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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER: 0-25940
VIEW TECH, INC.
(Name of Small Business Issuer In Its Charter)
CALIFORNIA 77-0312442
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
950 FLYNN ROAD
CAMARILLO, CA 93012
(Address of Principal Executive Offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 482-8277
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $.01 Par Value NASDAQ National Market
Common Stock Purchase Warrants NASDAQ National Market
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: NONE
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues for the most recent fiscal year were $13,346,103.
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the Registrant, based upon the closing sales price of the
Common Stock on the NASDAQ National Market on September 16, 1996 was
$14,033,151.
The number of shares of the registrant's Common Stock outstanding, as of
September 16, 1996 was 2,943,157.
DOCUMENTS INCORPORATED BY REFERENCE
None
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
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1. Description of Business............................................. 2
2. Description of Property............................................. 10
3. Legal Proceedings................................................... 10
4. Submission of Matters to a Vote of Security Holders................. 10
PART II
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5. Market for Common Equity and Related Stockholder Matters............ 11
6. Management's Discussion and Analysis or Plan of Operations.......... 12
7. Financial Statements................................................ 22
8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................ 22
PART III
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9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act................... 23
10. Executive Compensation.............................................. 26
11. Security Ownership of Certain Beneficial Owners and Management...... 30
12. Certain Relationships and Related Transactions...................... 31
13. Exhibits and Reports on Form 8-K.................................... 32
Signatures.......................................................... 35
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
View Tech, Inc. ("View Tech" or the "Company"), 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.
The Company'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 new products and services to
market, and more efficient utilization of limited resources.
As of September, 1996 the Company operates from 13 offices located
throughout the United States. The Company (i) provides its customers with
components produced by PictureTel Corporation ("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 in May 1996,
the Company and PictureTel agreed to expand the territories in which the Company
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 (5) years subject to annual reviews
and PictureTel's right to terminate without cause upon 60 days written notice.
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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.
There are currently three U.S. manufacturers of the equipment
representing the core technology of conference room or "roll-about" video
communications systems - PictureTel Corporation, Compression Labs, Incorporated,
and VTEL Corporation. This equipment, together with required peripheral
equipment manufactured by others, is currently marketed directly by these three
manufacturers, by telecommunications companies such as AT&T and SPRINT, and by
independent distributors such as the Company. PictureTel, View Tech's primary
supplier, has shown consistent growth in revenues over the past several years.
PictureTel reported revenues of $346.8 million for the year ended December 31,
1995, up from $255.2 million and $176.3 million for the years ended December 31,
1994 and 1993, respectively.
STRATEGY
The Company focuses its marketing efforts upon industries that it
believes will achieve significant benefits through utilization of video
communications, acquires a thorough 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. The Company believes that this industry focus, together with an
emphasis on providing comprehensive, high-quality service to its customers,
enables the Company to market video communications systems more effectively than
the video communications equipment manufacturers and telecommunications carriers
that are its principal competitors. The Company believes that these other
companies concentrate on their core businesses rather than on providing the
level of customer service provided by the Company. In addition to its current
expansion activities related to the new PictureTel agreement, the Company
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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
The Company offers three types of video communications systems -
integrated roll-about systems, custom-built conference rooms, and desktop
computer systems. Roll-about systems may be conveniently moved 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 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 the Company'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 the Company's revenues for such
period.
Apart from peripheral components manufactured by others, the Company only
sells systems manufactured by PictureTel. PictureTel is one of the largest
manufacturers of video communications equipment (in terms of revenues), and the
Company 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. The
Company 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, requiring less training than that of the
equipment produced by its competitors.
The prices of the complete systems sold by the Company 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 the
Company'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.
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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 Multiplexer. 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 a 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.
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 the Company's systems are purchased
by the Company from PictureTel, except the inverse multiplexers, which it
purchases from either of two manufacturers, Madge Networks, Inc., (formally
Teleos Communications, Inc.) and Ascend
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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 the Company's desktop-computer systems involve different
components, the desktop system has many of the capabilities of the conference-
room and roll-about systems. The Company's desktop video communications
equipment is also manufactured by PictureTel.
The Company 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
The Company believes that the quality and depth of its services are a
critical factor in its ability to compete successfully. Because of the
technical expertise and experience of its management and employees, the Company
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.
The Company 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, the Company provides consulting services that include an assessment of
its customer's needs and existing communications equipment, and cost-
justification and return-on-investment analyses.
Once the Company has made recommendations with respect to the most
effective method to achieve its customer's objectives and the customer has
ordered a system, the Company delivers, installs, and tests the video
communications equipment. When the equipment is functional, the Company
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, the Company 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, the Company ensures that its
customers achieve a significant return on their investment in the systems and
services provided by the Company.
The Company 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. The Company's suppliers, in turn, provide the Company with parts-
replacement warranties ranging from 90 days for PictureTel equipment to between
one and three years for other manufacturers' equipment. The Company's customers
can call the Company'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
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conferencing, telephone, facsimile, e-mail or through the mail. The Company 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 the Company's total charges for newly installed
systems.
The Company's service personnel maintain periodic contact with customers.
Prior to the expiration of the one-year warranty contract, the Company 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, the Company 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 the Company accounted for approximately 15% of the
Company's revenues for the fiscal year ended June 30, 1996.
In addition, the Company 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 the
Company's customers directly from the carrier. The Company intends to pursue
opportunities for providing such services to its customers with additional
carriers, as they provide the Company with recurring revenues based upon
customer video communications systems use. To date, the revenues attributable
to such services have not been material.
During 1996, the Company started providing MCU, or bridge, services to
its customers. Bridges allow people at more than two locations to communicate on
the same videoconference. Since bridges cost between $65,000 and $150,000 per
unit, the Company's customers typically do not purchase bridges themselves, but
instead contract to utilize such services when more than two locations need to
participate simultaneously in video communication. Bridging revenues for the
fiscal year ended June 30, 1996 were not material.
CUSTOMERS
While the Company 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 the Company
believes it has acquired substantial expertise are health care and distance-
education. During 1996, the Company 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. The Company 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.
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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, to facilitate teaching of hearing-
impaired students, and to hold institutional staff meetings. The Company has
installed systems at the Cal State University, San Bernardino; Loma Linda
University and Cal Tech.
No single customer accounted for more than 10% of the Company's revenues
for the fiscal year ended June 30, 1996.
The Company 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 customers named above were integrated roll-about
systems. To date, the Company has not experienced difficulty associated with
the timely delivery of equipment by its manufacturers.
SALES AND MARKETING
The Company has a number of programs in place for promoting its products
and services. Representatives of the Company regularly attend video
communications and advanced technology trade shows. The Company hosts seminars
and provides potential customers with the opportunity to learn more about the
Company's products and services using video communications demonstration
facilities located in each of the Company's offices. The Company also places
advertisements aimed at selected markets in industry trade publications and
utilizes limited and selective direct mail advertising.
In addition, the Company has an agreement with a telemarketing firm to
provide the Company with information regarding organizations that may be
interested in purchasing the Company'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 the Company with sales leads.
The Company 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 the Company's total revenues
were derived from existing customers.
DEPENDENCE ON PICTURETEL CORPORATION
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 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 the Company's
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suppliers to reduce reliance on independent distributors such as the Company
could have a material adverse effect on the Company. See "Competition."
COMPETITION
The video communications industry is highly competitive. The Company
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 regional Bell operating companies, 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 the Company, furnish many of the same products and services
provided by the Company, 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
those of the Company, 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). The Company's current agreement with PictureTel authorizes the
Company 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, the Company 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 the Company and is a competitor of the Company. While
there are suppliers of video communications equipment other than PictureTel,
termination of the Company's relationship with PictureTel could have a material
adverse effect on the Company.
The Company 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 the Company 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 the Company to compete successfully in the industry.
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EMPLOYEES
At September 16, 1996, the Company had 62 full-time employees, and a
network of consultants who are available on an as-needed basis to provide
technical and marketing support. The Company has 25 full-time employees engaged
in marketing and sales; 22 in technical services; and 15 in finance,
administration, and operations. None of the Company's employees are represented
by a labor union. The Company believes that its relations with its employees
are good.
ITEM 2. DESCRIPTION OF PROPERTY
The Company 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, California and
consist of a total of approximately 6,700 square feet. The Company'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, the Company 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. The Company may require additional
space during the next twelve months to house its operations in Camarillo and
Irvine, California; and Atlanta, Georgia. The Company believes that it can find
suitable additional space on reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
The Company 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
STOCK MARKET AND OTHER INFORMATION
The Company's 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 "VUTK" and "VWK," respectively, since
the Company's initial public offering on June 15, 1995. Prior to the offering,
there was no public trading market for the Company's equity securities. In
addition, warrants to purchase up to 575,000 shares of the Company'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 the Company's common stock. The warrants are redeemable at the
Company's option commencing June 15, 1996 upon 30 days notice to the
warrantholders at $0.25 per share if the closing price of the 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 the
Company's common stock for the quarters indicated:
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Bids
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HIGH LOW
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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
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On September 16, 1996, the last reported bids for the Company's common
stock and warrants on the NASDAQ National Market were $8.125 and $2.875,
respectively. As of September 16, 1996, there were 45 holders of record of the
Company's common stock and five holders of record of the Company's warrants.
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DIVIDENDS
The Company has never paid any cash dividends on its common stock. It
presently 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 common stock will be dependent on the
Company'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 board of directors deems
relevant.
TRANSFER AGENT AND REGISTRAR
U.S. Stock Transfer Corporation of Glendale, California serves as
transfer agent and registrar of the Company's common stock.
ITEM 6. 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 Form 10-KSB.
Certain statements contained in this Form 10-KSB 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 of 1933 and Section 21E of the Securities
Exchange Act of 1934 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," "Management's Discussion and Analysis or Plan of Operations" and
"Business," as well as those discussed elsewhere in this Form 10-KSB. All
forward-looking statements contained in this Form 10-KSB are qualified in their
entirety by this cautionary statement.
GENERAL
The Company 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. The Company establishes reserves for the estimated future costs of
the warranty portion of the services. See Note 2 of Notes to Financial
Statements.
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The Company 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, the Company 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, the Company 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 the Company'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, Wyoming and northern California. Prior to August 1995,
the Company operated under a sales and service dealer agreement covering most of
southern California.
In connection with its new agreement, during fiscal 1996, the Company
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, the Company's headcount increased from 22 to 52
employees at June 30, 1995 and 1996, respectively.
The Company'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 million in
1995 to $5.198 million 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 the Company's rapid expansion activities whereby
expenses have been incurred in advance of revenues, particularly, in the new
expanded territories. In addition, the Company wrote off acquisition expenses
of $191,388 relating to the termination of the acquisition of Power-Data
Services, Inc. ("PDS").
The Company intends to continue its expansion activities in fiscal 1997.
The Company is currently in the process of opening offices in Phoenix, Arizona
and Salt Lake City, Utah. In addition, the Company is expanding its operations
into the State of Florida and into the northeastern United States in connection
with its acquisitions of VistaTel International, Inc. and GroupNet, Inc.,
respectively. The Company also has signed a definitive agreement to merge with
USTeleCenters, Inc. which is headquartered in Boston, Massachusetts. (see Note
18 of Notes to Financial Statements). Although management anticipates that the
revenues generated by its existing offices, as well as 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 revenues, the Company's operating
income will be adversely affected.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's financial statements expressed as a percentage of the
Company'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 $6.383 million or 91.7% to $13.346 million
from $6.963 million 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 million or 63.3% to $4.303
million from $2.636 million 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 to 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 million or 149% to $1.707 million in
1996 from $685,428 in 1995. Selling expenses as a percentage of revenues
increased from 9.9% in 1995 to 12.8% in 1996. 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
14
<PAGE>
in selling expenses as a percentage of revenues is due to the fact that selling
expenses grew at a greater rate than the Company's revenues.
General and administrative expenses increased $2.282 million or 188.6%
to $3.492 million in 1996 from $1.210 million 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 the
Company'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 the Company's expansion program discussed above.
Income (loss) from operations decreased $1.635 million 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 (6.7)% 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 the
Company's expansion program and the write-off of acquisition expenses as
discussed above.
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 from PDS of $265,000 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 million for 1996. The
Company 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. The
Company will utilize approximately 51% of such benefit through carryback of the
current years net operating loss.
Net income (loss) decreased $1.155 million 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.
15
<PAGE>
Year Ended June 30, 1995 Compared to the Year Ended June 30, 1994
Revenues for 1995 increased $2.865 million or 69.9% to $6.963 million
from $4.098 million 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 million or 87.1% to $2.636
million from $1.409 million 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
$1.210 million 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 the Company'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 the Company had greater net operating loss carryforwards available in 1994
than in 1995.
16
<PAGE>
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 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 primary supplier of video conferencing products and services
within the State of Florida and 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 shareholders of VistaTel. The excess of the acquisition price over the net
assets acquired of approximately $339,000 will be accounted for a goodwill and
amortized over 15 years. VistaTel sells and services video conferencing systems
and provides network bridging services to businesses to use worldwide.
GROUPNET, INC.
- --------------
Pursuant to a merger agreement dated August 30, 1996, the Company 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 or $1,050,000 in the aggregate and $330,000 in cash,
of which, $110,000 was paid on August 30, 1996 upon 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 Select Dealer in video
communication product distribution in the northeastern United States. The
Company 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.
USTELECENTERS, INC.
- -------------------
On September 5, 1996, the Company announced a definitive agreement of
merger with USTeleCenters, Inc. ("USTeleCenters"), one of the oldest and largest
authorized sales agents for a few of the regional bell operating companies. The
merger is valued at approximately $18.5 million and is subject to the approval
by View Tech's and USTeleCenters' shareholders 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' shareholders will exchange all of their
outstanding USTeleCenters shares and options for View Tech common stock and
options, respectively. The transaction is expected to be completed on or about
November 30,
17
<PAGE>
1996. It is anticipated that USTeleCenters shareholders and optionholders (upon
exercise of their options) will receive approximately 2.5 million shares of View
Tech common stock.
The Company has advanced USTeleCenters $1 million evidenced by a promissory
note secured by all assets of USTeleCenters. The Company's security interest in
USTeleCenters assets is subordinated to the debt obligations owed by
USTeleCenters to its primary lender (and such lender's affiliate). 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. The Company executed an agreement with
the USTeleCenters' primary lender which restricts the Company's ability to bring
an action to collect the $1 million promissory note if USTeleCenters defaults.
Presently, without additional financing, USTeleCenters does not have sufficient
financing available to repay the note in full when due.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and expansion activities during
fiscal 1996 with the proceeds from its initial public offering 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 the Company's higher sales volume and funds
used to expand the Company'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 the
Company in connection with the termination of the acquisition of PDS in May
1996. The Company presently anticipates that its capital expenditures for
fiscal 1997 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 the Company's initial
public offering in June 1995.
The Company 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 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.
Four of such standby letters of credit were issued in favor of one leasing
company in connection with certain
18
<PAGE>
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 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.
The Company's primary supplier, PictureTel, provides the Company with a
purchasing line of credit and requires the Company 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 the Company.
During July and August 1996, the Company advanced an aggregate of $1
million to USTeleCenters for working capital purposes and in order for
USTeleCenters to repay certain bank debt due on September 1, 1996. The $1
million advanced is evidenced by a note which is subordinated to USTeleCenters'
debt obligations to its primary lender (and such lender's affiliate). 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.
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 the Company's 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.
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 aggregating approximately $3.0 million 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.
19
<PAGE>
RISK FACTORS
LIMITED HISTORY OF PROFITABLE OPERATIONS; SIGNIFICANT FLUCTUATIONS IN
OPERATING RESULTS; FUTURE RESULTS OF OPERATIONS UNCERTAIN. The Company has
operated since July 1992 and has incurred net losses for the fiscal year ended
June 30, 1993 and the nine months ended March 31, 1994, respectively. Although
it achieved revenue growth and profitability during fiscal 1994 and reported net
income for fiscal 1995, it reported a net loss of $(696,060) for the fiscal year
ended June 30, 1996. In the future, View Tech may experience significant
fluctuations in its operating results as a result of a number of factors,
including seasonality in product sales, 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 the
Company will achieve revenue growth or will be profitable on a quarterly or
annual basis.
FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING. It is
likely that additional financing will be required to fund further growth in the
Company's business beyond the next twelve months. The Company's actual capital
requirements will depend upon many factors, including the needs of the entities
that the Company is acquiring, the Company's internal expansion into new
territories, and capital requirements related to the Company's acquisition of
certain entities. See "--Unascertainable Risks Due to Current and Future
Acquisitions." To the extent that the Company raises additional capital by
issuing equity securities, ownership dilution to stockholders will result.
There can be no assurance that sources of such financing will be available, or
will be available on terms acceptable to the View Tech. Inability to obtain
additional financing could limit View Tech's marketing ability or its ability to
operate efficiently or expand its operations, any of which could have a material
adverse effect on the Company. In the event that adequate funds are not
available, the Company's business, results of operations or financial condition
could be adversely affected.
RAPID EXPANSION. View Tech began its operations in July 1992 and has grown
from two employees in one location to 62 employees in thirteen locations at
September 16, 1996. View Tech's acquisition strategy is to hire key personnel
in strategic geographic regions and to acquire businesses that compliment the
Company's operations. Within the past 18 months, the Company has acquired two
businesses in addition to the contemplated merger with USTeleCenters and has
hired 21 personnel to startup four new regions. View Tech is subject to the
uncertainties and risks associated with any expanding business. View Tech's
growth has placed significant demands on View Tech's financial resources and
management.
If the merger with USTeleCenters is consummated, View Tech will have over
150 new employees, which represents a substantial increase in the magnitude of
View Tech's operations and will place further demands on its financial and
management resources.
20
<PAGE>
UNASCERTAINABLE RISKS DUE TO CURRENT AND FUTURE ACQUISITIONS. The Company
plans to grow not only through additional territories but also through
acquisitions of other entities. Since June 30, 1996, the Company has completed
the acquisition of all of the assets of a small company in Florida and all of
the shares of a small company in Massachusetts. The Company also has entered a
merger agreement to merge with USTeleCenters, which the Company valued at $18.5
million (the "Merger"). The Merger involves the issuance of approximately 2.5
million shares of the Company's common stock (subject to certain adjustments)
for the equity of USTeleCenters. Additionally, the agreement with USTeleCenters
provides that the Company is obligated to either repay or refinance
approximately $3.0 million in bank indebtedness to USTeleCenters' primary
lender, as a condition of this transaction. The Merger is still subject to
shareholder approval and will not be consummated until shareholder approval is
obtained, which is anticipated to be in late November 1996. The Company has
loaned USTeleCenters $1 million since it entered into the letter of intent to
merge with USTeleCenters on July 23, 1996. If the Merger is completed, in
addition to the $3.0 million that the Company may have to pay to USTeleCenters
primary lender, the Company will also have to pay an aggregate of approximately
$1.8 million in acquisition costs, consisting of approximately $750,000 to its
financial advisors in connection with financial advisory services related to the
Merger, approximately $550,000 to USTeleCenters' investment banker, and
approximately $500,000 to USTeleCenters' and the Company's attorneys and
accountants. The Company executed an agreement with USTeleCenters primary
lender which restricts the Company's ability to bring an action to collect the
$1 million promissory note if USTeleCenters defaults.
By virtue of rapid growth through acquisitions, the Company will be subject
to the uncertainties and risks associated with any expanding business. Some of
these acquisitions may have the effect of substantially increasing the size of
the 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 the Company with another entity, it is possible that the
Company will encounter difficulties that cannot presently be ascertained. There
can be no assurance that any of the proposed or future acquisitions will not
have a material adverse effect upon the Company's business, results of
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 Company will achieve the anticipated benefits of such acquisitions, and it
is possible that such acquisitions will place significant demands on the
Company's financial resources and management and cause disruption of the
Company's operations due to the need for the management of View Tech and such
other entities to devote significant time and attention to integrating the
operations of the different companies.
21
<PAGE>
DEPENDENCE ON SUPPLIERS. 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 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 providers such
as View Tech could have a material adverse effect on View Tech. The Company 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 the 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.
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. The Company's future performance will depend in
significant part upon 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 the
Company's existing products obsolete, unmarketable or noncompetitive. View
Tech's ability to grow and to remain competitive will depend upon its ability
successfully to maintain and develop relationships with manufacturers of new and
enhanced products that include new technology and achieve levels of quality,
functionality, and price acceptable to the market, and to maintain a high level
of expertise relating to new products and the latest in communications systems
technology.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements of the Company are submitted as a separate section
of this Form 10-KSB on pages F-1 through F-17.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
22
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
Directors
Robert G. Hatfield, age 50, co-founded the Company 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., 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. (Bill) Hammon, age 44, who is Mr. Hatfield's brother, co-founded
the Company in 1992 and has since served as a director, chief operating officer
and president. He also served as secretary of the Company 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 50, has been a director of the Company 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 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 served as 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.
23
<PAGE>
Robert F. Leduc, age 50, has been a director of the Company 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 also has 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 currently
completing the requirements for a Ph.D. in Public Administration from the
University of Colorado.
Other Executive Officers
Tom Bailey, age 37, has been senior vice president - technical services
since August 1996 and was vice president -technical services since January
1993. Prior to joining the Company, Mr. Bailey was a product manager, service
executive, and lead software engineer for Delphi Information Systems, 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 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
the Company 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.
24
<PAGE>
COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING RULES
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who beneficially own more than 10% of a registered class of the
Company's common stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("Commission").
Such officers, directors, and shareholders are required by Commission
regulations to furnish the Company with copies of all such reports that they
file.
Based solely upon a review of copies of such reports furnished to the
Company during and with respect to its fiscal year ended June 30, 1996, and
based on written representations received by the Company from directors,
officers, and beneficial owners of more than 10% of the Company's common stock
("reporting persons") that no other reports were required, the Company believes
that, during the Company's 1996 fiscal year, all Section 16(a) filing
requirements applicable to the Company's reporting persons were complied with.
25
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
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"):
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 50,000 $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 50,000 $19,642
President and Chief 1995 $160,000 50,000 $17,989
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
</TABLE>
(1) All stock options were granted under the Company's 1995 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 $500 per month. Itemized
disclosure of other compensation in 1995 and 1994, are not required.
OPTION GRANTS
The following table sets forth information regarding stock option grants to
each of the Named Executives during the fiscal year ended June 30, 1996:
26
<PAGE>
OPTION GRANTS IN 1996 FISCAL YEAR
<TABLE>
<CAPTION>
Percent of Total
Number of Options
Shares Underlying Granted to
Options Employees in Exercise Price
Name Granted Fiscal Year ($/Share) Expiration Date
---- ------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
Robert G. Hatfield 50,000(1) 10.0% $6.375 6/12/06
50,000(2) 10.0% $6.625 7/17/05
John W. Hammon 50,000(1) 10.0% $6.375 6/12/06
50,000(2) 10.0% $6.625 7/17/05
William M. McKay 25,000(3) 5.0% $6.375 6/12/06
</TABLE>
(1) 12,500 vest on June 12, 1997, 1998, 1999, and 2000, respectively.
(2) 12,500 vest on July 17, 1996, 1997, 1998, and 1999, respectively.
(3) 6,250 vest on June 12, 1997, 1998, 1999, and 2,000, respectively.
YEAR END OPTION TABLE
The following table sets forth information regarding unexercised options
held by the Named Executives.
AGGREGATED OPTION EXERCISES IN 1996 FISCAL YEAR
AND VALUE OF OPTIONS AT FISCAL 1996 YEAR END
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the Money
Shares at Fiscal Year End Options at Fiscal Year End
Acquired Value ------------------ --------------------------
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------
<S> <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>
27
<PAGE>
COMPENSATION OF DIRECTORS
Outside directors receive $500 per day for each board meeting attended.
Directors receive no compensation for telephone meetings. Outside directors
that are members of either the stock option and compensation committee or the
audit committee receive $500 per day 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 $500 for all meetings attended on
the same day. Outside directors are also reimbursed for their travel expenses.
In addition to the per diem, outside directors receive options to acquire
10,000 shares of the Company's common stock on the day they are appointed to the
board of directors. Additionally, outside directors that have served on the
board for a full year receive options to acquire an additional 2,000 shares of
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 of the common stock on the NASDAQ National Market.
Board members that are also employees of the Company do not receive any
additional compensation for service on the board. No board member received any
other compensation for his services as a director.
EMPLOYMENT AGREEMENTS
The Company 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 the Company, 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 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 1, 1997 for Mr.
McKay. Effective July 1, 1996, 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 Company's 1995 Stock Option Plan (the "Plan"). The
Plan provides for four (4) year vesting from the date of issuance. However, if
there is a "change of control," the options vest immediately. The 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 the Company or any employee benefit plan of the Company or of any
Affiliate or Associate, both as defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, any Person
or any entity organized, appointed or established by the Company for or
pursuant to the terms of any such employee benefit plan), together with
28
<PAGE>
all Affiliates and Associates of such Person, shall become the beneficial
owner in the aggregate of 30% or more of the common stock of the Company then
outstanding; provided, however, that no "Change of Control" shall be deemed to
occur during any period in which any such Person, and its 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 the
Company 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."
The Agreement and Plan of Merger among the Company, its wholly-owned subsidiary,
View Tech Acquisition, Inc., and USTeleCenters, provides that the Company will
issue approximately 42.4% of its outstanding shares to the shareholders of UST
in exchange for all of the shares of UST. If the merger is consummated, all of
the outstanding stock options will immediately vest. See "Item 6. Management's
Discussion and Analysis or Plan of Operation" and footnote 18 of the notes to
financial statements for a discussion of the merger.
29
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to (i) each
director of the Company, (ii) the Named Executives, (iii) all directors and
executive officers of the Company as a group at September 16, 1996, including
the number of shares of common stock beneficially owned by each of them, and
(iv) each person known by the Company to own beneficially more than 5% of the
outstanding shares of the Company's common stock. Unless otherwise indicated
below, the business address of each individual is the same as the address of the
Company's principal executive offices.
<TABLE>
<CAPTION>
Amount and Nature Percent of
of Beneficial Class of
Ownership of Common
Name of Beneficial Owner Common Stock(1) Stock
- ------------------------ ----------------- ----------
<S> <C> <C>
Robert G. Hatfield(2) 595,000 20.1%
John W. Hammon(3) 475,000 16.0%
Calvin Carrera(4) 22,000 *
Robert F. Leduc(5) 12,000 *
William M. McKay(6) 18,200 *
All Directors and Executive 1,261,200 41.5%
Officers of the Company as
a Group
(6 persons)
</TABLE>
* Less than one percent
______________________________
(1) Includes shares issuable upon the exercise of options or warrants that are
exercisable within 60 days of the date of this Form 10-KSB. The shares
underlying such options or warrants 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) Chief Executive Officer and Chairman of the Company. Includes 25,000 shares
issuable upon exercise of options and 120,000 shares held in an irrevocable
trust 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.
(3) President and Chief Operating Officer of the Company. Includes 25,000
shares issuable upon exercise of options. Mr. Hammon's address is 101
Pacifica, Suite 100, Irvine, California 92718.
(4) Includes 12,000 shares issuable upon exercise of options. Mr. Carrera's
address is 10550 Summer View Circle, Camarillo, California 93012.
(5) Consists of 12,000 shares issuable upon exercise of options. Mr. Leduc's
address is 26 Thorn Oak, Trabuco Canyon, California 92679.
(6) Consists of 18,200 shares issuable upon exercise of options.
30
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH THE COMPANY'S FOUNDERS
In connection with the Company's organization in 1992, the Company sold
738,000 shares of its common stock to each of its founders, Messrs. Hatfield and
Hammon, for approximately $.007 per share. On October 3, 1994, July 17, 1995,
and June 12, 1996, the Company granted options to purchase an aggregate of
150,000 shares (50,000 shares each grant) of common stock to each of Messrs.
Hatfield and Hammon. The options, which have exercise prices of $.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 the
Company's indebtedness, all of which was repaid with a portion of the proceeds
from the Company's initial public offering in June 1995.
TRANSACTIONS WITH WINDERMERE HOLDINGS, INCORPORATED
The Company entered into a management services agreement with Windermere
Holdings, Incorporated ("Windermere") effective as of September 1, 1994 (the
"Windermere Agreement"). The Windermere Agreement provided that Windermere
would assist the Company with respect to the Company'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 Windermere Agreement expired September 30, 1995. Pursuant to the terms
of the Windermere Agreement, the Company paid Windermere $25,000 in July 1995
and a monthly retainer of $2,500, and reimbursed Windermere's reasonable
expenses. Pursuant to the Windermere Agreement, the Company also agreed to
issue to Windermere options to purchase 150,000 shares of 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 of the Company's common stock on that date. The Windermere
Agreement also provided for certain registration rights with respect to the
common stock issuable upon the exercise of such options. On September 13, 1995,
the Windermere Agreement was amended so that (i) the 75,000 options were issued
to each of Rolf N. Hufnagel, a former director of the Company and chief
operating officer of Windermere, and Robert E. Yaw II, the chief executive
officer of Windermere, with an exercise price equal to $7.375, which was the
closing price of the common stock on the NASDAQ SmallCap Market on September 13,
1995; and (ii) the Company was no longer obligated to pay Windermere a monthly
retainer.
On November 1, 1995, the Company entered into a subsequent agreement with
Windermere which provided for a payment of $5,000 per month through June 30,
1996. The Company 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, the Company entered into a new
agreement with Windermere that provided for (i) a monthly retainer of $5,000
from July to September 1996; (ii) the issuance of 55,000 options to purchase
common stock to one of Windermere's principals, issued on June 27, 1996 and
(iii) the issuance of 55,000 options to purchase common stock to Mr. Hufnagel,
issued on August 18, 1996. The agreement provides that such options be issued at
the market price as of the date of issuance.
31
<PAGE>
During fiscal 1996, the Company made total payments of $72,500 to
Windermere, excluding payments made for reimbursement of expenses. Effective
June 24, 1996, Mr. Hufnagel resigned as a director of the Company.
TRANSACTIONS WITH COFFIN . KCSA
The Company entered into a consulting agreement with Coffin . KCSA
("Coffin") under which Coffin provided assistance to the Company with respect to
the Company'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. The
Company paid Coffin $25,000 in July 1995 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 Company's initial public
offering in June 1995. William F. Coffin, a former director of the Company, is
a partner in Coffin . KCSA. During fiscal 1996, the Company paid Coffin . KCSA
fees of $65,000, excluding payments made for reimbursement of expenses.
Effective June 12, 1996, Mr. Coffin resigned as a director of the Company.
TRANSACTIONS WITH ECONOMICSAMERICA OF CALIFORNIA
In December 1994, the Company sold videoconferencing equipment to
EconomicsAmerica of California for $175,578, at prices and on terms generally
available to the Company's customers. Robert F. Leduc, chief executive officer
and a director of EconomicsAmerica, is also a director of the Company. William
F. Coffin, a director of EconomicsAmerica, is a former director of the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
--------
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Sale Agreement between the Company and VistaTel International,
Inc. dated July 10, 1996(1)
2.2 Agreement and Plan of Merger by and among the Company, GroupNet,
Inc., and Andrew W. Jamison dated August 30, 1996(2)
3.1 Restated Articles of Incorporation(3)
3.2 Bylaws(3)
4.1 Specimen Stock and Warrant Certificates(3)
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4.2 Warrant Agreement dated as of June 28, 1995 between the Company
and U.S. Stock Transfer Corporation of America(4)
10.1 Dealer Agreement between the Company and PictureTel Corporation
dated as of March 30, 1995(3)
10.2 Loan Agreement between the Company and Los Robles Bank dated as of
March 24, 1995, including Guaranty Agreements of Robert G.
