<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM TO
------ ------
Commission file number: 0-25940
VIEW TECH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0312442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 FLYNN ROAD
CAMARILLO, CA 93012
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (805) 482-8277
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class as of May 12, 1997
----- ----------------------------
Common Stock, $.0001 par value 6,381,744
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VIEW TECH, INC.
TABLE OF CONTENTS
-----------------
PAGE REFERENCE
--------------
PART I FINANCIAL INFORMATION
Consolidated Balance Sheets
March 31, 1997 (unaudited) and December 31, 1996 1
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996 (unaudited) 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Exhibits and Reports on Form 8-K 11
SIGNATURES 12
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIEW TECH, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,027,097 $ 365,139
Accounts receivable (net of reserves of $457,572
and $479,774, respectively) 9,921,503 10,609,832
Inventory 2,164,783 2,063,028
Other current assets 567,845 737,980
----------- -----------
Total Current Assets 13,681,228 13,775,979
PROPERTY AND EQUIPMENT, net 2,839,232 2,798,476
GOODWILL, net 1,604,449 1,632,370
OTHER ASSETS 421,501 313,783
----------- -----------
$18,546,410 $18,520,608
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 6,541,333 $ 7,682,887
Short-term bank debt -lines of credit 1,924,998 1,829,428
Current portion of capital lease obligations 458,994 450,669
Other current liabilities 2,280,532 2,198,485
Accrued merger costs -- 1,160,494
----------- -----------
Total Current Liabilities 11,205,857 13,321,963
----------- -----------
LONG-TERM OBLIGATIONS 576,311 779,920
----------- -----------
COMMITMENT AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.0001, authorized
5,000,000 shares, none issued or outstanding -- --
Common stock, par value $.0001, authorized
20,000,000 shares, issued and outstanding
6,357,082 and 5,666,814 shares, at March 31,
1997 and December 31, 1996, respectively 636 567
Additional paid-in capital 12,718,693 9,934,236
Retained deficit (5,955,087) (5,516,078)
----------- -----------
6,764,242 4,418,725
----------- -----------
$18,546,410 $18,520,608
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
VIEW TECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Revenues:
Product sales and service revenues $ 6,260,551 $5,581,318
Agency commissions 3,751,435 2,527,134
----------- ----------
10,011,986 8,108,452
----------- ----------
Cost and Expenses:
Costs of goods sold 4,568,209 3,890,468
Sales and marketing expenses 3,966,928 2,792,997
General and administrative expenses 1,830,804 1,130,675
----------- ----------
10,365,941 7,814,140
----------- ----------
Income (Loss) from Operations (353,955) 294,312
Other Expense (84,142) (68,426)
----------- ----------
Income (Loss) Before Income Taxes (438,097) 225,886
Provision for Income Taxes (912) (24,303)
----------- ----------
Net Income (Loss) $ (439,009) $ 201,583
=========== ==========
Earnings (Loss) Per Share $ (.07) $ .03
=========== ==========
Weighted Average Shares Outstanding 6,169,491 5,767,662
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
VIEW TECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (439,009) $ 201,583
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization 305,595 244,572
Provision for bad debts (22,202) (290,937)
Loss on sale of assets 7,649 --
Changes in assets and liabilities:
Accounts receivable 710,531 (495,106)
Inventory (101,755) (118,414)
Other current assets 62,417 (41,067)
Accounts payable (1,141,554) 380,839
Note payable to vendor -- (67,703)
Other accrued liabilities (993,449) (1,668)
----------- ----------
Net cash used by operating activities (1,611,777) (187,901)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (326,078) (165,099)
Short-term loan to PDS - (265,000)
----------- ----------
Net cash used in investing activities (326,078) (430,099)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 95,570 434,382
Repayments of capital lease and other debt obligations (280,283) (304,264)
Issuance of common, net 2,784,526 8,016
----------- ----------
Net cash provided by financing activities 2,599,813 138,134
----------- ----------
NET INCREASE (DECREASE) IN CASH 661,958 (479,866)
CASH, beginning of period 365,139 1,949,761
----------- ----------
CASH, end of period $ 1,027,097 $1,469,895
=========== ==========
SUPPLEMENTAL DISCLOSURES:
Operating activities reflect:
Interest paid $ 89,746 $ 101,798
=========== ==========
Income taxes paid $ 2,800 $ --
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
VIEW TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
- ----------------
View Tech, Inc., along with its wholly-owned subsidiary, USTeleCenters,
Inc., ("UST"), is a leading, single source provider of voice, video and data
equipment, network services and bundled telecommunications solutions for
business customers nationwide. The Company has equipment distribution
partnerships with PictureTel Corporation, Ascend Communications and Northern
Telecom and markets network services through agency agreements with Bell
Atlantic, GTE, NYNEX, Southwestern Bell and Sprint. The consolidated financial
statements include the accounts of View Tech and UST. All significant
intercompany balances and transactions have been eliminated in consolidation.
In November 1996, View Tech completed its merger with UST (the "Merger")
which was accounted for as a pooling of interest. Accordingly, the Company's
financial statements have been restated for all periods prior to the Merger to
include the results of operations, financial position, and cash flows of UST.
The information for the three months ended March 31, 1997 and 1996 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.
The Company has reclassified certain balance sheet and statement of
operations items for prior periods in order to conform to the current periods'
presentation.
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-K for the transition period from July 1, 1996 to December 31,
1996.
NOTE 2 - BASIS OF PRESENTATION
- ------------------------------
A reconciliation of consolidated total revenues and net income to amounts
applicable to the separate pooled companies prior to the Merger (effective,
November 29, 1996) is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
-------------------
<S> <C>
Total revenues:
View Tech............ $3,881,894
USTeleCenters........ 4,226,558
----------
$8,108,452
==========
Net income (loss):
View Tech............ $ (13,604)
USTeleCenters........ 215,187
----------
$ 201,583
==========
Net income (loss) per share
(fully-diluted basis):
View Tech............ $ --
USTeleCenters........ .03
----------
$ .03
==========
</TABLE>
4
<PAGE>
VIEW TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
NOTE 3 - 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 4 - LINES OF CREDIT
- ------------------------
The Company maintains a $1,750,000 credit facility (the "Note") to assist in
meeting its working capital needs, if required. The Note expires on October 1,
1997 and provides for a borrowing base of up to $1,750,000 with interest payable
monthly at the prime rate plus 1% per year. The borrowing base is determined
based on 60% of eligible accounts receivable, as defined. The Company had
outstanding borrowings of $500,000 under the Note as of March 31, 1997. Funds
available under the Note are reduced by certain outstanding standby letters of
credit issued on behalf of the Company. In addition to the $500,000 outstanding
under the Note, the Company has as of March 31, 1997, six outstanding standby
letters of credits totaling $524,000. One letter of credit is issued to the
Company's primary video conferencing equipment supplier as collateral for the
Company's purchasing line of credit with such supplier. Of the remaining five
letters of credit, four are 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 six standby letters of credit, the credit line available under the Note has
been reduced to $726,000.
