<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
VIEW TECH, INC.
(Exact Name of Small Business Issuer in Its Charter)
DELAWARE 6676 77-0312442
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Classification Identification No.)
Code Number)
_______________
950 FLYNN ROAD
CAMARILLO, CALIFORNIA 93012
(805) 482-8277
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
ROBERT G. HATFIELD
VIEW TECH, INC.
950 FLYNN ROAD
CAMARILLO, CA 93012
(805) 482-8277
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
________________
Copies of all communications, including all communications sent to the agent for
service, should also be sent to:
<TABLE>
<S> <C> <C>
V. JOSEPH STUBBS, ESQ. HOWARD J. KERN, ESQ. JOSEPH P. GALDA, ESQ.
LAURIE A. ALLEN, ESQ. Richman, Lawrence, Mann, Greene, Buchanan Ingersoll
Brobeck, Phleger & Harrison LLP Chizever, Friedman & Phillips, A Professional Corporation
550 S. Hope Street A Professional Corporation (Counsel to certain selling securityholders)
Los Angeles, CA 90071-2604 9601 Wilshire Blvd., Penthouse 1200 Two Logan Square
(213) 489-4060 Beverly Hills, CA 90210 18th and Arch Streets
(310) 274-8300 Philadelphia, PA 19103-6933
(215) 665-3879
</TABLE>
________________
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER
THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
If this form is filed to register securities for an offering pursuant to
Rule 462(b) under the Securities Act of 1933, as amended (the "Securities Act"),
please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [_]
________________
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING PROPOSED MAXIMUM REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SECURITY AGGREGATE OFFERING PRICE FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 575,000(1) $5.00 $2,875,000(3) $ 872.00
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock 1,287,688(2) $5.38 $6,927,762(4) $2,100.00
- ----------------------------------------------------------------------------------------------------------------------------
Totals 1,862,688 $9,802,762 $2,972.00
============================================================================================================================
</TABLE>
(1) Represents 575,000 shares of common stock, par value $0.0001 per share
("Common Stock") of View Tech, Inc. ("View Tech" or the "Company"),
underlying purchase warrants originally sold by the Company in connection
with the Company's initial public offering in June 1995 (the "Public
Warrants").
(2) Consists of 726,688 being offered for the account of the selling
stockholders named herein (the "Selling Stockholders"), including 295,000
shares of Common Stock underlying purchase warrants (the "Private
Warrants") and 266,000 shares of Common Stock underlying purchase options
(the "Options"). (The Private Warrants and the Public Warrants are
sometimes collectively referred to herein as the "Warrants.")
(3) Pursuant to Rule 457(o) under the Securities Act, the registration fee is
based on the maximum aggregate offering price of the Public Warrants.
(4) Pursuant to Rule 457(c) under the Securities Act, the maximum aggregate
offering price of the Common Stock is based upon the closing sales price of
the Common Stock as reported on The NASDAQ National Market on January 7,
1997.
_________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
VIEW TECH, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
<TABLE>
<CAPTION>
ITEM NO. FORM SB-2 REGISTRATION STATEMENT HEADING LOCATION IN PROSPECTUS
- -------- ----------------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
1 Front of Registration Statement and Outside Front Cover Front Cover Page; Cross Reference Sheet; Outside
Page of Prospectus......................................... Front Cover Page of Prospectus
2 Inside Front and Outside Back Cover Pages of Prospectus.... Inside Front Cover Page of Prospectus; Additional
Information; Outside Back Cover Page of Prospectus
3 Summary Information and Risk Factors....................... Prospectus Summary; Risk Factors
4 Use of Proceeds............................................ Prospectus Summary; Use of Proceeds
5 Determination of Offering Price............................ Outside Front Cover Page of Prospectus
6 Dilution................................................... *
7 Selling Security Holders................................... Outside Front Cover Page of Prospectus; Prospectus
Summary; Shares of the Selling Stockholders Being
Registered
8 Plan of Distribution....................................... Plan of Distribution
9 Legal Proceedings.......................................... *
10 Directors, Executive Officers, Promoters and Control Management
Persons....................................................
11 Security Ownership of Certain Beneficial Owners and Principal Stockholders
Management.................................................
12 Description of Securities.................................. Outside Front Cover Page of Prospectus; Prospectus
Summary; Capitalization
13 Interest of Named Experts and Counsel...................... *
14 Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities
15 Organization Within Last Five Years........................ Business
16 Description of Business.................................... Business
17 Management's Discussion and Analysis or Plan of Management's Discussion and Analysis or Plan of
Operations................................................. Operations
18 Description of Property.................................... Business
19 Certain Relationships and Related Transactions............. Certain Relationships and Related Transactions
20 Market for Common Equity and Related Stockholder
Matters.................................................... Market Data
21 Executive Compensation..................................... Executive Compensation
22 Financial Statements....................................... Supplemental Consolidated Financial Statements of
View Tech, Inc. for the years ended June 30, 1995
and 1996
23 Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure........................ *
* Not applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES+
+EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 10, 1997
1,862,688 Shares
PROSPECTUS
- ----------
VIEW TECH, INC.
COMMON STOCK
This prospectus (this "Prospectus") relates to: (i) an aggregate of 575,000
shares of common stock, $0.0001 par value ("Common Stock"), of View Tech, Inc.
("View Tech" or the "Company") which are being offered for sale by the Company
pursuant to outstanding warrants at an exercise price of $5.00 per share (the
"Public Warrants"); and (ii) 1,287,688 shares of Common Stock acquired by the
selling stockholders named herein (the "Selling Stockholders") in private
transactions which are being offered for the account of the Selling
Stockholders, which include (A) an aggregate of 266,000 shares of Common Stock
which are being offered for sale by the Company pursuant to outstanding options
at exercise prices ranging from $5.00 to $7.38 per share (the "Options") and (B)
an aggregate of 295,000 shares of Common Stock which are being offered by the
Company pursuant to Common Stock purchase warrants at exercise prices ranging
from $6.25 to $7.15 per share (the "Private Warrants") (collectively with the
Public Warrants, the "Warrants") (collectively, this "Offering"). See "Shares of
Selling Stockholders Being Registered." The Company will receive proceeds from
the exercise of the outstanding Warrants and Options from time to time if and
when they are exercised. However, the Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders.
Of the 1,136,000 shares of Common Stock covered by this Prospectus and
issuable upon exercise of the Warrants and the Options, 575,000 of such shares
were previously registered by the Company and were covered by a Prospectus dated
June 15, 1995 and the registration statement to which it related. Such
registration statement and prospectus have been superseded in their entirety by
this Prospectus and the new Registration Statement to which it relates.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Title of Each Class of Security Being Amount of Price to Public Proceeds to Issuer or Other
Registered Securities Per Share Persons(3)(4)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock (1) 575,000 $5.00 $2,875,000
- -----------------------------------------------------------------------------------------------------------
Common Stock (2) 1,287,688 $5.38 $6,927,762(5)
- -----------------------------------------------------------------------------------------------------------
Total 1,693,688 $9,802,762 /(6)/
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consists of 575,000 shares of Common Stock underlying the Public Warrants
with exercise prices of $5.00 per share.
(2) Consists of 1,287,688 shares of Common Stock being offered for the account
of the Selling Stockholders, which include 295,000 shares of Common Stock
underlying the Private Warrants at exercise prices ranging from $6.25 to
$7.15 per share and 266,000 shares of Common Stock underlying the Options
at exercise prices ranging from $5.00 to $7.38 per share.
(3) The Company does not have any agreement to pay underwriting commissions
with respect to the exercise of any of the Warrants or the Options.
(4) All expenses of this Offering are being borne by the Company. The Company
estimates that it will incur approximately $150,000 in registration, legal,
accounting, printing and listing fees in connection with this Offering.
(5) Represents the anticipated sale by the Selling Stockholders at $5.38 per
share, the last reported sales price reported on The NASDAQ National Market
on January 7, 1997, and does not give effect to ordinary brokerage
commissions or other costs of sale that will be borne solely by the Selling
Stockholders. There can be no assurances, however, that the Selling
Stockholders will be able to sell their shares at this price, or that a
liquid market will exist for the Company's Common Stock. The Company will
receive no proceeds upon the sale of shares of Common Stock by the Selling
Stockholders except for approximately $6,823,500 which will be paid by the
Selling Stockholders to the Company upon the exercise of the Private
Warrants and the Options. There can be no assurance that the Private
Warrants and the Options will be exercised. See "Use of Proceeds."
(6) The net proceeds from this Offering to be received by the Company from the
issuance of 1,136,000 shares of Common Stock issuable upon exercise of the
Warrants and the Options is estimated to be $6,673,500. There can be no
assurances that any of the Warrants and/or the Options will be exercised,
and accordingly, the Company may not receive any proceeds from this
Offering. See "Use of Proceeds."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................................. 2
Prospectus Summary.................................................................... 4
Summary Consolidated Financial Data................................................... 6
Risk Factors.......................................................................... 7
Use of Proceeds....................................................................... 11
Market Data........................................................................... 11
Capitalization........................................................................ 13
Shares of the Selling Stockholders Being Registered................................... 14
Plan of Distribution.................................................................. 16
Disclosure of Commission Position on Indemnification for Securities Act Liabilities... 16
Management's Discussion and Analysis or Plan of Operations............................ 17
Business.............................................................................. 23
Management............................................................................ 30
Recent Developments................................................................... 35
Security Ownership of Certain Beneficial Owners....................................... 37
Description of Capital Stock.......................................................... 37
Dividend Policy....................................................................... 39
Legal Matters......................................................................... 39
Experts............................................................................... 39
</TABLE>
______________
AVAILABLE INFORMATION
View Tech is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information filed by View Tech can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices at Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511, and at 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, the Commission maintains a web site at
http:/www.sec.gov containing reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission,
including the Company. View Tech's Common Stock is listed on The NASDAQ
National Market and reports, proxy and information statements and other
information concerning View Tech can also be inspected at the offices of The
NASDAQ, 1735 K Street, N.W., Washington D.C. 20006-1500.
The Company has filed with the Commission a Registration Statement
(together with all amendments and exhibits, the "Registration Statement") on
Form SB-2 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock offered pursuant to this Prospectus. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any agreement or other document referred to herein are not
necessarily complete and reference is made to the copy of such agreement or to
the Registration Statement and to the exhibits and schedules filed therewith.
Copies of the material containing this information may be obtained from the
Commission upon payment of the prescribed fee.
No person is authorized to give any information or make any representation
not contained in this Prospectus, and, if given or made, such information or
representation should not be relied upon as having been authorized. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to purchase, the securities offered by this Prospectus, in any jurisdiction, to
or from any person to whom it is unlawful to make such offer or solicitation of
an offer in such jurisdiction. Neither the delivery of this Prospectus nor any
distribution of securities made hereunder shall, under any circumstances, create
an implication that there has been no change in the affairs of View Tech since
the date of this Prospectus.
2
<PAGE>
Certain statements contained in this Prospectus that are not related to
historical results, including, without limitation, statements regarding View
Tech's business strategy and objectives, future financial position and estimated
cost savings, are forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act and involve risks and
uncertainties. Although View Tech believes that the assumptions on which these
forward-looking statements are based are reasonable, there can be no assurance
that such assumptions will prove to be accurate and actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed under "Risk Factors," "Management's Discussion and Analysis or
Plan of Operations" and "Business," as well as those discussed elsewhere in this
Prospectus. All forward-looking statements contained in this Prospectus are
qualified in their entirety by this cautionary statement.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes appearing elsewhere in this
Prospectus and in the documents incorporated in this Prospectus by reference and
the exhibits hereto. See "Risk Factors" for certain information that should be
considered by prospective investors.
The Company
View Tech, which commenced operations in July 1992, markets and installs
video communications systems and provides continuing services related to
installed systems. Video communications systems, utilizing advanced technology,
enable users at separate locations to engage in face-to-face discussions with
the relative affordability and convenience of using a telephone. In addition to
the use of video conferences as a corporate communications tool, use of video
communications systems is expanding into numerous additional applications,
including (i) teachers providing lectures to students at multiple locations,
(ii) judges conducting criminal arraignment proceedings while the accused
remains incarcerated, (iii) physicians engaging in consultations utilizing x-
rays and other pictographic material, (iv) coordination of emergency services by
public utilities, (v) conducting multi-location staff training programs and (vi)
engineers at separate design facilities coordinating the joint development of
products.
On November 29, 1996, View Tech completed the acquisition of USTeleCenters,
Inc., a Massachusetts corporation ("USTeleCenters"), by means of a merger of
USTeleCenters with and into View Tech Acquisition, Inc., a Delaware corporation
and a wholly-owned subsidiary of View Tech ("VTAI")(the "Merger"). The Merger
was effected pursuant to a Merger Agreement by and among the Company, VTAI and
USTeleCenters, dated as of September 5, 1996, as amended on October 31, 1996
(the "Merger Agreement"). In exchange for all of the outstanding shares of
USTeleCenters common stock, $0.01 par value, the USTeleCenters shareholders
received 2,240,976 shares of Common Stock (excluding options exercisable into
184,003 shares of Common Stock).
Following the Merger, VTAI changed its name to "USTeleCenters, Inc."
("UST") and continued to operate the former businesses of USTeleCenters.
Concurrent with the Merger, which was approved at View Tech's annual meeting of
stockholders on November 26, 1996, View Tech reincorporated in Delaware from
California, changed the par value of the Common Stock and its preferred stock to
$0.0001 from $0.01, amended its bylaws to provide for a staggered board of
directors, and increased the authorized number of shares of Common Stock to
20,000,000 shares from the original 10,000,000 shares.
UST designs, sells, manages and supports telecommunications systems
solutions for small and medium-sized businesses throughout the United States.
UST develops and manages sales and customer service programs on an outsourced
basis for (i) certain Regional Bell Operating Companies ("RBOCs"), (ii) other
telecommunications service providers and (iii) equipment manufacturers under
agency and value-added reseller ("VAR") agreements. In New England and New York,
UST also provides systems integration and on-going account management consulting
for middle market customers. On behalf of its RBOC clients, UST sells high speed
data services, Internet access, Centrex network services, local and long
distance services, voice mail and other "enhanced" services, discount calling
plans and toll-free services such as remote-call-forwarding. As a value-added
equipment reseller, UST sells, installs and maintains data transmission
products, video conferencing equipment and telephone systems.
View Tech is headquartered in Camarillo, California. Its executive offices
are located at 950 Flynn Road, Camarillo, California 93012. Its telephone
number at that address is 805/482-8277. View Tech's e-mail address is
[email protected].
4
<PAGE>
The Offering
<TABLE>
<S> <C>
Common Stock offered by the Company............ 575,000 shares/1/
Common Stock offered by Selling Stockholders... 1,287,688 shares/2/
Common Stock outstanding after this Offering... 6,827,462 shares/3/
Use of Proceeds................................ The Company currently anticipates that it
will use the net proceeds, if any, from the
Common Stock offered by the Company to
fund working capital requirements in
connection with anticipated growth of the
Company.
Plan of Distribution........................... The shares of Common Stock offered by
the Selling Stockholders may be initially
offered for sale from time to time by the
holders in regular brokerage transactions,
either directly or through brokers or to
dealers, in private sales or negotiated
transactions, or otherwise, at prices related
to then prevailing market prices. The
Company will not receive any proceeds
from the sale of shares of Common Stock
by the Selling Stockholders. All expenses
of the registration of such securities are,
however, being borne by the Company.
The Selling Stockholders, and not the
Company, will pay or assume such
brokerage commissions as may be incurred
in the sale of their securities. See "Shares of the
Selling Stockholders Being Registered."
NASDAQ National Market Symbol.................. VUTK/4/
</TABLE>
/1/ Consists of 575,000 shares of Common Stock underlying the Public Warrants.
/2/ Consists of 1,287,688 shares of Common Stock being offered for the account
of the Selling Stockholders which includes 295,000 shares of Common Stock
underlying the Private Warrants and 266,000 shares of Common Stock
underlying the Options.
/3/ Excludes 1,068,605 shares of Common Stock underlying Options issued by the
Company to certain of its directors, officers, employees and consultants.
/4/ The NASDAQ National Market trading symbol for the Public Warrants is
"VUTKW."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents summarized supplemental consolidated
historical statements of operations and balance sheet data of the Company. The
statements of operations data presented below as of June 30, 1996 and 1995, are
derived from View Tech's audited financial statements for the years ended June
30, 1996 and 1995 and from UST's audited financial statements for the twelve
months ended June 30 1996 and 1995. The balance sheet data presented below for
the quarter ended September 30, 1996 and 1995 are derived from View Tech's and
UST's unaudited historical financial statements. The summarized financial data
should be read in conjunction with the supplemental financial statements and
related notes thereto for the Company included elsewhere herein and in
"Management's Discussion and Analysis or Plan of Operations."
<TABLE>
<CAPTION>
Years Ended Three Months Ended
June 30, September 30,
--------------------------- ----------------------------
Statements of Operations Data: 1996 1995 1996 1995
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Product sales and service revenues.......... $19,680,386 $10,801,669 $ 6,001,979 $2,693,287
Agency commissions.......................... 11,313,350 17,696,300 4,016,505 3,723,403
----------- ----------- ----------- ----------
30,993,736 28,497,969 10,018,484 6,416,690
----------- ----------- ----------- ----------
COSTS AND EXPENSES:
Costs of goods sold......................... 14,269,108 7,618,770 4,817,141 2,281,389
Selling and marketing expenses.............. 9,653,345 15,565,601 2,780,434 2,307,376
General and administrative expenses......... 6,247,785 4,990,572 1,952,191 1,549,898
----------- ----------- ----------- ----------
30,170,238 28,174,943 9,549,766 6,138,663
----------- ----------- ----------- ----------
INCOME FROM OPERATIONS........................ 823,498 323,026 468,718 278,027
OTHER EXPENSE................................. (659,258) (592,853) (67,381) (63,091)
LOSS ON SUBLEASE, Including shutdown of offices -- (1,312,900) -- --
----------- ----------- ----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES............. 164,240 (1,582,727) 401,337 214,936
PROVISION FOR INCOME TAXES.................... 259,816 (294,083) (13,964) 59,707
----------- ----------- ----------- ----------
NET INCOME (LOSS) $ 424,056 $(1,876,810) $ 387,373 $ 274,643
=========== =========== =========== ==========
EARNINGS (LOSS) PER SHARE $ .07 $ (.50) $ .07 $ .05
=========== =========== =========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 5,676,304 3,765,467 6,288,305 5,571,055
=========== =========== =========== ==========
<CAPTION>
September 30, 1996
----------------------------------
Actual As Adjusted/1/
------ ---------------
<S> <C> <C>
Balance Sheet Data:
Total assets................................... $18,760,772 $24,234,272
Working capital................................ 3,796,981 9,270,481
Long-term liabilities.......................... 820,016 820,016
Stockholders' equity........................... 7,521,972 12,995,472
</TABLE>
- --------------
/1/ Adjusted to reflect the sale of the 1,136,000 shares of Common Stock
offered hereby by the Company underlying the Warrants and the Options at
exercise prices ranging from $5.00 to $7.38 per share and after deducting
estimated offering expenses of $150,000 and application of the estimated
net proceeds therefrom. The as-adjusted amounts also reflect the issuance
of Common Stock in connection with the Merger with UST in November 1996 and
the write-off of estimated after-tax merger expenses of $1.2 million and
the closing of the Company's private placement of 300,281 shares of Common
Stock, resulting in net proceeds of $1.4 million.
6
<PAGE>
RISK FACTORS
The factors discussed below and elsewhere in this Prospectus could
adversely affect the value of the Common Stock. In addition, the factors
discussed below and elsewhere in this Prospectus may constitute forward-looking
statements and, as such, may involve known or unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Any
forward-looking statements contained in this Prospectus should not be relied
upon as predictions of future events. Such forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "could," "seeks" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy. Such statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and they may be
incapable of being realized. The following factors may constitute or include
cautionary, forward-looking statements identifying important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results covered in such forward-looking statements. Other factors could
also cause actual results to vary materially from the future results covered in
such forward-looking statements. Actual results in the future could differ
materially from those described in the forward-looking statements or as a result
of the factors set forth below (which list does not purport to be exhaustive)
and the matters set forth in this Prospectus generally. See "Management's
Discussion and Analysis or Plan of Operations" and "Business" for a description
of certain other factors generally affecting the Company's business.
RISK RELATING TO THE COMPANY'S POTENTIAL INABILITY TO REFINANCE UST'S LINES OF
CREDIT
As of December 31, 1996, the Company owed UST's primary lender an aggregate
of $2,451,817 under two credit facilities, which are payable in full on March
31, 1997. UST is subject to a forbearance agreement which enables the lender to
foreclose on the debt if UST's financial condition falls below certain minimum
standards. The forbearance agreement, as amended, was originally entered into
on June 14, 1995. Based on UST's relationship with the lender, the Company's
management anticipates that the lender will refinance the lines of credit or
extend the date on which the lines of credit must be paid. However, if the
lender does not refinance such lines of credit and the Company has not raised
additional equity and/or arranged for alternative bank financing, the Company
will not have sufficient cash to repay the lender when the debt comes due.
There can be no assurance that View Tech will be able to renegotiate the lines
of credit with the lender, and if the lender requires payment in March 1997,
there can be no assurance that View Tech will be able to raise the additional
funds necessary to meet the Company's operating needs and capital requirements
or that such funds, if available, can be obtained on terms acceptable to the
Company. The failure to refinance the lines of credit, raise additional capital
or obtain additional bank financing will have a material adverse effect on the
Company's business, financial condition and results of operations. To the
extent that the Company raises additional capital by issuing equity securities,
ownership dilution to current stockholders of the Company will result. See
"Management's Discussion and Analysis or Plan of Operations."
FUTURE FINANCING REQUIREMENTS
The Company will require additional capital in order to operate its
business efficiently and to implement its internal expansion and acquisition
strategy. The Company plans to raise additional capital to meet such needs in
either the form of a private placement of its securities and/or traditional bank
financing, or a combination of both. There can be no assurance that the Company
will be able to raise additional funds necessary to meet such needs or that such
funds, if available, can be obtained on terms acceptable to the Company. The
failure to raise additional capital on terms acceptable to the Company could
force the Company to alter its business strategy, including but not limited to,
its acquisition strategy, in the future. See "Management's Discussion and
Analysis or Plan of Operations."
UNASCERTAINABLE RISKS DUE TO RAPID EXPANSION AND FUTURE ACQUISITIONS
Management anticipates that the Company will continue to grow not only
through internal expansion and the opening of additional offices in new
territories, but also through acquisitions of other entities. Since July 1992,
View Tech, by virtue of its expansion activity, has grown from two employees in
one location to 290 employees in 16 locations at December 31, 1996. In the past
18 months, View Tech has acquired three businesses, including USTeleCenters. By
virtue of rapid internal growth and external growth through acquisitions, the
Company will be subject to the uncertainties and risks associated with any
expanding business. In light of the potential significance of these changes and
the absence of a history of combined operations of View Tech with another
entity, it is possible that the Company will encounter difficulties, such as,
integration of operations, inefficiencies due to duplicative functions,
management and administrative differences and overlapping, competing or
incompatible areas of business and operations, that cannot presently be
ascertained. There can be no assurance that the Company will achieve the
anticipated benefits of its recent acquisitions. Such acquisitions could place
significant demands on the Company's financial resources and management and
cause
7
<PAGE>
disruption of the Company's operations due to the additional demands placed on
the Company's management in order to integrate such operations. See
"Management's Discussion and Analysis or Plan of Operations."
LIMITED HISTORY OF PROFITABLE OPERATIONS;
SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS; FUTURE RESULTS OF OPERATIONS
UNCERTAIN
View Tech and USTeleCenters have operated since 1992 and 1987,
respectively. On a combined basis, the Company incurred a net loss for the
fiscal year ended June 30, 1995, and has operated as a combined entity since
November 29, 1996. Although View Tech achieved profitability during fiscal 1996
and reported net income of $424,056 for fiscal 1996, it reported a net loss for
fiscal 1995 of $1,876,810. In the future, View Tech may continue to experience
significant fluctuations in operating results as a result of a number of
factors, including delays in product enhancements and new product introductions
by its suppliers, market acceptance of new products and services and reduction
in demand for existing products and services as a result of introductions of new
products and services by its competitors or by competitors of its suppliers. In
addition, View Tech's operating results may vary significantly depending on the
mix of products and services comprising its revenues in any period. There can
be no assurance that View Tech will achieve revenue growth or will be profitable
on a quarterly or annual basis in the future. See "Management's Discussion and
Analysis or Plan of Operations" and "Business."
DEPENDENCE ON SUPPLIERS, INCLUDING PICTURETEL AND NYNEX
For the fiscal year ended June 30, 1996, approximately 38% and 21% of the
Company's consolidated revenues were attributable to the sale of equipment
manufactured by PictureTel Corporation ("PictureTel") and to the sale of network
products and services provided by NYNEX, respectively. Termination of or change
of the Company's business relationships with PictureTel or NYNEX, disruption in
supply, failure of PictureTel or NYNEX to remain competitive in product quality,
function or price or a determination by PictureTel or NYNEX to reduce reliance
on independent providers such as the Company could have a material adverse
effect on the Company's business, financial condition and results of operation.
The Company is a party to agreements with PictureTel and NYNEX that authorize
the Company to serve as a non-exclusive dealer and sales agent, respectively, in
certain geographic territories. The PictureTel and NYNEX agreements expire on
August 2000, and December 31, 1998 respectively. The PictureTel and NYNEX
agreements can be terminated without cause upon 60 days and 12 months written
notice by the suppliers, respectively. There can be no assurance that these
agreements will not be terminated, or that they will be renewed on terms
acceptable to the Company. These suppliers have no affiliation with the Company
and are competitors of the Company. See "Management's Discussion and Analysis
or Plan of Operations" and "Business."
CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS
Upon the effectiveness of this Offering, View Tech's officers and directors
will beneficially own approximately 32.9% (assuming all options held by
executive officers and directors are exercised) of the outstanding Common Stock
of the Company. If the executive officers and directors act collectively,
assuming they continue to own all their shares, there is a substantial
likelihood that such holders will be able to elect all of the directors of View
Tech and to determine the outcome of all corporate actions requiring the
approval of the holders of the majority of shares, such as mergers and
acquisitions. See "Security Ownership of Certain Beneficial Owners and
Management."
COMPETITION
The video communications industry is highly competitive. The Company
competes with manufacturers of video and other communications equipment,
including PictureTel, its principal supplier, and their networks of dealers and
distributors. It also competes with telecommunications carriers, such as AT&T,
MCI Communications Corporation, SPRINT and other large corporations entering the
video communications market including Apple Computers, Inc., IBM, Intel
Corporation, NEC, Microsoft, Inc., Mitsubishi Ltd., Sony Corporation,
Matsushita/Panasonic, Hitachi and British Telecom. View Tech also competes with
large accounting and consulting firms that provide communications services, as
well as other independent distributors and communications service providers.
Many of these organizations have substantially greater name recognition and
financial, technical, manufacturing, marketing, distribution and other resources
than View Tech and, therefore, represent significant competition. In addition,
View Tech management believes that as the demand for video communications
systems and other communications products and services continues to increase,
additional competitors, many of which also will have greater resources than View
Tech, will enter the markets which View Tech currently serves. There can be no
assurance that the current and future competitors of View Tech will not succeed
in developing technologies and products that are more widely accepted in the
marketplace or that will render View Tech's technology and products obsolete or
noncompetitive. In addition, certain of such current and future competitors of
View Tech may be able to undertake more extensive marketing campaigns or adopt
more aggressive pricing policies than View Tech. There can be no assurance that
View Tech will have the resources required to respond effectively to market or
technological changes or to compete successfully
8
<PAGE>
with current or future competitors or that competitive pressures will not have a
material adverse effect View Tech's business, financial condition and results of
operations. See "Management's Discussion and Analysis or Plan of Operations."
The telecommunications industry is also highly competitive. The Company
competes with many other companies in the telecommunications business which have
substantially greater financial and other resources than the Company, selling
both the same and similar services. The Company's competitors in the sale of
network services include RBOCs such as NYNEX, Bell Atlantic, Southwestern Bell
and GTE, long distance carriers such as AT&T, MCI and SPRINT, other long
distance companies, by-pass companies and other agents. There can be no
assurance that the Company will be able to compete successfully against such
companies. See "Management's Discussion and Analysis or Plan of Operations" and
"Business."
RAPIDLY CHANGING TECHNOLOGY AND OBSOLESCENCE
The market for communications products and services is characterized by
rapidly changing technology, evolving industry standards and the frequent
introduction of new products and services. View Tech's 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 and services obsolete, unmarketable
or noncompetitive. The Company's ability to implement its growth strategies and
remain competitive will depend upon its ability successfully to (i) maintain and
develop relationships with manufacturers of new and enhanced products that
include new technology, (ii) achieve levels of quality, functionality and price
acceptability to the market, (iii) maintain a high level of expertise relating
to new products and the latest in communications systems technology, (iv)
continue to market quality telecommunications services on behalf of its RBOC and
other exchange service carriers and (v) continue to design, sell, manage and
support competitive telecommunications solutions for its customers. There can
be no assurance, however, that the Company will be able to implement its growth
strategies or remain competitive. See "Business."
GOVERNMENT REGULATION; UNCERTAINTY RELATING TO THE TELECOMMUNICATIONS ACT OF
1996
The federal government and certain states in which the Company operates
regulate various aspects of its business. On February 8, 1996, the
Telecommunications Act of 1996 (the "Telecommunications Act") was enacted into
law. This comprehensive federal legislation will affect many sectors of the
telecommunications industry. Included in the new statute are provisions
relating, subject to certain limitations, to the opening up of local telephone
markets to competition and the elimination of restrictions on certain local
carriers' entry into the long distance telecommunications market. It is unknown
as of the date of this Prospectus what impact the Telecommunications Act will
have on the Company's telecommunications business; however, it is likely that
the Company will face significant additional competition from entities with
greater financial and managerial resources. Furthermore, in October 1996, the
United States Court of Appeals for the Eighth Circuit granted a stay of
implementation of the Telecommunications Act in response to lawsuits filed by
local telephone companies and state officials claiming that the new federal
rules are arbitrary and usurp states' rights. There can be no assurance that
the delay in implementation of the Telecommunications Act will not have a
material adverse effect on the ability of the Company to compete in the local
telephone markets. See "--Competition."
DEPENDENCE UPON KEY PERSONNEL
The Company depends to a considerable degree on the continued services of
certain of its executive officers, including Mr. Hatfield, its chairman and
chief executive officer, Mr. Hammon, its president and chief operating officer,
and Mr. Reece, UST's chief executive officer, as well as on a number of highly
trained technical personnel. The loss of any of Messrs. Hatfield, Hammon or
Reece could have a material adverse effect on the Company. In addition, the
loss of other key management or technical personnel or the failure to attract
and retain such personnel could have a material adverse effect on the Company's
business, operations or financial condition. See "Executive Compensation--
Employment Contracts."
LIMITED PUBLIC MARKET AND VOLATILITY OF THE COMMON STOCK
There has been only a limited public market for, and limited public trading
in, the Common Stock, which is traded on The NASDAQ National Market. Continued
qualification to trade on The NASDAQ National Market is subject to certain
minimum stock price levels and financial requirements. There can be no
assurance that View Tech will continue to satisfy these requirements. In
addition, from time to time, there has been, and there again may be, significant
volatility in the public market for the Common Stock. There can be no assurance
that a stable or active market for the Common Stock will exist or be sustained
following this Offering. Although certain broker-dealers presently make a
market in the Common Stock, none is obligated to do so, and there can be no
assurance that there will continue to be broker-dealers willing to make a market
in the Common Stock. In the event that the market makers and specialists cease
to function as such, public trading of the Common Stock will be adversely
affected or may cease entirely. See "Market Data."
9
<PAGE>
SUBSTANTIAL NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE IN MARKET; REGISTRATION
RIGHTS
A substantial number of shares of Common Stock and shares of Common Stock
underlying options and warrants are or will become eligible for future sale in
the public market. As of January 2, 1997, there were approximately 1,931,188
outstanding shares of Common Stock that are "restricted shares" as defined in
Rule 144 promulgated under the Securities Act, of which 1,204,500 shares of
Common Stock currently are eligible for public resale pursuant to Rule 144. The
726,688 shares of Common Stock not currently eligible for resale under Rule 144
are being registered in this Offering and will be eligible for resale without
any restrictions upon the effectiveness of the Registration Statement of which
this Prospectus forms a part.
The sale of a substantial number of shares of Common Stock in the public
market pursuant to Rule 144 or otherwise, and the potential for such sales,
could adversely affect the prevailing market price for the Common Stock,
including the shares of Common Stock offered hereunder, and impair View Tech's
ability to raise additional capital through the sale of equity securities. See
"Description of Capital Stock."
POSSIBLE STATE AND FEDERAL RESTRICTIONS ON EXERCISE OF WARRANTS AND OPTIONS
Holders of Warrants and/or Options will be able to sell the underlying
Common Stock issuable upon exercise of the Warrants and/or the Options only if a
current registration statement relating to such Warrants and/or Options or the
underlying Common Stock is then in effect and on file with the Commission and
only if such securities are qualified for sale or exempt from qualification
under the applicable securities laws of the states in which the various holders
of Warrants and/or the Options reside. The agreements relating to the Warrants
and/or the Options contain certain provisions requiring the Company to file for,
and endeavor to secure, such current and effective registration of the shares of
Common Stock issuable upon exercise of the Warrants and/or the Options. Although
the Company has undertaken to use its best efforts to maintain the effectiveness
of this Prospectus covering the securities underlying the Warrants and/or the
Options, there can be no assurances that the Company will be able to do so. The
Company will maintain the effectiveness of this Prospectus if the benefits of
doing so (i.e., encouraging additional exercise of the Warrants and/or the
Options) outweigh the cost of maintaining the Prospectus. Among other things,
the Company's willingness to maintain the effectiveness of the Prospectus will
be dependent on the market price of the Company's Common Stock and whether a
liquid public market is developed. The likelihood of the Warrants and/or the
Options being exercised and the Company obtaining any proceeds therefrom, may be
greatly reduced if a current prospectus covering the securities issuable upon
the exercise of Warrants and/or Options is not kept effective or if such
securities are not qualified or exempt from qualification in the states in which
the holders of the Warrants and/or the Options reside. See "Description of
Securities."
SUBSTANTIAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AVAILABLE FOR FUTURE
ISSUANCE; POSSIBLE DILUTIVE AND ANTI-TAKEOVER EFFECTS
View Tech's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of Common Stock, of which there are approximately 12,000,000
shares of Common Stock authorized but unissued and unreserved. The Board of
Directors of the Company (the "Board of Directors") has the power to issue
substantial amounts of additional shares without stockholder approval. The
Company may issue a substantial number of additional shares in connection with
future financings or acquisitions. To the extent that additional shares of
Common Stock are issued, dilution of the interests of View Tech's stockholders
will occur.
The Company's Certificate of Incorporation authorizes the issuance of
5,000,000 shares of preferred stock, par value $0.0001 per share (the "Preferred
Stock"), with such designations, rights and preferences as may be determined
from time to time by the Board of Directors. The Board of Directors is
empowered, without stockholder approval, to issue the Preferred Stock with
dividend, liquidation, conversion, voting or other rights, which could adversely
affect the voting power or other rights of the holders of Common Stock. In
addition, the issuance of Preferred Stock and Common Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. Although the Company currently has no
commitments to issue any shares of Preferred Stock or Common Stock, other than
as described as "Recent Developments" below, there can be no assurance that View
Tech will not do so in the future.
NO DIVIDENDS ON COMMON STOCK
View Tech has never paid dividends on the Common Stock and anticipates that
for the foreseeable future all earnings, if any, will be retained for ongoing
operations and general corporate purposes. Accordingly, View Tech does not
expect to pay dividends on the Common Stock in the foreseeable future. See
"Dividend Policy."
LIMITATION OF LIABILITY; INDEMNIFICATION
Each of View Tech's Certificate of Incorporation and Bylaws contains
provisions that limit the liability of directors for monetary damages and
provides for indemnification of officers and directors under certain
circumstances. Such provisions may discourage stockholders from bringing a
lawsuit against directors for breaches of fiduciary duty and may also have the
effect of reducing the likelihood of derivative litigation against directors and
officers even though such action, if successful, might otherwise
10
<PAGE>
have benefitted View Tech and its stockholders. In addition, a stockholder's
investment in View Tech may be adversely affected to the extent that costs of
settlement and damage awards against View Tech's officers or directors are paid
by View Tech pursuant to such provisions.
EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of View Tech's Certificate of Incorporation and Bylaws
and of Delaware law may delay, defer or prevent a change in control of View Tech
and may adversely affect the voting and other rights of the holders of Common
Stock. In particular, the existence of the Company's classified Board of
Directors and the ability of the Company's Board of Directors to issue "blank
check" preferred stock without further stockholder approval may have the effect
of delaying, deferring or preventing a change in control of the Company. See
"Description of Capital Stock."
USE OF PROCEEDS
Assuming exercise of all of the Warrants and Options, the net proceeds from
this Offering to be received by the Company from the issuance of 1,136,000
shares of Common Stock covered by this Prospectus and issuable upon exercise of
the Warrants and the Options is estimated to be $6,673,500. The closing sales
price of the Common Stock on The NASDAQ National Market was $5.25 on January 2,
1997. Approximately 48.9% of the Warrants and Options are exercisable for
prices above $5.25. Accordingly, there is no assurance that any of the Warrants
and/or the Options will be exercised and the Company may not receive any
proceeds from this Offering. The Company will not receive any proceeds from the
sale of shares of Common Stock offered by the Selling Stockholders.
The Company currently anticipates that it will use the net proceeds of this
Offering, if any, to fund working capital requirements. In the event sufficient
proceeds are not received, the Company's short term plan is to meet cash needs
through external financing sources such as bank financing and private offerings
of debt and/or equity. The Company also expects that cash flow from operations
will provide additional funds to the Company as operating revenues increase.
The cost, timing and amount of funds required for such uses by the Company
cannot be precisely determined at this time and will be based on, among other
things, competitive developments, the rate of the Company's progress in product
development, and the availability of alternative methods of financing. In
addition, the Board of Directors has broad discretion in determining how the
proceeds of this Offering received by the Company will be applied.
MARKET DATA
The 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 on the Pacific Stock
Exchange under the symbols of "VUTK" and "VWK," respectively, since View Tech's
initial public offering on June 15, 1995. Prior to the Company's initial public
offering, there was no public trading market for View Tech's equity securities.
In addition, the Public Warrants are traded on The NASDAQ National Market, and
prior to November 18, 1995 the Public Warrants traded on The NASDAQ SmallCap
Market and the Pacific Stock Exchange under the symbols "VUTKW" and "VWK WS,"
respectively. The terms of the Public Warrants provide that one Public Warrant
plus $5.00 are required to purchase one additional share of Common Stock. The
Public Warrants are redeemable at View Tech's option commencing June 15, 1996
upon 30 days' notice to the holders thereof at $0.25 per share if the closing
bid 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 Public Warrants expire June 15, 1998.
11
<PAGE>
The following table sets forth the quarterly high ask and low bid prices
for the Common Stock for the quarters indicated.
<TABLE>
<CAPTION>
Sales Prices
------------
High Ask Low Bid
------------ -------
<S> <C> <C>
Fiscal 1995
Fourth Quarter June 30, 1995 (since June 16)... $6.88 $6.50
Fiscal 1996
First Quarter ended September 30, 1995.......... $8.88 $6.50
Second Quarter ended December 31, 1995.......... $8.75 $7.00
Third Quarter ended March 31, 1996.............. $8.00 $6.63
Fourth Quarter ended June 30, 1996.............. $8.25 $6.25
Fiscal 1997
First Quarter ended September 30, 1996......... $8.25 $6.25
Second Quarter ended December 31, 1996......... $8.25 $5.00
</TABLE>
On January 2, 1997, the closing sales price for the Common Stock and for
the Public Warrants on The NASDAQ National Market was $5.25 and $1.50,
respectively. As of January 2, 1997, there were 156 holders of record of Common
Stock and four holders of record of the Public Warrants.
12
<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1996, and the three months
ended September 30, 1996, the consolidated short-term debt, long-term debt and
capitalization of View Tech (i) on a historical basis and (ii) on a pro forma
basis after giving effect to this Offering.
<TABLE>
<CAPTION>
As of
September 30, 1996
---------------------------
View Tech As
Historical Adjusted/1/
----------- ------------
<S> <C> <C>
Short-term debt:
Notes payable and current portion
of long-term debt........................... $ 2,261,362 $ 2,261,362
----------- ------------
Long-term debt (less current portion).............. 820,016 820,016
----------- ------------
Stockholders' equity:
Preferred Stock, par value $0.01 per
share, 5,000,000 shares authorized
but none issued and outstanding............. -- --
Common Stock, par value $0.01 per
share (10,000,000 shares
authorized; 5,112,623 issued and
outstanding (5,334,033 on a
combined pro forma basis at
September 30, 1996)(2)...................... 53,340 901
Common stock subscribed, net.................. 1,390,102 --
Paid-in-capital............................... 8,190,017 16,306,058
Retained deficit.............................. (2,111,487) (3,311,487)
----------- -----------
Total stockholders' equity.................... 7,521,972 12,995,472
----------- -----------
Total capitalization.......................... $10,603,350 $16,076,850
=========== ===========
</TABLE>
- --------------
/1/ Adjusted to reflect the sale of the 1,136,000 shares offered hereby by the
Company at exercise prices ranging from $5.00 to $7.38 per share and after
deducting estimated offering expenses of $150,000 and application of the
estimated net proceeds therefrom. The as-adjusted amounts also reflect the
issuance of Common Stock in connection with the Merger with UST and the
write-off of after-tax expenses of $1.2 million incurred in connection with
the Merger with UST in November 1996 and the closing of the Company's
private placement of 300,281 shares of the Company's common stock,
resulting in net proceeds of approximately $1.4 million. The as-adjusted
amounts for Common Stock and paid-in capital reflect the change in the par
value of Common Stock from $0.01 to $0.0001.
13
<PAGE>
SHARES OF THE SELLING STOCKHOLDERS BEING REGISTERED
The following table sets forth certain information with respect to the
beneficial ownership of View Tech's Common Stock as of January 2, 1997 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by
each of the Selling Stockholders. Except as indicated in the footnotes to the
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER SHARES BENEFICIALLY
OWNED PRIOR TO OF OWNED AFTER
OFFERING SHARES OFFERING
------------------------ BEING --------------------
SELLING STOCKHOLDER NUMBER PERCENT(1) OFFERED NUMBER PERCENT(2)
- ------------------- -------- ------------ ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Nicholson/Kenny Capital Management, Inc........ 255,500(3)(4) 4.5% 255,500(3)(4) 0 *
Robert E. Yaw, II.............................. 210,000(5) 3.6% 210,000(5) 0 *
Rolf N. Hufnagel............................... 187,000(6) 3.2% 180,000(6) 7,000 *
Andrew W. Jamison.............................. 150,000 2.6% 150,000 0 *
Kenny Securities Corporation................... 125,000(3)(8) 2.1% 125,000(3)(8) 0 *
Robert T. Kirk................................. 76,500(7) 1.3% 76,500(7) 0 *
William F. Coffin Corporation
Defined Benefit Plan......................... 30,000 * 30,000 0 *
WVC Holdings L.P............................... 30,000 * 30,000 0 *
Windermere Holdings, Inc....................... 30,000 * 30,000 0 *
Concord Partners, Ltd.......................... 24,550 * 24,550 0 *
Mark McLain.................................... 17,619 * 17,619 0 *
Richard Downs.................................. 17,619 * 17,619 0 *
William Schofield.............................. 17,619 * 17,619 0 *
Glenn Desort................................... 17,125(7) * 17,125(7) 0 *
John Calabria.................................. 17,125(7) * 17,125(7) 0 *
Leasehold Analysis Consulting Group, Inc.
P/S Plan U/A/D 9/30/95, FBO Maria P.
Kossmeyer.................................... 16,461(3) * 16,461(3) 0 *
Wendy Tand Gusrae.............................. 13,600(7) * 13,600(7) 0 *
Maria P. Kossmeyer Rev Trust U/A/D 1/13/94
Maria P. Kossmeyer TTEE...................... 10,205(3) * 10,205(3) 0 *
MMCH Holdings L.P.............................. 9,000 * 9,000 0 *
Michael Morrisett.............................. 8,500(7) * 8,500(7) 0 *
Paul D. Medrano................................ 7,500(7) * 7,500(7) 0 *
Los Robles Bank................................ 6,000(9) * 6,000(9) 0 *
Gregory K. Allsberry........................... 5,000(3) * 5,000(3) 0 *
Mark Kruger.................................... 5,000(3) * 5,000(3) 0 *
Brian M. Herman................................ 4,500(7) * 4,500(7) 0 *
Michael Ferraro................................ 3,750(7) * 3,750(7) 0 *
David A. Carter................................ 3,400(7) * 3,400(7) 0 *
Kenton Grimm................................... 3,000(7) * 3,000(7) 0 *
Daniel O'Halloran.............................. 3,000(7) * 3,000(7) 0 *
Phillip J. Aiello, Jr.......................... 2,250(7) * 2,250(7) 0 *
Richard Gianella Rev Trust U/A/D 1/13/94
Richard Gianella TTEE........................ 2,040(3) * 2,040(3) 0 *
Paul J. Wirtz.................................. 2,000(3) * 2,000(3) 0 *
Eric Shore..................................... 1,500(7) * 1,500(7) 0 *
Daren Dickson.................................. 1,500(7) * 1,500(7) 0 *
David K. Evansen............................... 1,500(7) * 1,500(7) 0 *
Michael E. Petrusha............................ 1,050(7) * 1,050(7) 0 *
John A. Orlando................................ 1,050(7) * 1,050(7) 0 *
Peter D. Andolpho, Jr.......................... 1,050(7) * 1,050(7) 0 *
Scott Phillip Flynn............................ 1,050(7) * 1,050(7) 0 *
Phil James Flynn............................... 1,050(7) * 1,050(7) 0 *
Galen Clark.................................... 1,000(3) * 1,000(3) 0 *
Steven M. Lange Rev Trust U/A/D 10/24/95
Steven M. Lange or His Successor TTEE........ 1,000(3) * 1,000(3) 0 *
Dean Carlton & Darrell Carlton JT WROS......... 451(3) * 451(3) 0 *
Bear Stearns and Company, Inc. FBO Clayton
Kossmeyer IRA................................ 408(3) * 408(3) 0 *
Bear Stearns and Company, Inc. FBO Chase
Kossmeyer IRA(3)............................. 408(3) * 408(3) 0 *
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER SHARES BENEFICIALLY
OWNED PRIOR TO OF OWNED AFTER
OFFERING SHARES OFFERING
---------------------- BEING --------------------
SELLING STOCKHOLDER NUMBER PERCENT(1) OFFERED NUMBER PERCENT(2)
- ------------------- -------- ------------ ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Bear Stearns and Company, Inc. FBO Meryl
Kossmeyer IRA................................ 408(3) * 408(3) 0 *
Carolyn Enright & James Enright, Sr. JT
WROS......................................... 400(3) * 400(3) 0 *
</TABLE>
________________________________
* Less than one percent.
(1) Based on 5,691,462 shares outstanding, but excluding all options other than
options held by the stockholder and exercisable within 60 days of the date
of this Prospectus.
(2) Based on 6,827,462 shares outstanding, including 1,136,000 new shares being
offered hereunder.
(3) Acquired in a private placement (the "Private Placement") on October 31,
1996, in which 300,281 shares of Common Stock were issued to 76 investors,
including the Selling Stockholder. The securities were issued in reliance on
the exemption provided in Section 4(2) of the Securities Act, and Rule 506
of Regulation D promulgated thereunder, because no public offering was
involved and the securities were issued to no more than 35 non-accredited
investors. Kenny Securities Corporation, a registered broker/dealer,
assisted in the Private Placement and in connection therewith received a
commission equal to 8% of the gross proceeds ($120,000) and 15,000 Common
Stock purchase warrants, each exercisable until 2001 for one share of Common
Stock at an exercise price of $6.25 per common stock purchase warrant. Each
purchaser in the Private Placement acquired less than 1.0% of the Company's
total shares of stock outstanding.
(4) Nicholson/Kenny Capital Management, Inc. ("N/K") is a registered investment
adviser which purchased the shares offered hereby on behalf of certain
private accounts. N/K is an affiliate of Kenny Securities Corporation.
Does not include 125,000 shares of Common Stock which may be issued to Kenny
Securities Corporation pursuant to certain of the Private Warrants.
(5) Includes 30,000 shares of Common Stock held by Windermere Holdings,
Incorporated, of which Robert E. Yaw II is the chairman, and 130,000 shares
of Common Stock underlying options granted to Mr. Yaw exercisable at prices
ranging from $7.00 to $7.38.
(6) Includes 130,000 shares of Common Stock underlying options granted to Mr.
Hufnagel exercisable at prices ranging from $7.25 to $7.38.
(7) Barron Chase Securities Corp. ("Barron Chase") is a registered broker dealer
and acted as the managing underwriter in the Company's initial public
offering in June 1995. The shares of Common Stock being registered in this
Offering underlie the underwriter's warrants transferred by Barron Chase to
the Selling Stockholder. The underwriter's warrants have an exercise price
of $6.75 per share and expire in June 2001.
(8) Consists of 125,000 shares of Common Stock underlying Private Warrants
exercisable at prices ranging from $6.25 to $7.15 per share.
(9) Consists of 6,000 shares of Common Stock underlying Private Warrants
exercisable at $5.00 per share.
15
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders may from time to time sell all or a portion of the
Common Stock offered by the Selling Stockholders hereby in transactions at
prevailing market prices on The NASDAQ National Market, in private negotiated
transactions at negotiated prices, or in a combination of such methods of sale.