Hatfield and John W. Hammon(3)
10.3 Loan Agreement among the Company, Los Robles Bank, and the Small
Business Administration dated as of December as of December 16,
1992, including Guaranty Agreements of Robert G. Hatfield and John
W. Hammon(3)
10.4 Employment Agreement between the Company and Robert G. Hatfield,
dated as of March 30, 1995(3)
10.5 Employment Agreement between the Company and John W. Hammon, dated
as of March 30, 1995(3)
10.6 Employment Agreement between the Company and William M. McKay,
dated as of March 30, 1995(3)
10.7 Employment Agreement between the Company and Richard C. Bosworth,
dated as of March 30, 1995(3)
10.8 Employment Agreement between the Company and Tom Bailey, dated as
of March 30, 1995(3)
10.9 Management Services Agreement between the Company and Windermere
Holdings, Incorporated ("Windermere") dated as of September 1,
1994(3)
10.10 1995 Stock Option Plan, as amended (5)
10.11 Consulting Agreement between the Company and William F. Coffin
Corporation dated as of December 1, 1994(4)
10.12 Amendment to Dealer Agreement between the Company and PictureTel
Corporation dated August 1, 1995(4)
10.13 Revolving Note with City National Bank, dated February 20, 1996(6)
10.14 Loan Agreements with Power-Data Services, Inc. dated February 15,
1996 and March 22, 1996(6)
10.15 Consulting Agreement between the Company and Windermere dated as
of November 1, 1995(1)
10.16 Loan and Security Agreement between the Company and USTeleCenters
and Promissory Note from USTeleCenters dated July 26, 1996(1)
10.17 Subordination Agreement among the Company, The First National Bank
of Boston, and USTeleCenters dated July 26, 1996(1)
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.18 Promissory Note, dated August 30, 1996, of View Tech, Inc. payable
to Andrew W. Jamison (2)
10.19 Registration Rights Agreement, dated August 30, 1996, between View
Tech, Inc. and Andrew W. Jamison (2)
10.20 Consulting Agreement between the Company and Windermere, dated
June 27, 1996 (1)
10.21 Option Agreement, dated August 22, 1996, between Rolf Hufnagel and
the Company (1)
23.1 Consent of Independent Accountants(1)
24.1 Power of Attorney(1)
24.2 Certified Copy of Board of Directors' Resolution regarding Power
of Attorney(1)
27.1 Financial Data Schedule(1)
</TABLE>
- ---------------
(1) Filed herewith.
(2) Filed as an exhibit to the Company's Report on Form 8-K dated September
24, 1996 relating to the completion of the acquisition of GroupNet, Inc.
(3) Filed as an exhibit of the same number to the Company's Registration
Statement on Form SB-2 (Registration No. 33-91232) and incorporated herein
by reference.
(4) Filed as an Exhibit to the Company's Form 10-KSB for the fiscal year ended
June 30, 1995.
(5) Filed as an Exhibit to the Company's Form 10-QSB for the fiscal quarter
ended September 30, 1995.
(6) Filed as an Exhibit to the Company's Form 10-QSB for the fiscal quarter
ended March 31, 1996.
(b) REPORTS ON FORM 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended June 30, 1996.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
View Tech, Inc.
------------------------------------------------
(Registrant)
Date: September 27, 1996 By: *
------------------- ----------------------------------------
William M. McKay
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman and September 27, 1996
- ------------------------ Chief Executive Officer --------------------
Robert G. Hatfield (Principal Executive Officer)
* President and Director September 27, 1996
- ------------------------ --------------------
John W. Hammon
* Chief Financial Officer September 27, 1996
- ------------------------ (Principal Financial and --------------------
William M. McKay Accounting Officer)
* Director September 27, 1996
- ------------------------ --------------------
Calvin Carrera
* Director September 27, 1996
- ------------------------ --------------------
Robert F. Leduc
*By /s/ William M. McKay
-------------------------
William M. McKay
Attorney-in-Fact
35
<PAGE>
VIEW TECH, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Balance Sheets as of June 30, 1996 and 1995.................................... F-3
Statements of Operations for the years ended June 30, 1996 and 1995............ F-4
Statement of Stockholders' Equity for the years ended June 30, 1996 and 1995... F-5
Statements of Cash Flows for the years ended June 30, 1996 and 1995............ F-6
Notes to Financial Statements as of June 30, 1996 and 1995..................... F-7
</TABLE>
F-1
<PAGE>
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-2
<PAGE>
VIEW TECH, INC.
BALANCE SHEETS
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
June 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Current Assets:
Cash $1,463,199 $4,987,939
Accounts receivable (net allowance for doubtful
accounts of $23,756 and $0, respectively) 4,720,262 2,344,544
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-3
<PAGE>
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
----------- ----------
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 (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-4
<PAGE>
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-5
<PAGE>
VIEW TECH, INC.
STATEMENTS OF CASH FLOWS
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-6
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
NOTE 1 - THE BUSINESS
- ---------------------
View Tech, Inc. 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.
F-7
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
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.
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.
F-8
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
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>
As of June 30, 1996, cash deposits of $150,000 are restricted for use as
collateral in connection with an outstanding letter of credit of $250,000 to
PictureTel.
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-9
<PAGE>
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 - LONG TERM 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
and inventory:
<TABLE>
<CAPTION>
June 30,
--------------------
1996 1995
--------- --------
<S> <C> <C>
Equipment....................... $426,570 $84,516
Less accumulated amortization... 90,859 49,508
-------- -------
$335,711 $35,008
======== =======
</TABLE>
F-10
<PAGE>
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>
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.
F-11
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
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 and requires the Company
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 the Company.
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 (the "IPO") 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.
F-12
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
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.
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.
F-13
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
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
- ------------------------------------
Provision for income taxes is as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------
1996 1995
---------- -----------
<S> <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>
<S> <C>
Deferred tax asset:
Reserves and allowances........... $ 22,677
Net operating loss carryforward... 165,007
--------
$187,684
========
</TABLE>
F-14
<PAGE>
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, respectively, 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 and 1995.
F-15
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE 18 - SUBSEQUENT EVENTS (UNAUDITED)
- ---------------------------------------
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
shareholders 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.
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, View Tech 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 and USTeleCenters' shareholders 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' shareholders will exchange all of their
outstanding USTeleCenters shares and 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 USTeleCenters' shareholders and
optionholders (upon exercise of their options) will receive up to 2.5 million
shares of View Tech common stock.
F-16
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
During July and August 1996, the Company advanced an aggregate of $1
million to USTeleCenters for working capital purposes and in order for
USTeleCenters to repay certain bank debt due on September 1, 1996. The $1
million advanced 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 aggregating approximately $3.0 million 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.
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-17
<PAGE>
EXHIBIT 2.1
SALE AGREEMENT
DATE: July 10, 1996
PARTIES: VistaTel International, Inc., a Florida corporation (Seller)
View Tech, Inc., a California corporation (Purchaser)
RECITALS:
A. The Seller is engaged in the business of marketing and servicing video,
audio, and data conferencing systems and providing mediaconferencing network
services to businesses worldwide (Business).
B. The Seller has four (4) offices located in the State of Florida (Offices).
C. The Seller wishes to sell, and the Purchaser wishes to buy, substantially
all of the assets of the Seller's business in accordance with the provisions of
this agreement.
AGREEMENTS:
SECTION 1. SALE AND PURCHASE OF ASSETS
Subject to the terms and conditions of this Agreement and in reliance on the
representations, warranties, and agreements of the Seller contained herein, the
Purchaser will purchase and acquire from Seller at the Closing, and Seller will
sell, assign, transfer, convey, and deliver to the Purchaser at the Closing, the
following assets and properties:
1.1 Equipment. All of the equipment, rolling stock, tools, furniture, and
fixtures listed on the attached Exhibit A, together with all other tangible
personal property owned by the Seller and located at the Offices at the date of
the closing of this sale.
1.2 Inventory. All of the inventory, supplies, and marketing materials of
Seller produced or used in the operation of the Business.
1.3 Leasehold Interests. All of the interest of the Seller, as tenant, under
the real property leases listed on Exhibit B relating to the Offices (Real
Property Leases); all interest of the Seller in leasehold improvements on the
Offices made pursuant to the Leases; and all of the interest of the Seller, as
lessee, in the personal property leases listed on the attached Exhibit B.
<PAGE>
1.4 Intangible Assets. All of the goodwill and other intangible assets
relating to the Business, including but not limited to customer lists and files
and all of Seller's right, title, and interest in and to the business name
"VistaTel International," and all goodwill of the Seller's business operated
under that name.
1.5 Contracts. All of Seller's right, title, and interest in and to the
contracts listed on the attached Exhibit C (Contracts).
1.6 Accounts Receivable. The accounts receivable to be purchased under this
agreement are those accounts receivable of customers and employees listed on
Seller's Balance Sheet dated June 30, 1996 attached hereto as Exhibit D (Balance
Sheet).
1.7 Cash. All of the cash listed on the Balance Sheet.
SECTION 2. ASSUMPTION OF LIABILITIES
Subject to the terms and conditions of this Agreement and in reliance on the
representations, warranties, and agreements of the Seller contained herein, the
Purchaser agrees to assume and become responsible for at the Closing all of
Assumed Liabilities described in Exhibit E. The Purchaser will not assume or
have any responsibility, however, with respect to any other obligation or
liability of the Seller not included within the definition provided in Exhibit
E.
SECTION 3. PURCHASE PRICE
The Purchaser agrees to pay to the Seller at the Closing $370,000 (Purchase
Price) by delivery of 52,857 shares of common stock in the Purchaser. For
purposes of this Agreement, the Purchaser's common stock shall be valued at
$7.00 per share.
SECTION 4. PROCEDURE FOR PAYMENT
At the Closing, the Purchaser will furnish to U.S. Stock Transfer Corporation
(the "Exchange Agent") instructions as to the new View Tech stock certificates
to be issued to Seller pursuant to the terms of this Agreement.
SECTION 5. CLOSING
<PAGE>
This sale shall be closed at the office of Seller, 2255 Glades Road, Suite
324A, Boca Raton, Florida 3343 on July 17, 1996, or at such other place or at
such other time as the parties may agree upon in writing.
SECTION 6. SELLER'S CLOSING DOCUMENTS
Upon closing of this sale, the Seller shall execute and deliver to the
Purchaser the following documents:
6.1 Bill of Sale. A Bill of Sale conveying the equipment, inventory, and
other tangible personal property being purchased in accordance with the form
attached hereto as Exhibit F.
6.2 Lien Search. A current lien search covering the equipment, inventory, and
other tangible personal property being purchased in a form subject to the
reasonable satisfaction of counsel for the Purchaser; and termination
statements, satisfactions, or partial releases of the property being purchased
from any lien or encumbrance shown upon such lien search.
6.3 Assignments of Leasehold Interests. An assignment, in the form attached
as Exhibit G, of the Seller's interests in the Leases, together with such
consent or consents thereto as may be reasonably required by counsel for the
Purchaser, and assignments, in the form attached as Exhibit H, of the Seller's
interests in each of the personal property leases listed on Exhibit B, together
with such consent or consents thereto as may be reasonably required by counsel
for the Purchaser.
6.4 Assignment of Contracts. An assignment, in the form attached as Exhibit
I, of the Seller's interests in each of the contracts listed on Exhibit C,
together with such consent or consents thereto as may be reasonably required by
counsel for the Purchaser.
6.5 Assignment of Business Name. An assignment of the Seller's interest in
the business name "VistaTel International" in accordance with the form attached
hereto as Exhibit J.
6.6 Certified Resolution. A resolution of the board of directors and
shareholders of the Seller, certified to be true and correct and in full force
by the Secretary of the Seller, authorizing the execution and delivery of this
agreement on behalf of the Seller, authorizing the execution and delivery of the
closing documents to be furnished by the Seller, and authorizing performance by
the Seller pursuant to this agreement and the documents delivered by the Seller
at the time of closing.
6.7 Certificate Regarding Representations and Warranties. A certificate of
the Seller that all of the representations and warranties of the Seller
contained in this agreement continue to be accurate and in full force and effect
to the time of the closing of this sale.
<PAGE>
6.8 Noncompetition Agreement. A noncompetition agreement in the form attached
as Exhibit K executed by the Seller's shareholders listed on Exhibit L
(Shareholders).
6.9 Assignment of Accounts Receivable. An assignment, in the form attached as
Exhibit M, of the Seller's rights, title, and interest to collect each of the
accounts receivable listed on Exhibit D, together with such consent or consents
thereto as may be reasonably required by counsel for the Purchaser.
SECTION 7. PURCHASER'S CLOSING DOCUMENTS
Upon the closing of this sale, the Purchaser shall execute and deliver to the
Seller the following documents:
7.1 Assignment of Leasehold Interests. An assignment, in the form attached as
Exhibit G, of the Seller's interest in the Leases, and assignments, in the form
attached as Exhibit H, of the Seller's interest in the personal property leases
listed on Exhibit B, evidencing the Purchaser's assumption of such leases.
7.2 Certified Resolution. A resolution of the board of directors of the
Purchaser, certified to be true and correct and in full force by the Secretary
of the Purchaser, authorizing the execution and delivery of this agreement on
behalf of the Purchaser, authorizing the execution and delivery of the closing
documents to be furnished by the Purchaser, and authorizing performance by the
Purchaser pursuant to this agreement and the documents delivered by the
Purchaser at the time of closing.
7.3 Certificate Regarding Representations and Warranties. A certificate of
the Purchaser that all of the representations and warranties of the Purchaser
contained in this agreement continue to be accurate and in full force and effect
at the time of the closing of this sale.
SECTION 8. WARRANTIES AND REPRESENTATIONS OF SELLER
The Seller warrants and represents to the Purchaser that:
8.1 Organization. The Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida, with all
corporate powers necessary to own its assets and property and to carry on its
business as so owned and conducted.
8.2 Authority. The Seller has full corporate power and authority to execute
and deliver this agreement, to perform the Seller's obligations under this
agreement, and to enter into the transactions contemplated by this agreement,
and execution and delivery of this agreement has been duly authorized and
approved by the Seller's board of directors and shareholders.
<PAGE>
8.3 Property. The Seller is in possession of all of the property listed on
Exhibit A and its inventory; has good title to all such property, free and clear
of any lien, claim, encumbrance, charge, or equity whatsoever; does not hold or
possess any such property under any lease, security agreement, conditional sales
contract or other title retention or security arrangement; and has not received
any notice of any claim by any third person with regard to any such property.
8.4 Financial Statements. The Seller's financial statements for the fiscal
year ended December 31, 1995, and the interim financial statements for the
period ending June 30, 1996, which have been delivered to the Purchaser, are
true, correct, and complete; fairly present the financial condition of the
Seller and the results of the Seller's operations; and have been prepared in
accordance with generally accepted accounting principles consistently applied.
There has been no material adverse change in the financial condition of the
Seller since the date of the interim financial statements referred to in this
subsection.
8.5 Litigation. There are no actions, suits, claims, or proceedings pending
or threatened, by or against the Seller, at law or in equity, before or within
the jurisdiction of any federal, state, municipal, or other governmental court,
department, commission, board, bureau, agency, or instrumentality.
8.6 Agreement Will Not Cause Breach or Violation. The consummation of the
transactions contemplated by this agreement will not result in or constitute a
default or an event that, with notice or lapse of time or both, would be a
default, breach, or violation of the articles of incorporation or bylaws of the
Seller, or any lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, or other agreement, instrument,
or arrangement to which the Seller is a party or by which the Seller, or any of
the property referred to in this agreement is bound, or the creation or
imposition of any lien, charge, or encumbrance on any of such property.
8.7 Brokers. The Seller has not employed a broker or brokers in connection
with the transactions contemplated by this agreement, nor incurred any finder's
fee payable to any person, firm, or corporation as a result of such
transactions.
8.8 Adverse Factors. To the best knowledge and belief of the Seller, there
are no material adverse factors affecting the assets to be sold under the terms
of this agreement nor the business of the Seller in which such assets are used.