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 $3,500,000. 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 March 31, 1997, 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 (8.5% at March
31, 1997) plus 1.0%. The revolving line of credit and forbearance agreement
have been extended to August 1, 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
March 31, 1997, there was approximately $826,000 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 March 31, 1997, UST was in compliance
with the covenants or had received waivers under the forbearance agreement. In
connection with the renewal of the UST's revolving credit agreement, the lease
line term note was revised to provide for additional credit of $250,000. This
credit facility expires on August 1, 1997.
NOTE 5- SALE OF COMMON STOCK
- ----------------------------
The Company sold to one investor, Telcom Holding, LLC, an aggregate of
$2,860,000 of common stock on three separate closings occurring in January
and March, 1997. In addition, the Company issued an aggregate of 487,500
warrants to purchase common stock at $6.50 per share in connection with this
transaction. The Company will use such funds for working capital and to pay a
portion of the costs incurred in connection with the Merger.
5
<PAGE>
VIEW TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
NOTE 6 - COMMITMENTS
- --------------------
The Company executed a new office lease agreement in January, 1997 to house
its New York City operations. The lease provides for monthly rental payments of
$16,573 plus its proportionate share of building operating expenses. The lease
expires on August 30, 1999.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto appearing elsewhere in
this Form 10-Q. Except for historical information contained herein, the
statements in this Form 10-Q are forward-looking statements (including without
limitation, statements indicating that the Company "expects," "estimates,"
"anticipates," or "believes" and all other statements concerning future
financial results, product offerings or other events that have not yet
occurred), that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange
Act of 1934, as amended and Section 27A of the Securities Act of 1933, as
amended. Forward-looking statements involve known factors, risks and
uncertainties which may cause the Company's actual results in future periods to
differ materially from forecasted results. Those factors, risks and
uncertainties include, but are not limited to: the Company's ability to raise
additional funds that may be necessary to meet its future capital needs; the
Company's limited history of profitable operations and significant fluctuations
in operating results which may continue due to delays in product enhancements
and new product introductions by its suppliers; the 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; and the introduction of new rules
and regulations by the federal government and/or certain states pertaining to
the Company's telecommunications business that could lead to additional
competition from entities with greater financial and managerial resources.
Additional information on these and other risk factors are included under "Risk
Factors" and elsewhere in this Form 10-Q.
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 acquisitions. In November 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 merged into USTeleCenters, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company ("UST"). At the time of
the Merger, the Company operated out of 14 offices covering 24 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 calendar year 1997
through both internal expansion and strategic acquisitions, although there can
be no assurances that the Company will be able to do so. 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, the
Company's business, financial condition and results of operations will be
adversely affected.
7
<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>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
--------- --------
(Unaudited)
<S> <C> <C>
Revenues:
Product sales and service revenues.... 62.5% 68.8%
Agency commissions.................... 37.5 31.2
------ -----
100.0 100.0
====== =====
Costs and Expenses:
Costs of goods sold................... 45.6 48.0
Sales and marketing expenses.......... 39.6 34.5
General and administrative expenses... 18.3 13.9
------ -----
(103.5) 96.4
------ -----
Income (Loss) from Operations.......... (3.5) 3.6
Other Expense.......................... (0.8) (0.8)
------ -----
Income (Loss) Before Income Taxes...... (4.3) 2.8
Provision for Income Taxes............. (0.1) (0.3)
------ -----
Net (Loss) Income...................... (4.4)% 2.5%
====== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
REVENUES
Total revenues for the three months ended March 31, 1997 increased by $1.904
million or 23.5% to $10.012 million from $8.108 million in 1996.
Product Sales and Services
Product sales and service revenues increased by $679,233 or 12.2% to $6.261
million in 1997 from $5.581 million in 1996. The increase in revenues was
primarily related to the Company's nationwide expansion of its videoconferencing
business throughout calendar year 1996, including increasing its
videoconferencing sales force to 34 representatives at March 31, 1997, compared
to 19 representatives at March 31, 1996.
Agency Commissions
Agency commissions for 1997 increased by $1.224 million or 48.4% to $3.751
million from $2.527 million in 1996. The increase in agency commissions was due
to the Company beginning to rebuild its telemarketing sales force in 1997 to
enable it to market new product offerings on behalf of its RBOC and exchange
carrier clients.
8
<PAGE>
COSTS AND EXPENSES
Costs of goods sold for 1997 increased by $677,741 or 17.4% to $4.568 million
from $3.890 million in 1996. Costs of goods sold as a percentage of revenues
decreased to 45.6% in 1997 from 48.0% in 1996. The dollar increase in costs of
goods sold is primarily related to the increase in product sales and service
revenues and to an increase in technical service costs related to the Company's
videoconferencing business. Costs of goods sold as a percetnage of revenues
decreased due to the fact that such costs grew at a slower rate than overall
revenues.
Sales and marketing expenses for 1997 increased by $1.174 million or 42.0% to
$3.967 million from $2.793 million in 1996. Sales and marketing expenses as a
percentage of revenues increased to 39.6% in 1997 from 34.5% in 1996. The
dollar increase in selling and marketing expenses was primarily due to the
increase in the number of sales representatives and to higher sales volume which
resulted in higher compensation and related expenses for the Company's sales
force. Sales and marketing expenses as a percentage of revenues increased due
to the fact that selling expenses grew at a greater rate than overall revenues.
General and administrative expenses for 1997 increased by $700,129 or 61.9% to
$1.831 million from $1.131 million in 1996. General and administrative expenses
as a percentage of total revenues increased to 18.3% in 1997 from 13.9% in 1996.