The Selling Stockholders may sell the Common Stock offered hereby to purchasers
directly or may from time to time offer such Common Stock through dealers or
agents who may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the securities
for whom they may act as agent. The Selling Stockholders and any persons who
participate in the sale of the Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act and any commissions paid
or discounts or concessions allowed to any such person and any profits received
on resale of the securities offered hereby may be deemed to be underwriting
compensation under the Securities Act.
In order to comply with the securities laws of certain states, if applicable,
the Common Stock offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain
jurisdictions, such Common Stock may not be offered or sold unless registered or
qualified for sale in such jurisdictions or an exemption from any registration
or qualification requirement is available and the requirements thereof have been
satisfied.
The Company will receive no proceeds from the sale by the Selling Stockholders
of the Common Stock offered hereby. All of the expenses incurred in connection
with the registration of the Common Stock offered hereby will be paid by the
Company, except for commissions of dealers or brokers and any transfer fees
incurred in connection with the sales of the securities by the Selling
Stockholders, which commissions and fees will be paid by the Selling
Stockholders.
Each Selling Stockholder will, prior to any sales, agree (a) not to effect any
offers or sales of the Common Stock in any manner other than as specified in
this Prospectus, (b) to inform the Company of any sale of Common Stock at least
one business day prior to such sale and (c) not to purchase or induce others to
purchase Common Stock in violation of Rule 10b-6 under the Exchange Act.
The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Stockholders acting as principals for their own
accounts in one or more transactions in the over-the-counter market or in
negotiated transactions at market prices prevailing at the time of sale or at
prices otherwise negotiated. Alternatively, the shares of Common Stock may be
offered from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or underwriters
may receive compensation in the form of commissions or concessions from the
Selling Stockholders or the purchasers of the Common Stock.
Under the Exchange Act, and the regulations thereunder, any person engaged in
a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and
without limiting the foregoing, each Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Rule 15c2-6, and Rules 10b-6 and 10b-
7, which provisions may limit the timing of purchases and sales of Common Stock
by the Selling Stockholder. There are possible limitations upon trading
activities and restrictions upon broker-dealers effecting transactions in
certain securities which may also materially affect the value of, and an
investors ability to dispose of, the Company's securities.
There can be no assurance that the Selling Stockholders will sell all or any
of the securities offered by them hereby.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Article X of the Company's Certificate of Incorporation and Article VII,
Section 6 of the Company's Bylaws provide for indemnification of its directors
and officers to the fullest extent permitted by Delaware law. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that, in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with the Company's
supplemental consolidated financial statements and the notes thereto appearing
elsewhere in this Form SB-2. Certain statements contained in this Form SB-2
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, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and involve risks and uncertainties. Although View
Tech believes that the assumptions on which these forward-looking statements are
based are reasonable, there can be no assurance that such assumptions will prove
to be accurate and actual results could differ materially from those discussed
in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed under "Risk
Factors" and "Business," as well as those discussed elsewhere in this Form SB-2.
All forward-looking statements contained in this Form SB-2 are qualified in
their entirety by this cautionary statement.
GENERAL
View Tech commenced operations in July 1992. Since its initial public
offering of common stock in June 1995, the Company has grown rapidly through
internal expansion and through acquisition. Prior to August 1995, the Company
operated under a sales and service dealer agreement covering most of southern
California. In August 1995 and May 1996, View Tech amended its sales and
service agreement with its primary supplier, PictureTel. The amended agreement
has a term of five years and substantially expanded the scope of the Company's
business and its existing sales territory to include 13 additional states as
well as northern 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 July and August 1996, the Company acquired the net assets of VistaTel
International, Inc., a Florida corporation headquartered in Boca Raton, Florida,
and GroupNet, Inc., a Massachusetts corporation located in Boston,
Massachusetts, respectively, both of which were engaged in the marketing and
installation of video communication equipment. In addition, on November 29,
1996, the Company acquired USTeleCenters, Inc., a Massachusetts corporation
headquartered in Boston, Massachusetts ("USTeleCenters"), in a merger
transaction (the "Merger"), which was accounted for as a pooling-of-interests
for financial reporting purposes and pursuant to which USTeleCenters, Inc., a
Delaware corporation ("UST") became a wholly-owned subsidiary of the Company.
At the time of the Merger, the Company operated out of 13 offices covering 23
states and employed 75 people. The Merger resulted in the addition of three
offices and 225 additional employees.
The Company markets and installs video communications systems and provides
continuing services relating to installed systems. In addition, as a result of
the Merger, the Company designs, sells, manages and supports telecommunications
systems solutions for small and medium-sized businesses throughout the United
States. In addition, the Company develops and manages sales and customer
service programs on an outsourced basis for (i) certain Regional Bell Operating
Companies ("RBOCs"), (ii) other telecommunications service providers and (iii)
equipment manufacturers under agency and value added reseller ("VAR")
agreements. In New England and New York, the Company also provides systems
integration and on-going account management consulting for middle market
customers. On behalf of its RBOC clients, the Company sells high speed data
services, internet access, Centrex network services, local and long distance
services, voice mail and other "enhanced" services, discount calling plans and
toll-free services such as remote-call-forwarding.
The Company intends to continue its expansion activities in fiscal 1997
through both internal expansion and strategic acquisitions. The Company
recently opened sales offices in Phoenix, Arizona and Salt Lake City, Utah.
Although management anticipates that the revenues generated by its existing
offices, as well as the offices acquired through acquisition or expansion, will
exceed its operating costs for the next twelve months, there can be no assurance
that such results will be achieved. To the extent that such costs exceed such
revenues, View Tech's business, financial condition and results of operations
will be adversely affected.
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's consolidated financial statements expressed as a
percentage of the Company's revenues:
<TABLE>
<CAPTION>
Years Ended Three Months Ended
June 30, September 30,
------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C> <C>
Product sales and
service revenues................ 63.5% 37.9% 59.9% 42.0%
Agency commissions.............. 36.5 62.1 40.1 58.0
----- ----- ----- -----
100.0 100.0 100.0 100.0
----- ----- ----- -----
COSTS AND EXPENSES:
Costs of goods sold............. 46.0 26.7 48.1 35.6
Selling and marketing
expenses........................ 31.1 54.6 27.7 36.0
General and administrative
expenses........................ 20.2 17.5 19.5 24.1
----- ----- ----- -----
97.3 98.8 95.3 95.7
----- ----- ----- -----
INCOME FROM OPERATIONS............ 2.7 1.2 4.7 4.3
OTHER EXPENSE..................... (2.1) (2.1) (0.7) (1.0)
LOSS ON SUBLEASE,
including shutdown of offices... -- (4.6) -- --
----- ----- ----- -----
INCOME (LOSS)BEFORE INCOME
TAXES PROVISION................. 0.6 (5.5) 4.0 3.3
PROVISION FOR INCOME
TAXES........................... 0.8 (1.0) (0.1) 0.9
----- ----- ----- -----
NET INCOME (LOSS)................. 1.4% (6.5)% 3.9% 4.2%
===== ===== ===== =====
</TABLE>
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
REVENUES
Total revenues for 1996 increased $2.496 million or 8.8% to $30.994 million
from $28.498 million in 1995.
Product Sales and Services
Product sales and service revenues increased by $8.879 million or 82.2% to
$19.680 million in 1996 from $10.802 million in 1995. The increase was
primarily related to increased sales and marketing efforts for videoconferencing
products and services, including increased staffing and to the opening of three
regional and two sales offices devoted to the videoconferencing business in
1996.
Agency Commissions
Agency commissions for 1996 decreased by $6.383 million or 36.1% to $11.313
million from $17.696 million in 1995. The decrease in agency commissions was
primarily due to the restructuring of UST's business in 1995. Regulatory
changes, shifts in market conditions and the exhaustion of available "800"
numbers caused the "800" number business to deteriorate rapidly during 1995. As
a result of such changes, the Company curtailed its sales activities in the
"800" number market and terminated its unprofitable relationships with certain
telecommunication companies. In addition, as a result of such changing business
conditions, the Company closed its satellite office in San Francisco,
consolidated its Boston locations and reduced the size of its telemarketing
staff.
COSTS AND EXPENSES
Costs of goods sold for 1996 increased by $6.650 million or 87.3% to
$14.269 million from $7.619 million in 1995. Costs of goods sold as a
percentage of product sales and service revenues increased to 72.5% in 1996 from
70.5% in 1995. The percentage increase in costs of goods sold as a percentage
of product sales and service revenues is primarily related to increased
competitive
18
<PAGE>
pressures within the videoconferencing industry and to sales to various state-
funded organizations, resulting in lower selling prices and correspondingly a
higher ratio of cost of sales to revenues.
Selling and marketing expenses for 1996 decreased by $5.912 million or
38.0% to $9.653 million from $15.566 million in 1995. The decrease was
primarily due to lower compensation to sales personnel and related expenses as a
result of the decrease in agency commission revenues, reductions in the number
of sales personnel, and the closing and consolidation of certain of the
Company's sales offices related to its telecommunications business.
General and administrative expenses for 1996 increased by $1.257 million or
25.2% to $6.248 million from $4.991 million in 1995. General and administrative
expenses as a percentage of total revenues increased to 20.2% in 1996 from 17.5%
in 1995. The overall increase was primarily due to increases in general and
administrative expenses primarily related to the expansion of the Company's
videoconferencing business and to higher sales volume.
Income from operations increased $500,472 to $823,498 in 1996 from $323,026
in 1995. Income from operations as a percentage of revenues increased to 2.7%
for 1996 compared to 1.2% for 1995. The increase was primarily due to
reductions in selling and marketing expenses as a result of the restructuring of
the Company's telecommunications business.
Other expense in 1996 increased by $66,405 or 11.2% to $659,258 from
$592,853 in 1995. The increase was primarily due to the write-off of a note
receivable from Power Data Services, Inc. ("PDS") of $265,000 in connection with
the termination of the PDS acquisition in May 1996, offset by a decrease in net
interest expense.
The loss on sublease, including shutdown of offices (including severance
and related expenses), of $1.313 million was incurred in 1995 as a result of the
Company restructuring its telecommunications business as a result of the decline
of the "800" number business discussed above. During 1995, the Company closed
its sales offices in San Francisco and began to consolidate its Boston locations
which were primarily engaged in the resale of telecommunications products and
services on behalf of certain exchange carriers and RBOC's. Similar charges
were not incurred during 1996.
Provision for income tax expense decreased $553,899 to a tax benefit of
$259,816 in 1996 from a tax expense of $(294,083) for 1995. The decrease in
income tax expense relates to certain pre-tax losses incurred by the Company
prior to the Merger. The Company has utilized approximately 51% of such benefit
through carryback of such net operating loss, and expects to fully realize the
remaining tax benefit in future periods.
Net income (loss) increased $2.301 million to net income of $424,056 in
1996 from a loss of $(1.877) million for 1995. Net income as a percentage of
revenues increased to 1.4% for 1996 compared to a net loss of (6.5)% for 1995.
Net income (loss) per share increased to $0.07 for 1996 compared to a net loss
of $(0.50) for 1995. The weighted average number of shares outstanding
increased to 5,676,304 for 1996 from 3,765,467 in 1995.
YEAR ENDED JUNE 30, 1995 COMPARED TO THE YEAR ENDED JUNE 30, 1994
REVENUES
Total revenues for 1995 increased $2.679 million or 10.4% to $28.498
million from $25.818 million in 1994.
Product Sales and Services
Product sales and service revenues increased by $3.125 million or 40.7% to
$10.802 million in 1995 from $7.676 million in 1994. The increase in revenues
was primarily related to increased sales and marketing efforts related to the
Company's nationwide expansion of its videoconferencing business, including
increasing its videoconferencing sales force to ten representatives at June 30,
1995, compared to six representatives at June 30, 1994.
Agency Commissions
Agency commissions for 1995 decreased by $445,702 or 2.5% to $17.696
million from $18.142 million in 1994. The decrease in agency commissions was
primarily due to the Company beginning the process of restructuring its
telecommunications business in 1995 as a result of the decline in the "800"
number business. Regulatory changes, shifts in market conditions and the
exhaustion of available "800" numbers caused the "800" number business to
deteriorate rapidly during the latter part of the fiscal year ended June 30,
1995. As a result of such changes, the Company curtailed its sales activities
in the "800" number market and terminated its unprofitable relationships with
certain exchange carriers. In addition, as a result of the changing business
conditions
19
<PAGE>
in the latter part of 1995, the Company began to phase down its operations
resulting in the closure of its San Francisco office and the consolidation of
its Boston locations and to reduce the size of its telemarketing staff.
COSTS AND EXPENSES
Costs of goods sold for 1995 increased by $2.045 million or 36.7% to $7.619
million from $5.574 million in 1994. Costs of goods sold as a percentage of
product sales and service revenues decreased to 70.5% in 1995 from 72.6% in
1994. The percentage decrease in costs of goods sold as a percentage of product
sales and service revenues is primarily related to an increase in the margin on
video equipment sales due to volume discounts and corresponding lower unit
costs, as well as an increase in service revenues as a percentage of product and
service sales. Service revenues generally provide a higher profit margin than
equipment revenues.
Selling and marketing expenses for 1995 increased by $2.626 million or
20.3% to $15.566 million from $12.939 million in 1994. The increase was
primarily due to higher compensation to sales personnel and related expenses as
a result of increased staffing for telecommunications sales management and
support personnel for the telecommunication business.
General and administrative expenses for 1995 decreased by $1.568 million or
23.9% to $4.991 million from $6.558 million in 1994. General and administrative
expenses as a percentage of total revenues decreased to 17.5% in 1995 from 25.4%
in 1994. The overall decrease was primarily due to reductions in administrative
personnel and related expenses and the consolidation of certain of the Company's
administrative offices in connection with the restructuring of its
telecommunication business.
Income from operations decreased $423,983 to $323,026 in 1995 from $747,009
in 1994. Income from operations as a percentage of revenues decreased to 1.2%
for 1995, compared to 2.9% for 1994. The decrease was primarily due to the
overall increase in sales and marketing expenses related to the Company's
telecommunication business.
Other expense for 1995 increased by $309,355 or 109.1% to $592,853 from
$283,498 in 1994. The increase was primarily related to an increase in interest
expense relating to an increase in average bank debt outstanding in 1995
compared to 1994.
The loss on sublease, including shutdown of offices (including severance
and related expenses), of $1.313 million was incurred in 1995 as a result of the
Company restructuring its telecommunications business as a result of the decline
of the "800" number business discussed above. During 1995, the Company closed
its sales offices in San Francisco and began to consolidate its Boston locations
which were primarily engaged in the resale of telecommunications products and
services on behalf of certain exchange carriers and RBOC's. Similar charges
were not incurred during 1996.
Provision for income tax expense increased $294,965 to a provision of
$(294,083) in 1995 from a tax benefit of $882 for 1994. The increase in income
tax expense relates to certain pre-tax earnings realized by the Company, prior
to the Merger with USTeleCenters, for the year ended June 30, 1995.
Net income decreased $2.341 million to net loss of $1.877 million in 1995
from net income of $464,393 for 1994. Net income (loss) as a percentage of
revenues decreased to (6.5)% for 1995, compared to net income of 1.8% for 1994.
Net income (loss) per share decreased to a loss of $(0.50) for 1995 compared to
net income of $0.12 for 1994. The weighted average number of shares outstanding
increased to 3,765,467 for 1995 from 3,716,974 in 1994.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
REVENUES
Total revenues for the three months ended September 30, 1996 increased
$3.602 million or 56.1% to $10.018 million from $6.417 million in 1995.
Product Sales and Services
Product sales and service revenues increased by $3.309 million or 122.8% to
$6.002 million in 1996 from $2.693 million in 1995. The increase in revenues
was primarily related to the Company's nationwide expansion of its
videoconferencing business, including increasing its videoconferencing sales
force to 24 representatives at September 30, 1996, compared to 15
representatives at September 30, 1995.
20
<PAGE>
Agency Commissions
Agency commissions for 1996 increased by $293,102 or 7.9% to $4.017 million
from $3.723 million in 1995. The increase in agency commissions was due to the
Company beginning to rebuild its telemarketing sales force in 1996 to enable it
to market new product offerings on behalf of its RBOC and exchange carrier
clients.
COSTS AND EXPENSES
Costs of goods sold for 1996 increased by $2.536 million or 111.2% to
$4.817 million from $2.281 million in 1995. Costs of goods sold as a percentage
of product sales and service revenues decreased to 80.3% in 1996 from 84.7% in
1995. The percentage decrease in costs of goods sold is primarily related to
increased service revenues from the Company's videoconferencing business.
Service revenues generally provide a higher profit margin than equipment
revenues.
Selling and marketing expenses for 1996 increased by $473,058 or 20.5% to
$2.780 million from $2.307 million in 1995. Selling and marketing expenses as a
percentage of revenues decreased to 27.7% in 1996 from 36.0% in 1995. The
dollar increase in selling and marketing expenses was primarily due to higher
compensation and related expenses for its sales force as a result of the
increase in revenues related to the Company's videoconferencing business.
General and administrative expenses for 1996 increased by $402,293 or 26.0%
to $1.952 million from $1.550 million in 1995. General and administrative
expenses as a percentage of total revenues decreased to 19.5% in 1996 from 24.1%
in 1995. The overall increase in general and administrative expenses was
primarily due to a general increase in such expenses as a result of the
expansion of the Company's videoconferencing business. These expenses decreased
as a percentage of revenues because the rate of increase in such expenses was
less than the rate of increase in revenues.
Income from operations increased $190,691 to $468,718 in 1996 from $278,027
in 1995. Income from operations as a percentage of revenues increased to 4.7%
for 1996, compared to 4.3% for 1995. The overall improvement in income from
operations was attributable to increased revenues relating to product sales and
services.
Other expense in 1996 increased by $4,290 or 6.8% to $67,381 from $63,091
in 1995. The increase was due to a slight increase in net interest expense
related to capital lease obligations.
Provision for income tax expense increased $73,671 to a provision of
$(13,964) in 1996 from a tax benefit of $59,707 for 1995. The increase in
income tax expense relates to the increase in pre-tax income in 1996 compared to
1995.
Net income increased $112,730 to $387,373 in 1996 from $274,643 for 1995.
Net income as a percentage of revenues decreased to 3.9% for 1996 compared to
4.2% for 1995. Net income per share increased to $.07 for 1996 compared to $.05
for 1995. The weighted average number of shares outstanding increased to
6,288,305 for 1996 from 5,571,055 in 1995.
ACQUISITIONS
VistaTel
Effective July 1, 1996, View Tech acquired the net assets of VistaTel
International, Inc. ("VistaTel"), a private company based in Boca Raton,
Florida, which was 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 shareholders of VistaTel as consideration for the acquisition.
The excess of the acquisition price over the net assets acquired of
approximately $339,000 is being accounted for as goodwill which is amortized
over 15 years. The Company continues to operate VistaTel's previous business,
which sells and services video conferencing systems and provides network
bridging services for businesses.
GroupNet
Pursuant to a merger agreement dated August 30, 1996, View Tech acquired
GroupNet, Inc. ("GroupNet") for cash and Common Stock valued at $1.380 million.
The purchase price consisted of 150,000 shares of Common Stock valued at $7.00
per share or $1.050 million in the aggregate and $330,000 in cash, of which
$110,000 was paid on August 30, 1996 upon execution of the agreement and
$220,000 is payable on or before January 15, 1997. The excess of the
acquisition price over the net assets acquired of approximately $1.330 million
is being accounted for as goodwill which is amortized over 15 years. GroupNet,
based in Boston, Massachusetts, was an authorized PictureTel Select Dealer in
video communication product distribution in the northeastern United
21
<PAGE>
States. View Tech is continuing to operate GroupNet's former business in Boston
and New York. With the addition of GroupNet, View Tech has added the
northeastern United States to its marketing territory.
UST
On September 5, 1996, View Tech announced that it had entered into a
definitive agreement of merger with USTeleCenters, which was an authorized sales
agent for several of the regional bell operating companies. The Merger was
consummated, effective November 29, 1996, and was valued at $16.500 million.
The transaction was accounted for as a pooling of interests in which the
USTeleCenters' shareholders exchanged all of their outstanding USTeleCenters
shares and options for View Tech Common Stock and options, respectively,
USTeleCenters shareholders received 2,240,976 shares of View Tech Common Stock
in exchange for all outstanding shares held by USTeleCenters shareholders.
LIQUIDITY AND CAPITAL RESOURCES
View Tech has financed its recent operations and expansion activities with
the proceeds from its initial public offering completed in June 1995, bank debt
and vendor credit arrangements.
Net cash used for operating activities for the three months ended September
30, 1996 (the "Period") was $163,758. The primary uses of cash in 1996 were
increases in accounts receivable and prepaids and other assets of $1,490,954 and
$392,054 and a decrease in other accrued liabilities of $124,358. The uses of
cash reflect the Company's higher sales volume and funds used to expand the
Company's operations during 1996. Sources of cash from operating activities
were primarily related to an increase in accounts payable of $1,110,533.
Net cash used for investing activities for the Period was $373,104,
relating to the purchase of office furniture and computer equipment for $223,791
and the acquisition of VistaTel and GroupNet during July and August 1996.
Net cash provided by financing activities for the Period was $229,528,
primarily generated from the proceeds of $1,390,102 from the Company's private
placement of Common Stock, offset by the repayment of $1,165,824 in debt
obligations.
The Company maintains a $500,000 credit facility (the "Note") to assist in
meeting its working capital needs, if required. The Note expires on February
28, 1997 and provides for interest at the prime rate plus 1.5% per year. The
Company is currently in the process of increasing this credit facility to
provide for a borrowing limit up to $1,750,000 to provide for some portion of
its working capital needs. 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 September 30, 1996, although the
Company has as of September 30, 1996, five outstanding standby letters of
credits aggregating $274,000. Four of such standby letters of credit were
issued in favor of one leasing company in connection with certain capital lease
transactions relating to the purchase of computer equipment and furniture, and
one is issued to a surety company in connection with its issuance of a
performance bond on behalf of 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
$226,000.
The Company's wholly-owned subsidiary, UST, maintains a revolving credit
agreement with a bank. The agreement, pursuant to the terms of a forbearance
agreement, as amended, allows the subsidiary to borrow up to the lesser of the
financial borrowing base, as defined, or $1,850,000. The bank has a security
interest in the subsidiary's assets and the Company is guaranteeing the
repayment of amounts borrowed under the line. In addition, the subsidiary has
agreed, among other things, to maintain certain financial covenants and ratios,
as defined. As of September 30, 1996, UST was in compliance with the covenants
or had received waivers under the forbearance agreement. Interest on the
outstanding balance is payable monthly at the bank's base rate (8.25% at
September 30, 1996) plus 1.5%. In November 1996, UST amended its revolving line
of credit and forebearance agreement with the bank whereby the revolving line of
credit and forbearance agreement have been extended to March 31, 1997.
In addition, UST had maintained a lease line-of-credit agreement with a
bank which was converted into a term note as part of the forbearance agreement.
At September 30, 1996, there was approximately $973,600 outstanding under this
facility. UST is required to maintain certain restrictive covenants, including
profitability and liquidity covenants. Amounts outstanding bear interest at
rates ranging from 5.6% to 8.3%. As of September 30, 1996, UST was in compliance
with the covenants or had received waivers under the forbearance agreement.
UST's lines of credit are due on March 31, 1997. UST is subject to a
forbearance agreement which enables the lender to foreclose on the debt if UST's
financial condition falls below certain minimum standards. The forbearance
agreement, as amended, was originally entered into on June 14, 1995. Based on
UST's relationship with the lender, the Company's management anticipates
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that the lender will refinance the lines of credit or extend the date on which
the lines of credit must be paid. However, if the lender does not refinance
such lines of credit and the Company has not raised additional equity and/or
arranged for alternative bank financing, the Company will not have sufficient
cash to repay the lender when the debt comes due. There can be no assurance
that the Company will be able to renegotiate the lines of credit with the
lender, and if the lender requires payment in March 1997, there can be no
assurance that the Company will be able to raise the additional funds necessary
to meet the Company's operating needs and capital requirements or that such
funds, if available, can be obtained on terms acceptable to the Company. The
failure to refinance the lines of credit, raise additional capital or obtain
additional bank financing will have a material adverse effect on the Company's
business, financial condition and results of operations. To the extent that the
Company raises additional capital by issuing equity securities, ownership
dilution to current stockholders of the Company will result.
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.
The Company will require additional working capital to efficiently operate
its business and to adequately provide for its working capital needs. In this
regard, the Company is in the process of increasing the Note from $500,000 to
$1,750,000 and is seeking private equity financing of up to approximately
$3,000,000 to satisfy its working capital needs. In addition, if the Company
continues its expansion and/or acquisition activities, it will require
additional capital to finance such activities.
Exclusive of the cash required to repay the UST debt obligations on March
31, 1997 and to fund additional expansion activities, the Company believes that
its existing cash balances, combined with the proceeds from its anticipated
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.
The inability to obtain required additional financing could limit the Company's
ability to operate the Company efficiently or to continue its expansion
activities.
BUSINESS
GENERAL
View Tech, which commenced operations in July 1992, markets and installs
video communications systems and provides continuing services related to
installed systems. Video communications systems, utilizing advanced technology,
enable users at separate locations to engage in face-to-face discussions with
the relative affordability and convenience of using a telephone. In addition to
the use of video conferences as a corporate communications tool, use of video
communications systems is expanding into numerous additional applications,
including (i) teachers providing lectures to students at multiple locations,
(ii) judges conducting criminal arraignment proceedings while the accused
remains incarcerated, (iii) physicians engaging in consultations utilizing x-
rays and other pictographic material, (iv) coordination of emergency services by
public utilities, (v) conducting multi-location staff training programs, and
(vi) engineers at separate design facilities coordinating the joint development
of products.
The Company is headquartered in Camarillo, California. Its executive
offices are located at 950 Flynn Road, Camarillo, California 93012. Its
telephone number at that address is 805/482-8277. View Tech's e-mail address is
[email protected].
On November 29, 1996, View Tech completed the acquisition of USTeleCenters,
Inc., a Massachusetts corporation ("USTeleCenters"), by means of a merger of
USTeleCenters with and into View Tech Acquisition, Inc., a Delaware corporation
and a wholly-owned subsidiary of View Tech ("VTAI") (the "Merger"). The Merger
was effected pursuant to a Merger Agreement by and among the Company, VTAI and
USTeleCenters dated as of September 5, 1996, as amended on October 31, 1996. In
exchange for all of the outstanding shares of USTeleCenters common stock, $0.01
par value, the USTeleCenters shareholders received 2,240,976 shares of Common
Stock (excluding options convertible into 184,003 shares of Common Stock).
Following the Merger, VTAI changed its name to "USTeleCenters, Inc."
("UST") and continued to operate the former businesses of USTeleCenters.
Concurrent with the Merger, which was approved at View Tech's annual meeting of
stockholders on November 26, 1996, View Tech reincorporated in Delaware from
California, changed the par value of the Common Stock and its preferred stock to
$0.0001 from $0.01, amended its bylaws to provide for a staggered board of
directors, and increased its authorized number of shares of Common Stock to
20,000,000 shares from the original 10,000,000 shares.
UST designs, sells, manages and supports telecommunications systems
solutions for small- and medium-sized businesses throughout the United States.
UST develops and manages sales and customer service programs on an outsourced
basis for (i) certain Regional Bell Operating Companies
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("RBOCs"), (ii) other telecommunications service providers, and (iii) equipment
manufacturers under agency and value-added reseller ("VAR") agreements. In New
England and New York, UST also provides systems integration and on-going account
management consulting for middle market customers. On behalf of its RBOC
clients, UST sells high speed data services, Internet access, Centrex network
services, local and long distance services, voice mail and other "enhanced"
services, discount calling plans and toll-free services such as remote-call-
forwarding. As a value-added equipment reseller, UST sells, installs and
maintains data transmission products, video conferencing equipment and telephone
systems.
UST is located in Boston, Massachusetts. Its main offices are located at
745 Atlantic Avenue, Boston, Massachusetts 02111-2747. Its telephone number at
that address is 617/439-9911. UST's e-mail address is [email protected].
View Tech and UST (collectively referred to as the "Company") have 16
offices nationwide, and have significant market presence and organizational
strength in the Northeast and in Southern California. The Company is a leading
distributor of PictureTel's video conferencing equipment, a significant
telecommunications equipment reseller, and one of the oldest and largest
independent sales agents for certain RBOCs and long distance carriers.
THE VIDEOCONFERENCING INDUSTRY
Video communication entails the transmission of video and audio signals and
computerized data between two or more locations through a digital
telecommunication network. Video communications systems were first introduced in
the late 1970s in the form of specialized dedicated conference rooms outfitted
with expensive electronic equipment and requiring trained operators. Signals
were transmitted over dedicated transmission lines established between fixed
locations. Market acceptance of early systems was limited because of the low
quality of the video output, as well as the high hardware and transmission costs
and limited availability of transmission facilities.
During the 1980s, a series of technological developments resulted in a
dramatic increase in the quality of video communication, as well as a
substantial reduction in its cost. The proliferation of switched digital
networks, which transmit digital, as opposed to analog signals, eliminated the
requirement of dedicated transmission lines. Advances in data compression and
decompression technology, and the introduction of devices for separating and
distributing digital signals over several channels simultaneously and
recombining them after transmission, resulted in products with substantially
improved video and audio quality and further reduced hardware costs. Competition
among telecommunications carriers during the past decade, together with the
expanded use of fiber optic technology, have further contributed to reduced
transmission costs.
As of January 2, 1997 there were three U.S. manufacturers of the equipment
representing the core technology of conference room or "roll-about" video
communications systems: PictureTel; Compression Labs, Incorporated ("CLI"); and
VTEL Corporation ("VTEL"). This equipment, together with required peripheral
equipment manufactured by others, is marketed directly by these three
manufacturers, by telecommunications companies such as AT&T and SPRINT and by
independent distributors such as View Tech. PictureTel, View Tech's primary
supplier, has shown consistent growth in revenues over the past several years.
PictureTel reported revenues of $346,800,000 for the year ended December 31,
1995, up from $255,200,000 and $176,300,000 for the years ended December 31,
1994 and 1993, respectively. As of the date of this Prospectus, VTEL and CLI had
agreed to merge, with VTEL being the surviving corporation.
THE TELECOMMUNICATIONS INDUSTRY
Since the break-up of AT&T in 1984, the telecommunications industry has
experienced dramatic change and has become increasingly competitive. An
increased rate of technological development, combined with a substantial
relaxation of regulatory restraints, has created an intensely competitive
environment. Technology-based equipment manufacturers compete for quality
distribution channels, while long-distance and local network service providers
are positioning to participate in each other's market segments.
On February 8, 1996, the Telecommunications Act was enacted into law. See
"Risk Factors -- Government Regulation: Uncertainty Relating to the
Telecommunications Act of 1996." This comprehensive federal legislation will
affect many sectors of the telecommunications industry. Included in the new
statute are provisions relating to, subject to certain limitations, the opening
up of local telephone markets to competition and the elimination of restrictions
on certain local carriers' entry into the long distance telecommunications
market. Furthermore, in October 1996, the United States Court of Appeals for the
Eighth Circuit granted a stay of implementation of the Telecommunications Act in
response to lawsuits filed by local telephone companies and state officials
claiming that the new federal rules are arbitrary and usurp states' rights.
In this environment, management believes that the acquisition and retention
of end-user customers is critical to revenue growth and profitability. The
Company is developing into a high quality single-point-of-contact supplier of
specialized communications equipment and telecommunications network services.
The Company is a representative of a variety of client suppliers, and as such,
believes that it is perceived by end-user customers to be a convenient and
knowledgable resource and provider of telecommunications solutions.
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EQUIPMENT PRODUCTS
Video
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 moved conveniently from office to office and placed
into operation quickly, while custom-built video conference rooms are permanent
installations typically designed for specific applications. Desktop computer
systems involve multi-purpose personal computers with video communications
capabilities, and are generally used for one-on-one personal communications, or
when one person is presenting information to a group.
Apart from peripheral components manufactured by others, the Company
exclusively 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 1996, and has been
recognized by PictureTel as such for the last four 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, thereby 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 View Tech's systems
record full-color images and have pan, tilt and zoom capabilities. Some systems
include auxiliary video cameras to provide additional camera angles or to view
various locations within a room.
Codec. The coding-decoding device, known as the "codec," is the heart of a
video communications system. Because video images have high information
content, their transmission requires significantly greater bandwidth (capacity)
than is required to transmit audio signals or computer data. One codec converts
analog signals into digital signals and compresses the digital signals, enabling
them to be transmitted over conventional data networks, while a second codec
decompresses and reconstitutes the signals into their analog form at the
receiving location. The signals transmitted by codecs are bi-directional,
enabling each codec simultaneously to send and receive signals. The
compression-decompression process is accomplished using algorithms, or
mathematical formulae, that are embedded in the codec.
Inverse Multiplier. Because video signals (even after digital compression)
require greater bandwidth than is available in most telephone lines, an inverse
multiplexer is used to distribute the signals to several lines prior to
transmission. The distributed signals are then simultaneously transmitted over
the different lines, and a receiving inverse multiplexer recombines them to
their original format.
Multi-point Control Unit. A multi-point control unit, known as an "MCU" or
"bridge," is a device that enables persons at more than two locations to
participate simultaneously in video communication. The MCU is required at only
one of the participating locations.
Document Camera. The document camera may be used to display documents,
photographs and small three-dimensional objects in color. Because the document
camera produces "freeze-frame" images, enhanced resolution of the recorded item
is possible.
Videoscan Converter. The videoscan converter facilitates the transmission
of computerized data.
Keypad. The keypad, one of which is required at each participating
location, is the device used to control the video cameras, monitors and other
aspects of the system.
Speakerphone. Each participating site has a speakerphone, which provides
near-high-fidelity audio communications.
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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 View Tech's systems are purchased by
View Tech from PictureTel, except the inverse multiplexers, which it purchases
from either of two manufacturers, Teleos Communications, Inc. or Ascend
Communications, Inc., and the monitors, document cameras, videoscan converters,
videocassette recorders and white boards, which it acquires from various
sources, depending upon price and quality.
Although View Tech's desktop-computer systems involve different components,
the desktop system has many of the capabilities of the conference-room and roll-
about systems. View Tech's desktop video communications equipment is also
manufactured by PictureTel.
Telecommunications Equipment
The Company sells telecommunications equipment from such manufacturers as
Ascend (data transmission products) and Northern Telecom (telephone systems).
Voice. The Company markets a variety of telephone and other voice equipment
products designed specifically for small- to medium-sized business customers.
Northern Telecom key systems, Tone Commander consoles, are sold by the Company
under reseller agreements, and are installed and serviced by the Company for
business customers throughout the Northeast. Such equipment also may be sold in
conjunction with the provision of local and long-distance network services. This
voice equipment, voice network services combination is an important ingredient
in establishing the Company as a single-point-of-contact provider.
Data. The Company sells to business customers products specifically
designed to transmit data through the established local and long-distance
telephone services infrastructure. Products from companies such as Adtran,
Teleos and Ascend allow business customers to remote access into local area
networks, acquire bandwidth on demand and digitally transmit data. Products such
as these are sold in combination with local and/or long-distance network
services provided by the RBOCs, SPRINT and AT&T.
View Tech intends to continue providing its customers with additional
product selections in the future to the extent they compliment and enhance such
customers' communications capabilities. Future plans call for increased product
offerings, including desk-top video, wireless communications devices, data
products and telephone equipment for small- to medium-sized businesses, as well
as tele-commuting and entertainment components for the work-at-home and
residential markets.
SERVICES
The Company believes that the quality and depth of its customer services
are critical factors 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 communications needs and to develop customized systems
designed to provide efficient responses to each customer's unique needs.
The Company provides its customers with a full complement of video
communications and telecommunications services to ensure customer satisfaction.
Prior to the sale of its systems and services, the Company provides consulting
services that include an assessment of customer needs and existing
communications equipment, as well as cost-justification and return-on-investment
analyses for systems upgrade.
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 communications
equipment. When the system 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. 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, follow-up maintenance and comprehensive customer support with respect
to the communications equipment it provides and the integration thereof. The
Company's suppliers, in turn, provide parts-replacement warranties ranging from
90 days for PictureTel equipment to between one and three years for other
manufacturers' equipment. 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 conferencing,
telephone, facsimile, e-mail or through the mail. The Company also provides
onsite support and maintenance.
The Company's service personnel maintain regular 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. 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
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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. Critical to customer
retention is on-going after-sale relationships with customers. Installation,
training, maintenance, remote diagnostic, billing inquiry management, network
order processing, new product introduction and system enhancements creating
multipurpose solutions are a few of the many after-sale services that the
Company performs for its customers.
During 1996, View Tech started providing MCU, or bridge, services to its
customers. Since bridges cost between $65,000 and $150,000 per unit, View
Tech's customers typically elect to utilize such services when more than two
locations participate simultaneously in video communication.
Telecommunications Services
The Company also provides on-going after-sales telecommunications services
to its customers. Installation, maintenance, user training and network order-
processing are some of the services provided by the Company to its end-user
customers.
The Company sells a wide range of telecommunications services including,
high speed data connection, internet access, local and long distance services,
voice mail and other "enhanced" services, discount calling plans and toll-free
services. In addition, the Company provides Account Management for NYNEX under
which it serves as the primary interface between NYNEX and certain of its
business customers. Under this program, sales personnel provide a single-point-
of-contact and coordination for all of the customer's telecommunications needs.
The Company provides systems integration services, processes so-called "moves,
adds, and changes" on the telephone network, coordinates repairs, performs
network analysis, manages billing issues and provides other customer services.
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 typically could be obtained by
View Tech's customers directly from the carrier. The Company intends to pursue
opportunities for providing such services to its customers with additional
carriers, as such services 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.
STRATEGY
The Company focuses its marketing efforts on industries and market segments
that it believes will achieve significant benefits through utilization of video
and telecommunications services and equipment. The Company then acquires a
complete understanding of the operations of such industries, identifies the
particular communications needs of such industries and integrates or bundles the
services and/or equipment which will most effectively meet the needs of any
given segment of the market. These services range from the simple bundling of
long distance and local service to a small business to a complex installation of
video communications equipment and network services to meet the needs of the
health care practitioner. The Company believes that this focus on customer needs
in particular market segments, together with an emphasis on providing
comprehensive, high-quality service to its customers, enables the Company to
market its video communications systems and other telecommunications equipment
and services more effectively than competitive distribution channels. The
Company believes that its broad product offerings, industry focus, wide
geographic coverage and high quality service provide it with a unique
competitive advantage.
In addition to expanding its current key alliance partnerships with
PictureTel, NYNEX, GTE, Bell Atlantic and its other service providers and
equipment vendors, the Company intends to continue broadening it market focus
as its customers' needs become more comprehensive, and to expand its activities
into additional geographic markets by entering into further strategic alliances
with manufacturers and service providers,acquiring companies in the video and
telecommunications industries and establishing additional strategically located
sales and service facilities.
CUSTOMERS
The Company's customer base is divided into two segments, large
institutions with complex application-specific requirements for video
communications and small to medium-sized businesses with voice and data
transmission requirements. These segments are becoming less distinct as the
market develops. The Company currently focuses on these customer segments
separately but envisions such segments merging over time.
Video Systems Customers
While the Company has installed video communications systems for a
diversified customer base, including Southern California Edison, UNOCAL, Loma
Linda University, the Commonwealth of Massachusetts and Harvard University, it
has attempted to focus its marketing efforts on specific industries. 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. 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
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the 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.
Telecommunications Clients and Customers
The Company, through UST, markets telecommunication equipment and services
for various strategic partners or clients. The equipment sales are performed
under various reseller agreements and the customer is invoiced by UST. The
telecommunication services are sold to the Company's customers under sales
agency agreements, pursuant to which the customer is invoiced by the client for
the services over the term of the agreement and the Company is paid a commission
by the client. The Company's telecommunication clients include several RBOCs,
including NYNEX, Bell Atlantic and Southwestern Bell; other telecommunication
service providers, such as GTE and SPRINT; and equipment manufacturers,
including Northern Telecom, Ascend and Teleos. The Company typically has
renewable annual agreements with its telecommunication service clients, under
which it receives commissions based on sales and in some cases, such as the
Account Management Program with NYNEX and long distance services from SPRINT,
the Company receives a recurring fee based on customer usage of the services
sold. With respect to equipment sales, the Company purchases the equipment at
its dealer discount and resells the products to its customers at the list price
or other negotiated price.
The Company focuses on small to medium-sized business customers which the
major telecommunications providers cannot cost effectively service. The
Company's clients have retained its services to sell products to and in some
cases to manage the relationship with these customers. These customers are
comprised of medium-sized businesses which are served by a direct face-to-face
sales force based in the Company's Boston and New York offices, and small
businesses which are served by the Company's telephone-based sales force in
Boston and Cape Cod. The Company sells a range of products and services to these
customers in order to meet their voice, data and video communication needs. The
Company has developed sophisticated sales programs to allow the telephone-based
sales group to sell complex products historically only sold by a direct sales
force.
No single customer accounted for more than 10% of the Company's revenues
for the fiscal year ended June 30, 1996.
SALES AND MARKETING
Videoconferencing
View Tech has a number of programs in place for promoting its products and
services. Representatives of View Tech regularly attend video communications
and advanced technology trade shows. View Tech hosts seminars and provides
potential customers with the opportunity to learn more about View Tech's
products and services using video communications demonstration facilities
located in each of View Tech's offices. View Tech also places advertisements
aimed at selected markets in industry trade publications and utilizes limited
and selective direct mail advertising.
In addition, View Tech has an agreement with a telemarketing firm to
provide View Tech with information regarding organizations that may be
interested in purchasing View Tech's products and services. Management has
worked closely with the firm to develop approaches that it believes will enable
the firm effectively to identify individuals within organizations who are likely
to be interested in learning of the advantages of video communications.
PictureTel and other suppliers also provide View Tech with sales leads.
View Tech also maintains relationships with previous customers and attempts
to provide for their continuing hardware and service needs, including continuing
engineering, training and warranty services. See "--Services."
Telecommunications Sales
The Company utilizes a number of sales and marketing techniques, including
outside sales (or face-to-face) and inside sales (or telephones sales).
Outside Sales. The Company's outside sales activities are generally
focused on medium-sized businesses in New England and New York where the Company
maintains offices. Face-to-face sales are especially effective in selling more
expensive and technologically advanced services and equipment such as NYNEX's
Centrex network services and PictureTel's videoconferencing products. On-going
account management stimulates repeat business while protecting market share and
generating recurring revenue from certain clients such as NYNEX.
Inside Sales. The Company's inside sales group sells a broad range of
services over the telephone. In addition, the inside sales and service
departments generate leads, and in some instances, provide back-up support to
outside sales associates. The advantages of telemarketing include high response
rates, low transaction costs, direct interaction with customers and on-line
access to detailed customer or product information. The Company's telemarketing
clients include BellAtlantic, GTE, Southwestern Bell, SPRINT and other
telecommunications carriers.
DEPENDENCE ON SUPPLIERS, INCLUDING PICTURETEL AND NYNEX
For the fiscal year ended June 30, 1996, approximately 38% and 21% of the
Company's consolidated revenues were attributable to the sale of equipment
manufactured by PictureTel Corporation ("PictureTel") and network products and
services provided by NYNEX, respectively. Termination of or change of the
Company's business relationships with PictureTel or NYNEX, disruption in supply,
failure of PictureTel or NYNEX to remain competitive in product quality,
function or price or a determination by PictureTel or NYNEX to reduce reliance
on independent providers such as the Company could have a material adverse
effect on the Company's business, financial condition and results of operation.
The Company is a party to agreements with PictureTel and NYNEX that authorize
the Company to serve as a non-exclusive dealer in certain geographic
territories. The NYNEX and PictureTel agreements expire on December 31, 1998
and August 2000, respectively. The NYNEX and PictureTel agreements can be
terminated without cause upon 12 months and 60 days' written notice by the
suppliers, respectively. There can be no assurance that these
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agreements will not be terminated, or that they will be renewed on terms
acceptable to the Company. These suppliers have no affiliation with the Company
and are competitors of the Company. See "Management's Discussion and Analysis
or Plan of Operations" and "Business."
COMPETITION
The video communications industry is highly competitive. View Tech
competes with manufacturers of video communications equipment and their networks
of dealers and distributors, telecommunications carriers and other large
corporations, as well as other independent distributors. Telecommunications
carriers and other large corporations that have recently entered the video
communications market include VTEL and CLI, which recently announced plans to
merge, Apple Computers, Inc., AT&T, MCI, Sprint, some of the RBOCs, IBM, Intel
Corporation, Nippon Electric Corporation, MicroSoft, Inc., Mitsubishi Ltd.,
Fujitsu Ltd., Sony Corporation, Matsushita/Panasonic, Hitachi and British
Telecom. Many of these organizations have substantially greater financial and
other resources than View Tech, furnish many of the same products and services
provided by View Tech and have established relationships with major corporate
customers that have policies of purchasing directly from them. Management
believes that as the demand for video communications systems continues to
increase, additional competitors, many of which will have greater resources than
View Tech, will enter the video communications market.
A specific manufacturer's network of dealers and distributors typically
involves discreet territories that are defined geographically, in terms of
vertical market, or by application (e.g., project management or government
procurement). View Tech's current agreement with PictureTel authorizes View
Tech to distribute PictureTel products in the following states: Alabama,
Arizona, Arkansas, California, Colorado, Georgia, Louisiana, Mississippi,
Montana, New Mexico, Oklahoma, Tennessee, Texas, Utah and Wyoming. Because the
agreement is non-exclusive, however, View Tech is subject to competition within
these territories by other PictureTel dealers, whose customers elsewhere may
have branch facilities in these territories, and by PictureTel itself, which
directly markets its products to certain large national corporate accounts. The
agreement expires in August 2000 and can be terminated without cause upon 60
days' written notice by PictureTel. There can be no assurance that the
agreement will not be terminated, or that it will be renewed by PictureTel,
which has no other affiliation with View Tech and is a competitor of View Tech.
While there are suppliers of video communications equipment other than
PictureTel, termination of View Tech's relationship with PictureTel could have a
material adverse effect on View Tech.
View Tech believes that customer purchase decisions are influenced by
several factors, including cost of equipment and services, video communication
system features, connectivity and compatibility, a system's capacity for
expansion and upgrade, ease of use and services provided by a vendor.
Management believes that its comprehensive knowledge of the operations of the
industries it has targeted, the quality of the equipment that View Tech sells,
the quality and depth of its services, its nationwide presence and ability to
provide its customers with all of the equipment and services necessary to ensure
the successful implementation and utilization of its video communications system
enable View Tech to compete successfully in the industry.
The telecommunications industry is also highly competitive. The Company
competes with many other companies in the telecommunications business which have
substantially greater financial and other resources than the Company, selling
both the same and similar services. The Company's competitors in the sale of
network services include RBOCs such as NYNEX, Bell Atlantic, Southwestern Bell
and GTE, long distance carriers such as AT&T, MCI and SPRINT, other long
distance companies, by-pass companies and other agents. There can be no
assurance that the Company will be able to compete successfully against such
companies. See "Management's Discussion and Analysis or Plan of Operations" and
"Business."
EMPLOYEES
At January 2, 1997, View Tech had 290 full-time employees and a network of
consultants who are available on an as-needed basis to provide technical and
marketing support. View Tech has 150 full-time employees engaged in marketing
and sales, 74 in technical services and 66 in finance, administration and
operations. None of View Tech's employees is represented by a labor union.
View Tech believes that its relations with its employees are good.
REAL PROPERTIES
View Tech leases office facilities in Camarillo, Irvine and San Diego,
California, Atlanta, Georgia, Dallas, Texas, Englewood, Colorado, and Nashville,
Tennessee. Its executive offices are located in Camarillo and consist of a
total of approximately 6,700 square feet. View Tech's other facilities house
sales, technical and administrative personnel and consist of aggregate square
footage of approximately 13,500 square feet. The leases on those facilities
expire at various dates through October 2000. In August and September 1996,
View Tech entered into two new office leases aggregating approximately 2,700
square feet in Boca Raton, Florida and Phoenix, Arizona with terms of five and
two years, respectively. View Tech may require additional space during the next
12 months to house its operations in Camarillo and Irvine, California and
Atlanta, Georgia. View Tech believes that it can find
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<PAGE>
suitable additional space on reasonable terms. UST leases office facilities in
Boston and Cape Cod, Massachusetts and New York, New York. Its executive
offices are located in Boston and consist of a total of approximately 14,000
square feet. UST's other facilities house sales, technical and administrative
personnel and consist of aggregate square footage of approximately 20,000 square
feet. The leases on those facilities expire at various dates through 2001.
CLAIMS AND LITIGATION
The Company is not party to any material 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.
MANAGEMENT
The directors and executive officers of View Tech are as follows:
<TABLE>
<CAPTION>
Name Position
- ------------------------- ------------------------------------------------
<S> <C>
Robert G. Hatfield....... Chairman, Chief Executive Officer and Director
John W. Hammon........... President, Chief Operating Officer and Director
Franklin A. Reece, III... Director, Vice President
William M. McKay......... Chief Financial Officer, Treasurer and Secretary
Tom Bailey............... Vice President - Technical Services
Calvin M. Carrera........ Director
Robert F. Leduc.......... Director
David F. Millet.......... Director
</TABLE>
DIRECTORS
Robert G. Hatfield, age 51, co-founded View Tech in 1992, and has since
served as its chairman and chief executive officer. From 1977 to December 1991,
Mr. Hatfield was Executive Vice President of Delphi Information Systems, Inc.
("Delphi"), a provider of data processing systems for the distribution portion
of the property and casualty insurance industry. During Mr. Hatfield's 14 years
with Delphi, the firm grew from $100,000 in annual revenues and six employees,
to $50,000,000 in annual revenues and 350 employees. Mr. Hatfield's education
includes a B.B.A. from California Western University and an M.B.A. from
Thunderbird: American Institute for Foreign Trade.
John W. Hammon, age 45, is Mr. Hatfield's brother. Mr. Hammon co-founded
View Tech in 1992 and since then has served as a director, chief operating
officer and president. He also served as secretary of View Tech until May 1,
1995. Mr. Hammon has over 14 years of experience in the computer industry,
including the marketing of advanced software and hardware products. From 1987
to December 1991, he was Western Regional Director of PictureTel Corporation.
