the selection of
independent accountants for ratification by the shareholders at the View Tech
Annual Meeting. Carpenter Kuhen and Sprayberry has audited View Tech's
financial statements since View Tech's inception in 1992. Representatives of
Carpenter Kuhen and Sprayberry are expected to be present at the View Tech
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Shareholder ratification of the selection of Carpenter Kuhen and Sprayberry
as View Tech's independent accountants is not required by View Tech's Bylaws or
otherwise. However, the View Tech Board of Directors is submitting the
selection of Carpenter Kuhen and Sprayberry to the shareholders for
ratification as a matter of good corporate practice. If the shareholders fail
to ratify the selection, the Audit Committee of the View Tech Board of
Directors will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee and the View Tech Board of Directors
in their discretion may direct the appointment of a different independent
accounting firm at any time during the year if they determine that such a
change would be in the best interests of its shareholders.
THE VIEW TECH BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
124
<PAGE> 136
VIEW TECH PROXY PROPOSAL 4
THE VIEW TECH, INC. 1997 STOCK INCENTIVE PLAN
View Tech's shareholders are being asked to approve the View Tech, Inc.
1997 Stock Incentive Plan (the "1997 Plan") which is attached hereto as ANNEX
H. The 1997 Plan will become effective immediately upon such shareholder
approval.
300,000 shares of View Tech Common Stock will be reserved for issuance
under the 1997 Plan.
The 1997 Plan is designed to serve as a comprehensive equity incentive
program to attract and retain the services of individuals essential to View
Tech's long-term growth and financial success. Accordingly, officers and other
key employees, non-employee members of the View Tech Board of Directors and
consultants and other advisors in the service of View Tech or any parent or
subsidiary corporation (whether now existing or subsequently established) will
have the opportunity to acquire a meaningful equity interest through their
participation in the 1997 Plan.
The following is a summary of the principal features of the 1997 Plan and
does not purport to be a complete description of all the provisions of the 1997
Plan. A copy of the 1997 Plan will be furnished by View Tech to any
shareholder upon written request to the View Tech's Secretary, in Camarillo,
California.
DESCRIPTION OF THE 1997 PLAN
Structure. Under the 1997 Plan eligible individuals in the employ or
service of View Tech or any parent or subsidiary corporation may, at the
discretion of the Plan Administrator, as defined below, be granted options to
purchase shares of Common Stock.
Administration. The compensation committee of the View Tech Board of
Directors (the "Committee") will serve as the initial Plan Administrator with
respect to the 1997 Plan. However, one or more additional Board committees may
be appointed to administer the 1997 Plan with respect to certain designated
classes of individuals in View Tech's service. The term "Plan Administrator"
as used in this summary will mean the Committee and any other appointed
committee acting within the scope of its administrative authority under the
1997 Plan.
Eligibility. Officers and employees, non-employee members of the View Tech
Board and independent consultants and advisors in the service of View Tech or
any parent or subsidiary corporation (whether now existing or subsequently
established) will be eligible to participate in the 1997 Plan.
As of October 31, 1996, four executive officers, approximately 58 other
employees and two non-employee members of the View Tech Board of Directors were
eligible to participate in the 1997 Plan.
Share Reserve. The maximum number of shares of View Tech Common Stock
reserved for issuance under the 1997 will initially be 300,000. Shares subject
to any outstanding options under the 1997 Plan which expire or terminate prior
to exercise and any unvested shares reacquired by View Tech pursuant to its
repurchase rights under the 1997 Plan will be available for subsequent
issuance.
No one participant in the 1997 Plan may receive stock option grants for
more than 150,000 shares of View Tech Common Stock in the aggregate per
calendar year.
Valuation. For purposes of establishing the option price and for all other
valuation purposes under the 1997 Plan, the fair market value per share of View
Tech Common Stock on any relevant date under the 1997 Plan will be the closing
selling price per share of View Tech Common Stock on that date, as such price
is reported on the Nasdaq National Market. The closing selling price of the
View Tech Common Stock on October 31, 1996 was $5.75 per share.
Classification of Options under the 1997 Plan. The options granted under
the 1997 Plan may be either incentive stock options under the federal tax laws
or non-statutory options. Each granted option will have an exercise price per
share not less than one hundred percent (100%) of the fair market value per
share of View Tech Common Stock on the option grant date, and no granted option
will have a term in excess of ten (10) years. The shares subject to each
option will generally vest in a series of installments over a specified period
of service measured from the grant date.
Cessation of Service. Upon cessation of service, the optionee will have a
limited period of time in which to exercise any outstanding option to the
extent exercisable for vested shares. The Plan Administrator will have
125
<PAGE> 137
complete discretion to extend the period following the optionee's cessation of
service during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of
service.
GENERAL PROVISIONS
Vesting Acceleration. In the event that View Tech is acquired by merger or
asset sale, in which more than thirty-five percent (35%) of the outstanding
voting stock of View Tech, or all or substantially all of View Tech's assets
are acquired by another entity, respectively (a "Corporate Transaction"), each
outstanding option under the 1997 Plan which is not to be assumed or replaced
by the successor corporation will automatically accelerate in full, and all
unvested shares under the 1997 Plan will immediately vest, except to the extent
View Tech's repurchase rights with respect to those shares are transferred to
the successor corporation. The Plan Administrator will have complete
discretion to grant one or more options under the 1997 Plan which will become
fully exercisable for all option shares in the event those options are assumed
in the acquisition and the optionee's service with View Tech or the acquiring
entity is involuntarily terminated within a designated period following such
acquisition. The Plan Administrator will have similar discretion to grant
options which will become fully exercisable for all the option shares should
the optionee's service terminate, whether involuntarily or through a
resignation for good reason, within a designated period following a change in
control of View Tech effected through successful tender offer for more than 35%
of the outstanding voting stock or by proxy contest for the election of members
of the View Tech Board of Directors.
The acceleration of vesting in the event of a change in the ownership or
control of View Tech may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts
to gain control of View Tech.
Financial Assistance. The Plan Administrator may institute a loan program
to assist one or more participants in financing the exercise of outstanding
options under the 1997 Plan. The Plan Administrator will determine the terms
of any such assistance. However, the maximum amount of financing provided any
participant may not exceed the cash consideration payable for the issued shares
plus all applicable taxes incurred in connection with the acquisition of the
shares.
Changes in Capitalization. In the event any change is made to the
outstanding shares of View Tech Common Stock by reason of any recapitalization,
stock dividend, stock split, combination of shares, exchange of shares or other
change in corporate structure effected without View Tech's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the 1997 Plan, (ii) the number and/or
class of securities for which any one person may be granted stock options under
the 1997 Plan per calendar year, and (iii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits thereunder.
Options Assumed in a Corporate Transaction. Each outstanding option which
is assumed in connection with a Corporate Transaction will be appropriately
adjusted to apply and pertain to the number and class of securities which would
otherwise have been issued, in consummation of such Corporate Transaction, to
the option holder had the option been exercised immediately prior to the
Corporate Transaction. Appropriate adjustments will also be made to the option
price payable per share and to the class and number of securities available for
future issuance on both an aggregate and a per-participant basis.
Amendment and Termination. The View Tech Board of Directors may amend or
modify the 1997 Plan in any or all respects whatsoever. However, the View Tech
Board of Directors may not, without the approval of View Tech's shareholders,
increase the maximum number of shares issuable under the 1997 Plan (except in
connection with certain changes in capitalization), and other amendments may
require shareholder approval pursuant to applicable laws and regulations.
Unless sooner terminated by the View Tech Board of Directors, the 1997 Plan
will in all events terminate on December 31, 2006. Any options outstanding at
the time of such termination will remain in force in accordance with the
provisions of the instruments evidencing such grants.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1997 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
126
<PAGE> 138
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories:
(i) qualifying and (ii) disqualifying. A qualifying disposition occurs if the
sale or other disposition is made after the optionee has held the shares for
more than two (2) years after the option grant date and more than one (1) year
after the exercise date. If either of these two holding periods is not
satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then View Tech will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will View Tech be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by View Tech in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to
report as ordinary income, as and when View Tech's repurchase right lapses, an
amount equal to the excess of (i) the fair market value of the shares on the
date the repurchase right lapses over (ii) the exercise price paid for the
shares. The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of the
option an amount equal to the excess of (i) the fair market value of the
purchased shares on the exercise date over (ii) the exercise price paid for
such shares. If the Section 83(b) election is made, the optionee will not
recognize any additional income as and when the repurchase right lapses.
View Tech will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of View Tech in which such ordinary income is recognized by the optionee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
View Tech anticipates that any compensation deemed paid by it in connection
with disqualifying dispositions of incentive stock option shares or exercises
of non-statutory options granted will qualify as performance-based compensation
for purposes of Code Section 162(m) and will not have to be taken into account
for purposes of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers of View
Tech. Accordingly, all compensation deemed paid with respect to those options
will remain deductible by View Tech without limitation under Code Section
162(m).
ACCOUNTING TREATMENT
Under current accounting principles, neither the grant nor the exercise of
options granted under the 1997 Plan with exercise prices equal to the fair
market value of the option shares on the grant date will not result in any
charge to View Tech's reported earnings. However, View Tech must disclose, in
footnotes and pro-forma statements to View Tech's financial statements, the
impact those options would have upon View Tech's reported earnings were the
value of those options at the time of grant treated as a compensation expense.
In addition, the number of outstanding options under the 1997 Plan may be a
factor in determining View Tech's earnings per share on a fully-diluted basis.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of View
Tech present or represented and entitled to vote at the 1996 Meeting is
required for approval of the 1997 Plan. If such approval is obtained, then the
1997 Plan will become effective immediately. Should such shareholder approval
not be obtained, then the 1997 Plan will not be implemented.
THE VIEW TECH BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE VIEW TECH, INC. 1997 STOCK
INCENTIVE PLAN
127
<PAGE> 139
OTHER MATTERS
SHAREHOLDER PROPOSALS
Individual shareholders of View Tech may be entitled to submit proposals
which they believe should be voted upon by the shareholders. The Commission
has adopted regulations which govern the inclusion of such proposals in annual
proxy materials. All such proposals must be received by the Secretary of View
Tech no later than July 5, 1997 in order to be considered for inclusion in View
Tech's 1997 proxy materials.
128
<PAGE> 140
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
VIEW TECH
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Balance Sheets at June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Statements of Operations for the Years Ended June 30, 1996 and 1995 . . . . . . . . . . . F-3
Statement of Stockholders' Equity for the Years Ended June 30, 1996 and 1995 . . . . . . . F-4
Statements of Cash Flows for the Years Ended June 30, 1996 and 1995 . . . . . . . . . . . F-5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
UST
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . F-15
Balance Sheets at December 31, 1994 and 1995: Assets . . . . . . . . . . . . . . . . . . . F-16
Balance Sheets at December 31, 1994 and 1995: Liabilities and Stockholders' Deficit . . . F-17
Statements of Operations for the Years Ended December 31, 1994 and 1995 . . . . . . . . . F-18
Statements of Stockholders' Deficit for the Years Ended December 31, 1994 and 1995 . . . . F-19
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995 . . . . . . . . . F-20
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-21
Unaudited Balance Sheets at June 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . F-28
Unaudited Statements of Operations for the Six Months Ended June 30, 1995 and 1996 . . . . F-29
Unaudited Statement of Stockholders' Deficit for the Six Months Ended June 30, 1996 . . . F-30
Unaudited Statements of Cash Flows for the Six Months Ended June 30, 1995 and 1996 . . . . F-31
Notes to Unaudited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-32
GROUPNET
Unaudited Balance Sheet at December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-33
Unaudited Statement of Income From May 1, 1995 to December 31, 1995 . . . . . . . . . . . F-34
Statement of Cash Flows From May 1, 1995 to December 31, 1995 . . . . . . . . . . . . . . F-35
Notes to Unaudited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-36
Unaudited Balance Sheet at June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . F-37
Unaudited Statement of Income for the Six Months Ended June 30, 1996 . . . . . . . . . . . F-38
Unaudited Statement of Cash Flows for the Six Months Ended June 30, 1996 . . . . . . . . . F-39
UNAUDITED VIEW TECH PRO FORMA CONDENSED COMBINED FINANCIAL DATA
Unaudited Pro Forma Condensed Combined Balance Sheet at June 30, 1996 . . . . . . . . . . F-40
Unaudited Pro Forma Condensed Combined Balance Sheet at June 30, 1995 . . . . . . . . . . F-41
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year
Ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
Unaudited View Tech, Inc. Pro Forma Condensed Combined Statement of
Operations for the Year Ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . F-43
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year
Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-44
Notes to Unaudited Pro Forma Condensed Combined Financial Statements . . . . . . . . . . . F-45
</TABLE>
129
<PAGE> 141
INDEPENDENT AUDITORS' REPORT
To Board of Directors
and Shareholders of
VIEW TECH, INC.
We have audited the accompanying balance sheets of View Tech, Inc. as of June
30, 1996 and 1995 and the related statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of View Tech, Inc., as of June
30, 1996 and 1995, and the results of its operations and cash flows for the
years then ended, in conformity with generally accepted accounting principles.
CARPENTER KUHEN & SPRAYBERRY
Oxnard, California
September 24, 1996
F-1
<PAGE> 142
VIEW TECH, INC.
BALANCE SHEETS
JUNE 30, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
June 30,
----------------------------------------------
1996 1995
<S> <C> <C>
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,463,199 $ 4,987,939
Accounts receivable (net allowance for 4,720,262 2,344,544
doubtful accounts of $23,756 and $0, respectively) . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,104,577 492,098
Other current assets . . . . . . . . . . . . . . . . . . . . . 709,671 74,210
------------- -------------
Total Current Assets . . . . . . . . . . . . . . . . . . . 7,997,709 7,898,791
Property and equipment, net . . . . . . . . . . . . . . . . . . . 820,411 141,556
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 31,001 18,483
------------- -------------
$ 8,849,121 $ 8,058,830
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 3,254,527 $ 1,607,788
Income tax payable . . . . . . . . . . . . . . . . . . . . -- 252,924
Note payable . . . . . . . . . . . . . . . . . . . . . . . -- 331,466
Other current liabilities . . . . . . . . . . . . . . . . . 501,406 283,413
------------- -------------
Total Current Liabilities . . . . . . . . . . . . . . 3,755,933 2,475,591
------------- -------------
Long term capital lease obligations . . . . . . . . . . . . . . . 242,283 4,356
------------- -------------
Commitments and Contingencies -- --
Stockholders' Equity:
Preferred stock, par value $.01, authorized
5,000,000 shares, none issued or outstanding . . . . . . . -- --
Common stock, par value $.01, authorized
10,000,000 shares, issued and outstanding 2,890,200 and
2,856,000 shares at June 30, 1996 and 1995, respectively . 28,902 28,560
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 5,253,234 5,285,494
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . (431,231) 264,829
------------- -------------
4,850,905 5,578,883
------------- -------------
$ 8,849,121 $ 8,058,830
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 143
VIEW TECH, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,346,103 $ 6,963,487
Cost of Revenues . . . . . . . . . . . . . . . . . . . . . 9,042,922 4,327,679
------------- -------------
Gross Profit . . . . . . . . . . . . . . . . . . . . . . 4,303,181 2,635,808
------------- -------------
Operating Expenses:
Selling expenses . . . . . . . . . . . . . . . . . . . 1,706,626 685,428
General and administrative expenses . . . . . . . . . . 3,491,509 1,209,982
------------- -------------
5,198,135 1,895,410
------------- -------------
Income (Loss) from Operations . . . . . . . . . . . . . . . (894,954) 740,398
Other Income (Expense) . . . . . . . . . . . . . . . . . . (153,222) 12,575
------------- -------------
(1,048,176) 752,973
Provision for Income Taxes . . . . . . . . . . . . . . . . 352,116 (294,083)
============= =============
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . $ (696,060) $ 458,890
============= =============
Earnings (Loss) Per Share . . . . . . . . . . . . . . . . . $ (.24) $ .26
============= =============
Weighted Average Shares Outstanding . . . . . . . . . . . . 2,870,242 1,761,550
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 144
VIEW TECH, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Common stock Additional Retained Total
------------------------ Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1994 . . . . . . . 1,476,000 $ 14,760 $ 15,080 $ (194,061) $ (164,221)
Common stock issued . . . . . . . . . 1,380,000 13,800 5,270,414 -- 5,284,214
Net Income for year ended
June 30, 1995 . . . . . . . . . -- -- -- 458,890 458,890
-------------- -------------- -------------- -------------- --------------
Balance, June 30, 1995 . . . . . . . 2,856,000 28,560 5,285,494 264,829 5,578,883
Shares issued under stock
option plan . . . . . . . . . . 34,200 342 11,170 -- 11,512
Additional costs of initial public
offering of common stock . . . -- -- (43,430) -- (43,430)
Net loss for year ended
June 30, 1996 -- -- -- (696,060) (696,060)
-------------- -------------- -------------- -------------- --------------
Balance, June 30, 1996 . . . . . . . 2,890,200 $ 28,902 $ 5,253,234 $ (431,231) $ 4,850,905
============== ============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 145
VIEW TECH, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ (696,060) $ 458,890
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 168,792 54,479
Provision for bad debts . . . . . . . . . . . . . . . . . . 23,756 --
Loss on sale of fixed assets . . . . . . . . . . . . . . . . 2,007 --
Reserve on term loan to PDS . . . . . . . . . . . . . . . . 265,000 --
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . (2,399,474) (1,459,665)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . (612,479) (298,330)
Prepaids and other assets . . . . . . . . . . . . . . . . . (647,979) 22,406
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 1,646,739 456,156
Other accrued liabilities . . . . . . . . . . . . . . . . . (106,912) 438,152
---------------- ----------------
Net cash used by operating activities (2,356,610) (327,912)
---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . (457,695) (66,983)
Term loan to PDS . . . . . . . . . . . . . . . . . . . . . . . . (265,000) --
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . 3,480 --
Net cash used by investing activities . . . . . . . . . (719,215) (66,983)
---------------- ----------------
Cash flows from financing activities:
Lease payable reduction . . . . . . . . . . . . . . . . . . . . . (85,531) (60,858)
Long-term debt reduction . . . . . . . . . . . . . . . . . . . . (331,466) (27,790)
Draw on line of credit . . . . . . . . . . . . . . . . . . . . . -- 299,970
Line of credit reduction . . . . . . . . . . . . . . . . . . . . -- (299,970)
Issuance of common stock, net . . . . . . . . . . . . . . . . . . 11,512 5,284,214
Additional costs for initial public offering
of common stock . . . . . . . . . . . . . . . . . . . . . . (43,430) --
---------------- ----------------
Net cash provided (used) by financing activities . . . (448,915) 5,195,566
---------------- ----------------
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . (3,524,740) 4,800,671
Cash, beginning of period . . . . . . . . . . . . . . . . . . . . . . . 4,987,939 187,268
---------------- ----------------
Cash, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,463,199 $ 4,987,939
================ ================
Supplemental disclosures:
Operating activities reflect:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . $ 40,281 $ 62,690
================ ================
Income taxes paid . . . . . . . . . . . . . . . . . . . . . $ 374,680 $ 800
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 146
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
NOTE 1 - THE BUSINESS
View Tech, Inc. (the "Company") markets and installs video
communications systems and provides continuing services related to installed
systems to customers in Alabama, Arizona, Arkansas, California, Colorado,
Georgia, Louisiana, Mississippi, Montana, New Mexico, Oklahoma, Tennessee,
Texas, Utah and Wyoming. The Company was incorporated under the laws of
California in 1992 and commenced operations in July 1992.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition. The Company sells both products and services.
Product revenue consists of revenue from the sale of video communications
equipment and is recognized at the time title to the equipment passes to the
customer. Service revenue is derived from services rendered in connection with
the sale of new systems and from services rendered with respect to previously
installed systems. Services rendered in connection with the sale of new
systems are billed as a single charge and consist of engineering services
related to system integration, installation, technical training, user training
and one-year parts-and-service warranty. The majority of these services are
rendered at or prior to installation, and all of the revenue is recognized at
the time of installation, with a reserve established for the estimated future
costs of warranty services. Services rendered with respect to previously
installed systems are also billed as a single charge and consist of engineering
services related to evaluation and enhancement of equipment, additional
technical and user training, and extended warranty services. The related
revenue is also recognized at the time the majority of the services are
rendered, with a similar reserve established for the estimated costs of the
warranty services included in the charge.
Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Net Income (Loss) Per Share. Net income per share is computed on the
basis of the weighted average number of shares of common stock outstanding
during the period after consideration of the dilutive effect, if more than 3%,
of stock options. All options granted by the Company at a price less than the
initial public offering price during the 12 months preceding the initial public
offering (using the treasury stock method until shares are issued) have been
included in the calculation of common and common equivalent shares outstanding
for the periods presented if dilutive.
Cash and Cash Equivalents. The Company considers all highly liquid
investments with a maturity not exceeding three months at the date of purchase
to be cash equivalents. Short-term investments are stated at lower of cost or
market and are insured up to $100,000 by the FDIC.
Inventories. Inventories are accounted for on the basis of the lower
of cost or market. Cost is determined on a FIFO (first-in, first-out) basis.
Included in inventory is demonstration equipment held for resale in the
ordinary course of business. The Company sells its demonstration equipment
after the six month holding period required by its primary supplier.
Property and Equipment. Property and equipment are recorded at cost
and include improvements that significantly add to utility or extend useful
lives. Depreciation and amortization of property and equipment is provided
using the straight-line and MACRS methods over estimated useful lives ranging
from one to seven years. Expenditures for maintenance and repairs are charged
to expense as incurred.
Income Taxes. The Company accounts for income taxes using SFAS No.
109, "Accounting for Income Taxes," which requires a liability approach to
financial accounting and reporting for income taxes.
F-6
<PAGE> 147
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
Concentration of Risk. Items that potentially subject the Company to
concentrations of credit risk consist primarily of investments in excess of
FDIC limits and accounts receivable. Credit losses have not been material to
the Company's operations.
Approximately 58% of the Company's revenues are attributable to the
sale of equipment manufactured by PictureTel. Termination or change of the
Company's business relationship with PictureTel, disruption in supply, failure
of this supplier to remain competitive in quality, function or price, or a
determination by this supplier to reduce reliance on independent distributors
such as the Company could have a material adverse effect on the Company.
Reclassifications. The Company has reclassified certain items
including travel expenses relating to technical services of $51,442 to cost of
revenue from general and administrative expense for the year ended June 30,
1995 to conform to the current years presentation.
NOTE 3 - CASH
Cash is summarized as follows:
<TABLE>
<CAPTION>
June 30,
------------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Cash in money market . . . . . . . . . . $ 1,014,356 $ 4,602,035
Cash in other accounts . . . . . . . . . 448,843 385,904
----------------- ----------------
$ 1,463,199 $ 4,987,939
----------------- ----------------
</TABLE>
NOTE 4 - ACCOUNTS RECEIVABLE
The Company operates in a single business segment. Accounts
receivable consist of amounts due from trade customers for direct sales of
products and services.
NOTE 5 - INVENTORY
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . $ 343,774 $ 228,916
Demonstration equipment . . . . . . . 488,148 155,142
Spare Parts . . . . . . . . . . . . . 272,655 108,040
----------------- -----------------
$ 1,104,577 $ 492,098
================= =================
</TABLE>
NOTE 6 - OTHER CURRENT ASSETS
Included in other current assets at June 30, 1996 are deferred and
prepaid state and federal income taxes of $309,030. Also included are advances
to employees, officers and stockholders of $52,790 and $20,787, at June 30,
1996 and 1995, respectively.
F-7
<PAGE> 148
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
NOTE 7 - PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
June 30,
------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Computer equipment and software . . . $ 253,565 $ 37,761
Equipment . . . . . . . . . . . . . . 180,950 47,231
Furniture and fixtures 100,663 51,392
Leasehold improvements . . . . . . . . 103,247 25,557
Autos . . . . . . . . . . . . . . . . 18,931 2,793
----------------- -----------------
657,356 164,734
Less accumulated depreciation . . . . 172,656 58,186
----------------- -----------------
484,700 106,548
Leased equipment under capital leases,
net of accumulated amortization . . . 355,711 35,008
----------------- -----------------
$ 820,411 $ 141,556
================= =================
</TABLE>
NOTE 8 - NOTE PAYABLE
Note payable at June 30, 1995 represents a note, guaranteed by the
Small Business Administration. The note was repaid in July 1995 with proceeds
from the Company's initial public offering which closed on June 15, 1995.
NOTE 9 - CAPITAL LEASE OBLIGATIONS
The Company leases a portion of its machinery and equipment under
certain capital lease agreements. The following is an analysis of the leased
equipment:
<TABLE>
<CAPTION>
June 30,
----------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C> <C> <C>
Equipment . . . . . . . . . . . . . . . . . . . $ 426,570 $ 84,516
Less accumulated amortization . . . . . . . . . 90,859 49,508
---------------- ---------------
$ 355,711 $ 35,008
================ ===============
</TABLE>
F-8
<PAGE> 149
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
The following is a schedule of future minimum lease payments required
under capital leases, together with their present value as of June 30, 1996:
<TABLE>
<CAPTION>
Year Ending June 30,
--------------------
<S> <C> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 91,986
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,900
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,900
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,028
2001 and thereafter . . . . . . . . . . . . . . . . . . . . . 27,455
-------
$ 334,269
================
Net minimum lease payments . . . . . . . . . . . . . . . . . . $ 412,808
Less amount representing interest . . . . . . . . . . . . . . 78,539
-----------------
Present value of net minimum lease payments . . . . . $ 334,269
=================
</TABLE>
The current portion due under capital lease obligations at June 30, 1996 was
$91,986.
NOTE 10 - LINE OF CREDIT
The Company maintains a $500,000 credit facility (the "Note") to meet
its working capital needs, if required. The Note expires on November 1, 1996
and provides for interest at the prime rate plus one and one-half percent per
year. Funds available under the Note are reduced by certain outstanding
standby letters of credit issued on behalf of the Company. No amounts were
outstanding under the Note at June 30, 1996, although the Company has as of
June 30, 1996, five outstanding standby letters of credits aggregating $300,000
of which four were issued in favor of one leasing company in connection with
certain capital lease transactions relating to the purchase of computer
equipment and furniture and one was issued to a surety company in connection
with its issuance of a performance bond on behalf of the Company. The letter
of credit holders may draw against the letters of credit if the Company fails
to make timely payments or meet certain other conditions. As a result of
issuing the five standby letters of credit, the balance available under the
Note has been reduced to $200,000. As of June 30, 1996, the Company was in
technical default on two of its loan covenants for which it has received a
waiver of default from the lender.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company leases its facilities in California, Colorado, Texas,
Tennessee and Georgia, under operating leases, expiring through September 1998.
The Company also leases certain equipment. Lease payments for the year ended
June 30, 1996 and 1995 were $404,960 and $85,211 respectively. Minimum future
rental commitments under noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
--------------------
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 267,798
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,576
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,422
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,013
2001 and thereafter . . . . . . . . . . . . . . . . . . . . . 15,679
-----------------
$ 624,488
=================
</TABLE>
Letter of Credit. The Company's primary supplier, PictureTel
Corporation, provides the Company with a purchasing line of credit for $250,000
in favor of PictureTel in connection with this arrangement. The $250,000
letter of credit is collateralized by cash deposits of $150,000 and the assets
of the Company.
F-9
<PAGE> 150
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
NOTE 12 - COMMON AND PREFERRED STOCK
Common stock. On March 20, 1995, the Company effected a 100-for-1
stock split, increasing the number of outstanding shares to 1,476,000. All
share and per-share data have been adjusted to reflect these adjustments to
capital stock.
Public Stock Offering. On June 15, 1995 the Company completed an
initial public stock offering for the sale of 1,200,000 shares of its common
stock at $5.00 per share, less offering expenses. On June 25, 1996 the Company
transferred and closed the sale of an additional 180,000 shares of its common
stock to a representative of the underwriters on the same terms, solely to
cover over-allotments. With the over- allotment option exercised in full, the
total price to the public, total underwriting discounts and expenses, other
expenses and net proceeds to the Company were $6,971,875, $978,343, $709,318,
and $5,284,214, respectively.
Warrants. Included in the public stock offering in June 1995, was the
sale of 575,000 warrants to the public. All warrants are exercisable at $5.00
per share for a period of two years commencing one year after the effective
date of the registration statement.
Upon consummation of the public offering, the Company issued the
Underwriter 120,000 warrants to purchase common stock of the Company at an
exercise price of $6.75 or 135% of the public offering price per share. Such
warrants may be exercised at any time during the period of five years
commencing June 15, 1995. In addition, the Company issued the underwriters
50,000 warrants at an exercise price of $.1675 per warrant or 135% of the
public offering price. Each warrant is exercisable into one share of common
stock at a price of $6.75 per share for a three -year period commencing on June
15, 1995.
Preferred Stock. On February 1, 1995, the shareholders approved an
amendment to the Articles of Incorporation to authorize the issuance of
5,000,000 shares of $.01 par value Preferred Stock. The Preferred Stock may be
issued in one or more series with such rights and preferences as may be
determined by the Board of Directors. No Shares of Preferred Stock have been
issued.
Stock Option Plan. In July 1994, the Company began granting stock
options to key employees and certain non-employee directors and consultants to
the Company. The options are intended to provide incentive for such persons'
service and future services to the Company thereby promoting the interest of
the Company and its shareholders.
The stock option plan generally requires the exercise price of options
to be not less than the estimated fair market value of the stock at the date of
grant. Options vest over a maximum period of four years and may be exercised
in varying amounts over their respective terms. In accordance with the Plan,
all outstanding options shall become immediately exercisable upon a greater
than 30% change in control of the Company.
Activity with respect to the Stock Option Plan has been as follows:
<TABLE>
<CAPTION>
Exercise
Shares Price
------------- --------------------
<S> <C> <C>
Options outstanding, June 30, 1995 . . . . . . . . . . 376,600 $ .250 - 5.000
Granted . . . . . . . . . . . . . . . . . . . . . . 498,500 6.375 -7.750
Exercised . . . . . . . . . . . . . . . . . . . . . (34,300) .250 - .375
Canceled . . . . . . . . . . . . . . . . . . . . . (16,700) .250 -6.625
-------------
Options outstanding, June 30, 1996 . . . . . . . . . . 824,100
=============
</TABLE>
In addition, as of June 30, 1996, the Company had outstanding an
aggregate of 346,000 options primarily to consultants and advisors to the
Company. Approximately 6,000 options were issued at a market price of $5.00,
the remainder of such options were issued at market prices ranging from $6.375
to $7.375 and are fully vested.
F-10
<PAGE> 151
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
NOTE 13 - PENSION AND PROFIT SHARING PLAN
The Company has adopted a 401(k) retirement plan. Employees may
contribute up to 15% of their compensation per year, with the Company matching
25% of the employees' contributions not to exceed 5% of the compensation. All
employees with six months of continuous service are eligible to participate in
the plan. Company contributions vest based on the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Percent
---------------- --------------
<S> <C>
Less than 2 . . . . . . . . . . . . . . . . . . . . . 0%
2 . . . . . . . . . . . . . . . . . . . . . 20%
3 . . . . . . . . . . . . . . . . . . . . . 40%
4 . . . . . . . . . . . . . . . . . . . . . 60%
5 . . . . . . . . . . . . . . . . . . . . . 80%
6 or more . . . . . . . . . . . . . . . . . 100%
</TABLE>
Employer contributions to the 401(k) plan for the years ended June 30,
1996 and 1995 were $23,757 and $13,636, respectively.
NOTE 14 - OTHER INCOME (EXPENSE)
Included in other income (expense) at June 30, 1996, is a $265,000
expense incurred in connection with the write-off of the Company's note
receivable from Power-Data Services, Inc. ("PDS") which was due on May 31,
1996. The note and interest were not paid when due, therefore, the Company has
deemed this note to be uncollectible.
NOTE 15 - PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
Provision for income taxes is as follows:
Years Ended June 30,
------------------------------------------
1996 1995
---------------- -----------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . $ 178,150 $ (185,040)
State . . . . . . . . . . . . . . . (800) (68,684)
Deferred:
Federal . . . . . . . . . . . . . . 128,309 (34,031)
State . . . . . . . . . . . . . . . 46,457 (6,328)
---------------- -----------------
$ 352,116 $ (294,083)
================ =================
</TABLE>
The current portion of the Federal income tax benefit is comprised of
an income tax refund created by the carryback of a net operating loss. The
primary components of temporary differences which give rise to deferred taxes
at June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Deferred tax asset:
<S> <C> <C>
Reserves and allowances . . . . . . . . . . . $ 22,677
Net operating loss carryfoward . . . . . . . 165,007
---------
$ 187,684
=========
</TABLE>
F-11
<PAGE> 152
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
The tax effect of temporary differences that give rise to deferred tax
liabilities at June 30, 1996 was not material. Management has determined that
the Company will be able to realize the tax benefits of the net deferred tax
assets based on the future reversal of the taxable temporary differences.
At June 30, 1996, the Company had available net operating loss (NOL)
carryforwards of approximately $580,000 for federal income and state tax
purposes, respectively. The federal NOL has a carryover period of 15 years and
is available to offset future taxable income, if any, through 2011, and may be
subject to an annual statutory limitation.
NOTE 16 - SUPPLEMENTAL DISCLOSURES - CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Schedule of noncash transactions:
Noncash investing and financing transactions:
Cost of fixed assets purchased . . . . . . . . $ 853,134 $ 66,983
Less lease financing . . . . . . . . . . . . . (395,439) --
---------------- ----------------
Cash paid for fixed assets . . . . . . . . . . $ 457,695 $ 66,983
================ ================
</TABLE>
NOTE 17 - RELATED PARTY TRANSACTIONS
The Company had obtained a $100,000 letter of credit used to guarantee
payment to a major supplier. The letter of credit matured July 1, 1995, and
was secured by a certificate of deposit owned by the Company's President. This
certificate of deposit was redeemed and returned to the Company's President. A
new letter of credit was obtained at the Company's primary banking institution.
One individual who served as a director of the Company through June
24, 1996 is also an executive officer of Windermere Holdings, Incorporated
("Windermere"), who serves as an advisor to the Company. The Company has
entered into a management services agreement with Windermere under which
Windermere is obligated to assist the Company with a variety of management
matters, including strategic initiatives, marketing strategies and contract
negotiations. The initial agreement expired on September 30, 1995 and was
subsequently renewed by the Company on November 1, 1995 for a period of eight
months. In connection with Windermere's services, the Company paid fees and
expenses of $72,500 and $32,642 for the year ended June 30, 1996.
One of the Company's directors who served as a director of the Company
through June 12, 1996, also serves as an executive officer of Coffin # KCSA,
the Company's public relations firm and advisor. In connection with Coffin #
KCSA's services, the Company paid fees and expenses of $65,000 and $13,173,
respectively for the year ended June 30, 1996.