The dollar 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 and agency business. General and administrative
expenses as a percentage of revenues increased due to the fact that such
expenses grew at a greater rate than revenues.
Income from operations decreased $648,267 to a loss of $(353,955) in 1997 from
income of $294,312 in 1996. The loss from operations for 1997 related to the
increases in sales and marketing expenses, and general and administrative
expenses, discussed above. Income from operations as a percentage of revenues
decreased to (3.5)% for 1997, compared to 3.6% for 1996.
Other expense, primarily representing interest expense, for 1997 remained
level with 1996.
Provision for income tax expense decreased $23,391 to $912 in 1997 compared to
a provision of $24,303 for 1996. The decrease in the tax provision was related
to the Company's current period pre-tax loss.
Net income decreased $640,592 to a loss of $(439,009) in 1997 from net income
of $201,583 for 1996. Net income as a percentage of revenues decreased to
(4.4)% for 1997 compared to 2.5% for 1996. Net income per share decreased to
$(.07) for 1997 compared to $.03 for 1996. The weighted average number of shares
outstanding increased to 6,169,491 for 1997 from 5,767,622 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Over the past two years, View Tech has financed its operations and expansion
activities with the proceeds from its initial public offering completed in June
1995, private placements of equity securities, bank debt and vendor credit
arrangements.
Net cash used for operating activities for the three months ended March 31,
1997 (the "Period") was $1.612 million. The primary uses of cash in the first
quarter of 1997 were decreases in accounts payable and other accrued liabilities
of $1.142 million and $993,449, respectively. Sources of cash from operating
activities were primarily related to a decrease in accounts receivable $710,531.
Net cash used for investing activities for the Period was $326,078, relating
to the purchase of office furniture and computer equipment.
Net cash provided by financing activities for the Period was $2.600 million,
relating to net proceeds of $2.785 million from the sale of common stock by the
Company, offset by the repayment of $280,283 in debt obligations.
9
<PAGE>
The Company maintains a $1,750,000 credit facility (the "Note") to assist in
meeting its working capital needs, if required. The Note expires on October 1,
1997 and provides for a borrowing base of up to $1,750,000 with interest payable
monthly at the prime rate plus 1% per year. The borrowing base is determined
based on 60% of eligible accounts receivable, as defined. The Company had
outstanding borrowings of $500,000 under the Note as of March 31, 1997. Funds
available under the Note are reduced by certain outstanding standby letters of
credit issued on behalf of the Company. In addition to the $500,000 outstanding
under the Note, the Company has as of March 31, 1997, six outstanding standby
letters of credits totaling $524,000. One letter of credit is issued to the
Company's primary video conferencing equipment supplier as collateral for the
Company's purchasing line of credit with such supplier. Of the remaining five
letters of credit, four are 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 six standby letters of credit, the credit line available under the Note has
been reduced to $726,000.
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 $3,500,000. 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 March 31, 1997, 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 (8.5% at March
31, 1997) plus 1.0%. The revolving line of credit and forbearance agreement have
been extended to August 1, 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
March 31, 1997, there was approximately $826,000 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 March 31, 1997, UST was in compliance
with the covenants or had received waivers under the forbearance agreement. In
connection with the renewal of the UST's revolving credit agreement, the lease
line term note was revised to provide for additional credit of $250,000. This
credit facility expires on August 1, 1997.
The Company sold to one investor, Telcom Holding, LLC, an aggregate of
$2,860,000 of common stock on three separate closings occurring in January
and March, 1997. In addition, the Company issued an aggregate of 487,500
warrants to purchase common stock at $6.50 per share in connection with this
transaction. The Company will use such funds for working capital and to pay a
portion of the costs incurred in connection with the Merger.
UST's lines of credit are due on August 1, 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 the
Company will be able to renegotiate the lines of credit with the lender, and if
the lender requires payment in August 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.
10
<PAGE>
The Company may require additional working capital to efficiently operate its
business, continue to implement its growth strategy and to adequately provide
for its working capital needs. In this regard, the Company will continue to seek
private equity or debt financing to satisfy its capital needs. However,
exclusive of the cash required to repay the UST debt obligations on August 1,
1997 and to fund additional expansion activities, the Company believes that its
existing cash balances, combined with its anticipated operating cash flow and
borrowings under existing credit facilities will be adequate to meet the
Company's on-going cash needs for the next twelve months.
RISK FACTORS
FUTURE FINANCING REQUIREMENTS
The Company may require additional working 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. In connection with the private placement of
its securities, the Company sold to one investor, Telcom Holdings, LLC, an
aggregate of $2,860,000 of common stock on three separate closings occurring in
January and March 1997. There can be no assurance, however, that the Company
will be able to raise any additional funds that may be necessary to meet the
Company's future capital needs or that such additional funds, if available, can
be obtained on terms acceptable to the Company. The failure to raise additional
capital, when and if needed, 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.
UNASCERTAINABLE RISKS DUE TO RAPID EXPANSION AND FUTURE ACQUISITIONS
Management anticipates that the Company will continue to grow not only through
internal expansion, 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 approximately 300 employees in 16 locations at
March 31, 1997. In the past several 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 long 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.
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 three months ended
March 31, 1997 and has operated as a combined entity since November 29, 1996.
Although the Company achieved profitability and reported net income of $424,056
for fiscal 1996, it reported a net loss of $3,017,218 and $1,876,810 and for the
six months ended December 31, 1996 and the fiscal year ended June 30, 1995. 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.
DEPENDENCE ON SUPPLIERS, INCLUDING PICTURETEL AND NYNEX
For the three months ended December 31, 1996, approximately 43% and 14% of the
Company's consolidated revenues were attributable to the sale of equipment
manufactured by 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, among other things, would 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 1, 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.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
<TABLE>
<S> <C> <C>
(a) Exhibits
10.1 Severance and Consulting Agreement by and between, View Tech, Inc. and John W.
Hammon, dated April 22, 1997.
10.2 Tenth Amendment to Revolving Credit, Term Loan and Security Agreement between
USTeleCenters, Inc. and The First National Bank of Boston, dated March 31, 1997.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
- Current Report on Form 8-K, dated January 15, 1997, regarding the appointment of Paul C.