Prior to joining PictureTel, he held positions in field sales, customer service
and regional sales management with ADP, EDS and Tandem Computers. Mr. Hammon's
educational background includes a B.S. in Finance from California State
University - Los Angeles.
Calvin M. Carrera, age 51, has been a director of View Tech since September
1994. Mr. Carrera is Director of Advanced Programs for Engineering Management
Concepts ("EMC"), a firm which specializes in professional engineering and
management services for government and industry clients. He is responsible for
advanced program development and execution and has been with EMC since April
1995. From July 1994 to April 1995, he was Director of Western Operations for
APEX Technologies, Inc., a privately-held company which provides professional
engineering and training services for the federal and state governments. Prior
to joining APEX, Mr. Carrera served 15 years as General Manager of Veda
Incorporated, a privately-held firm which provides professional engineering
services for a diverse client base. Since 1991, he has been president of the
Defense Services Industry Executive Association, a non-profit corporation with
43 member companies dedicated to improving communications within the defense
services industry and between the industry and government. Mr. Carrera holds a
B.S. in Electrical Engineering from the University of Utah and an M.S. in
Electrical Engineering from the University of Southern California, where he has
also completed classroom work for a doctoral degree.
Robert F. Leduc, age 51, has been a director of View Tech since September
1994. From January 1992 to the present, he has been president and chief
executive officer of EconomicsAmerica of California, a California-based not-for-
profit funding organization that promotes education in economics. From January
1990 to January 1992, he was president of Foundation Group, another non-profit
organization. Mr. Leduc has also been a visiting professor at the L.B.J. School
of Public Affairs at the University
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<PAGE>
of Texas at Austin since 1990, and was previously a visiting professor or
lecturer at the Kennedy School of Public Administration at Harvard University,
the University of Alberta and Rutgers University. Mr. Leduc has specialized in
providing consulting services to not-for-profit organizations since 1972, and
served as executive director of a charitable foundation from 1982 to 1985 and a
trade association from 1985 to 1988. Mr. Leduc has an M.B.A. from Wayne State
University and is completing the requirements for a Ph.D. in Public
Administration from the University of Colorado.
Franklin A. Reece, III, age 50, has been a director of the Company and vice
president since November 29, 1996. Mr. Reece founded USTeleCenters in 1986.
From 1986 through the effective date of the Merger, Mr. Reece served as chairman
of the USTeleCenters Board of Directors and, from 1986 to 1995, as chief
executive officer of USTeleCenters. He also served as president from 1986 until
January, 1992. He was again elected president in March, 1995 and continues to
serve in such capacity. Prior to founding USTeleCenters, Mr. Reece was Director
of Manufacturing of Zymark Corporation, a manufacturer of robotic systems for
laboratory automation. Prior to Zymark Corporation, he was General Manager of
Sales for The Reece Corporation, a manufacturer of specialized automatic
equipment for the apparel industry. A graduate of Harvard College, Mr. Reece
has extensive international and domestic sales, distribution and management
experience. Mr. Reece serves on the board of several Boston-based non-profit
organizations.
David F. Millet, 52, has been a director of the Company since November 29,
1996. Mr. Millet was one of the original founders of USTeleCenters and was a
director of USTeleCenters from its inception in 1986 through the Effective Date
of the Merger. He is president of Chatham Venture Corporation, a private
investment firm and chairman and chief executive officer of Holographix, Inc., a
manufacturer of holographic optical components and systems. Mr. Millet, a
graduate of Harvard College, is also a director of Wall Data, Inc. and Natural
Microsystems Inc., a general partner of Gateway Partners, LP, a director of
Mohawk Metal Products and president and a director of Thomas Emery & Sons, LLC,
an investment company.
OTHER EXECUTIVE OFFICERS
Tom Bailey, age 37, has been vice president - technical services of View
Tech since January 1993. Prior to joining View Tech, Mr. Bailey was a product
manager, service executive and lead software engineer for Delphi, where he was
employed from 1988 to January 1993. During his six years with Delphi, Mr.
Bailey was responsible for coordination of more than 200 installations of
minicomputer and LAN-based information systems, as well as support, service and
technical research. Mr. Bailey's education includes a B.A. in mathematics and
computer science from California Lutheran University, as well as training in
TCP/IP, Unix, Novell and switched digital network designations.
William M. McKay, age 42, has been chief financial officer, treasurer and
secretary of View Tech since May 1, 1995. From October 1992 through April 1995,
he was an independent consultant and principal of MK Associates, a firm that
provides financial and operational consulting services to businesses. From
January 1991 to October 1992, Mr. McKay was senior vice president and chief
financial officer of Kennedy-Wilson, Inc., a real estate brokerage concern.
Prior to his service with Kennedy-Wilson, Mr. McKay was vice president and
controller of HSM Group, a real estate investment company that is affiliated
with Kennedy-Wilson with interests in partnerships owning residential and
commercial properties. Mr. McKay also has ten years of public accounting
experience with Deloitte & Touche, most recently as a senior manager in its
audit department. Mr. McKay is a member of the American Institute of Certified
Public Accountants, and has a B.S. in business administration with an emphasis
in accounting from the University of Southern California - Los Angeles.
For information with respect to securities ownership of Common Stock by the
directors, executive officers and beneficial owners of more than 5% of the
Common Stock, see "--View Tech Security Ownership of Certain Beneficial Owners
and Management."
31
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for the chief executive
officer and each of the most highly compensated executive officers whose
individual remuneration exceeded $100,000 for the fiscal year ended June 30,
1996 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------ All Other
Name and Principal Position Year Salary Bonus Options (1) Compensation (2)
- --------------------------------- ---- ------ ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert G. Hatfield 1996 $168,000 $ -- 100,000 $28,175
Chairman and Chief 1995 $160,000 $ -- 50,000 $41,986
Executive Officer 1994 $126,000 $ -- $29,053
John W. Hammon 1996 $168,000 $ -- 100,000 $19,642
President and 1995 $160,000 $ -- 50,000 $17,989
Chief Operating
Officer 1994 $126,000 $ -- $20,269
William M. McKay 1996 $118,216 $ -- 25,000 $ 6,000
Secretary and Chief 1995 $ 17,914 $ -- 72,800 $ 1,000
Financial Officer(3)
Franklin A. Reece, III 1996 $120,000 $27,693 73,602 $ --
Vice President and 1995 $137,500 $20,300 -- $ --
Director(4) 1994 $135,000 $32,825 -- $ --
</TABLE>
- -----------------------------
(1) All stock options to Messrs. Hatfield, Hammon and McKay were granted under
the 1995 Stock Option Plan. Mr. Reece's options were originally options to
acquire USTeleCenters common stock that were converted into options to
acquire Common Stock upon consummation of the Merger.
(2) For fiscal 1996, the amount listed includes: (i) 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;
(ii) 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; (iii) for Mr. McKay, an automobile allowance of
$500 per month. Itemized disclosure of other compensation in 1995 and 1994,
is not required.
(3) Mr. McKay was not employed by View Tech prior to its 1995 fiscal year.
(4) Mr. Reece became an employee of the Company on November 29, 1996 in
connection with the Merger, which was treated as a pooling of interests for
financial reporting purposes. The amounts shown were paid by UST.
32
<PAGE>
OPTION GRANTS
The following table sets forth information regarding stock option grants to
each of the Named Executives during the fiscal year ended June 30, 1996.
Option Grants
In The Fiscal Year Ended June 30, 1996
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------------
Number of Percent of Total
Shares Underlying Options Granted to
Options Employees in Exercise Price
Name Granted (1) Fiscal Year (2) ($/Share) Expiration Date
- ------------------------- ------------------ -------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Robert G. Hatfield 50,000 10.0% $6.375 6/12/06
50,000 10.0% $6.625 7/17/05
John W. Hammon 50,000 10.0% $6.375 6/12/06
50,000 10.0% $6.625 7/17/05
William M. McKay 25,000 5.0% $6.375 6/12/06
Franklin A. Reece, III 73,602 33.3% $ 0.41 9/12/00
</TABLE>
- --------------------------
(1) All options are fully vested.
(2) The percentages for Messrs. Hatfield, Hammon an McKay represent the
percentage of total options granted by the Company. Mr. Reece's options
were granted by USTeleCenters prior to the Merger and upon consummation of
the Merger were converted into options to acquire View Tech Common Stock.
The percentage stated for Mr. Reece represents the percentage of options
granted by USTeleCenters during the twelve months ended June 30, 1996.
Excludes 3,680 options granted to Mr. Reece by USTeleCenters and cancelled
prior to the Merger.
AGGREGATE OPTION EXERCISES
The following table sets forth information regarding unexercised options
held by the Named Executives. Mr. McKay was the only Named Executive who
exercised options during the fiscal year ended June 30, 1996:
Aggregate Option Exercises
In The Fiscal Year Ended June 30, 1996 And
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised "In-the-Money"
Options at Options at Fiscal
Shares Fiscal Year-End Year-End
Acquired on ----------------------------- ----------------------------
Name Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ----------- -------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Hatfield N/A N/A 12,500 137,500 $87,500 $350,000
John W. Hammon N/A N/A 12,500 137,500 87,500 350,000
William M. McKay 12,500 $82,737 5,700 79,600 13,538 328,113
Franklin A. Reece, III N/A N/A -- 73,602 -- 485,037
</TABLE>
The stock options described in the foregoing table became fully exercisable
upon consummation of the Merger.
33
<PAGE>
DIRECTOR COMPENSATION
Outside directors receive $1,000 each month and $1,000 for each meeting of the
Board of Directors attended. Directors receive no compensation for telephonic
meetings. Outside directors who are members of either the Stock Option and
Compensation Committee or the Audit Committee receive $1,000 per meeting
attended as well. However, if a Committee meets on the same day that the Board
of Directors is meeting, the outside director will only receive a single payment
of $1,000 for all meetings attended on the same day. Outside directors are also
reimbursed for their travel expenses.
In addition to the per diem, pursuant to the 1995 Stock Option Plan, outside
directors received options to acquire 10,000 shares of Common Stock on the day
they were elected to the Board of Directors. Additionally, outside directors
who served on the Board of Directors for a full year received options to acquire
an additional 2,000 shares of Common Stock on the fifth business day following
the annual meeting of stockholders. The exercise price of the stock options is
equal to the last reported sales price of the Common Stock on The NASDAQ
National Market. There are no options available under the 1995 Stock Option
Plan, and, accordingly outside directors will no longer receive automatic
grants.
Members of the Board of Directors who are also employees of View Tech do not
receive any additional compensation for service on the Board of Directors. No
member of the Board of Directors received any other compensation for his
services as a director.
EMPLOYMENT CONTRACTS; TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Employment Agreements. View Tech has entered into an employment agreement with
Mr. Reece on November 29, 1996 which expires on December 31, 1998. Under the
terms of this agreement, Mr. Reece's annual base salary is $150,000 and he is
entitled to receive from the Company an annual cash bonus, the amount of which
is subject to determination by the Company. On December 9, 1996, the directors
increased Mr. Reece's base salary to $198,000. The agreement provides that upon
termination of Mr. Reece's employment with the Company, either for Good
Reason or without Cause (as defined in the employment agreement), he is entitled
to receive salary payments through the first anniversary of the date on which
his employment was terminated (the "Termination Date"), in addition to a cash
lump-sum payment and the continuation of fringe benefits until the first
anniversary of the Termination Date. Upon the voluntary termination of his
employment with the Company, under certain circumstances, Mr. Reece is entitled
to receive a cash lump-sum payment, and in any event of termination of his
employment with the Company, he shall receive all accrued salary, bonus and
other benefits. In the event that his employment is terminated in connection
with a change of control of the Company, he will receive, for a period of time,
which is to be not less than one year, his salary, all fringe benefits to which
he is entitled and a cash lump-sum payment.
View Tech also has reaffirmed annual salary levels for each of Messrs.
Hatfield, Hammon and McKay of $220,000, $220,000 and $136,000, respectively,
and is in the process of negotiating employment agreements with them.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with View Tech's Founders. In connection with View Tech's
organization in 1992, View Tech sold 738,000 shares of Common Stock to each of
its founders, Messrs. Hatfield and Hammon, for approximately $0.007 per share.
On October 3, 1994, July 17, 1995 and June 12, 1996, View Tech granted options
to purchase an aggregate of 150,000 shares (50,000 shares each grant) of Common
Stock to each of Messrs. Hatfield and Hammon. The options, which have exercise
prices of $0.375, $6.625 and $6.375 per share, respectively, are fully vested.
Messrs. Hatfield and Hammon had guaranteed the repayment of $638,000 of View
Tech's indebtedness, all of which was repaid with a portion of the proceeds from
View Tech's initial public offering in June 1995.
Transactions with Windermere Holdings, Inc. View Tech entered into a
management services agreement with Windermere Holdings, Inc., ("WHI") effective
as of September 1, 1994 (the "WHI Agreement"). The WHI Agreement provided that
WHI would assist View Tech with respect to View Tech's management requirements,
strategic initiatives, marketing strategies, contract negotiation, investor
relations, organizational structure, retention of public relations advisors,
board structure and committees and executive compensation.
The WHI Agreement expired September 30, 1995. Pursuant to the terms of the
WHI Agreement, View Tech paid WHI $25,000 in July 1995 and a monthly retainer of
$2,500, and reimbursed WHI's reasonable expenses. Pursuant to the WHI
Agreement, View
34
<PAGE>
Tech also agreed to issue to WHI options to purchase 150,000 shares of View Tech
Common Stock on October 1, 1995, if the agreement was then in effect, which
options would be exercisable immediately and would have an exercise price equal
to the fair market value per share of View Tech Common Stock on that date. The
WHI Agreement also provided for certain registration rights with respect to
Common Stock issuable upon the exercise of such options. On September 13, 1995,
the WHI Agreement was amended so that (i) 75,000 options were issued to each of
Rolf N. Hufnagel, a former member of the Board of Directors and managing
director of WHI, and Robert E. Yaw II, chairman of WHI, with an exercise price
equal to $7.375, which was the closing bid price of the Common Stock on The
NASDAQ SmallCap Market on September 13, 1995 and (ii) View Tech was no longer
obligated to pay WHI a monthly retainer.
On November 1, 1995, View Tech entered into a subsequent agreement with WHI
which provided for a payment of $5,000 per month through June 30, 1996. View
Tech also made a short-term loan to Mr. Hufnagel of approximately $22,000 at a
10% interest rate in April 1996. The loan was repaid in June 1996 with
interest.
Subsequent to Mr. Hufnagel's resignation from the Board of Directors effective
June 24, 1996, View Tech entered into a new agreement with WHI that provided for
(i) a monthly retainer of $5,000 from July to September 1996; (ii) the issuance
of options to purchase 55,000 shares of Common Stock to one of WHI's principals,
which were issued on June 27, 1996 and (iii) the issuance of options to purchase
55,000 shares of Common Stock to Mr. Hufnagel, which were issued on August 22,
1996. The agreement provides that such options be issued at the market price as
of the date of issuance. The agreement further provided for the issuance of
options exercisable for View Tech Common Stock equal to 5% of the "Transaction
Value" of any merger or acquisition ("M&A") transactions for which WHI provided
advice. Pursuant to an amendment to such agreement entered into in October
1996, instead of issuing WHI options equal to 5% of the Transaction Value of the
Merger, View Tech agreed to pay WHI $175,000 in cash and to issue to WHI 30,000
shares of Common Stock as follows: (i) $50,000 on October 3, 1996; (ii) $50,000
on November 1, 1996; and (iii) $75,000 and 30,000 shares of Common Stock on the
effective date of the Merger. As of January 2, 1997, WHI received 30,000 shares
of Common Stock and $130,000.
During fiscal 1996, View Tech made payments totalling $72,500 to WHI,
excluding payments made for reimbursement of expenses.
Mr. Hammon, the president, chief operating officer and a director of View
Tech, loaned (i) $50,000 to a managing director of WHI in February 1996, (ii)
$250,000 to Mr. Yaw in February 1996, and (iii) $100,000 to Mr. Yaw in July
1996, for various purposes unrelated to the business of View Tech and WHI. The
specific dates for repayment have not been established by Mr. Hammon.
Transactions with Coffin.KCSA. View Tech entered into a consulting
agreement with Coffin.KCSA ("Coffin") under which Coffin provided assistance
to View Tech with respect to View Tech's investor relations, board structure and
committees and executive compensation. The agreement, effective December 1,
1994, was for an indefinite term and could be terminated by either party upon 30
days' written notice. View Tech paid Coffin $25,000 in July 1996, and paid
Coffin a monthly retainer and reimbursed Coffin's reasonable expenses. The
monthly retainer was originally $2,500 and was raised to $4,000 per month
following View Tech's initial public offering in June 1995. William F. Coffin,
a former director of View Tech, is a partner in Coffin. During fiscal 1996,
View Tech paid Coffin a total of $65,000, excluding payments made for
reimbursement of expenses. Effective June 12, 1996, Mr. Coffin resigned as a
director of View Tech.
RECENT DEVELOPMENTS
PRIVATE PLACEMENT
On December 31, 1996, the Company entered into an agreement (the "Purchase
Agreement") with Telcom Holding, LLC, a Massachusetts limited liability company
(the "Purchaser") formed by The O'Brien Group, Inc., a Massachusetts corporation
(the "O'Brien Group"), pursuant to which the Purchaser has agreed to use its
reasonable best efforts to purchase (i) up to 650,000 shares of Common Stock
(the "Purchase Shares") and (ii) Common Stock Purchase Warrants of the Company
(the "Telcom Purchase Warrants," and together with the Purchased Shares the
"Purchased Securities") for a purchase of up to 325,000 shares of Common
Stock, at a price of $4.40 per unit ("Unit"). Each Unit consists of one (1)
share of Common Stock and one (1) Telcom Purchase Warrant for the purchase of
one-half (1/2) share of Common Stock at a purchase price per share of $6.50. If
the aggregate purchase price for the Purchased Securities issued and sold to
Telcom is at least $2,500,000, the Company also has agreed to issue to certain
principals of the O'Brien Group additional Common Stock Purchase Warrants of the
Company (the "O'Brien Purchase Warrants") for the purchase of one-half (1/2) the
aggregate number of shares of Common Stock that are purchasable under the Telcom
Purchase Warrants issued and sold to Telcom, at a purchase price per share of
$6.50. The aggregate number of Purchased Securities may be increased by mutual
agreement of the Company and the Purchaser, but not to a number that would
require the Company to obtain stockholder approval under applicable rules
promulgated by The NASDAQ National Market.
35
<PAGE>
The Purchaser has agreed to use its reasonable best efforts to purchase
Purchased Securities with an aggregate purchase price of $2,500,000 or more by
January 15, 1997, and, cumulatively, Purchased Securities, including up to
650,000 Purchase Shares and Telcom Purchase Warrants to purchase up to 325,000
shares of Common Stock, by February 15, 1997; provided, however, that (i) the
Purchaser may in its discretion extend either such date for a closing by 15
days, (ii) the Company may in its discretion designate a date earlier than
January 15, 1997 for an initial closing with respect to issuance and sale of
Purchased Securities with an aggregate purchase price of less than $2,500,000;
(iii) there may not be more than three closings; and (iv) the last closing may
not occur later than February 28, 1997.
All proceeds from the sale of Purchased Securities are required to be used by
the Company for working capital purposes, including payment of professional
fees, costs and expenses approximating $1,100,000 associated with its merger
with USTeleCenters, Inc., a Massachusetts corporation, effective November 29,
1996.
Upon the first issuance and sale of any Purchased Securities to the Purchaser
under the Agreement (the "Initial Closing"), the Company is required to take
such actions as may be reasonably practicable to cause Paul C. O'Brien, the
president of the O'Brien Group, to be nominated and elected to serve as Chairman
and as a member of the Board of Directors. If Mr. O'Brien does not serve in such
capacity for any reason, the Company is required to take such actions as may be
reasonably practicable to cause another person designated by the Purchaser and
reasonably acceptable to a majority of the Board of Directors to be nominated
and elected to serve as a member of the Board of Directors. The foregoing
requirements expire at the end of the initial three-year director term to which
Mr. O 'Brien is elected.
As long as Telcom Purchase Warrants to purchase at least fifty percent (50%)
of the aggregate number of shares of Common Stock purchasable under all Telcom
Purchase Warrants issued under the Agreement are outstanding, but not longer
than six (6) months after the Initial Closing, subject to certain exceptions,
(i) if the Company intends to issue any equity securities to a third party, it
must offer to each holder of Purchased Shares and to each holder of shares of
Common Stock issued upon exercise of the Telcom Purchase Warrants or the O'Brien
Purchase Warrants (the "Warrant Shares") the right, for a period of twenty (20)
days, to purchase for cash, at a purchase price equal to the price or other
consideration for which such securities are to be issued, a number of such
securities (up to but not exceeding that number of such equity securities that
the Company intends to issue or has received an offer to purchase) that would
enable, after giving effect to such issuance, such holder to maintain its same
proportionate fully-diluted equity ownership in the Company as it held on the
date of such notice, and (ii) the Company will not, except with the affirmative
vote or consent of at least five (5) members of the Board of Directors, (A)
merge or consolidate with, or sell, assign, lease or otherwise dispose of or
voluntarily part with the control of (whether in one transaction or in a series
of transactions) all or substantially all of its assets to any third party, or
(B) permit any of its subsidiaries to do any of the foregoing, other than sales
or other dispositions of assets in the ordinary course of business. In addition,
holders of Purchased Shares and Warrant Shares are granted certain "piggyback"
registration rights and certain registration rights on Form S-3 (or Form SB-2 if
the Company is not eligible for any reason to use Form S-3) under the Agreement.
The Telcom Purchase Warrants and the O'Brien Purchase Warrants are redeemable
at View Tech's option on 30 days' notice to the holders thereof at a price of
$0.50 per share of underlying Common Stock if (i) the average closing bid price
of the Common Stock has been at least $10.00 per share for a period of 60
consecutive trading days ending within ten days prior to the Company's written
notice of redemption, or (ii) the Company effects a best efforts or firm
commitment underwritten public offering of Common Stock resulting in aggregate
gross proceeds to the Company of not less than $7,500,000, provided that in such
case the exercise price for the Telcom Purchase Warrants and the O'Brien
Purchase warrants will be reduced in proportion to any amount by which the
public offering price is less than $10.00 per share.
CHANGE IN FISCAL YEAR END
On December 9, 1996, the Company changed its fiscal year end from June 30 to
December 31, effective for the fiscal year ending December 31, 1996. The Company
will file a transition report on Form 10-KSB covering the period from July 1 to
December 31, 1996.
36
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with respect to (i) each
director of View Tech, (ii) the Named Executives, (iii) all directors and
executive officers of View Tech as a group at January 2, 1997, including the
number of shares of Common Stock beneficially owned by each of them, and (iv)
each person known by View Tech to own beneficially or of record more than 5% of
the outstanding shares of Common Stock. Unless otherwise indicated below, the
business address of each individual is the same as the address of View Tech's
principal executive offices.
<TABLE>
<CAPTION>
Prior to the Offering After the Offering
----------------------------------- ------------------------
Number of Number of
Shares Shares
Beneficially Beneficially
Beneficial Owner Owned(1) Percentage Owned(1) Percentage (2)
- ------------------------------------- --------------- ----------- --------------- --------------
<S> <C> <C> <C> <C>
Robert G. Hatfield (3)............... 720,000 12.3% 720,000 10.3%
John W. Hammon (4)................... 600,000 10.3% 600,000 8.6%
Calvin Carrera (5)................... 22,000 * 22,000 *
Robert F. Leduc (6).................. 12,000 * 12,000 *
Franklin A. Reece, III (7)........... 580,070 10.1% 580,070 8.4%
David F. Millet (8).................. 218,658 4.0% 218,658 3.3%
William M. McKay (9)................. 85,300 1.5% 85,300 1.2%
Executive Officers and
Directors as a Group (8 persons)... 2,422,293 39.0% 2,422,293 32.9%
</TABLE>
- ------------------
* Less than one percent.
(1) Based on 5,691,462 shares outstanding, and shares issuable upon the
exercise of options or warrants that are exercisable within 60 days of
January 2, 1997 which are deemed to be outstanding for the purpose of
computing the percentage of outstanding stock owned by such persons
individually and by each group of which they are a member, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person, including the following additional shares
issuable upon exercise of options: for Mr. Hatfield, 150,000 shares; for
Mr. Hammon, 150,000 shares; for Mr. Reece, 73,602 shares; for Mr. McKay,
85,300 shares; and for another View Tech executive officer, 47,000 shares.
(2) Includes in the denominator 1,136,000 shares of Common Stock to be issued
in connection with this Offering and underlying the Options and the
Warrants.
(3) Chief executive officer and chairman of View Tech. Includes 150,000 shares
issuable upon exercise of View Tech options and 120,000 shares held in an
irrevocable trust established for the benefit of Mr. Hammon's minor
children, of which Mr. Hatfield is trustee. Mr. Hatfield has sole
investment and voting power with respect to such shares.
(4) President and chief operating officer of View Tech. Includes 150,000
shares issuable upon exercise of View Tech options. Mr. Hammon's address
is 101 Pacifica, Suite 100, Irvine, California 92718.
(5) Includes 12,000 shares issuable upon exercise of View Tech options. Mr.
Carrera's address is 10550 Summer View Circle, Camarillo, California 93012.
(6) Includes 12,000 shares issuable upon exercise of View Tech options. Mr.
Leduc's address is 26 Thorn Oak, Trabuco Canyon, California 92679.
(7) View Tech director and vice president of View Tech and chief executive
officer of UST. Includes 73,602 shares issuable upon exercise of View Tech
options. Mr. Reece's address is 745 Atlantic Avenue, Boston, Massachusetts
02111-2747.
(8) View Tech director. Mr. Millet's address is 623 Chestnut Street, Needham,
Massachusetts 02192.
(9) Chief financial officer of View Tech. Includes 85,300 shares issuable upon
exercise of View Tech Options.
DESCRIPTION OF CAPITAL STOCK
GENERAL
View Tech is authorized to issue up to 20,000,000 shares of Common Stock,
par value $0.0001 per share, 5,691,462 shares of which were issued and
outstanding at January 2, 1997 and, at January 2, 1997 these shares were owned
by approximately 122 holders of record. In addition, View Tech is authorized to
issue up to 5,000,000 shares of Preferred Stock, $0.0001 par value. As of
January 2, 1997, there were no shares of Preferred Stock outstanding.
37
<PAGE>
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to the rights of holders
of Preferred Stock (if there are any shares outstanding), the holders of Common
Stock are entitled to receive such dividends as may be declared from time to
time by the Board of Directors out of funds legally available therefor and in
the event of liquidation, dissolution or winding-up of View Tech, to share
ratably in all assets remaining after payment of all liabilities. The holders
of Common Stock have no preemptive or conversion rights and are not subject to
further calls or assessments by View Tech. There are no redemption or sinking
fund provisions applicable to the Common Stock.
PREFERRED STOCK
The Certificate of Incorporation of View Tech provide that the Board of
Directors may issue an aggregate of 5,000,000 shares of Preferred Stock from
time to time in one or more series. As of January 2, 1997, there were no shares
of Preferred Stock outstanding.
The Board of Directors is authorized to determine, among other things, with
respect to each series of Preferred Stock which may be issued: (i) the dividend
rate, conditions and preferences, if any; (ii) whether dividends will be
cumulative and, if so, the date from which dividends will accumulate; (iii)
whether, and to what extent, the holders of a series will enjoy voting rights,
if any, in addition to those prescribed by law; (iv) whether and upon what
terms, a series will be convertible into or exchangeable for shares of any other
class of capital stock or other series of Preferred Stock; (v) whether, and upon
what terms, a series will be redeemable; (vi) whether a sinking fund will be
provided for the redemption of a series and, if so, the terms and conditions of
the sinking fund; and (vii) the preference if any, to which a series will be
entitled on voluntary or involuntary liquidation, dissolution or winding up of
View Tech. With regard to dividends, redemption and liquidation preference, any
particular series of Preferred Stock may rank junior to, on a parity with, or
senior to any other series of Preferred Stock and Common Stock. The Board of
Directors, without stockholder approval, can issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power of the
holders of Common Stock. The issuance of Preferred Stock under certain
circumstances could have the effect of delaying or preventing a change of
control of View Tech or other corporate action. The Board of Directors could
issue Preferred Stock having terms that could discourage an acquisition attempt
or other transaction that some, or a majority, of the stockholders, might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then market price of such stock.
OPTIONS AND WARRANTS
At January 2, 1997, 1,150,600 options (excluding the commitment to issue
the Purchased Securities described in "Recent Developments" herein), including
options outstanding under the View Tech Stock Option Plan, covering an aggregate
of 859,600 shares of Common Stock, all of which options are fully vested, and
warrants covering an aggregate of 870,000 shares of Common Stock were
outstanding. All of the shares of Common Stock underlying the foregoing options
and warrants are registered and/or are being registered hereunder and are fully
transferable upon exercise. The foregoing options and warrants have exercise
prices ranging from $0.25 per share to $7.75 per share, with a weighted average
exercise price of $2.33 per share, and expiration dates ranging from March 21,
1998 to September 1, 2006. An additional 184,005 shares of Common Stock are
issuable under a stock option plan previously administered by UST and assumed in
connection with the Merger. These options have exercise prices ranging from
$0.29 to $0.41 per share and expiration dates ranging from January 2001 to
February 2005.
DELAWARE ANTI-TAKEOVER LAW
View Tech is governed by the provisions of Section 203 of the General
Corporation law of the State of Delaware (the "GCL"), an anti-takeover law. In
general, the law prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became and
interested stockholder, unless the business combination is approved in a
prescribed manner. "Business combination" includes merger, asset sales and
other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with its affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock.
The provisions regarding certain business combinations under the GCL could
have the effect of delaying or preventing a change in control of the Company or
the removal of existing management. A takeover transaction frequently affords
stockholders the opportunity to sell their shares at a premium over current
market prices.
38
<PAGE>
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
General. Certain provisions of the Company's Certificate of Incorporation
and Bylaws may make more difficult the acquisition of control of the Company by
a tender offer, open market purchases not approved by the Company's Board of
Directors, a proxy contest or otherwise. The provisions are designed to reduce
the vulnerability of the Company to an unsolicited proposal for a takeover that
does not contemplate the acquisition of all outstanding shares of the Company or
which is otherwise unfair to stockholders of the Company.
Set forth below is a description of certain provisions of the Company's
Certificate of Incorporation and Bylaws. Such description is intended as a
summary only and is qualified in its entirety by reference to the Company's
Certificate of Incorporation and Bylaws.
Election of Directors. The Company's Certificate of Incorporation provides
that the Board of Directors is divided into three classes. One class of
directors is elected at each annual meeting of stockholders for three-year
terms. The Company's Bylaws provide that the number of directors shall be fixed
by majority approval of the Board of Directors or by vote of a majority of the
stockholders of the Company. Currently, the number of directors is set at six.
In addition, the Bylaws provide that such provision establishing the number of
directors may only be amended by majority approval of the Board of Directors or
by a vote of a majority of the stockholders of the Company.
Under Delaware law, in a corporation with a classified board of directors,
a director can only be removed during his or her term for cause.
Special Stockholders Meetings. The Company's Bylaws provide that special
meeting of the stockholders, for any purpose or purposes, unless required by
law, may be called by the president, a majority of the entire Board of Directors
or the holders of a majority of the outstanding shares of capital stock of the
Company entitled to vote. A special meeting may not be held absent such a
written request. The request must state the purpose or purposes of the proposed
meeting.
DIVIDEND POLICY
View Tech has never paid any cash dividends on its Common Stock. As of
January 2, 1997, it intends to retain earnings and capital for use in its
business and does not expect to pay any dividends within the foreseeable future.
Any payment of cash dividends in the future on the Common Stock will be
dependent on View Tech's financial condition, results of operations, current and
anticipated cash requirements, plans for expansion, restrictions, if any, under
debt obligations, as well as other factors that the Board of Directors deems
relevant.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
shares of View Tech Common Stock offered hereby will be passed upon for View
Tech by Brobeck, Phleger & Harrison LLP, Los Angeles, California.
EXPERTS
The financial statements of View Tech, Inc. included in this Prospectus
have been audited by Carpenter Kuhen & Sprayberry, independent accountants, as
indicated in the reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
The financial statements for UST for the twelve months ended June 30, 1995 have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts giving said reports.
39
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants........................................................ F-1
Supplemental Consolidated Balance Sheets as of June 30, 1996 and
September 30, 1996 (unaudited)................................................................. F-2
Supplemental Consolidated Statements of Operations for the years ended June 30, 1996 and
1995 and the three month periods ended September 30, 1996 and 1995 (unaudited)................. F-3
Supplemental Consolidated Statement of Stockholders' Equity for the years ended June 30, 1996
and 1995 and the three month period ended September 30, 1996 (unaudited)....................... F-4
Supplemental Consolidated Statements of Cash Flows for the years ended June 30, 1996
and 1995 and the three month periods ended September 30, 1996 and 1995 (unaudited)............. F-5
Notes to Supplemental Consolidated Financial Statements as of June 30, 1996..................... F-6
Notes to Supplemental Consolidated Financial Statements as of September 30, 1996 (unaudited).... F-21
VIEW TECH
Report of Independent Auditors.................................................................. F-24
Balance Sheets at June 30, 1996 and 1995........................................................ F-25
Statements of Operations for the Years Ended June 30, 1996 and 1995............................. F-26
Statement of Stockholders' Equity for the Years Ended June 30, 1996 and 1995.................... F-27
Statements of Cash Flows for the Years Ended June 30, 1996 and 1995............................. F-28
Notes to Financial Statements................................................................... F-29
Balance Sheets at September 30, 1996 (unaudited) and June 30, 1996.............................. F-40
Statements of Operations for the Three Months ended September 30, 1996 and 1995(unaudited)...... F-41
Statements of Cash Flows for the Three Months ended September 30, 1996 and 1995 (unaudited)..... F-42
Notes to Financial Statements as of September 30, 1996 (unaudited).............................. F-43
UST
Reports of Independent Public Accountants....................................................... F-46
Balance Sheets as of June 30, 1996 and September 30, 1996 (unaudited)........................... F-48
Statements of Operations for the twelve months ended June 30, 1996 and 1995 and the three
month periods ended September 30, 1996 and 1995 (unaudited).................................... F-49
Statements of Stockholders' Deficit for the twelve month periods ended June 30, 1996 and 1995
and the three month period ended September 30, 1996 (unaudited)................................ F-50
Statements of Cash Flows for the twelve month periods ended June 30, 1996 and 1995 and the
three month periods ended September 30, 1996 and 1995 (unaudited).............................. F-51
Notes to Financial Statements as of June 30, 1996.............................................. F-52
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholders of
VIEW TECH, INC.
We have audited the accompanying supplemental consolidated balance sheet of View
Tech, Inc. and subsidiary as of June 30, 1996 and the related supplemental
consolidated statements of operations, stockholders' equity and cash flows for
the years ended June 30, 1996 and 1995. These supplemental consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental consolidated
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 supplemental consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the supplemental consolidated
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 supplemental consolidated financial statements referred to
above present fairly, in all material respects, the financial position of View
Tech, Inc. and subsidiary as of June 30, 1996, and the results of their
operations and cash flows for the years ended June 30, 1996 and 1995, in
conformity with generally accepted accounting principles applied on a consistent
basis applicable after financial statements are issued for a period which
includes the date of consummation of the business combination.
We previously audited and reported on the statements of operations and cash
flows of View Tech, Inc. for the years ended June 30, 1996 and 1995, and of
USTeleCenters, Inc. for the twelve month period ended June 30, 1996, prior to
their restatement for the business combination consummated on November 29, 1996,
which was accounted for as a pooling of interests. Separate financial statements
of the wholly owned subsidiary included in the 1995 restated supplemental
consolidated statements of operations and cash flows were audited and reported
on separately by other auditors.
The supplemental financial statements give retroactive effect to the merger of
View Tech, Inc. and USTeleCenters, Inc. on November 29, 1996, which has been
accounted for as a pooling of interest as described in the notes 1 and 3 to the
supplemental consolidated financial statements. Generally accepted accounting
principles proscribe giving effect to a consummated business combination
accounted for by the pooling of interest method in financial statements that do
not extend through the date of consummation. These financial statements do not
extend through the date of consummation, however, they will become historical
consolidated financial statements of View Tech, Inc. and subsidiary after
financial statements covering the date of consummation of the business
combination are issued.
/s/ Carpenter Kuhen & Sprayberry
Oxnard, California
December 23, 1996
F-1
<PAGE>
VIEW TECH, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1996
----------------------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,465,199 $ 1,157,865
Accounts receivable (net of reserves
of $220,182 and $351,454) 7,907,284 9,908,707
Inventory 1,748,555 1,770,907
Other current assets 916,621 1,378,286
----------- -----------
Total Current Assets 12,037,659 14,215,765
PROPERTY AND EQUIPMENT, NET: 2,720,422 2,737,458
GOODWILL (net of accumulated amortization of $11,121) - 1,654,203
OTHER ASSETS 83,008 153,346
----------- -----------
$14,841,089 $18,760,772
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,910,774 $ 6,503,409
Notes payable to vendor 437,753 197,672
Current portion of long-term debt 2,998,582 2,063,690
Other current liabilities 1,319,583 1,654,013
----------- -----------
Total Current Liabilities 9,666,692 10,418,784
----------- -----------
LONG-TERM DEBT 952,864 820,016
----------- -----------
COMMITMENT 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 5,112,623 and 5,334,033 shares
at June 30 and September 30, 1996, respectively 51,125 53,340
Common stock subscribed, net - 1,390,102
Additional paid-in capital 6,669,268 8,190,017
Retained deficit (2,498,860) (2,111,487)
----------- -----------
4,221,533 7,521,972
----------- -----------
$14,841,089 $18,760,772
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
VIEW TECH, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended Three Month Periods Ended
June 30, September 30,
----------------------------- --------------------------
1996 1995 1996 1995
------------- ------------- ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product sales and service revenues $19,680,386 $10,801,669 $ 6,001,979 $2,693,287
Agency commissions 11,313,350 17,696,300 4,016,505 3,723,403
----------- ----------- ----------- ----------
30,993,736 28,497,969 10,018,484 6,416,690
----------- ----------- ----------- ----------
Costs and Expenses:
Costs of goods sold 14,269,108 7,618,770 4,817,141 2,281,389
Selling and marketing expenses 9,653,345 15,565,601 2,780,434 2,307,376
General and administrative expenses 6,247,785 4,990,572 1,952,191 1,549,898
----------- ----------- ----------- ----------
30,170,238 28,174,943 9,549,766 6,138,663
----------- ----------- ----------- ----------
Income From Operations 823,498 323,026 468,718 278,027
Other Income (Expense) (659,258) (592,853) (67,381) (63,091)
Loss on Sublease, Including Shutdown
of Offices - (1,312,900) - -
----------- ----------- ----------- ----------
Income (Loss) Before Income Taxes 164,240 (1,582,727) 401,337 214,936
Provision for Income Taxes 259,816 (294,083) (13,964) 59,707
----------- ----------- ----------- ----------
Net Income (Loss) $ 424,056 $(1,876,810) $ 387,373 $ 274,643
=========== =========== =========== ==========
Earnings (Loss) Per Share .07 (.50) .07 .05
=========== =========== =========== ==========
Weighted Average Shares Outstanding 5,676,304 3,765,467 6,288,305 5,571,055
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
VIEW TECH, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<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 1,687,750 $16,877 $1,006,890 $ (853,989) $ 169,778
Issuance of common stock 1,380,000 13,800 5,270,414 - 5,284,214
Shares issued under stock
option plan 2,226 22 17,978 - 18,000
Stockholders' distributions - - - (192,117) (192,117)
Net loss - - - (1,876,810) (1,876,810)
----------- --------- ---------- ----------- -----------
Balance, June 30, 1995 3,069,976 30,699 6,295,282 (2,922,916) 3,403,065
Shares issued under stock
option plan 34,200 342 11,170 - 11,512
Issuance of common stock 2,008,447 20,084 406,246 - 426,330
Additional costs of initial public
offering of common stock - - (43,430) - (43,430)
Net income - - - 424,056 424,056
----------- --------- ---------- ----------- -----------
Balance, June 30, 1996 5,112,623 51,125 6,669,268 (2,498,860) 4,221,533
Issuance of common stock 202,857 2,029 1,417,970 - 1,419,999
Shares issued under stock option
plan including deferred tax
effects of exercise of stock
options 18,553 186 102,779 - 102,965
Common stock subscribed, net - - - - 1,390,102
Net income - - - 387,373 387,373
----------- --------- ---------- ----------- -----------
Balance, September 30, 1996 (unaudited) 5,334,033 $53,340 $8,190,017 $(2,111,487) $ 7,521,972
=========== ========= ========== =========== ===========
</TABLE>
The accompanying notes are integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
VIEW TECH, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended Three Month Periods Ended
June 30, September 30,
----------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------ ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 424,056 $(1,876,810) $ 387,373 $ 274,643
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amoritzation 872,969 909,258 266,539 112,455
Provision for bad debts (307,818) 159,300 101,516 (176,881)
Noncash charge relating to loss on sublease including
shutdown of offices - 678,847 - -
Reserve on term loan to PDS 265,000 - - -
Charges in assets and liabilities, net of effects of
acquisitions:
Accounts receivable (1,968,522) (1,488,827) (1,490,954) 216,173
Inventory (679,357) (586,790) (22,352) (779,684)
Prepaids and other assets (617,359) 417,291 (392,054) (320,475)
Accounts payable 2,299,539 532,287 1,110,532 1,321,627
Other accrued liabilities (1,232,266) 557,962 (124,358) (696,546)
----------- ----------- ----------- -----------
Net cash used by operating activities (943,758) (697,482) (163,758) (48,688)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (865,496) (831,070) (223,791) (62,300)
Term loan to PDS (265,000) - - -
Acquisition of VisaTel and GroupNet - - (149,313) -
----------- ----------- ----------- -----------
Net cash used by investing activities (1,130,496) (831,070) (373,104) (62,300)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on line of credit 43,473 418,103 (518,631) (559,160)
Issuance of term note payable to bank - 1,500,000 - -
Long Term debt reduction (1,734,620) (267,652) (583,568) (927,266)
Lease payable reduction (85,531) (60,858) (19,103) (17,818)
Payments on amounts due to former landlord (66,220) (370,467) (44,522) 89,151
Stockholder distributions - (192,117) - -
Issuance of common stock, net 437,842 5,302,214 5,250 427,951
Additional costs for initial public offering of common (43,430) - - (43,430)
stock
Common stock subscribed for private placement - - 1,390,102 -
offering, net
----------- ----------- ----------- -----------
Net cash provided (used) by financing activities (1,448,486) 6,329,223 229,528 (1,030,572)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (3,522,740) 4,800,671 (307,334) (1,141,560)
CASH, BEGINNING OF PERIOD 4,987,939 187,268 1,465,199 4,987,939
----------- ----------- ----------- -----------
CASH, END OF PERIOD $ 1,465,199 $ 4,987,939 $ 1,157,865 $ 3,846,379
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Operating activities reflect:
Interest paid $ 467,061 $ 454,319 $ 85,676 $ 119,754
=========== =========== =========== ===========
Income taxes paid $ 375,480 $ 27,580 $ 600 $ 255,300
=========== =========== =========== ===========
</TABLE>
The accompanying notes are integral part of these financial statements.
F-5
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED 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 select
states throughout the United States. The Company was incorporated under the
laws of California in 1992 and commenced operations in July 1992. In November
1996, the Company changed its state of incorporation from California to
Delaware. Also in November 1996, View Tech acquired USTeleCenters, Inc.
("UST"), which designs, sells, and supports telecommunication systems solutions
for small and medium-sized businesses throughout the United States. UST also
sells telecommunication services on behalf of certain Regional Bell Operating
Companies ("RBOCs"). This business combination was accounted for as a pooling
of interests. Accordingly, the Company's consolidated financial statements have
been restated for all periods prior to the business combination to include the
results of operations, financial position, and cash flows of UST.
UST incurred significant losses in the year ended June 30, 1995, which resulted
in noncompliance under certain of its bank covenants and resulted in UST
restructuring its operations. Certain restructuring costs, primarily severance,
lease termination costs and fixed-asset write-offs were recorded during the year
ended June 30, 1995.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
Principles of Consolidation. The accompanying consolidated financial
---------------------------
statements include the accounts of the Company and its wholly-owned subsidiary.
Intercompany transactions and balances have been eliminated in consolidation.
Fiscal Periods. The Company's Fiscal year end is June 30. UST's year end
--------------
is December 31. The accompanying Financial Statements for UST for the twelve
month periods ended June 30, 1996 and 1995 are presented in order to conform
with ViewTech, Inc.'s year end.
Revenue Recognition. The Company sells both products and services. Product
-------------------
revenue consists of revenue from the sale of video communications and telephone
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.
F-6
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
The Company has agency agreements with various local exchange carriers and
telecommunications companies whereby the Company receives commissions on work
referred to these entities. The agreements are subject to annual renewals. At
June 30, 1995 the Company recognized revenues at the time that it received an
order number for installation or at the time the service was performed by the
local exchange carrier or telecommunications company. During fiscal year ended
June 30, 1996 the Company changed its revenue recognition policy due to
operational and procedural changes made by certain local exchange carriers
whereby the carrier changed the procedures in issuing order numbers. The
Company now recognizes revenue when the installation or service is ordered from
the local exchange carrier or telecommunication company and a reserve is
recorded for orders that will not receive an order number. Certain of the
entities have the right to credit or charge back future commission payments on
orders canceled within a 6 to 10 month period from the date of order. Provision
for cancellations are made at the time revenue is recognized. The Company is
not aware of any possible refunds or charge-backs that these entities might be
seeking, which have not been reserved at June 30, 1996.
In addition, under its agreement with NYNEX, the Company receives commissions on
management contracts. The Company recognizes these revenues at the time the
service is rendered.
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 shares issued to consummate the merger and of
the dilutive effect, if more than 3%, of stock options. All options granted by
the Company at a price less than the initial public offering price during the 12
months preceding the initial public offering (using the treasury stock method
until shares are issued) have been included in the calculation of common and
common equivalent shares outstanding for the periods presented if dilutive.
Cash and Cash Equivalents. The Company considers all highly liquid
-------------------------
investments with a maturity not exceeding three months at the date of purchase
to be cash equivalents. Short-term investments are stated at lower of cost or
market and are insured up to $100,000 by the FDIC.
Inventories. Inventories are accounted for on the basis of the lower of
-----------
cost or market. Cost is determined on a FIFO (first-in, first-out) basis.
Included in inventory is demonstration equipment held for resale in the ordinary
course of business. The Company sells its video demonstration equipment after
the six month holding period required by its primary equipment 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
ten years. Expenditures for maintenance and repairs are charged to expense as
incurred.
F-7
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
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.
UST has elected to be treated as an S corporation for federal income tax
purposes pursuant to Section 1362(a) of the Internal Revenue Code. As an S
corporation, all items of income or loss are passed through to the stockholders
and are reportable on their individual income tax returns. UST has elected to
be treated as a C corporation in California and New York. As a C corporation
UST is responsible for paying all taxes or income allocable to these states.
The Commonwealth of Massachusetts imposes income taxes at the corporate
level on certain S corporations with annual revenues in excess of $6 million.
As such, UST is subject to taxes at the corporate level in this state.
Upon consummation of the business combination, (discussed in note 1 and 3)
UST converted to a C corporation pursuant to Section 1362 of the Internal
Revenue Code. The financial statements reflected herein are for periods while
UST was still an S corporation, and accordingly, the provision for income taxes
on UST income before taxes has been calculated as discussed above.
Concentration of Risk. Items that potentially subject the Company to
---------------------
concentrations of credit risk consist primarily of investments in excess of FDIC
limits and the dependence on a major equipment vendor.
Approximately 38% of the Company's revenues are attributable to the sale of
equipment manufactured by PictureTel and approximately 21% of revenues are
attributable to the sale of network products and services provided by NYNEX.
Termination or change of the Company's business relationship with PictureTel
and/or NYNEX, disruption in supply, failure of these suppliers to remain
competitive in quality, function or price, or a determination by such suppliers
to reduce reliance on independent distributors such as the Company could have a
material adverse effect on the Company.
Reclassifications. The Company has reclassified travel expenses relating
-----------------
to technical services of $51,442 to cost of revenue from general and
administrative expense for the year ended June 30, 1995 to conform to the
current years presentation.
NOTE 3 -- BASIS OF PRESENTATION
- -------------------------------
On November 29, 1996, the Company acquired UST through a business
combination accounted for as a pooling-of-interests for financial reporting
purposes. Accordingly, the financial statements have been restated to include
all the historical results for UST.
A reconciliation of consolidated total revenues and net income to amounts
applicable to the separate pooled companies prior to the date of combination
(effective, November 29, 1996) is as follows:
F-8
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------
1996 1995
-----------------------------
<S> <C> <C>
Total revenues:
View Tech............................................... $13,346,103 $ 6,963,487
USTeleCenters........................................... 17,647,633 21,534,482
----------- -----------
$30,993,736 $28,497,969
=========== ===========
Net income (loss):
View Tech............................................... $ (696,060) $ 458,890
USTeleCenters........................................... 1,120,116 (2,335,700)
----------- -----------
$ 424,056 $(1,876,810)
=========== ===========
Net income (loss) per share (fully-diluted basis)
View Tech............................................... $ (.13) $ .12
USTeleCenters........................................... .20 (.62)
----------- -----------
$ .07 $ (.50)
=========== ===========
</TABLE>
NOTE 4 -- CASH
- ---------------
Cash is summarized as follows:
<TABLE>
<CAPTION>
June 30,
------------
1996
------------
<S> <C>
Cash in money market...................................................... $1,014,356
Cash in other accounts.................................................... 450,843
----------
$1,465,199
===========
</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.