NOTE 18 - SUBSEQUENT EVENTS
ACQUISITIONS
VISTATEL INTERNATIONAL, INC.
Effective July 1, 1996, the Company acquired the net assets of
VistaTel International, Inc. ("VistaTel"), a private company, based in Boca
Raton, Florida, which is a supplier of video conferencing products and services
within the state of Florida and is one of PictureTel's national re-sellers.
View Tech issued 52,857 shares of common stock, valued at $7.00 per share, to
the sole shareholder of VistaTel. The excess of the acquisition price over the
net assets acquired of approximately $339,000 will be accounted for as goodwill
and amortized over 15 years.
F-12
<PAGE> 153
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
GROUPNET, INC.
Pursuant to a merger agreement dated August 30, 1996, View Tech
acquired GroupNet, Inc. ("GroupNet") for cash and View Tech common stock valued
at $1,380,000. The purchase price consisted of 150,000 shares of common stock
valued at $7.00 per share and $330,000 in cash, of which, $110,000 was paid on
August 30, 1996 in connection with the execution of the agreement, and $220,000
is payable in equal installments of $110,000 due on October 15, 1996 and
December 16, 1996, respectively. The excess of the acquisition price over the
net assets acquired of approximately $1,330,000 will be accounted for as
goodwill and amortized over 15 years. GroupNet, based in Boston,
Massachusetts, was an authorized PictureTel dealer in the northeastern United
States. GroupNet merged into View Tech, which will continue to operate the
business of GroupNet.
USTELECENTERS, INC.
On September 5, 1996, the Company announced that it entered into a
definitive agreement of merger with USTeleCenters, Inc. ("USTeleCenters"), who
is an authorized sales agent for several of the regional bell operating
companies. The merger is valued at approximately $18.5 million and is subject
to the approval by View Tech's stockholders as well as satisfactory completion
of due diligence and certain conditions precedent. USTeleCenters currently owes
its primary lender (and such lender's affiliate) approximately $3.0 million
which is to be paid in full or appropriately refinanced at the close of such
merger. The transaction will be accounted for as a pooling of interests in
which USTeleCenters' stockholders will exchange all of their outstanding UST
shares and options for View Tech Common Stock options, respectively. The
transaction is expected to be completed on or about November 30, 1996. It is
anticipated that USTeleCenters stockholders and optionholders (upon exercise of
their options) will receive up to 2,500,000 shares of View Tech Common Stock.
During July and August 1996, the Company advanced an aggregate of $1
million to UST for working capital purposes and in order for USTeleCenters to
repay certain bank debt due on September 1, 1996. The $1 million advance is
evidenced by a note which is subordinated to USTeleCenters' debt obligations to
its primary lender (and such lender's affiliates). The promissory note
evidencing USTeleCenters' indebtedness provides for interest at 10%, payable
quarterly commencing on September 30, 1996. The principal and accrued interest
are due on June 15, 1997.
The Company is currently seeking bank financing, private debt and/or
equity financing for purposes of meeting anticipated cash needs related to the
merger with USTeleCenters. The company is required to either refinance or
repay certain debt and lease obligations of approximately $3.0 million in the
aggregate to USTeleCenters' primary lender (and such lender's affiliate) and is
required to pay certain merger costs of approximately $1.8 million, primarily
consisting of advisory fees and legal and accounting costs. In addition, the
Company will require additional working capital to efficiently operate the
combined companies during the months following the business combination.
Exclusive of the cash required in connection with the merger with
USTeleCenters, the Company believes that its existing cash balances, combined
with the proceeds from its private placement of common stock, anticipated
operating cash flow and borrowings under existing and anticipated credit
facilities will be adequate to meet the Company's on-going cash needs for the
next twelve months. There can be no assurance that the Company will be able to
raise additional financing on favorable terms, if at all, or that it will be
able to do so on a timely basis. Inability to obtain required additional
financing could limit the Company's ability to complete its business
combination with USTeleCenters and/or to efficiently operate the combined
companies.
F-13
<PAGE> 154
VIEW TECH,INC.
NOTES TO FINANCIAL STATEMENTS - (continued)
PRIVATE PLACEMENT
Subsequent to June 30, 1996, the Company received subscriptions for
equity capital of approximately $1.5 million through the private placement of
approximately 300,000 shares of common stock. Upon closing of the private
placement, the Company will realize net proceeds of approximately $1.380
million. The Company will use the net proceeds for general working capital
purposes and for working capital loans made to USTeleCenters in connection with
the proposed merger.
F-14
<PAGE> 155
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To USTeleCenters, Inc.:
We have audited the accompanying balance sheets of USTeleCenters, Inc. (a
Massachusetts corporation) as of December 31, 1994 and 1995, and the related
statements of operations, stockholders' deficit and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USTeleCenters, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 24, 1996 (except with respect to
the matter discussed in Note 2, as to which
the date is June 3, 1996)
F-15
<PAGE> 156
USTELECENTERS, INC.
BALANCE SHEETS
AT DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
ASSETS
December 31
------------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
Current Assets:
Accounts receivable, net of reserves of $799,000 and $ 3,884,777 $ 2,980,179
$350,000 in 1994 and 1995, respectively . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . 484,789 559,364
Other current assets . . . . . . . . . . . . . . . . . . . 94,552 120,141
-------------- --------------
Total Current Assets . . . . . . . . . . . . . . . 4,464,118 3,659,684
Property and Improvements, At Cost:
Equipment . . . . . . . . . . . . . . . . . . . . . . . . 2,146,276 2,426,285
Furniture and fixtures . . . . . . . . . . . . . . . . . . 1,438,463 1,609,167
Leasehold improvements . . . . . . . . . . . . . . . . . . 623,396 209,406
-------------- --------------
4,208,135 4,244,858
Less-Accumulated depreciation and amortization . . . . . . . . . . 1,460,416 2,123,608
-------------- --------------
2,747,719 2,121,250
-------------- --------------
Other Long-Term Assets 93,957 56,214
-------------- --------------
$ 7,305,794 $ 5,837,148
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE> 157
USTELECENTERS, INC.
BALANCE SHEETS
AT DECEMBER 31, 1994 AND 1995
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1994 1995
--------------- ---------------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt . . . . . . . . . . $ 1,180,036 $ 1,105,491
Note payable to vendor . . . . . . . . . . . . . . . . . -- 700,352
Accounts payable . . . . . . . . . . . . . . . . . . . . 1,609,501 1,778,858
Accrued expenses . . . . . . . . . . . . . . . . . . . . 701,443 842,726
Accrued restructuring costs . . . . . . . . . . . . . . 159,167 26,500
Customers' deposits . . . . . . . . . . . . . . . . . . 157,001 92,365
Current portion of amounts due to landlords . . . . . . 131,003 226,896
--------------- ---------------
Total Current Liabilities . . . . . . . . . . . . . . . 3,938,151 4,773,188
Long-Term Debt, Less Current Maturities . . . . . . . . . . . . . 3,789,952 1,946,186
--------------- ---------------
Amounts Due to Landlords, Net of Current Portion . . . . . . . . 301,505 119,514
--------------- ---------------
Deferred Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 89,356 53,500
--------------- ---------------
Commitments and Contingencies (Note 7)
Stockholders' Equity:
Common stock, $.01 par value
Authorized--1,000,000 and 11,000,000 shares at December
31, 1994 and 1995, respectively
Issued-875,500 shares and 8,994,657 shares
at December 31, 1994 and 1995, respectively . . 8,755 89,947
Capital in excess of par value . . . . . . . . . . . . . 1,024,172 1,369,310
Cumulative earnings (deficit) . . . . . . . . . . . . . 202,577 (465,823)
Stockholder distributions . . . . . . . . . . . . . . . (2,027,674) (2,027,674)
Treasury stock (10,500 shares), at cost . . . . . . . . (21,000) (21,000)
--------------- ---------------
Total stockholders' deficit . . . . . . . . . . (813,170) (1,055,240)
--------------- ---------------
$ 7,305,794 $ 5,837,148
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE> 158
USTELECENTERS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Revenues:
Agency commission . . . . . . . . . . . . . . . . . . . . . . . $ 18,114,987 $ 14,175,993
System and other product sales . . . . . . . . . . . . . . . . 3,918,710 5,798,600
------------- -------------
22,033,697 19,974,593
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . 2,938,910 4,650,121
Sales and marketing expenses . . . . . . . . . . . . . . . . . 15,805,023 11,418,695
General and administrative expenses . . . . . . . . . . . . . . 4,105,086 2,938,277
------------- -------------
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . (815,322) 967,500
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (232,900) (501,360)
Other Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93,000) (106,340)
Loss on Sublease, including shutdown of offices . . . . . . . . . . . . . . . (318,000) (994,900)
------------- -------------
Net loss before state tax provision . . . . . . . . . . . . . . . . . . . . . (1,459,222) (635,100)
State Tax Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (33,300)
------------- -------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,459,222) $ (668,400)
============= =============
Distribution to Stockholders . . . . . . . . . . . . . . . . . . . . . . . . $ (741,154) $ --
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE> 159
USTELECENTERS, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
Common Stock
Capital in Cumulative Total
NUMBER $.01 Excess of Earnings Stockholder Treasure Stockholders'
OF SHARES PAR VALUE par Value (Deficit) Distributions Stock Deficit
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December, 31, 1993 . . . . . 866,500 $ 8,665 $1,006,262 $ 1,661,799 $ (1,286,520) $ (21,000) $ 1,369,206
Stockholder distributions . . . . . . - - - - (741,154) - (741,154)
Exercise of stock options . . . . . . 9,000 90 17,910 - - - 18,000
Net loss . . . . . . . . . . . . . . - - - (1,459,222) - - (1,459,222)
--------- ------ ---------- ----------- ----------- --------- -----------
Balance, December 31, 1994 . . . . . 875,500 8,755 1,024,172 202,577 (2,027,674) (21,000) (813,170)
Issuance of common stock, net of
offering costs of $142,011 . . . . 8,119,157 81,192 345,138 - - - 426,330
Net loss . . . . . . . . . . . . . - - - (668,400) - - (668,400)
--------- ------- ---------- ------------ ------------ ---------- -----------
Balance, December 31, 1995 . . . . . 8,994,657 $89,947 $1,369,310 $ (465,823) $ (2,027,674) $ (21,000) $(1,055,240)
========== ======= ========== =========== ============ ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 160
USTELECENTERS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,459,222) $ (668,400)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 666,205 741,178
Noncash charge relating to loss on sublease, including shutdown of 318,000 360,847
offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . (300,857) 904,598
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,526 (142,497)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 95,328 (25,589)
Cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,475 --
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 144,252 169,357
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . (425,149) 8,616
Customers' deposits . . . . . . . . . . . . . . . . . . . . . . . . (88,984) (64,636)
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,356 (35,856)
------------- -------------
Net cash provided by (used in) operating activities . . . . . . (645,070) 1,247,618
------------- -------------
Cash Flows from Investing Activities:
Purchase of property and improvements . . . . . . . . . . . . . . . . . (661,904) (238,602)
Decrease in other long-term assets . . . . . . . . . . . . . . . . . . . 7,078 32,007
------------- -------------
Net cash used in investing activities . . . . . . . . . . . . . (654,826) (206,595)
------------- -------------
Cash Flows from Financing Activities:
Issuance of note payable to bank . . . . . . . . . . . . . . . . . . . . 1,500,000 --
Issuance of note payable to vendor . . . . . . . . . . . . . . . . . . . -- 700,352
Net borrowings (payments) on line of credit . . . . . . . . . . . . . . 891,270 (1,073,311)
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . (291,714) (845,000)
Payments on amounts due to former landlord . . . . . . . . . . . . . . . (114,853) (249,394)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . -- 426,330
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . 18,000 --
Stockholder distributions . . . . . . . . . . . . . . . . . . . . . . . (741,154) --
------------- -------------
Net cash provided by (used in) financing activities . . . . . . 1,261,549 (1,041,023)
------------- -------------
Net Decrease in Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,347) --
Cash, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,347 --
------------- -------------
Cash, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
============= =============
Supplemental Schedule of Noncash Investing and Financing Activities:
Equipment transferred from inventory . . . . . . . . . . . . . . . . . . $ -- $ 67,922
============= =============
Equipment acquired under capital lease obligations . . . . . . . . . . . $ 1,352,677 $ --
============= =============
Leasehold improvements acquired under allowance for amounts
due to landlord . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,880 $ --
============= =============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 211,000 $ 508,000
============= =============
Cash paid for state taxes . . . . . . . . . . . . . . . . . . . . . . . $ 148,000 $ 40,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 161
USTELECENTERS, INC.
Notes to Financial Statements
December 31, 1995
(1) Operations and Significant Accounting Policies
USTeleCenters, Inc. ("the Company") was incorporated in November 1986
to establish a regional telecommunications equipment distribution and
service business.
The Company incurred significant losses in 1994, which resulted in
noncompliance under certain of its bank covenants and resulted in the
Company restructuring its operations. Certain restructuring costs,
primarily severance and the cost of shutting down office facilities,
were recorded during the year ended December 31, 1994. In addition,
the Company recorded a charge to operations in 1995 for the final
costs associated with the restructuring. This charge primarily
consisted of severance, lease termination costs and fixed-asset
write-offs. Included in accrued expenses and amounts due to former
landlords as of December 31, 1995 are approximately $26,500 and
$190,000, respectively, relating to the restructuring.
The Company and the bank have entered into a Forbearance Agreement
through January 2, 1997, which includes amendments to certain
financial covenants and guarantees by certain stockholders. As a
result of the above changes, the Company's operating plan for 1996
indicates that the Company will have an operating profit. This is
based on assumptions that the Company believes are reasonable. The
Company believes it will meet the terms of the Forbearance Agreement
and its financial covenants through December 31, 1996 based on its
operating plan. However, in the event that the Company does not meet
its plan such that further noncompliance might occur, the Company
would have to seek replacement financing and/or waivers under the
Forbearance Agreement.
The accompanying financial statements reflect the application of
certain accounting policies as described in this note and elsewhere in
the accompanying financial statements and notes.
(a) Inventories
Inventories are stated at the lower of cost (first-in, first-out)
or market and consist of purchased products ready for sale.
(b) Depreciation and Amortization
The Company provides for depreciation and amortization by charges
to operations in amounts estimated to allocate the cost of
property and improvements over their estimated useful lives using
the straight-line and accelerated methods as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
<S> <C>
Equipment 3--10 Years
Furniture and fixtures 7 Years
Leasehold improvements Term of lease
</TABLE>
F-21
<PAGE> 162
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(1) Operations and Significant Accounting Policies (Continued)
(c) Revenue Recognition
The Company has agency agreements with various local exchange
carriers and telecommunications companies whereby the Company
receives commissions on work referred to these entities. The
agreements are subject to annual renewals. The Company recognizes
revenues at the time that it receives an order number for
installation or the service is performed by the local exchange
carrier or telecommunications company. Certain of the entities
have the right to credit or charge back future commission payments
on orders canceled within a 6- to 10-month period from the date of
the order. The Company is not aware of any possible refunds or
charge-backs that these entities might be seeking, which have not
been reserved at December 31, 1995.
In addition, under its agreement with NYNEX, the Company receives
commissions on management contracts. The Company recognizes these
revenues at the time the service is rendered.
The Company sells certain products under various nonexclusive
agreements with equipment manufacturers. The Company recognizes
telecommunication and video conferencing system sales at the time
of shipment. Installation costs, if material, are accrued.
During 1994 and 1995, agency commissions were generated primarily
from the agreements with NYNEX and other local exchange carriers.
In 1994 and 1995, sales to such companies, which accounted for 10%
or greater of total revenue, were as follows:
<TABLE>
<CAPTION>
Percentage of
Total Revenue
----------------------
1994 1995
----------------------
<S> <C> <C>
NYNEX 25% 33%
GTE 14 30
US West* 16 --
------- -------
55% 63%
======= =======
</TABLE>
*During 1995, the Company discontinued doing business with this customer.
F-22
<PAGE> 163
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(1) Operations and Significant Accounting Policies (Continued)
(d) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial
Instruments with Concentrations of Credit Risk, requires
disclosure of any significant off-balance-sheet credit risk
concentrations. The Company derived 63% of revenue from two
significant customers in 1995 (see Note 1(c) above). The Company
has no other significant off-balance-sheet concentration of credit
risk such as foreign exchange contracts, option contracts or other
foreign hedging arrangements.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) Long-Term Debt
At December 31, 1994 and 1995, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Revolving line of credit with a bank $ 1,687,582 $ 1,119,051
Term note due to a bank 1,500,000 655,000
Lease line-of-credit with a bank 1,782,406 1,277,626
--------------- -------------
4,969,988 3,051,677
Less--Current maturities 1,180,036 1,105,491
--------------- -------------
$ 3,789,952 $ 1,946,186
=============== =============
</TABLE>
In 1994, the Company amended its revolving credit agreement with a bank.
The amended agreement provides for a revolving line of credit and a
$1,500,000 term note. The bank has a security interest in the Company's
assets. In addition, the Company has agreed, among other things, to
maintain certain financial covenants and ratios, as defined. As of
December 31, 1995, the Company was in compliance with the covenants or
had received waivers under the Forbearance Agreement. Under the terms of
the Forbearance Agreement, the Company may borrow up to the lesser of the
financial borrowing base, as defined, or $2,000,000. Interest on the
outstanding balance is payable monthly at the bank's base rate (8.5% at
December 31, 1995) plus 1.5%. Under the agreement, the amounts
outstanding are due upon expiration of the agreement on April 30, 1996.
On June 3, 1996, the Company amended its revolving line of credit and
Forbearance Agreement with the bank. The revolving line of credit and
Forbearance Agreement have been extended to January 2, 1997. The amended
revolving credit agreement provides for monthly reductions in the
borrowing base of $50,000 from July to September 1996 and $100,000 for
October 1996.
F-23
<PAGE> 164
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(2) Long-Term Debt (Continued)
Under the term note, the Company is required to make principal payments
in twenty (20) equal, consecutive, monthly payments of $75,000 on the
last day of each month, beginning on April 30, 1995. Interest under the
note accrued at the bank's base rate plus 2.5% until March 31, 1995, and
then, at the bank's base rate plus 4.5%. Interest is payable on the last
day of each month. On June 3, 1996, the term note agreement was amended
to bear interest at the bank's base rate. The outstanding principal and
accrued interest under the term note were paid in full prior to September
1, 1996.
In 1992, the Company entered into a lease line-of-credit agreement with a
bank. The agreement was amended in 1994 to provide for maximum
borrowings of $4,000,000. The Company is required to maintain certain
restrictive covenants, including profitability and liquidity covenants.
Amounts outstanding bear interest at rates ranging from 5.6% to 8.3%. As
of December 31, 1995, the Company was in compliance with the covenants or
had received waivers under the Forbearance Agreement. There was
approximately $1,277,600 outstanding at December 31, 1995.
On June 3, 1996, certain stockholders of the Company guaranteed all
outstanding borrowings under the revolving credit, lease line of credit
and term note agreements up to $430,000. The Company's operating plan
indicates that the stockholders will pay the obligations of the term loan
on September 1, 1996, in order for the Company to have adequate cash to
fund operations through December 31, 1996.
(3) Amounts Due to Landlords
In 1993, the Company entered into a sublease agreement for its previously
occupied facility. Under the terms of the sublease, the Company is still
primarily liable for the amounts due under the original lease. Under the
terms of the sublease agreement, the Company is required to make payments
to the landlord for the monthly differential between the original lease
amount (approximately $23,700 per month) and the sublease income
(approximately $14,000 per month). The Company is required to pay
approximately $9,700 per month through June 1997. The balance of net
future amounts due to the former landlord is $155,840 as of December 31,
1995.
In 1994, the Company financed $150,880 of leasehold improvements through
an allowance from the landlord. As of December 31, 1995, approximately
$116,000 is outstanding for these improvements. This amount is being
repaid in monthly installments of approximately $5,000 through December
1997. In connection with the restructuring discussed in Note 1, the
Company wrote off these improvements and recorded a loss of approximately
$151,000. Additionally, the Company entered into a sublease agreement
for this facility. The Company recorded a loss of approximately $104,000
which represented the difference between the total future payments
reduced by sublease amounts paid directly to the landlord. In the event
that the sublessee fails to make its required monthly payments of
approximately $12,000 through August 1998, the Company is still primarily
liable for such sums. The total amounts payable to the landlord for
monthly rent, net of sublease amounts, are approximately $30,000, $16,000
and $4,000 in 1996, 1997 and 1998, respectively.
In addition, the Company terminated another facility lease during 1995 in
connection with the restructuring. The loss recorded on the lease
termination was approximately $60,000. Approximately $25,000 was
outstanding as of December 31, 1995. This amount is scheduled to be
repaid in full during 1996.
F-24
<PAGE> 165
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(4) Income Taxes
The Company has elected to be treated as an S corporation for federal
income tax purposes pursuant to Section 1362(a) of the Internal Revenue
Code. As an S corporation, all items of income or loss are passed
through to the stockholders and are reportable on their individual income
tax returns. The Company has elected to be treated as a C corporation in
California and New York. As a C corporation, the Company is responsible
for paying all taxes on income allocable to these states.
The Commonwealth of Massachusetts has enacted legislation that imposes
Massachusetts income taxes at the corporate level on certain S
corporations with annual revenues in excess of $6 million. As such, the
Company is subject to taxes at the corporate level in this state.
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, by providing for
state income taxes under the liability method.
The accompanying financial statements do not contain a pro forma income
tax provision as the Company had net operating losses for 1994 and 1995.
(5) Common Stock
The stockholders are entitled to certain rights and privileges, including
voting rights, dividend rights and distribution rights, in the event of
liquidation. The Company has placed certain restrictions on the sale or
transfer of stock by stockholders.
The Company follows a policy of distributing to stockholders an amount
estimated to equal the tax on their respective share of S corporation
quarterly taxable income.
During 1994, the Company made distributions to stockholders of $569,954
for their share of estimated S corporation taxable income. As the
Company did not have taxable income for 1994, it recovered certain of the
amounts distributed to stockholders through an offering of common stock
to existing stockholders. The Company issued 8,119,157 shares of common
stock for net proceeds of $426,330.
F-25
<PAGE> 166
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(6) Stock Option Plan
On September 20, 1988, the Board of Directors approved an incentive stock
option plan (the Plan) providing for a maximum of 1,100,000 shares that
may be issued under the Plan. The Plan stipulates that the option price
may not be less than 100% of the fair market value of the stock on the
date of grant. The Board of Directors has the right to determine a
vesting period upon the granting of options.
The following is a summary of the stock option activity (excluding the
nonqualified options discussed below) for the years ended December 31,
1994 and 1995:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICE RANGE
<S> <C> <C>
Options outstanding, December 31, 1993 67,500 $ 1.00--$ 2.20
Canceled (31,000) 1.00-- 2.00
Exercised (9,000) 2.00
--------- -----------------
Options outstanding, December 31, 1994 27,500 2.00-- 2.20
Granted 750,000 .07-- .10
--------- -----------------
Options outstanding, December 31, 1995 777,500 $ .07--$ 2.20
========= =================
Exercisable, December 31, 1995 77,500 $ .07--$ 2.20
========= =================
</TABLE>
In addition, the Company granted its directors nonqualified options to
purchase 150,000 shares of common stock at an exercise price of $.07 per
share.
(7) Commitments and Contingencies
(a) Commitments
Future minimum annual rental payments under all operating leases
(including amounts due to landlords, net of any of sublease income
discussed in Note 3) as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
<S> <C>
1996 $690,278
1997 465,446
1998 342,813
1999 335,872
2000 350,203
Thereafter 290,713
--------------
$ 2,475,325
==============
</TABLE>
F-26
<PAGE> 167
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(7) Commitments and Contingencies (Continued)
The leases require the Company to pay increases in real estate taxes,
operating costs and repairs over certain base year amounts. Total
rental expense included in the accompanying statements of operations
for the years ended December 31, 1994 and 1995 is approximately
$824,000 and $778,000, respectively. The Company has received rent
concessions during the first year of certain leases, which are being
deferred and amortized over the term of the lease.
(b) Contingencies
The Company is named in an employee-related lawsuit, in which the
plaintiffs are seeking undisclosed damages. The Company is vigorously
defending itself against such litigation and does not expect the
outcome to have a material impact on its financial position.
(8) Profit Sharing Plan
Effective January 1, 1993, the Company adopted a profit sharing plan
in accordance with Internal Revenue Service Code Section 401(k). The
plan covers all employees with six months or more of service.
Eligible employees are permitted to contribute up to 15% of gross
compensation. The Company may match employee contributions. In
addition, the Company reserves the right to make discretionary
contributions based on its profitability. The Company has made
contributions of $44,794 and $42,301 in 1994 and 1995, respectively.
(9) Sale of VMX Equipment
In January 1994, the Company sold to a third party its VMX call
processing equipment and service business. A gain on the sale of
approximately $114,000 is included in other income in the accompanying
1994 statement of operations. In addition, the Company is entitled to
25% of the gross receipts of certain future sales, as defined. The
Company has agreed not to compete with the buyer for a three-year
period.
(10) Note Payable
In January 1996, the Company converted certain amounts payable to an
equipment vendor into a promissory note bearing interest at 9% per
annum. Principal and interest are scheduled to be repaid in monthly
installments of approximately $73,000 from March to December 1996.
(11) Accrued Expenses
Accrued expenses consist of the following at December 31, 1994 and
1995:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Compensation and compensation-related $ 601,268 $ 690,122
Professional fees 56,632 48,000
Other 43,543 104,604
-------------- --------------
$ 701,443 $ 842,726
============== ==============
</TABLE>
F-27
<PAGE> 168
USTELECENTERS, INC.
UNAUDITED BALANCE SHEETS
JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 2,000
Accounts receivable, net of reserves of $528,000 and
$196,000 in 1995 and 1996, respectively . . . . . . 3,486,400 3,187,022
Inventories . . . . . . . . . . . . . . . . . . . . . . . 577,100 643,978
Other current assets . . . . . . . . . . . . . . . . . . 205,200 206,950
-------------- ---------------
Total current assets . . . . . . . . . . . . . . . . 4,268,700 4,039,950
-------------- ---------------
Property & equipment, net . . . . . . . . . . . . . . . . . . 2,442,900 1,900,011
Other long-term assets . . . . . . . . . . . . . . . . . . . 84,377 52,007
-------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . . . $ 6,795,977 $ 5,991,968
============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current maturities of long-term debt . . . . . . . . . . $ 3,310,400 $ 2,795,800
Notes payable to vendor . . . . . . . . . . . . . . . . . -- 437,753
Accounts payable . . . . . . . . . . . . . . . . . . . . 1,703,800 1,656,247
Accrued expenses . . . . . . . . . . . . . . . . . . . . 1,759,600 707,000
Accrued restructuring . . . . . . . . . . . . . . . . . . -- --
Customers' deposits . . . . . . . . . . . . . . . . . . . 188,982 149,500
Current portion of amounts due to landlords . . . . . . . 178,950 172,500
-------------- ---------------
Total current liabilities . . . . . . . . . . . . . 7,141,732 5,918,800
-------------- ---------------
Long term debt, less current maturities . . . . . . . . . . . 1,454,200 537,200
-------------- ---------------
Amounts due to landlords, net of current portion . . . . . . 104,435 73,300
-------------- ---------------
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . 71,428 92,040
-------------- ---------------
Common stock $.01 par value -
Authorized - 1,000,000 and 11,000,000 shares at
June 30, 1995 and 1996, respectively;
Issued - 875,000 and 8,984,157 shares at
June 30, 1995 and 1996, respectively . . . . . . . . 8,755 89,842
Capital in excess of par value . . . . . . . . . . . . . . . 1,024,172 1,348,415
Cumulative earnings (deficit) . . . . . . . . . . . . . . . . (960,071) (39,955)
Stockholder distributions . . . . . . . . . . . . . . . . . . (2,027,674) (2,027,674)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . (21,000) --
-------------- ---------------
Total stockholders' deficit $ (1,975,818) $ (629,372)
Total liabilities and
stockholders' deficit . . . . . . . . . . . . . . . . . . $ 6,795,977 $ 5,991,968
============== ===============
</TABLE>
[The accompanying notes are an integral part of these financial statements.]
F-28
<PAGE> 169
USTELECENTERS, INC.
UNAUDITED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
REVENUES:
Agency commissions . . . . . . . . . . . . . . . . . . . $ 8,641,998 $ 5,579,355
System and other product sales . . . . . . . . . . . . . 2,273,815 2,809,498
---------------- ---------------
10,915,813 8,388,853
----------------- ---------------
COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . . . . . 1,848,064 2,424,129
---------------- --------------
Sales and marketing expenses . . . . . . . . . . . . . . 7,119,836 3,647,860
General and administrative expenses . . . . . . . . . . . 1,765,016 1,583,015
---------------- --------------
10,732,916 7,655,004
---------------- --------------
Income (loss) from operations . . . . . . . . . . . . . . 182,897 733,849
---------------- --------------
Interest and other expense, net . . . . . . . . . . . . . (350,645) (248,981)
Loss on sublease including
shutdown of offices . . . . . . . . . . . . . . . . . . . (994,900) --
---------------- --------------
Income (loss) before state tax provision . . . . . . . . (1,162,648) 484,868
State income tax provision . . . . . . . . . . . . . . . -- (59,000)
---------------- --------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ (1,162,648) $ 425,868
================ ==============
</TABLE>
[The accompanying notes are an integral part of these financial statements.]
F-29
<PAGE> 170
USTELECENTERS, INC.
UNAUDITED STATEMENT OF STOCKHOLDERS DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Common Stock
Capital in Cumulative Total
Number $0.01 Excess of Earnings Stockholder Treasury Stockholders'
of Shares Par Value Par Value (Deficit) Distributions Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 8,994,657 $ 89,947 $1,369,310 $(465,823) $(2,027,674) $(21,000) $(1,055,240)
Retirement of treasury stock (10,500) (105) (20,895) -- -- 21,000 --
Net income -- -- -- 425,868 -- -- 425,868
----------- -------- ---------- ---------- ----------- -------- -----------
Balance, June 30, 1996 8,984,157 $ 89,842 $1,348,415 $ (39,955) $(2,027,674) $ -- $ (629,372)
=========== ======== ========== ========== =========== ======== ===========
</TABLE>
[The accompanying notes are an integral part of these financial statements.]
F-30
<PAGE> 171
USTELECENTERS, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,162,648) $ 425,868
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation & amortization . . . . . . . . . . . . . . . . . . . 457,400 396,694
Noncash charge relating to loss on sublease, including shutdown
of offices . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,847 --
Changes in assets & liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . 398,377 (297,145)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . (92,311) (84,810)
Other current assets . . . . . . . . . . . . . . . . . . . . . (110,648) 3,453
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 94,299 (52,247)
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . -- (262,600)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 342,333 (232,198)
Other current liabilities . . . . . . . . . . . . . . . . . . 45,784 (50,965)
---------------- -------------
Net cash used in operating activities . . . . . . . . . . . 333,433 (153,950)
---------------- -------------
Cash Flows From Investing Activities:
Purchase of property & improvements . . . . . . . . . . . . . . . . (152,581) (174,941)
Decrease in other long-term assets . . . . . . . . . . . . . . . . 9,630 3,942
---------------- -------------
Net cash used in investing activities . . . . . . . . . . . . (142,951) (170,999)
---------------- -------------
Cash flows From Financing Activities:
Payments on note payable to bank . . . . . . . . . . . . . . . . . (390,000) (174,941)
Net borrowings on line of credit . . . . . . . . . . . . . . . . . 199,518 501,890
---------------- -------------
Net cash provided by financing activities . . . . . . . . . . (190,482) 326,949
---------------- -------------
Net Increase in Cash -- 2,000
================ =============
Cash Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . -- --
================ =============
Cash, End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
================ =============
Supplemental disclosure of cash flow information:
---------------- -------------
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . 257,500 248,981
================ =============
</TABLE>
F-31
<PAGE> 172
USTELECENTERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
USTeleCenters, Inc. ("UST") was incorporated in November 1986 to
establish a regional telecommunications equipment distribution and service
business.
UST designs, sells, manages and supports telecommunications systems
solutions for small and medium-sized businesses throughout the United States.
UST develops and manages sales and customer service programs on an outsourced
basis for (i) certain RBOCs, (ii) other telecommunications service providers
and (iii) equipment manufacturers under agency and VAR agreements. In New
England and New York, UST also provides systems integration and on-going
account management consulting for middle market customers. On behalf of its
RBOC clients, UST sells high speed data services, internet access, Centrex
network services, local and long distance services, voice mail and other
"enhanced" services, discount calling plans and toll-free services such as
remote-call-forwarding. As a value-added equipment reseller, UST sells,
installs and maintains data transmission products, video conferencing equipment
and telephone systems.
The information for the six month periods ended June 30, 1996 and 1995
have not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for such periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the rules of the Securities and
Exchange Commission, although the Company believes that the disclosures
included in these financial statements are adequate to make the information not
misleading. The financial statements presented herein should be read in
conjunction with the audited financial statements and notes thereto included in
this Joint Proxy Statement/View Tech Proxy Statement/Prospectus for the fiscal
year ended December 31, 1995.
NOTE 2 - POTENTIAL MERGER
On September 5, 1996, the Company announced a definitive agreement of
merger with View Tech, Inc. ("VTI"). VTI markets, integrates and installs
video communications systems and provides continuing services related to
installed systems. The merger is valued at approximately $18.5 million and is
subject to the approval by VTI's and UST's shareholders as well as satisfactory
completion of due diligence and certain conditions precedent. The transaction
will be accounted for as a pooling of interests in which UST shareholders will
exchange all of their outstanding UST shares and options for VTI common stock
and options, respectively. The transaction is expected to be completed on or
about November 30, 1996. It is anticipated that UST shareholders and
optionholders (upon exercise of their options) will receive approximately 2.5
million shares of VTI common stock.
VTI has advanced UST $1 million evidenced by a promissory note secured
by all assets of UST. Interest accrues at 10% on the unpaid principal balance.
Quarterly interest payments commence on September 30, 1996 and the entire
unpaid balance of principal and accrued interest is due June 15, 1997.
NOTE 3 - STOCK OPTIONS
Subsequent to June 30, 1996, certain directors of the Company
exercised outstanding stock options to purchase 75,000 shares of common stock
at $.07 per share.
F-32
<PAGE> 173
GROUPNET, INC.
BALANCE SHEETS
DECEMBER 31, 1995
UNAUDITED
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,259
Accounts receivable (net of allowance of -0-) . . . . . . . . . . . . . . . . . 137,761
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,919
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,632
--------------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 202,571
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,446
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,921
--------------
$ 258,938
==============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149,214
Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,542
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,673
--------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 171,429
--------------
Long Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,097
--------------
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,412
--------------
Total Stockholder's Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,412
--------------
$ 258,938
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 174
GROUPNET, INC.