O'Brien as Chairman of the Board and the investment in View Tech common stock and
common stock purchase warrants by Telcom Holding, LLC of which Mr. O'Brien is a member
and manager.
- Current report on Form 8-K/A, dated February 14, 1997, presenting the pro-forma information
for the three months ended September 30, 1996 and 1995 in connection with the Company's
merger with USTeleCenters, Inc.
</TABLE>
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VIEW TECH, INC.
Date: May 15, 1997 By: \s\ William M. McKay
--------------------------------
William M. McKay
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
<PAGE>
EXHIBIT 10.1
SEVERANCE AND CONSULTING AGREEMENT
----------------------------------
THIS SEVERANCE AND CONSULTING AGREEMENT, dated April 22, 1997 (the
"Agreement"), is entered into by and between View Tech, Inc., a Delaware
corporation with its principal place of business in Camarillo, California (the
"Company"), and John W. Hammon (the "Executive").
WHEREAS, the Executive has been in the employ of the Company as its
Chief Operating Officer and President since the Company's inception;
WHEREAS, the Executive possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, the parties wish to settle the terms of the severance of
their employment relationship and any and all disputes which exist or could
exist between them;
WHEREAS, the parties wish to continue their association for a specific
period during which the Executive shall perform services as a consultant for the
Company;
WHEREAS, the Company and the Executive have determined that it is in
their respective best interests to enter into this Agreement on the terms and
conditions as set forth herein;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Severance of Employment Relationship; Resignation from Board.
------------------------------------------------------------
(a) The Executive confirms, by executing this Agreement, that he
has resigned his employment as President and Chief Operating Officer with the
Company, effective April 17, 1997.
(b) The Executive shall receive by April 21, 1997 all
compensation and benefits earned but unpaid as of that date, including all
accrued unused vacation.
(c) On or before April 21, 1997, the Executive shall return to
the Company all of the Company's property in his possession, including, but not
limited to, the Company's cellular phone and credit card that he possessed
during his employment.
(d) The Executive is currently a member of the Company's Board
of Directors (the "Board"). The Executive, by executing this Agreement, hereby
resigns his
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<PAGE>
position on the Board, effective May 20, 1997. The Executive shall also take all
other actions necessary to accomplish his resignation from the Board effective
May 20, 1997.
(e) The parties shall agree on the contents of a statement to be
released to the press regarding the existence and terms of this Agreement.
2. Consulting Services.
-------------------
(a) Consulting Period. The Company and the Executive hereby
-----------------
agree that beginning on the effective date of the Executive's resignation as
President and Chief Operating Officer (the "Consulting Commencement Date"), the
Company shall retain the services of the Executive to provide advisory and
consulting services to the Company (as set forth below) for the period
commencing on the Consulting Commencement Date until December 31, 1998 (the
"Consulting Period").
(b) Consulting Services; Fee; Attorneys' Fees Reimbursement. The
-------------------------------------------------------
advisory and consulting services to be provided by the Executive pursuant to
this Section 2 shall be rendered on a non-exclusive basis at such times and at
such locations as shall be required by the Company. The Executive agrees to be
available, upon request and at all reasonable times (and upon reasonable
notice), to the Company's Chief Executive Officer for consultation and advice on
matters relating to the business of the Company for at least 16 hours during
each week during the Consulting Period. The Executive shall be paid the sum of
$19,335 per month for his services during the Consulting Period (the "Consulting
Fee"). The Consulting Fee shall be payable in equal installments (except for the
first payment which may be prorated based upon the number of days covered by the
Consulting Period) with the same frequency as the Company pays its salaried
employees, as such payment periods are in effect from time to time in accordance
with Company policy. During the Consulting Period, the Company shall reimburse
the Executive for all pre-approved normal and reasonable business expenses
incurred by him at the request of the Company for which appropriate
documentation is provided to the Company but will not reimburse the Executive
for country club dues and other personal expenses. During the Consulting Period,
the Consulting Fee shall constitute the Executive's entire compensation, and he
shall not be eligible for bonuses or increases in compensation paid to
employees. The Company shall also pay to the Executive's counsel, Heller Ehrman
White & McAuliffe, the sum of two thousand five hundred dollars ($2,500.00)
within thirty (30) days of the Executive's execution of this Agreement as a
partial reimbursement of the Executive's legal fees incurred in connection with
the negotiation and preparation of this Agreement. This payment shall represent
the Company's sole obligation with respect to the payment of the Executive's
legal fees except as may be provided for by Section 6.14 below.
(c) Health Insurance. The Company shall provide the Executive
----------------
with all notices required under federal and state law upon his resignation
regarding continuation of group health coverage and shall reimburse the
Executive on a monthly basis for the premiums paid by the Executive to obtain
such coverage for a period of 18 months
2
<PAGE>
after his resignation, or until he is no longer eligible for continuation
coverage, whichever is earlier. For the balance of the Consulting Period, the
Company shall reimburse the Executive for the premiums paid in connection with a
health insurance policy obtained by the Executive providing comparable levels of
benefits to those provided for under the Company's group health plan applying to
senior executives at the commencement of the Consulting Period.
(d) Stock Option Agreements. The parties have entered into three
-----------------------
agreements, dated June 12, 1996, July 17, 1995 and October 3, 1994,
respectively, granting options to the Executive for the purchase of shares in
the Company (the "Stock Option Agreements"). The Company maintains a Stock
Option Plan that governs the grant of such options. True and correct copies of
the Company's Stock Option Plan, as amended, and the Stock Option Agreements are
attached hereto as Appendix A. Under the terms of the plan under which the Stock
Option Agreements were agreed to, the Executive's option to purchase certain
shares of Company common stock expires ninety (90) days after the termination of
the parties' relationship. The parties agree that the Executive's resignation as
President and Chief Operating Officer and continued retention as consultant
pursuant to the terms of this Agreement shall not be deemed to be a termination
of the parties' relationship for purposes of the Stock Option Agreements and the
option period applicable to the Stock Option Agreements.