F-9
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
NOTE 5 -- INVENTORY
- -------------------
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30,
------------
1996
------------
<S> <C>
Finished goods.................................. $ 625,365
Demonstration equipment......................... 488,148
Spare parts..................................... 695,042
----------
1,808,555
Less reserve for obsolescence................... 60,000
----------
$1,748,555
==========
</TABLE>
NOTE 6 -- PROPERTY AND EQUIPMENT
- --------------------------------
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
June 30,
------------
1996
------------
<S> <C>
Computer equipment and software................. $1,049,367
Equipment....................................... 1,199,034
Furniture and fixtures.......................... 587,421
Leasehold improvements.......................... 321,889
Autos........................................... 18,931
----------
3,176,642
Less accumulated depreciation................... 1,696,614
----------
1,480,028
Leased equipment under capital leases,
net of accumulated amortization................ 1,240,394
----------
$2,720,422
==========
</TABLE>
F-10
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
NOTE 7-- LONG-TERM DEBT
- -----------------------
At June 30, 1996 long-term debt consisted of the following:
<TABLE>
<CAPTION>
June 30,
-----------
1996
-----------
<S> <C>
Revolving line of credit with a bank.................. $1,868,105
Capital lease obligations (see Note-8)................ 1,379,380
Term note due to a bank............................... 430,000
Due to landlords (see Note-9)......................... 217,165
Deferred rent......................................... 56,796
----------
3,951,446
Less current maturities............................... 2,998,582
----------
$ 952,864
==========
</TABLE>
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.
The Company's wholly owned subsidiary maintains a revolving line of credit
with a bank. The bank has a security interest in the Company's assets. In
addition, the Company has agreed, among other things, to maintain certain
financial covenants and ratios. As of June 30, 1996, the Company's subsidiary
was in compliance with the covenants or had received waivers under the
Forbearance Agreement. Under the terms of the Forbearance Agreement, the
subsidiary may borrow up to the lesser of the financial borrowing base, or
$2,000,000. At June 30, 1996, approximately $1,868,000 was utilized under the
revolving line of credit. Interest on the outstanding balance is payable
monthly at the bank's base rate (8.25% at June 30, 1996) plus 1.5%. The
outstanding credit facilities are guaranteed by the Company.
F-11
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996
On November 27, 1996, the revolving line of credit and Forbearance
Agreement was amended and extended to March 31, 1997. The amended revolving
credit agreement provided for monthly reductions in the borrowing base of
$50,000 from July to September 1996.
The Company maintains a $1,500,000 term note with a bank. Under the term
note, the subsidiary is required to make principal payments in twenty (20)
equal, consecutive, monthly payments of $75,000 on the last day of each month,
beginning on April 30, 1995. Interest under the note accrued at the bank's base
rate plus 2.5% until March 31, 1995, and then, at the bank's base rate plus
4.5%. Interest is payable on the last day of each month. On June 3, 1996, the
term note agreement was amended to bear interest at the bank's base rate. The
outstanding principal balance of $430,000 and accrued interest under the term
note were paid in full on September 1, 1996.
The Company's subsidiary had maintained a lease line-of-credit agreement
with a bank which was converted into a term note as part of the forebearance
agreement. At June 30, 1996, there was approximately $1,045,000 outstanding
under this facility. The subsidiary is required to maintain certain restrictive
covenants, including profitability and liquidity covenants. Amounts outstanding
bear interest at rates ranging from 5.6% to 8.3%. As of June 30, 1996, the
subsidiary was in compliance with the covenants or had received waivers under
the Forbearance Agreement.
In January 1996, the Company's subsidiary converted approximately $700,000
payable to an equipment vendor into a promissory note bearing interest at 9% per
annum. Principal and interest are scheduled to be repaid in monthly
installments of approximately $73,000 from February to November 1996.
NOTE 8 -- 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:
<TABLE>
<CAPTION>
June 30, 1996
-------------
<S> <C>
Equipment........................................... $ 992,764
Furniture and fixtures.............................. 1,332,430
----------
2,325,194
Less accumulated amortization....................... 1,084,800
----------
$1,240,394
==========
</TABLE>
The following is a schedule of future minimum lease payments required
under capital leases, together with their present value as of June 30, 1996:
F-12
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Year Ending June 30,
-------------------
<S> <C>
1997................................................ $ 527,977
1998................................................ 379,180
1999................................................ 311,300
2000................................................ 133,468
2000 and thereafter................................. 27,455
----------
$1,379,380
==========
Net minimum lease payment........................... $1,585,740
Less amount representing interest................... 206,360
----------
Present value of net minimum lease payments......... $1,379,380
==========
</TABLE>
NOTE 9 -- AMOUNTS DUE TO LANDLORDS
- -----------------------------------
In 1994, the Company's wholly owned subsidiary entered into a sublease
agreement for its previously occupied facility. Under the terms of the
sublease, the subsidiary is still primarily liable for the amounts due under the
original lease. Under the terms of the sublease agreement, the subsidiary is
required to make payments to the landlord for the monthly differential between
the original lease amount (approximately $23,700 per month) and the sublease
income (approximately $14,000 per month). The subsidiary is required to pay
approximately $9,700 per month through June 1997. The balance of net future
amounts due to the former landlord is $97,742 as of June 30, 1996.
In 1995, the subsidiary financed $150,880 of leasehold improvements through
an allowance from the landlord. As of June 30, 1996, approximately $86,000 is
outstanding for these improvements. This amount is being repaid in monthly
installments of approximately $5,000 through December 1997. In connection with
the restructuring discussed in Note 1, the subsidiary wrote off these
improvements and recorded a loss of approximately $151,000. Additionally, the
subsidiary entered into a sublease agreement for this facility. The subsidiary
recorded a loss of approximately $104,000 which represented the difference
between the total future payments reduced by sublease amounts paid directly to
the landlord. In the event that the sublease fails to make its required monthly
payments of approximately $12,000 through August 1998, the Company is still
primarily liable for such sums.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
- -----------------------------------------
The Company leases its facilities in California, Colorado, Georgia,
Massachusetts, New York, Tennessee, and Texas, under operating leases expiring
through September 30, 2001. Certain leases require the Company to pay increases
in real estate taxes, operating costs and repairs over certain base year
amounts. The Company also leases certain equipment. Lease payments for the year
ended June 30, 1996 and 1995 were approximately $1,160,000 and $ 885,000,
respectively.
Minimum future rental commitments under non cancelable operating leases
(including amounts due to landlords, net of any sublease income) are as follows:
F-13
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Year Ending June 30,
- -------------------
<S> <C>
1997........................................ $ 908,554
1998........................................ 636,073
1999........................................ 437,823
2000........................................ 396,245
2001 and thereafter......................... 434,400
----------
$2,813,095
==========
</TABLE>
The Company has received rent concessions during the first year of certain
leases, which are being deferred and amortized over the term of the lease.
The Company's primary equipment supplier, PictureTel Corporation
("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.
The subsidiary is named in employee-related lawsuits, in which the
plaintiffs are seeking undisclosed damages. The Company is vigorously defending
itself against such litigation and does not expect the outcome to have a
material impact on its financial position.
NOTE 11 -- 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.
In November 1996, the Company increased the number of shares of common stock
authorized for issuance from 10,000,000 to 20,000,000 and changed the par value
of it's stock from .01 to .0001 per share.
Public Stock Offering. On June 15, 1995 the Company completed an initial
---------------------
public stock offering, "IPO" for the sale of 1,200,000 shares of its common
stock at $5.00 per share, less offering expenses. On June 25, 1995 the Company
transferred and closed the sale of an additional 180,000 shares of it's 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
F-14
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
years commencing June 15, 1995. In addition, the Company issued the underwriters
50,000 warrants at an exercise price of $.1675 per warrant or 135 % of the
public offering price. Each warrant is exercisable into one share of common
stock at a price of $6.75 per share for a three year period commencing on June
15, 1995.
Preferred Stock. On February 1, 1995, the shareholders approved an
---------------
amendment to the Articles of Incorporation to authorize the issuance of
5,000,000 shares of $.01 par value Preferred Stock. The Preferred Stock may be
issued in one or more series with such rights and preferences as may be
determined by the Board of Directors. No Shares of Preferred Stock have been
issued.
Stock Option Plan. In July 1994, the Company began granting stock options
-----------------
to key employees and certain non-employee directors and consultants to the
Company. The options are intended to provide incentive for such persons' service
and future services to the Company thereby promoting the interest of the Company
and its shareholders.
The stock option plan generally requires the exercise price of options to
be not less than the estimated fair market value of the stock at the date of
grant. Options vest over a maximum period of four years and may be exercised in
varying amounts over their respective terms. In accordance with the Plan, all
outstanding options shall become immediately exercisable upon a greater than 30%
change in control of the Company.
Activity with respect to the Stock Option Plan has been as follows:
<TABLE>
<CAPTION>
Shares Exercise Price
--------- --------------
<S> <C> <C>
Options outstanding, June 30, 1994...... 16,560 $1.000 - 2.200
Granted............................ 380,600 .250 - 5.000
Exercised.......................... (2,208) 2.000
Cancelled.......................... (11,605) .375 - 2.000
--------- --------------
Options outstanding, June 30, 1995...... 383,347 .250 - 5.000
Granted............................ 682,503 6.375 - 7.750
Exercised.......................... (34,300) .250 - .375
Cancelled.......................... (23,447) .250 - 6.625
---------
Options outstanding, June 30, 1996...... 1,008,103
=========
</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.
Upon consummation of the business combination on November 29, 1996 (as
discussed in notes 1 and 3) all unvested stock options became immediately
exercisable. At such time, the Company assumed all unexercised UST stock
options, 184,003, based on a conversion ratio. These options, assumed upon
consummation, are also fully vested and immediately exercisable.
NOTE 12 -- PENSION AND PROFIT SHARING PLAN
- -------------------------------------------
The Company and its wholly owned subsidiary participate in 401(k)
retirement plans. Under plan 1, the Company's employees may contribute up to
15% of their compensation per year, with the
F-15
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
Company matching 25% of the employees' contributions not to exceed 5% of
compensation. All employees with six months of continuous service are eligible
to participate in the plan. Company contributions vest at 20% annually over five
years beginning on the second year of service.
The Company's wholly owned subsidiary participates in plan 2. Under this
plan, employees may contribute up to 15% of their compensation. The subsidiary
may match employee contributions. Subsidiary contributions vest at 20% annually
over five years.
Employer contributions to the 401(k) plans for the years ended June 30,
1996 and 1995 were approximately $67,000 and $57,000, respectively.
NOTE 13 -- 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. Also included in other income (expense) at June 30, 1996, was
approximately $344,000 of net interest expense. Other income (expense) at June
30, 1995 was primarily comprised of net interest expense.
NOTE 14 -- 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........................ (93,100) (68,684)
Deferred:
Federal...................... 128,309 (34,031)
State........................ 46,457 (6,328)
-------- ---------
$259,816 $(294,083)
======== =========
</TABLE>
Total income tax expense differs from the expected tax expense (computed by
multiplying the United States federal statutory rate of approximately 35 percent
for the year ended June 30, 1996 and 1995 to income before income taxes) as a
result of the following:
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Computed "expected" tax (expense) benefit............. $(57,484) $ 553,955
State tax expense, net of federal benefit............. (9,608) 92,590
</TABLE>
F-16
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<S> <C> <C>
S corporation tax differential.............................. 424,346 (817,495)
Other, net.................................................. (97,438) (123,133)
-------- ---------
$259,816 $(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:
Deferred tax asset:
<TABLE>
<S> <C>
Reserves and allowances................ $ 22,677
Net operating loss carryforward........ 165,007
--------
$187,684
========
</TABLE>
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 15 -- SEGMENT INFORMATION (UNAUDITED)
- -------------------------------------------
The Company's operations are classified into two primary industry segments:
(a) product sales and service revenue generated from the sale of
telecommunication equipment and of videoconferencing and related services which
involve the marketing and installation of video communication systems and
providing continuing services related to installed systems, and (b) marketing
telecommunication services on behalf of certain RBOCS and exchange carriers for
an agency commission. Following is a summary of segment information for the
twelve months ended June 30, 1996 and 1995:
June 30, 1996
<TABLE>
<CAPTION>
Product Sales
and Service Agency
Revenues Commissions Combined
------------- ----------- ------------
<S> <C> <C> <C>
Total Revenue $19,680,386 $11,313,350 $30,993,736
===========
Operating profit 743,576 4,225,000 $ 4,968,576
General corporate expenses (4,145,078)
Other expense (659,258)
-----------
</TABLE>
F-17
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<S> <C> <C> <C>
Income from continuing operations
before income taxes $ 164,240
===========
Identifiable assets at June 30, 1996 2,404,065 1,257,000 $ 3,661,065
Corporate assets 11,180,024
-----------
Total assets at June 30, 1996 $14,841,089
===========
June 30, 1995
<CAPTION>
Product Sales
and Service Agency
Revenue Commissions Combined
------------- ----------- ------------
<S> <C> <C> <C>
Total Revenue $10,801,669 $17,696,300 $28,497,969
===========
Operating profit 282,513 4,517,000 $ 4,799,513
General corporate expenses (4,476,487)
Other expense (1,905,753)
-----------
Income from continuing operations
before income taxes $(1,582,727)
===========
</TABLE>
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................... $1,260,935 $1,726,132
Less lease financing............................. (395,439) (895,062)
---------- ----------
Cash paid for fixed assets $ 865,496 $ 831,070
========== ==========
</TABLE>
During the twelve month period ended June 30, 1996, the Company converted
approximately $700,000 of accounts payable to a vendor into a term note. During
the twelve month period ended June 30, 1995, the Company acquired $150,880 of
leasehold improvements under allowance for amounts due to landlords.
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 on 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
F-18
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
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.
NOTE 18 -- SUBSEQUENT EVENTS (UNAUDITED)
- -----------------------------------------
VISTATEL INTERNATIONAL, INC.
- ----------------------------
Effective July 1, 1996, the Company acquired the net assets of VistaTel
International, Inc., ("VistaTel") a private company, based in Boca Raton,
Florida, which is a supplier of video conferencing products and services within
the state of Florida and is one of PictureTel's national re-sellers. View Tech
issued 52,857 shares of common stock, valued at $7.00 per share, to the sole
shareholder of VistaTel. The excess of the acquisition price over the net
assets acquired of approximately $339,000 will be accounted for as goodwill and
amortized over 15 years.
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 UST, an authorized sales agent for several of the
regional bell operating companies. The merger was consummated, effective
November 29, 1996, and was valued at $16.5 million. The transaction was
accounted for as a pooling of interests in which UST's shareholders exchanged
all of their outstanding UST shares and options for View Tech common stock and
options, respectively. UST shareholders received 2,240,976 shares of ViewTech,
Inc. common stock in exchange for all outstanding shares held by UST
shareholders.
F-19
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
The Company will require additional working capital to efficiently operate
its business and to adequately provide for its working capital needs. In this
regard, the Company is in the process of increasing the Note from $500,000 to
$1,750,000 and is seeking private equity financing of up to approximately
$3,000,000 to satisfy its working capital needs. In addition, if the Company
continues its expansion and/or acquisition activities, it will require
additional capital to finance such activities.
Exclusive of the cash required to repay the UST debt obligations on March
31, 1997 and to fund additional expansion activities, the Company believes that
its existing cash balances, combined with the proceeds from its anticipated
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.
The inability to obtain required additional financing could limit the Company's
ability to operate the Company efficiently or to continue its expansion
activities. 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 efficiently operate the combined companies.
PRIVATE PLACEMENT
- -----------------
Subsequent to June 30, 1996, the Company received subscriptions for equity
capital of approximately $1,500,000 through the private placement of 300,281
shares of common stock. The private placement was closed on October 31, 1996
with the Company realizing net proceeds of $1,380,000 million. The Company used
the net proceeds for general working capital purposes and for working capital
loans made to UST in connection with the merger.
F-20
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1 - GENERAL
- ----------------
View Tech, Inc. markets and installs video communications systems and
provides continuing services related to installed systems to customers in select
states throughout the United States. In November 1996, View Tech acquired
USTeleCenters, Inc. ("UST") which designs, sells and supports telecommunication
systems solutions for small and medium-sized businesses throughout the United
States. UST also sells telecommunication services on behalf of certain Regional
Bell Operating Companies ("RBOCs"). The business combination (the "Merger") was
accounted for as a pooling of interests. Accordingly, the Company's consolidated
financial statements have been restated for all periods prior to the business
combination to include the results of operations, financial position and cash
flows of UST.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the rules of the Securities and Exchange
Commission, although the Company believes that the disclosures included in these
financial statements are adequate to make the information not misleading. The
financial statements presented herein should be read in conjunction with the
audited financial statements and notes thereto included in this Form SB-2 for
the fiscal years ended June 30, 1996 and 1995.
NOTE 2 - NET INCOME 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 shares issued to consummate the merger and of the dilutive
effect, if more than 3%, of stock options and common stock purchase warrants if
dilutive.
NOTE 3 - LINES OF CREDIT
- ------------------------
The Company maintains a $500,000 credit facility (the "Note") to assist in
meeting its working capital needs, if required. The Note expires on February 28,
1997 and provides for interest at the prime rate plus 1.5% per annum. The
Company is currently in the process of renewing this credit facility to provide
for a borrowing limit of up to $1.750 million to provide for some of its working
capital needs. 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 September 30, 1996, although the Company has as of
September 30, 1996, five outstanding standby letters of credits aggregating
$274,000. Four of such standby letters of credit were issued in favor of one
leasing company in connection with certain capital lease transactions relating
to the purchase of computer equipment and furniture, and one is issued to a
surety company in connection with its issuance of a performance bond on behalf
of 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 $226,000.
The Company's wholly-owned subsidiary, UST, maintains a revolving credit
agreement with a bank. The agreement, pursuant to the terms of a forbearance
agreement, as amended, allows the subsidiary to borrow up to the lesser of the
financial borrowing base, as defined, or $1.850 million. The bank has a security
interest in the subsidiary's assets and the Company is guaranteeing the
repayment of amounts borrowed under the line. In addition, the subsidiary has
agreed, among other things, to maintain certain financial covenants and ratios,
as defined. As of September 30, 1996, UST was in
F-21
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
compliance with the covenants or had received waivers under the forbearance
agreement. Interest on the outstanding balance is payable monthly at the bank's
base rate (8.25% at September 30, 1996) plus 1.5%. In November 1996, UST amended
its revolving line of credit and forbearance agreement with the bank whereby the
revolving line of credit and forbearance agreement have been extended to March
31, 1997.
In addition, UST had maintained a lease line-of-credit agreement with a
bank which was converted into a term note as part of the forbearance agreement.
At September 30, 1996, there was approximately $973,600 outstanding under this
facility. UST is required to maintain certain restrictive covenants, including
profitability and liquidity covenants. Amounts outstanding bear interest at
rates ranging from 5.6% to 8.3%. As of September 30, 1996, UST was in compliance
with the covenants or had received waivers under the forbearance agreement.
UST's lines of credit are due on March 31, 1997. UST is subject to a
forbearance agreement which enables the lender to foreclose on the debt if UST's
financial condition falls below certain minimum standards. The forbearance
agreement, as amended, was originally entered into on June 14, 1995. Based on
UST's relationship with the lender, the Company's management anticipates that
the lender will refinance the lines of credit or extend the date on which the
lines of credit must be paid. However, if the lender does not refinance such
lines of credit and the Company has not raised additional equity and/or arranged
for alternative bank financing, the Company will not have sufficient cash to
repay the lender when the debt comes due. There can be no assurance that View
Tech will be able to renegotiate the lines of credit with the lender, and if the
lender requires payment in March 1997, there can be no assurance that View Tech
will be able to raise the additional funds necessary to meet the Company's
operating needs and capital requirements or that such funds, if available, can
be obtained on terms acceptable to the Company. The failure to refinance the
lines of credit, raise additional capital or obtain additional bank financing
will have a material adverse effect on the Company's business, financial
condition and results of operations.
NOTE 4 - COMMITMENTS
- --------------------
The Company executed a new office lease agreement on October 11, 1996 for
approximately 5,946 square feet to house its Atlanta operations. The lease
provides for monthly rental payments of $10,653, plus its portion of building
operating expenses. The lease commenced on December 1, 1996 for a term of three
years. The office space previously occupied by the Company will be sub-let.
NOTE 5 - ACQUISITIONS
- ---------------------
VISTATEL INTERNATIONAL, INC.
- ----------------------------
Effective July 1, 1996, View Tech acquired the net assets of VistaTel
International, Inc. ("VistaTel"), a private company based in Boca Raton,
Florida, which was 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 shareholders of VistaTel as consideration for the acquisition. The
excess of the acquisition price of $339,000 over the net assets acquired is
being accounted for as goodwill which is amortized over 15 years. The Company
continues to operate VistaTel's previous business, which sells and services
video conferencing systems and provides network bridging services for
businesses.
F-22
<PAGE>
VIEW TECH, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
GROUPNET, INC.
- --------------
Pursuant to a merger agreement dated August 30, 1996, View Tech acquired
GroupNet, Inc. ("GroupNet") for cash and Common Stock valued at $1.330 million.
The purchase price consisted of 150,000 shares of Common Stock valued at $7.00
per share or $1.050 million in the aggregate and $330,000 in cash, of which
$110,000 was paid on August 30, 1996 upon execution of the agreement and
$220,000 is payable on or before January 15, 1997. The excess of the acquisition
price over the net assets acquired of approximately $1.330 million is being
accounted for as goodwill which is amortized over 15 years. GroupNet, based in
Boston, Massachusetts, was an authorized PictureTel Select Dealer in video
communication product distribution in the northeastern United States. View Tech
is continuing 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, View Tech announced that it had entered into a
definitive agreement of merger with UST, which was an authorized sales agents
for several of the regional bell operating companies. The Merger was
consummated, effective November 29, 1996, and was valued at $16.500 million.
The transaction was accounted for as a pooling of interests in which the UST's
shareholders exchanged all of their outstanding UST shares and options for View
Tech Common Stock and options, respectively, UST shareholders received 2,240,976
shares of View Tech Common Stock in exchange for all outstanding shares held by
UST shareholders.
PRIVATE PLACEMENT
- -----------------
At September 30, 1996, the Company had received common stock subscriptions
for equity capital of approximately $1.500 million through the private placement
of 300,281 shares of common stock. The private placement was terminated on
October 31, 1996 with the Company realizing net proceeds of approximately $1.390
million. The Company is using the net proceeds for general working capital
purposes and to replenish its cash loaned to UST in connection with the Merger.
F-23
<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 (except with respect to
the matters discussed in Note 18, as to which
the date is December 23, 1996)
F-24
<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-25
<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-26
<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-27
<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-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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-36
<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-37
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE 18 - SUBSEQUENT EVENTS (UNAUDITED)
- ---------------------------------------
VISTATEL INTERNATIONAL, INC.
- ----------------------------
Effective July 1, 1996, the Company acquired the net assets of VistaTel
International, Inc., ("VistaTel") a private company, based in Boca Raton,
Florida, which is a supplier of video conferencing products and services within
the state of Florida and is one of PictureTel's national re-sellers. View Tech
issued 52,857 shares of common stock, valued at $7.00 per share, to the sole
shareholder of VistaTel. The excess of the acquisition price over the net
assets acquired of approximately $339,000 will be accounted for as goodwill and
amortized over 15 years.
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 UST, an authorized sales agent for several of the
regional bell operating companies. The merger was consummated, effective
November 29, 1996, and was valued at $16.5 million. The transaction was
accounted for as a pooling of interests in which UST's shareholders exchanged
all of their outstanding UST shares and options for View Tech common stock and
options, respectively. UST shareholders received 2,240,976 shares of ViewTech,
Inc. common stock in exchange for all outstanding shares held by UST
shareholders.
F-38
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
The Company will require additional working capital to efficiently operate
its business and to adequately provide for its working capital needs. In this
regard, the Company is in the process of increasing the Note from $500,000 to
$1,750,000 and is seeking private equity financing of up to approximately
$3,000,000 to satisfy its working capital needs. In addition, if the Company
continues its expansion and/or acquisition activities, it will require
additional capital to finance such activities.
Exclusive of the cash required to repay the UST debt obligations on March
31, 1997 and to fund additional expansion activities, the Company believes that
its existing cash balances, combined with the proceeds from its anticipated
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.
The inability to obtain required additional financing could limit the Company's
ability to operate the Company efficiently or to continue its expansion
activities. 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 efficiently operate the combined companies.
PRIVATE PLACEMENT
- -----------------
Subsequent to June 30, 1996, the Company received subscriptions for equity
capital of approximately $1,500,000 through the private placement of 300,281
shares of common stock. The private placement was closed on October 31, 1996
with the Company realizing net proceeds of $1,380,000 million. The Company used
the net proceeds for general working capital purposes and for working capital
loans made to UST in connection with the merger.
F-39
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIEW TECH, INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,155,565 $ 1,463,199
Accounts receivable (net allowance for doubtful
accounts of $29,756 and $23,756, respectively) 6,141,682 4,720,262
Notes receivable 1,008,722 --
Inventory 1,264,398 1,104,577
Prepaid and other current assets 1,096,692 709,671
----------- -----------
Total Current Assets 10,667,059 7,997,709
Property and equipment, net 946,251 820,411
Deferred charge - goodwill (net of accumulated
amortization of $11,121) 1,654,203 --
Other assets 101,343 31,001
----------- -----------
$13,368,856 $ 8,849,121
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,664,593 $ 3,254,527
Note payable 220,000 --
Other current liabilities 576,703 501,406
----------- -----------
Total Current Liabilities 5,461,296 3,755,933
----------- -----------
Long-Term Liabilities 223,181 242,283
----------- -----------
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
3,093,157 and 2,890,200 shares at September
30, 1996 and June 30, 1996, respectively 30,931 28,902
Common stock subscribed, net 1,390,102 --
Paid-in capital 6,768,921 5,253,234
Retained deficit (505,575) (431,231)
----------- -----------
7,684,379 4,850,905
----------- -----------
$13,368,856 $ 8,849,121
----------- -----------
</TABLE>
See accompanying notes to financial statements
F-40
<PAGE>
VIEW TECH, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues $ 5,364,952 $ 1,689,673
Cost of Revenues 3,786,229 1,160,358
----------- -----------
Gross Profit 1,578,723 529,315
----------- -----------
Operating Expenses:
Selling expenses 660,931 245,496
General and administrative expenses 1,054,291 585,993
----------- -----------
1,715,222 831,489
----------- -----------
Loss from Operations (136,499) (302,174)
Other Income 14,120 56,216
----------- -----------
Loss Before Income Taxes (122,379) (245,958)
Provision for Income Taxes 48,036 90,607
----------- -----------
Net Loss $ (74,343) $ (155,351)
----------- -----------
Loss Per Share $ (.03) $ (.05)
----------- -----------
Weighted Average Shares Outstanding 2,959,248 2,858,750
----------- -----------
</TABLE>
See accompanying notes to financial statements
F-41
<PAGE>
VIEW TECH, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (74,343) $ (155,351)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 68,739 20,455
Provision for bad debts 6,000 --
Changes in assets and liabilities net
of effects of acquisitions:
Accounts receivable (815,435) (136,973)
Inventory (159,821) (537,784)
Prepaids and other assets (326,136) (305,166)
Accounts payable 885,702 751,405
Other accrued liabilities 20,769 (328,803)
---------- ----------
Net cash used by operating
activities (394,525) (692,217)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (134,795) (59,231)
Term loan to USTeleCenters, Inc. (1,000,000) --
Acquisitions of VistaTel and GroupNet (149,313) --
---------- ----------
Net cash used by investing
activities (1,284,108) (59,231)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment on capital lease
obligations (19,103) (16,841)
Repayment of long-term debt -- (331,466)
Issuance of common stock -- 1,625
Additional costs for initial public
offering of common stock -- (43,430)
Common stock subscribed for private
placement offering, net 1,390,102 --
---------- ----------
Net cash provided (used) by
financing activities 1,370,999 (390,112)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (307,634) (1,141,560)
CASH AND CASH EQUIVALENTS, beginning
of period 1,463,199 4,987,939
---------- ----------
CASH AND CASH EQUIVALENTS, end of
period $1,155,565 $3,846,379
---------- ----------
SUPPLEMENTAL DISCLOSURES:
Operating activities reflect:
Interest paid $ 9,446 $ 8,799
---------- ----------
Income taxes paid $ 600 $ 255,300
---------- ----------
</TABLE>
See accompanying notes to financial statements
F-42
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - GENERAL
- ----------------
View Tech, Inc. markets and installs video communications systems and
provides continuing services related to installed systems.
The information for the three months ended September 30, 1996 and 1995 has
not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for such periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the rules of the Securities and Exchange
Commission, although the Company believes that the disclosures included in these
financial statements are adequate to make the information not misleading. The
financial statements presented herein should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1996.
NOTE 2 - NET INCOME PER SHARE
- -----------------------------
Net income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period,
including common stock options and common stock purchase warrants when dilutive.
NOTE 3 - LINE OF CREDIT
- -----------------------
The Company maintains a $500,000 credit facility (the "Note") to meet its
working capital needs, if required. Although the Note expired on November 1,
1996, the Company is presently working with the bank to renew the Note at a
greater amount through November 1, 1997. The Note 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 September
30, 1996, although the Company has as of September 30, 1996, five outstanding
standby letters of credits aggregating $274,000 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
$226,000.
F-43
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - COMMITMENTS
- --------------------
The Company executed a new office lease agreement on October 11, 1996 for
approximately 5,946 square feet to house its Atlanta operations. The lease
provides for monthly rental payments of $10,653, plus its portion of building
operating expenses. The lease will commence on December 1, 1996 for a term of
three years. The office space previously occupied by the Company will be sub-
let.
NOTE 5 - 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 was a supplier of video conferencing products and services within
the State of Florida and was one of PictureTel's national re-sellers. The
acquisition was accounted for using the purchase method of accounting and
accordingly, acquisition costs have been allocated to the assets acquired and
liabilities assumed based upon their fair values at the date of acquisition.
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 costs over the
net assets acquired of $354,919 is accounted for as goodwill and is being
amortized over 15 years. The fair value of the assets acquired, excluding
goodwill, and the liabilities assumed was $322,846 and $284,227, respectively.
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
million. 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 November 15, 1996 and January
15, 1997, respectively. The acquisition was accounted for using the purchase
method of accounting and accordingly, acquisition costs have been allocated to
the assets acquired and liabilities assumed based upon their fair values at the
date of acquisition. The excess of acquisition costs over the net assets
acquired of $1.310 million is accounted for as goodwill and is being amortized
over 15 years. The fair value of the assets acquired, excluding goodwill, and
the liabilities assumed was $380,036 and $289,667, respectively. 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 GroupNet's Boston and New York offices.
Following is summarized pro forma operating results assuming that the
Company had acquired GroupNet on July 1, 1995.
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenues $ 5,587,711 $ 1,867,604
Loss before income taxes (173,031) (224,008)
Net loss (104,734) (142,181)
Net loss per share (.03) (.05)
Weighted average shares outstanding 3,109,248 3,008,750
</TABLE>
The summarized pro forma operating results include the historical operating
results for GroupNet for the two months ended August 30, 1996 and the three
months ended September 30, 1995. GroupNet was an S Corporation prior to its
acquisition by the Company, as such, GroupNet was not generally subject to
federal income taxes. Therefore, the pro forma operating results for GroupNet
include a pro forma tax provision at an effective rate of 40%. The summarized
pro forma information may not be indicative of the results of operations that
would have occurred if the acquisition had been concluded on July 1, 1996 or
1995 or which may be achieved in the future.
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 $18.500 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 $2.500 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
F-44
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - ACQUISITIONS (CONT.)
- -----------------------------
or about November 30, 1996. It is anticipated that USTeleCenters' shareholders
and optionholders (upon exercise of their options) will receive up to 2.500
million shares of View Tech common stock.
During July and August 1996, the Company advanced an aggregate of $1.000
million to USTeleCenters for working capital purposes and in order for
USTeleCenters to repay certain bank debt due on September 1, 1996. The $1.000
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 aggregating approximately $2.500 million
payable to USTeleCenters' primary lender (and such lender's affiliate) and is
required to pay certain merger costs of approximately $1.800 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
- -----------------
At September 30, 1996, the Company had received common stock subscriptions
for equity capital of approximately $1.500 million through the private placement
of 300,281 shares of common stock. The private placement was terminated on
October 31, 1996 with the Company realizing net proceeds of approximately $1.390
million. The Company is using the net proceeds for general working capital
purposes and to replenish its cash loaned to USTeleCenters in connection with
the proposed merger.
F-45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholders of
USTeleCenters, Inc.
We have audited the accompanying balance sheet of USTeleCenters, Inc., as of
June 30, 1996 and the related statements of operations, stockholders' equity and
cash flows for the twelve month periods 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. The
financial statements of USTeleCenters, Inc. as of June 30, 1995, were audited by
other auditors whose report, dated December 20, 1996, is attached.
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 USTeleCenters, Inc., as of June
30, 1996, and the results of its operations and cash flows for the twelve month
periods then ended, in conformity with generally accepted accounting principles.
CARPENTER KUHEN & SPRAYBERRY
Oxnard, California
December 21, 1996
F-46
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To USTeleCenters, Inc.:
We have audited the statements of operations, stockholders' deficit and cash
flows of USTeleCenters, Inc. (a Massachusetts corporation) for the year ended
June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and the cash flows of
USTeleCenters, Inc. for the year June 30, 1995 in conformity with generally
accepted accounting principles.
As discussed in notes 1 and 14, USTeleCenters, Inc. consummated a merger
agreement with View Tech, Inc. in November 1996.
/s/ Arthur Andersen LLP
Boston, Massachusetts
December 20, 1996
F-47
<PAGE>
USTELECENTERS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
June 30, 1996
1996 (unaudited)
----------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,000 $ 2,300
Accounts receivable, (net of reserves of $196,426
and $321,698, respectively) 3,187,022 3,767,025
Inventory 643,978 506,509
Other current assets 206,950 272,872
----------- -----------
Total current assets 4,039,950 4,548,706
PROPERTY AND EQUIPMENT, NET 1,900,011 1,791,207
OTHER ASSETS 52,007 52,003
----------- -----------
$ 5,991,968 $ 6,391,916
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,656,247 $ 1,838,816
Customer deposits 141,759 187,121
Accrued expenses 768,404 890,189
Note payable to vendor 437,753 197,672
Note payable - 1,000,000
Current portion of long-term debt 2,734,096 1,699,983
Current portion of amounts due to landlords 172,500 143,707
----------- -----------
Total current liabilities 5,910,759 5,957,488
----------- -----------
LONG-TERM DEBT 609,120 501,214
----------- -----------
AMOUNT DUE TO LANDLORDS 44,665 28,936
----------- -----------
DEFERRED RENT 56,796 66,684
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES - -
STOCKHOLDERS' EQUITY:
Common stock, par value $.01,
authorized 11,000,000 shares,
issued and outstanding 8,984,157 and 9,059,157
shares at June 30, and September 30, 1996, respectively 89,842 90,592
Paid-in capital 1,348,415 1,352,915
Stockholder distributions (2,027,674) (2,027,674)
Retained earnings (deficit) (39,955) 421,761
----------- -----------
(629,372) (162,406)
----------- -----------
$ 5,991,968 $ 6,391,916
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
USTELECENTERS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Twelve Month Period Ended Three Month Periods Ended
June 30, September 30,
------------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Agency commissions $11,313,350 $17,696,300 $4,016,505 $3,723,403
Product sales and service revenues 6,334,283 3,838,182 637,027 1,003,614
----------- ----------- ---------- ----------
17,647,633 21,534,482 4,653,532 4,727,017
----------- ----------- ---------- ----------
Costs and Expenses:
Costs of goods sold 5,226,186 3,291,091 1,030,912 1,121,031
Selling and marketing expenses 7,946,719 14,880,173 2,119,503 2,061,880
General and administrative expenses 2,756,276 3,780,590 897,900 963,905
----------- ----------- ---------- ----------
15,929,181 21,951,854 4,048,315 4,146,816
----------- ----------- ---------- ----------
Income (loss) from operations 1,718,452 (417,372) 605,217 580,201
Other expense (506,036) (605,428) (81,501) (119,307)
Loss on sublease, including shutdown
of offices - (1,312,900) - -
----------- ----------- ---------- ----------
Income (loss) before state tax provision 1,212,416 (2,335,700) 523,176 460,894
State tax provision (92,300) - (62,000) (30,900)
----------- ----------- ---------- ----------
Net income (loss) $ 1,120,116 $(2,335,700) $ 461,716 $ 429,994
=========== =========== ========== ==========
Pro Forma earnings (loss) per share $ .20 $ (.62) $ .07 $ .08
=========== =========== ========== ==========
Pro Forma weighted average shares
outstanding 5,676,304 3,765,467 6,288,305 5,571,055
=========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
USTELECENTERS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
------------------- Paid-In Earnings Stockholder Treasury Stockholders'
Shares Amount Capital (Deficit) Distributions Stock Deficit
--------- -------- ----------- ----------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1994 866,500 $ 8,665 $1,006,262 $ 1,175,629 $(1,835,557) $(21,000) $ 333,999
Stockholder distributions - - - - (192,117) - (192,117)
Exercise of stock options 9,000 90 17,910 - - - 18,000
Net loss - - - (2,335,700) - - (2,335,700)
---------- ------- ---------- ----------- ----------- -------- -----------
Balance, June 30, 1995 875,500 8,755 1,024,172 (1,160,071) (2,027,674) (21,000) (2,175,818)
Issuance of common stock,
net of offering costs 8,119,157 81,192 345,138 - - - 426,330
of $142,011
Retirement of treasury (10,500) (105) (20,895) - - 21,000 -
stock
Net income - - - 1,120,116 - - 1,120,116
---------- ------- ---------- ----------- ----------- -------- -----------
Balance, June 30, 1996 8,984,157 89,842 1,348,415 (39,955) (2,027,674) - (629,372)
Exercise of stock options 75,000 750 4,500 - - - 5,250
Net income - - - 461,716 - - 461,716
---------- ------- ---------- ----------- ----------- -------- -----------
Balance, September 30, 1996 9,059,157 $90,592 $1,352,915 $ 421,761 $(2,027,674) $ - $ (162,406)
========== ======= ========== =========== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-50
<PAGE>
USTELECENTERS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Twelve Month Period Ended Three Months Ended
June 30, September 30,
------------------------------- ------------------------
1996 1995 1996 1995
----------- ------------ --------- ----------
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,120,116 $(2,335,700) $ 461,716 $ 429,994
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization 702,200 809,612 197,800 92,000
Provision for bad debt (332,000) 159,300 125,698 (176,881)
Noncash charge relating to loss on sublease
including shutdown of offices 678,847 - -
Changes in assets and liabilities
Accounts receivable 431,378 (29,162) (705,701) 353,146
Inventory (66,878) (230,066) 137,469 (241,900)
Other current assets (1,750) 364,198 (65,918) (41,968)
Other assets 32,370 17,461 - 26,658
Accounts payable 652,800 76,132 182,569 570,221
Note payable to vendor (262,600) - (240,081)
Accrued expenses (800,899) (26,681) 39,703 (465,271)
Customer deposits (47,223) 75,061 45,362 115,602
Deferred rent (14,632) 71,428 9,888 (19,053)
----------- ----------- ---------- ---------
Net cash provided (used) by operating
activities 1,412,882 (369,570) 188,505 642,548
----------- ----------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and improvements (411,311) (764,087) (88,996) (3,069)
----------- ----------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of term debt - 1,500,000 1,000,000 -
Net borrowing (payment) on line of credit 16,231 383,642 (600,713) (810,719)
Payments on term debt (1,403,154) (239,862) (541,306) (595,800)
Payments on amounts due to former landlord (66,220) (370,467) (44,522) 89,151
Proceeds from stock issuance 426,330 18,000 5,250 426,330
Bank overdraft 27,242 34,461 82,082 251,559
Stockholder distributions - (192,117) - -
----------- ----------- ---------- ---------
Net cash provided (used) by financing
activity (999,571) 1,133,657 (99,209) (639,479)
----------- ----------- ---------- ---------
NET INCREASE IN CASH 2,000 - 300 -
CASH, BEGINNING OF PERIOD - - 2,000 -
----------- ----------- ---------- ---------
CASH, END OF PERIOD $ 2,000 $ - $ 2,300 $ -
=========== =========== ========== =========
SUPPLEMENTAL DISCLOSURES:
Operating activities reflect:
Interest paid $ 426,780 $ 391,629 $ 76,230 $ 110,955
=========== =========== ========== =========
Income taxes paid $ 806 $ 26,780 $ - $ -
=========== =========== ========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-51
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(1) Operations and Significant Accounting Policies
USTeleCenters, Inc. (the Company), or UST, was incorporated in November
1986 to establish a regional telecommunications equipment distribution and
service business. USTeleCenters, Inc. designs, sells, and supports
telecommunication systems solutions for small and medium-sized businesses
throughout the United States. UST also sells telecommunication services on
behalf of certain Regional Bell operating Companies ("RBOCS").
The Company incurred significant losses in the year ended June 30, 1995,
which resulted in noncompliance under certain of its bank covenants and
resulted in the Company restructuring its operations. Certain
restructuring costs, primarily severance, lease termination costs and
fixed-asset write-offs were recorded during the year ended June 30, 1995.
In November 1996, the Company was acquired by View Tech, Inc. (VTI), which
markets and installs video communications systems and provides continuing
services related to installed systems to customers in select states
throughout the United States. The business combination was accounted for
as a pooling of interests, however the accompanying financial statements
present the financial position and results of operations of UST only.
a) Fiscal Periods
The Company's year end is December 31. The accompanying financial
statements for the twelve month periods ended June 30, 1996 and 1995
are presented in order to conform with View Tech, Inc.'s year end.
b) Revenue Recognition
The Company has agency agreements with various local exchange carriers
and telecommunications companies whereby the Company receives
commissions on work referred to these entities. The agreements are
subject to annual renewals. At June 30, 1995 the Company recognized
revenues at the time that it received an order number for installation
or the service was performed by the local exchange carrier or
telecommunications company. During the twelve month period ended June
30, 1996, the company changed its revenue recognition policy due to
operational and procedural changes made by certain RBOCS. The Company
now recognizes revenue when the installation or service is ordered from
the local exchange carrier or telecommunication company and a reserve
is recorded for orders that will not receive an order number. Certain
of the entities have the right to credit or charge back future
commission payments on orders canceled within a 6 to 10 month period
from the date of order. Provision for cancellations are made at the
time revenue is recognized. The Company is not aware of any possible
refunds or charge-backs that these entities might be seeking, which
have not been reserved at June 30, 1996.
In addition, under its agreement with NYNEX, the Company receives
commissions on management contracts. The Company recognizes these
revenues at the time the service is rendered.
F-52
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
The Company sells certain products under various nonexclusive
agreements with equipment manufacturers. The Company recognizes
telecommunication and video conferencing system sales at the time of
shipment. Installation costs, if material, are accrued.
During the twelve month periods ended June 30, 1996 and 1995, agency
commissions were generated primarily from the agreements with NYNEX
and other local exchange carriers. Sales to such companies, which
accounted for 10% or greater of total revenue, were as follows:
<TABLE>
<CAPTION>
Twelve months ended June 30,
----------------------------
1996 1995
----- -----
<S> <C> <C>
NYNEX 37% 30%
Bell Atlantic 14% --
GTE 12% 27%
---- ----
63% 57%
==== ====
</TABLE>
c) Use of Estimates in the Preparation of Financial Statement
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
d) Net Income (Loss) Per Share
Pro Forma net income (loss) per share is computed on the basis of the
weighted average number of shares of Common Stock outstanding during
the period for View Tech, Inc. after consideration of the shares
issued to consummate the merger and of the dilutive effect, if more
than 3%, of stock options.
e) Inventory
Inventory is stated at the lower of cost or market, cost is determined
on a FIFO (first-in, first-out) basis.
f) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations in amounts estimated to allocate the cost of property and
improvements over the estimated useful lives using the straight-line
and accelerated methods as follows:
F-53
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
<S> <C>
Equipment 3-7 Years
Furniture and fixtures 7 Years
Leasehold improvements Term of lease
</TABLE>
g) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments
with Concentration of Credit Risk, requires disclosure of any
significant off-balance-sheet credit risk concentrations. The Company
derived 63% of revenue from three significant customers in 1996 (see
note 1(b) above). The Company has no other significant off-balance-
sheet concentration of credit risk such as foreign exchange contracts,
open contracts or other foreign hedging arrangements.
h) Reclassifications
The Company has reclassified certain items for the year ended June 30,
1995 to conform to the current years presentation.
(2) Property and Equipment
Property and equipment at June 30, 1996 are summarized as follows:
<TABLE>
<S> <C>
Equipment $1,813,886
Furniture and fixtures 486,758
Leasehold Improvements 218,642
----------
2,519,286
Less accumulated depreciation 1,523,958
----------
995,328
Equipment under capital lease net of
accumulated amortization 904,683
----------
$1,900,011
==========
</TABLE>
(3) Note Payable to Vendor
In January 1996, the Company converted approximately $700,000 payable
to an equipment vendor into a promissory note bearing interest at 9%
per annum. Principal and interest are scheduled to be repaid in monthly
installments of approximately $73,000 from February to November 1996.
F-54
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(4) Long-Term Debt
At June 30, 1996, long-term debt consisted of the following:
<TABLE>
<S> <C>
Revolving line of credit with a bank $ 1,868,105
Term note due to a bank 430,000
Lease line-of-credit with a bank 1,045,111
-------------
3,343,216
Less---Current maturities 2,734,096
-------------
$ 609,120
=============
</TABLE>
The Company maintains a revolving line of credit with a bank. The bank has
a security interest in the Company's assets. In addition, the Company has
agreed, among other things, to maintain certain financial covenants and
ratios. As of June 30, 1996, the Company was in compliance with the
covenants or had received waivers under the Forbearance Agreement. Under
the terms of the Forbearance Agreement, the Company may borrow up to the
lesser of the financial borrowing base, or $2,000,000. Interest on the
outstanding balance is payable monthly at the bank's base rate (8.25% at
June 30, 1996) plus 1.5%. At June 30, 1996, approximately $1,868,000 was
utilized under the revolving line of credit.
On November 27, 1996, the revolving line of credit and Forbearance
Agreement was amended and extended to March 31, 1997. The amended
revolving credit agreement provides for monthly reductions in the borrowing
base of $50,000 from July to September 1996.
The Company maintains a $1,500,000 term note with a bank. Under the term
note, the Company is required to make principal payments in twenty (20)
equal, consecutive, monthly payments of $75,000 on the last day of each
month, beginning on April 30, 1995. Interest under the note accrued at the
bank's base rate plus 2.5% until March 31, 1995, and then, at the bank's
base rate plus 4.5%. Interest is payable on the last day of each month.
On June 3, 1996, the term note agreement was amended to bear interest at
the bank's base rate. The outstanding principal balance of $430,000 and
accrued interest under the term note were paid in full on September 1,
1996.
The Company had maintained a lease line-of-credit agreement with a bank
which was converted into a term note as part of the forbearance agreement.
At June 30, 1996, there was approximately $1,045,000 outstanding under this
facility. The Company is required to maintain certain restrictive
covenants, including profitability and liquidity covenants. Amounts
outstanding bear interest at rates ranging from 5.6% to 8.3%. As of June
30, 1996, the Company was in compliance with the covenants or had received
waivers under the Forbearance Agreement.
In connection with Company's merger with View Tech, Inc. in November 1996,
View Tech guaranteed the Company's bank debt obligations.
(5) Amounts Due to Landlords
In 1994, the Company entered into a sublease agreement for its previously
occupied facility. Under the terms of the sublease, the Company is still
primarily liable for the amounts due under the original lease. Under the
terms of the sublease agreement, the Company is required to make
F-55
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
payments to the landlord for the monthly differential between the original
lease amount (approximately $23,700 per month) and the sublease income
(approximately $14,000 per month). The Company is required to pay
approximately $9,700 per month through June 1997. The balance of net future
amounts due to the former landlord is $97,792 as of June 30, 1996.
In 1995, the Company financed $150,880 of leasehold improvements through an
allowance from the landlord. As of June 30, 1996, approximately $86,000 is
outstanding for these improvements. This amount is being repaid in monthly
installments of approximately $5,000 through December 1997. In connection
with the restructuring discussed in Note 1, The Company wrote off these
improvements in 1995 and recorded a loss of approximately $151,000.
Additionally, the Company entered into a sublease agreement for this
facility. The Company recorded a loss of approximately $104,000 which
represented the difference between the total future payments reduced by
sublease amounts paid directly to the landlord. In the event that the
sublease fails to make its required monthly payments of approximately
$12,000 through August 1998, the Company is still primarily liable for such
sums.
(6) Long-Term Capital Lease Obligations
The Company leases a portion of its equipment and furniture and fixtures
under its lease line of credit with a bank. The following is an analysis
of the leased equipment at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Equipment........................ $ 735,604
Furniture and Fixtures........... 1,163,020
----------
1,898,624
Less accumulated amortization.... 993,941
----------
$ 904,683
==========
</TABLE>
The following is a schedule of future minimum lease payments required under
the lease line of credit, together with their present value as of June 30,
1996:
<TABLE>
<CAPTION>
Year Ending June 30,
<S> <C>
1997............................................ $ 435,991
1998............................................ 315,280
1999............................................ 239,400
2000............................................ 54,440
----------
$1,045,111
==========
Net minimum lease payment....................... 1,172,932
Less amount representing interest............... 127,821
----------
Present value of net minimum lease payments..... $1,045,111
==========
</TABLE>
F-56
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(7) Income Taxes
The Company has elected to be treated as an S corporation for federal
income tax purposes pursuant to Section 1362(a) of the Internal Revenue
Code. As an S corporation, all items of income or loss are passed through
to the stockholders and are reportable on their individual income tax
returns. The Company has elected to be treated as a C corporation in
California and New York. As a C corporation the Company is responsible for
paying all taxes on income allocable to these states.