STATEMENT OF INCOME
FROM MAY 1, 1995 (INCEPTION) TO DECEMBER 31, 1995
UNAUDITED
<TABLE>
<S> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 391,502
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266,903
--------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,599
--------------
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . 120,187
--------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,412
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 175
GROUPNET, INC.
STATEMENT OF CASH FLOWS
FROM MAY 1, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,412
Non-cash items included in net income:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,819
Changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . (136,316)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43,919)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . (9,998)
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . 171,428
--------------
Total Adjustments . . . . . . . . . . . . . . . . . . . . . . . (8,986)
--------------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . (4,574)
--------------
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . (64,265)
--------------
Cash flows from financing activities:
Borrowings from banks and others . . . . . . . . . . . . . . . . . . . . . . . . 81,443
Repayments of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,345)
Proceeds from sale of common stock . . . . . . . . . . . . . . . . . . . . . . . 5,000
--------------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . 83,098
--------------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 14,259
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . 0
--------------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 14,259
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 176
GROUPNET, INC.
NOTES TO FINANCIAL STATEMENTS
FROM MAY 1, 1995 (INCEPTION) TO DECEMBER 31, 1995
Unaudited
NOTE 1 - BUSINESS ACTIVITIES:
The Company sells, installs and services video conferencing equipment
to financial markets in the New England area. The Company is organized as an S
Corporation (Small Business Corporation) under the applicable laws of the
Commonwealth of Massachusetts.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of cash
and short term investments in highly liquid instruments such as certificates of
deposit and time deposits which generally mature within three months.
BASIS OF ACCOUNTING: Assets and liabilities, revenues and expenses,
are recognized on the accrual method of accounting. Product service contract
revenue is recognized over the length of the service contract, commencing in
the month of installation. The remaining revenue is recorded as deferred
revenue until the revenue is recognized.
INVENTORY: Inventory consists of materials and parts used in the
above mentioned activities and is valued at the lower of cost (determined by
the first-in, first-out method) or market.
DEPRECIATION: Depreciation is computed using the straight-line method
over the estimated useful life of the asset. The costs of maintenance and
repairs is charged to expenses as incurred, whereas significant improvements
are capitalized.
ACCOUNTS RECEIVABLE: Accounts receivable are recorded at their net
realizable value. No allowance for bad debts has been provided as all accounts
receivable are considered collectible.
NOTE 3 - NOTES PAYABLE:
Notes payable consist of the following:
<TABLE>
<S> <C>
Note Payable - AT & T Capital, $115.98 per month,
interest and principal, secured by equipment $ 2,926
Note Payable - Cape Code Bank & Trust, $575.94 per
month, interest and principal, secured by
motor vehicle 28,148
Note Payable - SEED Corp, $595.24 principal per
month plus accrued interest, secured by assets
of the stockholder 47,024
--------
TOTAL $ 78,098
========
</TABLE>
F-36
<PAGE> 177
GROUPNET, INC.
BALANCE SHEETS
JUNE 30, 1996
UNAUDITED
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,182
Accounts receivable (net allowance of $0) . . . . . . . . . . . . . . . . . . . 450,885
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,756
--------------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . 457,823
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,436
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,690
--------------
$ 516,949
==============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,638
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,153
--------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . 402,291
--------------
Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,715
--------------
Stockholder's Equity:
Common Stock; no par value . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
authorized - 200,000 shares
outstanding - 10,000 shares
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,943
--------------
54,943
--------------
$ 516,949
==============
</TABLE>
F-37
<PAGE> 178
GROUPNET, INC.
STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
UNAUDITED
<TABLE>
<S> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 743,031
Cost of Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518,114
--------------
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,917
--------------
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . 158,386
--------------
Income from Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,531
--------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,531
==============
</TABLE>
F-38
<PAGE> 179
GROUPNET, INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
UNAUDITED
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,531
Adjustments to reconcile net income to
net cash from operating activities
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 5,133
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . (314,569)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,919
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,552
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,424
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 70,770
--------------
Net cash provided by operating activities . . . . . . . . . . . 20,760
--------------
Cash flows from investing activity:
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . (6,954)
--------------
Cash flows from financing activities:
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . (5,883)
S Corp distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,000)
--------------
Net cash used by financing activities . . . . . . . . . . . . . (26,883)
Net decrease in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,077)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . 14,259
--------------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 1,182
==============
Supplemental disclosures:
Operating activities reflect:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,826
==============
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
==============
</TABLE>
F-39
<PAGE> 180
VIEW TECH, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
View Tech VistaTel GroupNet Adjustments
--------- -------- -------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents . . . . . $ 1,463,199 $ 34,059 $ 1,182 $ (110,000) (5)
Accounts receivable, net . . . . . . 4,720,262 262,639 450,885
Inventory . . . . . . . . . . . . . 1,104,577
Other current assets . . . . . . . . 709,671 5,756
----------- ----------- ------------ ------------
Total Current Assets . . . . 7,997,709 296,698 457,823 (110,000)
Property and equipment, net . . . . . . . . . 820,411 24,247 56,436
Deferred charges-goodwill . . . . . . . . . . 1,663,918 (5)
Other Assets . . . . . . . . . . . . . . . . 31,001 2,690
----------- ----------- ----------- -----------
$ 8,849,121 $ 320,945 $ 516,949 $ 1,553,918
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable . . . . . . . . . . $ 3,254,527 $ 264,633 $ 296,638 $ ---
Accrued expenses . . . . . . . . . . 19,173
Notes payable . . . . . . . . . . . 12,500 220,000 (5)
Current maturities of long-term debt
Other current liabilities . . . . . 501,406 6,000 93,153
----------- ----------- ----------- -----------
Total Current Liabilities . . . . . 3,755,933 289,806 402,291 220,000
----------- ----------- ----------- -----------
Long-term Liabilities . . . . . . . . . . . . 242,283 59,715
----------- ----------- ----------- -----------
Stockholders' Equity:
Common stock, par value $.01 . . . . 28,902 75,000 5,000 (77,971) (5)
Paid-in capital . . . . . . . . . . 5,253,234 195,000 1,222,971 (5)
Treasury stock . . . . . . . . . . .
Shareholder distributions . . . . . (21,000) 21,000 (5)
Retained earnings (deficit) . . . . (431,231) (238,861) 70,943 167,918 (5)
----------- ----------- ----------- -----------
4,850,905 31,139 54,943 1,333,918
----------- ----------- ----------- -----------
$ 8,849,121 $ 320,945 $ 516,949 $ 1,533,918
=========== =========== =========== ===========
</TABLE>
See notes to the pro forma condensed combined financial statements.
<TABLE>
<CAPTION>
View Tech Pro Forma Pro Forma
Pro Forma UST Adjustments Combined
--------- --- ----------- --------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents . . . . . $ 1,388,440 $ 2,000 $ --- $ 1,390,440
Accounts receivable, net . . . . . . 5,433,786 3,187,022 8,620,808
Inventory . . . . . . . . . . . . . 1,104,577 643,978 1,748,555
Other current assets . . . . . . . . 715,427 206,950 922,377
------------ ------------ ------------- -----------
Total Current Assets . . . . 8,642,230 4,039,950 12,682,180
Property and equipment, net . . . . . . . . . 901,094 1,900,011 2,801,105
Deferred charges-goodwill . . . . . . . . . . 1,663,918 1,663,918
Other Assets . . . . . . . . . . . . . . . . 33,691 52,007 85,698
------------ ------------ ------------ -----------
$ 11,240,933 $ 5,991,968 $ --- $17,232,901
============ ============ ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable . . . . . . . . . . $ 3,815,798 $ 1,656,247 $ (950,000) (4) $ 4,522,045
Accrued expenses . . . . . . . . . . 19,173 707,000 1,080,000 (3) 1,806,173
Notes payable . . . . . . . . . . . 232,500 437,753 670,253
Current maturities of long-term debt 2,795,800 (430,000) (4) 2,365,800
Other current liabilities . . . . . 600,559 322,000 922,559
------------ ------------ ------------ -----------
Total Current Liabilities . . . . . 4,668,030 5,918,800 (300,000) 10,286,830
------------ ------------ ------------ -----------
Long-term Liabilities . . . . . . . . . . . . 301,998 702,540 1,004,538
------------ ------------ ------------ -----------
Stockholders' Equity:
Common stock, par value $.01 . . . . 30,931 89,842 (61,842) (2) 58,931
Paid-in capital . . . . . . . . . . 6,671,205 1,348,415 1,441,842 (2) 9,461,462
Treasury stock . . . . . . . . . . .
Shareholder distributions . . . . . (2,027,674) 2,027,674 (2)
Retained earnings (deficit) . . . . (431,231) (39,955) (3,107,674) (2)(3) (3,578,860)
------------ ------------ ------------ -----------
6,270,905 (629,372) 300,000 5,941,533
------------ ------------ ------------ -----------
$ 11,240,933 $ 5,991,968 $ -0- $17,232,901
============ ============ ============ ===========
</TABLE>
See notes to the pro forma condensed combined financial statements.
F-40
<PAGE> 181
VIEW TECH, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
View Tech US Adjustments Combined
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents . . . . . . . $4,987,939 $ -- $ -- $ 4,987,939
Accounts receivable, net . . . . . . . 2,344,544 3,486,400 -- 5,830,944
Inventory . . . . . . . . . . . . . . . 492,098 577,100 -- 1,069,198
Other current assets . . . . . . . . . 74,210 205,200 -- 279,410
---------- ----------- ----------- -----------
Total Current Assets . . . . . . . . 7,898,791 4,268,700 -- 12,167,491
Property and equipment, net . . . . . . . . 141,556 2,442,900 -- 2,584,456
Other Assets . . . . . . . . . . . . . . . 18,483 84,377 -- 102,860
---------- ----------- ----------- -----------
$8,058,830 $ 6,795,977 $ -- $14,854,807
========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable . . . . . . . . . . . $1,607,788 $ 1,703,800 $ -- $ 3,311,588
Accrued expenses . . . . . . . . . . . -- 1,759,600 1,080,000 (3) 2,839,600
Income tax payable . . . . . . . . . . 252,924 -- -- 252,924
Notes Payable . . . . . . . . . . . . . 331,466 -- -- 331,466
Current maturities of long-term debt . -- 3,310,400 -- 3,310,400
Other current liabilities . . . . . . . 283,413 367,932 -- 651,345
---------- ----------- ----------- -----------
Total Current Liabilities . . . . . 2,475,591 7,141,732 1,080,000 10,697,323
---------- ----------- ----------- -----------
Long-term Liabilities . . . . . . . . . . . 4,356 1,630,063 -- 1,634,419
---------- ----------- ----------- -----------
Stockholders' Equity:
Common stock . . . . . . . . . . . . . 28,560 8,755 16,245 (2) 53,560
Paid-in capital . . . . . . . . . . . . 5,285,494 1,024,172 (37,245)(2) 6,272,421
Treasury stock . . . . . . . . . . . . -- (21,000) 21,000 (2) --
Shareholder distributions . . . . . . . -- (2,027,674) 2,027,674 (2) --
Retained earnings (deficit) . . . . . . 264,829 (960,071) (3,107,674)(3) (3,802,916)
---------- ----------- ----------- -----------
5,578,883 (1,975,818) (1,080,000) 2,523,065
---------- ----------- ----------- -----------
$8,058,830 $ 6,795,977 $ -- $14,854,807
========== =========== =========== ===========
</TABLE>
See notes to the pro forma condensed combined financial statements.
F-41
<PAGE> 182
VIEW TECH, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1996
------------------------------------------------------
View Tech Pro Forma
Pro Forma UST Combined(1)
------------- ------------ --------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ 16,236,944 $ 17,447,633 $ 33,684,577
------------- ------------ --------------
Operating Expenses:
Cost of Revenues . . . . . . . . . . . . 11,168,988 5,226,186 16,395,174
Selling expenses . . . . . . . . . . . . 2,038,890 7,946,719 9,985,609
General and administrative expenses . . . 4,006,478 2,756,276 6,762,754
------------- ------------ --------------
17,214,356 15,929,181 33,143,537
------------- ------------ --------------
Income (Loss) from Operations . . . . . . . . (977,412) 1,518,452 541,040
Other Income (expenses) . . . . . . . . . . . (153,222) (506,036) (659,258)
------------- ------------ --------------
Income (Loss) before Income Taxes . . . . . . (1,130,634) 1,012,416 (118,218)
Provision for Income Taxes(7) . . . . . . . . 385,099 (249,992) 135,107
------------- ------------ --------------
Net Income (Loss) . . . . . . . . . . . . . . $ (745,535) $ 762,424 $ 16,889
============= ============ ==============
Earnings (Loss) Per Share . . . . . . . . . . $ (.24) $ .30 $ -0-
============= ============ ==============
Weighted Average Shares Outstanding(6) . . . 3,073,099 2,500,000 5,873,099
============= ============ ==============
</TABLE>
See notes to the pro forma condensed combined financial statements.
F-42
<PAGE> 183
VIEW TECH, INC.
VIEW TECH PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1996
--------------------------------------------------------------------
View Tech
View Tech VistaTel GroupNet Pro Forma (1)
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ 13,346,103 $ 1,756,308 $ 1,134,533 $ 16,236,944
------------ ----------- ----------- -------------
Operating Expenses:
Cost of Revenues . . . . . . . . . . . . 9,042,922 1,342,359 783,707 11,168,988
Selling expenses . . . . . . . . . . . . 1,706,626 164,494 167,770 2,038,890
General and administrative expenses . . . 3,491,509 297,086 106,955 4,006,478
------------ ----------- ----------- -------------
14,241,057 1,803,939 1,058,432 17,214,356
------------ ----------- ----------- -------------
Income (Loss) from Operations . . . . . . . . (894,954) (47,631) 76,101 (977,412)
Other Income (expenses) . . . . . . . . . . . (153,222) (153,222)
------------ ----------- ----------- -------------
Income (Loss) before Income Taxes . . . . . . (1,048,176) (47,631) 76,101 (1,130,634)
Provision for Income Taxes(7) . . . . . . . . 352,116 19,052 (30,440) 385,099
------------ ----------- ----------- -------------
Net Income (Loss) . . . . . . . . . . . . . . $ (696,060) $ (28,579) $ 45,661 $ (745,535)
============ =========== =========== =============
Earnings (Loss) Per Share . . . . . . . . . . $ (.24) $ (.24)
============ =============
Weighted Average Shares Outstanding(6) . . . 2,870,242 3,073,099
============ =============
</TABLE>
See notes to the pro forma condensed combined financial statements.
F-43
<PAGE> 184
VIEW TECH, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1995
-------------------------------------------
View Tech UST Combined(1)
------------ ------------- -------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . $ 6,963,487 $ 21,734,482 $ 28,697,969
------------ ------------- ------------
Operating Expenses:
Cost of Revenues . . . . . . . . . . . . . 4,327,679 3,291,091 7,618,770
Selling expenses . . . . . . . . . . . . . 685,428 14,880,173 15,565,601
General and administrative expenses . . . . 1,209,982 3,780,590 4,990,572
------------ ------------- ------------
6,223,089 21,951,854 28,174,943
------------ ------------- ------------
Income (Loss) from Operations . . . . . . . . . 740,398 (217,372) 523,026
Other Income (expenses) . . . . . . . . . . . . 12,575 (605,428) (592,853)
Restructuring costs . . . . . . . . . . . . . . -- (1,312,900) (1,312,900)
------------ ------------- ------------
Income (Loss) before Income Taxes . . . . . . . 752,973 (2,135,700) (1,382,727)
Provision for Income Taxes(7) . . . . . . . . . (294,083) 703,826 409,743
------------ ------------- ------------
Net Income (Loss) . . . . . . . . . . . . . . . $ 458,890 $ (1,431,874) $ (972,984)
============ ============= ============
Earnings (Loss) Per Share . . . . . . . . . . . $ .26 $ (.57) $ (.23)
============ ============= ============
Weighted Average Shares Outstanding(6) . . . . 1,761,550 2,500,000 4,261,550
============ ============= ============
</TABLE>
See notes to the pro forma condensed combined financial statements.
F-44
<PAGE> 185
VIEW TECH, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. FISCAL PERIODS
1996 Pro Forma Information. The pro forma data presented herein
includes the View Tech Pro Forma information as of June 30, 1996 and for the
fiscal year then ended. Such pro forma information is derived from the audited
balance sheet and statement of operations of View Tech as of June 30, 1996 and
for the year then ended, and the unaudited balance sheet and statement of
operations for VistaTel and GroupNet for the twelve months ended June 30, 1996.
View Tech acquired VistaTel and GroupNet, effective July 1, 1996 and September
1, 1996, respectively. Such acquisitions were accounted for by View Tech
utilizing purchase accounting.
The pro forma combined data presented herein includes the View Tech
Pro Forma information, the effects of the Merger and the private placement of
approximately 300,000 shares of View Tech Common Stock as of June 30, 1996.
The financial information for UST is derived from UST's unaudited historical
balance sheet as of June 30, 1996 and the recasted statement of operations for
the twelve months ended June 30, 1996 (UST's actual year end is December 31).
1995 Pro Forma Information. The accompanying pro forma condensed
combined financial statements for 1995 includes the effects of the Merger and
are derived from View Tech's audited historical financial statements as of June
30, 1995 and for the year then ended and UST's unaudited historical balance
sheet as of June 30, 1995 and the recasted statement of operations for the
twelve months ended June 30, 1995.
2. STOCKHOLDERS' EQUITY
The pro forma adjustments to common stock, paid in capital and
treasury stock as of June 30, 1996 and 1995, reflect the issuance of 2,500,000
shares of View Tech common stock for all of the outstanding shares of UST
common stock, representing a Conversion Ratio of .25293 View Tech shares for
each share of UST common stock. For the purpose of these pro forma condensed
combined financial statements, the number of shares of View Tech common stock
to be issued represents the maximum number of shares which may be issued by
View Tech pursuant to the Agreement and Plan of Merger. Shareholder
distributions shown on the pro forma condensed combined balance sheet for UST
as of June 30, 1996 and 1995 have been reflected in the combined companies
retained earnings since UST will convert to a C corporation upon closing of
the Merger.
3. MERGER EXPENSES
Under the pooling-of-interests method of accounting, costs associated
with the merger of View Tech and UST are treated as an expense of the combined
company. The accompanying pro forma condensed combined statements of
operations do not reflect the expense associated with the Merger, which are
estimated to be approximately $1.8 million pre-tax and $1.080 million
after-tax, that will be recorded in the first period that financial statements
of the combined companies are presented, since such expenses are non-recurring.
The after-tax effect of these expenses are, however, reflected in the
accompanying pro forma condensed combined balance sheets as of June 30, 1996
and 1995, respectively, and as a liability and a reduction to retained
earnings. Merger expenses consist primarily of professional fees and proxy
solicitation costs. The tax effect of the Merger expenses was calculated using
View Tech's effective combined federal and state income tax rate of
approximately 40%.
4. PRIVATE PLACEMENT
Subsequent to June 30, 1996, the Company received subscriptions for
equity capital of approximately $1.5 million through the private placement of
approximately 300,000 shares of common stock. Upon closing of the private
placement, the Company will realize net proceeds of approximately $1.380
million. The pro forma adjustments assume that $430,000 of such proceeds are
used to paydown current maturities of long- term debt and that the balance is
used to paydown accounts payable as of June 30, 1996.
5. VISTATEL AND GROUPNET ACQUISITIONS
The pro forma adjustments shown in the View Tech Pro Forma balance
sheet and statement of operations as of June 30, 1996 and for the year then
ended, include the following: For VistaTel (a) adjustment to reflect the
issuance of 52,857 shares of View Tech Common Stock, valued at $7.00 per share,
or $370,000 for the net assets of VistaTel, (b) the recording of goodwill of
$338,861 and (c) the amortization of goodwill of $22,591 for the year ended
June 30, 1996; for GroupNet (a) the issuance of 150,000 shares of View Tech
Common Stock valued at $7.00 per share, or $1,050,000, payment of $110,000 in
cash and the issuance of a promissory note for
F-45
<PAGE> 186
$220,000 for the net assets of GroupNet, (b) the recording of goodwill of
$1,325,057 and (c) the amortization for goodwill of $88,337 for the year ended
June 30, 1996. The total goodwill recognized of $1,663,918 resulting from the
acquisition of VistaTel and GroupNet will be amortized on a straight line basis
over 15 years.
6. WEIGHTED AVERAGE SHARES OUTSTANDING
The weighted average number of shares shown in the Pro Forma Combined
statement of operations for the fiscal year ended June 30, 1996 for UST
represents the number of shares of View Tech Common Stock issuable to the UST
stockholders in connection with the Merger.
The weighted average number of shares shown in the View Tech Pro Forma
statement of operations for the fiscal year ended June 30, 1996 includes the
actual weighted average shares outstanding for View Tech as of June 30, 1996
and the shares issued in connection with the acquisitions of VistaTel and
GroupNet of 52,857 and 150,000, respectively.
7. INCOME TAXES
UST is currently an S corporation. As an S corporation, UST is
generally not subject to federal income taxes. Instead the stockholders are
taxed on their respective share of UST income at the stockholders' individual
federal and state income tax rates. Accordingly, there was no provision for
federal income taxes recorded by UST for the twelve months ended June 30, 1996
and 1995. Effective with the closing of the merger, UST automatically converts
to a C corporation. Net income for the twelve months ended June 30, 1996 and
1995 includes a pro forma provision for income taxes to reflect income taxes as
if UST had been taxed as a C corporation during such periods, assuming an
effective combined rate of 40%.
F-46
<PAGE> 187
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
VIEW TECH, INC.,
VIEW TECH ACQUISITION, INC.
AND
USTELECENTERS, INC.
September 5, 1996
A-1
<PAGE> 188
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C> <C>
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
2. BASIC TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
(a) THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
(b) ACTION BY THE BUYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
(c) THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
(d) ACTIONS AT THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(e) EFFECT OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(i) GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(ii) CERTIFICATE OF INCORPORATION. . . . . . . . . . . . . . . . . . . . . . . . A-8
(iii) BYLAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(iv) DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(v) BUYER SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(vi) TARGET SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(f) CONVERSION OF TARGET SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(g) PROCEDURE FOR PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
(h) CLOSING OF TRANSFER RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
(i) DISSENTING SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
3. REPRESENTATIONS AND WARRANTIES OF THE TARGET. . . . . . . . . . . . . . . . . . . . . . . A-11
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. . . . . . . . . . . . . . . . . A-12
(b) CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
(c) AUTHORIZATION OF TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
(d) NONCONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
(e) TITLE TO ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
(f) SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
(g) FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
(h) EVENTS SUBSEQUENT TO TARGET'S MOST RECENT FISCAL MONTH END. . . . . . . . . . . . A-13
(i) UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
(j) LEGAL COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
(k) TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
(l) REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
(m) INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
(n) TANGIBLE ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
(o) INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
(p) CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
(q) NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . . . A-21
(r) POWERS OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
(s) INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
(t) LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
(u) PRODUCT WARRANTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
(v) EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
</TABLE>
A-i
<PAGE> 189
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(w) EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
(x) GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
(y) ENVIRONMENTAL, HEALTH, AND SAFETY. . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
(z) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET . . . . . . . . . . . . . . . . . . . . A-24
(aa) BROKERS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
(ab) CONTINUITY OF BUSINESS ENTERPRISE. . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
(ac) SUBSTANTIAL CUSTOMERS, BROKERS AND SUPPLIERS . . . . . . . . . . . . . . . . . . . . . A-24
(ad) DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER . . . . . . . . . . . . . . . . . . . A-25
(b) CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
(c) AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
(d) FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
(e) EVENTS SUBSEQUENT TO THE BUYER'S MOST RECENT FISCAL YEAR END . . . . . . . . . . . . . A-26
(f) UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
(g) LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
(h) NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
(i) TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
(j) INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
(k) CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
(l) LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
(m) PRODUCT WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
(n) EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
(o) ENVIRONMENTAL, HEALTH, AND SAFETY. . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
(p) ADVISORY FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
(q) CONTINUITY OF BUSINESS ENTERPRISE. . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
(r) DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
(s) REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
(t) SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
(u) FILINGS WITH THE SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
(a) NOTICES AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
(b) REGULATORY MATTERS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
(i) SECURITIES ACT, SECURITIES EXCHANGE ACT, AND STATE SECURITIES LAWS . . . . . . . A-37
(ii) CALIFORNIA AND MASSACHUSETTS GENERAL CORPORATION LAW . . . . . . . . . . . . . . A-37
(c) LISTING OF BUYER SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
(d) NO MATERIAL CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
(e) OPERATION OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
(f) FULL ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
(g) NOTICE OF DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(h) EXCLUSIVITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
(i) CONTINUITY OF BUSINESS ENTERPRISE. . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
(j) EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
(k) DIRECTORSHIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
(l) PRELIMINARY MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
(m) BUSINESS COMBINATION UNDER RULE 145. . . . . . . . . . . . . . . . . . . . . . . . . . A-40
(n) ANCILLARY AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
(o) TARGET EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
(p) D&O INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
(q) NOTIFICATION OF BUYER DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
(r) NOTIFICATION OF CHANGES IN REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . A-41
(s) TREATMENT OF CONVERSION OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
(t) REGISTRATION OF CONVERSION OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
(u) SETTLEMENT OF OPTIONS AND RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
(v) ESTOPPEL CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
6. CONDITIONS TO OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
(a) CONDITIONS TO OBLIGATION OF THE BUYER. . . . . . . . . . . . . . . . . . . . . . . . . A-42
(b) CONDITIONS TO OBLIGATION OF THE TARGET . . . . . . . . . . . . . . . . . . . . . . . . A-44
7. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-46
(a) TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-46
(b) EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-47
8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-47
(a) SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-47
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . . . . A-47
(c) ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-47
(d) SUCCESSION AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-47
(e) COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
(f) HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
(g) NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
(h) GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
(i) AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
(j) SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
(k) EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
(l) CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . A-49
(n) VENUE; JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
(o) ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
(p) ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
</TABLE>
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TABLE OF CONTENTS
(Continued)
PAGE
Exhibit A--Form of Merger Agreement
Exhibit B-1, B-2--Certificates of Merger
Exhibit C--Form of Letter of Transmittal
Exhibit D--Permitted Investments
Exhibit E--Target Financial Statements
Exhibit F--Buyer Financial Statements
Exhibit G--Agreement Regarding Target Shareholders
Exhibit H--Form of Registration Rights Agreement
Disclosure Schedule--Exceptions to Representations and Warranties
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<PAGE> 192
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER entered into as of September 5, 1996 by
and among View Tech, Inc., a California corporation (the "BUYER"), View Tech
Acquisition, Inc., a California corporation to be incorporated (the "TRANSITORY
SUBSIDIARY"), and USTeleCenters, Inc., a Massachusetts corporation (the
"TARGET"). The Buyer, the Transitory Subsidiary, and the Target are referred
to collectively herein as the "PARTIES."
WHEREAS, upon the terms and subject to the conditions of this
Agreement and of a Merger Agreement in the form attached hereto as Exhibit A
(the "Merger Agreement"), in accordance with the California General Corporation
Law and the Massachusetts General Corporation Law, the Buyer, the Target, and
the Transitory Subsidiary will carry out a business combination pursuant to
which the Target will merge with and into the Transitory Subsidiary, the
stockholders of the Target will convert all of their outstanding Target Shares
into Buyer Shares with an aggregate value of $20 million, subject to adjustment
in accordance with the provisions of Section 2(f) of this Agreement, all in
accordance with Code Section 368(a)(1)(A) and Section 368(a)(2)(E).
WHEREAS, the Boards of Directors of the Buyer and the Target
unanimously have determined that the Merger is fair to, and in the best
interests of, their respective companies and stockholders, and have approved
and adopted this Agreement and the Merger, and have recommended approval and
adoption of this Agreement and the Merger by their respective stockholders.
WHEREAS, the Buyer's Board of Directors has approved and adopted this
Agreement and has approved the Merger as the sole stockholder of the Transitory
Subsidiary.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of state, local, or foreign law.
"AVERAGE CLOSING BID PRICE" means the average of the closing
bid prices of the Buyer Shares as reported by Nasdaq during the Determination
Period.
"BUYER" has the meaning set forth in the preface above.
"BUYER FINANCIAL STATEMENTS" has the meaning set forth in
Section 4(d) below.
"BUYER-OWNED SHARE" means any Target Share that the Buyer owns
beneficially or of record.
<PAGE> 193
"BUYER SHARES" means shares of the Common Stock, $0.01 par
value per share, of the Buyer.
"BUYER'S MOST RECENT BALANCE SHEET" means the balance sheet
contained within the Buyer's Most Recent Financial Statements.
"BUYER'S MOST RECENT FINANCIAL STATEMENTS" has the meaning
set forth in Section 4(d) below.
"BUYER'S MOST RECENT FISCAL YEAR END" has the meaning set
forth in Section 4(d) below.
"CALIFORNIA GENERAL CORPORATION LAW" means the General
Corporation Law of the State of California, as amended.
"CERTIFICATE OF MERGER" has the meaning set forth in Section
2(d) below.
"CLOSING" has the meaning set forth in Section 2(c) below.
"CLOSING DATE" has the meaning set forth in Section 2(c)
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning
the businesses and affairs of any of the Parties and their respective
Subsidiaries that is not already generally available to the public.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth
in Code Section 1563.
"CONVERSION OPTIONS" means the Target Options assumed by the
Buyer in the Merger.
"CONVERSION RATIO" has the meaning set forth in Section
2(f)(i) below.
"DEFINITIVE BUYER PROXY MATERIALS" means the definitive proxy
materials relating to the Special Buyer Meeting.
"DEFINITIVE TARGET PROXY MATERIALS" means the definitive proxy
materials relating to the Special Target Meeting.
"DETERMINATION PERIOD" shall mean the sixteen-day period
commencing on the tenth trading day immediately prior to the date of this
Agreement and terminating on the fifth trading day immediately thereafter.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3
below.
"DISSENTING SHARES" has the meaning set forth in Section 2(i)
below.
"EFFECTIVE TIME" has the meaning set forth in Section 2(e)(i)
below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution
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<PAGE> 194
retirement plan or arrangement which is an Employee Pension Benefit Plan, (c)
qualified defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee
Welfare Benefit Plan or material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA Section 3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of
the environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE AGENT" has the meaning set forth in Section 2(g)(i)
below.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time, applied on a consistent basis.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"INDEPENDENT AUDITORS" has the meaning set forth in Section
2(f)(iii) below.
"INITIAL CLOSING STATEMENT" has the meaning set forth in
Section 2(f)(iii) below.
"INITIAL CLOSING STATEMENT INCOME" has the meaning set forth
in Section 2(f)(iii) below.
"INITIAL CLOSING STATEMENT REVENUES" has the meaning set forth
in Section 2(f)(iii) below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals
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<PAGE> 195
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"IRS" means the Internal Revenue Service.
"JOINT DISCLOSURE DOCUMENT" means the disclosure document
combining the Prospectus, the Definitive Buyer Proxy Materials, and the
Definitive Target Proxy Materials.
"LIABILITY" means any liability (whether absolute, accrued or
contingent), including any liability for Taxes.
"MASSACHUSETTS GENERAL CORPORATION LAW" means the General
Corporation Law of the Commonwealth of Massachusetts, as amended.
"MERGER" has the meaning set forth in Section 2(a) below.
"MERGER AGREEMENT" has the meaning set forth in the preamble
above.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA
Section 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"PROSPECTUS" means the final prospectus relating to the
registration of the Buyer Shares issued in the Merger under the Securities Act.
"REGISTRATION STATEMENT" has the meaning set forth in Section
5(b)(i) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section
4043.
"REQUISITE BUYER STOCKHOLDER APPROVAL" means the affirmative
vote of the holders of a majority of the Buyer Shares entitled to vote thereon,
in favor of this Agreement and the Merger.
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<PAGE> 196
"REQUISITE TARGET STOCKHOLDER APPROVAL" means the affirmative
vote of the holders of at least 90% of the Target Shares entitled to vote
thereon, in favor of this Agreement and the Merger.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and payable
or for taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"SPECIAL BUYER MEETING" has the meaning set forth in Section
5(b)(ii) below.
"SPECIAL TARGET MEETING" has the meaning set forth in Section
5(b)(ii) below.
"SUBCHAPTER S CORPORATION" has the meaning set forth in
Section 3(k) below.
"SUBSIDIARY" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"SURVIVING CORPORATION" has the meaning set forth in Section
2(a)(i) below.
"TARGET" has the meaning set forth in the preface above.
"TARGET ADVISORY FEE" means the transaction fee due Target's
investment banker, Concord Partners, Ltd., in connection with the Merger.
"TARGET DIRECTOR DESIGNEES" means Franklin A. Reece, III (to
be elected for a term of three years) and David F. Millet (to be elected for a
term of two years), or if either Mr. Reece or Mr. Millet is unable to complete
his respective term, the individual designated as a Target Director Designee to
complete such term by the surviving individuals who were members of the
Target's Board of Directors immediately prior to the Effective Time and
approved by the Buyer's Board of Directors, which approval shall not be
unreasonably withheld or delayed.
"TARGET FINANCIAL STATEMENTS" has the meaning set forth in
Section 3(g) below.
"TARGET OPTION PLAN" means the stock option plan under which
the Conversion Options are issued.
"TARGET OPTIONS" means the options to acquire shares of the
Target's common stock issued to the officers, directors, employees, and
consultants of the Target and identified on Schedule 2(f)(i) of the Disclosure
Schedule.
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<PAGE> 197
"TARGET PROJECTED INCOME" means $1.532 million in before-tax
operating income for the nine month period ending September 30, 1996.
"TARGET PROJECTED REVENUES" means $15.192 million in revenues
for the nine month period ending September 30, 1996.
"TARGET SHARE" means any share of the Common Stock, $0.01 par
value per share, of the Target, including the shares of the Target Common Stock
issuable upon exercise of the Target Options.
"TARGET STOCKHOLDER" means any Person who or which holds any
Target Shares.
"TARGET'S MOST RECENT BALANCE SHEET" means the balance sheet
contained within the Target's Most Recent Financial Statements.
"TARGET'S MOST RECENT FINANCIAL STATEMENTS" has the meaning
set forth in Section 3(g) below.
"TARGET'S MOST RECENT FISCAL MONTH END" has the meaning set
forth in Section 3(g) below.
"TARGET'S MOST RECENT FISCAL YEAR END" has the meaning set
forth in Section 3(g) below.
"TARGET'S NOTICE" has the meaning set forth in Section 5(q)
hereof.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TO THE BUYER'S KNOWLEDGE" or other reference herein to the
Buyer's knowledge or awareness, means the actual knowledge of Robert G.
Hatfield, John W. Hammon and William M. McKay, after due inquiry of the
officers and directors of the Buyer and after reasonable investigation of the
books, records and files of the Buyer.