(e) Officer Receivable. The Executive has a balance of
------------------
approximately twenty six thousand three hundred dollars ($26,300) on his advance
account at the Company (the "Officer Receivable") that is due and owing to the
Company. The parties agree that the Officer Receivable shall be reduced by the
amount of properly documented business expense claims submitted by the Executive
to the Company, including those relating to a European business trip undertaken
by the Executive during his employment with the Company. The Executive shall
submit these expense claims to the Company no later than thirty (30) days after
his execution of this Agreement. The amount of the Officer Receivable remaining
after it has been reduced by the amount of proper business expenses submitted by
the Executive shall be deducted in equal installments from each payment of the
Consulting Fee until the Officer Receivable is entirely paid upon the expiration
of the Consulting Period.
3. Executive Covenants.
-------------------
3.1 Unauthorized Disclosure. (a) The Executive agrees and
-----------------------
understands that due to the Executive's position with the Company, both prior
and subsequent to the date of this Agreement, the Executive has been and will be
exposed to, and has received and will receive, confidential and proprietary
information of the Company or relating to the Company's business or affairs that
constitute trade secrets as defined by the Uniform Trade Secrets Act, California
Civil Code (S) 3426, et seq. (collectively, the "Trade Secrets"), including but
not limited to technical information, product information and formulae,
processes, business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing,
3
<PAGE>
expansion plans, business policies and practices and other forms of information
considered by the Company to be proprietary and confidential and in the nature
of trade secrets. Except to the extent that the proper performance of the
Executive's duties, services and responsibilities hereunder may require
disclosure, and except as such information (i) was known to the Executive prior
to his employment by the Company (including, without limitation, his employment
by the Company prior to the date of this Agreement) or (ii) was or becomes
generally available to the public other than as a result of a disclosure by the
Executive in violation of the provisions of this Section 3.1(a), the Executive
agrees that during the balance of his employment and during the Consulting
Period and at all times thereafter the Executive will keep such Trade Secrets
confidential and will not disclose such information, either directly or
indirectly, to any third person or entity without the prior written consent of
the Company. This confidentiality covenant has no temporal, geographical or
territorial restriction. On the Consulting Commencement Date, the Executive will
promptly supply to the Company all property, keys, notes, memoranda, writings,
lists, files, reports, customer lists, correspondence, tapes, disks, cards,
surveys, maps, logs, machines, technical data, formulae or any other tangible
product or document, and any and all copies, duplicates or reproductions
thereof, which has been produced by, received by or otherwise submitted to the
Executive in the course of his employment with the Company.
(b) Inventions. (i) The Executive agrees that any and all
----------
inventions, discoveries, improvements processes, formulae, business application
software, patents, copyrights and trademarks made, developed, discovered or
acquired by him prior to and during his employment or the Consulting Period,
solely or jointly with others or otherwise, which relate to the business of the
Company and all knowledge possessed by the Executive relating thereto
(collectively, the "Inventions"), shall be fully and promptly disclosed to the
Board of Directors and to such person or persons as the Board of Directors shall
direct and shall be the sole and absolute property of the Company and the
Company shall be the sole and absolute owner thereof. The Executive agrees that
he will at all times keep all inventions secret from everyone except the Company
and such persons as the Board of Directors may from time to time direct. The
Executive shall, as requested by the Company at any time and from time to time,
whether prior to or after the expiration of the Consulting Period, execute and
deliver to the Company any instruments deemed necessary by the Company to effect
disclosure and assignment of the Inventions to the Company or its designees and
any patent applications (United States or foreign) and renewals with respect
thereto, including any other instruments deemed necessary by the Company for the
prosecution of patent applications or the acquisition of letters of patent.
(ii) Reference is hereby made to Appendix B to this
Agreement reprinting the text of Sections 2870 through 2872 of the California
Labor Code. Execution of this Agreement by the Executive shall confirm that the
Executive has received and read such Appendix B. The provisions of this Section
3.1(b) shall not apply to any invention which qualifies fully under the
provisions of Section 2870 of the California Labor Code.
4
<PAGE>
3.2 Prohibited and Competitive Activities. The Executive and the
-------------------------------------
Company recognize that due to the nature of the Executive's engagement hereunder
and the relationship of the Executive to the Company, both prior and subsequent
to the date of this Agreement, the Executive has had and will have access to,
has had and will acquire, and has assisted and may continue to assist in
developing, confidential and proprietary information relating to the business
and operations of the Company and its affiliates, including Trade Secrets. The
Executive acknowledges that such information has been and will be of central
importance to the business of the Company and its affiliates and that disclosure
of it to, or its use by, others (including, without limitation, the Executive
(other than in furtherance of the Company's business and affairs)) could cause
substantial loss to the Company. The Executive and the Company also recognize
that an important part of the Executive's duties has been to develop goodwill
for the Company and its affiliates through his personal contact with Clients (as
defined below), employees, and others having business relationships with the
Company, and that there is a danger that this goodwill, a proprietary asset of
the Company, may follow the Executive when his employment relationship with the
Company is terminated. The Executive accordingly agrees as follows:
(a) Prohibited Activities. The Executive agrees that he
---------------------
will not at any time during the Consulting Period: (i) (other than in the course
of his duties as Consultant) disclose or furnish to any other person or,
directly or indirectly, use for his own account or the account of any other
person, any Trade Secrets, no matter from where or in what manner he may have
acquired such Trade Secrets, and he shall retain all such Trade Secrets in trust
for the benefit of the Company, its affiliates and the successors and assigns of
any of them, (ii) directly or indirectly, whether for his own account or for the
account of any other person, solicit, divert, or endeavor to entice away from
the Company or any entity controlled by the Company, or otherwise engage in any
activity intended to terminate, disrupt, or interfere with, the Company's or any
of its affiliates' relationship with, Clients, or otherwise adversely affect the
Company's or any of its affiliates' relationship with Clients or other business
relationships of the Company or any affiliate thereof, (iii) publish or make any
statement critical of the Company or any shareholder or affiliate of the
Company, or in any way adversely affect or otherwise malign the business or
reputation or any of the foregoing persons; provided, however, that if, in the
-------- -------
written opinion of counsel, the Executive is legally compelled to disclose Trade
Secrets to any tribunal or else stand liable for contempt or suffer other
similar censure or penalty, then the disclosure to such tribunal of only those
Trade Secrets which such counsel advises in writing are legally required to be
disclosed shall not constitute a Prohibited Activity provided that the Executive
shall give the Company as much advance notice of such disclosure as is
reasonably practicable, or (iv) during the balance of his employment and during
the Consulting Period directly or through one or more intermediaries, solicit
for employment or recommend to any subsequent employer of the Executive the
solicitation for employment of, any person who, at the time of such
solicitation, is employed by the Company or any affiliate thereof; provided,
however, that if any such person contacts the Executive concerning employment
outside the Company and Executive notifies the Company in writing of his intent
to discuss employment opportunities with such person and the Company gives
written permission for such
5
<PAGE>
discussions to take place, then any subsequent discussions and any employment
resulting therefrom shall not be deemed to be solicitation for employment by the
Executive for the purposes of this Agreement.