The Commonwealth of Massachusetts has enacted legislation that imposes
Massachusetts income taxes at the corporate level on certain S corporations
with annual revenues in excess of $6 million. As such, the Company is
subject to taxes at the corporate level in this state.
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, by providing for
state income taxes under the liability method.
(8) Common Stock
The stockholders are entitled to certain rights and privileges, including
voter rights, dividend rights and distribution rights, in the event of
liquidation. The Company has placed certain restrictions on the sale or
transfer of stock by stockholders. Furthermore, the Company has deemed
ownership of the stock if certain events occur and will purchase the stock
at a determined price.
The Company follows a policy of distributing to stockholders an amount
estimated to equal the tax on their respective shares of S corporation
quarterly taxable income. There were no distributions made to
stockholders during the year ended June 30, 1996. During the year ended
June 30, 1996, the Company recovered certain amounts of prior distributions
to stockholders through an offering of common stock to existing
stockholders. The Company issued 8,119,157 shares of common stock for net
proceeds of $426,330.
Upon consummation of the business combination on November 29, 1996 (as
discussed in notes 1 and 14), all outstanding shares of the Company's
common stock were exchanged for an equivalent amount of VTI common stock
based on a .24534 per share conversion ratio.
(9) Stock Option Plan
On September 20, 1988, the Board of Directors approved an incentive stock
option plan (the Plan) providing for a maximum of 82,500 shares that may be
issued under the Plan. The number of shares that may be issued under the
Plan was increased to 1,100,000 during the twelve month period ended June
30, 1996. The Plan stipulates that the option price may not be less than
100% of the fair market value of the stock on the date of grant. The Board
of Directors has the right to determine a vesting period upon granting of
options.
F-57
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
The following is a summary of the stock option activity (excluding the
nonqualified options discussed below) for the twelve month period ended
June 30, 1996:
<TABLE>
<CAPTION>
Shares Exercise Price
-------- ----------------
<S> <C> <C>
Options outstanding June 30, 1994... 67,500 $1.00 - 2.20
Canceled....................... (31,000) 1.00 - 2.00
Exercised...................... (9,000) 2.00
------- ------------
Options outstanding June 30, 1995... 27,500 $2.00 - 2.20
Granted........................ 750,000 .07 - .10
Canceled....................... (27,500) 2.00 - 2.20
-------
Options outstanding June 30, 1996... 750,000 .07 - .10
=======
</TABLE>
In addition, during the twelve month period ended June 30, 1996, the
Company granted its directors nonqualified options to purchase 150,000
shares of common stock at an exercise price of $.07 per share.
Upon consummation of the business combination on November 29, 1996 (as
discussed in notes 1 and 14), all unvested stock options became immediately
exercisable. At such time, all unexercised options were assumed under
VTI's stock option plan. The equivalent VTI options received are also
fully vested and exercisable.
(10) Commitments and Contingencies
a) Commitments
Future minimum annual rental payments under all operating leases
(including amounts due to landlords, net of any of sublease income
discussed in Note 5) as of June 30, 1996 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
<S> <C>
1997 $640,756
1998 437,497
1999 347,401
2000 344,232
2001 and thereafter 418,721
----------
$2,188,607
==========
</TABLE>
The leases require the Company to pay increases in real estate taxes,
operating costs and repairs over certain base year amounts. Total
rental expense included in the accompanying statements of operations
for the twelve month periods ended June 30, 1996 and 1995 was
approximately $757,000 and $800,000 respectively. The Company has
received rent concessions during the first year of certain leases,
which are being deferred and amortized over the term of the lease.
F-58
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
b) Contingencies
The Company is named in employee-related lawsuits, in which the
plaintiffs are seeking undisclosed damages. The Company is vigorously
defending itself against such litigation and does not expect the
outcome to have a material impact on its financial position.
(11) Profit Sharing Plan
Effective January 1, 1993, the Company adopted a profit sharing plan in
accordance with Internal Revenue Code Section 401(k). The plan covers all
employees with six months or more of service. Eligible employees are
permitted to contribute up to 15% of gross compensation. The Company may
match employee contributions. The Company has made contributions of
approximately $43,000 during the twelve month periods ended June 30, 1996
and 1995.
(12) Segment Information (unaudited)
The Company's operations are classified into two primary industry segments:
(a) marketing telecommunication services on behalf of certain RBOCS and
exchange carriers for an agency commission, and (b) product sales and
service revenue generated from the sale of telecommunication equipment and
of videoconferencing and related services which involve the marketing and
installation of video communication systems and providing continuing
services related to installed systems. Following is a summary of segment
information for the twelve month periods ended June 30, 1996 and 1995:
June 30, 1996
<TABLE>
<CAPTION>
Product
Sales and
Agency Service
Commissions Revenues Combined
--------------- -------------- ------------
<S> <C> <C> <C>
Total Revenue $11,313,000 $ 6,334,000 $17,647,000
===========
Operating profit 4,225,000 (317,000) $ 3,908,000
General corporate expenses (2,190,000)
Other expense (506,000)
-----------
Income from continuing operations
before income taxes $ 1,212,000
===========
Identifiable assets at June 30, 1996 1,258,000 974,000 $ 2,232,000
Corporate assets 3,760,000
-----------
Total assets at June 30, 1996 $ 5,992,000
===========
</TABLE>
F-59
<PAGE>
USTELECENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
June 30, 1995
<TABLE>
<CAPTION>
Product
Sales and
Agency Service
Commissions Revenues Combined
----------- ----------- --------
<S> <C> <C> <C>
Total Revenue $17,696,000 $ 3,838,000 $21,534,000
===========
Operating profit 4,517,000 (1,184,000) $ 3,333,000
General corporate expenses (3,751,000)
Other expense (1,918,000)
-----------
Income from continuing operations
before income taxes $(2,336,000)
===========
</TABLE>
(13) Supplemental Disclosures - Cash Flow Information
During the twelve month period ended June 30, 1995, the Company financed
the acquisition $895,062 of equipment under capital lease obligations.
Also during this period, the Company acquired $150,880 of leasehold
improvements under allowance for amounts due to landlords.
During the twelve month period ended June 30, 1996, the Company converted
approximately $700,000 of accounts payable to a vendor into a term note.
(14) Subsequent Events
On July 26, 1996, the Company entered into a promissory note payable to
an equipment vendor, bearing interest at 9% per annum. Principal and
interest are scheduled to be repaid in four monthly installments of
approximately $27,000 from August to November 1996.
During July and August 1996, the Company received an aggregate of $1
million from View Tech for working capital purposes and in order for
the Company to repay certain bank debt due on September 1, 1996. The $1
million advance is evidenced by a note which is subordinated to the
Company's debt obligations to its primary lender (and such lender's
affiliates). The promissory note provides for interest at 10%, payable
quarterly commencing on September 30, 1996. The principal and accrued
interest are due on June 15, 1997.
On September 5, 1996, the Board of Directors entered into a definitive
agreement of merger with View Tech, Inc. who markets, integrates and
installs video communications systems and provides continuing services
related to installed systems to customers in specific states throughout
the United States. The transaction was consummated on November 29,
1996, at a value of approximately $16.5 million. The business
combination was accounted for as a pooling of interests. At such time,
UST shareholders and optionholders exchanged all of their outstanding
shares and stock options totaling 9,884,157 shares for 2,240,976 shares
of VTI common stock and options to purchase 184,003 shares of VTI
common stock.
F-60
<PAGE>
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article X of View Tech's Certificate of Incorporation and Article VII,
Section 6 of View Tech's Bylaws provide for indemnification of its officers and
directors to the fullest extent permitted by Delaware Law.
Item 25. Other Expenses of Issuance and Distribution.
Estimates of fees and expenses incurred or to be incurred by the Company in
connection with the issuance and distribution of Common Stock incident to this
Registration Statement are as follows:
<TABLE>
<S> <C>
SEC Filing Fee $ 2,972.00
Accounting Fees 60,000.00
Legal 60,000.00
Printing and Mailing Costs and Fees 20,000.00
Miscellaneous 5,000.00
-----------
TOTAL $147,972.00
===========
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
On July 10, 1996, the Company issued 52,857 shares of Common Stock to the
owners of VistaTel International, Inc. ("VistaTel") in connection with the
purchase of all of the assets of VistaTel. The securities were issued in
reliance of the exemption provided in Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"), because no public offering was involved
and the shares were issued exclusively to the three shareholders of VistaTel.
On September 24, 1996, the Company issued 150,000 shares of Common Stock to
the sole shareholder of GroupNet, Inc. ("GroupNet") in connection with the
merger of GroupNet with and into the Company. The securities were issued in
reliance on the exemption provided in Section 4(2) of the Securities Act,
because no public offering was involved and the shares were issued exclusively
to the sole shareholder of GroupNet.
On October 31, 1996, 300,281 shares of Common Stock were issued to 76
investors pursuant to a private placement. The securities were issued in
reliance on the exemption provided in Section 4(2) of the Securities Act, and
Rule 506 of Regulation D promulgated thereunder, because no public offering was
involved and the securities were issued to no more than 35 non-accredited
investors. Kenny Securities Corporation, a registered broker/dealer, assisted
in the private placement and in connection therewith received a commission equal
to 8% of the gross proceeds ($120,000) and 15,000 Common Stock Purchase
Warrants, each exercisable until 2001 for one share of Common Stock at an
exercise price of $6.25 per Common Stock Purchase Warrant. Each purchaser
acquired less than 1% of the company's total shares of stock outstanding.
On December 11, 1996, 30,000 shares of Common Stock were issued to the
chairman of Windermere Holdings, Inc. ("WHI") in connection with WHI's
assistance with respect to the merger of USTeleCenters, Inc. ("UST") with and
into a wholly-owned subsidiary of the Company (the "Merger"). The securities
were issued in reliance on the exemption provided in Section 4(2) of the
Securities Act, because no public offering was involved and the shares were
issued exclusively to the chairman of WHI.
On January 6, 1997, 24,550 shares of Common Stock were issued to Concord
Partners Ltd. ("Concord") in connection with Concord's assistance with respect
to the Merger. The securities were issued in reliance on the exemption provided
in Section 4(2) of the Securities Act because no public offering was involved.
II-1
<PAGE>
Item 27. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated September 5, 1996, by and among the
Company, View Tech Acquisition, Inc., a California corporation and
USTeleCenters, Inc., a Massachusetts corporation, as amended by Amendment No.
1, dated October 31, 1996, by and among the Company, View Tech Acquisition,
Inc., a California corporation, USTeleCenters, Inc., a Massachusetts corporation
and View Tech Acquisition, Inc., a Delaware corporation, to that certain
Agreement and Plan of Merger, dated as of September 5, 1996, by and among the
Company, View Tech Acquisition, Inc., a California corporation and
USTeleCenters, Inc, a Massachusetts corporation. (1)
2.2 Form of Agreement of Merger by and among the Company, USTeleCenters, Inc.,
a Massachusetts corporation and View Tech Acquisition, Inc., a Delaware
corporation. (1)
2.3 Agreement and Plan of Merger, dated as of November 27, 1996 by and among
View Tech, Inc., a California corporation and View Tech Delaware, Inc., a
Delaware corporation. (2)
2.4 Sale Agreement between the Company and VistaTel International, Inc., dated
July 10, 1996. (3)
2.5 Agreement and Plan of Merger by and among the Company, GroupNet, Inc. and
Andrew W. Jamison dated August 30, 1996. (4)
3.1 Certificate of Incorporation of the Company, as amended by Agreement and Plan of
Merger, dated as of November 27, 1996. (2)
3.2 Bylaws of the Company. (2)
4.1 Warrant Agreement dated as of June 28, 1995 between the Company and U.S.
Stock Transfer Corporation of America. (5)
4.2 Form of Warrant between the Company and Telcom Holding, LLC. (2)
5.1 Opinion of Brobeck, Phleger & Harrison LLP, counsel to the Company as to the
legality of the securities being registered. (9)
10.1 Dealer Agreement between the Company and PictureTel Corporation dated as of
March 30, 1995. (8)
10.2 Employment Agreement between the Company and Franklin A. Reece, III dated as
of November 29, 1996. (9)
10.3 Employment Agreement between the Company and Robert G. Hatfield, dated as of
December 9, 1996. (9)
10.4 Employment Agreement between the Company and John W. Hammon, dated as of
December 9, 1996. (9)
10.5 Employment Agreement between the Company and William M. McKay, dated as of
December 9, 1996. (9)
10.6 1995 Stock Option Plan, as amended. (6)
10.7 Amendment to Dealer Agreement between the Company and PictureTel
Corporation dated August 1, 1995. (5)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.8 1997 Stock Incentive Plan. (1)
10.9 Loan and Security Agreement, dated as of July 26, 1996, by and between the
Company and USTeleCenters, Inc. and Promissory Note from USTeleCenters, Inc.
(3)
10.10 Subordination Agreement, dated as of July 26, 1996, by and among the Company,
the First National Bank of Boston, BancBoston Leasing, Inc., and USTeleCenters,
Inc. (3)
10.11 Consulting Agreement, dated as of June 27, 1996, by and between the Company
and Windermere Holdings, Incorporated. (3)
10.12 Option Agreement, dated as of August 22, 1996 by and between the Company and
Rolf N. Hufnagel. (3)
10.13 Sublease Agreement dated as of October 11, 1996, by and between Atlantic Steel
Industries, Inc. and the Company (together with prime Lease Agreement dated as
of November 1, 1993 between Atlantic Steel Industries, inc. and State of California
Public Employees' Retirement System). (2)
10.14 Common Stock and Common Stock Purchase Warrants Agreement, dated as of
December 31, 1996, by and between the Company and Telecom Holding, LLC, a
Massachusetts limited liability company. (2)
10.15 Letter Agreement, dated as of December 31, 1996, from the Company to Paul C.
O'Brien and Mark P. Kiley. (2)
10.16 Promissory Note of the Company, dated August 30, 1996 payable to Andrew W.
Jamison. (4)
10.17 Registration Rights Agreement, dated August 30, 1996, between the Company and
Andrew W. Jamison. (4)
10.18 Revolving Note with City National Bank, dated February 20, 1996. (10)
10.19 Loan Agreements with Power-Data Services, Inc., dated February 15, 1996 and
March 22, 1996. (10)
11.1 Computation of Earnings per Share. (2)
21.1 Subsidiaries of the Company. (2)
23.1 Consent of Carpenter, Kuhen and Sprayberry. (2)
23.2 Consent of Brobeck, Phleger & Harrison LLP. (Included as part of Exhibit 5.1)
23.3 Consent of Arthur Andersen LLP. (2)
24.1 Power of Attorney. (Included on page II-6 of this Registration Statement)
24.2 Certified Copy of Board of Directors' Resolution regarding Power of Attorney. (9)
27 Financial Data Schedule (2)
</TABLE>
- -----------------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-4
(Registration No. 333-13459) and incorporated herein by reference.
(2) Filed herewith.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1996, and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Report on Form 8-K dated September 24,
1996 relating to the completion of the acquisition by the Company of
GroupNet, Inc., and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1995, and incorporated herein by reference.
(6) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the fiscal quarter ended September 30, 1995, and incorporated herein by
reference.
II-3
<PAGE>
(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the fiscal quarter ended September 30, 1996, and incorporated herein by
reference.
(8) Filed as an exhibit to the Company's Registration Statement on Form SB-2
(Registration No. 33-91232), and incorporated herein by reference.
(9) To be filed by amendment.
(10) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the fiscal quarter ended March 31, 1996, and incorporated herein by
reference.
Item 28. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Camarillo, State of California, on January 9,
1997.
View Tech, Inc.
By: /s/ Robert G. Hatfield
----------------------------------------
Robert G. Hatfield
Chief Executive Officer
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature to this
Registration Statement appears below hereby appoints Robert G. Hatfield and
William M. McKay, or either of them, as his attorney-in-fact to sign on his
behalf individually and in the capacity stated below and to file all amendments
and post-effective amendments to this Registration Statement, and any and all
instruments or documents filed as a part of or in connection with this
Registration Statement or the amendments thereto, and any such attorneys-in-fact
may make such changes and additions in this Registration Statement as such
attorney-in-fact may deem necessary or appropriate.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
/s/ Robert G. Hatfield Chairman and January 9, 1997
- ---------------------------------- Chief Executive Officer
Robert G. Hatfield (Principal Executive Officer)
/s/ John W. Hammon President and Director January 9, 1997
- ----------------------------------
John W. Hammon
/s/ William M. McKay Chief Financial Officer January 9, 1997
- ---------------------------------- (Principal Financial and
William M. McKay Accounting Officer)
/s/ Calvin M. Carrera Director January 9, 1997
- ----------------------------------
Calvin M. Carrera
/s/ Robert F. Leduc
- ---------------------------------- Director January 9, 1997
Robert F. Leduc
/s/ Franklin A. Reece, III
- ----------------------------------
Franklin A. Reece, III Director January 9, 1997
/s/ David F. Millet
- ---------------------------------- Director January 9, 1997
David F. Millet
</TABLE>
II-6
<PAGE>
Exhibit 2.3
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER dated as of November 27, 1996
("PLAN") involves VIEW TECH DELAWARE, INC., a Delaware corporation ("VIEW TECH-
DEL") and VIEW TECH, INC., a California corporation ("VIEW TECH"). View Tech-
Del and View Tech are sometimes referred to herein as the "CONSTITUENT
CORPORATIONS."
RECITALS
--------
A. View Tech-Del is a corporation duly organized and existing under the
laws of the State of Delaware.
B. View Tech is a corporation duly organized and existing under the laws
of the State of California.
C. The authorized capital stock of View Tech-Del consists of Twenty
Million (20,000,000) shares of Common Stock, $.0001 par value per share ("VIEW
TECH-DEL COMMON STOCK"), of which One Thousand (1,000) shares are issued and
outstanding, and Five Million (5,000,000) shares of Preferred Stock, $.0001 par
value per share, of which no shares are issued and outstanding. View Tech is
the sole shareholder of View Tech-Del.
D. The authorized capital stock of View Tech consists of Ten Million
(10,000,000) shares of Common Stock, par value $.01 ("VIEW TECH COMMON STOCK"),
and Five Million shares of Preferred Stock, par value $.01. Three Million,
Three Hundred Ninety-Three Thousand, Four Hundred Thirty-Eight (3,393,438)
shares of View Tech Common Stock are issued and outstanding. There are also
outstanding options for the purchase of One Million, One Hundred Thirty-Nine
Thousand, One Hundred (1,139,100) shares or View Tech Common Stock (the "VIEW
TECH OPTIONS") and warrants covering Eight Hundred Seventy Thousand (870,000)
shares of View Tech Common Stock (the "VIEW TECH WARRANTS").
E. The board of directors of View Tech has determined that, for the
purpose of effecting the reincorporation of View Tech in the State of Delaware,
it is advisable and in the best interests of View Tech that it merge with and
into View Tech-Del upon the terms and conditions herein provided.
F. The respective boards of directors of View Tech and View Tech-Del have
resolved that View Tech be merged under and pursuant to the General Corporation
Law of the State of Delaware and the General Corporation Law of the State of
California into a single corporation existing under the laws of the State of
Delaware.
G. The respective boards of directors of View Tech-Del and View Tech have
approved the merger upon the terms and conditions set forth herein and have
approved this Plan
<PAGE>
and the boards of directors of View Tech-Del and View Tech have directed that
this Plan be submitted to a vote of their respective stockholders.
NOW THEREFORE, each Constituent Corporation adopting this Plan agrees as
follows:
1. MERGER
------
1.1 Merger
------
Subject to Paragraph 4.2 below, and in accordance with the provisions
of this Plan, the Delaware General Corporation Law and the California General
Corporation Law, View Tech shall be, at the Effective Date (as defined in
Paragraph 1.2 below), merged with and into View Tech-Del ("MERGER"), and the
separate existence of View Tech shall cease and View Tech-Del shall be the
surviving corporation (the "SURVIVING CORPORATION") and the capital stock of
View Tech-Del shall be the capital stock of the surviving corporation (e.g.,
View Tech-Del Common Stock to become the "SURVIVING CORPORATION'S COMMON
STOCK").
1.2 Filing and Effectiveness
------------------------
The Merger shall become effective when this Plan, together with the
resolution of the Board of Directors of View Tech adopting and approving same,
shall have been filed with the Secretary of State of the State of Delaware (the
"EFFECTIVE DATE OF MERGER").
For purposes of California Law, the Merger shall become effective as to
View Tech on the Effective Date of the Merger, upon such filing in California as
is required by Sections 1108 and 1110 of the General Corporation Law of
California, which filing will be made by View Tech and/or View Tech-Del, as
applicable.
1.3 Certificate of Incorporation
----------------------------
Except for the change of the name of the Surviving Corporation as
provided in this paragraph 1.3, the Certificate of Incorporation of View Tech-
Del as in effect immediately prior to the Effective Date of Merger shall
continue in full force and effect as the Certificate of Incorporation of the
Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law. From and after the Effective Date of Merger, the
Certificate of Incorporation of View Tech-Del shall be amended by deleting
Article FIRST in its entirety and substituting in lieu thereof the following:
"FIRST: The name of this Corporation is View Tech, Inc."
1.4 Bylaws
------
The Bylaws of View Tech-Del as in effect immediately prior to the
Effective Date of Merger shall continue in full force and effect as the Bylaws
of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
1.5 Agreements
----------
2
<PAGE>
All agreements to which View Tech is a party and which are in effect
immediately prior to the Effective Date of Merger shall continue in full force
and effect and shall be assumed in their entirety by the Surviving Corporation
as of the Effective Date of Merger.
1.6 Directors and Officers
----------------------
The directors and officers of View Tech-Del immediately prior to the
Effective Date of Merger shall be the directors and officers of the Surviving
Corporation until their successors shall have been duly elected and qualified or
until otherwise as provided by law, the Certificate of Incorporation of the
Surviving Corporation or the Bylaws of the Surviving Corporation.
1.7 Effect of Merger
----------------
Upon the Effective Date of Merger, the separate existence of View Tech
shall cease and View Tech-Del, as the Surviving Corporation, (i) shall continue
to possess all of its assets, rights, powers and property as constituted
immediately prior to the Effective Date of Merger, shall be subject to all
actions previously taken by the View Tech board of directors and shall succeed,
without other transfer, to all of the assets, rights, powers and property of
View Tech in the manner as more fully set forth in Section 259 of the Delaware
General Corporation Law, and (ii) shall continue to be subject to all of its
debts, liabilities and obligations as constituted immediately prior to he
Effective Date of Merger and shall succeed, without other transfer, to all of
the debts, liabilities and obligations of View Tech in the same manner as if
View Tech-Del had itself incurred them, all as more fully provided under the
applicable provisions of the Delaware General Corporation Law and the California
General Corporation Law.
2. MANNER OF CONVERSION OF STOCK
-----------------------------
2.1 View Tech Securities
--------------------
Upon the Effective Date of Merger, each share of View Tech Common
Stock, no par value, issued and outstanding immediately prior thereto shall, by
virtue of the Merger and without any action by the holders of such shares or any
other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.0001 par value per share, of the
Surviving Corporation, and all View Tech Options and all View Tech Warrants
outstanding immediately prior to the Merger will be assumed by View Tech
Delaware, and will continue to have, and be subject to, the same terms and
conditions of each such option and as set forth in View Tech's employee stock
option plan, if applicable, immediately prior to the Merger, except that such
options and warrants will be exercisable for such number of shares of View Tech
Delaware Common Stock as is equal to the number of shares of View Tech Common
Stock that were issuable upon exercise of such options and warrants immediately
prior to the Merger. No shares of View Tech Preferred Stock are outstanding.
2.2 View Tech-Del Securities
------------------------
Upon the Effective Date of Merger, each share of View Tech-Del Common
Stock, issued and outstanding immediately prior thereto shall, by virtue of the
Merger and without any
3
<PAGE>
action by the holder of such shares or any other person, be cancelled and
returned to the status of authorized but unissued shares.
2.3 Exchange of Certificate
-----------------------
After the Effective Date of Merger, each holder of an outstanding
certificate formerly representing shares of View Tech Common Stock may at such
shareholder's option surrender the same for cancellation to the Surviving
Corporation, and each such holder shall be entitled to receive in exchange
therefor a certificate representing the number of shares of the Surviving
Corporation's Common Stock into which the surrendered shares were converted as
herein provided. Until so surrendered, each outstanding certificate theretofore
representing shares of View Tech Common Stock shall be deemed for all purposes
to represent the number of whole shares of the Surviving Corporation's Common
Stock into which such shares of View Tech were converted in the Merger. The
registered owner on the books and records of the Surviving Corporation of any
such outstanding certificate shall, until such certificate shall have been
surrendered for conversion to the Surviving Corporation, have and be entitled to
exercise any voting and other rights with respect to, and to receive dividends
and other distributions upon, the shares of the Surviving Corporation's Common
Stock represented by such outstanding certificate as provided in this paragraph
2.3.
2.4 Legends
-------
Each certificate representing the Surviving Corporation's Common Stock
so issued in the Merger shall bear the same legends, if any, with respect to
restrictions on transferability as the certificates of View Tech so converted
and given in exchange therefor, unless otherwise determined by the board of
directors of the Surviving Corporation in compliance with applicable laws.
2.5 Endorsement of Surrendered Shares
---------------------------------
If any certificate for shares of the Surviving Corporation's Common
Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a condition of
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer, that such transfer otherwise be
proper and that the party requesting such transfer pay to the Surviving
Corporation any transfer or other taxes payable by reason of the issuance of
such new certificate in the name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
3. COVENANTS TO BE PERFORMED PRIOR TO EFFECTIVE DATE OF MERGER
-----------------------------------------------------------
3.1 Consents
--------
Each of View Tech and View Tech-Del shall use its best efforts to
obtain the consent and approval of each person whose consent or approval shall
be required in order to permit consummation of the Merger.
4
<PAGE>
3.2 Governmental Authorizations
---------------------------
Each of View Tech and View Tech-Del shall cooperate in filing any
necessary reports or other documents with any federal, state, local or foreign
authorities having jurisdiction with respect to the Merger.
4. GENERAL
-------
4.1 Further Assurances
------------------
View Tech-Del and View Tech each covenants and agrees that it will,
before, on or after the Effective Date of Merger, take such other actions as may
be required by the California General Corporation Law and/or the Delaware
General Corporation Law.
4.2 Abandonment
-----------
At any time before the Effective Date of Merger, this Plan may be
terminated and the Merger may be abandoned for any reason whatsoever by the
board of directors of either View Tech or View Tech-Del or both, notwithstanding
the approval of this Plan by the shareholders of View Tech or the stockholders
of View Tech-Del or both.
4.3 Amendment
---------
The boards of directors of the Constituent Corporations may amend this
Plan at any time prior to the filing of this Plan (or certificate in lieu
thereof) with the Secretary of State of the State of Delaware, provided that an
amendment made subsequent to the adoption of the Plan by the stockholders of
either Constituent Corporation shall not: (1) alter or change the amount or kind
of shares, securities, cash, property and/or rights to be received in exchange
for or on conversion of all or any of the shares of any class or series thereof
of such Constituent Corporation, (2) materially alter or change any term of the
Certificate of Incorporation of the Surviving Corporation to be effected by the
Merger, or (3) alter or change any of the terms and conditions of this Plan if
such alteration or change would adversely affect the holders of any class or
series thereof of such Constituent Corporation.
4.4 Registered Office
-----------------
The registered office of the Surviving Corporation in the State of
Delaware is located at Corporate Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware and Corporation Trust Company is the
registered agent of the Surviving Corporation at such address.
4.5 Plan
----
Copies of this Plan will be on file at the principal place of business
of the Surviving Corporation at 950 Flynn Road, Camarillo, California 93012, and
copies thereof will be furnished to any stockholder of either Constituent
Corporation, upon request and without cost.
5
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
VIEW TECH, INC.
By: /s/ Robert G. Hatfield
------------------------
Robert G. Hatfield
Title: Chief Executive Officer
The undersigned hereby affirms and acknowledges, under penalties of
perjury, that this instrument is the act and deed of View Tech, Inc. and that
the facts stated herein are true.
By: /s/ Robert G. Hatfield
------------------------
Robert G. Hatfield
Title: Chief Executive Officer
VIEW TECH DELAWARE, INC.
By: /s/ Robert G. Hatfield
------------------------
Robert G. Hatfield
Title: Chief Executive Officer
The undersigned hereby affirms and acknowledges, under penalties of
perjury, that this instrument is the act and deed of View Tech Delaware, Inc.
and that the facts stated herein are true.
By: /s/ Robert G. Hatfield
------------------------
Robert G. Hatfield
Title: Chief Executive Officer
6
<PAGE>
The undersigned secretary of View Tech, Inc. hereby certifies that this
Plan was adopted and approved by the shareholders of View Tech, Inc. at a
meeting properly noticed and held on November 26, 1996.
/s/ William M. McKay
- ----------------------
William M. McKay
Secretary
The undersigned secretary of View Tech Delaware, Inc. hereby certifies
that this Plan was adopted and approved by the sole stockholder of View Tech
Delaware, Inc. by written consent dated November 26, 1996.
/s/ William M. McKay
- ----------------------
William M. McKay
Secretary
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION OF
VIEW TECH DELAWARE, INC.
ARTICLE I
The name of this corporation is View Tech Delaware, Inc.
ARTICLE II
The address of the registered office of the corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Twenty Five Million (25,000,000) shares. Twenty Million (20,000,000) shares
shall be Common Stock, par value $.0001 per share and Five Million (5,000,000)
shares shall be Preferred Stock, par value $.0001 per share.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to fix or alter the
divided rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price or
prices, and the liquidation preferences of any wholly unissued series of
Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or any of them, and to increase or decrease the number of
shares of any series subsequent to the issue of shares of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
<PAGE>
ARTICLE V
The name and mailing address of the incorporator is William M. McKay,
View Tech, Inc., 950 Flynn Road, Camarillo, CA 93012.
ARTICLE VI
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the bylaws of the corporation.
ARTICLE VII
The number of directors of the corporation shall be fixed from time to
time by, or in the manner provided in, the bylaws or amendment thereof duly
adopted by the Board of Directors or by the stockholders. The directors of the
corporation shall be divided into three classes; the terms of office of those of
the first class to expire at the annual meeting next ensuing; of the second
class one year thereafter; of the third class two years thereafter; and at each
annual election held after such classification and election, directors shall be
chosen for a full term, as the case may be, to succeed those whose terms expire.
ARTICLE VIII
Elections of directors need not be by written ballot unless the bylaws
of the corporation shall so provide.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the corporation.
ARTICLE X
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the
2
<PAGE>
stockholders of this Article to authorize corporation action further eliminating
or limiting the personal liability of directors then the liability of a director
of the corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this Article
X by the stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE XI
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has signed this Certificate this
31st day of October, 1996.
/s/ William M. McKay
------------------------------
William M. McKay, Incorporator
3
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER dated as of November 27, 1996
("PLAN") involves VIEW TECH DELAWARE, INC., a Delaware corporation ("VIEW TECH-
DEL") and VIEW TECH, INC., a California corporation ("VIEW TECH"). View Tech-
Del and View Tech are sometimes referred to herein as the "CONSTITUENT
CORPORATIONS."
RECITALS
--------
A. View Tech-Del is a corporation duly organized and existing under the
laws of the State of Delaware.
B. View Tech is a corporation duly organized and existing under the laws
of the State of California.
C. The authorized capital stock of View Tech-Del consists of Twenty
Million (20,000,000) shares of Common Stock, $.0001 par value per share ("VIEW
TECH-DEL COMMON STOCK"), of which One Thousand (1,000) shares are issued and
outstanding, and Five Million (5,000,000) shares of Preferred Stock, $.0001 par
value per share, of which no shares are issued and outstanding. View Tech is
the sole shareholder of View Tech-Del.
D. The authorized capital stock of View Tech consists of Ten Million
(10,000,000) shares of Common Stock, par value $.01 ("VIEW TECH COMMON STOCK"),
and Five Million shares of Preferred Stock, par value $.01. Three Million,
Three Hundred Ninety-Three Thousand, Four Hundred Thirty-Eight (3,393,438)
shares of View Tech Common Stock are issued and outstanding. There are also
outstanding options for the purchase of One Million, One Hundred Thirty-Nine
Thousand, One Hundred (1,139,100) shares or View Tech Common Stock (the "VIEW
TECH OPTIONS") and warrants covering Eight Hundred Seventy Thousand (870,000)
shares of View Tech Common Stock (the "VIEW TECH WARRANTS").
E. The board of directors of View Tech has determined that, for the
purpose of effecting the reincorporation of View Tech in the State of Delaware,
it is advisable and in the best interests of View Tech that it merge with and
into View Tech-Del upon the terms and conditions herein provided.
F. The respective boards of directors of View Tech and View Tech-Del
have resolved that View Tech be merged under and pursuant to the General
Corporation Law of the State of Delaware and the General Corporation Law of the
State of California into a single corporation existing under the laws of the
State of Delaware.
G. The respective boards of directors of View Tech-Del and View Tech
have approved the merger upon the terms and conditions set forth herein and have
approved this Plan and the boards of directors of View Tech-Del and View Tech
have directed that this Plan be submitted to a vote of their respective
stockholders.
<PAGE>
NOW THEREFORE, each Constituent Corporation adopting this Plan agrees as
follows:
1. MERGER
------
1.1 Merger
------
Subject to Paragraph 4.2 below, and in accordance with the provisions
of this Plan, the Delaware General Corporation Law and the California General
Corporation Law, View Tech shall be, at the Effective Date (as defined in
Paragraph 1.2 below), merged with and into View Tech-Del ("MERGER"), and the
separate existence of View Tech shall cease and View Tech-Del shall be the
surviving corporation (the "SURVIVING CORPORATION") and the capital stock of
View Tech-Del shall be the capital stock of the surviving corporation (e.g.,
View Tech-Del Common Stock to become the "SURVIVING CORPORATION'S COMMON
STOCK").
1.2 Filing and Effectiveness
------------------------
The Merger shall become effective when this Plan, together with the
resolution of the Board of Directors of View Tech adopting and approving same,
shall have been filed with the Secretary of State of the State of Delaware (the
"EFFECTIVE DATE OF MERGER").
For purposes of California Law, the Merger shall become effective as to
View Tech on the Effective Date of the Merger, upon such filing in California as
is required by Sections 1108 and 1110 of the General Corporation Law of
California, which filing will be made by View Tech and/or View Tech-Del, as
applicable.
1.3 Certificate of Incorporation
----------------------------
Except for the change of the name of the Surviving Corporation as
provided in this paragraph 1.3, the Certificate of Incorporation of View Tech-
Del as in effect immediately prior to the Effective Date of Merger shall
continue in full force and effect as the Certificate of Incorporation of the
Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law. From and after the Effective Date of Merger, the
Certificate of Incorporation of View Tech-Del shall be amended by deleting
Article FIRST in its entirety and substituting in lieu thereof the following:
"FIRST: The name of this Corporation is View Tech, Inc."
1.4 Bylaws
------
The Bylaws of View Tech-Del as in effect immediately prior to the
Effective Date of Merger shall continue in full force and effect as the Bylaws
of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
1.5 Agreements
----------
2
<PAGE>
All agreements to which View Tech is a party and which are in effect
immediately prior to the Effective Date of Merger shall continue in full force
and effect and shall be assumed in their entirety by the Surviving Corporation
as of the Effective Date of Merger.
1.6 Directors and Officers
----------------------
The directors and officers of View Tech-Del immediately prior to the
Effective Date of Merger shall be the directors and officers of the Surviving
Corporation until their successors shall have been duly elected and qualified or
until otherwise as provided by law, the Certificate of Incorporation of the
Surviving Corporation or the Bylaws of the Surviving Corporation.
1.7 Effect of Merger
----------------
Upon the Effective Date of Merger, the separate existence of View Tech
shall cease and View Tech-Del, as the Surviving Corporation, (i) shall continue
to possess all of its assets, rights, powers and property as constituted
immediately prior to the Effective Date of Merger, shall be subject to all
actions previously taken by the View Tech board of directors and shall succeed,
without other transfer, to all of the assets, rights, powers and property of
View Tech in the manner as more fully set forth in Section 259 of the Delaware
General Corporation Law, and (ii) shall continue to be subject to all of its
debts, liabilities and obligations as constituted immediately prior to he
Effective Date of Merger and shall succeed, without other transfer, to all of
the debts, liabilities and obligations of View Tech in the same manner as if
View Tech-Del had itself incurred them, all as more fully provided under the
applicable provisions of the Delaware General Corporation Law and the California
General Corporation Law.
2. MANNER OF CONVERSION OF STOCK
-----------------------------
2.1 View Tech Securities
--------------------
Upon the Effective Date of Merger, each share of View Tech Common
Stock, no par value, issued and outstanding immediately prior thereto shall, by
virtue of the Merger and without any action by the holders of such shares or any
other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.0001 par value per share, of the
Surviving Corporation, and all View Tech Options and all View Tech Warrants
outstanding immediately prior to the Merger will be assumed by View Tech
Delaware, and will continue to have, and be subject to, the same terms and
conditions of each such option and as set forth in View Tech's employee stock
option plan, if applicable, immediately prior to the Merger, except that such
options and warrants will be exercisable for such number of shares of View Tech
Delaware Common Stock as is equal to the number of shares of View Tech Common
Stock that were issuable upon exercise of such options and warrants immediately
prior to the Merger. No shares of View Tech Preferred Stock are outstanding.
3
<PAGE>
2.2 View Tech-Del Securities
------------------------
Upon the Effective Date of Merger, each share of View Tech-Del Common
Stock, issued and outstanding immediately prior thereto shall, by virtue of the
Merger and without any action by the holder of such shares or any other person,
be cancelled and returned to the status of authorized but unissued shares.
2.3 Exchange of Certificate
-----------------------
After the Effective Date of Merger, each holder of an outstanding
certificate formerly representing shares of View Tech Common Stock may at such
shareholder's option surrender the same for cancellation to the Surviving
Corporation, and each such holder shall be entitled to receive in exchange
therefor a certificate representing the number of shares of the Surviving
Corporation's Common Stock into which the surrendered shares were converted as
herein provided. Until so surrendered, each outstanding certificate theretofore
representing shares of View Tech Common Stock shall be deemed for all purposes
to represent the number of whole shares of the Surviving Corporation's Common
Stock into which such shares of View Tech were converted in the Merger. The
registered owner on the books and records of the Surviving Corporation of any
such outstanding certificate shall, until such certificate shall have been
surrendered for conversion to the Surviving Corporation, have and be entitled to
exercise any voting and other rights with respect to, and to receive dividends
and other distributions upon, the shares of the Surviving Corporation's Common
Stock represented by such outstanding certificate as provided in this paragraph
2.3.
2.4 Legends
-------
Each certificate representing the Surviving Corporation's Common Stock
so issued in the Merger shall bear the same legends, if any, with respect to
restrictions on transferability as the certificates of View Tech so converted
and given in exchange therefor, unless otherwise determined by the board of
directors of the Surviving Corporation in compliance with applicable laws.
2.5 Endorsement of Surrendered Shares
---------------------------------
If any certificate for shares of the Surviving Corporation's Common
Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a condition of
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer, that such transfer otherwise be
proper and that the party requesting such transfer pay to the Surviving
Corporation any transfer or other taxes payable by reason of the issuance of
such new certificate in the name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
3. COVENANTS TO BE PERFORMED PRIOR TO EFFECTIVE DATE OF MERGER
-----------------------------------------------------------
3.1 Consents
--------
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<PAGE>
Each of View Tech and View Tech-Del shall use its best efforts to
obtain the consent and approval of each person whose consent or approval shall
be required in order to permit consummation of the Merger.
3.2 Governmental Authorizations
---------------------------
Each of View Tech and View Tech-Del shall cooperate in filing any
necessary reports or other documents with any federal, state, local or foreign
authorities having jurisdiction with respect to the Merger.
4. GENERAL
-------
4.1 Further Assurances
------------------
View Tech-Del and View Tech each covenants and agrees that it will,
before, on or after the Effective Date of Merger, take such other actions as may
be required by the California General Corporation Law and/or the Delaware
General Corporation Law.
4.2 Abandonment
-----------
At any time before the Effective Date of Merger, this Plan may be
terminated and the Merger may be abandoned for any reason whatsoever by the
board of directors of either View Tech or View Tech-Del or both, notwithstanding
the approval of this Plan by the shareholders of View Tech or the stockholders
of View Tech-Del or both.
4.3 Amendment
---------
The boards of directors of the Constituent Corporations may amend this
Plan at any time prior to the filing of this Plan (or certificate in lieu
thereof) with the Secretary of State of the State of Delaware, provided that an
amendment made subsequent to the adoption of the Plan by the stockholders of
either Constituent Corporation shall not: (1) alter or change the amount or kind
of shares, securities, cash, property and/or rights to be received in exchange
for or on conversion of all or any of the shares of any class or series thereof
of such Constituent Corporation, (2) materially alter or change any term of the
Certificate of Incorporation of the Surviving Corporation to be effected by the
Merger, or (3) alter or change any of the terms and conditions of this Plan if
such alteration or change would adversely affect the holders of any class or
series thereof of such Constituent Corporation.
4.4 Registered Office
-----------------
The registered office of the Surviving Corporation in the State of
Delaware is located at Corporate Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware and Corporation Trust Company is the
registered agent of the Surviving Corporation at such address.
4.5 Plan
----
5
<PAGE>
Copies of this Plan will be on file at the principal place of business
of the Surviving Corporation at 950 Flynn Road, Camarillo, California 93012, and
copies thereof will be furnished to any stockholder of either Constituent
Corporation, upon request and without cost.
6
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
VIEW TECH, INC.
By: /s/ Robert G. Hatfield
-----------------------
Robert G. Hatfield
Title: Chief Executive Officer
The undersigned hereby affirms and acknowledges, under penalties of
perjury, that this instrument is the act and deed of View Tech, Inc. and that
the facts stated herein are true.
By: /s/ Robert G. Hatfield
-----------------------
Robert G. Hatfield
Title: Chief Executive Officer
VIEW TECH DELAWARE, INC.
By: /s/ Robert G. Hatfield
-----------------------
Robert G. Hatfield
Title: Chief Executive Officer
The undersigned hereby affirms and acknowledges, under penalties of
perjury, that this instrument is the act and deed of View Tech Delaware, Inc.
and that the facts stated herein are true.
By: /s/ Robert G. Hatfield
-----------------------
Robert G. Hatfield
Title: Chief Executive Officer
7
<PAGE>
The undersigned secretary of View Tech, Inc. hereby certifies that this
Plan was adopted and approved by the shareholders of View Tech, Inc. at a
meeting properly noticed and held on November 26, 1996.
/s/ William M. McKay
- ----------------------
William M. McKay
Secretary
The undersigned secretary of View Tech Delaware, Inc. hereby certifies
that this Plan was adopted and approved by the sole stockholder of View Tech
Delaware, Inc. by written consent dated November 26, 1996.
/s/ William M. McKay
- ----------------------
William M. McKay
Secretary
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
VIEW TECH, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Camarillo, State of California, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1996, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote
<PAGE>
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of
<PAGE>
the stock having voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one upon
which by express provision of the statutes or of the certificate of
incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders. The
directors of the corporation shall be divided into three classes; the terms of
office of those of the first class to expire at the annual meeting next ensuing;
of the second class one year thereafter; of the third class two years
thereafter; and at each annual election held after such classification and
election, directors shall be chosen for a full term, as the case may be, to
succeed those whose terms expire.
Section 2. Vacancies and new created directorships resulting from any
increase in the
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<PAGE>
authorized number of directors may be filled by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, unless sooner displaced.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute. If, at the time of filling any vacancy or
any newly created directorship, the directors then in office shall constitute
less than a majority of the whole board (as constituted immediately prior to any
such increase), the Court of Chancery may, upon application of any stockholder
or stockholders holding at least ten percent of the total number of the shares
at the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
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<PAGE>
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or forty-eight (48)
hours notice to each director either personally or by telegram; special meetings
shall be called by the president or secretary in like manner and on like notice
on the written request of two directors unless the board consists of only one
director, in which case special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of the sole
director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum,
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<PAGE>
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors, provided, however, that while the Board of
Directors is
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classified, stockholders may only remove directors for cause.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, treasurer and a secretary. The
Board of Directors may elect from among its members a Chairman of the Board and
a Vice Chairman of the Board. The Board of Directors may also choose one or
more vice-presidents, assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by
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the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors;
he shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers
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as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which
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shall be renewed every six years) in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice- chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof
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and the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall
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not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time
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designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section
6 shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director, and (iii) inure to the
benefit of the heirs, executors and administrators of such a person. The
corporation's obligation to provide indemnification under this Section 6 shall
be offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the corporation or
any other person.
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Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise
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involves services by, such person to the plan or participants or beneficiaries
of the plan; excise taxes assessed on a person with respect to an employee
benefit plan pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate or incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
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EXHIBIT 4.2
Form of Warrant
No. W- 1 Right to Purchase _____ Shares of Common Stock of View Tech, Inc.
VIEW TECH, INC.
COMMON STOCK PURCHASE WARRANT
VIEW TECH, INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received Telcom Holding, LLC, or assigns, is entitled, subject
to the terms set forth below, to purchase from the Company at any time or from
time to time before 5:00 P.M., Eastern time, on December 31, 2001, ________
fully paid and nonassessable shares of Common Stock, $0.0001 par value, of the
Company, at a purchase price per share of $6.50 (such purchase price per share
as adjusted from time to time as herein provided is referred to herein as the
"Purchase Price"). The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
This Warrant is one of the Common Stock Purchase Warrants (the "Warrants")
evidencing the right to purchase shares of Common Stock of the Company, issued
pursuant to a certain Common Stock and Warrant Purchase Agreement (the
"Agreement"), dated as of December 31, 1996, between the Company and Telcom
Holding, LLC, a copy of which is on file at the principal office of the Company,
and the holder of this Warrant shall be entitled to all of the benefits of the
Agreement, as provided therein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include View Tech, Inc. and any corporation
which shall succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes the Company's Common Stock, $0.0001
par value per share, as authorized on the date of the Agreement and any
other securities into which or for which any of such Common Stock may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Market Price" means, as of any day, if the Common Stock is
then traded on a national stock exchange or on the NASDAQ National Market
System, the lower of the average closing sale price of the Common Stock,
and if the Common Stock is not so traded, the lower of the average closing
bid price of the Common Stock, during (i) the thirty (30) consecutive
trading days or (ii) the three (3) consecutive trading days ending on the
trading day next preceding such day.
(d) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holders of the Warrants at any time shall be
entitled to receive, or shall have received, on the exercise of the
Warrants, in lieu of or in addition to
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Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(e) The term "Securities Act" means the Securities Act of 1933 or any
similar federal statute, and the rules and regulations of the Securities
and Exchange Commission (or of any other federal agency then administering
the Securities Act) thereunder, all as the same shall be in effect at the
time.
1. EXERCISE OF WARRANT.
-------------------
1.1. FULL EXERCISE. This Warrant may be exercised in full by the holder
-------------
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part by surrender
----------------
of this Warrant in the manner and at the place provided in Subsection 1.1 except
that the amount payable by the holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. PAYMENT BY DEBT SURRENDER. Notwithstanding the payment provisions of
-------------------------
Subsections 1.1 and 1.2, all or part of the payment due upon exercise of this
Warrant in full or in part may be made by the surrender by such holder to the
Company of any promissory note, debenture, bond or other evidence of
indebtedness for borrowed money of the Company and such evidence of indebtedness
so surrendered shall be credited against such payment in an amount equal to the
principal amount thereof and accrued interest to the date of surrender.
1.4 NET ISSUE ELECTION. The holder hereof may elect to receive, without
------------------
the payment by such holder of any additional consideration, shares equal to the
value of this Warrant or any portion hereof by the surrender of this Warrant or
such portion to the Company, with the form of subscription at the end hereof
duly executed by such holder, at the office of the Company. Thereupon, the
Company shall issue to such holder such number of fully paid and nonassessable
shares of Common Stock as is computed using the following formula:
X = Y (A-B)
-------
A
2
<PAGE>
where X = the number of shares to be issued to such holder pursuant to this
Subsection 1.4.
Y = the number of shares covered by this Warrant in respect of which the
net issue election is made pursuant to this Subsection 1.4.
A = the Market Price as of the date of the relevant net issue election
pursuant to this Subsection 1.4.
B = the Purchase Price in effect under this Warrant at the time such net
issue election is made pursuant to this Subsection 1.4.
1.5. COMPANY ACKNOWLEDGMENT. The Company will, at the time of the exercise
----------------------
of this Warrant, upon the request of the holder hereof acknowledge in writing
its continuing obligation to afford to such holder any rights to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.
1.6. TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or trust company
---------------------------
shall have been appointed as trustee for the holders of the Warrants pursuant to
Subsection 4.2, such bank or trust company shall have all the powers and duties
of a warrant agent appointed pursuant to Section 12 and shall accept, in its own
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
-------------------------------------------------
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
--------------------------------------------------------
RECLASSIFICATION. ETC. In case at any time or from time to time, prior to any
- ---------------------
exercise hereof as provided in Section 1, the holders of Common Stock (or Other
Securities) shall have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) shall have become entitled to
receive, without payment therefor,
(a) other or additional stock or other securities or property (other than
cash) by way of dividend, or
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(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification, recapitalization,
combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Subsection 4.4), then and in each such case the holder of this Warrant,
on the exercise hereof as provided in Section 1, shall be entitled to receive
the amount of stock and other securities and property (including cash in the
cases referred to in subdivisions (b) and (c) of this Section 3) which such
holder would hold on the date of such exercise if on the date hereof he had been
the holder of record of the number of shares of Common Stock covered by such
exercise and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) receivable by him as
aforesaid during such period, giving effect to all adjustments called for during
such period by Sections 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
---------------------------------------------------------
4.1. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time or
------------------------------------------
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, the holder of this Warrant, on the exercise hereof as provided in Section
1 at any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Sections 3
and 5.
4.2. DISSOLUTION. In the event of any dissolution of the Company following
-----------
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in Boston, Massachusetts, as trustee for the holder or
holders of the Warrants.