"TO THE TARGET'S KNOWLEDGE" or other reference herein to the
Target's knowledge or awareness, means the actual knowledge of Franklin A.
Reece, III, David F. Millet and Angelo P. Gentile, after due inquiry of the
officers and directors of the Target and after reasonable investigation of the
books, records and files of the Target.
"TOTAL TARGET VALUATION" means the maximum number of Buyer
Shares issuable to Target Stockholders in the Merger, following the adjustments
described in Section 2(f) below, multiplied by the Average Closing Bid Price.
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<PAGE> 198
"TRADING DAY" means any day on which the New York Stock
Exchange is open for business.
"TRANSACTION FEES" has the meaning set forth in Section
2(f)(iv) below.
"TRANSITORY SUBSIDIARY" has the meaning set forth in the
preface above.
2. BASIC TRANSACTION.
(a) THE MERGER.
(i) On and subject to the terms and conditions of
this Agreement and the Merger Agreement, and in accordance with the
Massachusetts General Corporation Law and the California General
Corporation Law, the Target will merge with and into the Transitory
Subsidiary (the "MERGER") at the Effective Time. The Transitory
Subsidiary shall be the corporation surviving the Merger as a
wholly-owned subsidiary of the Buyer (the "SURVIVING CORPORATION").
(ii) The Target hereby represents that its Board
of Directors, at a meeting duly called and held at which a quorum was
present and acting throughout, has unanimously (A) determined that
this Agreement, the Merger Agreement and the Merger are fair to and in
the best interests of, the Target and its stockholders, (B) approved
this Agreement, the Merger Agreement and the Merger, and (C) resolved
to recommend approval and adoption by the stockholders of the Target
of this Agreement, the Merger Agreement and the Merger to the extent
required and in a manner permitted by the Massachusetts General
Corporation Law and the California General Corporation Law.
(b) ACTION BY THE BUYER. The Buyer, acting through its
Board of Directors, shall, in accordance with the California General
Corporation Law and the Securities Exchange Act: (i) as soon as practicable,
duly call, give notice of, convene and hold the Special Buyer Meeting for the
purpose of adopting and approving this Agreement, the Merger Agreement and the
Merger; (ii) include in the Definitive Buyer Proxy Materials the conclusion and
recommendation of the Board of Directors to the effect that the Board of
Directors, having determined that this Agreement, the Merger Agreement and the
Merger are in the best interests of the Buyer and its stockholders, has
approved this Agreement, the Merger Agreement and the Merger and recommends
that the stockholders of the Buyer vote in favor of the approval and adoption
of this Agreement, the Merger Agreement and the Merger; (iii) use its
reasonable best efforts to obtain the necessary approval and adoption of this
Agreement, the Merger Agreement and the Merger by the stockholders of the
Buyer; and (iv) as sole stockholder of the Transitory Subsidiary, shall adopt
and approve this Agreement, the Merger Agreement and the Merger.
(c) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Burns & Levinson LLP in Boston, Massachusetts, commencing at 9:00 a.m. local
time on the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as the
Parties may mutually determine (the "CLOSING DATE").
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(d) ACTIONS AT THE CLOSING. At the Closing, (i) the
Target will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 6(a) below, (ii) the Buyer and the Transitory
Subsidiary will deliver to the Target the various certificates, instruments,
and documents referred to in Section 6(b) below, (iii) the Transitory
Subsidiary and the Buyer will file with the Secretary of State of the State of
California and the Target will file with the Secretary of State of the
Commonwealth of Massachusetts Certificates and Articles of Merger, as
applicable, in the forms attached hereto as Exhibits B-1 and B-2 (collectively
referred to herein as the "CERTIFICATE OF MERGER"), and (iv) the Buyer will
deliver to the Exchange Agent in the manner provided below in this Section 2
the certificates evidencing the Buyer Shares issued in the Merger.
(e) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective
at the time (the "EFFECTIVE TIME") the Transitory Subsidiary and the
Target file the Certificate of Merger with the Secretary of State of
the Commonwealth of Massachusetts and the Secretary of State of the
State of California. The Merger shall have the effect set forth in
the Massachusetts General Corporation Law. The Surviving Corporation
may, at any time after the Effective Time, take any action (including
executing and delivering any document) in the name and on behalf of
either the Buyer or the Target in order to carry out and effectuate
the transactions contemplated by this Agreement.
(ii) CERTIFICATE OF INCORPORATION. The
Certificate of Incorporation of the Transitory Subsidiary in effect at
and as of the Effective Time will remain the Certificate of
Incorporation of the Surviving Corporation without any modification or
amendment in the Merger.
(iii) BYLAWS. The Bylaws of the Transitory
Subsidiary in effect at and as of the Effective Time will remain the
Bylaws of the Surviving Corporation without any modification or
amendment in the Merger.
(iv) DIRECTORS AND OFFICERS. The directors and
officers of the Transitory Subsidiary in office at and as of the
Effective Time will remain the directors and officers of the Surviving
Corporation (retaining their respective positions and terms of
office), together with the Target Director Designees.
(v) BUYER SHARES. Each Buyer Share issued and
outstanding at and as of the Effective Time will remain issued and
outstanding.
(vi) TARGET SHARES. No Target Share shall be
deemed to be outstanding or to have any rights other than those set
forth in Section 2(f) and Section 2(i) below after the Effective Time.
(f) CONVERSION OF TARGET SHARES. At the Effective Time,
by virtue of the Merger and without any action on the part of the Buyer, the
Target, the Transitory Subsidiary, or the holders of any of the foregoing
securities:
(i) Every option (other than the Target Options
identified in Section 2(f)(i) of the Disclosure Schedule), warrant, or
other right to acquire a share of Target Stock, and every share of
Target Stock issued and outstanding and owned by the Buyer immediately
prior to the Effective Time, shall automatically be canceled and
retired and shall cease to exist, and no cash or Buyer Shares, or
other consideration shall be delivered or deliverable or exchanged
therefor. For
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purposes of this Section 2(f)(i) and the calculation of the Conversion
Ratio, it is assumed that there are 9,884,157 Target Shares and the
Average Closing Bid Price is $8.00. At and as of the Effective Time,
(1) each Target Share (other than any Dissenting Shares or Buyer-owned
Shares) shall be converted into the right to receive .25293 Buyer
Shares (the ratio of .25293 Buyer Shares to one Target Share is
referred to herein as the "CONVERSION RATIO"), (2) each Dissenting
Share shall be converted into the right to receive payment from the
Buyer with respect thereto in accordance with the provisions of the
Massachusetts General Corporation Law, and (3) each Buyer- owned Share
shall be canceled; provided, however, that the Conversion Ratio shall
be subject to equitable adjustment in the event of any stock split,
stock dividend, reverse stock split, or other change in the number of
Target Shares outstanding; provided, however, that the Conversion
Ratio shall be subject to adjustments, if applicable, provided in
Section 2(f)(ii), (iii) and (iv) below. No fractional Buyer Shares
shall be issued. Any conversion which would otherwise result in a
fractional share shall be rounded up to the nearest whole Buyer Share.
(ii) The Conversion Ratio determined in accordance
with Section 2(f)(i) shall be adjusted (A) upward if the Average
Closing Bid Price is less than $7.00 so that the Total Target
Valuation is $17.5 million, and (B) downward if the Average Closing
Bid Price is more than $9.00 so that the Total Target Valuation is
$22.5 million; provided, however, that the Conversion Ratio shall be
subject to the downward adjustment provided in Section 2(f)(iii)
below, after the adjustment, if any, pursuant to this Section
2(f)(ii). By way of example, if the Average Closing Bid Price is
$6.00, then the Conversion Ratio shall be adjusted upward to .295085
so that the Target Stockholders receive up to 2,916,667 shares, which
when multiplied by $6.00 provides a Total Target Valuation of $17.5
million. Conversely, if the Average Closing Bid Price is $10.00, the
Conversion Ratio shall be adjusted downward to .227637 so that the
Target Stockholders receive up to 2,250,000 shares, which when
multiplied by $10.00 provides a Total Target Valuation of $22.5
million.
(iii) At least twenty (20) days prior to the
Special Buyer Meeting but no earlier than October 15, 1996, the Target
shall have prepared and delivered to the Buyer (A) an unaudited
statement of operations of the Target, for the nine-month period
ending September 30, 1996, prepared in accordance with GAAP (the
"INITIAL CLOSING STATEMENT") applied on the basis consistent with the
unaudited statement of operations of the Target for the six months
ended June 30, 1996, and (B) a certificate of the President and Chief
Financial Officer of Target, in their capacities as such, certifying
that the Initial Closing Statement was prepared on the basis described
above and as to the amount of the Target's revenues (the "INITIAL
CLOSING STATEMENT REVENUES") and the amount of the Target's before-tax
operating income (the "INITIAL CLOSING STATEMENT INCOME"). If, within
five (5) business days after receiving such Initial Closing Statement,
the Buyer notifies the Target that it disputes items therein (and in
such notice states the nature of the dispute in reasonable detail),
and if the Buyer and the Target are unable, within five (5) business
days after receipt by the Target of the Buyer's notice of such
dispute, to resolve such disputed items, then the Buyer shall select a
firm of nationally recognized certified public accountants (other than
such firms as are then engaged by the Target or the Buyer) (the
"INDEPENDENT AUDITORS"), who shall resolve all remaining disputed
items and its resolution shall be final and binding on the Parties and
enforceable in a court of law. The fees and expenses of such
Independent Auditors, if required hereunder, shall be apportioned
between the Parties to reflect the relative differences between the
position asserted by each party with respect to each disputed item
referred to such firm and the resolution reached by such firm, with
each party bearing the fees and expenses of such disputed items that
is further from the Independent
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Auditor's resolution. The Conversion Ratio determined in accordance
with the provisions of Section 2(f)(i) and (ii) and the applicable
Total Target Valuation shall be further adjusted downward by the
greater of the percentage that Initial Closing Statement Revenues or
Initial Closing Statement Income are less than 80% of the Target
Projected Revenues and Target Projected Income, respectively.
Following the $6.00 Average Closing Bid Price example provided in
Section 2(f)(ii) above, if the Initial Closing Statement Revenues and
the Initial Closing Statement Income are 15% and 20% less than 80% of
the Target Projected Revenues and the Target Projected Income,
respectively, then the Conversion Ratio shall be reduced by 20% to
.236068, which will provide a Total Target Valuation of $13,999,998,
based upon up to 2,333,333 Buyer Shares being issued.
(iv) The Conversion Ratio, after adjustment, if
any, pursuant to Section 2(f)(ii) and 2(f)(iii), shall be adjusted
downward so that the Total Target Valuation equals the Total Target
Valuation as determined under Section 2(f)(i)-(iii), less the sum of
(1) 66 2/3% of the Target Advisory Fee and (2) 100% of the legal and
accounting expenses of the Target incurred in connection with the
Merger. The sum of Section 2(f)(iv)(1) and Section 2(f)(iv)(2) above
are collectively referred to herein as the "TRANSACTION FEES."
Assuming that there are no adjustments pursuant to the provisions of
Section 2(f)(ii) and (iii) above, and that the Target Shares remain at
9,884,157 shares and that the Average Closing Bid Price remains at
$8.00, i.e. is not subject to the adjustments in Section 2(f)(ii)
above, and further assuming that the Transaction Fees are $500,000,
then the Total Target Valuation shall be reduced to $19,500,000,
reducing the Conversion Ratio to .2466067. This adjusted Conversion
Ratio is arrived at by taking the net value of the Target, i.e.
$19,500,000, dividing it by $8.00, which quotient of 2,437,500 equals
the total number of Buyer Shares to be issued hereunder, and dividing
such quotient by the Target Shares, i.e. 9,884,157.
(g) PROCEDURE FOR PAYMENT.
(i) Immediately after the Effective Time, (A) the
Buyer will furnish to U.S. Stock Transfer Corporation (the "EXCHANGE
AGENT") instructions directing the Exchange Agent to issue to each
Target Shareholder (other than holders of Dissenting Shares and
Buyer-owned Shares) their pro rata share of Buyer Shares equal to the
product of (I) the Conversion Ratio as adjusted in accordance with the
provisions of Section 2(f)(ii), (iii) and (iv) above times (II) the
number of Target Shares such shareholder owns, and (B) the Buyer will
cause the Exchange Agent to mail a letter of transmittal (with
instructions for its use) in the form attached hereto as Exhibit C to
each record holder of outstanding Target Shares for the holder to use
in surrendering the certificates which represented his, her, or its
Target Shares in exchange for a certificate representing the number of
Buyer Shares to which he, she, or it is entitled.
(ii) The Buyer will not pay any dividend or make
any distribution on Buyer Shares (with a record date at or after the
Effective Time) to any record holder of outstanding Target Shares
until the holder surrenders for exchange his, her, or its certificates
which represented Target Shares. The Buyer instead will pay the
dividend or make the distribution to the Exchange Agent in trust for
the benefit of the holder pending surrender and exchange. The Buyer
may cause the Exchange Agent to invest any cash the Exchange Agent
receives from the Buyer as a dividend or distribution in one or more
of the permitted investments set forth on Exhibit D attached hereto;
provided, however, that the terms and conditions of the investments
shall be such as to permit the Exchange Agent to make prompt payments
of cash to the holders of outstanding Target Shares as necessary. The
Buyer may cause the Exchange Agent to pay over to the Buyer any net
earnings with respect to the investments, and the Buyer will replace
promptly
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any cash which the Exchange Agent loses through investments. In no
event, however, will any holder of outstanding Target Shares be
entitled to any interest or earnings on the dividend or distribution
pending receipt.
(iii) The Buyer may cause the Exchange Agent to
return any Buyer Shares and dividends and distributions thereon
remaining unclaimed 180 days after the Effective Time, and thereafter
each remaining record holder of outstanding Target Shares shall be
entitled to look to the Buyer (subject to abandoned property, escheat,
and other similar laws) as a general creditor thereof with respect to
the Buyer Shares and dividends and distributions thereon to which he,
she, or it is entitled upon surrender of his, her, or its
certificates.
(iv) The Buyer shall pay all charges and expenses
of the Exchange Agent.
(h) CLOSING OF TRANSFER RECORDS. After the close of
business on the Closing Date, transfers of Target Shares outstanding prior to
the Effective Time shall not be made on the stock transfer books of the
Surviving Corporation. On or after the Closing Date, any Target Share
presented to the Buyer, the Exchange Agent, or the Surviving Corporation, as
the case may be, shall be converted into the applicable number of Buyer Shares.
(i) DISSENTING SHARES.
(i) Notwithstanding any other provision of this
Agreement to the contrary, shares of Target Stock that are outstanding
immediately prior to the Effective Time and which are held by Target
Stockholders who shall not have voted in favor of the Merger or
consented thereto in writing and who shall be entitled to and shall
have demanded properly in writing appraisal for such shares in
accordance with the Massachusetts General Corporation Law and who
shall not have withdrawn such demand or otherwise have forfeited
appraisal rights (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive Buyer Shares. Such
stockholders shall be entitled to receive payment of the appraised
value of such Target Shares held by them in accordance with the
provisions of the Massachusetts General Corporation Law, except that
all Dissenting Shares held by such stockholders, who shall have failed
to perfect or who effectively shall have withdrawn, forfeited, or lost
their rights to appraisal of such Target Shares under the
Massachusetts General Corporation Law, shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive, the Buyer Shares, upon
surrender, in the manner provided in Section 2(f) above.
(ii) The Target shall give the Buyer prompt notice
of any demands for appraisal received by it, withdrawals of such
demands, and any other instruments served pursuant to the
Massachusetts General Corporation Law and received by the Target and
relating thereto. The Target (and after the Closing, the Transitory
Subsidiary) shall direct all negotiations and proceedings with respect
to demand for appraisal rights under the Massachusetts General
Corporation Law.
3. REPRESENTATIONS AND WARRANTIES OF THE TARGET. The Target
represents and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement and,
subject to amendment by Target for events occurring after the date of this
Agreement, will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3), except as set forth in the disclosure
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schedule accompanying this Agreement and initialed by the Parties (the
"DISCLOSURE SCHEDULE"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
3.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.
The Target is a corporation duly organized, validly existing, and in corporate
good standing under the laws of the jurisdiction of its incorporation. The
Target is duly qualified as a foreign corporation in each jurisdiction where
its ownership or leasing of property or where the nature of its activities
requires such qualification, except to the extent that the failure to so
qualify would not have a material adverse effect on the business, operations,
condition (financial or otherwise), assets or Liabilities of the Target. The
Target has full corporate power and authority to carry on the businesses in
which it is engaged and to own, lease, and use the properties owned, leased,
and used by it, and has in full force and effect all authorizations and has
made all filings to the extent required for such ownership, lease, and use of
its properties and the conduct of its business, except to the extent that the
failure to obtain such authorizations or to make such filings would not have a
material adverse effect on the operations of the Target.
(b) CAPITALIZATION. The entire authorized capital stock
of the Target consists of 11,000,000 Target Shares, of which 9,021,657 shares
of common stock of Target are issued and outstanding and no Target Shares are
held in treasury. All of the issued and outstanding Target Shares have been
duly authorized and are validly issued, fully paid, and nonassessable. There
are also outstanding Target Options for the purchase of 862,500 Target Shares,
excluding 15,000 Target Options to be canceled prior to the Effective Time.
Except for the Target Options, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Target to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Target.
(c) AUTHORIZATION OF TRANSACTION. The Target has the
requisite corporate power and authority to execute and deliver this Agreement
and the Merger Agreement and to perform its obligations hereunder and
thereunder; provided, however, that the Target cannot consummate the Merger
unless and until it receives the Requisite Target Stockholder Approval. This
Agreement constitutes the valid and legally binding obligation of the Target,
enforceable against Target in accordance with its terms and conditions, except
as such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratoriums or other similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a proceeding at law or
in equity).
(d) NONCONTRAVENTION. To the Target's Knowledge, neither
Target's execution and the delivery of this Agreement, nor Target's
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Target is subject or any provision of the charter or bylaws
of the Target, which would have a material adverse effect on the Target, or
(ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement,
contract, lease, license, instrument or other arrangement to which the Target
is a party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets). To
the Target's Knowledge, and other than in connection with the Massachusetts
General Corporation Law, the Target does not need to give any notice to, make
any
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filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except where the failure to give
any such notice, to make any such filing, or obtain any such authorization,
consent, or approval would not have a material adverse effect on the ability of
Target to consummate the transactions contemplated by this Agreement or have a
material adverse effect on the Target's business, operations, condition
(financial or otherwise), assets or Liabilities as in existence immediately
prior to the Closing.
(e) TITLE TO ASSETS. The Target has good title to, or a
valid leasehold interest in, the tangible properties and assets used by the
Target, located on its premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Target's Most Recent Balance Sheet.
(f) SUBSIDIARIES. There are no Subsidiaries of the
Target.
(g) FINANCIAL STATEMENTS. Attached hereto as Exhibit E
are the following financial statements (collectively the "TARGET FINANCIAL
STATEMENTS"): (i) audited balance sheets and statements of operations or
income, stockholders' deficit or investment, and cash flows as of and for the
fiscal years ended December 31, 1993, 1994, and 1995 (the "TARGET'S MOST RECENT
FISCAL YEAR END") for the Target; and (ii) unaudited balance sheet and
statements of operations and cash flows (the "TARGET'S MOST RECENT FINANCIAL
STATEMENTS") as of and for the six months ended June 30, 1996 (the "TARGET'S
MOST RECENT FISCAL MONTH END") for the Target. The Target Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, present
fairly the financial condition of the Target as of such dates and the results
of operations of the Target for such periods, are correct and complete in all
material respects and are consistent in all material respects with the books
and records of the Target; provided, however, that the Target's Most Recent
Financial Statements are subject to normal year-end adjustments and lack
footnotes and other presentation items.
(h) EVENTS SUBSEQUENT TO TARGET'S MOST RECENT FISCAL
MONTH END. Since the Target's Most Recent Fiscal Month End and continuing up
to and including the date of this Agreement, there has not been any material
adverse change in the business, financial condition, operations or results of
operations of the Target. Without limiting the generality of the foregoing,
since that date:
(i) the Target has not sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other than in
the Ordinary Course of Business;
(ii) the Target has not entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more
than $50,000 or outside the Ordinary Course of Business;
(iii) the Target has not and to the Target's
Knowledge, no other party has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more
than $50,000 to which the Target is a party or by which the Target is
bound;
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(iv) the Target has not imposed any Security
Interest upon any of its assets, tangible or intangible, except in
favor of Buyer;
(v) the Target has not made any capital
expenditure (or series of related capital expenditures) either
involving more than $50,000 or outside the Ordinary Course of
Business;
(vi) the Target has not made any capital
investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments,
loans, and acquisitions) either involving more than $50,000 or outside
the Ordinary Course of Business;
(vii) the Target has not issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either
involving more than $50,000 singly or $100,000 in the aggregate,
except with respect to the Buyer;
(viii) the Target has not delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(ix) the Target has not canceled, compromised,
waived, or released any right or claim (or series of related rights
and claims) either involving more than $50,000 or outside the Ordinary
Course of Business;
(x) the Target has not granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
(xi) there has been no change made or authorized
in the charter or bylaws of the Target;
(xii) the Target has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock, except in
connection with the exercise of the Target Options;
(xiii) the Target has not declared, set aside, or
paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiv) the Target has not experienced any material
damage, destruction, or loss (whether or not covered by insurance) to
its property;
(xv) the Target has not made any loan to, or
entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xvi) the Target has not entered into any
employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or
agreement;
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(xvii) the Target has not granted any increase in
the base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xviii) the Target has not adopted, amended, modified
or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
(xix) the Target has not made any other change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xx) the Target has not made or pledged to make
any charitable or other capital contribution outside the Ordinary
Course of Business;
(xxi) there has not been any other material
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving the Target; and
(xxii) the Target has not committed to any of the
foregoing, except in respect to the transactions contemplated by this
Agreement.
(i) UNDISCLOSED LIABILITIES. The Target has no material
Liability except for (i) Liabilities reflected on the Target's Most Recent
Balance Sheet (and in any notes thereto and under the capital leases set forth
in the notes to the Target Financial Statements for the Target's Most Recent
Fiscal Year End) and (ii) Liabilities which have arisen after the Target's Most
Recent Fiscal Month End in the Ordinary Course of Business, none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law.
(j) LEGAL COMPLIANCE. To the Target's Knowledge, the
Target has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), except to the extent any such failure would not have a material
adverse effect on the operations of the Target, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against the Target alleging any failure so to
comply and, to the Target's Knowledge, there is no basis for any such action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice to be filed or to be commenced against any of them alleging any failure
so to comply.
(k) TAX MATTERS.
(i) The Target elected at inception to be treated
as a corporation taxed under Subchapter S of the Code (a "SUBCHAPTER S
CORPORATION") and to the Target's Knowledge has been qualified as a
Subchapter S Corporation thereunder throughout its existence. The
Target has filed all Tax Returns required to be filed by it. All such
Tax Returns were correct and complete in all material respects. All
Taxes owed by the Target (whether or not shown on any Tax Return) have
been paid. The Target currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where the Target does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
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There are no Security Interests on any of the assets of the Target
that arose in connection with any failure (or alleged failure) to pay
any Tax.
(ii) The Target has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) The Target does not expect any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim, and to the Target's
Knowledge there is no basis for any such dispute or claim, concerning
any Tax Liability of the Target. Section 3(k) of the Disclosure
Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Target for taxable periods ended on
or after December 31, 1993, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the
subject of audit. The Target has delivered to the Buyer correct and
complete copies of all state, local, and federal income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by the Target since December 31, 1993.
(iv) The Target has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(v) The unpaid Taxes of the Target (A) did not,
as of the Target's Most Recent Fiscal Month End, exceed the reserve
for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income)
reflected in the Target's Most Recent Balance Sheet (and in any notes
thereto) and (B) will not exceed that reserve as adjusted for the
passage of time up to and including the Closing Date in accordance
with the past custom and practice of the Target in filing its Tax
Returns.
(vi) The Target has not filed a consent under Code
Section 341(f) concerning collapsible corporations. The Target has
not made any payments, is not obligated to make any payments, nor is
the Target a party to any agreement that under certain circumstances
would obligate it to make any payments that will not be deductible
under Code Section 280G. The Target has not been a United States real
property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Target has disclosed on its federal income Tax
Returns all positions taken therein that would give rise to a
substantial understatement of federal income Tax within the meaning of
Code Section 6662. The Target is not a party to any Tax allocation or
sharing agreement. The Target (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Target) nor (B)
does the Target have any Liability for the Taxes of any Person (other
than the Target) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vii) Section 3(k) of the Disclosure Schedule sets
forth the following information with respect to the Target as of the
most recent practicable date (as well as on an estimated pro forma
basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of the Target in its
assets; and (B) to the extent applicable, the amount of any net
operating loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution allocable to the
Target.
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(l) REAL PROPERTY.
(i) The Target does not own any real property:
(ii) Section 3(l)(ii) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to
the Target. The Target has delivered to the Buyer correct and
complete copies of the leases and subleases listed in Section 3(l)(ii)
of the Disclosure Schedule (as amended to date). With respect to each
lease and sublease listed in Section 3(l)(ii) of the Disclosure
Schedule,
(A) the lease or sublease is in full
force and effect and constitutes a legal, valid and binding
agreement of the Target, enforceable in accordance with its
terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratoriums
or other similar laws affecting the enforcement of creditors'
rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a
proceeding at law or in equity);
(B) the Target is not and to the
Target's Knowledge, no other party to the lease or sublease is
in material breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a
material breach or default or permit termination,
modification, or acceleration thereunder;
(C) there are no oral agreements,
forebearance programs in effect or material disputes as to the
lease or sublease;
(D) the Target has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
(E) (i) to the Target's Knowledge, the
Target is not in violation of any applicable laws or
governmental rules and regulations in regard to the use of the
facilities leased or subleased thereunder, and (ii) the Target
has not received any written notice from any governmental
authority of any such violation; and
(F) all facilities leased or subleased
thereunder are supplied with or have available utilities and
other services suitable for the operation of said facilities.
(m) INTELLECTUAL PROPERTY.
(i) The Target owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property sufficient for the operation of the businesses
of the Target as presently conducted and as presently proposed to be
conducted. The Target has taken sufficient protective measures to
maintain and protect each item of Intellectual Property that it owns
or uses.
(ii) To the Target's Knowledge, the Target has not
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of third parties,
and the Target has not received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim
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that the Target must license or refrain from using any Intellectual
Property rights of any third party). To the Target's Knowledge, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
the Target.
(iii) The Target does not own any patent or
application therefor. Section 3(m)(iii) of the Disclosure Schedule
identifies each material license, agreement, or other permission which
the Target has granted to any third party with respect to any of its
Intellectual Property. The Target has delivered to the Buyer correct
and complete copies of all material licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. Section 3(m)(iii) of the Disclosure Schedule also identifies
each trade name or unregistered trademark used by the Target in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Section 3(m)(iii)
of the Disclosure Schedule,
(A) to the Target's Knowledge, the
Target possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or
other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge; and
(C) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is
pending or, to the Target's Knowledge, threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item, and there is no basis for any such
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand; and
(D) the Target has never agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect
to the item pursuant to any material agreement relating to the
Intellectual Property.
(iv) Section 3(m)(iv) of the Disclosure Schedule
identifies each material item of Intellectual Property that any third
party owns and that the Target uses pursuant to license, sublicense,
agreement, or permission. The Target has delivered to the Buyer
correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in
Section 3(m)(iv) of the Disclosure Schedule,
(A) the license, sublicense, agreement,
or permission covering the item is in full force and effect
and constitutes a legal, valid and binding agreement of the
Target, enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratoriums or other similar laws
affecting the enforcement of creditors' rights generally and
the availability of equitable remedies (regardless of whether
enforceability is considered in a proceeding at law or in
equity);
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(B) to the Target's Knowledge, (i) the
Target is not in material breach or default, and (ii) no event
has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination,
modification, or acceleration thereunder;
(C) the Target is not a party to any
sublicense material to the business of the Target;
(D) to the Target's Knowledge, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
(E) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is
pending or is threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property; and
(F) the Target has not granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(v) To the Target's Knowledge, the Target will
not interfere with, infringe upon, misappropriate, or otherwise come
into conflict with, any Intellectual Property rights of third parties
as a result of the continued operation of its businesses as presently
conducted and as presently proposed to be conducted.
(n) TANGIBLE ASSETS. Section 3(n) of the Disclosure
Schedule lists the Target's tangible assets. The Target owns or leases all
buildings, machinery, equipment, and other tangible assets adequate for the
conduct of the business as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from material defects (patent and
latent), has been maintained in all material respects in accordance with normal
industry practice, is in reasonable operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used and presently is proposed to be used.
(o) INVENTORY. The inventory of the Target consists of
purchased parts and finished goods, all of which is presently usable and
salable for the purpose for which it was procured, except for obsolete items
and items of below standard quality, all of which have been written off or
written down to their net realizable value as reflected in the aggregate on the
Target's Most Recent Balance Sheet, to be adjusted for the passage of time up
to and including the Closing Date in accordance with past custom and practice
of the Target.
(p) CONTRACTS. Section 3(p) of the Disclosure Schedule
lists the following contracts and other agreements to which the Target is a
party, except contracts and other agreements involving a potential acquisition
of the capital stock or assets of Target, which by their terms are subject to a
non-disclosure covenant:
(i) any agreement (or group of related
agreements) for the lease of personal property to or from any Person
providing for lease payments in excess of $25,000 per annum;
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(ii) any agreement (or group of related
agreements) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the furnishing
or receipt of services, the performance of which will extend over a
period of more than one year, involve consideration in excess of
$50,000 per year, or to the Target's Knowledge, result in a material
loss to the Target;
(iii) any agreement concerning a partnership or
joint venture;
(iv) any agreement (or group of related
agreements) under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $25,000 or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
non-competition, except as hereinabove provided;
(vi) any agreement involving any of the Target
Stockholders and their Affiliates (other than the Target);
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or
other material plan or arrangement for the benefit of its current or
former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis, not
cancelable on 30 days or less notice, and which provides for annual
compensation in excess of $25,000 or provides severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xi) except as otherwise listed pursuant to this
Section 3(p), any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
operations, condition (financial or otherwise), assets or Liabilities
of the Target, other than client or customer sales contracts entered
into in the Ordinary Course of Business of the Target;
(xii) any other agreement (or group of related
agreements) the performance of which involves annual consideration in
excess of $50,000.
The Target has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3(p) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the material terms and conditions
of each oral agreement referred to in Section 3(p) of the Disclosure Schedule.
With respect to each such agreement, to the Target's Knowledge: (A) the
agreement is in full force and effect and constitutes a legal, valid and
binding agreement of the Target, enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratoriums or other similar laws affecting the
enforcement of creditors' rights generally and the availability of equitable
remedies (regardless of whether enforceability is considered in a proceeding at
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law or inequity); and (B) no party is in material breach or default, and no
event has occurred which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification, or
acceleration, under the agreement.
(q) NOTES AND ACCOUNTS RECEIVABLE. All notes and
accounts receivable of the Target are reflected properly on its books and
records, are valid receivables and are collectible in the aggregate, net of
reserves for bad debts, pending sales, and cancellations, as reflected in the
Target's Most Recent Balance Sheet (or in any notes thereto), to be adjusted
for the passage of time up to and including the Closing Date in accordance with
the past custom and practice of the Target.
(r) POWERS OF ATTORNEY. There are no outstanding powers
of attorney executed on behalf of the Target.
(s) INSURANCE. Section 3(s) of the Disclosure Schedule
sets forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the Target has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past three years:
(i) the name, address, and telephone number of
the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy, to the Target's Knowledge: (A) the
policy is in full force and effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of the Target, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratoriums or other similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a proceeding at law or
inequity); and (B) neither the Target nor any other party to the policy is in
material breach or default (including with respect to the payment of premiums
or the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a material breach or default, or permit
termination, modification, or acceleration, under the policy.
(t) LITIGATION. Section 3(t) of the Disclosure Schedule
sets forth in each instance in which the Target (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Target's Knowledge, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. To the Target's Knowledge,
there is no basis for any present or future action, suit, proceeding, hearing
and investigation that could result in any material adverse change in the
business, operations, condition (financial or otherwise), assets or Liabilities
of the Target.
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(u) PRODUCT WARRANTY. Within the last 48 months, each
product sold, leased, or delivered by the Target has been in conformity with
all express and implied warranties of the Target, and the Target does not have
any Liability (and to the Target's Knowledge, there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims reflected in the Target's Most
Recent Balance Sheet to be adjusted for the passage of time up to and including
the Closing Date in accordance with the past custom and practice of the Target.
Section 3(u) of the Disclosure Schedule includes copies of the standard terms
and conditions of sale or lease for the Target (containing applicable guaranty,
warranty, and indemnity provisions).
(v) EMPLOYEES. To the Target's Knowledge, no executive,
key employee, or group of employees has tendered resignations or expressed
their intentions to terminate employment with the Target. The Target is not a
party to or bound by any collective bargaining agreement, nor has the Target
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. To the Target's Knowledge, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Target.
(w) EMPLOYEE BENEFITS.
(i) Section 3(w) of the Disclosure Schedule lists
each Employee Benefit Plan that the Target maintains or as to which
the Target contributes.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund) complies in
material form and in operation in all material respects with
the applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B will have been met
in all material respects prior to the Closing Date with
respect to each applicable Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan and any and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid
to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Target.
All premiums or other payments for all periods ending on or
before the Closing Date have been paid or accrued in
accordance with the past custom and practice of the Target
with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan
which is an Employee Pension Benefit Plan meets the material
formal requirements of a "qualified plan" under Code Section
401(a) and has received, within the last two years, an updated
favorable determination letter from the Internal Revenue
Service.
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(E) The Target does not maintain and has
not maintained any Employee Pension Benefit Plan which is a
defined benefit type plan.
(F) The Target has delivered to the
Buyer correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination
letter received from the IRS, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such
Employee Benefit Plan.
(ii) The Target is not a member of a Controlled
Group of Corporations. With respect to each Employee Benefit Plan
that the Target maintains or ever has maintained or to which the
Target contributes, ever has contributed, or ever has been required to
contribute:
(A) No such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event as to
which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been
instituted or, to the Target's Knowledge, threatened.
(B) To the Target's Knowledge, there
have been no Prohibited Transactions with respect to any such
Employee Benefit Plan. To the Target's Knowledge, no
Fiduciary has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the
administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the
Target's Knowledge, threatened. To the Target's Knowledge,
there is no basis for any such action, suit, proceeding,
hearing, or investigation.
(C) The Target has not incurred, nor to
the Target's Knowledge, is there any reason to expect that the
Target will incur any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(iii) The Target does not contribute to, never has
contributed to, and never has been required to contribute to any
Multiemployer Plan, nor does it have any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(iv) The Target does not maintain and never has
maintained and does not contribute, never has contributed, and never
has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with Code
Section 4980B).