"Clients" shall mean those persons (as defined in Section
4.12(b) below) who, at any time during the Executive's course of employment and
the Consulting Period with the Company (including, without limitation, prior to
the date of this Agreement) are or were clients or customers of the Company or
any affiliate thereof or any predecessor of any of the foregoing.
(b) Non-Competition. By and in consideration of the
---------------
Company's entering into this Agreement and providing the Consulting Fee and
benefits to be provided by the Company to the Executive, and further in
consideration of the Executive's continued exposure to the confidential and
proprietary information of the Company (including, without limitation, the
Company's Trade Secrets), the Executive agrees that the Executive will not,
during the balance of his employment and the term of the Consulting Period,
engage in any Competitive Activity. The term "Competitive Activity" means
engaging in any of the following activities: (i) serving as a director of any
Competitor (as defined below), (ii) directly or indirectly through one or more
intermediaries, either (X) controlling any Competitor or (Y) owning any equity
or debt interests in any Competitor (other than equity or debt interests which
are publicly traded and, at the time of any acquisition, do not exceed 5% of the
particular class of interests outstanding) (it being understood that, if
interests in any Competitor are owned by an investment vehicle or other entity
in which the Executive owns and equity interest, a portion of the interests in
such Competitor owned by such entity shall be attributed to the Executive, such
portion shall be determined by applying the percentage of the equity interest in
such entity owned by the Executive to the interests in such Competitor owned by
such entity), (iii) employment by (including serving as an officer or partner
of), providing consulting services to (including, without limitation, as an
independent contractor) or, managing or operating the business or affairs of,
any Competitor or (iv) participating in the ownership, management, operation or
control of or being connected in any manner with any Competitor. The term
"Competitor" as used herein means any person (other than the Company or any
affiliate thereof) that competes with any of the business conducted by the
Company or any affiliate thereof at or prior to the time the Executive engages
in one or more of the Competitive Activities listed above. The parties agree
that the Company currently conducts business in the following areas, among
others: the design, sale, management and/or support of telecommunications
systems; telecommunications systems integration services; Centrex network
services; telecommunications account management services; high speed data
services; internet access services; voice mail and other "enhanced" services;
discount calling plans and remote call forwarding services; the marketing, sale,
installation and maintenance of data transmission products; local and long
distance telephone services; and the marketing, sale, installation and
maintenance of videoconferencing equipment and telephone systems services.
6
<PAGE>
(c) Remedies. The Executive agrees that any breach of the
--------
terms of this Section 3 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law; the
Executive therefore also agrees that in the event of said breach or any threat
of breach, the Company shall be entitled to an immediate injunction and
restraining order to prevent such breach and/or threatened breach and/or
continued breach by the Executive and/or any and all persons and/or entities
acting for and/or with the Executive, without having to prove damages, in
addition to any other remedies to which the Company may be entitled at law or in
equity. The terms of this paragraph shall not prevent the Company from pursuing
any other available remedies for any breach or threatened breach hereof,
including but not limited to the recovery of damages from the Executive.
4. Waiver and General Release.
--------------------------
4.1 Consultation With Attorney. The Executive has been advised
--------------------------
to consult with an attorney before signing this Agreement, and hereby warrants
that he has done so.
4.2 Term of Offer. The Executive shall have twenty-one (21) days
-------------
from his receipt of this Agreement to accept its terms by signing it.
4.3 Revocation. The Executive shall have seven (7) days after
----------
signing this Agreement to revoke it by notifying the Company in writing of
revocation.
4.4 Mutual Release. The Executive hereby expressly waives any
--------------
and all claims, demands, and causes of action which he has, claims to have, or
may have, whether known or unknown, against the Company and all of its past,
present and future corporate parents, divisions, subsidiaries, affiliates,
related entities, successors, assigns, officers, attorneys, employees and
agents, except claims for indemnity by the Executive against the Company in
------
accordance with the Company's Certificate of Incorporation, Bylaws and/or
applicable law. As used in this Agreement, "claims," "demands," and "causes of
action" include, but are not limited to, contract claims, whether express or
implied, tort claims, equitable claims, claims for breach of fiduciary duty,
fraud claims, claims arising out of federal, state or local laws, regulations or
ordinances prohibiting discrimination on account of race, sex, sexual
orientation, religion, age or national origin, including claims under the Age
Discrimination in Employment Act, wage claims, claims for vacation pay, overtime
pay, severance pay, back pay, fringe benefits, debts, accounts, compensatory
damages, punitive damages, and/or liquidated damages. The Company likewise
waives any and all claims, demands, and causes of action which it has, claims to
have, or may have, whether known or unknown, against the Executive, his heirs,
personal representatives, executors, administrators and assigns, except claims
------
against the Executive for embezzlement or misappropriation or misdirection of
Company assets.
7
<PAGE>
4.5 California Civil Code Section 1542. It is understood and
----------------------------------
agreed that all rights under California Civil Code Section 1542 are hereby
expressly waived by each party. Said Section provides as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release which if known by him must have
materially affected his settlement with the debtor.
5. Restriction on Sale of Stock; Registration Rights. The Executive
-------------------------------------------------
currently holds 450,000 shares of stock in the Company (the "Shares"). The
Executive may acquire additional shares of the Company's common stock pursuant
to the Option Agreements or otherwise (the "Options," collectively with the
Shares, the "Securities".) While the Executive is a member of the Board, he is
subject to the statutory and regulatory restrictions on the volume of shares of
the Company that he can sell. Based on the potential deleterious effect on the
value of shares of the Company's stock should a substantial number of shares be
sold in a short period, and in consideration of the promises and mutual
covenants contained herein, the Executive shall not, during the Consulting
Period, sell or cause to be sold more than one percent (1%) of the Company's
outstanding common stock in any three (3) month period, or in any other period
that is approved by the Board.