4.3. CONTINUATION OF TERMS. Upon any reorganization, consolidation, merger
---------------------
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of
4
<PAGE>
stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 6.
4.4. EXTRAORDINARY EVENTS. In the event that the Company shall (i) issue
--------------------
additional shares of Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
or (iii) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Subsection 4.4. The holder
of this Warrant shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Subsection 4.4) be issuable on such exercise by a
fraction of which (i) the numerator is the Purchase Price which would otherwise
(but for the provisions of this Subsection 4.4) be in effect, and (ii) the
denominator is the Purchase Price in effect on the date of such exercise.
5. ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN THE MARKET
--------------------------------------------------------------------
PRICE IN EFFECT.
- ----------------
5.1. GENERAL. If the Company shall at any time or from time to time, issue
-------
any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Subsection 5.4), in a
transaction exempt from registration under the Securities Act, without
consideration or for a net consideration per share less than the Market Price in
effect immediately prior to such issuance, then, and in each such case: (a) the
Purchase Price shall be lowered to an amount determined by multiplying such
Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares of Common
Stock outstanding immediately prior to the issuance of such additional
shares of Common Stock, plus (b) the number of shares of Common Stock which
the net aggregate consideration, if any, received by the Company for the
total number of such additional shares of Common Stock so issued would
purchase at the Purchase Price in effect immediately prior to such
issuance, and
(2) the denominator of which shall be (a) the number of shares of Common
stock outstanding immediately prior to the issuance of such additional
shares
5
<PAGE>
of Common Stock plus (b) the number of such additional shares of Common
Stock so issued;
and (b) the holder of this Warrant shall thereafter, on the exercise hereof as
provided in Section 1, be entitled to receive the number of shares of Common
Stock determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Subsection 5.1) be issuable on such
exercise by the fraction of which (i) the numerator is the Purchase Price which
would otherwise (but for the provisions of this Subsection 5.1) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
5.2. DEEMED ISSUANCE OF COMMON STOCK. The issuance of any warrants,
-------------------------------
options or other subscription or purchase rights with respect to shares of
Common Stock and the issuance of any securities convertible into or exchangeable
for shares of Common Stock (or the issuance of any warrants, options or any
rights with respect to such convertible or exchangeable securities), in a
transaction exempt from registration under the Securities Act, shall be deemed
an issuance at such time of such Common Stock if the Net Consideration Per Share
which may be received by the Company for such Common Stock (as hereinafter
determined) shall be less than the Purchase Price at the time of such issuance
and, except as hereinafter provided, an adjustment in the Purchase Price and the
number of shares of Common Stock issuable upon exercise of this Warrant shall be
made upon each such issuance in the manner provided in Subsection 5.1. Any
obligation, agreement or undertaking to issue warrants, options, or other
subscription or purchase rights at any time in the future shall be deemed to be
an issuance at the time such obligation, agreement or undertaking is made or
arises. No adjustment of the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made under Subsection 5.1
upon the issuance of any shares of Common Stock which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made upon the issuance
of any such warrants, options or other rights or upon the issuance of any
convertible securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided. Any adjustment of the Purchase Price and
the number of shares of Common Stock issuable upon exercise of this Warrant with
respect to this Subsection 5.2 which relates to warrants, options or other
subscription or purchase rights with respect to shares of Common Stock shall be
disregarded if, as, and when, and to the extent that, any such warrants, options
or other subscription or purchase rights expire or are canceled without being
exercised, so that the Purchase Price effective immediately upon such
cancellation or expiration shall be equal to the Purchase Price in effect at the
time of the issuance of the expired or canceled warrants, options or other
subscriptions or purchase rights, with such additional adjustments as would have
been made to that Purchase Price had the expired or canceled warrants, options
or other subscriptions or purchase rights not been issued. For purposes of this
Subsection 5.2, the "Net Consideration Per Share" which may be received by the
Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal to the
total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions, or other purchase rights
or convertible or
6
<PAGE>
exchangeable securities, plus the minimum amount of consideration, if any,
payable to the Company upon exercise or conversion thereof, divided by the
aggregate number of shares of Common Stock that would be issued if all such
warrants, options, subscriptions, or other purchase rights or convertible
or exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by the
Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights, or convertible
or exchangeable securities without giving effect to any possible future
price adjustments or rate adjustments which may be applicable with respect
to such warrants, options, subscriptions or other purchase rights or
convertible securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5,
consists of property other than cash, such consideration shall be deemed to have
the same value as shall be determined in good faith by the Board of Directors of
the Company.
This Subsection 5.2 shall not apply under any of the circumstances
described in Subsection 4.4.
5.3. DILUTION IN CASE OF OTHER SECURITIES. In case any Other Securities
------------------------------------
(other than described in Subsection 5.1) shall be issued or sold, or shall
become subject to issue upon the conversion or exchange of any stock (or Other
Securities) of the Company (or any other issuer of Other Securities or any other
person referred to in Section 4) or to subscription, purchase or other
acquisition pursuant to any rights or options granted by the Company (or such
other issuer or person), for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, the computations, adjustments and
readjustments provided for this Section 5 with respect to the Purchase Price and
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be made as nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time receivable on the
exercise of the Warrants, so as to protect the holders of the Warrants against
the effect of such dilution.
5.4. EMPLOYEE STOCK OPTION PLANS (THE "PLANS"). The provisions of this
-----------------------------------------
Section 5 shall not apply to the exercise of options granted to directors,
officers and employees for any such Plan now existing or adopted after the date
hereof, provided that such Plans do not provide for the purchase in the
aggregate of more than 1,771,000 shares of Common Stock.
5.5. EXPIRATION. Notwithstanding anything to the contrary contained in
----------
this Warrant, the provisions of this Section 5 shall expire six (6) months after
the initial Closing (as defined in the Agreement).
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
-------------------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to
7
<PAGE>
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock receivable on the
exercise of this Warrant above the amount payable therefor on such exercise, (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of all Warrants from time to time outstanding, (c) will
not issue any capital stock of any class which is preferred as to dividends or
as to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage of par value in respect of participation in
dividends and in any such distribution of assets, and (d) will not transfer all
or substantially all of its properties and assets to any other person (corporate
or otherwise), or consolidate with or merge into any other person or permit any
such person to consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of the Warrants.
7. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
------------------------------------------
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of the Warrants, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
the Warrants and, on the written request at any time of any holder of a Warrant,
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated. In case of any dispute concerning
computation of any adjustment or readjustment, the Company at its expense will
promptly cause independent certified public accountants of recognized standing
selected by the Company to compute such adjustment or readjustment in accordance
with the terms of the Warrants. The determination of such accountants shall be
final and binding for all purposes.
8. NOTICES OF RECORD DATE, ETC. In the event of
---------------------------
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
8
<PAGE>
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or
merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities (other than the issue of Common Stock on the exercise of
the Warrants),
THEN and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least twenty (20) days
prior to the date specified in such notice on which any such action is to be
taken.
9. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
------------------------------------------------------------
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
-----------------------
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9
<PAGE>
12. WARRANT AGENT. The Company may, by written notice to each holder of a
-------------
Warrant, appoint an agent having an office in either Los Angeles, California,
Boston, Massachusetts or New York, New York for the purpose of issuing Common
Stock (or Other Securities) on the exercise of the Warrants pursuant to Section
1, exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant
to Section 1.1, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.
13. REMEDIES. The Company stipulates that the remedies at law of the
--------
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms,
------------------
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred by endorsement (by the
holder hereof executing the form of assignment at the end hereof) and
delivery in the same manner as in the case of a negotiable instrument
transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered
to transfer absolute title hereto by endorsement and delivery hereof to a
bona fide purchaser hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in favor of each
such bona fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby;
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary; and
(d) the Common Stock or other securities issued or issuable upon
exercise of this Warrant shall not be transferable except in compliance
with federal and applicable state securities laws.
15. NOTICES, ETC. All notices and other communications from the Company
------------
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall
10
<PAGE>
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. This
Warrant is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
17. REDEMPTION. Notwithstanding anything to the contrary contained
----------
herein, on or after the first (1st) anniversary of the initial Closing (as
defined in the Agreement), the Company may at its option redeem this Warrant (i)
if the average closing bid price of the Common Stock was at least $10.00 during
a period of sixty (60) consecutive trading days ending within ten (10) days
prior to the date of the Company's written notice of redemption or (ii) if the
Company effects a best efforts or firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale by the Company of its Common Stock (or units
including Common Stock) with aggregate gross proceeds to the Company of not less
than $7,500,000 (calculated after deducting underwriter's discounts and
commissions but before expenses) (a "Qualified Public Offering"). The Company
shall give written notice of any such election to the holder of this Warrant,
which notice shall set forth the proposed redemption date, which shall be a date
not less than thirty (30) nor more than sixty (60) days after such notice; the
aggregate number of and the number of each affected holder's Warrants to be
redeemed; and the redemption price per Registrable Share, which shall be $0.50
per Registrable Share (subject to adjustment upward, but not downward, in
accordance with Sections 3, 4 and 5 hereof, mutatis mutandis). On the
------- --------
redemption date, the holders shall surrender their Warrants for cancellation.
From and after the date on which the redemption price therefor is paid in full,
all Warrants shall no longer be outstanding. Notwithstanding the foregoing,
nothing herein shall be deemed to prevent the exercise of this Warrant after any
such redemption notice is given and before the redemption date specified
therein. Notwithstanding anything to the contrary contained in this Warrant, in
the event of any redemption notice with respect to a Qualified Public Offering,
(i) this Warrant shall automatically be deemed to be exercised in full pursuant
to the provisions of Subsection 1.4 hereof, without any further action on behalf
of the holder hereof, immediately prior to the effectiveness of the registration
statement with respect thereto and (ii) in connection with such exercise the
Purchase Price then in effect shall be reduced by an amount equal to (a) $10.00
less (b) the price per share (or unit) at which the Company's Common Stock (or
units) is offered to the public in such Qualified Public Offering.
11
<PAGE>
18. EXPIRATION; AUTOMATIC EXERCISE. The right to exercise this Warrant
------------------------------
shall expire at 5:00 P.M., Eastern time, on December 31, 2001. Notwithstanding
the foregoing, this Warrant shall automatically be deemed to be exercised in
full pursuant to the provisions of Subsection 1.4 hereof, without any further
action on behalf of the holder hereof, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
DATED: ___________, 1997 VIEW TECH, INC.
BY: _________________
NAME:
TITLE:
12
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO VIEW TECH, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder shares of Common Stock of
VIEW TECH, INC. and herewith makes payment of $_______ therefor, and requests
that the certificates for such shares be issued in the name of, and delivered
to, __________________________ whose address is:
__________________________________________________. If said number of shares is
less than all te shares covered by the within Warrant, a new Warrant shall be
registered in the name of the undersigned and delivered to the address stated
below.
Dated: _________, ____
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant or the attached
Assignment)
Witness:
_______________________________________
(Address)
______________________
__________________________________________
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
the assignee named below the right represented by the within Warrant to purchase
the number of shares of Common Stock (or Other Securities) to which the within
Warrant relates, and appoints _______________________ Attorney to transfer such
right on the books of VIEW TECH, INC.. with full power of substitution in the
premises:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated: __________, ____
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
Witness:
______________________________________
(Address)
_____________________
13
<PAGE>
EXHIBIT 10.13
SUBLEASE AGREEMENT
------------------
THIS SUBLEASE AGREEMENT (the "Sublease"), made as of this 11th day of
October, 1996, by and between Atlantic Steel Industries, Inc., having an office
at 2859 Paces Ferry Road, Suite 1900, Atlanta, Georgia 30339 ("Sublessor"); and
ViewTech, Inc., a California corporation, having an office at 950 Flynn Road,
Camarillo, California 93012 ("Sublessee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sublessor, as "Tenant", entered into a lease (the "Prime Lease")
with State of California Employees Retirement System, agency of State of
California (the "Prime Landlord"), dated November 1, 1993, leasing certain space
on the 19th floor of that certain building known as "Overlook III" at 2859 Paces
Ferry Road, Atlanta, Georgia (the "Building"). Said Prime Lease to which
reference is made above is incorporated herein by this reference and made a part
hereof as attachment "A".
WHEREAS, Sublessor and Sublessee have agrees that Sublessor shall sublet
approximately 5,946 square feet of such space as rented under the Prime Lease to
Sublessee, as such space is shown on Exhibit "B" attached hereto and by this
reference incorporated herein, upon the terms and conditions as herein
described.
NOW, THEREFORE, for Ten and No/100 Dollars ($10.00) and other good and
valuable consideration, paid by the parties hereto to one another, the receipt
and sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereto hereby covenant and agree as follows:
1. Premises, Rent and Term. (a) Sublessor hereby leases to Sublessee the
-----------------------
5,946 square feet, more or less, of space on the 19th floor of the Building,
shown on Exhibit "B: (the "Sublease Premises"), beginning on December 1, 1996
and ending on December 31, 1999, (the "Term").
(b) The base rent ("Base Rent") for such Sublease Premises shall be
Ten Thousand Six Hundred Fifty Three and 25/100 Dollars ($10,653.25) per month,
plus the additional rent (the "Additional Rent") described in Paragraph 3 of
this Sublease.
(c) Sublessee shall pay the Base Rent and Additional Rent
(collectively the "Rent") provided for hereunder in advance on the first day of
every month during the Term.
2. No Assignment. Sublessee shall not assign this Sublease nor sublet
-------------
the Premises in whole or in part and shall not permit Sublessee's interest in
this Sublease to be vested in any third party by operation of law or otherwise.
1
<PAGE>
3. Other Charges. If Sublessor shall be charged for Additional Rent or
-------------
any other sums pursuant to the provisions of the Prime Lease, including, but not
limited to, Paragraph 3 thereof, Sublessee shall be liable for all of such
Additional Rent or other sums. If Sublessee shall procure any additional
services from the Building, such as alterations or after-hour air conditioning,
Sublessee shall pay for same at the rates charged therefor by the Prime Landlord
and shall make such payment to the Sublessor or Prime Landlord, as Sublessor
shall direct. Any Rent or other sums payable by Sublessee under this Paragraph
3 shall be Additional Rent and collectible by Sublessor as such. If Sublessor
shall receive any refund from Prime Landlord, Sublessee shall be entitled to the
return of so much thereof as shall be attributable to prior payments by
Sublessee.
3.1 Payment of Operating Costs by Sublessee: In addition to Base Rent,
---------------------------------------
Sublessee agrees to pay as Additional Rent to Sublessor all Operating Costs as
described in paragraph 2 of Exhibit "D" and in Exhibit "E" of the Prime Lease.
For the purposes of this Sublease, Base Year Operating Costs, as defined in
Paragraph 2(a) of Exhibit D to the Prime Lease, shall be the actual Operating
Costs, on a per square foot per annum basis, for the calendar year 1996, as
adjusted in accordance with Exhibit "E" of the Prime Lease. Such payments shall
begin on January 1, 1997.
4. Subordinate to Prime Lease. This Sublease is subject and subordinate
--------------------------
in all instance and under all circumstances to the Prime Lease. Except as may
be inconsistent with the terms hereof, all the terms, covenants and conditions
in the Prime Lease contained shall be applicable to this Sublease with the same
force and affect as if Sublessor were the "Landlord" under the Prime Lease and
sublessee were the "Tenant" thereunder; and in case of any breach hereof by
Sublessee, Sublessor shall have all the rights against Sublessee as would be
available to Prime Landlord against Sublessor as "Tenant" under the Prime Lease
for purposes of this Sublease. Base Year Operating Costs, as defined in
Paragraph 2(a) of Exhibit "D" to the Prime Lease, shall be the actual Operating
Costs, on a per square foot per annum basis, for the calendar year 1996, as
adjusted in accordance with Exhibit "E: of the Prime Lease. Such payments shall
begin on January 1, 1997.
4.1 The following provisions of the Master Lease are not incorporated
herein and, as between Sublessor and Sublessee, are deemed deleted:
(i) Paragraphs 3, 4, and 5 of Exhibit "D."
5. Services. Notwithstanding anything to the contrary contained herein,
--------
the only services or rights to which Sublessee is entitled hereunder are those
to which Sublessor is entitled to as "Tenant" under the Prime Lease and that for
all such services and rights Sublessee will look to Prime Landlord under Prime
Lease.
6. No Acts. Sublessee shall neither do nor permit anything to be done
-------
which would cause the Prime Lease to be terminated or forfeited or any claims to
accrue to the benefit of Prime Landlord by reason of any right of termination or
forfeiture reserved or vested in Prime Landlord under the Prime Lease, or any
rights to damages accruing to or for the benefit of Prime Landlord under the
Prime Lease, and Sublessee shall indemnify and hold Sublessor harmless from and
against all loss, cost, incurred by Sublessor by reason of any default on the
part of Sublessee by
2
<PAGE>
reason of which the Prime Lease may be terminated or forfeited, or any claims
shall accrue to the benefit of or for Prime Landlord under the Prime Lease.
7. First Months Rent and Security Deposit: Sublessee has paid Sublessor,
--------------------------------------
upon the execution and delivery of this Sublease, the sum of Twenty One Thousand
Three Hundred Six and 50/100 Dollars ($21,306.50) one-half of which shall be
applied to Sublessee's first months rent obligation and one-half of which shall
be held as security for the full and faithful performance of the terms,
covenants and conditions of this Sublease on Sublessee's part to be performed or
observed, including, but not limited to, payment of Rent or for any other sum
which Sublessor may expend or be required to expend by reason of Sublessee's
failure to comply with the terms and conditions of the Prime Lease or this
Sublease, including, but not limited to, any damages or deficiency incurred by
Sublessor as "Tenant" under the Prime Lease in reletting the Sublease Premises,
in whole or in part, whether such damages shall accrue before or after summary
proceedings or other re-entry by Sublessor. If Sublessee shall fully and
faithfully comply with all the terms, covenants and conditions of this Sublease
on Sublessee's part to be performed or observed, the security, or any unapplied
balance thereof, shall be applied to Sublessor's last month of Base Rent.
8. Sublease Premises. Sublessee shall take the Sublease Premises "as is,
-----------------
where is", and Sublessor makes and has made no representations or warranties
whatsoever with respect to the Sublease Premises or the fitness thereof for
Sublessee's intended purpose.
9. Brokerage. Cushman & Wakefield of Georgia, Inc. has acted as agent
---------
for Sublessor in this transaction. Cushman & Wakefield is to be paid a
commission by the Sublessor. Shaw & Associates has acted as agent for Sublessee
in this transaction. Shaw & Associates is to be paid a commission by Sublessor.
Sublessor is obligated to pay commission in accordance with a separate written
agreement between Sublessor and Cushman & Wakefield of Georgia, Inc.
10. No Other Agreement. All prior understandings and agreements between
------------------
the parties are merged within this Sublease, which alone fully and completely
sets forth the understanding of the parties hereto. This Sublease may not be
changed or terminated in any manner other than by an agreement in writing,
executed by the party against whom enforcement of the change or termination is
sought.
11. Notice. Any notice of demand which either party may or must give to
------
the other hereunder shall be in writing and delivered personally or sent by
certified mail, return receipt requested, addressed if to Sublessor, as follows:
Dan Coto
SIVACO Georgia
24 Herring Road
P.O. Box 1194
Newman, GA 30265
(770) 253-6333
and if to Sublessee, as follows:
3
<PAGE>
Dianna Branch
ViewTech, Inc.
950 Flynn Road
Camarillo, CA 93012
Either party may, by notice in writing, direct that future notices or demand be
sent to a different address.
12. Binding. The covenants and agreements herein contained shall bind and
-------
inure to the benefit of Sublessor, Sublessee, and their respective executors,
administrators, successors and assigns.
SPECIAL STIPULATIONS
1. Sublessor agrees to give Sublessee, at no additional charge, the
refrigerator, microwave and dishwasher.
IN WITNESS WHEREOF, the undersigned have caused this Sublease to be
executed under seal and delivered, on the day and year first above written.
"SUBLESSOR"
By: /s/
-------------------------
Its: Assistant Secretary
-------------------
Attest: /s/
---------------------
Its: Office Manager
-------------------
(CORPORATE SEAL)
"SUBLESSEE"
By: /s/ William M. McKay
-----------------------------
Its: Chief Financial Officer
-----------------------
Attest: /s/
-------------------------
Its: Facilities Manager
-----------------------
(CORPORATE SEAL)
State of California Public Employees'
Retirement System, an agent of the
State of California
4
<PAGE>
Consented to by:
------------------------------------
By: LaSalle Advisors Limited, Agent
By: /s/
--------------------------------
Its: Vice President
--------------------------
Attest: /s/
----------------------------
Its: Asst. Administrator
--------------------------
(CORPORATE SEAL)
By consenting to this Sublease, State of California Public Employees Retirement
System, an agency of the State of California, as "Prime Landlord", in no way
agrees to perform or be obligated to perform any services on behalf of Sublessee
hereunder, but shall continue to provide any such services to the Sublease
Premises in accordance with the terms and conditions of the Prime Lease.
Sublessee shall have no rights or claims against Prime Landlord, but shall
instead look solely to Sublessor for any such claims.
5
<PAGE>
OVERLOOK III
OFFICE BUILDING LEASE AGREEMENT
This Lease Agreement (the "Lease") is entered into as of the _____ day of
____________, 199_, by and between the State of California Public Employees'
Retirement System (hereinafter called "Landlord") and Atlantic Steel Industries,
Inc. (hereinafter called "Tenant").
W I T N E S S E T H
- - - - - - - - - -
1 Definitions and Basic Provisions. Certain definitions and basic
--------------------------------
provisions (the "Basic Lease Information") of this Lease are:
1.1 Lease Date: __________________, 199_
1.2 Tenant: Atlantic Steel Industries, Inc.
1.3 Tenant's Address: 2859 Paces Ferry Road
Suite 1900
Atlanta, GA 30339
Contact __________________ Telephone: _______________
1.4 Landlord: State of California Public Employees' Retirement
System, an agency of the State of California
1.5 Landlord's Address: LaSalle Advisors Limited
11 South LaSalle Street
Chicago, IL 60603
Contact: Calpers Portfolio Manager
Telephone: (312) 782-5800
Copy to: LaSalle Partners Asset Management Limited
Suite 250
2839 Paces Ferry Road
Atlanta, GA 30339
Attn: Mr. Brad Jennings
Telephone: (404) 319-8900
1.6 Premises: Suite No. 1900 in the office building located at 2839
Paces Ferry Road (the "Building"), known as Overlook III. The Building and the
land upon which it is situated, which land is more particularly described in
Exhibit "A" hereto, are herein sometimes collectively called the Project.
- -----------
<PAGE>
1.7 Lease Term: The period commencing on January 1, 199__ (or the
earlier date on which Tenant occupies the Premises with Landlord's prior written
consent), and subject to adjustment as provided in the Lease (the "Commencement
Date"), and continuing until December 31, 1999.
1.8 Base Rent: $9,414.50 per month.
1.9 Security Deposit: $9,414.50
1.10 Tenant's Share: the percentage that expresses the ratio between
the number of rentable square feet comprising the Premises (5,946), and the
number of rentable square feet of the Building (432,312), which, for the
purposes of the Lease, shall be 1.375%.
1.11 Permitted Use: General Office Use.
1.12 Lease Year: The period of twelve (12) calendar months or less
commencing with the Commencement Date and ending at midnight on the following
December 31, each successive period of twelve (12) calendar months thereafter
during the Lease Term, and the final period of twelve (12) calendar months or
less commencing on January 1 of the calendar year in which the Lease Term
expires. During any Lease Year within the Lease Term that is less than twelve
(12) full months, any amount to be paid with respect to such period shall be
prorated, based on the actual number of months and the actual number of days of
any partial month assuming each month to have thirty (30) days.
2 Lease Grant. In consideration of rent to be paid and the other
-----------
covenants and agreements to be performed by Tenant and upon the terms
hereinafter stated, Landlord does hereby lease, demise and let unto Tenant the
Premises, which are outlined in red on the plan attached hereto as Exhibit "A-
----------
1", commencing on the Commencement Date and ending on the last day of the Lease
- --
Term, unless sooner terminated as herein provided. If this Lease is executed
before the Premises become vacant, or otherwise available and ready for
occupancy, or if any present tenant or occupant of the Premises holds over, and
Landlord cannot acquire possession of the Premises prior to the Commencement
Date, Landlord shall not be deemed to be in default hereunder, and Tenant agrees
to accept possession of the Premises at such time as Landlord is able to tender
the same, such date shall be deemed to have accepted the same as suitable for
the purposes herein intended and to have acknowledged that the same comply fully
with Landlord's obligations. Within five (5) days after Landlord's architect
shall certify to Tenant that the Premises are substantially complete but prior
to Tenant moving in to the Premises, Tenant shall make an inspection of the
Premises, and except for latent defects, and except for incomplete or defective
items other than latent defects of which Landlord is notified by Tenant within
such period, Tenant shall be deemed t have accepted the Premises in their then
condition. Any latent defects to the Premises which may be claimed by Tenant
shall be claimed by Tenant within twelve (12) months of the Commencement Date,
and any such claims not so raised by Tenant within said
2
<PAGE>
twelve (12) month period shall be waived by Tenant. Within ten (10) days after
request of Landlord, Tenant agrees to give Landlord a letter confirming the
Commencement Date and certifying that Tenant has accepted delivery of the
Premises and that the condition of the Premises complies with Landlord's
obligations hereunder.
3 Rent.
----
3.1 Tenant agrees to pay to Landlord in advance on or before the
first day of each month starting with January 1, 199_, the Base Rent, subject to
adjustment as hereinafter provided, without deduction or set off, for each month
thereafter for the remainder of the entire Lease Term. One such monthly
installment together with the Security Deposit shall be due and payable by
Tenant to Landlord upon execution of this Lease, and a like monthly installment
shall be due and payable without demand on or before the first day of each
calendar month succeeding the Commencement Date during the Lease Term. Rent for
any period of less than a full month shall be prorated, based on one thirtieth
(1/30) of the current monthly rent for each day of the partial month this Lease
is in effect.
3.2 If any installment of the Base Rent, or any other sums which
become owing by Tenant to Landlord under the provisions hereof, is not received
within ten (10) days after the date of notice from Landlord of such late
payment, without in any way implying Landlord's consent to such late payment,
Tenant, to the extent permitted by law, agrees to pay, in addition to said
installment of the Base Rent or such other sums owed, it being understood that
said late payment charge shall constitute liquidated damages and shall be for
the purpose of reimbursing Landlord for additional costs and expenses which
Landlord presently expects to incur in connection with the handling and
processing of late installment payments of the Base Rent and such other sums
which become owing by Tenant to Landlord hereunder: provided, however, if more
than one (1) payment due of Tenant hereunder in any one (1) calendar year is not
made until after notice of such late payment is received by Tenant, then the
late charge in this Paragraph shall be due by Tenant if any subsequent payments
due of Tenant hereunder in the same calendar year are not made within five (5)
days within the date when due (without the requirement for prior notice).
Landlord and Tenant expressly covenant and agree that in the event of any such
late payment by Tenant, the damages so resulting to Landlord will be difficult
to ascertain precisely, and that the foregoing charge constitutes a reasonable
and good faith estimate by the parties of the extent of such damages and does
not constitute interest. Notwithstanding the foregoing, the foregoing late
charges shall not apply to any sums which may have been advanced by Landlord to
or for the benefit of Tenant pursuant to the provisions of this Lease.
Notwithstanding the above, the late charge shall not be due unless the amount
due is not paid by Tenant within ten (10) days of the date notice from Landlord
of such late payment is received by Tenant; provided, however, if more than one
(1) payment due of Tenant hereunder in any one (1) calendar year is not made
until after notice of such late payment is received by Tenant, then the late
charge in this paragraph shall be due by Tenant if any subsequent payments due
of Tenant hereunder in the same calendar year are not made within five (5) days
of the date when due.
3
<PAGE>
3.3 The Security Deposit shall be held by Landlord without liability
and as security for the performance by Tenant of Tenant's covenants and
obligations under this Lease, it being expressly understood that such deposit
shall not be considered an advance payment of rent or a measure of Landlord's
damages in case of default by Tenant. Upon the occurrence of any event of
default by Tenant, Landlord may (but shall not be obligated to), from time to
time, without prejudice to any other remedy, use the Security Deposit to the
extent necessary to make good any arrearage of Rent and any other damage, injury
expense or liability caused to Landlord by such event of default. Following any
such application of the Security Deposit, Tenant shall pay to Landlord on demand
the amount so applied in order to restore the Security Deposit to its original
amount. If Tenant is not then in default hereunder, any remaining balance of
the Security Deposit shall be returned by Landlord to Tenant upon termination of
this Lease. If Landlord transfers its interest in the Premises during the Lease
Term, Landlord may assign the Security Deposit to the transferee and thereafter
shall have no further liability for the return of the Security Deposit.
3.4 All sums other than Base Rent payable by Tenant to Landlord under
any provision of this Lease shall constitute Additional Rent. Base Rent and
Additional Rent are herein referred to collectively as "Rent". All Rent due
hereunder shall bear interest from the due date until paid in full at a rate
equal to the lesser of: (a) the prime interest rate in effect from day to day at
the First National Bank of Atlanta, Georgia plus three (3) percentage points; or
(b) the maximum legal rate allowed by law. If more than the maximum legal rate
of interest should ever be collected with regard to any sum due hereunder, said
excess amount shall be credited against future payments of Rent thereafter first
accruing hereunder. If no such further Rent accrues hereunder, said excess sums
shall be promptly refunded by Landlord to Tenant upon written demand by Tenant.
3.5 No payment by Tenant or receipt by Landlord of a lesser amount
than the correct Rent shall be deemed to be other than a payment on account, nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment be deemed an accord and satisfaction. Landlord may accept such
check of payment without prejudice to Landlord's right to recover the balance or
to pursue any other remedy in this Lease or otherwise provided by law or equity.
4 Consumer Price Index Increases. INTENTIONALLY DELETED. (See Special
------------------------------
Provision #2 of Exhibit "D").
-----------
5 Landlord's Obligations.
----------------------
5.1 Subject to the limitations hereinafter set forth, Landlord agrees
to furnish Tenant while occupying the Premises facilities to provide (a) water
at those points of supply provided for general use of tenants of the Building;
(b) heated and refrigerated air conditioning in season, from 8:00 a.m. to 6:00
p.m. Monday through Friday and from 8:00 a.m. to 1:00 p.m. on Saturdays, except
for holidays (the "Building Hours"), at such temperatures and in such amounts as
are comparable to other first-class buildings in the area
4
<PAGE>
of the Building, such service at night and on Saturday afternoons, Sundays and
holidays to be furnished only at the written request of Tenant, who shall pay
upon demand Landlord's customary charges for such services; (c) janitorial
services to the Premises on weekdays other than holidays and such window
washing, all such being comparable to the janitorial services and window washing
services provided in other first-class buildings in the area of the Building;
and (d) operatorless passenger elevators for ingress and egress to the floor on
which the Premises are located, in common with other tenants, provided that
Landlord may reasonably limit the number of elevators to be in operation at
times other than during customary business hours for the Building and on
holidays. In addition, Landlord agrees to maintain the public and common areas
(the "Common Facilities") of the Building, such as lobbies, stairs, corridors
and restrooms, in reasonably good order and condition, except for damage
occasioned by Tenant, or its employees, agents or invitees. If Tenant shall
desire any of the services specified in this Section 5.1 at any time other than
times herein designated, such service or services shall be supplied to Tenant
only at the written request of Tenant delivered to Landlord before 3:00 p.m. on
the business days preceding such extra usage, and Tenant shall pay to Landlord
as Additional Rent the cost of such service or services immediately upon receipt
of a bill therefor.
5.2 Without additional cost to Tenant, Landlord shall provide
standard electric lighting and current for Tenant's use and occupancy of the
Premises and shall make available electric lighting and current for the common
areas of the Building in the manner and to the extent deemed by Landlord to be
standard. If Tenant's use of electric current (a) exceeds 110 volt power, or
(b) exceed that required for routine lighting and operation of general office
machines (such as typewriters, dictating equipment, desk model adding machines
and the like) which use 110 volt electrical power, then the Tenant shall pay on
demand the cost (as determined in good faith by the Landlord) of any such
excess. Without Landlord's prior written consent, Tenant shall not install any
data processing or computer equipment in the Premises or any other equipment
which it shall require for its use other than the normal electric current or
other utility service. When heat generating machines or equipment (other than
general office machines as described hereinbefore) are used in the Premises by
Tenant which affect the temperature otherwise maintained by the air conditioning
system or otherwise overload any utility, Landlord shall have the right to
install supplemental air conditioning units or other supplemental equipment in
the Premises, and the cost thereof (as determined in good faith by Landlord),
including without limitation, the cost of installation, operation, use and
maintenance, shall be paid by Tenant to Landlord on demand. The rate charged by
Landlord shall not exceed the rate prevailing for Tenant as a user as
established by the applicable rate classification published from time to time by
the local electric power company or other utility supplier. The obligation of
the Landlord hereunder to make available such utilities shall be subject to the
rules and regulations of the supplier of such utilities and of any municipal or
other governmental authority regulating the business of providing such utility
service. Tenant will be billed monthly for such additional utility service and
all such charges shall be considered due upon delivery of such bill and be
deemed as so much Additional Rent due from Tenant to Landlord.
5
<PAGE>
5.3 Landlord shall not in any way be liable or responsible to Tenant
for any loss or damages or expense which Tenant may sustain or incur if either
the quantity or character of any utility service is changed or is no longer
available or is no longer suitable for Tenant's requirements. Tenant covenants
and agrees that at all times its use of electric current shall never exceed the
capacity of existing feeders to the Building or the risers or wiring
installations. Any riser or risers or wiring required or necessary to meet
Tenant's excess electrical requirements upon written request of Tenant will be
installed by Landlord at the sole cost and expense of Tenant (if, in Landlord's
sole judgment, the same are necessary and will not cause permanent damage or
injury to the Building or the Premises or cause or create a dangerous or
hazardous condition or entail excessive or unreasonable alterations, repairs or
expense or interfere with or disturb other tenants or occupants). At any time
when Landlord is making such additional utility service available to the
Premises pursuant to this Section, Landlord may, at its option, upon not less
than thirty (30) days' prior written notice to Tenant, discontinue the
availability of such additional utility service. If Landlord gives any such
notice of discontinuancy, Landlord shall make all the necessary arrangements
with the public utility supplying the utilities to the Premises with respect to
obtaining such additional utility service to the Premises, but Tenant will
contract directly with such public utility for the supplying of such additional
utility service to the Premises).
5.4 Failure to any extent to make available, or any slow-down,
stoppage or interruption of, these defined services resulting from any cause
(including, but not limited to, Landlord's compliance with (a) any voluntary or
similar governmental or business guideline now or hereafter published or (b) any
requirements now or hereafter established by any governmental agency, board or
bureau having jurisdiction over the operation and maintenance of the Building)
shall not render Landlord liable in any respect for damages to either person,
property, or business, nor be construed as an eviction of the Tenant or work an
abatement of Rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereof. Should any equipment or machinery furnished by Landlord break
down or for any cause cease to function properly, Landlord shall use reasonable
diligence to repair same promptly, but Tenant shall have no claim for abatement
of rent or damages on account of any interruptions in service occasioned thereby
or resulting therefrom. Notwithstanding the above, if any services described
above are interrupted for a period of ten (10) or more consecutive business days
for an occurrence within Landlord's control or as a result of Landlord's gross
negligence or willful misconduct, and such interruption materially and adversely
affects Tenant's use of or access to the Premises or the Building, Rent due
hereunder for the portion of the Premises actually affected shall abate after
such period until such service is restored.
5.5 Tenant's obligations to pay any and all Additional Rent pursuant
to this Article 5 shall continue and shall cover all periods up to the actual
date of expiration or termination of this Lease; provided, however, if Landlord
terminates this Lease without waiving Landlord's right to seek damages against
Tenant, Tenant's obligation to pay any and all Additional Rent pursuant to this
Article 5 shall not terminate as a result thereof.
6
<PAGE>
6 Leasehold Improvements.
----------------------
6.1 Intentionally deleted.
6.2 Intentionally deleted.
6.3 Final working drawings of all improvements that Tenant desires to
be installed in the Premises, whether or not all or any of the work is to be
done by Landlord, must have been submitted to and approved by Landlord no later
than October 19, 1993. The final working drawings shall evidence improvements
that comply with applicable law, shall be in a form commonly used in the
Building for construction purposes and shall be signed by Tenant and Landlord.
6.4 If there are any changes by Tenant, Tenant's contractors,
subcontractors, subcontractors or agents from the improvements set forth in the
final working drawings approved by Landlord, each such change must receive the
prior written approval of Landlord, and in the event of any such approved change
in the working drawings, Tenant shall, upon completion of the improvements,
furnish Landlord with an accurate "as-built" plan of the improvements as
constructed, which plans shall be incorporated into this Lease by this reference
for all intents and purposes.
6.5 Any contractors and subcontractors engaged by Tenant shall be
subject to Landlord's approval and shall comply with all standards and
regulations established by Landlord. Such contractors and subcontractors shall
coordinate their efforts to insure timely completion of all work. Contractors
or subcontractors engaged by Tenant shall employ labor, materials, and funds to
insure the progress of the work without interruption on account of strikes, work
stoppage, or similar causes for delay. During construction of any improvements,
contractors and subcontractors shall coordinate with Landlord the movement of
equipment and materials. Tenant's work shall be conducted in such manner so as
to maintain harmonious labor relations and not to interfere with or delay
Landlord's contractors or Landlord's operation of the Building or the use of the
Building by other tenants.
6.6 All design, construction and installation shall conform to the
requirements of applicable building, plumbing and electrical codes and the
requirements of any authority having jurisdiction over or with respect to such
work.
6.7 If Tenant, with Landlord's prior written permission, employs its
own contractors or decorators, or if Tenant or Tenant's agents makes changes in
the work after approval of the plans by Landlord, and if such contractor or
decorator or such changes shall delay the work to be performed hereunder, or if
Tenant shall otherwise delay the completion of said work, then, notwithstanding
any provision to the contrary in this Lease, Tenant's obligation to pay Rent
hereunder shall nevertheless commence on the Commencement Date. If the Premises
are not ready for occupancy on the Commencement Date for any reason other than
the reasons specified in the immediately preceding sentence, the obligations of
Landlord
7
<PAGE>
and Tenant shall nevertheless continue in full force and effect, in which event
the Rent provided for herein shall abate and not commence, and the Commencement
Date shall not occur, until the date the leasehold improvements to the Premises
are substantially complete (as determined by Landlord's architect), such
abatement of Rent to constitute full settlement of all claims that Tenant might
otherwise have against Landlord by reason of the Premises not being ready for
occupancy by Tenant on the Commencement Date.
6.8 Tenant shall bear the entire cost of any improvements to be
installed by Landlord in the Premises in excess of the "Allowance" (as herein
defined) and shall pay for such as hereinafter provided. Tenant shall pay to
Landlord upon Landlord's approval of the working drawings referred to herein, an
advance payment equal to fifty percent (50%) of the cost (including labor,
material and overhead) of such improvements in excess of the Allowance, as
estimated by Landlord. Notwithstanding any provision contained herein to the
contrary, it is understood and agreed that Landlord shall have no obligation to
commence installation of such improvements in excess of the Allowance until (a)
Tenant shall have furnished to Landlord and Landlord shall have approved the
final working drawings as required by the provisions hereof, and (b) Landlord
shall have received Tenant's advance payment for the portion of the cost of the
installation of the improvements in excess of the Allowance as required by the
immediately preceding sentence. After the commencement of the installation of
the leasehold improvements referred to herein, Tenant agrees to make progress
payments in advance to Landlord for the remainder of the cost (including labor,
material and overhead as aforesaid) of the improvements in excess of the
Allowance as estimated from time to time by Landlord and set forth in interim
invoices therefor submitted by Landlord to Tenant at such intervals as Landlord
may determine. Tenant shall pay to Landlord the amount specified in each such
invoice upon delivery of each such invoice to Tenant, and upon substantial
completion of the installation of such improvements, Tenant shall pay to
Landlord the remainder of the actual cost of such work in excess of the
Allowance, or Landlord shall refund to Tenant the amount, if any, by which all
prior progress payments by Tenant exceed the actual cost of the installation of
such improvements in excess of the Allowance, as the case may be. In no event
credit be given to Tenant for any Building standard allowances not used.
7 Permitted Use. Tenant shall use the Premises only for the Permitted
-------------
Use. Tenant will not occupy or use the Premises, or permit any portion of the
Premises to be occupied or use, for any business or purpose other than the
Permitted Use or for any use or purpose which is unlawful in part or in whole or
deemed to be disreputable in any manner or extra hazardous on account of fire,
nor shall Tenant use, store, or discharge any "Hazardous Material" as defined in
Section 46 hereof, nor permit anything to be done which will in any way increase
the rate of insurance on the Building or contents; and in the event that, by
reasons of acts of the Tenant, there shall be any increase in the rate of
insurance on the Building or contents created by Tenant's acts or conduct of
business, then such acts of Tenant shall be deemed to be an event of default
hereunder and Tenant hereby agrees to pay to Landlord the amount of such
increase on demand, and acceptance of such payment shall not constitute a waiver
of any of Landlord's other rights provided herein. Tenant will
8
<PAGE>
conduct its business and control its agents, employees and invitees in such a
manner as not to create any nuisance, nor interfere with, annoy or disturb other
tenants or Landlord in the management of the Building. Tenant will maintain the
Premises in a clean, healthful and safe condition and will comply with all laws,
ordinances, orders, rules and regulations (state, federal, municipal and other
agencies of bodies having jurisdiction thereof) with reference to Tenant's
specific use, specific condition or specific occupancy of the Premises. Tenant
will not, without the prior written consent of the Landlord, which consent shall
not be unreasonably withheld or delayed, paint, install lighting or decorations,
or install any signs, window or door lettering or advertising media of any type
on or about the premises or any part thereof.
8 Tenant's Repairs and Alterations. Tenant will not in any manner
--------------------------------
deface or injure the Building, and will pay the cost of repairing any damage or
injury done to the Building or any part thereof by Tenant or Tenant's agents,
employees or invitees. Tenant shall throughout the Lease Term take good care of
the Premises and keep them free from waste and nuisance of any kind. Tenant
agrees to keep the Premises, including all fixtures installed by Tenant, in good
condition, and to make all necessary non-structural repairs except those caused
by fire, casualty or acts of God covered by Landlord's fire insurance policy
covering the Building, or which would be covered under a standard fire insurance
policy. The performance by Tenant of its obligations to maintain and make
repairs shall be conducted only by contractors and subcontractors approved in
writing by Landlord, it being understood that Tenant shall procure and maintain
and shall cause such contractors and subcontractors engaged by or on behalf of
Tenant to procure and maintain insurance coverage against such risks, in such
amounts and with such companies as Landlord may require in connection with any
such maintenance and repair. If Tenant fails to make such repairs within
fifteen (15) days after the occurrence of the damage or injury, Landlord may at
its option make such repair, and Tenant shall, upon demand therefor, pay
Landlord for the cost thereof. At the end or other termination of this Lease,
Tenant shall deliver up the Premises with all improvements located thereon
(except as otherwise herein provided)in good repair and condition, reasonable
wear and tear excepted; and shall deliver to Landlord all keys to the Premises.
Tenant will not make or allow to be made any alterations or physical additions
in or to the Premises without the prior written consent of Landlord. All
alterations, additions or improvements (whether temporary or permanent in
character) made in or upon the Premises without either by Landlord or Tenant,
shall be the Landlord's property on termination of this Lease and shall remain
on the Premises without compensation to Tenant, provided that Landlord, at its
option, may by written notice to Landlord, require Tenant to remove any such
alterations, additions or improvements at Tenant's cost which Landlord has not
consented to or which Landlord has not stated, at the time of Landlord's consent
to the making of such improvements, that such improvement need not be removed by
Tenant at the end of the Term or Lease. Tenant shall, subject to the above,
restore the Premises to the condition of the Premises at the Commencement Date,
normal wear and tear excepted. All furniture, movable trade fixtures and
equipment installed by Tenant may be removed by Tenant at the termination of
this Lease if Tenant so elects, and shall be so removed if required by Landlord,
or if not so removed shall, at the option of Landlord, become the
9
<PAGE>
property of Landlord. All such installations, removals and restoration shall be
accomplished in a good workmanlike manner so as not to damage the Premises or
the primary structure or structural qualities of the Building or the plumbing,
electrical lines or other utilities.
9 Subletting and Assigning.
------------------------
9.1.1 Tenant shall not assign, mortgage or encumber this Lease, nor
sublet, suffer or permit the Premises or any part thereof to be used by others,
without the prior written consent of Landlord in each instance, which consent of
Landlord shall not be unreasonably withheld. Tenant shall have the right to
assign the Lease or sublet the Premises, or any part thereof, without Landlord's
consent, but subject to Landlord's rights to notice and prohibition contained
herein, to any parent, subsidiary, affiliate or controlled corporation or to
corporation which Tenant may be converted or which it may merge as a result of a
consolidation, reorganization or merger or to any transferee of substantially
all of the stock or assets of Tenant. Tenant shall have the obligation to
notify Landlord if its intent of any such arrangement, and if Landlord
reasonably determines that the proposed assignee or sublessee is engaged in a
business which would materially interfere with the operation of the Property or
its obligations under lease covering a portion of the Property, Landlord shall,
within Landlord's sole reasonable consent, have the right to prohibit such
arrangement based upon the issue of the business of the proposed assignee or
sublessee of the compatibility of the proposed assignee or sublessee with the
businesses in the Building.
9.1.2 For the purposes of this Lease, an "assignment" prohibited by
this Section 9 shall be deemed to include the following: if Tenant is a
partnership, a withdrawal or change (voluntary, involuntary, by operation of
law) of any one or more of the partners thereof, or the dissolution of the
partnership; or, if Tenant is a corporation, any dissolution, merger
consolidation or other reorganization of Tenant, or any change in the ownership
(voluntary, involuntary, by operation of law, creation of new stock or
otherwise) of fifty percent (50%) or more of its capital stock from the
ownership existing on the date of execution hereof, or, the sale of fifty
percent (50%) of the value of the assets of Tenant.
9.1.3 Notwithstanding the foregoing, without Landlord's consent, but
upon ten (10) days' notice to Landlord, this Lease may be assigned, or the
9.2 No less than thirty (30) days prior to the effective date of a
proposed assignment or sublease other than one made pursuant to Subsection
9.1.3), Tenant shall offer to reconvey to Landlord, as of said effective date,
that portion of the Premises which Tenant is seeking to assign or sublet, which
offer shall contain an undertaking by Tenant to accept, as full and adequate
consideration for the reconveyance, Landlord's release of Tenant from all future
Rent and other obligations under this Lease with respect to the Premises or the
portion thereof so reconveyed. Landlord, in its absolute discretion, shall
accept or reject the offered reconveyance within thirty (30) days of the offer
and if Landlord accepts, the reconveyance shall be evidenced by an agreement to
Landlord in form and substance. If
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Landlord fails to accept or reject the offer within the thirty (30) day period,
Landlord shall be deemed to have rejected the offer.
9.3 If Landlord rejects or is deemed to have rejected Tenant's offer
of reconveyance and if Landlord gives its consent to any assignment of this
Lease or to any sublease, or if Tenant is otherwise permitted to make any
assignment or sublease pursuant to this Lease, Tenant shall in consideration
therefor, pay to Landlord, as Additional Rent:
9.3.1 In the case of an assignment, an amount equal to all sums
and consideration paid to Tenant by the assignee for or by reason of such
assignment (including any sums paid for the sale, rental, or use of Tenant's
Property in excess of the then unamortized value of Tenant's Property as
reflected in Tenant's federal income tax returns) less the reasonable brokerage
commissions and legal fees, if any, actually paid by Tenant in connection with
such assignment; and
9.3.2 In the case of a sublease, any rents, additional charge or
other consideration payable under the sublease to Tenant by the subtenant
(including any sums paid for the sale, rental or use of Tenant's Property in
excess of the then unamortized value of Tenant's Property as reflected in
Tenant's federal income tax returns) that are in excess of the Rent during the
term of the sublease with respect to the sublease space, less the reasonable
brokerage commissions and legal fees, if any, actually paid by Tenant in
connection with such subletting.
The sums payable hereunder shall be paid to Landlord as and when
payable by the assignee or subtenant to Tenant.
9.4 Tenant shall reimburse Landlord on demand for any reasonable
costs that Landlord may incur in connection with said assignment or sublease,
including the reasonable costs of investigating the acceptability of the
proposed assignee or subtenant, and reasonable legal costs incurred in
connection with the granting of any requested consent.
9.5 No assignment or subletting shall affect the continuing primary
liability of Tenant (which, following assignment, shall be joint and several
with the assignee), and Tenant shall not be released from performing any of the
terms, covenants and conditions of this Lease.
10 Indemnity. (a) Landlord shall not be liable for and Tenant will
---------
indemnify and save harmless Landlord of and from any fines, suits, demands,
losses and actions (including attorneys' fees) for any injury to person or
damage to or loss of property on or about the Premises caused by the gross
negligence or willful misconduct of, or breach of the Lease by Tenant, its
employees or subtenants, or arising out of Tenant's use of the Premises.
Landlord shall not be liable or responsible for any loss or damage to any
property or death or injury to any person occasioned by theft, fire, act of God,
public enemy, criminal conduct of third parties, injunction, riot, strike,
insurrection, war, court order, requisition of other
11
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governmental body or authority, by other tenants of the Building or any other
matter, or for any injury or damage or inconvenience which may arise through
repair or alteration of any part of the Building, or failure to make repairs, or
from any cause whatever except Landlord's willful misconduct.
(b) Landlord will indemnify and save harmless Tenant of and
from all fines, suits, demands, losses and actions (including attorney's fees)
for any injury to person or damage to or loss of property by Tenant, if such is
caused by the gross negligence or willful misconduct of Landlord.