SECTION 9. WARRANTIES AND REPRESENTATIONS OF PURCHASER
The Purchaser warrants and represents to the Seller that:
<PAGE>
SECTION 13. LICENSES AND PERMITS
The Purchaser shall be responsible for obtaining all necessary licenses,
permits, or governmental approvals for the operation of the business presently
conducted by the Seller. The Seller shall cooperate with the Purchaser in
obtaining such licenses, permits, or approvals. However, the obtaining of any
license, permit, or approval shall not be a condition of the closing of this
sale.
SECTION 14. RISK OF LOSS
All risk of loss to the property being purchased under this agreement shall
remain with the Seller to the date of the closing of this sale and shall pass to
the Purchaser upon the closing of this sale.
SECTION 15. BOOKS AND RECORDS
During the period from the date of this agreement to the date of the closing
of this sale, the Purchaser and its representatives shall be permitted access to
the business premises of the Seller and access to all books, records, files, and
documents relating to the conduct of the business of the Seller. In addition,
the Purchaser shall be permitted to contact and discuss with the Seller's
officers, employees, attorneys, accountants, suppliers, and other persons who
are furnishing, or have furnished, services to the Seller in connection with the
business of the Seller all aspects of the conduct of such business, and the
Seller shall furnish authorization, in such form as may be requested by one or
more of such persons, for any such person to engage in such discussion. The
Purchaser shall not disclose any information obtained by the examination or
discussion provided in this paragraph to any person except agents and employees
of the Purchaser and other persons furnishing advice to the Purchaser in
connection with the purchase under this agreement. The inspection and
discussion under the provisions of this paragraph, or the opportunity for such
inspection and discussion, shall not be deemed a waiver or modification of any
representation or warranty of the Seller, except as otherwise specifically
provided in this agreement.
SECTION 16. NONCOMPETITION AGREEMENT
<PAGE>
The Shareholders agree to execute and deliver to the Purchaser upon the
closing of this sale a Noncompetition Agreement in the form attached as Exhibit
K.
SECTION 17. TRANSFERABILITY
Prior to the closing of this sale, the Purchaser shall not assign or transfer
any interest of the Purchaser under this agreement.
SECTION 18. MISCELLANEOUS PROVISIONS
18.1 Binding Effect. The provisions of this agreement shall be binding upon
and inure to the benefit of the heirs, personal representatives, successors, and
assigns of the parties.
18.2 Notice. Any notice or other communication required or permitted to be
given under this agreement shall be in writing and shall be mailed by certified
mail, return receipt requested, postage prepaid, addressed to the parties at the
following addresses:
If to the Seller:
VistaTel International, Inc.
2255 Glades Road, Suite 324A
Boca Raton, FL 33431
Attention: James Bell
If to the Purchaser:
View Tech, Inc.
950 Flynn Road
Camarillo, CA 93012
Attention: Robert G. Hatfield
All notices and other communications shall be deemed to be given at the
expiration of three days after the date of mailing. The address of a party to
which notices or other communications shall be mailed may be changed from time
to time by giving written notice to the other parties.
18.3 Litigation Expense. In the event of a default under this agreement, the
defaulting party shall reimburse the nondefaulting party or parties for all
costs and expenses reasonably incurred by the nondefaulting party or parties in
connection
<PAGE>
with the default, including without limitation attorney's fees. Additionally, in
the event a suit or action is filed to enforce this agreement or with respect to
this agreement, the prevailing party or parties shall be reimbursed by the other
party for all costs and expenses incurred in connection with the suit or action,
including without limitation reasonable attorney's fees at the trial level and
on appeal.
18.4 Waiver. No waiver of any provision of this agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
18.5 Applicable Law. This agreement shall be governed by and shall be
construed in accordance with the laws of the State of Florida.
18.6 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.
18.7 No Third Party Beneficiaries. This agreement shall not confer any rights
or remedies upon any other person or entity other than the parties hereto and
their respective successors and permitted assigns.
18.8 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.
18.9 Entire Agreement. This agreement constitutes the entire agreement
between the parties pertaining to its subject matter, and it supersedes all
prior contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this agreement shall be
binding unless executed in writing by all parties.
IN WITNESS WHEREOF, the undersigned have executed this agreement effective as
of July 10, 1996.
VistaTel International, Inc.
By: /s/ Mark McLain
--------------------------
Title: President
-----------------------
View Tech, Inc.
By: /s/ Robert G. Hatfield
----------------------------
Title: Chief Executive Officer
----------------------------
<PAGE>
EXHIBIT 10.15
November 1, 1995
Mr. Robert E. Yaw II
Windermere Holdings, Incorporated
The Oaks
227 St. James Park
Osprey, Florida 34229
Re: Consulting Agreement
---------------------
Dear Mr. Yaw:
This letter confirms View Tech, Inc.'s (the "Company") agreement (this
"Consulting Agreement") to retain Windermere Holdings, Incorporated and its
employees (collectively "WHI") to position management and the Company so as to
increase the Company's visibility in its industry and position it for growth in
the future. Attached hereto is a summary of the major activities that WHI will
perform in connection with this Consulting Agreement. This summary is
incorporated into the terms of this Consulting Agreement between WHI and the
Company. Below are additional agreements between the parties with respect to
this Consulting Agreement:
1. Term. Commencing November 1, 1995, the Company hereby appoints WHI to
----
perform the duties and render the services described in the attached Summary of
Services on a month to month basis subject to termination upon 30 days written
notice from either party.
2. Non-Exclusive Services. WHI will devote part of the time and efforts
----------------------
of its employees to the Company during the term of this Consulting Agreement.
3. Board Approval. This Consulting Agreement has not been approved by the
--------------
Company's board of directors and is only binding upon the Company if and when
such approval is obtained.
4. Compensation. In consideration of WHI's services, the Company shall
------------
pay WHI a cash retainer of $5,000 per month due on the first day of each month
through June 30, 1996, for a total of $40,000, plus reimbursement of reasonable
out-of-pocket expenses. Such reasonable out-of-pocket expenses incurred in the
performance of its services hereunder shall be documented by WHI in a writing
submitted to the Company at least 30 days prior to the date payment is to be
made hereunder.
5. Non-Competition. WHI from time to time may represent entities in
---------------
competition with the Company, and the Company acknowledges that such
representation is not a breach of this Consulting Agreement. Nevertheless, WHI
(i) shall not divulge trade secrets or confidential information of any sort with
respect to the Company; and (ii) shall advise the Company of any such business
relationship.
<PAGE>
Robert E. Yaw II
November 1, 1995
Page 2
6. Non-Assignability. This Consulting Agreement shall inure to the
-----------------
benefit of and shall be binding upon the successors and the assigns of the
Company. Since this Consulting Agreement is based upon the unique abilities and
personal confidence in WHI and its employees, WHI shall have no right to assign
this Consulting Agreement or any of the rights hereunder written without the
written consent of the Company.
7. Notices. Any change of address must be sent to the other party via
-------
such procedure to be valid against such other party.
8. Severability. If any provision of this Consulting Agreement shall be
------------
found invalid by any court of competent jurisdiction, such findings shall not
effect the validity of the other provisions hereto. Any notice required or
permitted to be given hereunder shall be sufficient if in writing and if sent by
certified mail or facsimile to the parties at their present principal business
addresses. If any provision of this consulting agreement should be found invalid
by any court of competent jurisdiction, such findings shall not effect the
validity of the other provisions hereof and the invalid provisions shall be
deemed to have been severed herefrom.
9. Entire Agreement. This Consulting Agreement constitutes the entire
----------------
agreement between the parties pertaining to its subject matter, and it
supersedes all prior contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or amendment of
this Consulting Agreement shall be binding unless executed in writing by all
parties.
10. Attorneys's Fees. If any action is brought to enforce the terms of
----------------
this Consulting Agreement, the prevailing party shall be entitled to its costs
and reasonable attorneys' fees.
11. Arbitration. Any dispute concerning this Consulting Agreement shall
-----------
be settled by binding Arbitration in accordance with the Rules of the American
Arbitration Association in the County of Ventura, State of California.
If the terms hereof meet with your approval, please indicate by signing
below.
Sincerely,
By: /s/ Robert G. Hatfield
---------------------------------------------
Robert G. Hatfield, Chief Executive Officer
Agreed and accepted as of the date first above stated:
Windermere Holdings, Incorporated
By: /s/ Robert E. Yaw II
---------------------------------------------
Robert E. Yaw II, its Chairman
<PAGE>
SUMMARY OF SERVICES
RESEARCH REPORT
- ----------------
WHI will assist the Company in locating a securities firm capable of providing
analyst coverage of the Company, its products, and the industries in which it
competes.
BOARD OF DIRECTORS AND ADVISORY BOARD
- --------------------------------------
WHI will continue to assist the Company in maintaining a quality board of
directors and introducing the Company to other people that can provide their
respective expertise as board members or advisors to the board of directors.
FINANCING OPTIONS/ACQUISITION CANDIDATES
- -----------------------------------------
WHI will assist the Company in reviewing different financing options/acquisition
candidates that will enable the Company to continue to grow and take advantage
of marketing opportunities.
PUBLIC RELATIONS
- ----------------
WHI will assist the Company with any and all appropriate press releases,
designed not only for the trade community but also the investment community.
The public relations will: serve to create a higher degree of visibility for the
Company within its trade; be used for marketing purposes among present and
future clients; and develop a level of awareness among potential investors.
<PAGE>
EXHIBIT 10.16
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is made this 26th day of
July, 1996, between View Tech, Inc., a California corporation ("Lender"), with
its principal office address located at 950 Flynn Road, Camarillo, California,
and USTeleCenters, a Massachusetts corporation ("Borrower"), with its principal
office address located at 745 Atlantic Avenue, Boston, MA.
In consideration of the loan agreed to be made, the security interest
granted, and the other covenants and agreements made by this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of all of
which are acknowledged, the parties agree as follows:
1. Purpose of Agreement. The purpose of this Agreement is to establish
the terms upon which Lender will make a loan to Borrower subject to the terms of
the Subordination Agreement between Lender, Borrower, and the Bank of Boston of
even date herewith.
2. Definitions. The following terms shall have the following meanings:
(a) "Obligations" shall mean (1) all sums due and payable by Borrower (i)
to Lender with respect to the Loan (together with all other sums due under the
Loan Documents) or (ii) to Lender, or its affiliates and subsidiaries pursuant
to any Related Documents; and (2) all other Indebtedness, obligations, and
liabilities of the Borrower to Lender now existing or hereafter incurred or
created.
(b) "Collateral" shall mean the property of Borrower set forth on
attached Exhibit A, and all additions, attachments and successions to it, all
replacements of it, all substitutions for it and all cash and non-cash proceeds
of such property.
(c) "Loan Documents" shall mean this Agreement, all exhibits to it, and
all notes, financing statements and other documents executed pursuant to this
Agreement or contemplated by it or executed to provide further assurance to
Lender with respect to collection of sums under this Agreement or under the
Note.
(d) "Note" shall mean the Promissory Note executed and delivered by
Borrower pursuant to Section 3 of this Agreement.
(e) "Related Documents" shall mean any accounts, leases, agreements,
undertakings or other arrangements other than the Loan Documents, to which
Borrower is a party or by which it is bound and to which Lender and its
affiliates and its subsidiaries are also a party.
(f) "Indebtedness" shall, with respect to any person or entity, mean: (1)
all obligations of such person or entity for borrowed money; (2) all obligations
of such person or entity evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations of such person or entity
in respect of letters of credit, letter of credit guaranties,
1
<PAGE>
bankers acceptances, interest rate swaps, controlled disbursement accounts, or
other financial products; (3) all obligations under capital leases; (4) all
obligations or liabilities of others secured by a lien or security interest on
any property or asset of such person or entity, irrespective of whether such
obligation or liability is assumed; and (5) any obligation of such person or
entity guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-
made, discounted, or sold with recourse to such person or entity) and any
indebtedness, lease, dividend, letter of credit, or other obligation of any
other person or entity.
3. Loan.
(a) Lender agrees to loan to Borrower $1,000,000 (the "Loan") to be
loaned in two $500,000 advances, the first on July 26, 1996, and the second on
August 15, 1996, subject to the terms hereof and of the Note of even date.
(b) Lender's obligation to make the Loan or any advance hereunder is
subject to the following conditions:
(i) The Loan shall be evidenced by a Promissory Note in the form of the annexed
Exhibit B, which Promissory Note shall be executed and delivered by Borrower to
Lender contemporaneously with the making of such Loan;
(ii) The proceeds of the Loan shall be used solely to fund the ordinary working
capital needs of the Borrower;
(iii) The aggregate principal amount of the Loan shall not exceed $1,000,000;
and
(iv) Borrower is not then in default under any Obligations or in payment or
acceleration of the maturity of any other Indebtedness of Borrower owing to any
person.
(c) Notwithstanding the provisions of Section 3(b) above, Lender shall
not have any obligations to advance the final $500,000 hereunder if Borrower is
in default under any of the terms provided herein or in the Note.
4. Representations. To induce Lender to enter into this Agreement,
Borrower makes the following representations and warranties on which it agrees
Lender is entitled to rely:
(a) Borrower is duly organized, validly existing and in good standing
under the laws of the state of its incorporation and is duly qualified and in
good standing under the laws of those states in which the present conduct of its
business requires that it be qualified to do business.
(b) The execution, delivery and performance of this Agreement and all
other Loan Documents are within the Borrower's corporate powers, have been duly
authorized, are not in contravention of law or the terms of Borrower's charter,
bylaws or other corporate records, or of any indenture, agreement or undertaking
to which the Borrower is a party or by which it is bound.
2
<PAGE>
(c) Except for the security interest granted by Borrower and any prior
liens, security interests or encumbrances of which Borrower has notice, if any,
set forth on Exhibit C, Borrower is the owner of the Collateral free of any
lien, security interest or other encumbrance.
(d) This Agreement and the related documents which are exhibits to it
have been properly executed on behalf of Borrower and, upon execution by Lender,
this Agreement and the Related Documents and the transactions contemplated by
them, will be the valid and binding obligation of Borrower, fully enforceable
against Borrower in accordance with their respective terms, except as may be
limited by bankruptcy and the laws of creditors' rights generally.
(e) Borrower is not in default with respect to any of its existing
indebtedness or under the terms of any other undertaking, agreement or document
to which it is a party or by which it is bound, and the execution by Borrower of
this Agreement and the other Loan Documents will not cause a default or
acceleration of any Indebtedness or other obligation contained in any other
undertaking, agreement or document to which the Borrower is a party or by which
it is bound, either immediately, or after notice and/or the passage of time. No
action, event or condition has occurred and is continuing to occur which, with
notice or the passage of time or both, would constitute a default under any
provision of this Agreement or any other agreement, undertaking or document to
which Borrower is a party or by which Borrower is bound.
(f) There are no suits or proceedings pending, or to the knowledge of
Borrower, threatened against or affecting Borrower, which, if adversely
determined, would have a material adverse effect on the financial condition,
business, operations, assets, properties, or prospects of Borrower subsequent to
Borrower's June 30, 1996 Balance Sheet, and there are no proceedings by or
before any governmental commission, board, bureau, or other administrative
agency pending, or to the knowledge of Borrower, threatened against Borrower.
(g) Borrower has obtained all consents, approvals or authorizations and
given all notices that Borrower is required to give with respect to the
execution and delivery of this Agreement and the other Loan Documents of the
undertaking or performance of any obligation under this Agreement or under any
of the other Loan Documents.
(h) Except as may be set forth on Exhibit A, all of the Collateral is
located at the Borrower's principal place of business stated above and at
Borrower's other offices located at the addresses provided on Exhibit E.
(i) The financial statements and information of Borrower delivered to
Lender in connection with the Loan, are complete and correct and fairly present
the financial position of Borrower and have been prepared in accordance with
generally accepted accounting principles on a consistent basis throughout the
periods involved. Since the date of the latest of such statements, there has
been no material adverse change in the financial condition, business,
operations, assets, properties, or prospects of Borrower from that set forth in
Borrower's June 30, 1996 financial statements, which are attached hereto as
Exhibit D.
3
<PAGE>
(j) There are no facts known to Borrower which have not been disclosed
in writing to Lender which could result in a material adverse change in the
financial condition, business, operations, assets, properties, or prospects of
Borrower subsequent to Borrower's June 30, 1996 Balance Sheet.