5.1 Market Stand-Off. In connection with any underwritten public
----------------
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended (the
"Act"), the Executive shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any of the Securities without the prior written consent of the
Company or its underwriters. Such restriction (the "Market Stand-Off") shall be
in effect for such period of time from and after the effective date of the final
prospectus for the offering as may be requested by the Company or such
underwriters, provided that such period of time shall not exceed one hundred and
eighty (180) days. The Executive shall be subject to the Market Stand-Off
provided and only if the officers and directors of the Company are also subject
- --------------------
to similar restrictions. Any new, substituted or additional securities or
options which are by reason of any Recapitalization or Reorganization, as
defined below, distributed with respect to the Securities shall be immediately
subject to the Market Stand-Off, to the same extent the Securities are at such
time covered by such provisions. "Recapitalization" shall mean any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the Company's outstanding Common Stock as a class without
the Company's receipt of consideration. "Reorganization" shall mean (i) a merger
or consolidation in which the Company is not the surviving entity (ii) a sale,
transfer or other disposition of all or substantially all of the Company's
assets or (iii) any transaction effected primarily to change the state in which
the
8
<PAGE>
Company is incorporated or to create a holding company structure. In order to
enforce the Market Stand-Off, the Company may impose stop-transfer instructions
with respect to the Securities until the end of the applicable stand-off period.
5.2 Registration Rights. (a) The Company covenants and agrees
-------------------
with the Executive that in the event that the Company proposes to file a
registration statement under the Act with respect to any of its equity
securities (other than pursuant to registration statements on Form S-4 or Form
S-8 or any successor or similar forms), whether or not for its own account, then
the Company shall give written notice of such proposed filing to the Executive
promptly (and in any event at least twenty (20) days before the anticipated
filing date). Such notice shall offer to the Executive, together with others who
have similar rights, the opportunity to include in such registration statement
such number of securities as they may request. The Company shall cause the
managing underwriter of a proposed underwritten offering (unless the offering is
an underwritten offering of a class of the Company's equity securities other
than Common Stock and the managing underwriter has advised the Company in
writing that, in its opinion, the inclusion in such offering of Common Stock
would materially adversely affect the distribution of such offering) to permit
the Executive to be included in the registration to include such securities in
the proposed offering and the Company shall use its reasonable best efforts to
include such securities in such proposed offering on the same terms and
conditions as any similar securities of the Company included therein. If the
offering of which the Company gives notice is a public offering involving an
underwriter, the right of the Executive to registration pursuant to this section
shall be conditioned upon the Executive's participation in such underwriting and
the inclusion of the securities to be sold by the Executive in the underwriting.
Should the Executive propose to distribute securities through such underwriting,
he shall enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters. Such underwriting agreement
shall provide that expenses relating to the inclusion of securities owned by the
Executive in any such underwritten offering, other than any underwriter's
discount and commissions or transfer taxes, shall be paid by the Company.
(b) The foregoing notwithstanding, in the case of a firm
commitment offering on underwriting terms appropriate for such a transaction, if
any such managing underwriter of recognized standing shall advise the Company
and the Executive in writing that, in its opinion, the distribution of all or a
specified portion of the securities requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by increasing
the aggregate amount of the offering in excess of the maximum amount of
securities which such managing underwriter believes can reasonably be sold in
the contemplated distribution, then the securities to be included in a
registration which is a primary underwritten offering on behalf of the Company
shall be included in the following order: (i) first, the securities the Company
proposes to include therein and (ii) second, such other securities (including
the Securities) requested to be included pro rata among the other holders
(including the Executive) of such other securities according to the number of
securities requested to be included by each such holder requesting inclusion
therein. In the
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<PAGE>
event that a holder or holders of the Company's securities (other than the
Executive) requests, pursuant to rights granted to such holder or holders, that
the Company file a registration statement for the public offering of securities
and the Company and the other holders of the Company's securities (including the
Executive) who have rights to be included in such registration, request to be
included in such registration and the managing underwriter of such offering
shall advise the Company and the holders requesting inclusion in the offering
that, in its opinion, the distribution of a specified portion of the securities
requested to be included in the registration would materially adversely affect
the distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution
then, the securities to be included in the registration shall be included in the
following order: (i) first, all of the securities requested to be included
therein by the holder or holders making the initial request for the
registration, and (ii) second, such other securities (including the Securities)
requested to be included pro rata among the Company and the holders of such
other securities according to the number of securities requested to be included
by the Company and each such holder requesting inclusion therein. For purposes
of this section, the Company agrees to request for inclusion in the registration
only that number of securities that the Company intends, in good faith, to sell,
if all such securities so requested by the Company were permitted to be included
by the managing underwriter in such registration and sold pursuant thereto.
6. Miscellaneous.
-------------
6.1 Binding Effect; Assignment. This Agreement shall inure to
--------------------------
the benefit of and be binding upon the parties hereto and their respective
heirs, executors, representatives, estates, successors and assigns, including
any successor or assign to all or substantially all of the business and/or
assets of the Company, whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or otherwise; provided, however, that the
-------- -------
Executive, or any beneficiary or legal representative of the Executive, shall
not assign all or any portion of the Executive's rights or obligations under
this Agreement without the prior written consent of the Company.
6.2 Notices. Whenever notice is required to be given under the
-------
terms of this Agreement, such notice shall be in writing and delivered by hand
or by registered or certified mail, postage prepaid, or transmitted by telex,
telegram or telecopier, addressed as follows:
10
<PAGE>
(a) If to the Company, to it at:
View Tech, Inc.
950 Flynn Road
Camarillo, CA 93012
Tel: (805) 482-8277
Fax: (805) 482-3825
(b) With a copy to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, CA 90071
Tel: (213) 489-4060
Fax: (213) 745-3345
Attn: V. Joseph Stubbs, Esq.