(x) GUARANTIES. The Target is neither a guarantor nor
liable for any Liability or obligation (including indebtedness) of any other
Person.
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(y) ENVIRONMENTAL, HEALTH, AND SAFETY. The Target has
complied in all material respects with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against the
Target alleging any failure so to comply. Without limiting the generality of
the preceding sentence, the Target has obtained and been in compliance with all
of the terms and conditions of all material permits, licenses, and other
authorizations which are required under, and has complied with all other
material limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in,
all Environmental, Health, and Safety Laws, except where such non-compliance
would not have a material adverse effect on the operations of the Target.
(z) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET. None
of the Target Stockholders and their Affiliates has been involved in any
business or contractual (whether written or oral) arrangement or relationship
with the Target within the past 12 months involving aggregate annual payments
in excess of $50,000, and none of the Target Stockholders and their Affiliates
owns any asset, tangible or intangible, which is used in the business of the
Target.
(aa) BROKERS' FEES. Except with respect to Concord
Partners, Ltd., and as otherwise as provided in Section 8(k), the Target has no
liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.
(ab) CONTINUITY OF BUSINESS ENTERPRISE. The Target
operates at least one significant historic business line, or owns at least a
significant portion of its historic business assets, in each case within the
meaning of Treas. Reg. Section 1.368-1(d).
(ac) SUBSTANTIAL CUSTOMERS, BROKERS AND SUPPLIERS.
(i) Section 3(ac) of the Disclosure Schedule
lists the 10 customers of the Target with the highest volume of
purchases from the Target during the six-month period ending June 30,
1996, and the amount for which each such customer was invoiced during
such period.
(ii) The Target has not been declared ineligible
to bid on a state or federal government contract.
(iii) No customer listed on Section 3(ac) of the
Disclosure Schedule has (A) ceased, or notified the Target in writing
of an intention to cease dealing with or through the Target; (B)
reduced or notified the Target in writing of an intention to reduce,
substantially its dealings with or through the Target; or (C) changed,
or notified the Target in writing of an intention to change,
substantially the terms on which it is prepared to deal with or
through the Target. To the Target's Knowledge all of the customers
listed in Section 3(ac) of the Disclosure Schedule will continue to be
a customer of the Transitory Subsidiary after the Closing.
(ad) DISCLOSURE. None of the information that Target has
provided in connection with the representations and warranties provided for
herein contain or that the Target will supply specifically for use in the
Registration Statement, the Prospectus, or the Definitive Buyer Proxy Materials
will contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they are or will be made, not
misleading.
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4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Target that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout
this Section 4), except as set forth in the Disclosure Schedule. The
Disclosure Schedule will be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Section 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.
The Buyer is a corporation duly organized, validly existing, and in corporate
good standing under the laws of the jurisdiction of its incorporation. The
Buyer is duly qualified as a foreign corporation in each jurisdiction where its
ownership or leasing of property or where the nature of its activities requires
such qualification, except to the extent that the failure to so qualify would
not have a material adverse effect on the business, operations, condition
(financial or otherwise), assets or Liabilities of the Buyer. The Buyer has
full corporate power and authority to carry on the businesses in which it is
engaged and to own, lease, and use the properties owned, leased, and used by
it, and has in full force and effect all authorizations and has made all
filings to the extent required for such ownership, lease, and use of its
properties and the conduct of its business, except to the extent that the
failure to obtain such authorizations or to make such filings would not have a
material adverse effect on the operations of the Buyer.
(b) CAPITALIZATION. The entire authorized capital stock
of the Buyer consists of 5,000,000 shares of preferred stock, none of which is
outstanding, and 10,000,000 Buyer Shares, of which 3,243,057 Buyer Shares are
issued and outstanding (including 300,000 Buyer Shares currently being offered
in a non-related private placement of common stock) and no Buyer Shares are
held in treasury. All of the issued and outstanding Buyer Shares have been
duly authorized and are validly issued, fully paid, and nonassessable (except
for the Buyer Shares currently offered, which will be fully paid and
non-assessable when issued). All of the Buyer Shares to be issued in the
Merger have been duly authorized and, upon consummation of the Merger, will be
validly issued, fully paid, and nonassessable. Except for the options and
warrants listed on Section 4(b) to the Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Buyer to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Buyer.
(c) AUTHORIZATION OF TRANSACTION. The Buyer has the
requisite corporate power and authority to execute and deliver this Agreement
and the Merger Agreement and to perform its obligations hereunder and
thereunder; provided, however, that the Buyer cannot consummate the Merger
unless and until it receives the Requisite Buyer Stockholder Approval. This
Agreement constitutes the valid and legally binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms and conditions,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratoriums or other similar laws affecting the
enforcement of creditors' rights generally and the availability of equitable
remedies (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(d) FINANCIAL STATEMENTS. Attached hereto as Exhibit F
are the following financial statements (collectively the "BUYER FINANCIAL
STATEMENTS"): (i) audited balance sheets and statements of operations,
stockholders' equity (deficit), and cash flows as of and for the fiscal years
ended June 30, 1994, 1995, and 1996 (the "BUYER'S MOST RECENT FISCAL YEAR
END"). The Buyer Financial Statements as of and for the fiscal year ended June
30, 1996 shall be referred to as the "BUYER'S MOST RECENT
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FINANCIAL STATEMENTS." The Buyer Financial Statements (including the Notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of the Buyer as of such dates and the results of operations of the
Buyer for such periods, are correct and complete in all material respects, and
are consistent in all material respects with the books and records of the
Buyer.
(e) EVENTS SUBSEQUENT TO THE BUYER'S MOST RECENT FISCAL
YEAR END. Since the Buyer's Most Recent Fiscal Year End and continuing up to
and including the date of this Agreement, there has not been any material
adverse change in the business, financial condition, operations or results of
operations of the Buyer. Without limiting the generality of the foregoing,
since that date:
(i) the Buyer has not sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other than in
the Ordinary Course of Business;
(ii) the Buyer has not entered into any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $50,000 or
outside the Ordinary Course of Business;
(iii) the Buyer has not and to the Buyer's
Knowledge, no other party has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more
than $50,000 to which the Buyer is a party or by which the Buyer is
bound;
(iv) the Buyer has not imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) the Buyer has not made any capital
expenditure (or series of related capital expenditures) either
involving more than $50,000 or outside the Ordinary Course of
Business;
(vi) the Buyer has not made any capital investment
in, any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $50,000 or outside the
Ordinary Course of Business;
(vii) the Buyer has not issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either
involving more than $50,000 singly or $100,000 in the aggregate;
(viii) the Buyer has not delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(ix) the Buyer has not canceled, compromised,
waived, or released any right or claim (or series of related rights
and claims) either involving more than $50,000 or outside the Ordinary
Course of Business;
(x) the Buyer has not granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
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(xi) there has been no change made or authorized
in the charter or bylaws of the Buyer;
(xii) the Buyer has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(xiii) the Buyer has not declared, set aside, or
paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiv) the Buyer has not experienced any material
damage, destruction, or loss (whether or not covered by insurance) to
its property;
(xv) the Buyer has not made any loan to, or
entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xvi) the Buyer has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) the Buyer has not granted any increase in the
base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xviii) the Buyer has not adopted, amended, modified
or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
(xix) the Buyer has not made any other change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xx) the Buyer has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(xxi) there has not been any other material
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving the Buyer; and
(xxii) the Buyer has not committed to any of the
foregoing, except in respect to the transactions contemplated by this
Agreement.
(f) UNDISCLOSED LIABILITIES. The Buyer has no material
Liability except for (i) Liabilities reflected on the Buyer's Most Recent
Balance Sheet (and in any notes thereto) and (ii) Liabilities which have arisen
after the Buyer's Most Recent Fiscal Year End in the Ordinary Course of
Business, none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law.
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(g) LEGAL COMPLIANCE. To the Buyer's Knowledge, the
Buyer has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), except to the extent any such failure would not have a material
adverse effect on the operations of the Buyer, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Buyer alleging any failure so to comply and, to
the Buyer's Knowledge, there is no basis for any such action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice to be filed
or to be commenced against any of them alleging any failure so to comply.
(h) NONCONTRAVENTION. To the Buyer's Knowledge, neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer
is subject or any provision of the charter or bylaws of the Buyer, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement,
contract, lease, license, instrument or other arrangement to which the Buyer is
a party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets). To
the Buyer's Knowledge, and other than in connection with the California General
Corporation Law, the Securities Exchange Act, the Securities Act, and the state
securities laws, the Buyer does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give any such
notice, to make any such filing, or obtain any such authorization, consent, or
approval would not have a material adverse effect on the ability of the Buyer
to consummate the transactions contemplated by this Agreement or have a
material adverse effect on the Buyer's business, operations, condition
(financial or otherwise), assets or Liabilities as in existence immediately
prior to the Closing.
(i) TAX MATTERS.
(i) The Buyer has filed all Tax Returns required
to be filed by it. All such Tax Returns were correct and complete in
all material respects. All Taxes owed by the Buyer (whether or not
shown on any Tax Return) have been paid. The Buyer currently is not
the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where the Buyer does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Buyer that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Buyer has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) The Buyer does not expect any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim, and to the Buyer's
Knowledge there is no basis for any such dispute or claim, concerning
any Tax Liability of the Buyer. Section 4(i) of the Disclosure
Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Buyer for taxable periods ended on
or after June 30, 1993,
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indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Buyer
has delivered to the Target correct and complete copies of all state,
local, and federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Buyer
since June 30, 1993.
(iv) The Buyer has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(v) The unpaid Taxes of the Buyer (A) did not, as
of the Buyer's Most Recent Fiscal Year End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) expected to be
set forth on the face of the Buyer's Most Recent Balance Sheet (rather
than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Buyer in filing
its Tax Returns.
(vi) The Buyer has not filed a consent under Code
Section 341(f) concerning collapsible corporations. The Buyer has not
made any payments, is not obligated to make any payments, nor is the
Buyer a party to any agreement that under certain circumstances would
obligate it to make any payments that will not be deductible under
Code Section 280G. The Buyer has not been a United States real
property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Buyer has disclosed on its federal income Tax
Returns all positions taken therein that would give rise to a
substantial understatement of federal income Tax within the meaning of
Code Section 6662. The Buyer is not a party to any Tax allocation or
sharing agreement. The Buyer (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Buyer) nor (B)
does the Buyer have any Liability for the Taxes of any Person (other
than the Target) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vii) Section 4(i) of the Disclosure Schedule sets
forth the following information with respect to the Buyer as of the
most recent practicable date (as well as on an estimated pro forma
basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of the Buyer in its
assets; (B) to the extent applicable, the amount of any net operating
loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Buyer.
(j) INTELLECTUAL PROPERTY.
(i) The Buyer owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property sufficient for the operation of the businesses
of the Buyer as presently conducted and as presently proposed to be
conducted. The Buyer has taken sufficient protective measures to
maintain and protect each item of Intellectual Property that it owns
or uses.
(ii) To the Buyer's Knowledge, the Buyer has not
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of third parties,
and the Buyer has not received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim
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that the Buyer must license or refrain from using any Intellectual
Property rights of any third party). To the Buyer's Knowledge, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
the Buyer.
(iii) The Buyer does not own any patent or
application therefor. Section 4(j)(iii) of the Disclosure Schedule
identifies each material license, agreement, or other permission which
the Buyer has granted to any third party with respect to any of its
Intellectual Property. The Buyer has delivered to the Target correct
and complete copies of all material licenses, agreements, and
permissions (as amended to date) and has made available to the Target
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. Section 4(j)(iii) of the Disclosure Schedule also identifies
each trade name or unregistered trademark used by the Buyer in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Section 4(j)(iii)
of the Disclosure Schedule,
(A) to the Buyer's Knowledge, the Buyer
possesses all right, title, and interest in and to the item,
free and clear of any Security Interest, license, or other
restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge; and
(C) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is
pending or, to the Buyer's Knowledge, threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item, and there is no basis for any such
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand; and
(D) the Buyer has never agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect
to the item pursuant to any material agreement relating to the
Intellectual Property.
(iv) Section 4(j)(iv) of the Disclosure Schedule
identifies each material item of Intellectual Property that any third
party owns and that the Buyer uses pursuant to license, sublicense,
agreement, or permission. The Buyer has delivered to the Target
correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in
Section 4(j)(iv) of the Disclosure Schedule,
(A) the license, sublicense, agreement,
or permission covering the item is in full force and effect
and constitutes a legal, valid and binding agreement of the
Buyer, enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratoriums or other similar laws
affecting the enforcement of creditors' rights generally and
the availability of equitable remedies (regardless of whether
enforceability is considered in a proceeding at law or
inequity);
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(B) to the Buyer's Knowledge, the Buyer
is not in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a
material breach or default or permit termination,
modification, or acceleration thereunder;
(C) the Buyer is not a party to any
sublicense material to the business of the Buyer;
(D) to the Buyer's Knowledge, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
(E) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is
pending or is threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property; and
(F) the Buyer has not granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(v) To the Buyer's Knowledge, the Buyer will not
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its businesses as presently
conducted and as presently proposed to be conducted.
(vi) To the Buyer's Knowledge, there are no new
products, inventions, procedures, or methods of manufacturing or
processing that any competitors or other third parties have developed
which reasonably could be expected to supersede or make obsolete any
product or process of any of the Buyer.
(k) CONTRACTS. Section 4(k) of the Disclosure Schedule
lists the following contracts and other agreements to which the Buyer is a
party, except contracts and other agreements involving a potential acquisition
of the capital stock or assets of the Buyer, which by their terms are subject
to a non-disclosure covenant:
(i) any agreement (or group of related
agreements) for the lease of personal property to or from any Person
providing for lease payments in excess of $25,000 per annum;
(ii) any agreement (or group of related
agreements) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the furnishing
or receipt of services, the performance of which will extend over a
period of more than one year, result in a material loss to the Buyer,
or involve consideration in excess of $50,000 per year;
(iii) any agreement concerning a partnership or
joint venture;
(iv) any agreement (or group of related
agreements) under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $25,000 or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
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(v) any agreement concerning confidentiality or
non-competition, except as hereinabove provided;
(vi) any agreement involving any of the Buyer's
stockholders and their Affiliates (other than the Buyer);
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or
other material plan or arrangement for the benefit of its current or
former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis not
cancelable on 30 days or less notice providing annual compensation in
excess of $25,000 or providing severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xi) except as otherwise listed pursuant to this
Section 4(k), any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations of the Buyer,
other than client or customer sales contracts entered into in the
Ordinary Course of Business of the Buyer;
(xii) any other agreement (or group of related
agreements) the performance of which involves annual consideration in
excess of $50,000.
The Buyer has delivered to the Target a correct and complete copy of each
written agreement listed in Section 4(k) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the material terms and conditions
of each oral agreement referred to in Section 4(k) of the Disclosure Schedule.
With respect to each such agreement, to the Buyer's Knowledge: (A) the
agreement is in full force and effect and constitutes a legal, valid and
binding agreement of the Buyer, enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratoriums or other similar laws affecting the
enforcement of creditors' rights generally and the availability of equitable
remedies (regardless of whether enforceability is considered in a proceeding at
law or inequity); and (B) no party is in material breach or default, and no
event has occurred which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification, or
acceleration, under the agreement.
(l) LITIGATION. Section 4(l) of the Disclosure Schedule
sets forth in each instance in which the Buyer (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Buyer's Knowledge, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. To the Buyer's Knowledge, there
is no basis for any present or future action, suit, proceeding, hearing and
investigation that could result in any material adverse change in the business,
condition (financial or otherwise), operations, assets or Liabilities of the
Buyer.
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(m) PRODUCT WARRANTY. Within the last 48 months, each
product sold, leased, or delivered by the Buyer has been in conformity with all
express and implied warranties of the Buyer, and the Buyer does not have any
Liability (and to the Buyer's Knowledge, there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
Buyer's Most Recent Balance Sheet to be adjusted for the passage of time up to
and including the Closing Date in accordance with the past custom and practice
of the Buyer. Section 4(m) of the Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for the Buyer (containing
applicable guaranty, warranty, and indemnity provisions).
(n) EMPLOYEE BENEFITS.
(i) Section 4(n) of the Disclosure Schedule lists
each Employee Benefit Plan that the Buyer maintains or as to which the
Buyer contributes.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund) complies in
material form and in operation in all material respects with
the applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B will have been met
in all material respects prior to the Closing Date with
respect to each applicable Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan and any and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid
to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Buyer.
All premiums or other payments for all periods ending on or
before the Closing Date have been paid or accrued in
accordance with GAAP with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan
which is an Employee Pension Benefit Plan meets the material
formal requirements of a "qualified plan" under Code Section
401(a) and has received, within the last two years, a
favorable determination letter from the Internal Revenue
Service.
(E) The Buyer does not maintain and has
not maintained any Employee Pension Benefit Plan which is a
defined benefit type plan.
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(F) The Buyer has delivered to the
Target correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination
letter received from the IRS, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such
Employee Benefit Plan.
(ii) The Buyer is not a member of a Controlled
Group of Corporations. With respect to each Employee Benefit Plan
that the Buyer and the Controlled Group of Corporations which includes
the Buyer maintains or ever has maintained or to which the Buyer
contributes, ever has contributed, or ever has been required to
contribute:
(A) No such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event as to
which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been
instituted or, to the Buyer's Knowledge threatened.
(B) To the Buyer's Knowledge there have
been no Prohibited Transactions with respect to any such
Employee Benefit Plan. To the Buyer's Knowledge no Fiduciary
has any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration
or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Buyer's Knowledge
threatened. To the Buyer's Knowledge, there is no basis for
any such action, suit, proceeding, hearing, or investigation.
(C) The Buyer has not incurred, nor to
the Buyer's Knowledge, is there any reason to expect that the
Buyer will incur any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(iii) The Buyer does not contribute to, never has
contributed to, and never has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) The Buyer does not maintain and never has
maintained and does not contribute, never has contributed, and never
has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with Code
Section 4980B).
(o) ENVIRONMENTAL, HEALTH, AND SAFETY. The Buyer has
complied in all material respects with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against the
Buyer alleging any failure so to comply. Without limiting the generality of
the preceding sentence, the
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Buyer has obtained and been in compliance with all of the terms and conditions
of all material permits, licenses, and other authorizations which are required
under, and has complied with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety Laws,
except where such non-compliance would not have a material adverse effect on
the operations of the Buyer.
(p) ADVISORY FEES. Except with respect to Concord
Partners, Ltd., Kenny Securities Corporation, and Windermere Holdings,
Incorporated, and as otherwise provided in Section 8(k) and in Section 4(p) of
the Disclosure Schedule, the Buyer does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(q) CONTINUITY OF BUSINESS ENTERPRISE. It is the present
intention of the Buyer to continue at least one significant historic business
line of the Target, or to use at least a significant portion of the Target's
historic business assets in a business, in each case within the meaning of
Treas. Reg. Section 1.368-1(d).
(r) DISCLOSURE. The Registration Statement, the
Prospectus, and the Definitive Buyer Proxy Materials will comply with the
Securities Act and the Securities Exchange Act in all material respects. The
Registration Statement, the Prospectus, and the Definitive Buyer Proxy
Materials will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they will be made, not
misleading; provided, however, that the Buyer makes no representation or
warranty with respect to any information that the Target will supply
specifically for use in the Registration Statement, the Prospectus, and the
Definitive Buyer Proxy Materials. None of the information that the Buyer will
supply specifically for use in the Definitive Target Proxy Materials will
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they will be made, not misleading.
(s) REAL PROPERTY.
(i) The Buyer does not own any real property:
(ii) Section 4(s)(ii) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to
the Buyer. The Buyer has delivered to the Target correct and complete
copies of the leases and subleases listed in Section 4(s)(ii) of the
Disclosure Schedule (as amended to date). With respect to each lease
and sublease listed in Section 4(s)(ii) of the Disclosure Schedule,
(A) the lease or sublease is in full
force and effect and constitutes a legal, valid and binding
agreement of the Buyer, enforceable in accordance with its
terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratoriums
or other similar laws affecting the enforcement of creditors'
rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a
proceeding at law or in equity);
(B) the Buyer is not and to the Buyer's
Knowledge, no other party to the lease or sublease is in
material breach or default, and no event has occurred which,
with
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notice or lapse of time, would constitute a material breach
or default or permit termination, modification, or
acceleration thereunder;
(C) there are no oral agreements,
forebearance programs in effect or material disputes as to the
lease or sublease;
(D) the Buyer has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
(E) (i) to the Buyer's Knowledge, the
Buyer is not in violation of any applicable laws or
governmental rules and regulations in regard to the use of the
facilities leased or subleased thereunder, and (ii) the Buyer
has not received any written notice from any governmental
authority of any such violation; and
(F) all facilities leased or subleased
thereunder are supplied with or have available utilities and
other services suitable for the operation of said facilities.
(t) SUBSIDIARIES. The Transitory Subsidiary, when
incorporated, will be the only Subsidiary of the Buyer. Section 4(t) of the
Disclosure Schedule sets forth for the Transitory Subsidiary (i) its name and
expected jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of shares of
each class of its capital stock to be issued to the Buyer, and (iv) the
proposed directors and officers of the Transitory Subsidiary. As of the
Closing, the Transitory Subsidiary will be a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of
its incorporation. The Transitory Subsidiary will be duly authorized to
conduct business and will be in good standing under the laws of each
jurisdiction where such qualification is required. Prior to the Closing, the
Transitory Subsidiary will not conduct any business. At the time of the
Closing, the Transitory Subsidiary will have full corporate power and authority
to ratify this Agreement and carry out the transactions contemplated herein.
On or before October 31, 1996, the Buyer will deliver to the Target correct and
complete copies of the charter and bylaws of the Transitory Subsidiary. As of
the Closing, all of the issued and outstanding shares of capital stock of the
Transitory Subsidiary will have been duly authorized and will be validly
issued, fully paid, and nonassessable. The Buyer will hold of record and own
beneficially all of the outstanding shares of the Transitory Subsidiary, free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Buyer to sell, transfer, or
otherwise dispose of any capital stock of any of the Transitory Subsidiary.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Transitory Subsidiary.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of the Transitory Subsidiary. As of
the Closing, the minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Transitory Subsidiary will be correct and complete. As of the Closing, the
Transitory Subsidiary will not be in default under or in violation of any
provision of its charter or bylaws. As of the Closing, the Transitory
Subsidiary will not control directly or indirectly or have any direct or
indirect equity participation in any corporation, partnership, trust, or other
business association.
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(u) FILINGS WITH THE SEC. The Buyer has filed with the
SEC all reports, registrations, and statements, together with any amendments
thereto, required to be made therewith, all of which as the respective dates
were in full compliance with the rules and regulations of the SEC.
5. COVENANTS. The Parties agree as follows with respect to the
period from and after the execution of this Agreement.
(a) NOTICES AND CONSENTS. The Target and the Buyer will
give any notices to third parties, and will use its respective reasonable best
efforts to obtain any third party consents, that the Buyer or the Target
reasonably may request in connection with the matters referred to in Section
3(d) or Section 4(h) above.
(b) REGULATORY MATTERS AND APPROVALS. Each of the
Parties will give any notices to, make any filings with, and use its reasonable
best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred
to in Section 3(d) and Section 4(h) above. Without limiting the generality of
the foregoing:
(i) SECURITIES ACT, SECURITIES EXCHANGE ACT, AND
STATE SECURITIES LAWS. The Buyer will prepare and file with the SEC a
registration statement on Form S-4 or any successor form under the
Securities Act relating to the offering and issuance of the Buyer
Shares issued in the Merger (and the Buyer Shares, if any, issued to
Concord Partners, Ltd. as contemplated by Section 8(k) (the
"REGISTRATION STATEMENT") and preliminary proxy materials under the
Securities Exchange Act relating to the Special Buyer Meeting. The
Buyer in each instance will use its reasonable best efforts to respond
to the comments of the SEC thereon and will make any further filings
(including amendments and supplements) in connection therewith that
may be necessary, proper, or advisable. The Buyer will file any
post-effective amendments and take whatever actions that may be
necessary, proper or advisable to keep the Registration Statement (and
any related filings and registrations under state securities laws)
effective during the period of distribution of the Buyer Shares
covered thereby. The Buyer will provide the Target, and the Target
will provide the Buyer, with whatever information and assistance in
connection with the foregoing filings that the filing party reasonably
may request. The Buyer will take all reasonable actions that may be
necessary, proper, or advisable under state securities laws in
connection with the offering and issuance of the Buyer Shares.
(ii) CALIFORNIA AND MASSACHUSETTS GENERAL
CORPORATION LAW. The Target will call a special meeting of its
stockholders (the "SPECIAL TARGET MEETING") as soon as reasonably
practicable, but such notice for the meeting will be sent no earlier
than the date the SEC declares effective the Registration Statement,
in order that the Target Stockholders may consider and vote upon the
adoption of this Agreement and the approval of the Merger in
accordance with the Massachusetts General Corporation Law. The Buyer
will call a special meeting of its stockholders (the "SPECIAL BUYER
MEETING") as soon as reasonably practicable in order that the
stockholders of Buyer may consider and vote upon the approval of this
Agreement, the Merger Agreement and the Merger in accordance with the
California General Corporation Law. The Parties will mail the Joint
Disclosure Document to their respective stockholders simultaneously
and as soon as reasonably practicable. It is understood that the
Definitive Target Proxy Materials will include, among other things,
the Prospectus and other information contained in the Registration
Statement, and the Parties will use their reasonable best efforts to
obtain the consent of all third parties (including their respective
accountants) for the use thereof. The Joint Disclosure Document will
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contain the unanimous affirmative recommendations of the respective
boards of directors of the Parties in favor of the approval of this
Agreement, the Merger Agreement and the Merger; provided however, that
no director or officer of either Party shall be required to violate
any fiduciary duty or other requirement imposed by law in connection
therewith.
(c) LISTING OF BUYER SHARES. The Buyer will use its
reasonable best efforts to cause the Buyer Shares that will be issued in the
Merger to be approved for listing on the Nasdaq National Market, subject to
official notice of issuance, prior to the Effective Time.
(d) NO MATERIAL CHANGES. The Target agrees that prior to
the 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 any
powers of attorney, or open additional accounts or boxes or grant any
additional powers of attorney, without in each case obtaining the prior written
consent of the Buyer, such consent not be unreasonably withheld or delayed.
(e) OPERATION OF BUSINESS. The Target will not engage in
any practice, take any action, or enter into any transaction, in any material
respect, outside the Ordinary Course of Business, without the prior written
consent of the Buyer. Without limiting the generality of the foregoing:
(i) the Target will not authorize or effect any
change in its charter or bylaws;
(ii) the Target will not grant any options,
warrants, or other rights to purchase or obtain any of its capital
stock or issue, sell, or otherwise dispose of any of its capital stock
(except upon the conversion or exercise of options, warrants, and
other rights currently outstanding);
(iii) except as required in connection with its
status as an S Corporation and as required in connection with tax
payments on income earned for the present tax year, the Target will
not declare, set aside, or pay any dividend or distribution with
respect to its capital stock (whether in cash or in kind), or redeem,
repurchase, or otherwise acquire any of its capital stock, in either
case outside the Ordinary Course of Business;
(iv) the Target will not issue any note, bond, or
other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation
outside the Ordinary Course of Business;
(v) the Target will not impose any Security
Interest upon any of its assets outside the Ordinary Course of
Business;
(vi) the Target will not make any capital
investment in, make any loan to, or acquire the securities or assets
of any other Person outside the Ordinary Course of Business;
(vii) the Target will not initiate any changes in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business; and
(viii) the Target will not commit to any of the
foregoing.
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(f) FULL ACCESS. The Parties will permit representatives
of the other Party to have full access at all reasonable times, and in a manner
so as not to interfere with the normal business operations of the Parties, to
all premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to each of the Parties. The Parties
will treat and hold as such any Confidential Information they receive in the
course of the reviews contemplated by this Section 5(f), will not use any of
the Confidential Information except in connection with this Agreement, and, if
this Agreement is terminated for any reason whatsoever, agree to return to the
respective Party all tangible embodiments (and all copies) thereof which are in
their respective possession. The Parties acknowledge and agree that the
Confidentiality and Non-Disclosure Agreement executed by Buyer and dated May
24, 1996 shall remain in full force and effect, without modification hereby.
(g) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the other of the occurrence of any event that would
constitute a breach of any of its own representations and warranties in Section
3 and Section 4 above. No disclosure by any Party pursuant to this Section
5(g), however, shall be deemed to amend or supplement the Disclosure Schedule
or to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant, except as otherwise provided in Section 3 or Section 4 above.
(h) EXCLUSIVITY. The Target will not solicit, initiate,
or encourage the submission of any proposal or offer, and will not entertain,
pursue, consider or accept any proposal or offer from any Person relating to
the acquisition of all or substantially all of the capital stock or assets of
any of the Target (including any acquisition structured as a merger,
consolidation, or share exchange). The Target shall notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing and will provide the Buyer with a written copy
of any such proposal, offer, inquiry, or contact.
(i) CONTINUITY OF BUSINESS ENTERPRISE. The Buyer will
continue at least one significant historic business line of the Target, or use
or lease a significant portion of the Target's historic business assets in a
business, in each case within the meaning of Treas. Reg. Section 1.368-1(d).
(j) EMPLOYMENT AGREEMENTS. The Buyer will use its best
efforts to enter into an employment agreement with Franklin A. Reece, III and
Angelo P. Gentile on mutually acceptable terms to the respective employee and
the Buyer.
(k) DIRECTORSHIPS. The Buyer will recommend to its
stockholders the Target Director Designees for nomination to positions as
directors of the Buyer in the Definitive Buyer Proxy Materials (and any other
proxy materials, if necessary), to serve for a term of three and two years,
respectively, and to any vacancy created by the death or withdrawal of any
incumbent Target Director Designee during such three or two year term. As the
sole stockholder of Transitory Subsidiary, the Buyer shall elect the Target
Director Designees as directors of the Transitory Subsidiary for a period of
three and two years, respectively, and to any vacancy created by the death or
withdrawal of any incumbent Target Director Designee during such three or two
year term. The Buyer will also take all actions necessary to amend the Buyer's
bylaws and charter, if necessary or advisable, to provide for staggered terms
of Board members.
(l) PRELIMINARY MEETING. Following execution of this
Agreement, the Target will organize an informal meeting of its stockholders to
preliminarily discuss the Merger and the other transactions contemplated
herein, subject to final approval at the Special Target Meeting. The Target
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will notify the Buyer of the time and place of such meeting so that the Buyer's
agents and/or other representatives may attend the meeting.
(m) BUSINESS COMBINATION UNDER RULE 145. Each of the
Parties will use their reasonable best efforts to take such actions in order to
provide that the Merger and the transactions contemplated by this Agreement
satisfy the requirements of a business combination under Rule 145 of the
Securities Act.
(n) ANCILLARY AGREEMENTS.
(i) The Buyer shall enter into a mutually
acceptable Registration Rights Agreement, a form of which is attached
hereto as Exhibit H which shall, among other things, grant the Target
Stockholders, "piggyback" registration rights with respect to the
Buyer Shares issued in the Merger, for a period of 42 months after the
Closing Date, require prompt publication of financial results that
report at least thirty days of combined operations of Buyer and
Target, require continued compliance by Buyer with the public
information requirements of Rule 144 in order to afford the Target
Stockholders the benefits thereof in connection with the resale of
Buyer Shares issued in the Merger, require compliance with the
reporting requirements under the Securities Exchange Act and with
listing requirements of the NASDAQ National Market and shall timely
file all reports required thereunder and require Buyer to keep the
Registration Statement, and any state securities law filings and
registrations relating thereto, effective for the period of
distribution of the Buyer Shares issued in the Merger.
(ii) The Target shall use its reasonable best
efforts to cause the Target Stockholders to enter into the agreements
referred to in Section 6(a)(xvi) below.
(o) TARGET EMPLOYEES. The Buyer shall cause the
Transitory Subsidiary to (i) employ each person employed by Target on the
Closing Date on at least an "employment-at-will" basis as of the first business
day after the Closing Date, (ii) provide such benefits and salary to such
person who accepts the offer of employment with the Transitory Subsidiary
comparable to the benefits and salary previously provided or paid by Target as
of the Closing Date, and (iii) grant to each such person credit for his/her
years of service with the Target for purposes of calculating such person's
right to participate in applicable benefit plans and programs and the level of
such participation.
(p) D&O INSURANCE. The Buyer shall obtain directors and
officers insurance coverage for the directors and officers of the Buyer and the
Transitory Subsidiary that will be in place and provide coverage prior to the
Closing Date.
(q) NOTIFICATION OF BUYER DILUTION. The Buyer will
provide written notice to the Target of any proposed issuance of Buyer Shares
(other than the Buyer Shares issuable (i) in the non-related private placement
as disclosed in Section 4(b) hereof, (ii) upon exercise of the rights listed in
Section 4(b) of the Disclosure Schedule, (iii) upon completion of the Merger,
or (iv) upon assumption of the Conversion Options) or of securities
exchangeable for or convertible or exercisable into Buyer Shares, or any
commitment or agreement which could give rise to issuance of any such
securities, and if any such proposed issuance would cause the aggregate number
of Buyer Shares issued or issuable thereby to exceed by 500,000 (or more) in
the aggregate the sum of the number of Buyer Shares disclosed in Section 4(b)
above and issuable upon exercise of the options, warrant, rights, and other
commitments disclosed in Section 4(b) of the Buyer's Disclosure Schedule. The
Target may object to such issuance by written notice
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within five (5) business days of receipt of the Buyer's written notice of such
proposed issuance (the "TARGET'S NOTICE"); it being the intent of the Parties
to discuss during this period the proposed issuance and the underlying
transaction. Following receipt of the Target's Notice, the Buyer shall have
five (5) business days to withdraw its written notice and notify the Target in
writing that it does not intend to go forward with the proposed stock issuance.
(r) NOTIFICATION OF CHANGES IN REPRESENTATIONS AND
WARRANTIES. The Parties will notify each other of any material changes in the
representations and warranties provided in Section 3 and Section 4 hereof as
soon as reasonably practicable after the respective Party first discovers such
changed circumstances.