5. Covenants of Borrower. While this Agreement continues in effect, and
while any sum payable under the terms of the Loan Documents is outstanding,
Borrower covenants and warrants to Lender that it will, unless the prior written
consent of the Lender to do otherwise is obtained:
(a) Continue its existence in good standing in all states in which the
conduct of its business requires Borrower to be qualified to do business and in
good standing.
(b) Except for the liens disclosed in Exhibit C, keep the Collateral free
of any lien, security interest or other encumbrance and defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest adverse to Lender.
(c) Give Lender written notice of each location at which the Collateral
is or will be kept other than for temporary processing, storage or similar
purposes and, except to the extent such notice is given, all Collateral shall be
kept at Borrower's addresses as it appears at the beginning of this Agreement.
(d) Give Lender immediate notice of any alleged or actual default by
Borrower under any indenture, agreement, document or undertaking to which
Borrower is a party or by which it is bound (including but not limited to the
Related Documents), or of any threatened claim or litigation or proceeding
commenced in which a decision adverse to Borrower would require payment by
Borrower of $50,000 or more or otherwise have a material adverse effect on
Borrower's financial condition, business, operations, assets, properties, or
prospects of Borrower subsequent to Borrower's June 30, 1996 Balance Sheet.
(e) Furnish to Lender (i) a monthly balance sheet and profit and loss
statement of Borrower in the format prescribed by Lender on or before the 15th
day of each month for the preceding month, and (ii) a statement of financial
condition and statement of income and expense of Borrower in the format
prescribed by Lender on or before the 90th day after the end of each fiscal year
of Borrower, which statements shall be certified by an officer of Borrower.
(f) As evidenced by Debtor's quarterly financial statements, maintain a
debt to equity ratio not greater than the ratio computed based on the Borrower's
June 30, 1996 Balance Sheet including the proceeds of the Loan made hereunder
(for purposes of this provision "debt" shall mean all liabilities of Borrower
and "equity" shall mean the sum of all amounts attributable to stock and capital
contributed in excess of par value (but shall not include retained earnings)).
(g) As evidenced by Debtor's quarterly financial statements, maintain a
minimum net worth not less than the net worth shown on Borrower's June 30, 1996
Balance Sheet including the proceeds of the Loan made hereunder (for purposes of
this provision "net worth" shall mean
4
<PAGE>
the amount of shareholders equity less the sum of all intangible assets other
than amounts paid as area or franchise fees).
(h) Furnish to Lender from time to time such further information
regarding the financial condition, business, operations, assets, properties, or
prospects of Borrower as Lender may reasonably request.
(i) Duly pay and discharge all taxes, assessments and governmental
charges or levies imposed upon Borrower or upon any properties belonging to
Borrower, prior to the date on which penalties attach, and all lawful claims
which if unpaid, might become a lien or charge upon Borrower's properties,
provided that Borrower shall not be required to pay such tax, assessment,
charge, levy or claim which is being contested by Borrower in good faith and by
proper proceedings and for which a reserve has been established, in case of an
adverse final decision.
(j) Comply with the requirements of all applicable laws, rules,
regulations, rulings and orders of any governmental or judicial authority,
noncompliance with which would have a material adverse affect upon Borrower's
financial condition, business, operations, assets, properties, or prospects of
Borrower.
(k) Maintain and preserve all of Borrower's properties necessary or
useful in the proper conduct of Borrower's business in good working order and
condition, ordinary wear and tear excepted.
(l) Not sell, transfer, lease or otherwise dispose of all or any
material part of its assets, except in the ordinary course of its business.
(m) Not incur, create, assume or permit to exist any Indebtedness that
equals or exceeds $100,000 except the Loan and existing Indebtedness disclosed
to Lender on Exhibit D (Borrower's June 30, 1996 Balance Sheet) except for
unsecured trade indebtedness incurred in the ordinary course of business.
(n) Except for distributions necessary to pay taxes incident to
Borrower's Sub-S status, not declare or pay any dividends upon its outstanding
shares; make any loans to directors, officers, stockholders or employees; make
or enter into any agreement under which Borrower would be bound to make, any
purchase, redemption, retirement or other acquisition for value of any of its
outstanding shares.
(o) Except for distributions necessary to pay taxes incident to
Borrower's Sub-S status, not make any distributions to stockholders or pay any
principal or interest of any stockholder loans.
(p) Shall make good faith efforts to negotiate and execute with Lender a
definitive merger agreement relating to the merger between Lender and Borrower
by August 16, 1996.
5
<PAGE>
(q) Not permit anything to be done to the Collateral which could
materially impair its value.
(r) Apply the proceeds of the Loan to fund Borrower's ordinary working
capital needs.
6. Insurance.
(a) Borrower will insure the Collateral against all insurable casualties
and risks. Within 15 days of the date hereof, Borrower will add Lender as an
additional insured or loss payee under all its existing property and general
liability insurance policies, and copies of all policies or certificates of
insurance shall be furnished to Lender. Borrower will pay all premiums due or
to become due for such insurance.
(b) Borrower, its president, and its chief financial officer shall
provide Lender and its agents with all information, execute any documents, and
take any actions, including but not limited to, taking physical examinations,
that Lender and its agents may reasonably request in connection with attempting
to obtain life insurance on the lives of the president and/or the chief
financial officer of Borrower, naming Lender as beneficiary, and Lender may, at
its option, maintain such insurance as long as any amounts are outstanding under
the Loan Documents in an amount equal to or in excess of all amounts due Lender
under the Loan Documents.
7. Grant of Security Interests.
(a) As security for the payment and satisfaction of all Obligations,
Borrower grants to Lender a security interest in the Collateral, wherever
located, whenever acquired by Borrower, together with all substitutions and
replacements and renewals.
(b) The security interest granted by Borrower to Lender pursuant to this
Agreement upon perfection shall be an indefeasible lien and security interest
with respect to the Collateral prior to any other liens or encumbrances on the
Collateral except such liens, security interests or encumbrances set forth on
Exhibit C.
(c) Lender shall, in addition to all other rights granted in this
Agreement, have all the rights and benefits available to a secured party under
the terms of the Uniform Commercial Code in effect in the state in which
Borrower's principal place of business (set forth above) is located.
(d) Borrower agrees to execute all financing statements which Lender may
request Borrower to execute to further evidence and to perfect Lender's security
interest in the Collateral and to do all other acts or things and execute all
other documents which may be required to further perfect and protect Lender's
security interest in the Collateral.
(e) At such time as all of the Obligations arising in connection with
the Loan are repaid, Lender will, at Borrower's expense, execute releases of
financing statements and return any of the Collateral then in Lender's
possession and do all such other acts and things and execute all such documents
as may be necessary to release the security interest granted to Lender.
6
<PAGE>
8. Collection of Accounts Receivable and Other Assets.
(a) Until Lender requires that debtors owing accounts to Borrower be
notified of Lender's security interest, Borrower shall continue to collect all
accounts and shall either hold the proceeds received in trust for Lender until
paid to Lender or shall reinvest such proceeds in additional inventory or
equipment or use such proceeds for then current working capital needs. Lender
agrees that it will not execute its rights under this Paragraph 8(a) unless
there is an Event of Default as defined in Paragraph 9 below.
(b) Borrower irrevocably appoints Lender its true and lawful attorney,
with power of substitution, in the name of Borrower or in the name of Lender or
otherwise for the use and benefit of Lender, but at the cost and expense of
Borrower, without notice to Borrower or any of its representatives or
successors, to repair, alter or supply goods, if any, necessary to fulfill in
whole or in part the purchase order of any account debtor from which any
Collateral has arisen; to demand, collect, receipt for and give renewals,
extensions, discharges and releases of any Collateral, to institute and to
prosecute legal and equitable proceedings to realize upon the Collateral, to
settle, compromise, compound or adjust claims in respect to any Collateral or
any legal proceedings brought in respect of it; and generally to sell in whole
or in part for cash, credit or property to others or to itself at any public or
private sale, assign, make any agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as though Lender were the absolute
owner for all purposes. Lender agrees that it will not execute its rights under
this Paragraph 8(b) unless there is an Event of Default as defined in Paragraph
9 below.
(c) Borrower also irrevocably appoints Lender its true and lawful
attorney, with power of substitution, in the name of Borrower or in the name of
Lender or otherwise for the use and benefit of Lender, but at the cost and
expense of Borrower, without notice to Borrower or any of its representatives or
successors, to take control in any manner of cash or non-cash items of payment
or proceeds; to endorse the name of Borrower upon any notes, acceptances,
checks, drafts, money orders, bills of lading, freight bills, chattel paper or
other evidences of payment or Collateral that may come into Lender's possession;
to sign Borrower's name on any invoices relating to any accounts, on drafts
against account debtors and notices to account debtors; to sign Borrower's name
on any proof of claim in bankruptcy against any account debtor; to sign
Borrower's name on any notice of lien, claim of mechanics lien or assignment or
satisfaction of mechanics lien; to notify all account debtors to make payment of
all accounts to Lender; to apply any funds collected by Lender as a result of
the acts Lender is permitted to perform against sums due under the Loan
Documents, and to do all acts and things necessary in Lender's sole judgment, to
carry out this Agreement. Lender agrees that it will not execute its rights
under this Paragraph 8(c) unless there is an Event of Default as defined in
Paragraph 9 below.
9. Events of Default, Acceleration. The following shall constitute
Events of Default and shall entitle Lender to exercise Lender's rights and
remedies under this Agreement, including but not limited to those specified in
Section 10.
7
<PAGE>
(a) Subject to Paragraph 9(c) below with respect to the amounts due
hereunder, the failure of Borrower to pay or perform any of the Obligations in
excess of $50,000 (whether such Obligations are pursuant to the Loan Documents
or the Related Documents) as and when due and payable.
(b) The determination that any material representation or warranty of
Borrower contained in this Agreement or any other Loan Document or any other
published materials provided to Lender is not true, accurate and complete and is
materially misleading.
(c) The failure of Borrower to perform, observe or comply with any of
the provisions of the Loan Documents or the Related Documents within 30 days of
the date of written notice of such failure.
(d) The filing of any petition for relief under the Bankruptcy Code or
any similar federal or state statute by or against Borrower or the failure by
Borrower to generally pay its debts as they become due.
(e) An application for the appointment of a receiver for the making of a
general assignment for the benefit of creditors by, or the insolvency of,
Borrower.
(f) The dissolution, merger, consolidation or reorganization of
Borrower, other than a merger, consolidation or reorganization with the Lender.
(g) If there is any change of control of Borrower, whether voluntary or
involuntary, by sale, merger, consolidation, reorganization or otherwise, other
than a merger, consolidation or reorganization with the Lender.
(h) If any creditor of Borrower proceeds, threatens to proceed or
notifies Borrower of its intention to proceed to enforce its rights under the
provisions of any instrument creating an interest in the assets of Borrower or
if any creditor of Borrower seeks, threatens or notifies Borrower of its
intention to accelerate the payment of any Indebtedness owing to it by Borrower,
or if Borrower is otherwise in default under the terms of any agreement creating
an interest in the assets of Borrower.
(i) If Lender in its sole discretion determines in good faith that a
material adverse change has occurred in the financial condition, business,
operations, assets, properties, or prospects set forth in Borrower's June 30,
1996 Balance Sheet attached hereto as Exhibit D or from the financial condition,
business, operations, assets, properties, or prospects of Borrower most recently
disclosed to Lender in any manner.
10. Remedies. Upon the occurrence of an Event of Default, Lender may,
at its option, and except as otherwise set forth herein without notice to
Borrower, declare the unpaid balance of the Note to be immediately due and
payable. In this event (and in addition to all of its rights, powers and
remedies under this Agreement), Lender shall have all of the rights and remedies
of a secured party under applicable provisions of the Uniform Commercial Code
and under other applicable laws. Borrower, upon demand by Lender, shall
assemble the Collateral and make it
8
<PAGE>
available to Lender at a place designated by Lender which is mutually convenient
to both parties. Lender or its agents may enter upon the Borrower's premises to
take possession of the Collateral, to remove it, to render it unusable or to
sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by
Lender with respect to the Collateral which is required by applicable laws and
is sent by regular mail, postage prepaid, to Borrower at the address of Borrower
specified above, or such other address of Borrower which may from time to time
be shown on Lender's records, at least 5 days prior to such sale, disposition or
other action, shall constitute reasonable notice to Borrower. Borrower shall
pay to Lender on demand any and all expenses incurred or paid by Lender in
establishing, defending, protecting or enforcing its security interest or rights
upon or under the Loan Documents or with respect to the Collateral or in
collecting all amounts due, including, without limitation, all of Lender's
reasonable attorneys fees, accountants and appraisers fees, fees of auctioneers
and selling agents, costs of taking possession, repair and refurbishing of the
Collateral, cost of sale of the Collateral and cost of perfecting or protecting
any security interest in the Collateral, and the cost of filing all financing
statements or other documents required to perfect Borrower's security interest,
including but not limited to all recording costs and taxes. All of such sums
shall be deemed to be additional amounts due under this Agreement.
11. Deficiency. If the sale or other disposition of the Collateral
fails to fully satisfy the Obligations in connection with the Loan, Borrower
shall remain liable to Lender for any deficiency.
12. Remedies Cumulative. Each right, power and remedy of Lender as
provided for in this Agreement or in the Loan Documents or existing at law or in
equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this
Agreement or in the Loan Documents or existing at law or in equity or by statute
or otherwise, and the exercise or beginning of the exercise by Lender of any one
or more of such rights, powers or remedies shall not preclude the simultaneous
or later exercise by Lender of any or all such other rights powers or remedies.
13. Waiver. No failure by Lender to insist upon the strict performance
of any term, condition, covenant or agreement of this Agreement or of the Loan
Documents, or to exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver of any such term, condition, covenant or
agreement of any such breach, or preclude Lender from exercising any such right,
power or remedy at any later time or times. By accepting payment after the due
date of any sum due under the Loan Documents or any of the Obligations, Lender
shall not be deemed to have waived the right either to regular payment when due
of all other sums due under the Loan Documents or Obligations, or to declare a
default for failure to effect such payment of any such other sum due Lender.
14. Expenses. Borrower shall pay to Lender on demand any and all
expenses incurred or paid by Lender in establishing, defending, protecting or
enforcing its security interest or rights upon or under the Loan Documents or
with respect to the Collateral or in collecting all amounts due, including,
without limitation, all of Lender's reasonable attorneys fees, accountants and
9
<PAGE>
appraisers fees, fees of auctioneers and selling agents, costs of taking
possession, repair and refurbishing of the Collateral, cost of sale of the
Collateral and cost of perfecting or protecting any security interest in the
Collateral, and the cost of filing all financing statements or other documents
required to perfect Borrower's security interest, including but not limited to
all recording costs and taxes. All of such sums shall be deemed to be
additional amounts due under this Agreement.
15. Miscellaneous. The paragraph headings of this Agreement are for
convenience only, and shall not limit or otherwise affect any of the terms.
Neither this Agreement nor any term, condition, covenant or agreement of it may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. Lender reserves the right to assign the
Promissory Note to be executed by Borrower provided the terms and conditions of
the Note shall remain the same. This Agreement shall be governed by any
applicable laws, and shall be binding upon the successors and assigns of
Borrower and shall inure to the benefit of the successors and assigns of Lender.
As used in this Agreement, the singular number shall include the plural, the
plural the singular and the use of the masculine, feminine or neuter gender
shall include all genders, as the context may require, and the term "person"
shall include an individual, a corporation, an association, a partnership, a
trust and an organization. Unless varied by this Agreement, all terms which are
defined by the Uniform Commercial Code shall have the same meanings under this
Agreement as assigned to them by the Uniform Commercial Code. All covenants,
agreements, representations and warranties made by Borrower shall survive the
making of the Loan and the execution and delivery of the Note, and shall
continue in full force and effect until all of the obligations arising in
connection with the Loan are repaid.