11 Subordination and Mortgagee's Right to Cure Landlord's Defaults.
---------------------------------------------------------------
11.1 Landlord currently owns the Building free and clear of any
mortgages, deeds to secure debt or other like instruments. This Lease and all
rights of Tenant hereunder are subject and subordinate to any deeds to secure
debt, mortgages or any other instruments of security, as well as to any ground
leases or primary leases, that hereafter cover all or any part of the Building,
the land situated beneath the Building or any interest of Landlord therein, and
to any and all advances made on the security thereof, and to any and all
increases, renewals, modifications, consolidations, replacements and extensions
of any such deeds to secure debt, mortgages, instruments of security or leases.
This provision shall be self-operative and no further instrument shall be
required to effect such subordination of this Lease. Tenant shall, however,
upon demand at any time or times execute, acknowledge and deliver to Landlord
any and all instruments and certificates that in the judgment of Landlord may be
necessary or proper to confirm or evidence such subordination. Notwithstanding
the generality of the foregoing provisions of the Section 11, Tenant agrees that
any such mortgagee shall have the right at any time to subordinate any such
deeds to secure debt, mortgages or other instruments of security, or sale of the
Building pursuant to any such deeds to secure debt, mortgages or other
instruments of security, or sale of the Building pursuant to any such deeds to
secure debt, mortgages or other instruments of security, to attorn to such
purchaser upon any such sale and to recognize such purchaser as Landlord under
this Lease. The agreement of Tenant to attorn upon demand of Landlord's
mortgagee contained in the immediately preceding sentence shall survive any such
foreclosure sale. Tenant shall upon demand at any time or times before or after
any such foreclosure sale, execute, acknowledge and deliver to Landlord's
mortgagee any and all instruments and certificates that in the judgment of
Landlord's mortgagee may be necessary or proper to confirm all instruments and
certificates that in the judgment of Landlord's mortgagee may be necessary or
proper to confirm or evidence such attornment, and Tenant hereby irrevocably
appoints Landlord's mortgagee as Tenant's agent and attorney-in-fact for the
purpose of executing, acknowledging and delivering any such instruments and
certificates.
11.2 Anything contained in this Lease to the contrary
notwithstanding, if Tenant is leasing more than ten percent (10%) of the
Building, in the event of a breach or default hereunder on the part of the
Landlord, Tenant shall not terminate this Lease, assert any claim for damages
against the Landlord, or assert any right of setoff against of Rent,
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because of such breach or default without first giving to any mortgagee, from
time to time, of the property of which the Premises is part, written notice of
and the right, but not the obligation, for a reasonable time, not to exceed
sixty (60) days, to cure such breach or default, provided Tenant has been
notified in writing of the name and address of such mortgagee.
12 Rules and Regulations. Tenant and Tenant's agents, employees and
---------------------
invitees will comply fully with all requirements of the rules and regulations of
the Building and related facilities which are attached hereto as Exhibit "C",
-----------
and made a part hereof as though fully set forth herein. Landlord in its sole
judgment shall at all times have the right to change such rules and regulations
or to promulgate other rules and regulations in such manner as may be deemed
advisable for safety, care, or cleanliness of the Building and related
facilities or premises, and for preservation of good order therein, all of which
rules and regulations, changes and amendments will be forwarded to Tenant in
writing and shall be carried out and observed by Tenant. Tenant shall further
be responsible for the compliance with such rules and regulations by the
employees, servants, agents, visitors and invitees of Tenant.
13 Inspection. Landlord or its officers, agents, and representatives
----------
shall have the right to enter into and upon any and all parts of the Premises at
all reasonable hours (or, in any emergency, at any hour) and (a) inspect same or
clean or make repairs or alterations or additions as Landlord may deem necessary
(but without any obligation to do so, except as expressly provided for herein)
or (b) show the Premises to prospective tenants, purchasers or lenders; and
Tenant shall not be entitled to any abatement or reduction of Rent by reason
thereof, nor shall such be deemed to be an actual or constructive eviction.
14 Condemnation. If the Premises, or any part thereof, or if the
------------
Building or any portion of the Building, leaving the remainder of the Building
unsuitable for use as an office building comparable to its use on the
Commencement Date of this Lease, shall be taken or condemned in whole or in part
for public purposes, or sold in lieu of condemnation, then the Lease Term shall,
at the sole option of Landlord, forthwith cease and terminate. All compensation
awarded for taking (or sale proceeds in lieu thereof) shall be the property of
Landlord, and Tenant shall have no claim thereto, the same being hereby
expressly waived by Tenant.
15 Fire or Other Casualty. In the event the Building should be totally
----------------------
destroyed by fire, tornado or other casualty or in the event the Premises or the
Building should be so damaged that rebuilding or repairs cannot be completed
within one hundred eighty (180) days after the date of such damage, Landlord or
Tenant may at its option terminate this Lease, in which event the Rent shall be
abated during the unexpired portion of this Lease effective from the date of
such damage, or if the damage should be more serious but neither Landlord nor
Tenant elects to terminate this Lease, in either such event Landlord shall
within ninety (90) days after the date of such damage commence to rebuild or
repair the Building and/or Premises and shall proceed with reasonable diligence
to restore the Building
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and/or Premises to not less than substantially the same condition in which it
was immediately prior to the happening of the casualty except that Landlord
shall not be required to rebuild, repair or replace any part of the furniture,
equipment, fixtures and other improvements which may have been placed by Tenant
or other tenants within the Building on the Premises. Landlord shall allow
Tenant a fair diminution of Rent during the time the Premises are unfit for
occupancy, on the basis of the portion of the Premises which is unfit for
occupancy. In the event any mortgagee under a deed to secure debt, security
agreement or mortgage on the Building should require that the insurance proceeds
be used to retire the mortgage debt, Landlord shall have no obligation to
rebuild and this Lease shall terminate upon notice to Tenant. Except as
hereinafter provided, any insurance which may be carried by Landlord or Tenant
against loss or damage to the Building or to the Premises shall be for the sole
benefit of the party carrying such insurance and under its sole control.
16 Holding Over. Should Tenant hold over the Premises, or any part
------------
thereof, after the expiration of the Lease Term, unless otherwise agreed in
writing by Landlord, such holding over shall constitute and be construed as a
tenancy at will only, at a daily rental equal to one hundred fifty percent
(150%) of the daily Rent payable for the last month of the Lease Term. The
inclusion of the preceding sentence shall not be construed as Landlord's consent
for Tenant to hold over.
17 Taxes on Tenant's Property. Tenant shall be liable for all taxes
--------------------------
levied or assessed against personal property, furniture or fixtures placed by
Tenant in the Premises (herein called "Tenant's Property"). If any such taxes
for which Tenant is liable are levied or assessed against Landlord or Landlord's
property and if Landlord elects to pay the same or if the assessed value of
Landlord's property and if Landlord elects to pay the same or if the assessed
value of Landlord's property is increased by inclusion of personal property,
furniture or fixtures placed by Tenant in the Premises, and Landlord elects to
pay the taxes based on such increase, Tenant shall pay to Landlord upon demand
that part of such taxes for which Tenant is primarily liable hereunder.
18 Events of Default. The following events shall be events of default by
-----------------
Tenant under this Lease.
18.1 Tenant shall fail to pay when due any Rent or other sums payable
by Tenant hereunder (or under any other lease now or hereafter executed by
Tenant in connection with space in the Building), which failure is not cured
within ten (10) days after written notice thereof is given by Landlord to
Tenant; provided, however, that Landlord shall not be required to give a notice
of default under this Section 18.1 more than one (1) time in any period of
twelve (12) consecutive months with respect to any repeated or reoccurring
default.
18.2 Tenant shall fail to comply with or observe any other provision
of this Lease (or any other lease now or hereafter executed by Tenant in
connection with space in the Building); provided, however, that, except as
provided in the following sentence, it shall
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not be an event of default if Tenant immediately commences to cure the matter
for which notice of default was given under this Paragraph 18.2 with all due
diligence and all reasonable effort, and successfully cures such matter as soon
as is reasonably possible, and in any event within fifteen (15) days of the date
notice of such default was given; provided, however, if Tenant is continuously,
diligently pursuant such cure to completion, and such cure cannot be
accomplished in fifteen (15) days, Tenant shall have up to forty-five (45) days
to accomplish such cure, prior to such failure being an event of default
hereunder. Notwithstanding the above, it shall be an immediate event default on
the part of Tenant if the matter in question is such that it presents a danger
of life or the possibility of substantial property damage.
18.3 Tenant or any guarantor of Tenant's obligations hereunder shall
make an assignment for the benefit of creditors.
18.4 Any petition shall be filed by or against Tenant or any
guarantor of Tenant's obligations hereunder under any section or chapter of the
Federal Bankruptcy Act, as amended from time to time, or under any similar law
or statute of the United States or any State thereof; or Tenant or any guarantor
of Tenant's obligations hereunder shall be adjudged bankrupt or insolvent in
proceedings filed thereunder; provided, however, that with respect to any such
petition filed against, but not by, Tenant, it shall not be an event of default
unless Tenant does not have such petition dismissed within sixty (60) days of
the filing thereof.
18.5 A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant or any guarantor of Tenant's
obligations hereunder.
18.6 Tenant shall desert or vacate any portion of the Premises.
Notwithstanding the terms and conditions of Paragraph 18.6 of the Lease, if
Tenant has abandoned or vacated the Premises, then Landlord's sole remedy shall
be in such instance to terminate the Lease (which Landlord shall have the
option, but not the obligation, to do). In the event of such a termination,
Tenant shall not be liable for damages for such early termination of the Lease;
provided, however, in no event shall such termination eliminate or otherwise
limit any claims which Landlord might have against Tenant for any acts,
omissions or defaults on the part of Tenant occurring on or prior to the date of
such termination.
18.7 Any writ of execution, attachment, or garnishment shall be
levied against any interest of Tenant in this Lease, the Premises, or any
property located in the Premises.
19 Remedies. If Tenant defaults under this Lease, then without any
--------
notice or demand to Tenant whatsoever, Landlord shall have the right (but not
any duty) to exercise, on a cumulative basis, any or all of the following
remedies:
15
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19.1 Landlord may continue this Lease in full force and effect, and
proceed to collect all Rent when due.
19.2 Landlord may continue this Lease in full force and effect and
may enter the Premises and relet all or any part of them to other parties for
Tenant's account. Tenant shall be liable to pay on demand to Landlord all costs
Landlord incurs in entering the Premises and reletting them, including, without
limitation, brokers' commissions, expenses of repairs and remodeling, attorneys'
fees, and all other actual costs. Reletting may be for a period shorter or
longer than the remaining term of this Lease. During the term of any reletting,
Tenant shall pay to Landlord the Rent due under this Lease on the dates due,
less any net rents Landlord receives from any reletting.
19.3 Landlord may, without any notice or demand whatsoever, terminate
Tenant's rights under this Lease at any time. On termination, Landlord shall
have the right to recover from Tenant all costs, expenses, losses and damages
caused by said default and termination including, but not limited to:
19.3.1 An amount equal to all unpaid Rent that had accrued at
the time of termination of this Lease;
19.3.2 An amount equal to (a) the amount of Rent that would have
accrued under this Lease between (i) the date of termination of this Lease, and
(ii) the date the calculation is made under this subsection 19.3.2 if this Lease
had been prematurely terminated; less (b) any net amounts of rent actually
received by Landlord with respect to such time period; plus
19.3.3 An amount equal to (a) the present value of all Rent
(assuming that the Additional Rent payable hereunder for the future will be the
same as for the most recent Lease Year) which would have accrued under this
Lease had this Lease not been terminated, for the period of time between (i) the
date of calculation of Rent under subsection 19.3.2, and (ii) the date the Lease
Term would have ended if this Lease had not been prematurely terminated; less
(b) the present value of rent at that time being actually collected for
comparable leases in the immediate geographic area of the Project; plus
19.3.4 An amount equal to (a) all actual costs and expenses,
including but not limited to attorneys' fees that have at that time been
incurred by Landlord, plus the present value of all actual costs and expenses,
including, but not limited to, attorneys' fees, that with reasonable certainty
are likely to have to be incurred thereafter by Landlord, which are reasonably
necessary to compensate Landlord for all economic losses proximately caused by
Tenant's default.
In computing the present value of amounts for purposes of this subsection
19.3, a capitalization rate of eight percent (8%) per annum shall be used.
16
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19.4 Without any showing of need or the presence of any
statutory or common law grounds, all of which requirements are hereby expressly
waived, Landlord may have a receiver appointed to take possession of the
Premises and relet in accordance with subsection 19.2.
19.5 Landlord may cure any default at Tenant's cost. If Landlord
at any time, by reason of Tenant's default, the sum so paid by Landlord shall be
immediately due from Tenant to Landlord on demand, and shall bear interest from
the date paid by Landlord until Landlord shall have been reimbursed by Tenant.
Said sum, together with interest thereon, shall be Additional Rent.
19.6 Landlord may apply all or part of the Security Deposit, as
provided in Section 3.3.
19.7 Landlord may exercise any or all other rights or remedies
available at law or equity, including, without limitation, the right to
restraining orders, injunctions and decrees of specific performance.
20 Attorneys' Fees. If either party should bring any action under this
---------------
Lease against the other, then the party found liable, responsible or guilty, as
applicable, in such action agrees in such case to pay to the other, prevailing
party all costs, including but not limited to court costs and a reasonable
attorney's fee occurred in connection therewith.
21 Security Interest. In addition to the statutory landlord's lien,
-----------------
Landlord shall have, at all times, and Tenant hereby grants to Landlord, a valid
security interest to secure payment of damages or loss which Landlord may suffer
by reason of the breach of Tenant of any covenant, agreement or condition
contained herein, upon all goods, wares, equipment, fixtures, furniture,
improvements and other personal property of Tenant presently or which may
hereafter be situated on the Premises, and all proceeds therefrom, and such
property shall not be removed therefrom without the consent of Landlord until
all arrearages in Rent as well as any and all sums of money then due to Landlord
hereunder shall first have been paid and discharged and all the covenants,
agreements and conditions hereof have been fully complied with and performed by
Tenant. Upon the occurrence of an event of default by Tenant, Landlord may, in
addition to any other remedies provided herein, enter upon the Premises and take
possession of any and goods, wares, equipment, fixtures, furniture, improvements
and other personal property of Tenant situated on the Premises, without
liability for trespass or conversion, and sell the same at public or private
sale, with or without having such property at the sale, after giving Tenant
reasonable notice of the time and place of any public sale or of the time after
which any private sale is to be made, at which sale Landlord or its assigns may
purchase said property unless otherwise prohibited by law. Unless otherwise
provided by law, and without intending to exclude any other manner of giving
Tenant reasonable notice, the requirement of reasonable notice shall be met if
such notice is given in the manner prescribed in Section 28 of this Lease at
least five (5) days before the time of sale. The proceeds from any such
disposition, less any and all expenses
17
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connected with the taking of possession, holding and selling of the property
(including reasonable attorneys' fees and other expenses), shall be applied as a
credit against the debts secured by the security interest granted in this
Section 21. Any surplus shall be paid to Tenant or as otherwise required by
law; and Tenant shall pay any deficiencies forthwith. Upon request by Landlord,
Tenant agrees to execute and deliver to Landlord a financing statement in form
sufficient to perfect the security interest of Landlord in the said property and
the proceeds thereof under the provisions of the Uniform Commercial Code in
force in the State of Georgia. The statutory lien for rent is not hereby
waived, the security interest herein granted being in addition and supplementary
thereto.
22 Mechanic's Lien. Tenant will not permit any mechanic's lien to be
---------------
placed upon the Premises, the Building or any improvements thereon during the
Lease Term caused by or resulting from any work performed, materials furnished
or obligation incurred by or at the request of Tenant, and in the case of the
filing of any such lien, Tenant will promptly pay or otherwise discharge the
same. If default in payment or discharge thereof shall continue for twenty (20)
days after written notice thereto from Landlord to Tenant, Landlord shall have
the right and privilege at Landlord's option of paying the same or any portion
thereof without inquiry as to the validity thereof, and any amounts so paid,
including expenses and interest, shall be so much Additional Rent hereunder due
from Tenant to Landlord and shall be repaid to Landlord immediately on demand.
23 Waiver of Subrogation. Each party to this Lease (the "Waiving Party")
---------------------
hereby waives any cause of action it might have against the other party hereto
on account of any loss or damage that is covered by any insurance policy that
covers the Premises, Tenant's fixtures, personal property, leasehold
improvements or business and which names Tenant as a party insured, it being
understood and agreed that this provision is cumulative of Section 10 hereof.
Tenant agrees that it will request its insurance carrier to endorse all
applicable policies waiving the carrier's rights of recovery under subrogation
or otherwise against Landlord.
24 Liability Insurance. Tenant shall procure and maintain throughout the
-------------------
Lease Term a policy or policies of insurance at its sole cost and expense and in
amounts of not less than a combined single limit of $2,000,000 or such other
amounts as Landlord may from time to time require, insuring Tenant and Landlord
against any and all liability to the extent obtainable for injury to or death of
a person or persons or damage to property occasioned by or arising out of or in
connection with the use, operation and occupancy of the Premises and
specifically providing coverage for Tenant's indemnification obligations imposed
by Section 10 of this Lease. Landlord retains the right in its sole reasonable
discretion to increase the amount of insurance required not more frequently than
annually based on such factors as inflation, Tenant's insurance claims history,
the advice of Landlord's insurance advisors and any other relevant factors.
Tenant shall furnish a certificate of insurance and such other evidence
satisfactory to Landlord of the maintenance of all insurance coverages required
hereunder, and Tenant shall obtain a written obligation on the part of each
insurance
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company to notify Landlord at least thirty (30) days prior to cancellation or
material change of any such insurance.
25 Brokerage. Tenant warrants that it has had no dealings with any
---------
broker or agent in connection with the negotiation or execution of this Lease,
other than with Cushman and Wakefield of Georgia, Inc. ("CW") and Tenant agrees
to indemnify Landlord against all costs, expenses, attorneys' fees or other
liability for commissions or other compensation or charges claimed by any broker
other than CW claiming the same by, through or under Tenant.
26 Change of Building Name. Landlord reserves the right to change the
-----------------------
name by which the Building is designated.
27 Estoppel Certificates. Tenant agrees to furnish from time to time
---------------------
when requested by Landlord or the holder of any deed to secure debt or mortgage
covering all or any part of the Building or the improvements therein or the
Premises or any interest of Landlord therein, a certificate signed by Tenant
confirming and containing such factual certifications and representations deemed
appropriate by Landlord or the holder of any deed to secure debt or mortgage
covering all or any part of the Building or the improvements therein or the
Premises or any interest of Landlord therein, and Tenant shall, within ten (10)
days following receipt of said proposed certificate from Landlord, return a
fully executed copy of said certificate to Landlord. In the event Tenant shall
fail to return a fully executed copy of such certificate to Landlord within the
foregoing ten (10) day period, then Tenant shall be deemed to have approved and
confirmed all of the terms, conditions and representations contained in such
certificate.
28 Notices. Each provision of this Lease, or of any applicable laws,
-------
ordinances, regulations, and other requirements with reference to the sending,
mailing or delivery of any notice, or with reference to the making of any
payment by Tenant to Landlord, shall be deemed to be compiled with when and if
the following steps are taken:
28.1 All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at Landlord's Address set forth
in section 1.5 or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith, and
28.2 Any notice or document required to be delivered hereunder shall
be deemed to be delivered if actually received and whether or not received when
deposited in the United States mail, postage prepaid, certified or registered
mail (with or without return receipt requested), addressed to the parties hereto
at the respective addresses set forth in Article 1 or at such other address as
either of said
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parties shall have theretofore specified by written notice delivered in
accordance herewith.
29 Force Majure. When a period of time is herein prescribed for any
------------
action to be taken by Landlord, Landlord shall not be liable or responsible for
and there shall be excluded from the computation for any such period of time,
any delays due to strikes, riots, acts of God, shortages or labor or materials,
war, laws, regulations or restrictions or any other causes of any kind
whatsoever which are beyond the control of Landlord.
30 Severability. If any clause or provision of this Lease is illegal,
------------
invalid or unenforceable under present or future laws effective during the Lease
Term, then and in that event, it is the intention of the parties hereto that the
remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.
31 Amendments; Binding Effect. This Lease may not be altered, changed or
--------------------------
amended, except by instrument in writing signed by both parties hereto. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord and addressed to Tenant, nor shall
any custom or practice which may evolve between the parties in the
administration of the terms hereof be construed to waive or lessen the right of
Landlord to insist upon the performance by Tenant in strict accordance with the
terms hereof. The terms and conditions contained in this Lease shall apply to,
inure to the benefit of, and be binding upon the parties hereto, and upon their
respective successors in interest and legal representatives, except as otherwise
herein expressly provided.
32 Quiet Enjoyment. Provided Tenant has performed all of the terms and
---------------
conditions of this Lease, including the payment of Rent, to be performed by
Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises for the
Lease Term, without hinderance from Landlord, subject to the terms and
conditions of this Lease.
33 Gender. Words of any gender used in this Lease shall be held and
------
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
34 Joint and Several Liability. If there be more than one Tenant, the
---------------------------
obligations hereunder imposed upon Tenant shall be joint and several. If there
be a guarantor of Tenant's obligations hereunder, the obligations hereunder
imposed upon Tenant shall be the joint and several obligations of Tenant and
such guarantor
20
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and Landlord need not first proceed against Tenant before proceeding against
such guarantor nor shall any such guarantor be released from its guaranty for
any reason whatsoever, including without limitation, in case of any amendments
hereto, waivers hereof or failure to give such guarantor any notices hereunder.
35 Captions. The captions contained in this Lease are for convenience or
--------
reference only, and in no way limit or enlarge the terms and conditions of this
Lease.
36 Exhibits and Attachments. All exhibits, attachments, riders and
------------------------
addenda referred to in this Lease are incorporated into this Lease and made a
part hereof for all intents and purposes.
37 No Joint Venture. Landlord and Tenant are not and shall not be deemed
----------------
to be, for any purpose, partners or joint venturers with each other.
38 Time of the Essence. Time is of the essence with regard to each
-------------------
provision of this Lease.
39 Evidence of Authority. If Tenant is other than a natural person,
---------------------
Tenant shall deliver to Landlord such legal documentation as Landlord may
request to evidence the authority of those signing this Lease to bind the
Tenant.
40 Governing Law. This Lease shall be construed and interpreted in
-------------
accordance with and governed by the laws of Georgia.
41 Entire Agreement. This Lease constitutes the entire agreement between
----------------
the parties, and there is no other agreement between the parties relating in any
manner to the Project.
42 Exculpation. The term Landlord as used in this Lease so far as
-----------
covenants or obligations on the part of Landlord are concerned shall be limited
to mean and include only the owner or owners at the time in question of the
Landlord's interest in the Building. Tenant acknowledges and agrees, for itself
and its successors and assigns, that no trustee, director, officer, employee or
agent of Landlord shall be personally liable for any of the terms, covenants or
obligations of Landlord hereunder, and Tenant shall look solely to Landlord's
interest in the Building for the collection of any judgment (or enforcement or
any other judicial process) requiring the payment of money by Landlord with
respect to any of the terms, covenants and conditions of this Lease to be
observed or performed by Landlord and no other property or assets of Landlord
shall be subject to levy, execution or other enforcement for the satisfaction of
any obligation due Tenant or its successors or assigns.
21
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43 Covenants are Independent. Each covenant of Landlord and Tenant under
-------------------------
this Lease is independent of each other covenant under this Lease, and no
default by either party in performance of any covenant shall excuse the other
party from the performance of any other covenant.
44 Usufruct. The rights of Tenant hereunder constitute a usufruct, which
--------
is not subject to levy or sale. No estate shall pass out of Landlord.
45 Right to Relocate Tenant. (a) Except as provided below, at any time
------------------------
during the Term, Landlord shall have the right upon thirty (30) days' prior
notice to Tenant, to relocate Tenant from the Premises to any other portion of
the Project which is constructed with a floor plan and tenant finishes
substantially equivalent to the Premises; provided, however, that Landlord may
not locate Tenant to a floor below the 8th floor, unless such space is located
on the south side of the Building. As to any relocation to the 8th floor or
higher of the Building, such relocation may be to any location on said floor.
Notwithstanding the above, so long as Tenant is still leasing and occupying at
least 5946 rentable square feet in the Building and is in full compliance with
the terms of the Lease, then Landlord shall not relocate Tenant in the first
eighteen (18) months of the Term.
(b) Landlord shall bear the expenses of said relocating, plus the
expense of any renovation or alterations necessary to make said substituted
space substantially equivalent to the Premises. If Landlord exercises either of
its rights set forth in this Section 45, then the substituted space shall for
all purposes constitute the Premises and all other terms and conditions of this
Lease shall continue in full force and effect and shall apply to the substituted
space.
46 Hazardous Materials.
-------------------
46.1 Tenant shall not cause or permit any Hazardous Material (as
defined in Section 46.3 below) to be brought, kept or used in or about the
Building by Tenant, its agents, employees, contractors or invitees. Tenant
hereby indemnifies Landlord from and against any breach by Tenant of the
obligations stated in the preceding sentence, and agrees to defend and hold
Landlord harmless from and against any and all loss, damage, cost and/or
expenses (including, without limitation, diminution in value of the Building,
damages for the loss or restriction on use of rentable or usable space or of any
amenity of the Building, damages arising from any adverse impact on marketing of
space in the Building, and sums paid in settlement of claims, attorneys' fees,
consultant fees, and expert fees) which arise during or after the term of this
Lease as a result of such breach. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present
22
<PAGE>
in the soil or ground water on or under the Building which results from such a
breach. Without limiting the foregoing, if the presence of any Hazardous
Material in the Building caused or permitted by Tenant results in any
contamination of the Building, Tenant shall promptly take all actions at its
sole expense as are necessary to return the Building to the conditions existing
prior to the introduction of such Hazardous Material to the Building; provided
that the Landlord's approval of such actions, and the contractors to be used by
Tenant in connection therewith, shall first be obtained.
46.2 Notwithstanding any provision in this Lease to the contrary, it
shall not be unreasonable for Landlord to withhold its consent to any proposed
transfer, assignment, or subletting of the Premises if (i) the proposed
transferee's anticipated use of the Premises involves the generation, storage,
use, treatment or disposal of Hazardous Material; (ii) the proposed transferee
has been required by any prior Landlord, lender, or governmental authority to
take remedial action in connection with Hazardous Material contaminating a
property if the contamination resulted from such transferee's actions or use of
the property in question; or (iii) the proposed transferee is subject to an
enforcement order issued by any governmental authority in connection with the
use, disposal, or storage of a Hazardous Material.
46.3 As used herein, the term "Hazardous Material" means any hazardous
or toxic substance, material, or waste which is or becomes regulated by any
local governmental authority or the United States Government. The term
"Hazardous Material" includes, without limitation, any material or substance
which is (i) defined as a "hazardous waste", "extremely hazardous waste", or
"restricted hazardous waste" or similar term under the law of the jurisdiction
where the property is located, or (ii) designated as a hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
(S) 1317), (iii) defined as a "hazardous substance" pursuant to Section 101 of
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S) 9601 et. seq. (42 U.S.C. (S) 9601).
46.4 As used herein, the term "Laws" means any applicable federal,
state or local laws, ordinances, or regulation relating to any Hazardous
Material affecting the Building, including, without limitation, the laws,
ordinances, and regulations referred to in Section 46.3 above.
46.5 Landlord and its employees, representatives and agents shall have
access to the Building during reasonable hours and upon reasonable notice to
Tenant in order to conduct periodic environmental inspections and tests of
Hazardous Material contamination of the Building.
23
<PAGE>
Special Provisions. The special provisions set forth in Exhibit "D" herein are
- ------------------ -----------
made a part hereof.
SIGNED, SEALED AND DELIVERED as of the date first above written.
LANDLORD:
By: State of California Public Employees'
Retirement System, an agency of the State of
California
By: [insert name] , Agent
By:
TENANT:
[insert name]
By:
Its:
Attest:
Its:
24
<PAGE>
EXHIBIT "A"
-----------
ALL THAT TRACT or parcel of land lying and being in Land Lots 909 and 910, 7th
District, 2nd Section, Cobb County, Georgia and being more particularly
described as follows:
TO FIND THE POINT OF BEGINNING commence at an iron pin located at the
intersection of the southern right of way of Mt. Wilkinson Parkway (160 foot
public right of way) with eastern right of way of Overlook Lane (a 60 foot
public right of way); thence South 54 degrees 40' 17" East 12.53 feet to a
marble monument located on the eastern right of way of Overlook Parkway (a 70
foot private right of way); thence South 02 degrees 58' 17" East along said
right of way of Overlook Parkway 173.70 feet to a marble monument which is the
POINT OF BEGINNING; thence leaving said eastern right of way of Overlook Parkway
run South 75 degrees 55" 27" East 178.85 feet to a marble monument; thence South
61 degrees 24' 13" East 28.86 feet to a marble monument; thence South 89 degrees
19' 24" East 31.12 feet to a marble monument; thence North 75 degrees 16' 20"
East 197.60 feet to an iron pin; thence South 02 degrees 47' 13" East 703.01
feet to a point; thence South 48 degrees 27' 35" West 212.29 feet to a point;
thence North 82 degrees 13' 45" West 124.66 feet to a point located on the
eastern right of way of Overlook Parkway; thence in a generally northerly
direction along said eastern right of way to Overlook Parkway and following the
curvature thereof the following courses and distances:
along the arc of a curve to the left having a radius of 195.00 feet, said arc
being subtended by a chord bearing North 35 degrees 20' 53" west for 146.11
feet, an arc distance of 149.76 feet to a point; North 56 degrees 21' 106" West
39.34 feet to a point; along the arc of a curve to the right having a radius of
80.00 feet, said arc being subtended by a chord bearing north 13 degrees 38' 55"
West for 110.55 feet, an arc distance of 122.04 feet to a point; North 30
degrees 03' 16" East 9490 feet to a point; along the arc of a curve to the left
having a radius of 215.00 feet, said arc being subtended by a chord bearing
North 13 degrees 20' 32" East for 123.65 feet, an arc distance of 125.43 feet to
a point; North 02 degrees 27' 46" West 371.44 feet to a marble monument, being
the POINT OF BEGINNING.
being property designated as Parcel "A" and containing 7.92 acres according to
that certain Boundary Survey of the Overlook #3 Office Building for Atlanta
Overlook Associates #3. United States Fidelity and Guaranty Company, BA
Mortgage and International Realty Corporation. The First National Bank of
Atlanta and Lawyers Title Insurance Corporation, prepared by Planners and
Engineers Collaborative, dated May 15, 1985, last revised July 26, 1985, and
bearing the certification of Robert Lee White, Georgia Registered Land Surveyor
No. 2080.
25
<PAGE>
EXHIBIT "A-1"
Attached to and made a part of this Lease
Dated:__________________________
Landlord: State of California Public
Employees' Retirement System
Tenant: Atlantic Steel Industries, Inc.
26
<PAGE>
EXHIBIT "B"
-----------
INTENTIONALLY DELETED
27
<PAGE>
EXHIBIT "C"
-----------
Attached to and made part of
Lease Agreement dated: November 1, 1993
Landlord: State of California Public Employees' Retirement System
Tenant: Atlantic Street Industries, Inc.
The following rules and regulations shall apply, where applicable, to
the Premises, the Building, the parking garage associated therewith, the land
situated beneath the Building and the appurtenances thereto:
1 Sidewalks, doorways, vestibules, halls, stairways and other similar
areas shall not be obstructed by tenants or used by any tenant for any purpose
other than ingress and egress to and from the leased premises and for going from
one to another part of the Building.
2 Plumbing, fixtures and appliances shall be used only for the purpose
for which designed, and no sweepings, rubbish, rags, Hazardous Material as
defined herein, or other unsuitable material shall be thrown or placed therein.
Damage resulting to any such fixtures or appliances from misuse by a tenant or
such tenant's agents, employees or invitees, shall be paid by such tenant, and
Landlord shall not in any case be responsible therefore.
3 No signs, advertisements or notices shall be painted or affixed on or
to any windows or doors or other part of the Building except of such color, size
and style and in such places as shall be first approved in writing by Landlord.
No nails, books, or screws shall be driven or inserted in any part of the
Building except by the building maintenance personnel and except for the hanging
of ordinary and customary sized art or other like objects on the walls of the
interior of the Premises, nor shall any part of the Building be defaced by
tenants. No curtains or other window treatments shall be placed between the
glass and the Building standard window treatments.
4 Landlord will provide and maintain an alphabetical directory board for
all tenants in the main lobby of the Building and no other directory shall be
permitted unless previously consented to by Landlord in writing.
5 Landlord shall provide all locks for doors in each tenant's leased
premises, such initial locks to be at Landlord's cost, and for any subsequent
replacement thereof at the cost of such Tenant, and no Tenant shall place any
additional lock or locks on any door in its leased area without Landlord's prior
28
<PAGE>
written consent. A reasonable number of keys to the locks on the doors in each
tenant's leased premises shall be furnished by Landlord to each tenant, such
initial keys to be at Landlord's cost, and for any subsequent replacement
thereof at the cost of such tenant, and the tenants shall not have any duplicate
keys made.
6 With respect to work being performed by tenants in any leased premises
with the approval of Landlord, all tenants will refer all contractors,
contractors' representatives and installation technicians rendering any service
to them to Landlord for Landlord's supervision, approval and control before the
performance of any contractual services. This provision shall apply to all work
performed in the building including, but not limited to, installations of
telephones, telegraph equipment, electrical devices and attachments, and any and
all installations of every nature affecting floors, walls, woodwork, trim,
windows, ceilings, equipment and any other physical portion of the Building.
7 Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which requires the use of elevators or stairways, or movement through
the Building entrances or lobby shall be restricted to such hours as Landlord
shall designate. All such movement shall be under the supervision of Landlord
and in the manner agreed between the tenants and Landlord by prearrangement
before performance. Such prearrangement initiated by a tenant will include
determination by Landlord, and subject to its decision and control, as to the
time, method, and routing of movement and as to limitations for safety or other
concern which may prohibit any article, equipment or any other item from being
brought into the Building. The tenants are to assume all risks as to the damage
to articles moved and injury to persons or public engaged or not engaged in such
movement, including equipment, property and personnel of Landlord if damaged or
injured as a result of acts in connection with carrying out this service for a
tenant from the time of entering the Project to completion of work; and Landlord
shall not be liable for acts of any person engaged in, or any damage or loss to
any of said property or persons resulting from, and act in connection with such
service performed for a tenant.
8 Landlord shall have the power to prescribe the weight and position of
safes and other heavy equipment or items, which shall in all cases, to
distribute weight, stand on supporting devices approved by Landlord. All
damages done to the Building by the installation or removal of any property of a
tenant, or done by a tenant's property while in the Building, shall not be
repaired at the expense of such tenant.
9 A tenant shall notify the Building manager when safes or other heavy
equipment are to be taken in or out of the Building, and the moving shall be
done under the supervision of the Building manager, after written permission
from
29
<PAGE>
Landlord. Persons employed to move such property must be acceptable to
Landlord.
10 Corridor doors which are not the main entrance to the Premises, when
not in use, shall be kept closed. The main entrance door to the Premises may be
kept open during the Building Hours.
11 Each tenant shall cooperate with Landlord's employees in keeping its
leased premises neat and clean. Tenants shall not employ any person for the
purposes of such cleaning other than the Building's cleaning and maintenance
personnel. Landlord shall be in no way responsible to the tenants, their
agents, employees, or invitees for any loss of property from the leased premises
or public areas or for any damages to any property thereon from any cause
whatsoever.
12 To insure orderly operation of the Building, no ice, mineral or other
water, towels, newspapers and the like shall be delivered to any leased area
during times outside the Building Hours, except by persons appointed or approved
by Landlord in writing.
13 Should a tenant require telegraphic, telephone, annunciator or other
communication service, Landlord will direct the electrician where and how wires
are to be introduced and placed and none shall be introduced or placed except as
Landlord shall direct. Electric current shall not be used for power of heating
without Landlord's prior written permission.
14 Tenants shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Building or otherwise interfere in any way
with other tenants or persons having business with them.
15 Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairway. No birds or animals shall be brought into or kept in, on or
about any tenant's leased premises.
16 Machinery not typically found in a commercial or professional office
shall not be operated by any tenant in its leased premises without the prior
written consent of Landlord, nor shall any tenant use or keep in the Building
any inflammable or explosive fluid or any other Hazardous material.
17 No portion of any tenant's leased premises shall at any time be used
or occupied as sleeping or lodging quarters.
18 Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further rules and regulations as in its
sole judgment shall from time to time be deemed appropriate for the safety,
protection,
30
<PAGE>
care and cleanliness of the Building, the operation thereof, the preservation of
good order therein and the protection and comfort of the tenants and their
agents, employees and invitees, which rules and regulations, when made and
written notice thereof is given to tenant, shall be binding upon it in like
manner as if originally herein prescribed.
19 Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased premises or public or common areas
regardless of whether such loss occurs when the area is locked against entry or
not.
20 Any additional services, not required by lease to be performed by
Landlord, which Tenant request Landlord to perform and which are performed by
Landlord shall be billed to Tenant at Landlord's cost plus fifteen percent
(15%).
31
<PAGE>
EXHIBIT "D"
-----------
SPECIAL PROVISIONS INVOLVING LEASE
BETWEEN STATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT
SYSTEM AND ATLANTIC STEEL INDUSTRIES, INC.
1 Early Occupancy. The Lease Term shall not commence until January
---------------
1, 1994, provided, however, if the Premises are available prior to that date
(with no representation or warranty whatsoever as to whether or not such
Premises shall be so available). Landlord will permit Tenant to occupy the
Premises prior to the Commencement Date, under the terms and conditions of the
Lease.
2 Operating Costs. (a) The initial Operating costs shall be, as to
---------------
the Premises, the actual Operating Costs, on a per square foot per annum basis,
for the calendar year 1994 (the "Base Year Operating Costs"), adjusted in
accordance with Exhibit "E" of the Lease.
-----------
(b) Notwithstanding the terms and conditions of paragraph 3 of this
Lease, except as described below, in no event shall Tenant's Share of Operating
Costs for any year exceed the amount which would have been due in such year had
such costs increased in each and every year by one hundred ten percent (110%) of
Tenant's Share of Operating costs for each prior year of the Lease Term (such
increases being cumulative and compounding); provide, however, and
notwithstanding the above limitation, that for the purposes of determining
whether or not the aforesaid limit on increases in Tenant's Share of Operating
Costs from year to year is exceeded or not, the components of Operating Costs
related to taxes and assessments attributable to the property or Building or its
operation, utilities costs to the Building, property or Premises and insurance
premiums related to or payable in connection with the Building, Property or
Premises shall not be considered or factored in to such determination, and there
shall be no limit on the amounts of Operating Costs related to taxes, utilities
and insurance premiums for the Building, Property or Premises that can be passed
on by Landlord to Tenant or that shall be due of Tenant at any time and from
year to year, except as expressly provided for in this Lease.
3 Tenant Improvements. Landlord shall cause the tenant fit-up and
-------------------
finish work in the Premises to be completed in accordance with construction
documents (the "Construction Documents") dated October 18, 1993 (the
"Allowance") and shall provide an allowance of $15.75 per rentable square foot
of space in the Premises. To the extent the costs to complete the tenant fit-up
and finish work int eh Premises are less than the Allowance, then the difference
shall be applied to the first installments of Monthly Rental Due from Tenant.
32
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4 Renewal of Lease. Provided this Lease is then in full force and
----------------
effect and there has been no assignment of this Lease by Tenant or a sublease of
the Premises or any portion thereof, and Tenant is in full compliance with the
terms and conditions of this Lease, landlord hereby grants to tenant an option
to renew this Lease for one (1) period of five (5) years, at a rental rate equal
to the then prevailing per rentable square foot rate payable by tenants having a
credit standing substantially similar to that of Tenant for office space which
is comparable in quality, size, utility and location to the Premises being
leased Project, as evidenced by recent transactions in the Building and Project
and/or in comparable buildings and projects located within a three (3) mile
radius of the Building and Project. Tenant shall notify Landlord not less than
twelve (12) months prior to the end of the Term if Tenant desires to renew this
Lease under the terms of this Special Provision 4. If Tenant does give such
notice, Landlord shall indicate to Tenant within thirty (30) days after Tenant's
notice as described above, with the rental rate which shall be in effect for the
Term as extended, on the basis as above-described. Tenant shall have thirty
(30) days from the date Landlord make such offer to either accept or reject such
offer. If Tenant rejects such offer or fails to respond within such thirty (30)
day period, then this Lease shall terminate as of the end of the Term as
established herein. If Tenant accepts such offer, then the Term shall be
extended by said five (5) year period, upon the same terms and conditions as
contained in this Lease, and the rent for such period shall be the rent as
offered by Landlord and accepted by Tenant pursuant to the terms and conditions
of this Special Provision 4.
5 Vinings Club Memberships. (a) As long as Tenant is in full
------------------------
compliance with the terms and conditions of this Lease and this Lease is in full
force and effect. Landlord will pay the initiation fee at the Vinings Club for
up to three (3) full individual memberships.
(b) Nothing contained herein shall mean or be construed to mean that
Landlord shall be obligated to pay any additional or special charges or fees
which Tenant might incur in or with respect to the Club and all such charges and
fees shall be the responsibility of Tenant.
(c) Nothing contained herein shall mean or be construed to mean that
landlord guarantees that the Club shall remain open for business, or that
Landlord would have an obligation to provide access or memberships in another
club if the Club ceases to operate or changes its method of operation.
6 Conference Room. Tenant shall have the right to use the conference
---------------
room in the Building, upon such rules for such use as Landlord shall adopt from
time to time, without additional charge or expense to Tenant only as long as
Landlord makes available to al the tenants in the Building said conference room.
33
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7 Failure to Deliver Premises. Notwithstanding anything to the
---------------------------
contrary contained herein, in the event the Premises are not ready on or before
July 1, 1994 (as extended by one (1) day for every day Landlord is delayed due
to causes created by, through or under Tenant or due to any causes as described
in Paragraph 29 herein), then Tenant shall, before July 1, 1994 (as such date
may be extended for every day Landlord is delayed due to causes created by,
through or under Tenant or due to any causes as described in Paragraph 29
herein) be entitled to terminate the Lease. If Tenant has the right to so
terminate the Lease for said reason, than Tenant shall make such election within
ten (10) days of the date Tenant first has the right to so terminate the lease.
If Tenant does not deliver such notice within said period, then Tenant shall be
deemed to have waived its right to cancel this Lease for the aforesaid reasons,
unless Landlord and Tenant agree otherwise in writing.
34
<PAGE>
EXHIBIT "E"
-----------
Lease Agreement dated: November 1, 1993
Landlord: State of California Public Employees' Retirement System
Tenant: Atlantic Steel Industries, Inc.
1 Reimbursement for Operating Costs.
---------------------------------
1.1 Definitions. The definitions set forth in this section 1.1 shall
-----------
be applied whenever any of the following terms are used in this special
Stipulation 1.
1.1.1 Operating Costs: shall mean all costs paid by Landlord or
---------------
its representatives in connection with the ownership, management,
maintenance, operation, insuring, repairing, redecorating, cleaning,
and securing of the Building, as determined by Landlord to be
necessary or appropriate for a first-class building, including, but
not limited to, all of the following costs:
1.1.1.1 All wages, salaries, and related expenses of all
on-site and off-site agents, employees and contractors engaged in
the management, operation, maintenance, repair, redecoration,
cleaning, and security of the Building, plus the cost of all
management, maintenance, and security offices in the Building.
Agents, employees and contractors who do not spend their time
exclusively on the Building shall have their aforesaid charges
pro-rated by landlord, based upon the time spent on, in
connection with or in relation to the Building.
1.1.1.2 All supplies and materials used and labor charges
incurred in the management, operation, maintenance, repair,
redecoration, cleaning and security of the Building.
1.1.1.3 All equipment purchased or leased for the
performance of Landlord's obligations hereunder.
1.1.1.4 All management, maintenance, cleaning, security,
promotional and other service agreements for the Building and the
equipment therein, including, but not limited to, alarm service,
security service, window cleaning, and elevator and escalator
maintenance.
1.1.1.5 All accounting, legal and engineering fees and
expenses, including, but not limited to, the cost of audits by
certified public accountants for the Building.
35
<PAGE>
1.1.1.6 All insurance premiums, including, but not limited
to, fire, casualty, extended coverage, public liability, rent
abatement, boiler, and worker's compensation insurance applicable
to the Building, Landlord's employees and Landlord's personal
property used in connection therewith.
1.1.1.7 All redecorating (including painting, wallpapering
and floor coverings), maintaining and repairing of the Building,
except for space leased to a particular tenant, structural or
non-structural, including, but not limited to, the mechanical,
electrical, heating, ventilating and air conditioning equipment,
landscape maintenance and the replacement of trees and shrubbery.
1.1.1.8 All removing of trash, rubbish, garbage and other
refuse from the Building, as well as removal of ice and snow from
the sidewalks, driveways and parking lots.
1.1.1.9 All amortization of capital improvements
(including, but not limited to, accounting, legal, architectural
and engineering fees incurred in connection therewith) made to
the Building subsequent to the Commencement Date which will
improve operating efficiencies (but only to the extent of the
savings achieved thereby) or which may be required by any law.
1.1.1.10 All charges for electricity, gas, water, sewer,
and other utilities furnished by the Building.
1.1.1.11 All ad valorem property taxes covering all real
and personal property constituting a part of the Building,
including, but not limited to, all general and special
assessments of every kind.
1.1.1.12 All other expenses of owning, maintaining,
operating, insuring, securing, managing, cleaning, redecorating
or repairing the Building.
1.1.2 Notwithstanding any of the foregoing to the contrary, Operating
Costs shall not include:
1.1.2.1 Costs which are directly reimbursed to Landlord by
other tenants.
36
<PAGE>
1.1.2.2 Payments on mortgages or ground leases owned by
Landlord.
1.1.2.3 Costs of leasehold improvements for which Landlord
has agreed to pay.
1.1.2.4 Payment of any return on equity to any owner of the
Building.
1.1.2.5 Costs reimbursed by proceeds of insurance.
1.1.2.6 Costs of the initial construction of the Building
or any depreciation thereof.
1.1.2.7 Payments of claims, damages or expenses resulting
from any willful misconduct of Landlord or any of its authorized
representatives.
1.1.3 Tenant's Share. Shall mean the percentage that expresses
--------------
the ratio between the number of rentable square feet comprising the
Premises (5946), and the number of rentable square feet of the
Building (432,312), which, for the purposes of the Lease, shall be
1.375". This figure shall be adjusted if the number of rentable
square feet comprising the Premises changes.
1.2 Payment of Operating Costs by Tenant. In addition to the Base Rent,
------------------------------------
tenant agrees to pay as additional Rent to Landlord tenant's Share of Operating
Costs in excess of the Operating Costs for the Building for 1994, on a per
square foot per annum basis and adjusted as required herein (the "Initial
Operating Costs"), which Additional Rent shall be due in twelve (12) equal
installments in each Lease Year, beginning in January, 1995 and continuing each
month thereafter throughout the remainder of the Lease. One monthly installment
of Tenant's Share of estimated Operating Costs shall be due and payable by
Tenant to Landlord upon the execution of this Lease. All subsequent payments of
Tenant's Share of Operating Costs in excess of Initial Operating Costs shall be
due and payable without demand, deduction or set off in advance on or before the
first day of each month of the Lease Term. During any Lease Year within the
Lease Term that is less than twelve (12) full months, any amount to be paid with
respect to such period shall be proportionately adjusted based on that portion
of the Lease Year that this Lease is in effect.
1.3 Calculation of Operating Costs. On or before December 15 of each
------------------------------
Lease Year, Landlord shall provide Tenant with Landlord's estimate of Tenant's
Share of Estimated Operating Costs for the following Lease Year. Beginning on
the
37
<PAGE>
January 1 of each Lease Year the amount of Tenant's Share of Estimated Operating
Costs shall be adjusted tot he amount set forth in Landlord's notice. As
promptly as practicable after the end of each Lease Year, Landlord shall compute
the actual Operating Costs for the previous Lease Year. If Tenant's Share of
the actual Operating Costs is greater than the amount Tenant paid to Landlord as
Tenant's Share of the Estimated Operating Costs for the previous Lease Year,
Tenant shall, within fifteen (15) days after receipt of notice of Tenant's Share
of actual Operating Costs, pay to Landlord as Additional Rent an amount equal to
the difference between tenant's Share of actual Operating Costs and tenant's
Share of Estimated Operating Costs. If Tenant's Share of the actual Operating
Costs for such Lease Year, such excess amount shall be applied against the
installment of Additional Rent next coming due until the same has been fully
applied.
1.4 Adjustments to Operating Costs. Notwithstanding anything to the
------------------------------
contrary contained herein, if the Building is not fully occupied during any
calendar year, appropriate adjustments shall be made to determine Operating
Costs as though the Building has been fully occupied in such calendar year.
38
<PAGE>
EXHIBIT 10.14
VIEW TECH, INC.
950 FLYNN ROAD
CAMARILLO, CALIFORNIA 93012
AS OF DECEMBER 31, 1996
TELCOM HOLDING, LLC
C/O THE O'BRIEN GROUP, INC.
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
RE: COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS
GENTLEMEN:
View Tech, Inc., a Delaware corporation (the "Company"), hereby agrees with
Telcom Holding, LLC, a Massachusetts limited liability company (the "Purchaser")
as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF COMMON STOCK AND WARRANTS
1.01. THE COMMON STOCK AND WARRANTS. The Company has authorized the
-----------------------------
issuance and sale to the Purchaser of up to (i) 650,000 shares (the "Purchased
Shares") of common stock, $0.0001 par value per share ("Common Stock") of the
Company and (ii) the Company's Common Stock Purchase Warrants for the purchase
(subject to adjustment as provided therein) of up to 325,000 shares of the
Company's Common Stock, at a price of $4.40 per unit consisting of one (1) share
of Common Stock and Common Stock Purchase Warrants for the purchase of one-half
(1/2) share of Common Stock, subject to increase as provided below. The Common
Stock Purchase Warrants shall be substantially in the form set forth in Exhibit
-------
1.01 hereto and are herein referred to individually as a "Warrant" and
- ----
collectively as the "Warrants", which terms shall also include any warrants
delivered in exchange or replacement therefor. The Purchased Shares and the
Warrants are sometimes referred to collectively herein as the "Purchased
Securities." Any shares of Common Stock issued or issuable upon exercise of the
Warrants, and such shares when issued, are herein referred to as the "Warrant
Shares."