(s) TREATMENT OF CONVERSION OPTIONS. At the Effective
Time, the Target Option Plan and each Target Option, whether vested or
unvested, which is not exercised at or before the Effective Time, will be
assumed by the Buyer (each such option assumed by the Buyer is referred to in
this Agreement as a "CONVERSION OPTION"). Section 2(f)(i) of the Target's
Disclosure Schedule sets forth a true and complete list as of the date hereof
of all Target Options under the Target Option Plan, including the name of the
respective holder, the number of Target Shares subject to each such option, the
exercise or vesting schedule, the exercise price per share, the term of each
such option, and Target Options to be canceled prior to the Closing. On the
Closing Date, the Target shall deliver to the Buyer an updated Section 2(f)(i)
of the Target Disclosure Schedule current as of such date, including the number
of Target Options to be exercised at and as of the Effective Time, the number
of Target Options exercised prior to the Effective Time, and the number of
Conversion Options. Each Conversion Option assumed by the Buyer under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Target Option Plan and any option agreement
relating thereto, at and as of the Effective Time, except that (i) such option
will be exercisable for that number of Buyer Shares equal to the product of the
number of Target Shares that were issuable upon exercise of such option
(whether vested or unvested) immediately prior to the Effective Time multiplied
by the Conversion Ratio and rounded up to the nearest whole Buyer Share, (ii)
the per share exercise price for the Buyer Shares issuable upon exercise of
such assumed option shall be equal to the exercise price of such Conversion
Option, and (iii) each Conversion Option shall be fully vested and immediately
exercisable. The Merger will not terminate any of the outstanding options
under such plan. It is the intention of the Parties that the options so
assumed by the Buyer retain their status as incentive stock options as defined
in Section 422 of the Code following the Effective Time to the extent such
options qualified as incentive stock options prior to the Effective Time.
Within ten (10) business days after the Effective Time, the Buyer will issue to
each Person who, immediately prior to the Effective Time was a holder of a
Conversion Option under the Target Option Plan a document in form and substance
satisfactory to such Person evidencing the foregoing assumption of such option
by the Buyer.
(t) REGISTRATION OF CONVERSION OPTIONS. As soon as
reasonably practicable after the Effective Time, the Buyer will prepare and
file with the SEC a registration statement on Form S-8 or any successor form
under the Securities Act relating to the offering and issuance of the Buyer
Shares to be issued upon the exercise of the Conversion Options.
(u) SETTLEMENT OF OPTIONS AND RIGHTS. Other than the
Conversion Options and the Target Options exercised on or before the Closing,
the Target shall cause any other options, rights or agreements of any kind to
acquire the Target Common Stock or other securities of the Target to have been
either canceled, terminated, modified or exchanged on terms and conditions
reasonably satisfactory to the Buyer prior to the Effective Time.
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(v) ESTOPPEL CERTIFICATES. The Target shall use its
reasonable best efforts to obtain Estoppel Certificates (the "Estoppel
Certificates") in form and substance mutually acceptable to the Parties from
the lessors of the properties listed in Schedule 3(l)(ii) of the Target's
Disclosure Schedule prior to the Closing.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The
obligation of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Target Stockholder Approval;
(ii) the Target shall have procured all of the
third party consents specified in Section 5(a) above;
(iii) each representation and warranty set forth in
Section 3 above shall be true and correct in all material respects at
and as of the Closing Date, subject to any amendments thereto as
permitted under Section 3 above;
(iv) the Target shall have performed and complied
with all of its covenants hereunder through the Closing;
(v) no action, suit, or proceeding shall be
pending or threatened before any court or quasijudicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge could (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) materially
and adversely affect the right of the Surviving Corporation to own the
former assets and to operate the former businesses of the Target, and
(D) and no such injunction, judgement, order, decree, ruling or charge
shall be in effect;
(vi) the Target shall have delivered to the Buyer
a certificate to the effect that each of the conditions specified
above in Section 6(a)(i)-(v) is satisfied;
(vii) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Buyer Stockholder Approval;
(viii) the Registration Statement and any applicable
state securities filings and registrations shall be effective under
the Securities Act and any applicable state securities laws or
regulations at and as of the Effective Time, and no stop order shall
have been issued by the SEC or any state regulatory agency;
(ix) the Buyer Shares that will be issued in the
Merger shall have been approved for listing on the Nasdaq National
Market, subject to official notice of issuance;
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(x) the Parties shall have received all
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(d) and Section 4(h)
above;
(xi) the Buyer shall have received from counsel to
the Target an opinion in form and substance reasonably acceptable to
the Buyer, addressed to the Buyer, and dated as of the Closing Date;
(xii) the Buyer shall have received the
resignations, effective as of the Closing, of each director and
officer of the Target other than those whom the Buyer shall have
specified in writing at least three business days prior to the
Closing;
(xiii) the Buyer shall have received from the
Target's independent auditors' their consent to the use by the Buyer
of such auditors' audit report in the Registration Statement and their
agreement to provide such consent in any other filing by the Buyer
that may require reference to the Target's audited financial
statements;
(xiv) the Buyer shall have received from its
independent accountants an opinion dated as of the Closing, in form
and substance reasonably satisfactory to the Buyer, that this
Agreement and the transactions contemplated herein qualify for pooling
of interests accounting treatment under Accounting Principles Board
Opinion No. 16;
(xv) the Buyer shall have completed its due
diligence and all outstanding issues relating thereto shall have been
satisfactorily resolved by the Parties;
(xvi) the Buyer shall have received from each of
the Target Stockholders an agreement in the form of Exhibit G
attached hereto that: (i) if such Target Stockholder was an officer,
director, or the holder of 10% or more of the Target Shares
immediately prior to the Merger, he or she will not sell or arrange
for the sale of any of the Buyer Shares until the first day following
publication of financials reporting not less than 30 days of combined
operations of the Buyer and the Target; and (ii) he or she does not
intend to take any actions that will jeopardize the tax-free nature of
this transaction;
(xvii) the Buyer shall have received from Franklin
A. Reece, III and Angelo P. Gentile executed employment agreements as
provided for in Section 5(j) hereof;
(xviii) the Target shall have delivered the Estoppel
Certificates executed by the lessors of the properties listed in
Schedule 3(l)(ii) of the Target's Disclosure Schedule;
(xix) the Buyer shall have obtained directors and
officers insurance coverage in accordance with the provisions of
Section 5(p) hereof;
(xx) the Target shall have canceled all
outstanding or authorized options (other than the Target Options and
the Conversion Options identified in Section 2(f)(i) of the Disclosure
Schedule), warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could
require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock;
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(xxi) all actions to be taken by the Target in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer; and
(xxii) from the date hereof through the Effective
Time, there shall have been no material adverse change (or
developments involving a prospective material adverse change) in the
business, condition (financial or otherwise), operations, properties,
or prospects of the Target.
The Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing other than Section 6(a)(xvi)
which is not waivable.
(b) CONDITIONS TO OBLIGATION OF THE TARGET. The
obligation of the Target to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(i) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Buyer Stockholder Approval
and the Buyer's Approval as the sole stockholder of the Transitory
Subsidiary;
(ii) the Registration Statement and any applicable
state securities filings and registrations shall be effective under
the Securities Act and any applicable state securities laws or
regulations at and as of the Effective Time, and no stop order shall
have been issued by the SEC or any state regulatory agency;
(iii) the Buyer Shares that will be issued in the
Merger shall have been approved for listing on the Nasdaq National
Market, subject to official notice of issuance;
(iv) each representation and warranty set forth in
Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(v) the Buyer shall have performed and complied
with all of its covenants hereunder through the Closing;
(vi) no action, suit, or proceeding shall be
pending or threatened before any court or quasijudicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge could (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) materially
and adversely affect the right of the Surviving Corporation to own the
former assets and to operate the former businesses of the Target; and
(D) no such injunction, judgement, order, decree, ruling or charge
shall be in effect;
(vii) the Buyer shall have delivered to the Target
a certificate to the effect that each of the conditions specified
above in Section 6(b)(i)-(vi) and Section 6(b)(ix), (xiii) and (xiv)
below, is satisfied;
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(viii) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Target Stockholder Approval;
(ix) the Target Director Designees shall be
elected directors of the Buyer at the Special Buyer Meeting for terms
of two and three years, respectively, contingent only upon the
Closing, and the by-laws of the Buyer, and any other appropriate
charter documents of the Buyer, shall be amended to provide for
staggered terms of Directors to permit such elections as provided in
Section 5(k);
(x) the Parties shall have received all
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(d) and Section 4(h)
above;
(xi) the Target shall have received from counsel
to the Buyer an opinion in form and substance reasonably acceptable to
the Target, addressed to the Target, and dated as of the Closing Date;
(xii) the Target shall have received from its
counsel an opinion dated as of the Closing, in form and substance
reasonably satisfactory to the Target, that this Merger and the
transactions contemplated hereby qualify as a tax-free reorganization
under Code Section 368(a)(1)(A) and Section 368(a)(2)(E);
(xiii) the Target Director Designees shall be
elected directors of the Transitory Subsidiary, prior to the Closing,
for terms of three and two years, respectively, from the date of their
election;
(xiv) the Buyer and each of the Target Stockholders
shall have entered into the Registration Rights Agreement referred to
in Section 5(n)(i) above;
(xv) the Buyer shall have received from Franklin
A. Reece, III and Angelo P. Gentile executed employment agreements as
provided for in Section 5(j) hereof;
(xvi) the Target shall have completed its due
diligence and all outstanding issues relating thereto shall have been
satisfactorily resolved by the Parties;
(xvii) the Buyer shall have procured all of the
third party consents specified in Section 5(a) above;
(xviii) the Target shall have received the consent of
the Bank of Boston to the Merger and the transactions contemplated
hereby, and the unconditional release of the personal guaranties by
certain Target Directors of the Target's liabilities and obligations
to said Bank of Boston;
(xix) the Target shall have received from H. C.
Wainwright an opinion in form and substance acceptable to the Target
that the Merger and the consideration offered to the Target
Stockholders thereunder is fair from a financial point of view to the
Target Stockholders;
(xx) the Buyer shall have obtained the directors
and officers insurance coverage in accordance with the provisions of
Section 5(p) hereof;
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(xxi) the Merger and the transactions contemplated
hereby shall qualify as a business combination under Rule 145 of the
Securities Act;
(xxii) the Target shall have received from the
Buyer's independent auditors' their consent to the use by the Target
of such auditors audit report in the Joint Disclosure Document and
their agreement to provide such consent in any other filing and/or
mailing by the Target that may require reference to the Buyer's
audited financial statements;
(xxiii) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Target; and
(xxiv) from the date hereof through the Effective
Time, there shall have been no material adverse change (or
developments involving a prospective material adverse change) in the
business, condition (financial or otherwise), operations, properties,
or prospects of the Buyer.
The Target may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either the Buyer or the
Target may terminate this Agreement with the prior authorization of its Board
of Directors (whether before or after stockholder approval) as provided below:
(i) the Buyer and the Target may terminate this
Agreement by mutual written consent at any time prior to the Effective
Time;
(ii) the Buyer may terminate this Agreement by
giving written notice to the Target at any time prior to the Effective
Time (A) in the event the Target has breached any representation,
warranty, or covenant contained in this Agreement in any material
respect, the Buyer has notified the Target of this breach, in writing,
and the breach has continued without cure for a period of five (5)
business days after the written notice of breach or (B) if the Closing
shall not have occurred on or before November 30, 1996, by reason of
the failure of any condition precedent under Section 6(a) hereof that
cannot be satisfied through the exercise of reasonable best efforts
within five (5) business days following November 30, 1996 (unless the
failure results primarily from the Buyer breaching any representation,
warranty, or covenant contained in this Agreement);
(iii) the Target may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Effective
Time (A) in the event the Buyer has breached any representation,
warranty, or covenant contained in this Agreement in any material
respect, the Target has notified the Buyer of the breach, in writing,
and the breach has continued without cure for a period of five (5)
business days after the written notice of breach or (B) if the Closing
shall not have occurred on or before November 30, 1996, by reason of
the failure of any condition precedent under Section 6(b) hereof that
cannot be satisfied through the exercise of reasonable best efforts
within five (5) business days following November 30, 1996 (unless the
failure results
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primarily from the Target breaching any representation, warranty, or
covenant contained in this Agreement);
(iv) any Party may terminate this Agreement by
giving written notice to the other Party at any time after the Special
Buyer Meeting or the Special Target Meeting in the event this
Agreement, the Merger Agreement and the Merger fail to receive the
Requisite Buyer Stockholder Approval or the Requisite Target
Stockholder Approval, respectively;
(v) The Target may terminate this Agreement by
giving written notice to the Buyer on the 10th business day following
the date of delivery of Target's Notice if Buyer has not retracted its
notice of proposed issuance of stock within five (5) business days of
receipt of the Target Notice in accordance with Section 5(q) hereof;
(b) EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 7(a) above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in Section 5(f) above
and the Confidentiality and the Non-Disclosure Agreement referenced therein
shall survive any such termination; provided further, however, that any such
termination will have no effect on amounts that the Target currently owes or
may owe in the future to the Buyer. Anything herein to the contrary
notwithstanding, termination of this Agreement pursuant to Section 7(a) above
shall be the sole and exclusive remedy for the breach of any representation or
warranty by a Party under Section 3 or Section 4 above.
8. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties,
covenants and agreements in this Agreement, including without limitation the
representations and warranties of the Parties in Section 3 and Section 4 of
this Agreement, shall survive the Effective Time, except for those covenants
and agreements contained herein which by their terms apply in whole or in part
after the Effective Time.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable efforts to advise the other Party
prior to making the disclosure).
(c) ENTIRE AGREEMENT. This Agreement (including the
documents referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they related in any
way to the subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Party.
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(e) COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Target:
Franklin A. Reece, III
USTeleCenters, Inc.
745 Atlantic Avenue
Boston, MA 02111-2747
Copy to:
Robert C. Rives, Jr., Esq.
Burns & Levinson
125 Summer Street
Boston, MA 02110-1624
If to the Buyer:
Robert G. Hatfield
View Tech, Inc.
950 Flynn Road
Camarillo, CA 93012
Copies to:
V. Joseph Stubbs, Esq.
Brobeck Phleger & Harrison LLP
550 South Hope Street
Los Angeles, CA 90071-2604
Howard J. Kern, Esq.
Law Offices of Howard J. Kern
4057 Rhodes Avenue
Studio City, CA 91604
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such
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notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Party notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with applicable federal laws and the domestic laws
of the State of California without giving effect to any choice or conflict of
law provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of California.
(i) AMENDMENTS AND WAIVERS. The Parties may mutually
amend any provision of this Agreement at any time prior to the Effective Time
with the prior authorization of their respective boards of directors; provided,
however, that any amendment effected subsequent to stockholder approval will be
subject to the applicable restrictions contained in the California General
Corporation Law and in the Massachusetts General Corporation Law. No amendment
of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by both of the Parties. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(k) EXPENSES. Except as herein provided, each of the
Parties will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement. However, the Buyer will
pay at the Closing (i) the fees of Concord Partners, Ltd., forty percent of
which shall be paid in either additional Buyer Shares (to be issued with the
other Buyer Shares to be issued hereunder) (valued in accordance with the
provisions of Section 2(f)(i)-(iii) above) or in cash, at Buyer's option, and
the balance in cash and (ii) the fees of the Target's legal counsel and
accountants in cash. The payments to Concord Partners, Ltd. and the Target's
legal counsel and accountants will reduce the Total Target Valuation as
provided for in Section 2(f)(iv) above.
(l) CONSTRUCTION. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) VENUE; JURISDICTION. All actions with respect to
this Agreement will be instituted in a state court sitting in Ventura County,
California or Suffolk County, Massachusetts or in a federal court for the
Central District of California, or the Eastern Division of the District of
Massachusetts, subject to the provisions on arbitration in Section 8(o) below.
By the execution of this Agreement, each Party irrevocably and unconditionally
submits to the jurisdiction (both subject matter and personal) of each such
court and irrevocably and unconditionally waives: (a) any objection such Party
might now or hereafter
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have to the venue in any such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient forum.
(o) ARBITRATION. Any disputes arising out of this
Agreement and the transactions among the Parties contemplated by this Agreement
shall be settled by binding arbitration to be held in (i) Ventura County,
California if such arbitration proceeding is initiated by Target and (ii) in
Suffolk County, Massachusetts if such arbitration proceeding is initiated by
Buyer, in each case in accordance with the rules of the American Arbitration
Association. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. The statute of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding,
and the commencement of an arbitration proceeding shall be deemed the
commencement of an action for these purposes. This Section 8(o) is not
intended to limit, expand, or otherwise affect the rights, remedies, or
obligations that the Buyer, the Target, or any other Person may have pursuant
to other written agreements referred to in this Agreement or otherwise.
(p) ATTORNEYS' FEES. Each Party agrees that the losing
party in any suit or action shall reimburse the prevailing party for its
reasonable costs, expenses, and attorney's fees incurred in any action brought
to determine the rights of the Parties hereunder.
*****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
View Tech, Inc.
By: /s/ Robert G. Hatfield
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
View Tech Acquisition, Inc.
By: /s/ Robert G. Hatfield
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
USTeleCenters, Inc.
By: /s/ Franklin A. Reece
---------------------------------
Franklin A. Reece, III
Title: President
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AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1 ("Amendment No. 1"), entered into as of
October 31, 1996, by and among View Tech, Inc., a California corporation (the
"Buyer"), View Tech Acquisition, Inc., a California corporation ("VTAI-Cal"),
USTeleCenters, Inc., a Massachusetts corporation (the "Target"), and View Tech
Acquisition, Inc., a Delaware corporation ("VTAI-Del"), to that certain
Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 5,
1996, by and among Buyer, VTAI-Cal and the Target. Except as otherwise
provided herein, all capitalized terms used in Amendment No. 1 shall have the
meanings set forth in the Merger Agreement after giving effect to Amendment No.
1. The Buyer, the Target, VTAI-Cal and VTAI-Del are referred to collectively
herein as the "Parties."
WHEREAS, the Buyer, the Target and VTAI-Cal entered into the
Merger Agreement with respect to, among other things, the merger of the Target
by and into VTAI-Cal; and
WHEREAS, the Parties desire to amend the Merger Agreement as
set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the Parties agree as
follows:
9. VTAI-Cal shall be substituted and replaced in the
Merger Agreement with VTAI-Del, and all references to "Transitory Subsidiary"
in the Merger Agreement shall apply to VTAI-Del.
10. The phrase, "Delaware General Corporation Law" shall
be added immediately following the phrase "California General Corporation Law"
in each of the first recital and Sections 2(a)(i) and (ii) of the Merger
Agreement.
11. A new definition, "'DELAWARE GENERAL CORPORATION LAW'
means the General Corporation Law of the State of Delaware, as amended." shall
be added to Section 1 immediately after the definition of "Definitive Target
Proxy Materials."
12. The phrase, "the Secretary of State of the State of
Delaware" shall be added immediately following the phrase "Secretary of State
of the State of California" in Section 2(d)(iii) of the Merger Agreement.
13. The phrase "and the Secretary of State of the State
of Delaware" shall be added immediately following the phrase "Secretary of
State of the State of California" in Section 2(e) of the Merger Agreement.
14. The phrase "(and the Buyer Shares, if any, issued to
Concord Partners, Ltd. as contemplated by Section 8(k)" set forth in the first
sentence of Section 5(b)(i) of the Merger Agreement shall be deleted and
replaced with the phrase, "provided, however, that the Buyer shall register
the Buyer Shares, if any, issued to Concord Partners, Ltd. as contemplated by
Section 8(k) on Form SB-2 or any successor form under the Securities Act, as
soon as practicable but in no event later than ninety (90) days after the
Closing Date."
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15. The reference to "Section 368(a)(2)(E)" set forth in
Section 6(b)(xii) of the Merger Agreement shall be deleted and changed to
"Section 368(a)(2)(D)."
16. The reference to "H. C. Wainwright" set forth in
Section 6(b)(xix) of the Merger Agreement shall be deleted and changed to "an
investment banker or financial advisor of its choice."
17. There are no other amendments, changes or
modifications to the Merger Agreement and all other sections thereof shall
remain unaffected by Amendment No. 1.
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IN WITNESS WHEREOF, the Parties hereto have executed Amendment No. 1
as of the date first above written.
View Tech, Inc., a California corporation
By: /s/ Robert G. Hatfield
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
View Tech Acquisition, Inc., a California corporation
By: /s/ Robert G. Hatfield
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
View Tech Acquisition, Inc., a Delaware corporation
By: /s/ Robert G. Hatfield
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
USTeleCenters, Inc., a Massachusetts corporation
By: /s/ Franklin A. Reece
---------------------------------
Franklin A. Reece, III
Title: President
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ANNEX B
OPINION OF O'CONOR, WRIGHT WYMAN, INC.
November 1, 1996
Board of Directors
USTeleCenters, Inc.
745 Atlantic Avenue
Boston, MA 02111
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of USTeleCenters, Inc. (the "UST Shareholders") of
the proposed merger of USTeleCenters, Inc. ("UST" or the "Company") with and
into View Tech Acquisition, Inc. ("VTAI"), a wholly-owned subsidiary of View
Tech, Inc. ("View Tech") and of the consideration offered to the UST
Shareholders pursuant to the terms of the Agreement and Plan of Merger dated as
of September 5, 1996, by and among View Tech, VTAI and UST, as amended by
Amendment No. 1 entered into as of October 31, 1996, by and among View Tech,
VTAI, UST and View Tech Acquisition, Inc., a Delaware Corporation ("VTAI-Del")
(the "Merger Agreement").
Pursuant to the Merger Agreement, among other things: (A) UST will be merged
with and into VTAI (the "Merger"); (B) each share of UST common stock, $0.01
par value per share ("UST Common Stock") (other than dissenters' shares), will
be converted into the right to receive shares of View Tech Common Stock, $0.01
par value per share ("View Tech Common Stock") based on the Conversion Ratio
(as defined below); and (C) View Tech will assume the UST Stock Option Plan
(the "UST Option Plan"), and all UST stock options outstanding as of the
effective time of the Merger (the "UST Options") will be converted into the
right to acquire shares of View Tech Common Stock for each share of UST Common
Stock underlying the UST Options (the "Conversion Options") based on the
Conversion Ratio.
The Merger Agreement provides for the issuance of up to 2,500,000 shares of
View Tech Common Stock (the "Merger Shares") (i) in exchange for all
outstanding shares of UST Common Stock (other than dissenters' shares) and (ii)
upon exercise of the Conversion Options. As of October 30, 1996, based upon
the Conversion Ratio and assuming exercise of all of the UST Options 2,500,000
shares of View Tech Common Stock would be issuable in exchange for 9,884,157
shares of UST Common Stock. The number of Merger Shares to be issued in the
Merger has been determined pursuant to a conversion ratio of 0.25293 of a share
of View Tech Common Stock (to be adjusted for the amount of certain fees of
UST's accountants, attorneys and financial advisor attributable to the Merger
and payable by View Tech on the effective date of the Merger) for each
outstanding share of UST Common Stock and each share of UST Common Stock
otherwise issuable upon exercise of the Conversion Options (the "Conversion
Ratio").
Based upon the closing price of $5.75 per share for View Tech Common Stock in
public trading on the NASDAQ National Market on October 31, 1996, the last
trading day prior to issuance of this opinion, and upon the Conversion Ratio of
0.25293 (exclusive of the above-referenced adjustment), the aggregate value of
the 2,500,000 shares of View Tech Common Stock (the "Merger Consideration")
issuable in exchange for 9,884,157 shares of UST Common Stock was approximately
$14.4 million. Assuming that the amount of the total fees adjustment is
approximately $600,000, the effective Conversion Ratio would be reduced to
approximately 0.2453421 and the net Merger Consideration after adjustment would
be reduced to approximately $13.8 million. There can be no assurance that the
value of the View Tech Common Stock issuable to UST shareholders and former
holders of UST Options, and thus the aggregate and net adjusted value of the
Merger Consideration, will not increase or decrease prior to the effective date
of the Merger, or thereafter.
O'Conor, Wright Wyman, Inc., as part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions and for corporate and other purposes. For our
services in connection with rendering this opinion, UST has paid us a fee and
has reimbursed us for certain expenses and UST has
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indemnified us and certain related parties against certain liabilities. UST's
obligation for our fees and disbursements was not contingent upon our issuance
of a favorable opinion letter or upon completion of the proposed Merger.
Neither O'Conor, Wright Wyman, Inc. nor the individuals involved with this
opinion have any present or contemplated future interest in UST, View Tech or
the transactions contemplated in the Merger Agreement.
In connection with this opinion, we have undertaken certain reviews, analyses
and inquiries which we have deemed relevant and have, among other things:
(a) reviewed the Merger Agreement dated as of September 5, 1996
and Amendment No. 1 to the Merger Agreement dated as of
October 31, 1996;
(b) reviewed the Form S-4 Registration Statement of View Tech,
Inc. filed with the Securities and Exchange Commission on
October 4, 1996 (the "Registration Statement") and certain
changes proposed for incorporation into a prospective
amendment thereto;
(c) reviewed certain historical financial statements and
information relating to UST, including (i) audited financial
statements for the years ended December 31, 1992 through 1995;
(ii) unaudited summary financial statements for the six months
ended June 30, 1995 and 1996 and for the nine months ended
September 30, 1996; and (iii) unaudited condensed pro forma
financial statements for the twelve months ended June 30, 1995
and 1996, as presented in the Pro Forma Combined Financial
Statements included in the Registration Statement and
referenced below;
(d) reviewed the UST Confidential Information Memorandum prepared
by Concord Partners, Ltd. ("Concord"), financial advisors to
UST with respect to the sale of UST and to the Merger;
reviewed with members of UST's senior management and with
Concord, an Acquisition Summary prepared by Concord; and
reviewed the View Tech Letter of Intent and Term Sheet dated
July 23, 1996, agreed to and accepted by UST on July 26, 1996;
(e) reviewed and discussed with members of UST's senior management
and Board of Directors (i) the Company's historical and
current operations, financial condition and future prospects;
(ii) certain internal financial information and forecasts
prepared by management of the Company; and (iii) UST's reasons
for the Merger and factors considered by the UST Board of
Directors in approving the Merger, as well as potentially
negative risk factors considered by the UST Board of Directors
in its deliberations concerning the Merger;
(f) reviewed certain historical financial statements and public
filings of View Tech, including (i) audited financial
statements for the fiscal years ended June 30, 1993 through
1996; (ii) Prospectus dated June 15, 1995; (iii) Annual Report
for the fiscal year ended June 30, 1995; (iv) Form 10-KSB for
the fiscal year ended June 30, 1996; (v) unaudited draft
summary financial statements for the three months ended
September 30, 1996 and 1995, (vi) the Unaudited Pro Forma
Condensed Combined Financial Statements of View Tech for the
year ended June 30, 1996 (reflecting, on a pro forma basis,
the Merger and the July 1, 1996 acquisition of VistaTel, Inc.
and the September 24, 1996 acquisition of GroupNet, Inc.) and
for the year ended June 30, 1995 (reflecting, on a pro forma
basis, the Merger) (the "Pro Forma Combined Financial
Statements"); met with the Chief Executive Officer of View
Tech to discuss View Tech's historical and current operations,
financial condition and future prospects; reviewed certain
forecasts prepared by View Tech; and reviewed the historical
stock prices and trading volumes of View Tech Common Stock,
including stock prices reflected in certain View Tech
financing transactions;
(g) computed certain valuation ratios for UST based upon the
aggregate value of the Merger Consideration and compared such
valuation ratios for UST with similar information for certain
publicly-traded companies which we deemed comparable and with
valuation ratios prevailing in certain recent merger and
acquisition transactions in the telecommunications industry;
and
(h) performed such other analyses and investigations and
considered such other factors as we deemed appropriate.
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In rendering our opinion, we have relied, without assuming any responsibility
for the independent verification of such information, upon the accuracy,
completeness and reasonableness of all information, including financial
forecasts, whether provided to us by UST and View Tech and their outside
professional advisors, or otherwise publicly available. We have further relied
upon the assurance of management of UST and of View Tech that they are unaware
of any facts that would make the information they provided to us incomplete or
misleading in any material respect. In arriving at our opinion, we have
neither performed nor obtained any independent valuation or appraisal of the
assets of UST. Our opinion is necessarily based upon economic, market and
other conditions and circumstances existing and disclosed to us that can be
evaluated as of the date of this opinion.
In rendering our opinion, we have assumed that the Merger will be consummated
on the terms and conditions provided for in the Merger Agreement, without
material modification thereof, and that the Merger Consideration will be based
upon a Conversion Ratio of up to 0.25293 (subject to downward adjustment only
for certain fees of the attorneys, accountants and financial advisor of UST to
be paid by View Tech on the effective date of the Merger). We have further
assumed that the Merger and the transactions contemplated thereby will qualify
as a tax-free reorganization under applicable sections of the Internal Revenue
Code and will qualify for pooling of interests accounting treatment under
Accounting Principles Board Opinion No. 16.
This opinion letter is provided exclusively to the Board of Directors of UST
for use in its consideration of the Merger. It may not be used for any other
purpose, except that the full text of this opinion letter and a summary thereof
meeting the requirements for inclusion in a Form S-4 Registration Statement may
be provided to the shareholders of UST, for their exclusive use, in a Joint
Proxy Statement/View Tech Proxy Statement/Prospectus forming part of a Form S-4
Registration Statement. It may not be relied upon by any parties other than
the Board of Directors of UST and the shareholders of UST.
We have not served as financial advisors to UST in negotiation of the terms of
the Merger Agreement, nor have we determined or recommended the consideration
to be received by the shareholders of UST in the Merger, but only undertaken
the reviews, analyses and inquiries described herein in order to arrive at our
opinion. This opinion letter shall not constitute a recommendation to any
shareholder of UST as to how such shareholder should vote with respect to the
Merger.
Based upon and subject to the foregoing and such other matters as we consider
relevant, it is our opinion that, as of November 1, 1996, the Merger and the
Merger Consideration offered to the shareholders of UST are fair to such
shareholders from a financial point of view.
Very truly yours,
O'CONOR, WRIGHT WYMAN, INC.
/s/ SCOTT H. PRESENT
---------------------------------
Scott H. Present
Vice President and
Director of Valuation Services
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ANNEX C
CERTIFICATE OF INCORPORATION OF
VIEW TECH DELAWARE, INC.
ARTICLE I
The name of this corporation is View Tech Delaware, Inc.
ARTICLE II
The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to
issue two classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the corporation is
authorized to issue is Twenty Five Million (25,000,000) shares. Twenty Million
(20,000,000) shares shall be Common Stock, par value $.0001 per share and Five
Million (5,000,000) shares shall be Preferred Stock, par value $.0001 per
share.
(B) The Preferred Stock may be issued from time to time
in one or more series. The Board of Directors is hereby authorized, within the
limitations and restrictions stated in this Certificate of Incorporation, to
fix or alter the divided rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number
of shares of such series.
ARTICLE V
The name and mailing address of the incorporator is William M.
McKay, View Tech, Inc., 950 Flynn Road, Camarillo, California 93012.
ARTICLE VI
Except as otherwise provided in this Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind any or all of the bylaws of the corporation.
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ARTICLE VII
The number of directors of the corporation shall be fixed from
time to time by, or in the manner provided in, the bylaws or amendment thereof
duly adopted by the Board of Directors or by the stockholders. The directors
of the corporation shall be divided into three classes; the terms of office of
those of the first class to expire at the annual meeting next ensuing; of the
second class one year thereafter; of the third class two years thereafter; and
at each annual election held after such classification and election, directors
shall be chosen for a full term, as the case may be, to succeed those whose
terms expire.
ARTICLE VIII
Elections of directors need not be by written ballot unless
the bylaws of the corporation shall so provide.
ARTICLE IX
Meetings of stockholders may be held within or without the
State of Delaware, as the bylaws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the bylaws of the corporation.
ARTICLE X
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 for liability (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 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware General Corporation Law is
amended after approval by the stockholders of this Article to authorize
corporation action further eliminating or limiting the personal liability of
directors then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this
Article X by the stockholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.
ARTICLE XI
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 statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate this 4th day of October, 1996.
/s/ WILLIAM M. McKAY
---------------------------------
William M. McKay, Incorporator
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ANNEX D
BYLAWS
OF
VIEW TECH DELAWARE, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held in the City of Camarillo, State of California, at
such place as may be fixed from time to time by the Board of Directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders, commencing with
the year 1996, shall be held at such date and time as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting,
at which they shall elect by a plurality vote a board of directors, and
transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten 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 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.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president and shall be
called by the president or secretary at the request in writing of a majority of
the Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not fewer than ten (10) nor more than sixty
(60) days before the date of the meeting, to each stockholder entitled to vote
at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat,
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present in person or represented by proxy, shall have power to 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 thirty 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 stockholder of record entitled to
vote at the meeting.
Section 9. 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 the statutes or
of the certificate of incorporation, a different vote is required, in which
case such express provision shall govern and control the decision of such
question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent 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, provided however, that elections of directors must be
held at an annual meeting of the stockholders. 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.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the
whole board shall be determined by resolution of the Board of Directors or by
the stockholders at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
The directors of the corporation shall be divided into three classes; the terms
of office of those of the first class to expire at the annual meeting next
ensuing; of the second class one year thereafter; of the third class two years
thereafter; and at each annual election held after such classification and
election, directors shall be chosen for a full term, as the case may be, to
succeed those whose terms expire.
Section 2. Vacancies and new created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at
the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed
by or under the direction of its board of directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these bylaws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary
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to the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time to time
be determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or forty-eight (48)
hours notice to each director either personally or by telegram; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two directors unless the board consists
of only one director, in which case special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of the sole director.
Section 8. At all meetings of the board a majority of the
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 of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, 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 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, 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, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. 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 of 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.
Any such committee, 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; but no such committee shall have
the power or authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending
the bylaws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. 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.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their
expenses, if any,
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of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors; provided, however, that while the Board of
Directors is classified pursuant to Section 1 of this Article III, stockholders
may only so remove directors for cause.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these bylaws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of incorporation or of
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the Board of Directors and shall be a president, treasurer and a secretary.
The Board of Directors may elect from among its members a Chairman of the Board
and a Vice Chairman of the Board. The Board of Directors may also choose one
or more vice-presidents, assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a president, a treasurer, and
a secretary and may choose vice presidents.
Section 3. 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.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officer
elected or appointed by the Board of Directors may be removed at any time by
the affirmative vote of a majority of the Board of Directors. Any vacancy
occurring in any office of the corporation shall be filled by the Board of
Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside
at all meetings of the Board of Directors and of the stockholders at which he
shall be present. He shall have and may exercise such powers as are, from time
to time, assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the
Vice Chairman of the Board, if any, shall preside at all meetings of the Board
of Directors and of the stockholders at which he shall be present. He shall
have and may exercise such powers as are, from time to time, assigned to him by
the Board and as may be provided by law.
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THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer
of the corporation; and in the absence of the Chairman and Vice Chairman of the
Board he shall preside at all meetings of the stockholders and the Board of
Directors; he 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.
Section 9. 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.
Section 10. In the absence of the president or in the event
of his inability or refusal to act, the vice-president, if any, (or in the
event there be more than one vice-president, the vice-presidents in the order
designated by the directors, 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.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders 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
of all meetings of the stockholders 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.
Section 12. 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.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. 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.