16. Venue; Jurisdiction. All actions with respect to this Agreement and
the Related Documents will be instituted in a state court sitting in Ventura
County, California or in a federal court for the Central District of California
subject to the provisions on arbitration. By the execution of this Agreement,
Borrower irrevocably and unconditionally submits to the jurisdiction (both
subject matter and personal) of each such court and irrevocably and
unconditionally waives: (a) any objection the Borrower might now or hereafter
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.
17. Arbitration. Lender and Borrower agree that all disputes, claims
and controversies between them, whether individual, joint, or class in nature,
arising from this Agreement or the Related Documents, including without
limitation contract and tort disputes, shall be arbitrated pursuant to the Rules
of the American Arbitration Association, upon request of either party, in the
County of Ventura, State of California. 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.
10
<PAGE>
In witness, the parties executed this Agreement on behalf of each of the
parties by their respective duly authorized officers and subscribed on the day
written above.
View Tech, Inc.
By /s/ Robert G. Hatfield
----------------------------
USTeleCenters, Inc.
By /s/ Franklin A. Reece, III
--------------------------------
11
<PAGE>
PROMISSORY NOTE
$1,000,000 Camarillo, California
July 26, 1996
FOR VALUE RECEIVED, USTELECENTERS, INC., a Massachusetts corporation
(the "Borrower"), promises to pay to the order of VIEW TECH, INC., a California
corporation, its successors and assigns (the "Lender") at 950 Flynn Road,
Camarillo, California 93012, or at such other place as might be designated in
writing by the Lender, the principal sum of One Million and 00/100 Dollars
($1,000,000.00) or so much thereof as has been disbursed by the Lender and
remains unpaid, together with interest thereon at the rate of ten percent per
annum. Interest will be calculated on the basis of the actual days elapsed
based on a per diem charge computed over a year composed of three hundred sixty
(360) days.
All loan proceeds shall be disbursed in accordance with the terms of
the Loan and Security Agreement between Lender and Borrower of even date
herewith.
Principal and interest will be paid as follows: Absent default, the
Borrower shall make quarterly interest payments on this Promissory Note, which
are due and payable commencing with the quarter ending September 30, 1996. The
entire unpaid balance of principal and accrued but unpaid interest owing will be
due and payable on June 15, 1997. Interest due shall be calculated from July
29, 1996 on the first $500,000 disbursed, and from the date of funding on the
second $500,000. However, if prior to the scheduled repayment as set forth
herein, the Borrower issues options and/or shares of its common stock which give
the holders thereof more than 10% ownership of the Borrower based upon the
number of shares currently outstanding, the outstanding principal and all
accrued and unpaid interest shall immediately become due and payable.
Advances and payments under this Note may, at the option of the
Lender, be recorded on this Note, which will be prima facie evidence of such
advances, payments and the unpaid balance of this Note, absent a showing of
manifest error.
The Borrower will have the right at any time and from time to time to
prepay the unpaid principal balance of this Note in whole or in part without
penalty, but with interest on the unpaid principal balance accrued to the date
of prepayment.
The Borrower agrees that if, and as often as, this Note is placed in
the hands of an attorney for collection or to defend or enforce any of the
Lender's rights under this Note or otherwise relating to the indebtedness hereby
evidenced, the Borrower will pay the Lender's reasonable attorneys' fees, all
court costs and all other expenses incurred by the Lender in connection
therewith. The Lender may collect a late charge equal to five percent (5%) of
each payment which is not received by the Lender within ten (10) days after the
due date of such payment. Such late charge represents the estimate of
reasonable compensation for the loss which will be sustained by the Lender
arising from the Borrower's failure to make timely payments and may be collected
without prejudice to the rights of the Lender to collect any other amounts
arising from the occurrence of an Event of Default. During the existence of any
Event of Default, the Lender may apply payments received on any amount due
hereunder or under
12
<PAGE>
the terms of any instrument now or hereafter evidencing or securing payment of
this indebtedness as the Lender determines from time to time.
This Note is issued by the Borrower and accepted by the Lender
pursuant to a lending transaction negotiated, consummated and to be performed in
the states of California and Massachusetts. This Note is to be construed
according to the internal laws of the State of California. All actions with
respect to this Note or any other instrument securing payment of this Note will
be instituted in a state court sitting in Ventura County, California or in a
federal district court for the Central District of California subject to the
provisions on arbitration. By the execution of this Note, the Borrower
irrevocably and unconditionally submits to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waives:
(a) any objection the Borrower might now or hereafter 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.
On the breach by the Borrower of any provision of this Note or any
other instrument now or hereafter evidencing or securing payment of the
indebtedness hereby evidenced or on the default in payment or performance under
any instrument governing, evidencing or securing payment of disbursements in the
principal amount of up to One Million and 00/100 Dollars ($1,000,000.00) made by
the Lender to the Borrower of even date, at the option of the Lender, the entire
indebtedness evidenced by this Note will become immediately due, payable and
collectible then or thereafter as the Lender might elect, regardless of the date
of maturity of this Note in accordance with the provisions of this Note.
Failure by the Lender to exercise such option will not constitute a waiver of
the right to exercise the same on the occurrence of any subsequent Event of
Default.
This Note is intended to strictly conform with all usury laws to the
extent applicable to the transactions contemplated hereby. The provisions of
this Note and of all agreements between the Borrower and the Lender are hereby
expressly limited so that in no contingency or event whatsoever, shall the
amount contracted for, charged, paid or agreed to be paid to the Lender for the
use, forbearance or retention of money or credit hereunder or otherwise exceed
the maximum rate permitted by law therefor. If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between the Borrower and the Lender shall, at the time of the
execution and delivery thereof, or at the time or performance of such provision
shall be due, involve or purport to require any payment in excess of the limits
prescribed by law, the obligation to be performed or fulfilled shall be reduced
automatically to the limit prescribed by law without the necessity of the
execution of any amendment or new document.
The following events shall be deemed "Events of Default:"
A. Nonpayment. The nonpayment when due of any installment of
----------
interest or principal owing under this Note within 30 days of the date of
written notice of such non-payment.
B. Breach of Agreement. The failure by the Borrower to perform
-------------------
or observe any written representation, warranty or agreement provided to Lender.
C. Representations and Warranties. Any representation,
------------------------------
statement, certificate, schedule or report made or furnished to the Lender by or
on behalf of the Borrower proves to be false or erroneous in any respect at the
time of the making thereof.
D. Insolvency; Bankruptcy. The insolvency (meaning an inability
----------------------
to pay debts as the same become due or the existence of liabilities in excess of
assets) of Borrower, or the institution of
13
<PAGE>
bankruptcy, reorganization, liquidation, receivership or conservatorship
proceeding by or against Borrower.
E. Judgment. Entry by any court of a final uninsured judgment
--------
against Borrower which is not discharged or stayed to the satisfaction of the
Lender.
F. Other Debt. The default in payment or acceleration of the
----------
maturity of any indebtedness of Borrower owing to any person or persons,
including the Lender, which in the aggregate exceeds $100,000.
G. Adverse Change. The occurrence of a material adverse change
--------------
subsequent to the Borrower's June 30, 1996 Balance Sheet in the financial
condition, business, operations, assets, properties, or prospects of Borrower.
H. Ownership and Management. A change in the controlling
------------------------
ownership, the president, or the chief financial officer of Borrower shall occur
which is unsatisfactory to Lender.
I. Corporate Existence. Any act or omission (formal or informal)
-------------------
of Borrower or its officers, directors or shareholders leading to, or resulting
in, the termination, invalidation (partial or total), revocation, suspension,
interruption or unenforceability of its corporate existences, rights, licenses,
franchises or permits, or the transfer or disposition (whether by sale, lease or
otherwise) to any person of all or a substantial part of their property.
Within five (5) business days of the date of written notice (the "Cure
Period") of the occurrence of an Event of Default as defined herein and in the
Loan and Security Agreement of even date between Lender and Borrower (the "Loan
Agreement"), Borrower shall cure any such Event of Default. Lender's obligation
to fund any additional moneys under this Note and/or the Loan Agreement shall be
tolled during the Cure Period. In the event Borrower cures such default, Lender
shall fund any additional moneys still committed to Borrower by no later than
the date equal to (i) the date on which Borrower effected the cure plus (ii) the
number of days the lending obligation was tolled. If such default is not
corrected by the expiration of the Cure Period, Lender shall have no duty to
fund additional amounts due hereunder or under the Loan Agreement and may
exercise any rights it has herein or therein.
Lender and Borrower agree that all disputes, claims and controversies
between them, whether individual, joint, or class in nature, arising from this
Note or otherwise, including without limitation contract and tort disputes,
shall be arbitrated pursuant to the Rules of the American Arbitration
Association, upon request of either party, in the County of Ventura, State of
California. 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.
IN WITNESS WHEREOF, the Borrower has executed this instrument
effective the date first above written.
Borrower: USTELECENTERS, INC.
By /s/ Franklin A. Reece, Inc.
-------------------------------
Its President
14
<PAGE>
Exhibit 10.17
SUBORDINATION AGREEMENT
-----------------------
SUBORDINATION AGREEMENT, dated as of July 29, 1996 among VIEW TECH, INC.,
--
a California corporation (together with its successors and assigns, the
"Subordinated Creditor"), THE FIRST NATIONAL BANK OF BOSTON (the "Bank")
--------------------- ----
BANCBOSTON LEASING, THE INC.(the "Lessor" and together with the Bank,
collectively, the"Lenders") and USTELECENTERS, INC., a corporation organized
under the laws of Massachusetts(together with its successors and assigns, the
"Borrower").
--------
The parties hereto agree as follows;
SECTION 1.
(a) As used herein the following terms shall have the following meanings:
"Collateral" shall have the meaning assigned to it in the Loan
----------
Agreement.
"Default" shall have the meaning assigned to it in the Loan Agreement.
-------
"Event of Default" shall have the meaning assigned to it in the Loan
----------------
Agreement.
"Forbearance Agreement" shall mean the Forbearance Agreement dated as
---------------------
of June 14, 1995, as amended through a Fourth Amendment thereto, between
the Borrower and the Bank, as the same may be further amended, amended and
restated, modified, refinanced, extended or supplemented from time to time.
"Loan Agreement" shall mean the Revolving Credit, Term Loan and
--------------
Security Agreement dated as of October 19, 1992, as amended through a
Seventh Amendment thereto, between the Borrower and the Bank, as the same
may be further amended, amended and restated, modified, refinanced,
extended or supplemented from time to time.
"Senior Credit Agreements" shall mean, collectively, the Loan
------------------------
Agreement, the Forbearance Agreement and the equipment leases, rent
schedules and agreements, as in effect from time to time, between the
Lessor and the Borrower.
"Senior Notes" shall mean, collectively, that Third Amended and
------------
Restated Secured Revolving Credit Note dated as of June 3, 1996 and that
First Amended and Restated Term Promissory Note dated as of June 3, 1996,
and any other promissory note or notes of the Borrower outstanding from
time to time under any Senior Credit Agreement.
"Senior Obligations" shall mean (a) the principal amount of, and
------------------
accrued interest on (including, without limitation, any interest which
accrues after the commencement of
<PAGE>
and liabilities of the Borrower to any Lender now existing or hereafter
incurred or created under any Senior Credit Agreement, and (c) all other
indebtedness, obligations and liabilities of the Borrower to any Lender now
existing or hereafter incurred or created.
"Subordinated Note" shall mean the promissory note of the Borrower to
-----------------
the Subordinated Creditor originally dated as of July____, 1996, as the
same may be amended, modified or supplemented from time to time.
"Subordinated Obligations" shall mean (a) the principal amount of,
------------------------
and accrued interest on (including, without limitation, any interest which
accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Borrower)
the Subordinated Note, and (b) all other indebtedness, obligations and
liabilities of the Borrower to the Subordinated Creditor now existing or
hereafter incurred or created under the Subordinated Note.
"Subordinated Security Agreement" shall mean the Security Agreement
dated as of July______, 1996 between the Borrower and the Subordinated
Creditor.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of the Agreement, and section, subsection,
schedule and exhibits reference are to this Agreement unless otherwise
specified.
SECTION 2.
(a) The Subordinated Creditor agrees, for itself and each future holder of
the Subordinated Obligations, that the Subordinated Obligations are, and
hereafter will be, expressly subordinate and junior in right of payment (as
defined in Section 2(b)) to all Senior Obligations.
(b) "Subordinated and junior in right of payment" shall mean that:
(i) No part of the Subordinated Obligations shall have any claim to
the assets of the Borrower on a parity with or prior to the claim of the
Senior Obligations. Unless and until the Senior Obligations shall have been
paid in full (A) the Subordinated Creditor will not, take, demand or
receive, and the Borrower will not make, give or permit, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment or (except pursuant to the Subordinated Security Agreement)
security for the whole or any part of the Subordinated Obligations, and (B)
the Subordinated Creditor will not, for any reason or under any
circumstances, (a) accelerate the time for payment of any of the
Subordinated Obligations, (b) commence or join in the commencement of any
bankruptcy or insolvency proceeding against the Borrower or (c) commence or
take any legal or other similar proceedings (whether at law, in equity, by
arbitration or otherwise) against the Borrower to enforce any of the rights
or remedies of the Subordinated Creditor against
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<PAGE>
the Borrower, provided, that the Borrower may make, and the Subordinated
--------
Creditor may receive, scheduled payments on account of accured interest on
the Subordinated Note in accordance with the terms thereof (A) during the
Forbearance Period (as defined in the Forbearance Agreement), so long as
(i) no Default or Event of Default, other than the Existing Defaults (as
defined in the Forbearance Agreement), shall have occurred and be
continuing or would occur as a result of, or after giving effect to, such
payment, and (ii) no default under or breach of the Forbearance Agreement
by the Borrower shall have occurred and be continued or would occur as a
result of, or after giving effect to, such payment; and (B) after
expiration of the Forbearance Period (as defined in the Forbearance
Agreement), so long as (i) no Default or Event of Default shall have
occurred and be continuing or would occur as a result of, or after giving
effect to, such payment and (ii) no default under or breach of the
Forbearance Agreement by the Borrower shall have occurred and be continuing
or would as a result of, or after giving effect to, such payment.
(ii) In the event of any distribution, division or application,
partial or complete, voluntary of involuntary, by operation of law or
otherwise, of all or any substantial part of the property, assets or
business of the Borrower or the proceeds thereof, to any creditor or
creditors of the Borrower, or of any insolvency, bankruptcy, liquidation,
reorganization or similar proceedings, or its assets, or any proceedings
for the voluntary liquidation, dissolution or other winding-up of the
Borrower, whether or not involving insolvency or bankruptcy proceedings, or
that all amounts owing under any Senior Note have become, or have been
declared to be, due and payable (and have not been paid in accordance with
their terms), then and in any such event, and payment or distribution of
any kind or character, whether in cash, property or securities which, but
for the subordination provisions contained herein, would otherwise be
payable or deliverable to the Subordinated Creditor upon or in respect of
the Subordinated Obligations, shall instead to be paid over or delivered to
the Lenders and shall promptly be applied (subject to applicable law) as a
prepayment on account of the Senior Obligations, and the Subordinated
Creditor shall not receive any such payment or distribution or any benefit
therefrom unless and until the Senior Obligations shall have been paid in
full.
(c) For purposes of this Agreement, the phrase "paid in full" shall mean
the indefeasible payment in full of the Senior Obligations in cash or cash
equivalents.
(d) Until all the Senior Obligations are paid in full, the Borrower will
not make and the Subordinated Creditor will not receive any prepayment of
principle in respect of the Subordinated Obligations.
SECTION 3.