1.02. PURCHASE AND SALE OF PURCHASED SHARES AND WARRANTS.
--------------------------------------------------
(a) THE CLOSING. The Company agrees to issue and sell to the Purchaser,
-----------
and, subject to and in reliance upon the representations, warranties, terms and
conditions of this Agreement, the Purchaser agrees to purchase, Purchased
Securities including up to 650,000 Purchased Shares and Warrants to purchase up
to 325,000 Warrant Shares; provided, however, that the aggregate number of
-------- -------
Purchased Securities may be increased by mutual agreement, but not to a number
that would require Company stockholder approval under rules of the National
1
<PAGE>
Association of Securities Dealers, Inc. Such purchase and sale shall take place
at one or more closings (singly and collectively, the "Closing") to be held at
the office of Jager, Smith, Stetler & Arata, P.C., One Financial Center, Boston,
Massachusetts, 02111 on such dates and at such times as may be mutually agreed
upon, but not later than February 28, 1997. At each Closing the Company will
issue Common Stock and one Warrant, registered in the name of the Purchaser, to
purchase (subject to adjustment as provided therein) one-half the number of
shares of Common Stock purchased at such Closing, against delivery to the
Company of a check or a receipt of a wire transfer, in the amount of the
aggregate purchase price of the number of shares of Common Stock purchased at
such Closing in payment of the full purchase price for the Purchased Shares and
Warrants purchased at such Closing.
(b) TIMING OF CLOSING. The Purchaser is conducting an offering of its Class
-----------------
A membership interests to a limited number of accredited investors, in a
transaction exempt from registration under the Securities Act pursuant to
Regulation D thereunder, in order to fund its investment in the Company. The
Purchaser agrees to use its reasonable best efforts to purchase Purchased
Securities with an aggregate purchase price of $2,500,000 or more by January 15,
1997, and, cumulatively, Purchased Securities including up to 650,000 shares of
Common Stock and Warrants to purchase up to 325,000 Warrant Shares (subject to
increase as provided above) by February 15, 1997; provided, however, that (i)
-------- -------
the Purchaser may in its discretion extend either such anticipated date for a
Closing by up to fifteen (15) days, (ii) the Company may in its discretion
designate an earlier date for an initial Closing with respect to issuance and
sale of Purchased Securities with an aggregate purchase price of less than
$2,500,000, (iii) there shall not be more than three (3) Closings and (iv) the
last Closing shall occur not later than February 28, 1997.
(c) USE OF PROCEEDS. The Company agrees to use the full proceeds from the
---------------
sale of the Purchased Shares and Warrants solely for working capital, which will
include payment of costs associated with its recent merger with USTeleCenters,
Inc.
1.03. REPRESENTATIONS BY THE PURCHASER. (a) INVESTMENT REPRESENTATIONS.
-------------------------------- --------------------------
The Purchaser represents that it is its present intention to acquire the
Purchased Securities to be acquired by it for its own account and that the
Purchased Securities are being and will be acquired by it for the purpose of
investment and not with a view to distribution or resale thereof. The
acquisition by the Purchaser of the Purchased Securities acquired by it shall
constitute a confirmation of this representation by the Purchaser. The
Purchaser further represents that it understands and agrees that, until
registered under the Securities Act or transferred pursuant to the provisions of
Rule 144 as promulgated by the Commission, all certificates evidencing any of
the Purchased Shares, the Warrants and the Warrant Shares, whether upon initial
issuance or upon any transfer thereof, shall bear a legend, prominently stamped
or printed thereon, reading substantially as follows:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended (the "Act") or the securities laws of
any state, have been acquired for investment and not with a view to
distribution or resale and may not be offered for sale, sold, delivered
after sale, transferred, pledged or hypothecated in the absence of an
effective registration statement covering such securities under the Act and
any applicable state securities laws, unless the holder
2
<PAGE>
shall have obtained an opinion of counsel satisfactory to the corporation
that any such transfer shall not be in violation of the Act."
(b) ACCESS TO INFORMATION. The Purchaser, during the course of this
---------------------
transaction and prior to the purchase of any Purchased Securities, has had the
opportunity to ask questions of and receive answers from representatives of the
Company concerning the terms and conditions of the offering of the Purchased
Securities, and to obtain any additional information, documents, records and
books relative to the Company, its business and an investment in the Company
necessary to verify the accuracy of information contained in the Securities
Filings or otherwise relative to the business, operations and financial
condition of the Company.
(c) GENERAL ACCESS. The Purchaser has received and read or reviewed, and
--------------
is familiar with, this Agreement and confirms that all documents, records and
books pertaining to the Purchaser's investment in the Company and requested by
the Purchaser have been made available or delivered to it.
(d) SOPHISTICATION AND KNOWLEDGE. The Purchaser is capable of evaluating
----------------------------
the merits and risks of the purchase of the Purchased Securities. The Purchaser
can bear the economic risks of this investment and can afford a complete loss of
its investment.
(e) TRANSFER RESTRICTIONS IMPOSED BY SECURITIES LAWS. The Purchaser
------------------------------------------------
understands that the Purchased Securities and the Warrant Shares have not been
registered under the Securities Act and applicable state securities laws, and
cannot be resold unless their resale is subsequently registered under the
Securities Act and applicable state securities laws or unless an exemption from
such registration is available; the Purchaser is purchasing the Purchased
Securities for investment for the account of the Purchaser and not for the
account of others, and not with any present view toward resale or other
distribution thereof; the Purchaser agrees not to resell or otherwise dispose of
all or any part of the Purchased Securities or Warrant Shares purchased by the
Purchaser except as permitted by law, including, without limitation, any
regulations under the Securities Act and applicable state securities laws; the
Company does not have any present intention and is under no obligation to
register the Purchased Securities or Warrant Shares under the Securities Act and
applicable state securities laws, except as provided in this Agreement; and Rule
144 under the Securities Act may not be available as a basis for exemption from
registration of the Shares thereunder.
(f) LACK OF LIQUIDITY. The Purchaser has no present need for liquidity in
-----------------
connection with the purchase of the Purchased Securities.
(g) SUITABILITY AND INVESTMENT OBJECTIVES. The purchase of the Purchased
-------------------------------------
Securities by the Purchaser is consistent with the general investment objectives
of the Purchaser. The Purchaser understands that the purchase of the Purchased
Securities involves a high degree of risk.
(h) ACCREDITED INVESTOR STATUS; PURCHASER'S MEMBERS. Each of the
-----------------------------------------------
Purchaser's Class A members is an "accredited investor" as that term is defined
in Rule 501 of Regulation D under the Securities Act. Each Class A member of
the Purchaser has made or will make to the Purchaser and its members
representations and warranties to the same effect as set forth in this
3
<PAGE>
Section 1.04 with respect to itself and its purchaser representative, if any.
The Purchaser shall provide the Company with such further information and
documents as the Company may reasonably request in order to confirm the
availability of an exemption from registration under the Securities Act with
respect to the issuance and sale of the Purchased Securities, including without
limitation copies of materials provided by the Purchaser to its Class A members
and their completed offeree questionnaires.
ARTICLE II
CONDITIONS TO PURCHASER'S OBLIGATION
The obligation of the Purchaser to purchase and pay for the Purchased Shares
and Warrants at the Closing is subject to the following conditions:
2.01. REPRESENTATIONS AND WARRANTIES. Each of the representations and
------------------------------
warranties of the Company set forth in Article III hereof shall be true on the
date of the Closing.
2.02. DOCUMENTATION AT CLOSING. The Purchaser shall have received prior
------------------------
to or at the Closing all of the following, each in form and substance
satisfactory to the Purchaser and its counsel:
(a) A certified copy of all charter documents of the Company; a
certified copy of the resolutions of the Board of Directors of the Company
evidencing approval of this Agreement, the Purchased Shares, the Warrants, and
other matters contemplated hereby; a certified copy of the By-laws of the
Company; and certified copies of all documents evidencing other necessary
corporate or other action and governmental approvals, if any, with respect to
this Agreement, the Purchased Shares and the Warrants.
(b) A favorable opinion of Brobeck, Phleger & Harrison, counsel for the
Company, as to such matters as the Purchaser, or its counsel, may reasonably
request.
(c) A certificate of the Secretary or an Assistant Secretary of the
Company which shall certify the names of the officers of the Company authorized
to sign this Agreement, the Purchased Shares, the Warrants and the other
documents or certificates to be delivered pursuant to this Agreement by the
Company, or any of its officers, together with the true signatures of such
officers. The Purchaser may conclusively rely on such certificates until it
shall receive a further certificate of the Secretary or an Assistant Secretary
of the Company canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.
(d) A certificate from a duly authorized officer of the Company stating
that the representations and warranties of the Company contained in Article III
hereof and otherwise made by the Company in writing in connection with the
transactions contemplated hereby are true and correct.
(e) Payment for the costs, expenses and taxes identified in Section
7.04 as to which the Purchaser gives the Company notice prior to the Closing.
4
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as follows:
3.01. ORGANIZATION AND STANDING OF THE COMPANY AND ITS SUBSIDIARIES. The
-------------------------------------------------------------
Company and each Subsidiary is a duly organized and validly existing corporation
in good standing under the laws of the jurisdiction in which it was organized
and has all requisite corporate power and authority for the ownership and
operation of its properties and for the carrying on of its business as now
conducted and as now proposed to be conducted. The Company and each Subsidiary
is duly licensed or qualified and in good standing as a foreign corporation
authorized to do business in all jurisdictions wherein the character of the
property owned or leased, or the nature of the activities conducted, by it makes
such licensing or qualification necessary unless the failure to so qualify would
not have a Material Adverse Effect. USTeleCenters, Inc., a Delaware corporation,
and View Tech Acquisition, Inc., a California corporation, are the only
Subsidiaries of the Company as of the date hereof. All of the outstanding
capital stock of each Subsidiary has been duly authorized and validly issued, is
fully paid and nonassessable, and is owned beneficially and of record by the
Company, free and clear of any lien, right, encumbrance or restriction of any
nature, including, without limitation, any lien, right, encumbrance or
restriction on transfer.
3.02. CORPORATE ACTION. The Company has all necessary corporate power and
----------------
has taken all corporate action required to make all the provisions of this
Agreement, the Purchased Shares, the Warrants and any other agreements and
instruments executed in connection herewith and therewith the valid and
enforceable obligations they purport to be. Sufficient shares of authorized but
unissued Common Stock of the Company have been reserved by appropriate corporate
action in connection with the prospective exercise of the Warrants. Neither the
issuance of the Purchased Shares or Warrants, nor the issuance of shares of
Common Stock upon the exercise of the Warrants, is subject to preemptive or
other similar statutory or contractual rights and will not conflict with any
provisions of the Company's charter or by-laws or of any agreement or
instrument to which the Company or any Subsidiary is a party or by which it is
bound.
3.03. GOVERNMENTAL APPROVALS. No authorization, consent, approval,
----------------------
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution or delivery by the Company of, or for the performance
by it of its obligations under, this Agreement, the Purchased Shares or the
Warrants, other than filings under federal or state securities laws.
3.04. CAPITALIZATION; STATUS OF CAPITAL STOCK. The Company has a total
---------------------------------------
authorized capitalization consisting of 20,000,000 shares of Common Stock, of
which 5,691,462 shares are issued and outstanding. All the outstanding shares
of capital stock of the Company have been duly authorized, are validly issued
and are fully paid and nonassessable. The Purchased Shares, when issued and
paid for in accordance with the terms of this Agreement, will be duly
authorized, validly issued and fully paid and nonassessable. The shares of
Common Stock
5
<PAGE>
issuable upon exercise of the Warrants, when issued and paid for in accordance
with the terms of the Warrants, will be duly authorized, validly issued and
fully paid and nonassessable. Except as set forth in Exhibit 3.04, there are no
------------
options, warrants or rights to purchase shares of capital stock or other
securities of the Company authorized, issued or outstanding, nor is the Company
obligated in any other manner to issue shares of its capital stock or other
securities. There are no restrictions on the transfer of shares of capital
stock of the Company other than those imposed by relevant state and federal
securities laws. No holder of any security of the Company is entitled to
preemptive or similar statutory or contractual rights, either arising pursuant
to any agreement or instrument to which the Company is a party, or which are
otherwise binding upon the Company. Neither the issuance of the Purchased
Shares, the Warrants nor the Warrant Shares will result in an adjustment under
the antidilution or exercise rights of any holders of any outstanding shares of
capital stock, options, warrants or other rights to acquire any securities of
the Company. The offer and sale of all shares of capital stock and other
securities of the Company issued before the Closing complied with or were exempt
from all federal and state securities laws.
3.05. COMPLIANCE WITH OTHER INSTRUMENTS. The Company and each Subsidiary
---------------------------------
is in compliance in all respects with the terms and provisions of this Agreement
and of its charter and by-laws and in all material respects with the terms and
provisions of the mortgages, indentures, leases, agreements and other
instruments, and of all judgments, decrees, governmental orders, statutes, rules
and regulations by which it is bound or to which its properties or assets are
subject, the failure to comply with which could have a Material Adverse Effect
with respect to the Company or any Subsidiary. There is no term or provision in
any of the foregoing documents and instruments which could have a Material
Adverse Effect with respect to the Company or any Subsidiary. Neither the
execution and delivery of this Agreement or the Warrants, nor the consummation
of any transactions contemplated hereby or thereby has constituted or resulted
in or will constitute or result in a default or violation of any term or
provision in any of the foregoing documents or instruments.
3.06. TITLE TO ASSETS, PATENTS. Except as set forth in Exhibit 3.06, the
------------------------ ------------
Company and each Subsidiary has good and clear record and marketable title in
fee to such of its fixed assets as are real property, and good and merchantable
title to all of its other assets, now carried on its books including those
reflected in the most recent balance sheets of the Company and its Subsidiaries
included in the Securities Filings, or acquired since the date of such balance
sheets (except personal property disposed of since said date in the ordinary
course of business) free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. The Company and each Subsidiary enjoys
peaceful and undisturbed possession under all leases under which it is
operating, and all said leases are valid and subsisting and in full force and
effect. The Company and each Subsidiary owns or, to the best of the Company's
knowledge, has a valid right to use the patents, patent rights, licenses,
permits, trade secrets, trademarks, trademark rights, trade names or trade name
rights or franchises, copyrights, inventions and intellectual property rights
being used to conduct its business as now operated and as now proposed to be
operated; and, to the best of the knowledge of the Company, the conduct of its
business as now operated and as now proposed to be operated does not and will
not conflict with valid patents, patent rights, licenses, permits, trade
secrets, trademarks, trademark rights, trade names or trade name rights or
franchises, copyrights, inventions and intellectual property rights of others.
Neither the Company nor any Subsidiary has any obligation to compensate any
6
<PAGE>
Person for the use of any such patents or such rights nor has the Company or any
Subsidiary granted to any Person any license or other rights to use in any
manner any of such patents or such rights of the Company or any Subsidiary.
3.07. FINANCIAL AND OTHER INFORMATION. The financial statements of the
-------------------------------
Company and its Subsidiaries included in the Securities Filings present fairly
the respective financial positions of the Company and its Subsidiaries as at the
dates thereof and their respective results of operations for the periods covered
thereby and have been prepared in accordance with generally accepted accounting
principles consistently applied. Neither the Company nor any Subsidiary has any
liability contingent or otherwise not disclosed in the aforesaid financial
statements or in the notes thereto that could, together with all such other
liabilities, have a Material Adverse Effect with respect to the Company or any
Subsidiary, nor does the Company have any reasonable grounds to know of any such
liability. Since the date of said financial statements, (i) there has been no
material adverse change in the business, assets or condition, financial or
otherwise, operations or prospects, of the Company or any Subsidiary; (ii) to
the best of the knowledge of the Company, no Material Adverse Effect with
respect to the Company or any Subsidiary has resulted from any legislative or
regulatory change, any revocation or change in any franchise, license or right
to do business, or any other event or occurrence, whether or not insured
against; and (iii) neither the Company nor any Subsidiary has entered into any
material transaction not in the ordinary course of business, except as disclosed
in the Securities Filings, or made any distribution on its capital stock. Other
than the transactions contemplated by this Agreement, no event or circumstances
has occurred or exists with respect to the Company or any Subsidiary or its
respective business, properties, operations or condition, financial or
otherwise, which, under applicable law, the Company is required to disclose
publicly and which has not been so disclosed.
3.08. LITIGATION. There is no litigation, proceeding or investigation
----------
(governmental or otherwise) pending or, to the best of the knowledge of the
Company, threatened against the Company or any Subsidiary affecting any of its
properties or assets, or against any officer, key employee or principal
stockholder of the Company or any Subsidiary which might result, either in any
case or in the aggregate, in any Material Adverse Effect with respect to the
Company or any Subsidiary, or which might call into question the validity of
this Agreement, the Purchased Shares, the Warrants or any action taken or to be
taken pursuant hereto or thereto. Neither the Company nor any Subsidiary, nor,
to the best of the knowledge of the Company, any officer or key employee of the
Company or any Subsidiary, or principal stockholder of the Company or any
Subsidiary, is in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or, other government agency
affecting the Company or any Subsidiary.
3.09. SECURITIES ACT. Neither the Company nor anyone acting on its behalf
--------------
has offered any of the Purchased Shares, Warrants or similar securities, or
solicited any offers to purchase or made any attempt by preliminary conversation
or negotiations to dispose of the Purchased Shares, Warrants or similar
securities, to any Person other than the Purchaser. Neither the Company nor
anyone acting on its behalf has offered or will offer to sell the Purchased
Shares, Warrants or similar securities to, or solicit offers with respect
thereto from, or enter into any preliminary conversations or negotiations
relating thereto with, any Person,
7
<PAGE>
so as to bring the issuance and sale of the Purchased Shares and Warrants under
the registration provisions of the Securities Act.
3.10. DISCLOSURE. Neither this Agreement, the financial statements
----------
included in the Securities Filings nor any other agreement, document,
certificate or written statement furnished to the Purchaser or its counsel by or
on behalf of the Company or any Subsidiary in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
3.11. REGISTRATION RIGHTS. Other than the Purchaser pursuant to the terms
-------------------
of Article V hereof and except as set forth in Exhibit 3.11, no Person has
------------
demand or other rights to cause the Company to file any registration statement
under the Securities Act relating to any securities of the Company or any right
to participate in any such registration statement.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01. AFFIRMATIVE COVENANTS OF THE COMPANY. Without limiting any other
------------------------------------
covenants and provisions hereof, the Company covenants and agrees that, as long
as Warrants to purchase at least fifty percent (50%) of the aggregate Warrant
Shares are outstanding, it will perform and observe the following covenants and
provisions and will cause each Subsidiary to perform and observe such of the
following covenants and provisions as are applicable to such Subsidiary:
(a) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain, and cause
-----------------------------------
each Subsidiary to preserve and maintain, its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect; provided, however, that nothing herein
-------- -------
contained shall prevent any merger, consolidation or transfer of assets
permitted by Section 4.02.
(b) BOARD OF DIRECTORS. The Company shall take such actions as may be
------------------
reasonably practicable to ensure that Paul C. O'Brien is nominated and elected
to serve as Chairman and a member of the Company's Board of Directors. At any
time when Mr. O'Brien does not so serve for any reason, the Company shall take
such actions as may be reasonably practicable to ensure that another person
designated by the Purchaser and reasonably acceptable to a majority of the
Company's Board of Directors is nominated and elected to serve as a member of
the Company's Board of Directors. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of this Subsection (b) shall expire
at the end of the initial three-year term as a director to which Mr. O'Brien is
elected, without prejudice to the right of any Person to nominate him for
subsequent election or reelection.
(c) REPORTS AND FILINGS. Promptly after sending, making available, or filing
-------------------
the same, the Company shall send to the Purchaser, in such quantities as the
Purchaser may
8
<PAGE>
reasonably request, such reports and financial statements as the Company or any
Subsidiary shall send or make available to the stockholders of the Company or
the Commission. The Company will also provide to the Purchaser such other
filings under the Exchange Act or the Securities Act as the Purchaser may from
time to time reasonably request. Subject to such limitations and restrictions
with respect to non-public or confidential information as may be necessary or
appropriate under the federal securities laws, policies and practices from time
to time adopted by the Company's Board of Directors and the advice of securities
counsel, the Company will also provide to the Purchaser such other information
respecting the business, properties, operations and the condition, financial or
otherwise, of the Company or any of its Subsidiaries, as the Purchaser may from
time to time reasonably request, subject to the Purchaser's execution of such
confidentiality or non-disclosure agreement in customary form as the Company may
reasonably request.
(d) RIGHT OF PARTICIPATION. In the event that the Company intends to issue
----------------------
to a third party or receives from a third party an offer to purchase any
securities of the Company (other than debt securities with no equity feature),
it shall offer to each holder of Purchased Shares or Warrant Shares, by written
notice, the right, for a period of twenty (20) days, to purchase for cash, at a
purchase price equal to the price or other consideration for which such
securities are to be issued, a number of such securities (up to but not
exceeding that number of such securities that the Company intends to issue or
has received an offer to purchase) that would enable, after giving effect to
such issuance, such holder to maintain its same proportionate fully-diluted
equity ownership in the Company as it held as of the date of such notice;
provided, however, that the participation rights pursuant to this Subsection (d)
- -------- -------
shall not apply to securities issued: (A) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of Common Stock, (B) pursuant to subscriptions, warrants, options, convertible
securities, or other rights which are listed in Exhibit 3.04, (C) solely in
------------
consideration for the acquisition (whether by merger or otherwise) by the
Company of stock or assets of any other entity, (D) pursuant to a best efforts
or firm commitment underwritten public offering and (E) upon exercise of options
granted to directors, officers and employees after the date hereof. The
Company's written notice to each holder of Purchased Shares or Warrant Shares
shall describe the securities proposed to be issued by the Company and specify
the number, price, payment terms. Each holder of Purchased Shares or Warrant
Shares may accept the Company's offer as to the full number of securities
offered or any lesser number, by written notice thereof given by it to the
Company at any time prior to the expiration of the aforesaid twenty (20) day
period, in which event the Company shall, contemporaneously with or promptly
after the sale to any third party pursuant to this Subsection (d), sell and such
holder shall buy, upon the terms specified, the number of securities agreed to
be purchased by such holder. The Company shall be free at any time after the
date of its notice of offer to the holders of Purchased Shares or Warrant
Shares, to offer and sell the number of such securities specified in its notice
of offer to any third party; provided, however, if such third party sale or
-------- -------
sales are not consummated within ninety (90) days after the date of the
Company's notice of offer, the Company shall not sell such securities as shall
not have been purchased within such period without again complying with this
Subsection (d). All calculations set forth in this Subsection (d) shall give
effect to and assume the conversion, exercise and exchange into or for (whether
directly or indirectly) shares of Common Stock of all such securities, that are
so convertible, exercisable or
9
<PAGE>
exchangeable. Notwithstanding anything to the contrary contained in this
Agreement, the provisions of this Subsection (d) shall expire six (6) months
after the initial Closing.
4.02. NEGATIVE COVENANT OF THE COMPANY. Without limiting any other
--------------------------------
covenants and provisions hereof, the Company covenants and agrees that, as long
as Warrants to purchase at least fifty percent (50%) of the aggregate Warrant
Shares are outstanding, it will not, except with the affirmative vote or consent
of at least five (5) members of its Board of Directors, (i) merge or consolidate
with, or sell, assign, lease or otherwise dispose of or voluntarily part with
the control of (whether in one transaction or in a series of transactions) all
or substantially all of its assets (whether now owned or hereafter acquired) to,
any Person, or permit any Subsidiary to do any of the foregoing, except for
sales or other dispositions of assets in the ordinary course of business and
except that (1) any Subsidiary may merge into or consolidate with or transfer
assets to any other Subsidiary and (2) any Subsidiary may merge into or transfer
assets to the Company, or (ii) issue any securities, or agree to issue or
authorize the issuance of any securities, in a transaction exempt from
registration under the Securities Act, if any of Sections 3, 4, 5 or 6 of the
Warrants (whether or not Section 5 of the Warrants shall then be in effect in
accordance with its terms) would be applicable as a result of such merger or
other transaction or issuance of securities. Notwithstanding anything to the
contrary contained in this Agreement, the provisions of this Section 4.02 shall
expire six (6) months after the initial Closing.
ARTICLE V
REGISTRATION RIGHTS
5.01. "PIGGY BACK" REGISTRATION. If at any time the Company shall
------------------------
determine to register under the Securities Act (including pursuant to a demand
of any stockholder of the Company exercising registration rights) any of its
Common Stock of the type which has been or may be issued upon the exercise of
the Warrants (other than (i) on Form S-4, S-8 or its then equivalent or (ii) a
registration statement on Form SB-2 which the Company intends to file imminently
with respect to up to 1,693,688 shares of Common Stock and shares of Common
Stock underlying certain existing warrants and stock options), it shall send to
each holder of Registrable Shares, including each holder who has the right to
acquire Registrable Shares, written notice of such determination and, if within
thirty (30) days after receipt of such notice, such holder shall so request in
writing, the Company shall use its best efforts to include in such registration
statement all or any part of the Registrable Shares such holder requests to be
registered, except that if, in connection with any offering involving an
underwriting of Common Stock to be issued by the Company, the managing
underwriter shall impose a limitation on the number of shares of such Common
Stock which may be included in any such registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution,
and such limitation is imposed pro rata among the holders of such Common Stock
--- ----
having an incidental ("piggy back") right to include such Common Stock in the
registration statement according to the amount of such Common Stock which each
holder had requested to be included pursuant to such right, then the Company
shall be obligated to include in such registration statement only such limited
portion of the Registrable Shares with respect to which such holder has
requested inclusion hereunder. No incidental
10
<PAGE>
right under this Section 5.01 shall be construed to limit any registration
required under Section 5.02.
5.02. REGISTRATION ON FORM S-3 OR SB-2. In addition to the rights
--------------------------------
provided the holders of Registrable Shares in Section 5.01 above, after at least
six (6) months from the date of the initial Closing under this Agreement, if the
registration of Registrable Shares under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), the Company will
promptly so notify each holder of Registrable Shares, including each holder who
has a right to acquire Registrable Shares, and then will at any time, and from
time to time, thereafter, as expeditiously as possible, use its best efforts to
effect qualification and registration under the Securities Act on said Form S-3
of all or such portion of the Registrable Shares as the holder or holders shall
specify; provided, however, that if the registration of Registrable Shares under
-------- -------
the Securities Act cannot then be effected on Form S-3 (or any similar form
promulgated by the Commission), but can then be effected on Form SB-2 (or any
similar form promulgated by the Commission), the Company will so notify each
holder of Registrable Shares, including each holder who has a right to acquire
Registrable Shares, and upon written request of one or more holders of at least
two-thirds (2/3rds) of the Registrable Shares, the Company will use its best
efforts to cause such of the Registrable Shares as may be requested by any
holder or holders thereof to be so registered under the Securities Act as
expeditiously as possible; provided, further, that the minimum market value of
--------- -------
any offering and registration of Registrable Shares made pursuant to this
Section 5.02 shall be at least $2,000,000 (calculated after deducting
underwriter's discounts and commissions but before expenses). The Company shall
not be required to effect more than (i) one (1) registration during any l2-month
period pursuant to this Section 5.02 and (ii) two (2) such registrations on Form
SB-2 (or any similar form promulgated by the Commission) in the aggregate. If,
in connection with any such offering the holder or holders are unable to include
in such offering or registration the full number of Registrable Shares for which
registration has been requested, either as a result of any limitation on the
registration of shares placed by the managing underwriter or for any other
reason, then such registration shall be deemed to have been a "piggy-back"
registration under Section 5.01 of this Agreement.
If, prior to the time of any request by holders of Registrable Shares
pursuant to this Section 5.02, the Company has publicly announced its intention
to register any of its securities for a public offering under the Securities
Act, no registration of Registrable Shares shall be initiated pursuant to this
Section 5.02 until 180 days after the effective date of the registration so
announced unless the Company is no longer proceeding diligently to effect such
registration, whether such registration is for the sale of securities for the
Company's own account or for the account of others.
5.03. EFFECTIVENESS. The Company will use its best efforts to maintain
-------------
the effectiveness for up to nine (9) months of any registration statement
pursuant to which any of the Registrable Shares are being offered, and from time
to time will amend or supplement such registration statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act and any applicable state securities statute or regulation. The Company will
also provide each holder of Registrable Shares with as many copies of the
prospectus contained in any such registration statement as it may reasonably
request.
11
<PAGE>
5.04. INDEMNIFICATION OF HOLDER OF REGISTRABLE SHARES. In the event that
-----------------------------------------------
the Company registers any of the Registrable Shares under the Securities Act,
the Company will indemnify and hold harmless each holder and each underwriter of
the Registrable Shares so registered (including any broker or dealer through
whom such shares may be sold) and each person, if any, who controls such holder
or any such underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages, expenses or liabilities,
joint or several, to which they or any of them become subject under the
Securities Act or under any other statute or at common law or otherwise, and,
except as hereinafter provided, will reimburse each such holder, each such
underwriter and each such controlling person, if any, for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented by the Company) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with such registration, unless such untrue
statement or omission was made in such registration statement, preliminary or
amended, preliminary prospectus or prospectus in reliance upon and in conformity
with information furnished in writing to the Company in connection therewith by
such holder of Registrable Shares, any such underwriter or any such controlling
person expressly for use therein. Promptly after receipt by any holder of
Registrable Shares, any underwriter or any controlling person, of notice of the
commencement of any action in respect of which indemnity may be sought against
the Company, such holder of Registrable Shares, or such underwriter or such
controlling person, as the case may be, will notify the Company in writing of
the commencement thereof, and, subject to the provisions hereinafter stated, the
Company shall assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to such holder of
Registrable Shares, such underwriter or such controlling person, as the case may
be), and the payment of expenses insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against the
Company. Such holder of Registrable Shares, any such underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action and to participate in the defense thereof but the fees and expenses of
such counsel shall not be at the expense of the Company unless the employment of
such counsel has been specifically authorized by the Company. The Company shall
not be liable to indemnify any person for any settlement of any such action
effected without the Company's consent. The Company shall not, except with the
approval of each party being indemnified under this Section 5.04, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
5.05. INDEMNIFICATION OF COMPANY. In the event that the Company registers
--------------------------
any of the Registrable Shares under the Securities Act, each holder of the
Registrable Shares so registered will indemnify and hold harmless the Company,
each of its directors, each of its
12
<PAGE>
officers who have signed the registration statement, each underwriter of the
Registrable Shares so registered (including any broker or dealer through whom
such of the shares may be sold) and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act from and against
any and all losses, claims, damages, expenses or liabilities, joint or several,
to which they or any of them may become subject under the Securities Act or
under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Company and each such director,
officer, underwriter or controlling person for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing to
the Company in connection therewith by such holder of Registrable Shares
expressly for use therein; provided, however, that such holder's obligations
-----------------
hereunder shall be limited to an amount equal to the gross proceeds to such
holder of the Registrable Shares sold in such registration. Promptly after
receipt of notice of the commencement of any action in respect of which
indemnity may be sought against such holder of Registrable Shares, the Company
will notify such holder of Registrable Shares in writing of the commencement
thereof, and such holder of Registrable Shares shall, subject to the provisions
hereinafter stated, assume the defense of such action (including the employment
of counsel, who shall be counsel satisfactory to the Company) and the payment of
expenses insofar as such action shall relate to the alleged liability in respect
of which indemnity may be sought against such holder of Registrable Shares. The
Company and each such director, officer, underwriter or controlling person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall not be at
the expense of such holder of Registrable Shares unless employment of such
counsel has been specifically authorized by such holder of Registrable Shares.
Such holder of Registrable Shares shall not be liable to indemnify any person
for any settlement of any such action effected without such holder's consent.
5.06. EXCHANGE ACT REGISTRATION. In connection with any registration of
-------------------------
the resale of Registrable Shares pursuant to the preceding Sections of this
Article V, the Company will, at its expense, simultaneously cause such
Registrable Shares to be listed on any securities exchange, or included on the
NASDAQ trading system, on which the Company's Common Stock is then listed or
included. So long as the Company is subject to the reporting requirements of
either Section 13 or Section 15(d) of the Exchange Act, the Company will use its
best efforts to timely file with the Commission such information as the
Commission may require under either of said Sections; and in such event, the
Company shall use its best efforts to take all action as may be required as a
condition to the availability of Rule 144 under the Securities Act (or any
successor exemptive rule hereinafter in effect) with respect to such Common
Stock. The Company shall furnish to any holder of Registrable Shares forthwith
upon request (i) a written statement by the Company as to its compliance with
the reporting requirements of Rule 144, (ii) a copy of the most recent annual or
quarterly report of the
13
<PAGE>
Company as filed with the Commission, and (iii) such other reports and documents
as a holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a holder to sell any such Registrable Securities
without registration.
5.07. DAMAGES. The Company stipulates that the remedies at law of the
-------
holder of Registrable Shares in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Article V are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
5.08. FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the preceding
----------------------------------
Sections of this Article V, the Company is required hereunder to register
Registrable Shares, it agrees that it shall also do the following:
(a) Furnish to each selling holder such copies of each preliminary and
final prospectus and such other documents as said holder may reasonably request
to facilitate the public offering of its Registrable Shares;
(b) Use its best efforts to register or qualify the Registrable Shares
covered by said registration statement under the applicable securities or "blue
sky" laws of such jurisdictions, in the case of an underwriter registration, as
the underwriter or, otherwise, as any selling holder may reasonably request;
provided, however, that the Company shall not be obligated to qualify to do
- -------- -------
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by the
registration statement in any jurisdiction where it is not then so subject;
(c) Furnish to each selling holder upon request photocopies of
(i) an opinion of counsel for the Company, dated the effective date
of the registration statement, and
(ii) "comfort" letters signed by the Company's independent public
accountants who have examined and reported on the Company's financial
statements included in the registration statement, to the extent permitted
by the standards of the American Institute of Certified Public Accountants,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities, to the extent that the Company is
required to deliver or cause the delivery of such opinion or "comfort" letters
to the underwriters in an underwritten public offering of securities;
14
<PAGE>
(d) Subject to the third sentence of Section 4.01(c), permit each
selling holder or his counsel or other representatives to inspect and copy such
corporate documents and records as may reasonably be requested by them;
(e) Furnish to each selling holder, upon request, a copy of all
documents filed and all correspondence from or to the Commission in connection
with any such offering; and
(f) Use its best efforts to insure the obtaining of all necessary
approvals from the National Association of Securities Dealers, Inc.
5.09 EXPENSES. In case of a registration under the preceding Sections of
--------
this Article V, the Company shall bear all costs and expenses of each such
registration, including without limitation printing, legal and accounting
expenses, Commission and National Association of Securities Dealers, Inc. filing
fees and expenses, and "blue sky" fees and expenses and the reasonable fees and
disbursements of not more than one counsel for the selling holders of
Registrable Shares in connection with the registration of their Registrable
Shares; provided, however, that the Company shall have no obligation to pay or
-------- -------
otherwise bear any portion of the underwriters, commissions or discounts
attributable to the Registrable Shares.
The Company shall pay all expenses in connection with any registration
initiated pursuant to this Agreement which is withdrawn, delayed or abandoned at
the request of the Company, unless such registration is withdrawn, delayed or
abandoned solely because of any actions of the holders of Registrable Shares.
5.10. DELAY OF REGISTRATION. For a period not to exceed ninety (90) days,
---------------------
the Company shall not be obligated to prepare and file, or prevented from
delaying or abandoning, a registration statement pursuant to this Agreement at
any time when the Company, in its good faith judgment with advice of counsel,
reasonably believes:
(a) that the filing thereof at the time requested, or the offering of
Registrable Shares pursuant thereto, would materially and adversely affect (a) a
pending or scheduled public offering of the Company's securities, (b) an
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction by or of the Company, (c) preexisting and continuing negotiations,
discussions or pending proposals with respect to any of the foregoing
transactions, or (d) the financial condition of the Company in view of the
disclosure of any pending or threatened litigation, claim, assessment or
governmental investigation which may be required thereby; and
(b) that the failure to disclose any material information with respect
to the foregoing would cause a violation of the Securities Act or the Exchange
Act.
ARTICLE VI
DEFINITIONS
15
<PAGE>
6.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
---------------------
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Agreement" means this Common Stock and Warrant Purchase Agreement as from
time to time amended and in effect between the parties.
"Commission" means the Securities and Exchange Commission or any other or
successor agency then administering the Securities Act or the Exchange Act.
"Company" means and shall include View Tech, Inc. and its successors and
assigns.
"Common Stock" includes the Company's Common Stock, $0.0001 par value per
share, as authorized on the date of this Agreement and any other securities into
which or for which any of such Common Stock may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934 or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Material Adverse Effect" means, with respect to any Person, any material
adverse effect upon its business, properties, operations or condition, financial
or otherwise.
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Purchaser" means and shall include not only Telcom Holding, LLC but also
any other holder or holders of any of the Purchased Shares or Warrants.
"Registrable Shares" means and shall include the Purchased Shares and the
Warrant Shares.
"Securities Act" means the Securities Act of 1933 or any similar federal
statute, and the rules and regulations of the Securities and Exchange Commission
(or of any other federal agency then administering the Securities Act)
thereunder, all as the same shall be in effect at the time.
"Securities Filings" means, collectively, the Company's Form 10K-SB dated
September 29, 1996 and any filing of the Company with the Commission thereafter
pursuant to the Securities Act or the Exchange Act, including its Joint Proxy
Statement/Prospectus dated November 5, 1996, its Form 10Q-SB dated November 14,
1996, its Form 8-K dated November 29, 1996 and its Form 8-K/A-1 dated October
30, 1996, in each case as filed with the Commission.
"Subsidiary" or "Subsidiaries" means any corporation, limited liability
company or other Person of which the Company and/or any of its other
Subsidiaries (as herein defined)
16
<PAGE>
directly or indirectly owns at the time fifty percent (50%) or more of the
outstanding shares, membership interests or other equity interests of every
class of such Person other than directors' qualifying shares.
"Warrants" shall have the meaning assigned to that term in Section 1.01.
ARTICLE VII
MISCELLANEOUS
7.01. No Waiver; Cumulative Remedies. No failure or delay on the part of
------------------------------
the Purchaser, or any other holder of the Purchased Shares or Warrants in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
7.02. Amendments, Waivers and Consents. Any provision in this Agreement
--------------------------------
or the Warrants to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein or
therein set forth may be omitted or waived, if the Company shall obtain the
consent thereto in writing from the holder or holders of at least fifty percent
(50%) of the Warrant Shares. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. Written notice of any waiver or consent effected under this Subsection
shall promptly be delivered by the Company to any holders who did not execute
the same.
7.03. Addresses for Notices, etc. All notices, requests, demands and
--------------------------
other communications provided for hereunder shall be in writing (including
telegraphic communication) and mailed or telegraphed or delivered to the
applicable party at the addresses indicated below:
If to the Company: View Tech, Inc.
959 Flynn Road
Camarillo, CA 93012
Attention: Chief Executive Officer
with a copy to: Brobeck, Phleger & Harrison
550 South Hope Street
Los Angeles, CA 90071-2604
Attention: V. Joseph Stubbs, Esq.
17
<PAGE>
If to the Purchaser: Telcom Holding, LLC
c/o The O'Brien Group, Inc.
Two International Place
Boston, Massachusetts 02110
Attention: Manager
with a copy to: Jager, Smith, Stetler & Arata, P.C.
One Financial Center
Boston, MA 02111
Attention: John L. Bronson, Esq.
If to any other holder of the Purchased Shares or Warrants: at such holder's
address for notice as set forth in the register maintained by the Company, or,
as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when mailed or telegraphed, respectively, be effective
when deposited in the mails or delivered to the telegraph company, respectively,
addressed as aforesaid.
7.04. COSTS, EXPENSES AND TAXES. The Company agrees to pay within thirty
-------------------------
(30) days after demand (i) all costs and expenses of the Purchaser in connection
with the preparation, execution and delivery of this Agreement, the Purchased
Shares, the Warrants and other instruments and documents to be delivered
hereunder, including the reasonable fees and out-of-pocket expenses of Jager,
Smith, Stetler & Arata, P.C., counsel for the Purchaser, with respect thereto,
but not exceeding $25,000 in the aggregate, as well as (ii) the reasonable fees
and out-of-pocket expenses of legal counsel, independent public accountants and
other outside experts reasonably retained by the Purchaser in connection with
the amendment (other than an amendment requested by the Purchaser) or
enforcement of this Agreement, the Warrants and other instruments and documents
to be delivered hereunder or thereunder. In addition, the Company shall pay any
and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement, the Purchased Shares, the
Warrants and the other instruments and documents to be delivered hereunder or
thereunder and agrees to save the Purchaser harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and filing fees.
7.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Purchaser.
7.06. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
------------------------------------------
warranties made in this Agreement, the Warrants or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof and the making of the loans.
18
<PAGE>
7.07. PRIOR AGREEMENTS. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
7.08. SEVERABILITY. The invalidity or unenforceability of any provision
------------
hereof shall in no way affect the validity or enforceability of any other
provision.
7.09. GOVERNING LAW. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Delaware.
7.10. HEADINGS. Article, Section and Subsection headings and the Table of
--------
Contents in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.
7.11. SEALED INSTRUMENT. This Agreement is executed as an instrument
-----------------
under seal.
7.12. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
7.13. FURTHER ASSURANCES. From and after the date of this Agreement, upon
------------------
the request of the Purchaser, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the Warrants.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VIEW TECH, INC.
BY: /s/ Robert G. Hatfield
______________________
ROBERT G. HATFIELD
CHIEF EXECUTIVE OFFICER
TELCOM HOLDING, LLC
BY: /s/ Paul C. O'Brien
______________________
PAUL C. O'BRIEN
MANAGER
20
<PAGE>
EXHIBIT 10.15
VIEW TECH, INC.
950 Flynn Road
Camarillo, California 93012
As of December 31, 1996
Paul C. O'Brien and Mark P. Kiley
c/o The O'Brien Group, Inc.
Two International Place
Boston, Massachusetts 02110
Re: Common Stock Purchase Warrants
------------------------------
Gentlemen:
Pursuant to an agreement dated today's date (the "Purchase Agreement")
between View Tech, Inc. (the "Company") and Telcom Holding, LLC ("Telcom"), the
Company has agreed to issue and sell, and Telcom has agreed to purchase, up to
650,000 shares of Common Stock and up to 325,000 Common Stock Purchase Warrants
("Purchased Securities") of the Company, subject to increase as provided
therein, upon the terms and subject to the conditions set forth therein.
In consideration of financial advisory and consulting services performed by
you for the Company and its subsidiaries, in the event that the aggregate
purchase price of Purchased Securities issued and sold in one or more closings
under the Purchase Agreement is at least $2,500,000, the Company agrees to issue
to you warrants for the purchase of its Common Stock in substantially the same
form and upon the same terms and conditions as the warrants included in the
Purchased Securities, covering in the aggregate one-half (1/2) the aggregate
number of shares of Common Stock as are covered by the warrants which are
included in the Purchased Securities.
Very truly yours,
View Tech, Inc.
By: /s/ Robert G. Hatfield
________________________
Robert G. Hatfield
Chief Executive Officer
1
<PAGE>
EXHIBIT 11.1 - Computation of Earnings Per Share
The following is a calculation of the historical and fully diluted per share
amounts included within this Form SB-2 for the years ended June 30, 1996 and
1995 and the three month periods ended September 30, 1996 and 1995. The weighted
average number shares outstanding reflect the shares issued to consummate the
merger on November 29, 1996, all stock splits, stock dividends and shares issued
in the initial public offering during the year ended June 30, 1995.
<TABLE>
<CAPTION>
Fully Diluted Fully Diluted
Year Ended Year Ended Earnings Per Share Earnings Per Share
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Total number of outstanding stock options and warrants 1,572,737 245,066 1,572,737 $ 245,066
========== ========== ========== ==========
Proceeds upon exercise of options (exercise price $.250 - $7.750) $7,031,542 $ 281,168 $7,031,542 $ 281,168
Market value of stock at date of treasury stock purchase 7.50 6.65 7.38 6.50
---------- ---------- ---------- ----------
Number of shares that can be repurchased from proceeds
under treasury stock method 937,164 42,262 953,429 43,257
Total number of outstanding stock options and warrants 1,572,737 245,066 1,572,737 245,066
---------- ---------- ---------- ----------
Excess of options and warrants over treasury shares
that could be repurchased (1) 635,573 202,804 619,308 201,809
Weighted average number of shares outstanding (2) 5,040,731 3,765,467 5,040,731 3,765,467
---------- ---------- ---------- ----------
Total number of common and common equivalent shares (3) 5,676,304 3,765,467 5,660,039 3,765,467
========== ========== ========== ==========
Net income $ 424,056 ($1,876,810) $ 424,056 ($1,876,810)
========== ========== ========== ==========
Earnings per share $ 0.07 ($0.50) $ 0.07 ($0.50)
========== ========== ========== ==========
<CAPTION>
Three Month Three Month Fully Diluted Fully Diluted
Period Ended Period Ended Earnings Per Share Earnings Per Share
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------ ------------ ------------------ -----------------
Total number of outstanding stock options and warrants 2,128,128 1,296,782 2,128,128 1,296,782
=========== ========== =========== ==========
Proceeds upon exercise of options
(exercise price $.250 - $7.750) $10,721,885 $5,722,139 $10,721,885 $5,722,139
Market value of stock at date of treasury stock purchase 7.27 7.60 7.13 8.00
----------- ---------- ----------- ----------
Number of shares that can be repurchased from proceeds
under treasury stock method 1,040,045 753,111 1,504,826 715,267
Total number of outstanding stock options and warrants 2,128,128 1,296,782 2,128,128 1,296,782
----------- ---------- ----------- ----------
Excess of options and warrants over treasury shares
that could be repurchased (1) 1,088,083 543,671 623,302 581,515
Weighted average number of shares outstanding (2) 5,200,222 5,027,384 5,200,222 5,027,384
----------- ---------- ----------- ----------
Total number of common and common equivalent shares (3) 6,288,305 5,571,055 5,823,524 5,608,899
=========== ========== =========== ==========
Net income $ 433,373 $ 274,643 $ 433,373 $ 274,643
=========== ========== =========== ==========
Earnings per share $ 0.07 $ 0.05 $ 0.07 $ 0.05
=========== ========== =========== ==========
</TABLE>
Notes:
(1) The excess of options and warrants over treasury shares that could be
repurchased is limited to 20% of the number shares outstanding at the end
of the period. This limitation was applied during the three-month period
ended September 30, 1995. The excess of the number of shares that could be
repurchased over the 20% limitation is assumed to be first applied to short
and long term borrowings and any remainder invested in govern-ment
secuities. These assumptions increased net income by $46,000, which
represents the decrease in interest expense during the period.
(2) The weighted average number of shares outstanding is determined by relating
(a) the portion of time within the reporting period that a particular
number of shares of a certain security has been outstanding to (b) the
total time in that period.
(3) The total number of common and common equivalent shares used for weighted
average number of shares outstanding included in EPS for the year ended
June 30, 1995, is limited to the actual weighted average number of shares
outstanding before excess of options and warrants over treasury shares that
could be repurchased due to the antidilutive effect on EPS brought about by
the net loss incurred in this period.
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF VIEW TECH, INC.
-------------------------------
View Tech, Inc., a Delaware corporation (the "Company" and "Registrant"),
has the following wholly-owned subsidiaries incorporated in the jurisdicitions
identified:
(1) USTeleCenters, Inc., a Delaware corporation; and
(2) View Tech Acquisition, Inc., a California corporation.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of the following:
1) Our report dated December 23, 1996, relating to the supplemental
consolidated financial statements of View Tech, Inc., which appear in such
Prospectus;
2) Our report dated September 24, 1996, relating to the Financial Statements of
View Tech, Inc. for the year ended June 30, 1996, which appear in such
Prospectus;
3) Our report dated December 21, 1996, relating to the financial statements of
USTeleCenters, Inc., which appear in such Prospectus; and
4) Reference to us under the heading "Experts" in such Prospectus.
\s\ CARPENTER KUHEN & SPRAYBERRY
Oxnard, California
January 8, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
Registration Statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
January 9, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM SB-2
FILED ON JANUARY 10, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-START> JUL-01-1995 JUL-01-1996
<PERIOD-END> JUN-30-1996 SEP-30-1996
<CASH> 1,465,199 1,157,865
<SECURITIES> 0 0
<RECEIVABLES> 8,127,466 10,260,161
<ALLOWANCES> (220,182) (351,454)
<INVENTORY> 1,748,555 1,770,907
<CURRENT-ASSETS> 12,037,659 14,215,765
<PP&E> 4,417,036 5,752,132
<DEPRECIATION> (1,696,614) (3,014,674)
<TOTAL-ASSETS> 14,841,089 18,760,772
<CURRENT-LIABILITIES> 9,666,692 10,418,784
<BONDS> 0 0
0 0
0 0
<COMMON> 51,125 53,340
<OTHER-SE> 4,170,408 7,468,632
<TOTAL-LIABILITY-AND-EQUITY> 14,841,089 18,760,772
<SALES> 30,993,736 10,018,484
<TOTAL-REVENUES> 30,993,736 10,018,484
<CGS> 30,170,238 9,549,760
<TOTAL-COSTS> 30,170,238 9,549,760
<OTHER-EXPENSES> 265,000 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 394,258 67,381
<INCOME-PRETAX> 164,240 401,337
<INCOME-TAX> 259,816 (13,964)
<INCOME-CONTINUING> 0 387,373
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 424,056 387,373
<EPS-PRIMARY> .07 .07
<EPS-DILUTED> .07 .07
</TABLE>