Section 14. 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.
Section 15. 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.
Section 16. 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.
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ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation 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, or the president
or a vice-president and 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.
Certificates may be issued for partly paid shares and in such
case upon the face or back of the certificates issued to represent any such
partly paid shares, the total amount of the consideration to be paid therefor,
and the amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate
may be 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.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation 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 or certificates, 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
certificates, 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.
TRANSFER OF STOCK
Section 4. 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, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder 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 sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action. 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.
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REGISTERED STOCKHOLDERS
Section 6. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares 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 the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 2. 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 purposes 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.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal
having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent
authorized under the laws of the State of Delaware, as those laws may be
amended and supplemented from time to time, indemnify any director made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section
6 shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director, and (iii) inure to the
benefit of the heirs, executors and administrators of such a person. The
corporation's obligation to provide indemnification under this Section 6 shall
be offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the corporation or
any other person.
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Expenses incurred by a director of the corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he is or was a director of the corporation (or was serving at the
corporation's request as a director or officer of another corporation) shall be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized by relevant
sections of the General Corporation Law of Delaware. Notwithstanding the
foregoing, the corporation shall not be required to advance such expenses to an
agent who is a party to an action, suit or proceeding brought by the
corporation and approved by a majority of the Board of Directors of the
corporation which alleges willful misappropriation of corporate assets by such
agent, disclosure of confidential information in violation of such agent's
fiduciary or contractual obligations to the corporation or any other willful
and deliberate breach in bad faith of such agent's duty to the corporation or
its stockholders.
The foregoing provisions of this Section 6 shall be deemed to
be a contract between the corporation and each director who serves in such
capacity at any time while this bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
The Board of Directors in its discretion shall have power on
behalf of the corporation to indemnify any person, other than a director, made
a party to any action, suit or proceeding by reason of the fact that he, his
testator or intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all
directors, officers and employees who are determined by the corporation or
otherwise to be or to have been "fiduciaries" of any employee benefit plan of
the corporation which may exist from time to time, Section 145 of the General
Corporation Law of Delaware shall, for the purposes of this Section 6, be
interpreted as follows: an "other enterprise" shall be deemed to include such
an employee benefit plan, including without limitation, any plan of the
corporation which is governed by the Act of Congress entitled "Employee
Retirement Income Security Act of 1974," as amended from time to time; the
corporation shall be deemed to have requested a person to serve an employee
benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan pursuant to such
Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed
or new bylaws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate or incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
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ANNEX E
FORM OF AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER dated as of _________________, 1996 (this
"AGREEMENT") involves VIEW TECH DELAWARE, INC., a Delaware corporation ("VIEW
TECH-DEL") and VIEW TECH, INC., a California corporation ("VIEW TECH"). View
Tech-Del and View Tech are sometimes referred to herein as the "CONSTITUENT
CORPORATIONS."
RECITALS
A. View Tech-Del is a corporation duly organized and existing
under the laws of the State of Delaware.
B. View Tech is a corporation duly organized and existing under
the laws of the State of California.
C. The authorized capital stock of View Tech-Del consists of
Twenty Million (20,000,000) shares of Common Stock, $.0001 par value per share,
of which One Thousand (1,000) shares are issued and outstanding, and Five
Million (5,000,000) shares of Preferred Stock, $.0001 par value per share, of
which no shares are issued and outstanding. View Tech is the sole stockholder
of View Tech-Del.
D. The authorized capital stock of View Tech consists of Ten
Million (10,000,000) shares of Common Stock, par value $.01 ("VIEW TECH COMMON
STOCK"), of which ____________________________________________ (_____________)
shares are issued and outstanding, and Five Million shares of Preferred Stock,
par value $.01, of which no shares are outstanding.
E. The Board of Directors of View Tech has determined that, for
the purpose of effecting the reincorporation of View Tech in the State of
Delaware, it is advisable and in the best interests of View Tech that it merge
with and into View Tech-Del upon the terms and conditions herein provided.
F. The respective Boards of Directors of View Tech and View
Tech-Del have resolved that View Tech be merged under and pursuant to the
General Corporation Law of the State of Delaware and the General Corporation
Law of the State of California into a single corporation existing under the
laws of the State of Delaware.
G. The respective Boards of Directors of View Tech-Del and View
Tech have approved the merger upon the terms and conditions set forth herein
and have approved this Agreement and the Boards of Directors of View Tech-Del
and View Tech have directed that this Agreement be submitted to a vote of their
respective stockholders.
NOW THEREFORE, each Constituent Corporation adopting this Agreement
agrees as follows:
1. MERGER
1.1 Merger
Subject to Paragraph 4.2 below, and in accordance with the provisions of
this Plan, the Delaware General Corporation Law and the California General
Corporation Law, View Tech shall be, at the Effective Date (as defined in
Paragraph 1.2 below), merged with and into View Tech-Del ("MERGER"), and the
separate existence of View Tech shall cease and View Tech-Del shall be the
surviving corporation (the "SURVIVING CORPORATION").
1.2 Filing and Effectiveness
The Merger shall become effective when this Agreement, together with the
resolutions of the Boards of Directors of View Tech and View Tech-Del adopting
and approving same, shall have been filed with the Secretary of State of the
State of Delaware (the "EFFECTIVE DATE OF MERGER").
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For purposes of California Law, the Merger shall become effective as to
View Tech on the Effective Date of the Merger, upon such filing in California
as is required by Section 1108 of the General Corporation Law of California,
which filing will be made by View Tech and/or View Tech-Del, as applicable.
1.3 Certificate of Incorporation
Except for the change of the name of the Surviving Corporation as provided
in this paragraph 1.3, the Certificate of Incorporation of View Tech-Del as in
effect immediately prior to the Effective Date of Merger shall continue in full
force and effect as the Certificate of Incorporation of the Surviving
Corporation until duly amended in accordance with the provisions thereof and
applicable law. From and after the Effective Date of Merger, the Certificate
of Incorporation shall be amended by deleting Article FIRST in its entirety and
substituting in lieu thereof the following: "FIRST: The name of this
Corporation is View Tech, Inc."
1.4 Bylaws
The Bylaws of View Tech-Del as in effect immediately prior to the
Effective Date of Merger shall continue in full force and effect as the Bylaws
of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
1.5 Agreements
All agreements to which View Tech is a party and which are in effect
immediately prior to the Effective Date of Merger shall continue in full force
and effect and shall be assumed in their entirety by the Surviving Corporation
as of the Effective Date of Merger.
1.6 Directors and Officers
The directors and officers of View Tech-Del immediately prior to the
Effective Date of Merger shall be the directors and officers of the Surviving
Corporation until their successors shall have been duly elected and qualified
or until otherwise as provided by law, the Certificate of Incorporation of the
Surviving Corporation or the Bylaws of the Surviving Corporation.
1.7 Effect of Merger
Upon the Effective Date of Merger, the separate existence of View Tech
shall cease and View Tech-Del, as the Surviving Corporation, (i) shall continue
to possess all of its assets, rights, powers and property as constituted
immediately prior to the Effective Date of Merger, shall be subject to all
actions previously taken by the View Tech Board of Directors and shall succeed,
without other transfer, to all of the assets, rights, powers and property of
View Tech in the manner as more fully set forth in Section 259 of the Delaware
General Corporation Law, and (ii) shall continue to be subject to all of its
debts, liabilities and obligations as constituted immediately prior to the
Effective Date of Merger and shall succeed, without other transfer, to all of
the debts, liabilities and obligations of View Tech in the same manner as if
View Tech-Del had itself incurred them, all as more fully provided under the
applicable provisions of the Delaware General Corporation Law and the
California General Corporation Law.
2. MANNER OF CONVERSION OF STOCK
2.1 View Tech Securities
Upon the Effective Date of Merger, (i) each share of View Tech Common
Stock, no par value, issued and outstanding immediately prior thereto shall, by
virtue of the Merger and without any action by the holders of such shares or
any other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.0001 par value per share, of the
Surviving Corporation, and all options (the "VIEW TECH OPTIONS") to purchase
View Tech Common Stock under the View Tech Stock Option Plan, or issued outside
of such plan, and all warrants to purchase View Tech Common Stock (the "VIEW
TECH WARRANTS"), outstanding immediately prior to the Merger will be assumed by
View
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Tech Delaware, and will continue to have, and be subject to, the same terms and
conditions of each such option and as set forth in the View Tech Stock Option
Plan, if applicable, immediately prior to the Merger, except that such options,
warrants and conversion rights will be exercisable for such number of shares of
View Tech Delaware Common Stock as is equal to the number of shares of View
Tech Common Stock that were issuable upon exercise of such options and warrants
immediately prior to the Merger.
2.2 View Tech-Del Securities
Upon the Effective Date of Merger, each share of View Tech-Del Common
Stock, par value $.0001, issued and outstanding immediately prior thereto
shall, by virtue of the Merger and without any action by the holder of such
shares or any other person, be cancelled and returned to the status of
authorized but unissued shares.
2.3 Exchange of Certificate
After the Effective Date of Merger, each holder of an outstanding
certificate formerly representing shares of View Tech Common Stock may at such
shareholder's option surrender the same for cancellation to the Surviving
Corporation, and each such holder shall be entitled to receive in exchange
therefor a certificate representing the number of shares of the Surviving
Corporation's Common Stock into which the surrendered shares were converted as
herein provided. Until so surrendered, each outstanding certificate
theretofore representing shares of View Tech Common Stock shall be deemed for
all purposes to represent the number of whole shares of the Surviving
Corporation's Common Stock into which such shares of View Tech were converted
in the Merger. The registered owner on the books and records of the Surviving
Corporation of any such outstanding certificate shall, until such certificate
shall have been surrendered for conversion to the Surviving Corporation, have
and be entitled to exercise any voting and other rights with respect to, and to
receive dividends and other distributions upon, the shares of Common Stock of
the Surviving Corporation represented by such outstanding certificate as
provided in this paragraph 2.3.
2.4 Legends
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to
restrictions on transferability as the certificates of View Tech so converted
and given in exchange therefor, unless otherwise determined by the Board of
Directors of the Surviving Corporation in compliance with applicable laws.
2.5 Endorsement of Surrendered Shares
If any certificate for shares of Common Stock of View Tech-Del is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
party requesting such transfer pay to the Surviving Corporation any transfer or
other taxes payable by reason of the issuance of such new certificate in the
name other than that of the registered holder of the certificate surrendered,
or establish to the satisfaction of View Tech-Del that such tax has been paid
or is not payable.
3. COVENANTS TO BE PERFORMED PRIOR TO EFFECTIVE DATE OF MERGER
3.1 Consents
Each of View Tech and View Tech-Del shall use its best efforts to obtain
the consent and approval of each person whose consent or approval shall be
required in order to permit consummation of the Merger.
3.2 Governmental Authorizations
Each of View Tech and View Tech-Del shall cooperate in filing any
necessary reports or other documents with any federal, state, local or foreign
authorities having jurisdiction with respect to the Merger.
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4. GENERAL
4.1 Further Assurances
View Tech-Del and View Tech each covenants and agrees that it will, on or
before the Effective Date of Merger, take such other actions as may be required
by the California General Corporation Law and/or the Delaware General
Corporation Law.
4.2 Abandonment
At any time before the Effective Date of Merger, this Agreement may be
terminated and the Merger may be abandoned for any reason whatsoever by the
Board of Directors of either View Tech or View Tech-Del or both,
notwithstanding the approval of this Agreement by the shareholders of View Tech
or the stockholders of View Tech-Del or both.
4.3 Amendment
The Boards of Directors of the Constituent Corporations may amend this
Agreement at any time prior to the filing of this Agreement (or certificate in
lieu thereof) with the Secretary of State of the State of Delaware, provided
that an amendment made subsequent to the adoption of the Agreement by the
stockholders of either Constituent Corporation shall not: (1) alter or change
the amount or kind of shares, securities, cash, property and/or rights to be
received in exchange for or on conversion of all or any of the shares of any
class or series thereof of such Constituent Corporation, (2) materially alter
or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (3) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series thereof of such Constituent
Corporation.
4.4 Registered Office
The registered office of the Surviving Corporation in the State of
Delaware is located at Corporate Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware and Corporation Trust Company is the
registered agent of the Surviving Corporation at such address.
4.5 Agreement
Copies of this Agreement will be on file at the principal place of
business of the Surviving Corporation at 950 Flynn Road, Camarillo, California
93012, and copies thereof will be furnished to any stockholder of either
Constituent Corporation, upon request and without cost.
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ANNEX F
CHAPTER 13. DISSENTERS' RIGHTS
SECTION
1300. Reorganization or short-form merger; dissenting shares;
corporate purchase at fair market value; definitions.
1301. Notice to holders of dissenting shares in reorganizations;
demand for purchase; time; contents.
1302. Submission of share certificates for endorsement;
uncertificated securities.
1303. Payment of agreed price with interest; agreement fixing
fair market value; filing; time of payment.
1304. Action to determine whether shares are dissenting shares or
fair market value; limitation; joinder; consolidation;
determination of issues; appointment of appraisers.
1305. Report of appraisers; confirmation; determination by court;
judgment; payment; appeal; costs.
1306. Prevention of immediate payment; status as creditors;
interest.
1307. Dividends on dissenting shares.
1308. Rights of dissenting shareholders pending valuation;
withdrawal of demand for payment.
1309. Termination of dissenting share and shareholder status.
1310. Suspension of right to compensation or valuation
proceedings; litigation of shareholders' approval.
1311. Exempt shares.
1312. Right of dissenting shareholder to attack, set aside or
rescind merger or reorganization; restraining order or
injunction; conditions.
CROSS REFERENCES
Foreign corporations subject to this chapter, see Section 2115. Mergers into
state depository corporation, inapplicability of this division, see Financial
Code Section 4883. Sales of business units to state depository corporation,
inapplicability of this chapter, see Financial Code Section 4853.
Section 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES;
CORPORATE PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of
a corporation is required for a reorganization under subdivisions (a) and (b)
or subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are
dissenting shares as defined in subdivision (b). The fair market value shall be
determined as of the day before the first announcement of the terms of the
proposed reorganization or short-form merger, excluding any appreciation or
depreciation in consequence of the proposed action, but adjusted for any stock
split, reverse stock split, or share dividend which becomes effective
thereafter.
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(b) As used in this chapter, "dissenting shares" means shares
which come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302,1303 and 1304; provided, however, that this provision does
not apply to any shares with respect to which there exists any restriction on
transfer imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described in
* * * subparagraph (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in * * * subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph), were
voted against the reorganization, or which were held of record on the effective
date of a short-form merger; provided, however, that * * * subparagraph (A)
rather than * * * subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather than
at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with Section
1301.
(4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record. (Added
by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by Stats. 1976,
c. 641, Section 21.3, eff. Jan. 1, 1977; Stats. 1982, c. 36, p. 69, Section
3, eff. Feb. 17, 1982; Stats. 1990, c. 1018 (A.B. 2259), Section 2; Stats.
1993, c. 543 (A.B.2063), Section 13.)
CROSS REFERENCES
Application of this chapter to transactions consummated after effective date of
new law, see Section 2313. Foreign corporations subject to this chapter, see
Section 2115.
Section 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS;
DEMAND FOR PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation
to purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval,
accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a
statement of the price determined by the corporation to represent the fair
market value of the dissenting shares, and a brief description of the procedure
to be followed if the shareholder desires to exercise the shareholder's right
under such sections. The statement of price constitutes an offer by the
corporation to purchase at the price stated any dissenting shares as defined in
subdivision (b) of Section 1300, unless they lose their status as dissenting
shares under Section 1309.
(b) Any shareholder who has a right to require the corporation
to purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
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which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares
held of record by the shareholder which the shareholder demands that the
corporation purchase and shall contain a statement of what such shareholder
claims to be the fair market value of those shares as of the day before the
announcement of the proposed reorganization or short-form merger. The statement
of fair market value constitutes an offer by the shareholder to sell the shares
at such price. (Added by Stats. 1975, c. 682, Section 7, eff. Jan. 1, 1977.
Amended by Stats. 1976, c. 641, Section 21.6, eff. Jan. 1, 1977; Stats. 1980,
c. 501, p. 1052, Section 5; Stats. 1980, c. 1155, p. 3831, Section 1.)
CROSS REFERENCES
Savings association mergers, information furnished to minority stockholders,
see Financial Code Section 5760.
Section 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT;
UNCERTIFICATED SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a Statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder
demands that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation the new certificates, initial
transaction statement, and other written statements issued therefor shall bear
a like statement, together with the name of the original dissenting holder of
the shares. (Added by Stats. 1975, c. 682, Section 7, eff. Jan. 1, 1977.
Amended by Stats.1986, c. 766, Section 23.)
Section 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING
FAIR MARKET VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the
shares are dissenting shares and agree upon the price of the shares, the
dissenting shareholder is entitled to the agreed price with interest thereon at
the legal rate on judgments from the date of the agreement. Any agreements
fixing the fair market value of any dissenting shares as between the
corporation and the holders thereof shall be filed with the secretary of the
corporation.
(b) Subject to the provisions of Section 1306, payment of the
fair market value of dissenting shares shall be made within 30 days after the
amount thereof has been agreed or within 30 days after any statutory or
contractual conditions to the reorganization are satisfied, whichever is later,
and in the case of certificated securities, subject to surrender of the
certificates therefor, unless provided otherwise by agreement. (Added by
Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by Stats.1980, c.
501, p. 1053, Section 6; Stats.1986, c. 766, Section 24.)
Section 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES
OR FAIR MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION;
DETERMINATION OF ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting
shares, or the corporation and the shareholder fail to agree upon the fair
market value of the shares, then the shareholder demanding purchase of such
shares as dissenting shares or any interested corporation, within six months
after the date on which notice of the approval by the outstanding shares
(Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed
to the shareholder, but not thereafter, may file a complaint in the superior
court of the proper county praying the court to determine whether the shares
are dissenting shares or the fair market value of the dissenting shares or both
or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs
or be joined as defendants in any such action and two or more such actions may
be consolidated.
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(c) On the trial of the action, the court shall determine the
issues. If the status of the shares as dissenting shares is in issue, the court
shall first determine that issue. If the fair market value of the dissenting
shares is in issue, the court shall determine, or shall appoint one or more
impartial appraisers to determine, the fair market value of the shares. (Added
by Stats.1975, c. 682, Section 7 eff. Jan. 1, 1977.)
CROSS REFERENCES
Consolidation of actions, see Code of Civil Procedure Section 1048.
Defendants, joinder, see Code of Civil Procedure Section Section 379, 382.
Designation of parties, see Code of Civil Procedure Section 308. Dissolution,
determination of fair value of shares, see Section 2000. Form of action, see
Code of Civil Procedure Section 307. Intervention, see Code of Civil
Procedure Section 387. Limitation of six months, see Code of Civil Procedure
Section 341. Plaintiffs, joinder, see Code of Civil Procedure Section Section
378, 382. Trial of issues, see Code of Civil Procedure Section 591 et seq.
Section 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they
shall proceed forthwith to determine the fair market value per share. Within
the time fixed by the court, the appraisers, or a majority of them, shall make
and file a report in the office of the clerk of the court. Thereupon, on the
motion of any party, the report shall be submitted to the court and considered
on such evidence as the court considers relevant. If the court finds the
report reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and
file a report within 10 days from the date of their appointment or within such
further time as may be allowed by the court or the report is not confirmed by
the court, the court shall determine the fair market value of the dissenting
shares.
(c) Subject to the provisions of Section 1306, judgment shall
be rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at
the legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect
to uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation
to the appraisers to be fixed by the court, shall be assessed or apportioned as
the court considers equitable, but, if the appraisal exceeds the price offered
by the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of
Section 1301). (Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.
Amended by Stats.1976, c. 641, Section 22, eff. Jan. 1, 1977; Stats.1977, c.
235, p. 1068, Section 16; Stats. 1986, c. 766, Section 25.)
CROSS REFERENCES
Costs, generally, see Code of Civil Procedure Section 1021 et seq.
Manner of giving and entering judgment, see Code of Civil Procedure Section
664 et seq.
Relief granted to plaintiff, scope, see Code of Civil Procedure Section 580.
Section 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS;
INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate
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on judgments until the date of payment, but subordinate to all other creditors
in any liquidation proceeding, such debt to be payable when permissible under
the provisions of Chapter 5. (Added by Stats.1975, c. 682, Section 7 eff. Jan.
1, 1977.)
CROSS REFERENCES
Dividends and reacquisitions of shares, see Section 500 et seq.
Section 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the
dissenting shares after the date of approval of the reorganization by the
outstanding shares (Section 152) and prior to payment for the shares by the
corporation shall be credited against the total amount to be paid by the
corporation therefor. (Added by Stats. 1975, c. 682, Section 7, eff. Jan. 1,
1977)
CROSS REFERENCES
Dividends, see Section 500 et seq.
Section 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION;
WITHDRAWAL OF DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto. (Added by Stats.1975, c. 682, Section 7, eff.
Jan. 1, 1977.)
Section 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon
abandonment of the reorganization, the corporation shall pay on demand to any
dissenting shareholder who has initiated proceedings in good faith under this
chapter all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree
upon the status of the shares as dissenting shares or upon the purchase price
of the shares, and neither files a complaint or intervenes in a pending action
as provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision (i)
of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the
corporation, withdraws the shareholder's demand for purchase of the dissenting
shares. (Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
Section 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION
PROCEEDINGS; LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation. (Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
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CROSS REFERENCES
Short-form mergers, see Section 1110.
Section 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger. (Added by
Stats. 1975, c. 682, Section 7, eff. Jan 1, 1977. Amended by Stats. 1988, c.
919, Section 8.)
Section 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR
RESCIND MERGER OR REORGANIZATION; RESTRAINING ORDER OR
INJUNCTION; CONDITIONS
(a) No shareholder of a corporation who has a right under this
chapter to demand payment of cash for the shares held by the shareholder shall
have any right at law or in equity to attack the validity of the reorganization
or short-form merger; or to have the reorganization or short-form merger set
aside or rescinded, except in an action to test whether the number of shares
required to authorize or approve the reorganization have been legally voted in
favor thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or
short-form merger or to have the reorganization or short-form merger set aside
or rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization or short-former merger
is directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-former merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled. (Added by Stats. 1975, c. 682,
Section 7, eff. Jan 1, 1977. Amended by Stats. 1976, c. 641, Section 22.5,
eff. Jan 1, 1977; Stats. 1988, c. 919, Section 9.)
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ANNEX G
PROVISIONS OF THE GENERAL LAWS OF MASSACHUSETTS
RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
(SECTIONS 85 TO 98 OF CHAPTER 156B OF THE
GENERAL LAWS OF MASSACHUSETTS)
85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK;
EXCEPTION. A stockholder in any corporation organized under the laws of
Massachusetts which shall have duly voted to consolidate or merge with another
corporation or corporations under the provisions of sections seventy-eight or
seventy-nine who objects to such consolidation or merger may demand payment for
his stock from the resulting or surviving corporation and an appraisal in
accordance with the provisions of sections eighty-six to ninety-eight,
inclusive, and such stockholder and the resulting or surviving corporation
shall have the rights and duties and follow the procedure set forth in those
sections. This section shall not apply to the holders of any shares of stock
of a constituent corporation surviving a merger if, as permitted by subsection
(c) of section seventy-eight, the merger did not require for its approval a
vote of the stockholders of the surviving corporation.
86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES. If a
corporation proposes to take a corporate action as to which any section of this
chapter provides that a stockholder who objects to such action shall have the
right to demand payment for his shares and an appraisal thereof, sections
eighty-seven to ninety-eight, inclusive, shall apply except as otherwise
specifically provided in any section of this chapter. Except as provided in
sections eighty-two and eighty-three, no stockholder shall have such right
unless (1) he files with the corporation before the taking of the vote of the
shareholders on such corporate action, written objection to the proposed action
stating that he intends to demand payment for his shares if the action is taken
and (2) his shares are not voted in favor of the proposed action.
87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF
MEETING; FORM. The notice of the meeting of stockholders at which the approval
of such proposed action is to be considered shall contain a statement of the
rights of objecting stockholders. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock, and the directors may authorize the inclusion in any
such notice of a statement of opinion by the management as to the existence or
non-existence of the right of the stockholders to demand payment for their
stock on account of the proposed corporate action. The notice may be in such
form as the directors or officers calling the meeting deem advisable, but the
following form of notice shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the
meeting and effected by the corporation, any stockholder (1) who files
with the corporation before the taking of the vote on the approval of
such action, written objection to the proposed action stating that he
intends to demand payment for his shares if the action is taken and
(2) whose shares are not voted in favor of such action has or may have
the right to demand in writing from the corporation (or, in the case
of a consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of
mailing to him of notice in writing that the corporate action has
become effective, payment for his shares and an appraisal of the value
thereof. Such corporation and any such stockholder shall in such
cases have the rights and duties and shall follow the procedure set
forth in section 88 to 98, inclusive, of chapter 156B of the General
Laws of Massachusetts."
88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO. The corporation
taking such action, or in the case of a merger or consolidation the surviving
or resulting corporation, shall, within ten days after the date on which such
corporate action became effective, notify each stockholder who filed written
objection meeting the requirements of section eighty-six and whose shares were
not voted in favor of the approval of such action, that the action approved at
the meeting of the corporation of which he is a stockholder has become
effective. The giving of such notice shall not be deemed to create any rights
in any stockholder receiving the same to demand payment for his stock. The
notice shall be sent by registered or certified mail, addressed to the
stockholder at his last known address as it appears in the records of the
corporation.
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89. DEMAND FOR PAYMENT; TIME FOR PAYMENT. If within twenty days
after the date of mailing of a notice under subsection (e) of section
eighty-two, subsection (f) of section eighty-three, or section eighty-eight any
stockholder to whom the corporation was required to give such notice shall
demand in writing from the corporation taking such action, or in the case of a
consolidation or merger from the resulting or surviving corporation, payment
for his stock, the corporation upon which such demand is made shall pay to him
the fair value of his stock within thirty days after the expiration of the
period during which such demand may be made.
90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE. If
during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county
where the corporation in which such objecting stockholder held stock had or has
its principal office in the commonwealth.
91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE. If the bill is
filed by the corporation, it shall name as parties respondent all stockholders
who have demanded payment for their shares and with whom the corporation has
not reached agreement as to the value thereof. If the bill is filed by a
stockholder, he shall bring the bill in his own behalf and in behalf of all
other stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof, and service of
the bill shall be made upon the corporation by subpoena with a copy of the bill
annexed. The corporation shall file with its answer a duly verified list of
all such other stockholders, and such stockholders shall thereupon be deemed to
have been added as parties to the bill. The corporation shall give notice in
such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any
stockholder making demand shall not invalidate the proceedings as to other
stockholders to whom notice was properly given, and the court may at any time
before the entry of a final decree make supplementary orders of notice.
92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE.
After hearing the court shall enter a decree determining the fair value of the
stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and
shall be exclusive of any element of value arising from the expectation, or
accomplishments of the proposed corporate action.
93. REFERENCE TO SPECIAL MASTER. The court in its discretion may
refer the bill or any question arising thereunder to a special master to hear
the parties, make findings and report the same to the court, all in accordance
with the usual practice in suits in equity in the superior court.
94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL. On motion
the court may order stockholder parties to the bill to submit their
certificates of stock to the corporation for notation thereon of the pendency
of the bill, and may order the corporation to note such pendency in its records
with respect to any uncertificated shares held by such stockholder parties, and
may on motion dismiss the bill as to any stockholder who fails to comply with
such order.
95. COSTS, INTEREST. The costs of the bill including the reasonable
compensation and expenses of any master appointed by the court, but exclusive
of fees of counsel or of experts retained by any party, shall be determined by
the court and taxed upon the parties to the bill, or any of them, in such
manner as appears to be equitable, except that all costs of giving notice to
stockholders as provided in this chapter shall be paid by the corporation.
Interest shall be paid upon any
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award from the date of the vote approving the proposed corporate action, and
the court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT. Any
stockholder who has demanded payment for his stock as provided in this chapter
shall not thereafter be entitled to notice of any meeting of stockholders or to
vote such stock for any purpose and shall not be entitled to the payment of
dividends or other distribution on the stock (except dividends or other
distributions payable to stockholders of record at a date which is prior to the
date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections to
and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3) inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
97. STATUS OF SHARES PAID FOR. The shares of the corporation paid
for by the corporation pursuant to the provisions of this chapter shall have
the status of treasury stock or in the case of a consolidation or merger the
shares or the securities of the resulting or surviving corporation into which
the shares of such objecting stockholder would have been converted had he not
objected to such consolidation or merger shall have the status of treasury
stock or securities.
98. EXCLUSIVE REMEDY; EXCEPTION. The enforcement by a stockholder of
his right to receive payment for his shares in the manner provided in this
chapter shall be an exclusive remedy except that this chapter shall not exclude
the right of such stockholder to bring or maintain an appropriate proceeding to
obtain relief on the ground that such corporate action will be or is illegal or
fraudulent as to him.
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ANNEX H
VIEW TECH, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Incentive Plan is intended to promote the
interests of View Tech, Inc. a California corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
Under the Plan, eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common Stock.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Plan with respect to Section 16 Insiders.
B. Administration of the Plan with respect to all other
persons may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer the Plan
with respect to such persons. The members of the Secondary Committee may be
Board members who are Employees eligible to receive discretionary option grants
under the Plan or any other stock option, stock appreciation, stock bonus or
other stock plan of the Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
may be removed by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the provisions of
such programs and any outstanding options thereunder as it may deem necessary
or advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan under its jurisdiction or any option
or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member
of the Primary Committee or the Secondary Committee shall be liable for any act
or omission made in good faith with respect to the Plan or any option grants
under the Plan.
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IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are
as follows:
(i) Employees,
(ii) non-employee members of the Board or
the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Each Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority to
determine which eligible persons are to receive option grants under the Plan,
the time or times when such option grants are to be made, the number of shares
to be covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times when each option
is to become exercisable, the vesting schedule (if any) applicable to the
option shares and the maximum term for which the option is to remain
outstanding.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The number of shares of
Common Stock initially reserved for issuance over the term of the Plan shall be
300,000 shares.
B. No one person participating in the Plan may receive
stock options for more than 150,000 shares of Common Stock in the aggregate per
calendar year.
C. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent those
options expire or terminate for any reason prior to exercise in full. Unvested
shares issued under the Plan and subsequently repurchased by the Corporation,
at the original issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants under the
Plan. However, should the exercise price of an option under the Plan be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option, then
the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock issued to the
holder of such option.
D. If any change is made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted stock options under the Plan per calendar year
and (iii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
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ARTICLE TWO
PROVISIONS OF THE PLAN
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the
Plan applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than one hundred percent (100%)
of the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Three and the documents evidencing the option, be payable in one
or more of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is
exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:
(i) Any option outstanding at the time
of the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
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(ii) Any option exercisable in whole or
in part by the Optionee at the time of death may be subsequently
exercised by the personal representative of the Optionee's estate or
by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and
distribution.
(iii) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
(i) extend the period of time for which
the option is to remain exercisable following the Optionee's cessation
of Service from the limited exercise period otherwise in effect for
that option to such greater period of time as the Plan Administrator
shall deem appropriate, but in no event beyond the expiration of the
option term, and/or
(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments
in which the Optionee would have vested had the Optionee continued in
Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall
have no shareholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the
lifetime of the Optionee, Incentive Options shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the Optionee's death. However,
a Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
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II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted
to Employees.
B. DOLLAR LIMITATION. The aggregate Fair Market Value
of the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To
the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
C. 10% SHAREHOLDER. If any Employee to whom an
Incentive Option is granted is a 10% Shareholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. However, an outstanding
option shall not so accelerate if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation (or parent thereof) or to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation (or
parent thereof), (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and provides
for subsequent payout in accordance with the same vesting schedule applicable
to those option shares or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall
be made by the Plan Administrator, and its determination shall be final,
binding and conclusive.
B. All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
C. Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the remaining term of the Plan and (iii)
the maximum number and/or class of securities for which any one person may be
granted stock options under the Plan per calendar year.
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E. The Plan Administrator shall have full power and
authority to grant options under the Plan which will automatically accelerate
in the event the Optionee's Service subsequently terminates by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which
those options are assumed or replaced and do not otherwise accelerate. Any
options so accelerated shall remain exercisable for fully-vested shares until
the earlier of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more
of the Corporation's outstanding repurchase rights with respect to shares held
by the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
F. The Plan Administrator shall have full power and
authority to grant options under the Plan which will automatically accelerate
in the event the Optionee's Service subsequently terminates by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control. Each option so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more
of the Corporation's outstanding repurchase rights with respect to shares held
by the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.
H. The outstanding options shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
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ARTICLE THREE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the
option exercise price under the Plan by delivering a full-recourse, interest
bearing promissory note payable in one or more installments. The terms of any
such promissory note (including the interest rate and the terms of repayment)
shall be established by the Plan Administrator in its sole discretion. In no
event may the maximum credit available to the Optionee exceed the sum of (i)
the aggregate option exercise price payable for the purchased shares plus (ii)
any Federal, state and local income and employment tax liability incurred by
the Optionee in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options under the Plan shall be subject to
the satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options under the Plan with the
right to use shares of Common Stock in satisfaction of all or part of the Taxes
incurred by such holders in connection with the exercise of their options.
Such right may be provided to any such holder in either or both of the
following formats:
Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such Non-Statutory Option, a portion of
those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or
more shares of Common Stock previously acquired by such holder (other
than in connection with the option exercise triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the
approval of the Corporation's shareholders at the 1996 Annual Meeting. Options
may be granted under the Plan at any time on or after the date of such
shareholder approval. If such shareholder approval is not obtained, then this
Plan shall not become effective, and no options shall be granted and no shares
shall be issued under the Plan.
B. The Plan shall terminate upon the earliest of (i)
December 31, 2006, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such plan termination, all outstanding option grants shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations
with respect to stock options at the time outstanding under the Plan unless the
Optionee consents to such amendment or modification. In addition, certain
amendments may require shareholder approval in accordance with applicable laws
and regulations.
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B. Options to purchase shares of Common Stock may be
granted under the Plan that are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued shall be held in escrow until there is obtained shareholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such shareholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees the exercise price paid for
any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock upon
the exercise of any granted option shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the stock options granted under it and the
shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate such person's Service at
any time for any reason, with or without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by
any person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than thirty-five percent (35%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's
shareholders, or
(ii) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than thirty-five (35%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean View Tech, Inc., a California corporation, and
its successors.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
I. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock on the
date in question, as such price is reported on the Nasdaq National
Market or any successor system.
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If there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be deemed equal
to the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
J. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
K. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation
which materially reduces his or her level of responsibility, (B) a
reduction in his or her level of compensation (including base salary,
fringe benefits and target bonuses under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%)
or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected without the individual's consent.
L. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee or other person in the Service of the Corporation (or
any Parent or Subsidiary).
M. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
N. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
O. OPTIONEE shall mean any person to whom an option is granted
under the Plan.
P. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
Q. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
R. PLAN shall mean the Corporation's 1997 Stock Incentive Plan,
as set forth in this document.
S. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Plan with respect to one or more classes of
eligible persons, to the extent such entity is carrying out its administrative
functions with respect to the persons under its jurisdiction.
H-10
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T. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the Plan with
respect to Section 16 Insiders.
U. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons other than Section 16 Insiders.
V. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
W. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.
X. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
Y. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
Z. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options in
connection with the exercise of those options.
AA. 10% SHAREHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
H-11
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation of View Tech contain a provision that
limits the personal liability of View Tech's directors for monetary damages in
an action brought by or in the right of View Tech for breach of a director's
duties to View Tech and its shareholders. Such provision does not limit the
liability of View Tech for acts or omissions that involve intentional
misconduct or a knowing culpable violation of law, for acts or omissions that a
director believes to be contrary to the best interests of View Tech or its
shareholders or that involve the absence of good faith on the part of the
director, for any transaction from which a director derived an improper
personal benefit, for acts or omissions that show a reckless disregard for the
director's duty to the corporation or its shareholders in circumstances under
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duty, or a risk of serious injury to the corporation
or its shareholders, for acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to View
Tech or its shareholders, under Section 310 of the California General
Corporation Law (which involves liability for a director having a material
financial interests in a corporate transaction), or under Section 316 of the
California General Corporation Law (which imposes liability on directors who
approve certain improper distributions to shareholders or approve certain
improper loans or guarantees to any director or officer).
View Tech's Bylaws permit View Tech to indemnify its officers and
directors to the full extent permitted by Section 317 of the California General
Corporation Law and applicable law. Section 317 of the California General
Corporation Law makes provisions for the indemnification of officers, directors
and other corporate agents in terms sufficiently broad to indemnify such
persons, under certain circumstances, for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act of 1933, as amended.
In addition, View Tech's Bylaws permit the corporation to purchase and
maintain insurance on behalf of any agent (as defined in Section 317 of the
California General Corporation Law) against any liability asserted against or
incurred by the agent in such capacity or arising out of the agent's status as
such, whether or not the corporation would have the power to indemnify the
agent against such liability under the provisions of Section 317 of the
California General Corporation Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
# 2.1 Agreement and Plan of Merger, dated September 5, 1996, by and
among View Tech, Inc., a California corporation, View Tech
Acquisition, Inc., a California corporation and USTeleCenters,
Inc., a Massachusetts corporation (exhibits omitted but will
be filed by the registrant with the Commission upon request)
# 2.2 Form of Agreement of Merger by and among View Tech, Inc., a
California corporation, USTeleCenters, Inc., a Massachusetts
corporation and View Tech Acquisition, Inc., a Delaware
corporation, to be filed with the Secretary of State of the
State of Delaware
# 2.3 Form of Agreement of Merger by and among View Tech, Inc., a
California corporation and View Tech Delaware, Inc., a
Delaware corporation, to be filed with the Secretary of State
of the State of Delaware
2.4 Amendment No. 1, dated October 31, 1996, by and among View
Tech, Inc., a California corporation, View Tech Acquisition,
Inc., a California corporation, USTeleCenters, Inc., a
Massachusetts corporation and View Tech Acquisition, Inc., a
Delaware corporation, to that certain Agreement and Plan of
Merger, dated as of September 5, 1996, by and among View Tech,
Inc., a California corporation, View Tech Acquisition, Inc., a
California corporation and USTeleCenters, Inc., a
Massachusetts corporation
* 3.1 Restated Articles of Incorporation of View Tech, Inc.
* 3.2 Bylaws of View Tech, Inc.
5.1 Opinion of Brobeck, Phleger & Harrison LLP
8.1 Form of Opinion of Burns & Levinson LLP
8.2 Opinion of Carpenter, Kuhen & Sprayberry
10.1 View Tech, Inc. 1997 Stock Incentive Plan
II-1
<PAGE> 283
23.1 Consent of Carpenter Kuhen & Sprayberry
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1)
# 23.3 Consent of Burns & Levinson LLP (included in Exhibit 8.1)
23.4 Consent of Arthur Andersen LLP
23.5 Consent of O'Conor, Wright Wyman, Inc.
23.6 Consent of Kenny Securities Corp.
# 24.1 Power of Attorney
* 27.1 Financial Data Schedule
# 99.1 Form of View Tech, Inc. proxy card
# 99.2 Form of USTeleCenters, Inc. proxy card
# 99.3 Form of Letter of Transmittal to US Stock Transfer Corporation
from USTeleCenters, Inc. shareholders
99.4 Consent of Franklin A. Reece, III
99.5 Consent of David F. Millet
* Incorporated by reference in View Tech's Annual Report on Form 10-KSB
for the year ended June 30, 1995 (File No. 0-25940).
ITEM 22. UNDERTAKINGS.
(a) 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 foregoing provisions, 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) of 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
(c) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 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.
(d) 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-2
<PAGE> 284
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Camarillo, California on November 4, 1996.
VIEW TECH, INC.
By /s/ WILLIAM M. MCKAY
-----------------------------------
Name: William M. McKay
Title: Chief Financial Officer,
Treasurer and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
* Chief Executive Officer and November 4, 1996
- -------------------------- Chairman of the Board
Robert G. Hatfield (Principal Executive Officer)
/S/ WILLIAM M. McKAY Chief Financial Officer, November 4, 1996
- -------------------------- Treasurer and Secretary
William M. McKay (Principal Financial and
Accounting Officer)
* Director November 4, 1996
- --------------------------
John W. Hammon
* Director November 4, 1996
- --------------------------
Calvin Carrera
* Director November 4, 1996
- --------------------------
Robert F. Leduc
*/s/ WILLIAM M. MCKAY
- --------------------------
William M. McKay
Attorney-in-Fact
II-3
<PAGE> 285
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
<TABLE>
<S> <C> <C>
# 2.1 Agreement and Plan of Merger, dated September 5, 1996, by and among View Tech,
Inc., a California corporation, View Tech Acquisition, Inc., a California
corporation and USTeleCenters, Inc., a Massachusetts corporation (exhibits
omitted but will be filed by the registrant with the Commission upon request) .
# 2.2 Form of Agreement of Merger by and among View Tech, Inc., a California
corporation, USTeleCenters, Inc., a Massachusetts corporation and View Tech
Acquisition, Inc., a Delaware corporation, to be filed with the Secretary of
State of the State of Delaware . . . . . . . . . . . . . . . . . . . . . . . .
# 2.3 Form of Agreement of Merger by and among View Tech, Inc., a California
corporation and View Tech Delaware, Inc., a Delaware corporation, to be filed
with the Secretary of State of the State of Delaware . . . . . . . . . . . . .
2.4 Amendment No. 1, dated October 31, 1996, by and among View Tech, Inc., a
California corporation, View Tech Acquisition, Inc., a California corporation,
USTeleCenters, Inc., a Massachusetts corporation and View Tech Acquisition,
Inc., a Delaware corporation, to that certain Agreement and Plan of Merger,
dated as of September 5, 1996, by and among View Tech, Inc., a California
corporation, View Tech Acquisition, Inc., a California corporation and
USTeleCenters, Inc., a Massachusetts corporation . . . . . . . . . . . . . . .
* 3.1 Restated Articles of Incorporation of View Tech, Inc. . . . . . . . . . . . . .
* 3.2 Bylaws of View Tech, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.1 Opinion of Brobeck, Phleger & Harrison LLP . . . . . . . . . . . . . . . . . .
8.1 Form of Opinion of Burns & Levinson LLP . . . . . . . . . . . . . . . . . . . .
8.2 Opinion of Carpenter, Kuhen & Sprayberry . . . . . . . . . . . . . . . . . . .
10.1 View Tech, Inc. 1997 Stock Incentive Plan . . . . . . . . . . . . . . . . . . .
23.1 Consent of Carpenter Kuhen & Sprayberry . . . . . . . . . . . . . . . . . . . .
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1) . . . . .
# 23.3 Consent of Burns & Levinson LLP (included in Exhibit 8.1) . . . . . . . . . . .
23.4 Consent of Arthur Andersen LLP . . . . . . . . . . . . . . . . . . . . . . . .
23.5 Consent of O'Conor, Wright Wyman, Inc. . . . . . . . . . . . . . . . . . . . .
23.6 Consent of Kenny Securities Corp. . . . . . . . . . . . . . . . . . . . . . . .
# 24.1 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
* 27.1 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . .
# 99.1 Form of View Tech, Inc. proxy card . . . . . . . . . . . . . . . . . . . . . .
# 99.2 Form of USTeleCenters, Inc. proxy card . . . . . . . . . . . . . . . . . . . .
# 99.3 Form of Letter of Transmittal to US Stock Transfer Corporation from
USTeleCenters, Inc. shareholders . . . . . . . . . . . . . . . . . . . . . . .
99.4 Consent of Franklin A. Reece, III . . . . . . . . . . . . . . . . . . . . . . .
99.5 Consent of David F. Millet . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
* Incorporated by reference in View Tech's Annual Report on Form 10-KSB for
the year ended June 30, 1995 (File No. 0-25940).
# Previously filed
<PAGE> 1
Exhibit 2.4
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1 ("Amendment No. 1"), entered into as of
October 31, 1996, by and among View Tech, Inc., a California corporation (the
"Buyer"), View Tech Acquisition, Inc., a California corporation ("VTAI-Cal"),
USTeleCenters, Inc., a Massachusetts corporation (the "Target"), and View Tech
Acquisition, Inc., a Delaware corporation ("VTAI-Del"), to that certain
Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 5,
1996, by and among Buyer, VTAI-Cal and the Target. Except as otherwise
provided herein, all capitalized terms used in Amendment No. 1 shall have the
meanings set forth in the Merger Agreement after giving effect to Amendment No.
1. The Buyer, the Target, VTAI-Cal and VTAI-Del are referred to collectively
herein as the "Parties."
WHEREAS, the Buyer, the Target and VTAI-Cal entered into the
Merger Agreement with respect to, among other things, the merger of the Target
by and into VTAI-Cal; and
WHEREAS, the Parties desire to amend the Merger Agreement as
set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the Parties agree as
follows:
1. VTAI-Cal shall be substituted and replaced in the
Merger Agreement with VTAI-Del, and all references to "Transitory Subsidiary"
in the Merger Agreement shall apply to VTAI-Del.
2. The phrase ", Delaware General Corporation Law" shall
be added immediately following the phrase "California General Corporation Law"
in each of the first recital and Sections 2(a)(i) and (ii) of the Merger
Agreement.
3. A new definition, "'DELAWARE GENERAL CORPORATION LAW'
means the General Corporation Law of the State of Delaware, as amended." shall
be added to Section 1 immediately after the definition of "Definitive Target
Proxy Materials."
4. The phrase ", the Secretary of State of the State of
Delaware" shall be added immediately following the phrase "Secretary of State
of the State of California" in Section 2(d)(iii) of the Merger Agreement.
5. The phrase "and the Secretary of State of the State
of Delaware" shall be added immediately following the phrase "Secretary of
State of the State of California" in Section 2(e) of the Merger Agreement.
6. The phrase "(and the Buyer Shares, if any, issued to
Concord Partners, Ltd. as contemplated by Section 8(k)" set forth in the first
sentence of Section 5(b)(i) of the Merger Agreement shall be deleted and
replaced with the phrase ", provided, however, that the Buyer shall register
the Buyer Shares, if any, issued to Concord Partners, Ltd. as contemplated by
Section 8(k) on Form SB-2 or any successor form under the Securities Act, as
soon as practicable but in no event later than ninety (90) days after the
Closing Date."
<PAGE> 2
7. The reference to "Section 368(a)(2)(E)" set forth in
Section 6(b)(xii) of the Merger Agreement shall be deleted and changed to
"Section 368(a)(2)(D)."
8. The reference to "H. C. Wainwright" set forth in
Section 6(b)(xix) of the Merger Agreement shall be deleted and changed to "an
investment banker or financial advisor of its choice."
9. There are no other amendments, changes or
modifications to the Merger Agreement and all other sections thereof shall
remain unaffected by Amendment No. 1.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed Amendment
No. 1 as of the date first written above.
View Tech, Inc., a California corporation
By: /s/ ROBERT G. HATFIELD
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
View Tech Acquisition, Inc., a California corporation
By: /s/ ROBERT G. HATFIELD
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
View Tech Acquisition, Inc., a Delaware corporation
By: /s/ ROBERT G. HATFIELD
---------------------------------
Robert G. Hatfield
Title: Chief Executive Officer
USTeleCenters, Inc., a Massachusetts corporation
By: /s/ FRANKLIN A. REECE,III
---------------------------------
Franklin A. Reece, III
Title: President
<PAGE> 1
Exhibit 5.1
Brobeck, Phleger & Harrison LLP
November 4, 1996
View Tech, Inc.
950 Flynn Road
Camarillo, CA 93012
Re: Registration Statement on Form S-4
File No. 333-13459
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 (File
No. 333-13459) (the "Registration Statement") originally filed by View Tech,
Inc. (the "Company") with the Securities and Exchange Commission (the
"Commission") on October 4, 1996, as amended by Amendment No. 1 thereto filed
on November 4, 1996 (the "Registration Statement") in connection with the
registration under the Securities Act of 1933, as amended, of 2,500,000 shares
(the "Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock"). As your special counsel in connection with this transaction,
we have examined the proceedings taken and are familiar with the proceedings
proposed to be taken by you in connection with the sale and issuance of the
Shares.
It is our opinion that, upon conclusion of the proceedings
being taken or contemplated by us, as your special counsel, to be taken prior
to the issuance of the Shares and upon completion of the proceedings being
taken in order to permit such transactions to be carried out in accordance with
the securities laws of the various states where required, the Shares, when
issued and sold in the manner described in the Registration Statement, will be
legally and validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption
"Legal Matters" in the Registration Statement and to the filing of this opinion
as an exhibit to the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
Exhibit 8.1
Form of Burns & Levinson LLP Opinion Letter
Shareholders of USTeleCenters, Inc.
Ladies and Gentlemen:
You have requested our opinion regarding the discussion of the
material U.S. federal tax consequences under the captions "JOINT PROXY
STATEMENT/VIEW TEXT PROXY STATEMENT/PROSPECTUS SUMMARY--THE JOINT PROXY
PROPOSAL: THE MERGER--Certain Federal Tax Consequences" and "THE JOINT
PROPOSAL--THE MERGER--Certain Federal Tax Consequences" in the Joint Proxy
Statement/View Tech Proxy Statement/Prospectus which will be included in the
Registration Statement on Form S-4 filed on the date hereof with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). The Registration Statement relates to the
proposed merger of USTeleCenters, Inc. with and into View Tech Acquisition,
Inc., a wholly-owned subsidiary of View Tech, Inc. This opinion is delivered
in accordance with the requirements of Item 601(b)(8) of Regulation S-B under
the Securities Act.
In rendering our opinion, we have reviewed the Registration Statement
and such other materials as we have deemed necessary or appropriate as a basis
for our opinion. In addition, we have considered the applicable provisions of
the Internal Revenue Code of 1996, as amended, Treasury Regulations, pertinent
judicial authorities, rulings of the Internal Revenue Service and such other
authorities as we have considered relevant.
Based upon the foregoing, it is our opinion that the statements made
under the captions "JOINT PROXY STATEMENT/VIEW TECH PROXY STATEMENT/PROSPECTUS
SUMMARY--THE JOINT PROXY PROPOSAL: THE MERGER--Certain Federal Tax
Consequences" and "THE JOINT PROPOSAL--THE MERGER-- Certain Federal Tax
Consequences" in the Joint Proxy Statement/View Tech Proxy
Statement/Prospectus, to the extent that they constitute matters of law or
legal conclusions, are correct in all material respects. There can be no
assurance that contrary positions may not be asserted by the Internal Revenue
Service.
This opinion is being furnished solely to the shareholders of
USTelecenters, Inc. in connection with the Registration Statement. You may
rely upon and refer to the foregoing opinion in the Registration Statement.
Any variation or difference in the facts from those set forth or assumed either
herein or in the Registration Statement may affect the conclusions stated
herein.
We hereby consent to the use of our name under the captions "JOINT
PROXY STATEMENT/VIEW TEXT PROXY STATEMENT/PROSPECTUS SUMMARY--THE JOINT PROXY
PROPOSAL: THE MERGER-Certain Federal Tax Consequences" and "THE JOINT
PROPOSAL--THE MERGER--Certain Federal Tax Consequences" in the Joint Proxy
Statement/View Tech Proxy
<PAGE> 2
Statement/Prospectus and to the filing of this opinion as an Exhibit to the
Registration Statement. In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission thereunder.
Very truly yours,
BURNS & LEVINSON LLP
By:
<PAGE> 1
Exhibit 8.2
CARPENTER KUHEN & SPRAYBERRY
Certified Public Accountants
<TABLE>
<S> <C> <C>
Ralph C. Kuhen, C.P.A. Martin J. Marietta,
Steve Barnes, C.P.A. C.P.A.
Greg Honegger, C.P.A. Members: Dan Sprayberry, C.P.A.
Mark Luttrell, C.P.A. American Institute of Certified Public Accountants Dean Carpenter, C.P.A.
Greg Braun, C.P.A. SEC Practice Section Dana Boutain, C.P.A.
Ann Braun, C.P.A. California Society of Certified Public Accountants Dwayne Schiellack,
Sonja Gilbreth, C.P.A. C.P.A.
Jennifer Haney, C.P.A. Charles DeSimone,
William Duerksen, C.P.A. C.P.A.
Kevin Reynier, C.P.A. Ursula Sutherland,
C.P.A.
Jeffrey Freeman, C.P.A.
Audrey Tamekazu, C.P.A.
Laima Swanson, C.P.A.
</TABLE>
October 31, 1996
View Tech, Inc.
View Tech Acquisition, Inc.
950 Flynn Rd., Suite F
Camarillo, CA 93012
RE: Tax Opinion Regarding USTeleCenters, Inc. Acquisition
Ladies and Gentlemen:
You have requested our opinions with respect to certain federal income tax
consequences of the acquisition of USTeleCenters, Inc. Our opinions, as
required by the Securities and Exchange Act Reg. S-B Item 601(b)(8), are set
forth in the final paragraph of this letter.
This acquisition will be accomplished by a merger (the "Merger") of View Tech
Acquisition, Inc. and USTeleCenters, Inc. The Merger will take place pursuant
to an Agreement and Plan of Merger dated as of September 5, 1996 (the "Merger
Agreement"), as amended October 31, 1996 by and among View Tech, Inc., View
Tech Acquisition, Inc. and USTeleCenters, Inc., as described in the prospectus
included as part of the Registration Statement on Form S-4 originally filed
with the Securities and Exchange Commission on October 4, 1996 (the
"Registration Statement").
In providing our opinions, we have reviewed the Merger Agreement and the
Registration Statement. We have relied upon the accuracy of the factual
statements and representations set forth in the Merger Agreement and the
Registration Statement. In addition, we have relied upon certain
representations relating to the Merger provided to us by View Tech, Inc. and
USTeleCenters, Inc., and upon the Representations and Warranties of the
Shareholders of USTeleCenters, Inc. provided to View Tech, Inc. by shareholders
of USTeleCenters, Inc. and attached as Exhibit I of the Merger Agreement. This
opinion is expressly conditioned upon the accuracy, as of the effective time of
the Merger (the "Effective Time"), of those factual statements and
representations. We have not undertaken, nor are we in a position to
undertake,
<PAGE> 2
Shareholders of View Tech, Inc.
October 31, 1996
Page 2
any independent investigation of the accuracy of such factual statements or
representations. In the event that the Merger is not consummated in accordance
with the terms of the Merger Agreement, without waiver or breach of any
material provisions thereof, or in the event that any of the representations,
statements or assumptions upon which our opinions are based are not true or
accurate at any time relevant time, then our opinions may not be relied upon.
Taxpayers seeking assurance of the federal tax results of particular
transactions can, in some cases, receive formal binding advice from the
Internal Revenue Service (the "Service") issued as a private letter ruling.
Such a ruling is not available with respect to the Merger, however. The
Service has announced that private letter rulings will not be issued to
taxpayers with respect to reorganizations qualifying under Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended ("Code"). Rev. Proc. 96-3,
1996-1 C.B. 82, sec. 3.01(24)(the "No-Ruling Policy"). Unlike a private
letter ruling, our opinion is not binding on the Service or on any courts. Our
opinion represents only our best judgment as to the probable outcome of the tax
issues addressed herein. Although our opinion is based upon the current Code,
judicial opinions and administrative pronouncements, all of those authorities
are subject to change, and any such changes may be retroactive to the Effective
Time. We disclaim any obligation to call such future developments to your
attention. Therefore, no assurance can be given that future legislation,
decisions or pronouncements will not materially affect our opinions or alter
the tax consequences of the Merger.
Pursuant to the No-Ruling Policy of the Service, there is little guidance
available on how and whether the "continuity of interest" requirement in
reorganization is satisfied. Prior to the No-Ruling Policy, the Service would
have required USTeleCenters, Inc. shareholders who own five percent or more of
the USTeleCenters, Inc. stock to represent that they have no plan or intention
to sell, exchange, or otherwise dispose of a number of shares of View Tech,
Inc. stock received that would reduce the USTeleCenters, Inc. shareholders'
ownership of View Tech, Inc. stock to a number of shares having a value, as of
the Effective Time, of less than fifty percent of the value of all of the
formerly outstanding stock of USTeleCenters, Inc. as of the Effective Time.
The management of USTeleCenters, Inc. would have been required to make a
similar representation, to the best of their knowledge, with respect to
shareholders owning less than five percent of the USTeleCenters, Inc. stock.
For that purpose, shares of USTeleCenters, Inc. exchanged for cash in lieu of
fractional shares of View Tech, Inc. stock would be treated as outstanding
USTeleCenters, Inc. stock at the Effective Time. Moreover, shares of View
Tech, Inc. stock and shares of USTeleCenters, Inc. stock held by USTeleCenters,
Inc. shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger would be considered. We have relied on the
representation of the USTeleCenters, Inc. management and on the Representations
and Warranties of the Shareholders of USTeleCenters, Inc. attached as Exhibit I
of the Merger Agreement to that effect. Nevertheless, we cannot assure you
that the continuity of interest requirement will be satisfied. If such
requirement is not satisfied, the Merger will not be treated as a
reorganization within the meaning of Section 368(a)(1)(A). In that event, a
USTeleCenters, Inc.'s shareholder would recognize gain or loss with respect to
each share of USTeleCenters, Inc. stock surrendered, equal to the difference
between the USTeleCenters, Inc. shareholder's basis in that share and the fair
market value, as of the Effective Time, of the View Tech, Inc. stock received
in exchange therefor. In such event, the
<PAGE> 3
Shareholders of View Tech, Inc.
October 31, 1996
Page 3
USTeleCenters, Inc. shareholder's aggregate basis in the View Tech, Inc. stock
received would equal its fair market value, and the holding period would begin
on the day after the Merger.
In addition, even if the Merger is treated as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code, a recipient of shares of View
Tech, Inc. stock will recognize gain to the extent that such shares are
considered to be received in exchange for services or property (other than
solely USTeleCenters, Inc. stock). All or a portion of such gain may be
taxable as ordinary income, rather than as capital gain. Gain would also have
to be recognized to the extent that a shareholder were treated as receiving
(directly or indirectly) consideration other than View Tech, Inc. stock in
exchange for the shares of USTeleCenters, Inc. stock.
Our opinions address only the United States federal income tax consequences set
forth in the final paragraph of this letter. We do not address any other
federal, state, local or foreign tax consequences to View Tech, Inc. or View
Tech Acquisition, Inc. or to their shareholders, as a result of the Merger or
of any other transaction (including any transaction undertaken in connection
with the Merger). For example, we express no opinion regarding (i) the tax
consequences of the Merger to particular classes of USTeleCenters, Inc.
shareholders such as dealers in securities, corporate shareholders that may be
subject to the alternative minimum tax, and foreign persons, (ii) the tax
treatment of the Merger to holders of warrants, options or other rights to
purchase USTeleCenters, Inc. stock, or (iii) the tax consequences to any party
with respect to any compensation for services paid (in cash or in kind) in
connection with or pursuant to the Merger.
Our opinions are intended solely for the purpose of the satisfaction of the
condition set forth in the Securities and Exchange Act Reg. S-B Item 601(b)(8).
Our opinions may not be relied upon by any person or entity other than View
Tech, Inc. and View Tech Acquisition, Inc. and their respective shareholders
and may not be made available to any other person or entity without our prior
written consent. We hereby consent to the inclusion of this letter as an
exhibit to the Registration Statement.
We are of the opinion that, assuming the consummation of the Merger in
accordance with the Merger Agreement and the accuracy of the factual statements
and representations described above as of the Effective Time, and subject to
the exceptions, limitations and qualifications discussed above, (i) the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code, (ii) each of View Tech, Inc. and
View Tech Acquisition, Inc. will be a party to the reorganization within the
meaning of Section 368(b) of the Code, and (iii) no gain or loss will be
recognized by View Tech, Inc., View Tech Acquisition, Inc. or their respective
shareholders as a result of the Merger.
Sincerely,
/s/ CARPENTER, KUHEN & SPRAYBERRY
CARPENTER, KUHEN & SPRAYBERRY, C.P.A.
<PAGE> 1
Exhibit 10.1
VIEW TECH, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Incentive Plan is intended to promote the
interests of View Tech, Inc. a California corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
Under the Plan, eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common Stock.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Plan with respect to Section 16 Insiders.
B. Administration of the Plan with respect to all other
persons may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer the Plan
with respect to such persons. The members of the Secondary Committee may be
Board members who are Employees eligible to receive discretionary option grants
under the Plan or any other stock option, stock appreciation, stock bonus or
other stock plan of the Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
may be removed by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the provisions of
such programs and any outstanding options thereunder as it may deem necessary
or advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan under its jurisdiction or any option
or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member
of the Primary Committee or the Secondary Committee shall be liable for any act
or omission made in good faith with respect to the Plan or any option grants
under the Plan.
<PAGE> 2
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are
as follows:
(i) Employees,
(ii) non-employee members of the Board or
the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Each Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority to
determine which eligible persons are to receive option grants under the Plan,
the time or times when such option grants are to be made, the number of shares
to be covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times when each option
is to become exercisable, the vesting schedule (if any) applicable to the
option shares and the maximum term for which the option is to remain
outstanding.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The number of shares of
Common Stock initially reserved for issuance over the term of the Plan shall be
300,000 shares.
B. No one person participating in the Plan may receive
stock options for more than 150,000 shares of Common Stock in the aggregate per
calendar year.
C. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent those
options expire or terminate for any reason prior to exercise in full. Unvested
shares issued under the Plan and subsequently repurchased by the Corporation,
at the original issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants under the
Plan. However, should the exercise price of an option under the Plan be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option, then
the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised and not by the net number of shares of Common Stock issued to the
holder of such option.
D. If any change is made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted stock options under the Plan per calendar year
and (iii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
<PAGE> 3
ARTICLE TWO
PROVISIONS OF THE PLAN
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the
Plan applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than one hundred percent (100%)
of the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Three and the documents evidencing the option, be payable in one
or more of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is
exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:
(i) Any option outstanding at the time
of the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or
in part by the Optionee at the time of death may be subsequently
exercised by the personal representative of the Optionee's
<PAGE> 4
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of
descent and distribution.
(iii) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
(i) extend the period of time for which
the option is to remain exercisable following the Optionee's cessation
of Service from the limited exercise period otherwise in effect for
that option to such greater period of time as the Plan Administrator
shall deem appropriate, but in no event beyond the expiration of the
option term, and/or
(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments
in which the Optionee would have vested had the Optionee continued in
Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall
have no shareholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the
lifetime of the Optionee, Incentive Options shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the Optionee's death. However,
a Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
<PAGE> 5
A. ELIGIBILITY. Incentive Options may only be granted
to Employees.
B. DOLLAR LIMITATION. The aggregate Fair Market Value
of the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To
the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
C. 10% SHAREHOLDER. If any Employee to whom an
Incentive Option is granted is a 10% Shareholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. However, an outstanding
option shall not so accelerate if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation (or parent thereof) or to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation (or
parent thereof), (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and provides
for subsequent payout in accordance with the same vesting schedule applicable
to those option shares or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall
be made by the Plan Administrator, and its determination shall be final,
binding and conclusive.
B. All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
C. Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the remaining term of the Plan and (iii)
the maximum number and/or class of securities for which any one person may be
granted stock options under the Plan per calendar year.
E. The Plan Administrator shall have full power and
authority to grant options under the Plan which will automatically accelerate
in the event the Optionee's Service subsequently terminates by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which
those options are assumed or replaced and do not otherwise accelerate. Any
options so accelerated shall remain exercisable for fully-vested shares until
the earlier of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more
of the Corporation's outstanding
<PAGE> 6
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full.
F. The Plan Administrator shall have full power and
authority to grant options under the Plan which will automatically accelerate
in the event the Optionee's Service subsequently terminates by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control. Each option so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more
of the Corporation's outstanding repurchase rights with respect to shares held
by the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.
H. The outstanding options shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
<PAGE> 7
ARTICLE THREE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the
option exercise price under the Plan by delivering a full-recourse, interest
bearing promissory note payable in one or more installments. The terms of any
such promissory note (including the interest rate and the terms of repayment)
shall be established by the Plan Administrator in its sole discretion. In no
event may the maximum credit available to the Optionee exceed the sum of (i)
the aggregate option exercise price payable for the purchased shares plus (ii)
any Federal, state and local income and employment tax liability incurred by
the Optionee in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options under the Plan shall be subject to
the satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options under the Plan with the
right to use shares of Common Stock in satisfaction of all or part of the Taxes
incurred by such holders in connection with the exercise of their options.
Such right may be provided to any such holder in either or both of the
following formats:
Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such Non-Statutory Option, a portion of
those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or
more shares of Common Stock previously acquired by such holder (other
than in connection with the option exercise triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the
approval of the Corporation's shareholders at the 1996 Annual Meeting. Options
may be granted under the Plan at any time on or after the date of such
shareholder approval. If such shareholder approval is not obtained, then this
Plan shall not become effective, and no options shall be granted and no shares
shall be issued under the Plan.
B. The Plan shall terminate upon the earliest of (i)
December 31, 2006, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such plan termination, all outstanding option grants shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations
with respect to stock options at the time outstanding under the Plan unless the
Optionee consents to such amendment or modification. In addition, certain
amendments may require shareholder approval in accordance with applicable laws
and regulations.
<PAGE> 8
B. Options to purchase shares of Common Stock may be
granted under the Plan that are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued shall be held in escrow until there is obtained shareholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such shareholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees the exercise price paid for
any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock upon
the exercise of any granted option shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the stock options granted under it and the
shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate such person's Service at
any time for any reason, with or without cause.
<PAGE> 9
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by
any person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than thirty-five percent (35%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's
shareholders, or
(ii) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than thirty-five (35%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean View Tech, Inc., a California corporation, and
its successors.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
I. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock on the
date in question, as such price is reported on the Nasdaq National
Market or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date
for which such quotation exists.
<PAGE> 10
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be deemed equal
to the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
J. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
K. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation
which materially reduces his or her level of responsibility, (B) a
reduction in his or her level of compensation (including base salary,
fringe benefits and target bonuses under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%)
or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected without the individual's consent.
L. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee or other person in the Service of the Corporation (or
any Parent or Subsidiary).
M. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
N. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
O. OPTIONEE shall mean any person to whom an option is granted
under the Plan.
P. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
Q. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
R. PLAN shall mean the Corporation's 1997 Stock Incentive Plan,
as set forth in this document.
S. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Plan with respect to one or more classes of
eligible persons, to the extent such entity is carrying out its administrative
functions with respect to the persons under its jurisdiction.
T. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the Plan with
respect to Section 16 Insiders.
<PAGE> 11
U. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons other than Section 16 Insiders.
V. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
W. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.
X. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
Y. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
Z. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options in
connection with the exercise of those options.
AA. 10% SHAREHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form S-4 of our
report dated September 24, 1996, relating to the financial statements of View
Tech, Inc., which appear in such Registration Statement. We also consent to
the use in the Registration Statement on Form S-4, of our opinion dated October
31, 1996 (included herein as Exhibit 8.2) and to all references to us included
in, or made a part of, this Registration Statement.
CARPENTER KUHEN & SPRAYBERRY
Oxnard, California
October 31, 1996
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 30, 1996
<PAGE> 1
Exhibit 23.5
CONSENT OF O'CONOR, WRIGHT WYMAN, INC.
We hereby consent to the inclusion of our opinion, dated November 1, 1996, as
an exhibit to, and any and all references to us in, the Registration Statement
on Form S-4 (S.E.C. file No. 333-13459) of View Tech, Inc., and that certain
JOINT PROXY STATEMENT/VIEW TECH PROXY STATEMENT/PROSPECTUS SUMMARY that forms a
part thereof.
O'CONOR, WRIGHT WYMAN, INC.
Boston, Massachusetts
/s/ SCOTT H. PRESENT
- -----------------------------
Scott H. Present
Vice President and
Director of Valuation Services
November 1, 1996
<PAGE> 1
Exhibit 23.6
CONSENT OF KENNY SECURITIES CORP.
We hereby consent to the inclusion of all references to our oral opinion, any
and all other references to us, in the Registration Statement on Form S-4
(S.E.C. file No. 333-13459) of View Tech, Inc., and that certain JOINT PROXY
STATEMENT/VIEW TECH PROXY STATEMENT/PROSPECTUS SUMMARY that forms a part
thereof.
KENNY SECURITIES CORP.
November 1, 1996
<PAGE> 1
Exhibit 99.4
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 of the Securities Act of 1933, as amended, as an
individual who is named as a potential director of View Tech, Inc. (the
"Registrant") in the Registrant's Registration Statement (File No. 333-13459)
(the "Registration Statement"), I hereby consent to the use of my name (and to
all references to me) included in or made a part of the Registration Statement.
/s/ FRANKLIN A. REECE, III
---------------------------------
Name: Franklin A. Reece, III
Boston, Massachusetts
October 31, 1996
<PAGE> 1
Exhibit 99.5
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 of the Securities Act of 1933, as amended, as an
individual who is named as a potential director of View Tech, Inc. (the
"Registrant") in the Registrant's Registration Statement (File No. 333-13459)
(the "Registration Statement"), I hereby consent to the use of my name (and to
all references to me) included in or made a part of the Registration Statement.
/s/ DAVID F. MILLET
---------------------------------
Name: David F. Millet
Boston, Massachusetts
October 31, 1996