(a) The Subordinated Creditor irrevocably authorizes and empowers the
Lenders the circumstances set forth in Section 2(b)(ii), to demand, sue for, and
collect and receive every such payment or distribution referred to in such
Section and give acquittance therefor, and file
-3-
<PAGE>
claims and proofs and claim, and to the claims of the Subordinated Creditor, in
any statutory or non-statutory proceedings and take such other proceedings, in
the name of the Lenders or in the name of the Subordinated Creditor or
otherwise, as the Lenders may deem necessary or advisable for the enforcement of
the provisions of this Agreement. The Subordinated Creditor hereby agrees, under
the circumstances set forth in Section 2(b)(ii), duly and promptly to take such
action as may be requested at any time and from time to time by any lender to
file appropriate proofs of claim in respect of the Subordinated Obligations, and
to execute and deliver such powers of attorney, assignments or proofs of claim
or other instruments as may be requested by any Lender in order to enable such
Lender to enforce any and all claims upon or in respect of Subordinated
Obligations and to collect and receive any and all payments or distributions
which may be payable or deliverable at any time upon or in respect of the
Subordinated Obligations.
(b) Should any payment or distribution or security, or the proceeds of any
thereof, be collected or received by the Subordinated Creditor in respect of the
Subordinated Obligations, and such collection or receipt is not expressly
permitted hereunder, the Subordinated Creditor will forthwith turn over the same
to the Lensers in the form received (except for the endorsement or the
assignment of the Subordinated Creditor when necessary) and, until so turned
over, the same shall be held in trust by the Subordinated Creditor as the
property of the Lenders.
(c) Subject to the payment in full of the Senior Obligations, the
Subordinated Creditor shall be subrogated to the rights of the Lenders to
receive payments or distributions of assets of the Borrower made on the Senior
Obligations until the Senior Obligations shall be paid in full; and, for the
purposes of such subrogation, payment or distributions to the Lenders of any
cash, property or securities to which the Subordinated Creditor would be
entitled except for the provisions of this Agreement shall, as between the
Borrower and its creditors other than the Lenders and the Subordinated Creditor,
be deemed to be a payment by the Borrower to or on account of Subordinated
Obligations, it being understood that the provisions of this Agreement are, and
intended solely, for the purpose of defining the relative rights of the
Subordinated Creditor, on the one hand, and the Bank, on the other hand.
SECTION 4.
The Subordinated Creditor represents and warrants to the Lenders that:
(a) The Subordinated Note has been issued to it for the good and valuable
consideration, is owned by the Subordinated Creditor free and clear of any
security interest, liens, charges or encumbrances whatsoever arising from,
through or under the Subordinated Creditor other than the interest of the
Lenders under this Agreement, is payable solely and exclusively to the
Subordinated Creditor and to no other person, firm, corporation or other entity,
without deduction for any defense, offset or counterclaim, and constitutes the
only evidence of the obligations evidenced thereby;
(b) The Subordinated Creditor has full power, authority and legal right to
execute, deliver and perform this Agreement, and the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Subordinated
-4-
<PAGE>
Creditor, does not require and stockholder
approval or approval or consent of any trustee or holders of any indebtedness or
obligations of the Subordinated Creditor and will not violate any provisions of
law, governmental regulation, order or decree of any provision of the
certificate of incorporation, the by-law, or any preferred stock of the
Subordinated Creditor or any provision of any indenture, mortgage, contract or
other Agreement to which the Subordinated Creditor is a party or by which it is
bound;
(c) No consent, license, approval or authorization of, or registration or
declaration with any governmental instrumentality, domestic or foreign, is
required in connection with the execution, delivery and performance by the
Subordinated Creditor of this Agreement; and
(d) This Agreement constitutes a legal, valid and binding obligation of
the Subordinated Creditor enforceable in accordance with its terms.
SECTION 5.
The Subordinated Creditor consents that, without the necessity of any
reservation of rights against the Subordinated Creditor, and without notice to
or further assent by the Subordinated Creditor, any demand for payment of any
Senior Obligation made by the Lenders may be rescinded in whole or in part by
the Lenders and any Senior Obligation may be continued, and the Senior
Obligations, or the liability of the Borrower or any other party upon or for any
part thereof, or any collateral security or guaranty therefor, or right of
offset with respect thereto, or any obligation or liability of the Borrower or
any other party under any Senior Credit Agreement, may, from time to time, in
whole or in part, be renewed, extended, modified, accelerated, compromised,
waived, surrendered or released by the Lenders and any Senior Credit Agreement
and any Senior Note and any document or instrument evidencing or governing the
terms of any Senior Obligations or any collateral security documents or
guaranties or documents in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Lenders may deem
advisable from time to time, and any collateral security at any time held by the
Lenders for the payment of any of the Senior Obligations may be sold, exchanged,
waived, surrendered or released, in each case all without notice to or further
assent by the Subordinated Creditor, which will remain bound under this
Agreement, and all without impairing, abridging, releasing or affecting the
subordination provided for herein, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. The Subordinated Creditor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Senior Obligations and notice of or proof of reliance by the Lenders upon this
Agreement, and the Senior Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred in reliance upon this
Agreement, and all dealings between the Borrower and the Lenders shall be deemed
to have been consummated in reliance upon this Agreement. The Subordinated
Creditor acknowledges and agrees that the Lenders has relied upon the
subordination provided for herein in entering into the Senior Credit Agreements
and in making funds available to the Borrower thereunder. The Subordinated
Creditor waives notice of or proof of reliance on this Agreement and protest,
demand for payment and notice of default.
-5-
<PAGE>
SECTION 6.
The Subordinated Creditor will not (i) sell, assign or otherwise transfer,
in whole or in part, the Subordinated Note or any interest therein to any other
person or entity (a "Transferee") or (ii) create, incur or suffer to exist any
security interest, lien, charge or other encumbrance whatsoever upon the
Subordinated Note in favor of any Transferee unless, in either case, such
Transferee expressly acknowledges to the Lenders in writing the subordination
provided for herein and agrees to be bound by all of the terms hereof.
SECTION 7.
The Subordinated Creditor hereby confirms that, regardless of the relative
times of attachment or perfection thereof or the order of filing of financing
statement, mortgages ar other Security Documents, or anything in this Agreement
or the Subordinated Security Agreement to the contrary, the security interests
and liens granted or to be granted from time to time pursuant to the Senior
Creditor Agreements, or any of them, shall in all respects be first and senior
security interests and liens, superior to any security interests and liens
granted to be granted to the Subordinated Creditor in assets of, or
ownership interests in, the Borrower pursuant to the Subordinated Security
Agreement or otherwise, it being the express intention of the parties that,
notwithstanding anything in this Agreement or the Subordinated Security
Agreement to the contrary, all liens and security interests granted to any
lender from time to time shall be prior and superior to any liens or security
interests granted to the Subordinated Creditor. In foreclosing on its security
interests and liens in the Collateral, so long as the relevant Lender proceeds
in a commercially reasonable manner, such lender may proceed to foreclose on
such Lender's security interests and liens in any manner which such lender, in
its sole discretion, chooses even though a higher price might have been realized
if such Lender had proceeded to foreclose on such Lender's security interests or
liens in another manner. Without limiting any of the rights (including any of
the foreclosure rights) of any Lender under any of the Senior Credit Agreements
or under the provisions of any applicable law, each Lender shall have the right
, exercisable at any time, and the Subordinated Creditor does hereby agree upon
request by such lender to release or discharge any and all security interests
in, and liens upon, all or any part of the Collateral under any of the Senior
Credit Agreements or under any of the agreements securing the Subordinated
Obligations, provided that such lender believes in good faith that any released
or discharged Collateral is being sold or transferred either (a) in the ordinary
course of business, or (b) following the occurrence and during the continuance
of a Default or Event of Default under one or more of the Senior Credit
Agreements or the indebtedness secured thereby, or a default under or breach of
the Forbearance Agreement, for the consideration believed by such Lender to be
reasonably equivalent to the fair value of such property, provided that the
proceeds of any such sale under the clause (b) shall be applied to prepay Senior
Obligations. Without limiting the foregoing and without implying that any lender
is obligated to undertake any special investigation with respect to its good
faith belief as to the fair value of any property, the parties hereby to be
bound as to the fair value of any property as determined by any independent
appraisal of such property that may be conducted at the request of any Lender.
The cost of any such appraisal shall be borne by the Borrower and shall
constitute Senior obligations. The Subordinated Creditor and each remedies under
the Subordinated Security Agreement are subject and Subordinated to the rights
and remedies of the senior lender in accordance with the provisions hereof
and, without limiting the foregoing, further agrees that Subordinated Creditor
and each subsequent holder shall not take any action that is inconsistent with
the provisions hereof. The Subordinated Creditor and each subsequent holder of
the Subordinated Obligations shall provide the Lenders with a copy of any notice
given by the Subordinated Creditor and each subsequent holder of the
Subordinated Note to the Borrower in connection with the Subordinated
Obligations or under the documents relating to the Subordinated Obligations. The
Subordinated Creditor further agrees that it shall not take a lien against any
collateral other than pursuant to the Subordinated Security Agreement.
SECTION 8.
(a) No failure to exercise, and no delay in exercising on the part of the
Lenders (or any agent therefor), from time to time, any right, power or
privilege under this Agreement or any of the Senior Obligations shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
of privilege under this Agreement preclude any other or future exercise thereof
or the exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement and in any agreement relating to any of the Senior
Obligations and all other agreements, instruments and documents referred to in
any of the foregoing are cumulative and shall not be exclusive of any rights or
remedies provided by law.
(b) The Subordinated Creditor agrees to execute and deliver such further
documents and to do such other acts and things as the Lenders may reasonably
request in order fully to effect the purposes of this Agreement.
(c) Any notice, request, demand, statement or consent desired or required
to be given hereunder shall be in writing and shall be delivered by hand, sent
by certified mail, return receipt requested, sent by a nationally recognized
commercial overnight delivery service with provisions for a receipt, postage or
delivery charges prepaid, or sent by facsimile transmission, and shall be deemed
given when actually delivered, if delivered by hand, upon receipt, if sent by
certified mail, the next Business Day after being placed in the possession of an
overnight delivery service, if sent by an overnight delivery service or if sent
by facsimile transmission, when electronic indication of receipt is received,
addressed as set forth below the addressee's signature on the signature pages of
this Agreement or to such other address as may hereafter be notified by the
respective parties hereto.
(d) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AGREEMENT SHALL BE GOVERNED BY, THE CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
(e) The subordination provisions contained herein are for the benefit of
the Lenders and its successor and assigns as holders from time to time of the
Senior Obligations and may not de rescinded or canceled or modified in any way;
nor, unless otherwise expressly provided for
-6-
<PAGE>
herein, may any provision of this
Agreement be waived or changed without the express prior written consent of the
Lenders.
(f) The Subordinated Creditor will cause the Subordinated Note to bear
upon its face a statement or legend to the effect that such Note is subordinate
and junior in right of payment to the Senior Obligations in the manner and to
the extent herein set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
VIEW TECH, INC.
By /s/ Robert G. Hatfield
------------------------
Name: ROBERT G. HATFIELD
Title: CEO
Address:
950 Flynn Road
Camarillo, CA 93012
Attention:______________
-7-
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Barbara S. Raymond
----------------------------
Name: BARBARA S. RAYMOND
Title: VICE PRESIDENT
Address:
100 Federal Street
Boston, MA 02110
Attention:
BANCBOSTON LEASING, INC.
By /s/ Robert M. Thomas
----------------------------
Name: ROBERT M. THOMAS
Title: VICE PRESIDENT
Address:
100 Federal Street
Boston, MA 02110
Attention:
USTELECENTERS, INC.
By /s/ Franklin A. Reece III
----------------------------
Name: FRANKLIN A. REECE III
Title: PRESIDENT & CHAIRMAN
Address:
745 Atlantic Ave.
Boston, MA 0211
-8-
<PAGE>
EXHIBIT 10.20
June 27, 1996
Mr. Robert E. Yaw II
Windermere Holdings, Incorporated
The Oaks
227 St. James Park
Osprey, Florida 34229
Re: Consulting Agreement
--------------------
Dear Mr. Yaw:
This letter confirms View Tech, Inc.'s (the "Company") agreement (this
"Consulting Agreement") to retain Windermere Holdings, Incorporated and its
employees (collectively "WHI") to position management and the Company so as to
increase the Company's visibility in its industry and position it for growth in
the future. WHI will also assist the Company in connection with the acquisition
of other entities whose business complements and/or supplements the business of
the Company. Attached hereto is a summary of the major activities that WHI will
perform in connection with this Consulting Agreement. This summary is
incorporated into the terms of this Consulting Agreement between WHI and the
Company. Below are additional agreements between the parties with respect to
this Consulting Agreement.
1. Term. Commencing July 1, 1996, the Company hereby appoints WHI to
----
perform the duties and render the services described in the attached Summary of
Services on a month to month basis subject to termination upon 30 days written
notice from either party.
2. Non-Exclusive Services. WHI will devote part of the time and efforts
----------------------
of its employees to the Company during the term of this Consulting Agreement.
3. Board Approval. This Consulting Agreement has not been approved by
--------------
the Company's board of directors and is only binding upon the Company if and
when such approval is obtained.
4. Compensation. In consideration of WHI's services, the Company shall
------------
pay WHI a cash retainer of $5,000 per month due on the first day of each month
through September 30, 1996, for a total of $15,000, plus reimbursement of
reasonable out-of-pocket expenses. Such reasonable out-of-pocket expenses
incurred in the performance of its services hereunder shall be documented by WHI
in a writing submitted to the Company at least 30 days prior to the date payment
is to be made hereunder.
<PAGE>
Robert E. Yaw II
June 27, 1996
Page 2
5. Non-Competition. WHI from time to time may represent entities in
---------------
competition with the Company, and the Company acknowledges that such
representation is not a breach of this Consulting Agreement. Nevertheless, WHI
(i) shall not divulge trade secrets or confidential information of any sort with
respect to the Company; and (ii) shall advise the Company of any such business
relationship.
6. Stock Options. In consideration of the services to be provided
-------------
hereunder, WHI will receive options to purchase a total of 110,000 shares of the
Company's common stock. 55,000 options shall have an exercise price equal to
$7.00, which was the closing price of the common stock on the Nasdaq National
Market, and shall be issued to Robert E. Yaw II. The remaining 55,000 options
shall be issued to Rolf N. Hufnagel on or about August 18, 1996 and shall have
an exercise price equal to the closing price of the common stock on the date of
issuance. The Company will issue Mr. Hufnagel a separate option agreement that
sets forth the terms of his options. The options shall be vested at such time as
this agreement is ratified by the Company's board of directors. Furthermore, WHI
shall receive additional options equal to 5% of the Transaction Value of any
acquisition that WHI assists with. For purposes of this Agreement, "Transaction
Value" means the total of all consideration received, including but not limited
to, (i) all cash and non-cash remuneration paid or payable; (ii) the aggregate
fair market value of any securities issued or issuable; and (iii) the aggregate
fair market value of any debts or contingent obligations assumed or satisfied in
connection with the relevant transaction. The exercise price of any such
additional options shall be equal to the closing market price of the Company's
common stock on the day that any agreement between the Company and any such
other entity becomes binding on both entities, i.e., the closing date of such
merger or acquisition.
7. Registration Rights. At the time the Company prepares and files
-------------------
with the SEC a registration statement on a Form S-3 under the Securities Act of
1933, as amended (the "Registration Statement"), the Company will include in any
such Registration Statement information relating to the offering, issuance, and
resale of the common stock underlying the 110,000 stock options to be issued
under Paragraph 6 hereof. View Tech 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. View Tech, at its sole discretion, will include
information relating to the offering, issuance, and resale of the common stock
underlying any additional options that WHI will receive in connection with its
assistance with acquisitions at such time as View Tech amends its Registration
Statement on Form S-3 or in any other registration statement that View Tech may
file.
8. Non-Assignability. This Consulting Agreement shall inure to the
-----------------
benefit of and shall be binding upon the successors and the assigns of the
Company. Since this Consulting Agreement is based upon the unique abilities and
personal confidence in WHI and its employees, WHI shall have no right to assign
this Consulting Agreement or any of the rights hereunder written without the
written consent of the Company.
<PAGE>
Robert E. Yaw II
June 27, 1996
Page 3
9. Notices. Any notice required or permitted to be given hereunder shall
-------
be sufficient if in writing and if sent by certified mail or facsimile to the
parties at their present principal business addresses. Any change of address
must be sent to the other party via such procedure to be valid against such
other party.
10. Severability. If any provision of this Consulting Agreement shall be
------------
found invalid by any court of competent jurisdiction, such findings shall not
effect the validity of the other provisions hereof and the invalid provisions
shall be deemed to have been severed herefrom.
11. Entire Agreement. This Consulting Agreement constitutes the entire
----------------
agreement between the parties pertaining to its subject matter, and it
supersedes all prior contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or amendment of
this Consulting Agreement shall be binding unless executed in writing by all
parties.
12. Attorneys' Fees. If any action is brought to enforce the terms of
---------------
this Consulting Agreement, the prevailing party shall be entitled to its costs
and reasonable attorneys' fees.
13. Arbitration. Any dispute concerning this Consulting Agreement shall
-----------
be settled by binding Arbitration in accordance with the Rules of the American
Arbitration Association in the County of Ventura, State of California.
If the terms hereof meet with your approval, please indicate by signing below.
Sincerely,
By: /s/ Robert G. Hatfield
------------------------------------
Robert G. Hatfield
Chief Executive Officer
Agreed and accepted as of the date first above stated:
Windermere Holdings, Incorporated
By: /s/ Robert E. Yaw II
------------------------------------
Robert E. Yaw II, its Chairman
<PAGE>
SUMMARY OF SERVICES
RESEARCH REPORT
- ---------------
WHI will assist the Company in locating a securities firm capable of providing
analyst coverage of the Company, its products, and the industries in which it
competes.
BOARD OF DIRECTORS AND ADVISORY BOARD
- -------------------------------------
WHI will continue to assist the Company in maintaining a quality board of
directors and introducing the Company to other people that can provide their
respective expertise as board members or advisors to the board of directors.
FINANCING OPTIONS/ACQUISITION CANDIDATES
- ----------------------------------------
WHI will assist the Company in reviewing different financing options/acquisition
candidates that will enable the Company to continue to grow and take advantage
of marketing opportunities.
PUBLIC RELATIONS
- ----------------
WHI will assist the Company with any and all appropriate press releases,
designed not only for the trade community but also the investment community. The
public relations will: serve to create a higher degree of visibility for the
Company within its trade; be used for marketing purposes among present and
future clients; and develop a level of awareness among potential investors.
<PAGE>
EXHIBIT 10.21
STOCK OPTION AGREEMENT
DATE: August 22, 1996
PARTIES: View Tech, Inc.
a California corporation (Corporation)
Rolf N. Hufnagel (Consultant)
RECITALS:
A. WHEREAS, the Consultant is employed by the Windermere Holdings, Inc.
("WHI"), a company retained by the Corporation to provide certain consulting
services.
B. WHEREAS, WHI has been an integral part of the growth and profitability
of the Corporation.
C. WHEREAS, the Corporation desires to grant the Consultant an option to
purchase 55,000 shares of the common stock of the Corporation in order to induce
the Consultant to remain, in his capacity as an employee of WHI, a consultant to
the Corporation and to continue to contribute to the growth and profitability of
the Corporation.
AGREEMENTS:
SECTION 1. OPTION
The Corporation hereby grants to the Consultant the option to purchase
55,000 shares of the authorized but unissued common stock, $0.01 par value, of
the Corporation upon the terms and conditions set forth in this agreement.
SECTION 2. PURCHASE PRICE
The purchase price for shares of stock purchased pursuant to this option
shall be $7.25 per share, which was the closing price of the Corporation's
common stock on the date hereof as reported by the Nasdaq National Market.
SECTION 3. EXERCISE OF OPTION
This option may be exercised by the Consultant at any time, or from time to
time, as to any part or all of the shares of stock covered by this option, on or
before the expiration of three (3) years from the date of this agreement. The
option shall be exercised by the Consultant giving notice of such exercise to
the Corporation. The notice shall state the number of shares to be purchased.
<PAGE>
SECTION 4. PAYMENT OF PURCHASE PRICE AND ISSUANCE OF STOCK
4.1 Purchase Price. The purchase price for all shares purchased under this
option shall be paid in cash, or a certified bank check or money order, for the
full option price. Upon receipt of such funds, the shares purchased shall be
issued by the Corporation as fully paid and nonassessable shares in accordance
with the provisions of section 4.2 of this Agreement.
4.2 Issuance of Stock. Following receipt of notice of exercise and payment
of the full purchase price, the Corporation shall instruct its transfer agent,
U.S. Stock Transfer Corporation, or such other transfer agent as may be employed
by the Corporation at the time of exercise, to issue to the Consultant the
number of shares requested to be purchased by the Consultant.
SECTION 5. REGISTRATION RIGHTS
5.1 Registration Rights. At the request of the Consultant, the Corporation
hereby agrees to register under the Securities Act of 1933, as amended (the
"Act"), the shares underlying options referred to in section 1 of this Agreement
in any registration statement relating to the Corporation's securities (other
than a registration statement relating solely to securities held or to be held
by the Corporation's employees, directors or consultants, or a registration of
securities to be issued in exchange for securities or assets of, or in
connection with a merger or consolidation with another corporation). The
Corporation agrees to give the Consultant reasonable notice regarding the filing
of any such registration statement, and the Consultant agrees to notify the
Corporation of the number of Consultant's shares to be included in any such
registration statement within a reasonable time after receipt of such notice.
5.2 Terms of Registration Rights. The Corporation shall be obligated to
register shares underlying the options referred to in section 1 of this
Agreement pursuant to section 5.1 of this Agreement commencing on the date of
issuance of the option relating to such shares and until the expiration of two
years following the date the option relating to such shares is exercised.
However, all such registration rights terminate with respect to unexercised
options upon the expiration of such options pursuant to section 6 of this
Agreement or the cancellation of such options in accordance with section 9 of
this Agreement.
5.3 Allocation of Expenses. The Corporation hereby agrees to pay all costs
and expenses relating to any registration pursuant to section 5.1 of this
Agreement, except transfer taxes, if any, fees and expenses of the Consultant's
counsel, and the Consultant's pro rata portion of any underwriting
non-accountable expense allowance and selling commissions.
5.4 Rights to Exclude the Consultant's Shares. Notwithstanding the
provisions of sections 5.1, 5.2, and 5.3 of this Agreement, if the
Corporation's managing underwriter, in connection with any registration
statement that would otherwise give rise to registration rights, advises the
Corporation that (a) the number of the Consultant's shares requested to be
included in such registration statement exceeds the number of shares that can be
sold in an orderly manner in such offering or (b) the inclusion of the
Consultant's shares would adversely affect the offering, then the Corporation
shall be required to include only that number of the Consultant's shares that
would not exceed such number or have such adverse effect. The number of
Consultant's shares to be included in any such registration statement shall be
that number that such
2
<PAGE>
managing underwriter determines in its sole discretion will not jeopardize the
success of the respective offering.
5.5 Indemnification. The Corporation hereby agrees to indemnify and hold
harmless the Consultant from any losses, claims, damages or liabilities to which
he may become subject based upon or arising from any registration of the
Consultant's common stock pursuant to this Agreement; provided, however, that
the Corporation shall not indemnify the Consultant for losses, claims, damages
or liabilities resulting from a statement or omission made in reliance upon and
in conformity with information furnished to the Corporation by the Consultant
for use in connection with the preparation of the registration statement. The
Consultant hereby agrees to indemnify and hold harmless the Corporation and its
officers, directors, and employees for and from any losses, claims, damages or
liabilities to which they may become subject based upon or arising from any
registration of the Consultant's common stock pursuant to this Agreement, if
such losses, claims, damages or liabilities result from a statement or omission
made in reliance upon and in conformity with information furnished to the
Corporation by the Consultant for use in connection with the preparation of the
registration statement.
SECTION 6. TERMINATION
This option shall terminate, and all rights of Consultant under this option
shall lapse, three years from the date hereof.
SECTION 7. SHAREHOLDER RIGHTS
The Consultant shall not have any rights as a shareholder of the
Corporation with respect to the shares covered by this option except to the
extent that the shares have been issued to the Consultant following the
Consultant's exercise of the option.
SECTION 8. ADJUSTMENTS
The number of shares subject to this option shall be proportionately
adjusted for any change in the stock structure of the Corporation because of any
stock dividends, recapitalizations, reorganizations, mergers, or other
restructuring.
SECTION 9. PROHIBITION AGAINST TRANSFER
This option is personal to the Consultant, and the Consultant shall have
no right to transfer his rights in the option in any manner other than by will
or by the laws of descent and distribution. The Consultant is the only person
that can exercise this option during his lifetime. Except as permitted by the
first sentence of this section 9, the options granted hereby and the rights and
privileges thereby conferred may not be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise) nor shall
any such option, right, or privilege be subject to execution, attachment, or
similar process. Upon any attempt so to transfer, assign, pledge, hypothecate,
or otherwise dispose of the options
3
<PAGE>
granted hereby or of any right or privilege conferred thereby contrary to the
provisions hereof, or upon the levy or any attachment or similar process upon
such option, right, or privilege, the option and such rights and privileges
shall immediately become null and void. The terms of this Agreement shall be
binding upon the executors, administrators, heirs, and successors of the
Consultant.
SECTION 10. EMPLOYMENT OF CONSULTANT
This Agreement is not an employment agreement and shall not be construed
as such. Nothing in this Agreement shall be construed to constitute or to be
evidence of any agreement or understanding, express or implied, on the part of
the Corporation to employ or retain the Consultant as a consultant for any
specific period of time, or on the part of the Consultant to remain as a
consultant of the Corporation for any specific period of time. However, it is
the desire of both parties that the Corporation's association with WHI continues
beyond the date hereof.
SECTION 11. MISCELLANEOUS PROVISIONS
11.1 Notice. Any notice or other communication required or permitted to be
given under this agreement shall be in writing and shall be mailed by certified
mail, return receipt requested, postage prepaid, addressed to the parties at the
following addresses:
Consultant: Rolf N. Hufnagel
4200 E. Skelly Drive, Suite 590
Tulsa, OK 74135
Telephone (918) 491-6333
Fax (918) 491-6433
Corporation: Robert G. Hatfield
View Tech, Inc.
950 Flynn Road
Camarillo, CA 93012
Telephone (805) 482-8277
Fax (805) 482-3825
All notices and other communications shall be deemed to be given at the
expiration of three days after the date of mailing. The address of a party to
which notices or other communications shall be mailed may be changed from time
to time by giving written notice to the other party.
11.2 Litigation Expense. In the event of a default under this agreement,
the defaulting party shall reimburse the nondefaulting party or parties for all
costs and expenses reasonably incurred by the nondefaulting party or parties in
connection with the default, including without limitation attorney's fees.
Additionally, in the event a suit or action is filed to enforce this agreement
or with respect to this agreement, the prevailing party or parties shall be
reimbursed by the other party for all costs and expenses incurred in connection
with the suit or action, including without limitation reasonable attorney's fees
at the trial level and on appeal.
4
<PAGE>
11.3 Waiver. No waiver of any provision of this agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
11.4 Applicable Law. This agreement shall be governed by and shall be
construed in accordance with the laws of the State of California.
11.5 Entire Agreement. This agreement constitutes the entire agreement
between the parties pertaining to its subject matter, and it supersedes all
prior contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by all parties.
View Tech, Inc.
By: /s/ Robert G. Hatfield
--------------------------------
Its: Chief Executive Officer
-------------------------------
/s/ Rolf N. Hufnagel
------------------------------------
Rolf N. Hufnagel
5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS'
We hereby consent to the use in the Annual Report on Form 10-KSB of our report
dated September 24, 1996, relating to the financial statements of View Tech,
Inc., which appear in such Annual Report.
CARPENTER KUHEN & SPRAYBERRY
Oxnard, California
September 27, 1996
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that and each of the undersigned
officers and directors of View Tech, Inc., a California corporation (the
"Company"), individually and in their respective capacities indicated below,
hereby makes, constitutes and appoints Robert G. Hatfield and William M. McKay,
or each of them, his true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities, to execute on behalf of the
Company, by signing their respective names as acting for the Company, this
annual report on Form 10-KSB, including all exhibits thereto and any and all
amendments thereto, and to file the same with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full powers and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this annual report on Form 10-KSB has been signed by the following
persons in the capacities and on the date indicated.
Dated as of the 20th day of September, 1996.
VIEW TECH, INC.
Attest: /s/ William M. McKay By: /s/ Robert G. Hatfield
--------------------- -----------------------
Secretary Robert G. Hatfield, Chairman and Chief
Executive Officer (Principal Executive
Officer)
/s/ Robert G. Hatfield
- ------------------------------
Robert G. Hatfield
Chairman, Chief Executive Officer,
and Director
/s/ William M. McKay
- ------------------------------
William M. McKay
Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ John W. Hammon
- ------------------------------
John W. (Bill) Hammon
President, Chief Operating Officer,
and Director
/s/ Calvin A. Carrera
- ------------------------------
Calvin A. Carrera
Director
/s/ Robert F. Leduc
- ------------------------------
Robert F. Leduc
Director
<PAGE>
EXHIBIT 24.2
SECRETARY'S CERTIFICATE
-----------------------
I, William M. McKay, Corporate Secretary for View Tech, Inc. (the
"Company"), hereby certify that, as of the date set forth below, attached hereto
as Exhibit "A" is a true and correct copy of the resolutions of the Company's
Board of Directors adopted as of September 20, 1996, regarding authorization to
file the Company's Annual Report on Form 10-KSB with the Securities and Exchange
Commission and the power of attorney related thereto, and such resolutions have
not been altered or amended and remain in full force and effect as of the date
hereof.
September 27, 1996
/s/ William M. McKay
-------------------------
William M. McKay
Secretary
<PAGE>
Exhibit A
---------
RESOLUTIONS OF THE BOARD OF DIRECTORS OF VIEW TECH, INC.
adopted as of September 20, 1996
1. RESOLVED, that the Company be, and hereby is, authorized to file its Annual
Report on Form 10-KSB, including all exhibits thereto and any and all
amendments thereto (the "Form 10-KSB"), with the Securities and Exchange
Commission (the "SEC") in connection with its reporting requirements under
the Securities Exchange Act of 1934, as amended.
2. RESOLVED FURTHER, that any officer or director of the Company executing, on
behalf of the Company or in any other capacity, the Form 10-KSB and any and
all exhibits and amendments thereto and other documents to be filed with the
SEC in connection therewith be, and hereby is, authorized to execute the
same through or by his duly authorized attorneys-in-fact pursuant to an
appropriate power of attorney signed by such officer or director appointing
each of Robert G. Hatfield and William M. McKay so to act or each of them to
so act alone; and that any officer or director of the Company executing on
behalf of the Company or otherwise any document or exhibit or amendment
thereto to be filed with the SEC is hereby authorized to execute the same
and to do and perform each and every act and thing whatsoever as necessary
or advisable to otherwise carry out the full intents and purposes as he
might or could do in person, through Robert G. Hatfield and William M.
McKay, or each of them acting alone as attorney-in-fact, pursuant to a power
of attorney reflecting such authorization.
3. RESOLVED FURTHER, that the Board of Directors hereby ratifies, adopts and
approves all agreements, instruments and other corporate actions previously
taken by the Company in connection with the filing of the Form 10-KSB with
the SEC.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,463,199
<SECURITIES> 0
<RECEIVABLES> 4,744,018
<ALLOWANCES> 23,756
<INVENTORY> 1,104,577
<CURRENT-ASSETS> 7,997,709
<PP&E> 1,013,067
<DEPRECIATION> 172,656
<TOTAL-ASSETS> 8,849,121
<CURRENT-LIABILITIES> 3,755,933
<BONDS> 0
0
0
<COMMON> 28,902
<OTHER-SE> 4,822,003
<TOTAL-LIABILITY-AND-EQUITY> 8,849,121
<SALES> 13,346,103
<TOTAL-REVENUES> 13,346,103
<CGS> 8,094,728
<TOTAL-COSTS> 14,241,057
<OTHER-EXPENSES> (153,222)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,048,176)
<INCOME-TAX> 352,116
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (696,060)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