(c) If to the Executive, to him at:
Mr. John W. Hammon
35065 Beach Boulevard
Capistrano Beach, CA 92675
(d) With a copy to:
Heller, Ehrman, White & McAuliffe
601 S. Figueroa Street, 40th Floor
Los Angeles, CA 90017-5704
Tel: (213) 689-0200
Fax: (213) 614-1868
Attn: Paul H. Greiner, Esq.
or to such other address as either party shall have specified for itself from
time to time to the other party in writing. All such notices shall be
conclusively deemed to be received and shall be effective, if sent by hand
delivery, upon receipt, or if sent by registered or certified mail, upon
receipt, or if transmitted by telex, telegram or telecopier (which shall be
followed promptly by hand delivery), upon confirmation of such transmission.
6.3 Governing Law. This Agreement and the rights and obligations
-------------
of the parties hereto shall be construed and enforced in accordance with and
governed by the laws of the State of California without giving effect to the
conflict of law principles thereof.
6.4 Severability. If any term or other provision of this
------------
Agreement, or any application thereof to any circumstances is invalid, illegal
or incapable of being
11
<PAGE>
enforced by any rule of law or public policy, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.
6.5 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties hereto with respect to its subject matter hereof
and supersedes all prior agreements and understandings, oral or written, between
them as to such subject matter, including, but not limited to, any and all
employment agreements, whether written, oral or implied.
6.6 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument.
6.7 Plurals; Gender; Headings. Under this Agreement, unless the
-------------------------
context otherwise requires, words in the singular number or in the plural number
shall each include the singular number and the plural number, and the use of any
gender shall include all genders. The headings in this Agreement are for
reference purpose only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement.
6.8 Further Assurances. Each party hereto shall do and perform
------------------
or cause to be done and performed all further acts and things and shall execute
and deliver all other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.9 Amendment and Modification. This Agreement may not be
--------------------------
amended, nor may any provision hereof be modified or waived, except by an
instrument in writing duly signed by the party to be charged.
6.10 Withholding. The Company shall not withhold any statutory
-----------
deductions from the Executive's Consulting Fee and will submit a Form 1099
documenting the payment of the Consulting Fee. The Executive shall defend the
Company and hold it harmless as to any claims or actions against the Company
under federal, state or local tax laws for taxes owed by the Executive arising
out of the Executive's receipt of the Consulting Fee.
6.11 Waiver. No provision of this Agreement may be waived or
------
discharged unless such waiver or discharge is agreed to in writing and signed by
the affected party, and no waiver or discharge of any breach by any party hereto
of any provision of this Agreement to be performed by such party, shall be
deemed a waiver or discharge of any other provisions or a waiver or discharge of
any breach of any other provisions, respectively, at the same or at any prior or
subsequent time.
12
<PAGE>
6.12 Definitions.
-----------
(a) The term "affiliate" shall mean, with respect to any
person, any other person directly or indirectly controlling, controlled by, or
under common control with such person.
(b) The term "person" shall mean an individual, a
corporation, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentally thereof.
6.13 Warranties.
----------
(a) Each party has received legal advice from attorneys of
their choice with respect to the advisability of entering into this Agreement
and the releases provided herein. This Agreement is based upon such advice,
after each party's respective attorneys were provided with a full and fair
opportunity to review the Agreement and consult with their respective clients
regarding the terms contained herein.
(b) Each party entering into this Agreement, and each
person executing this Agreement on behalf of any party, has full authority to do
so and to make the covenants, promises, representations, and warranties set
forth herein.
(c) Except as otherwise provided herein, this Agreement is
intended to be final and binding upon the parties and is further intended to be
effective as a full and final accord and satisfaction among them regardless of
any claims of fraud, misrepresentation, concealment of fact, mistake of fact or
law, duress, coercion, or any other circumstances whatsoever relating to the
subject matter or execution of this Agreement. Each party relies upon the
finality of this Agreement as a material factor inducing that party's execution
of this Agreement.
(d) There are no other agreements or understandings between
the parties relating to the matters and releases referred to in this Agreement
other than as set forth herein. The mutual obligations and undertakings of the
parties expressly set forth in this Agreement are the sole and only
consideration of this Agreement, and no representations, promises or inducements
of any nature whatsoever have been made by the parties other than as appear in
this Agreement.
13
<PAGE>
(e) This Agreement has been read carefully by each of the
parties and its contents are known and understood by each of the parties. This
Agreement is signed freely and voluntarily by each party hereto.
6.14 Attorneys' Fees. In the event of any litigation between the
---------------
parties in connection with the enforcement, interpretation or defense of this
Agreement, or the defense of any claim barred by this Agreement, the prevailing
party or parties shall be entitled to reimbursement from the other party of all
reasonable costs and expenses incurred by it in connection with the litigation,
including attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates provided below.
VIEW TECH, INC.
BY: /s/ Robert G. Hatfield
------------------------------
NAME: ROBERT G. HATFIELD
TITLE: CHIEF EXECUTIVE OFFICER
/s/ John W. Hammon
---------------------------------
JOHN W. HAMMON
4/22/97
14
<PAGE>
EXHIBIT 10.2
_______________________________________________________________________________
TENTH AMENDMENT
TO
REVOLVING CREDIT, TERM LOAN
AND SECURITY AGREEMENT
BETWEEN
USTELECENTERS, INC.
AND
THE FIRST NATIONAL BANK OF BOSTON
DATED AS OF MARCH 31, 1997
_______________________________________________________________________________
<PAGE>
TENTH AMENDMENT, dated as of March 31, 1997 (the "Amendment"), to that
certain Revolving Credit, Term Loan and Security Agreement dated as of October
19, 1992, as amended by a First Amendment dated as of June 18, 1993, a Second
Amendment dated as of June 15, 1994, a Third Amendment dated as of September 30,
1994, a Fourth Amendment dated as of December 9, 1994, a Fifth Amendment dated
as of June 14, 1995, a Sixth Amendment dated as of July 31, 1995, a Seventh
Amendment dated as of June 3, 1996, an Eighth Amendment dated as of September
16, 1996 and a Ninth Amendment dated as of November 27, 1996, by and between
USTELECENTERS, INC., a Delaware corporation and successor by merger to
USTeleCenters, Inc., a Massachusetts corporation (the "Company"), and THE FIRST
NATIONAL BANK OF BOSTON (the "Bank") (together, as so amended, the "Agreement").
WHEREAS, the Company has asked the Bank to amend certain terms of the
Agreement, and the Bank is willing to do so subject to all the terms, covenants
and conditions set forth in this Amendment.
NOW THEREFORE, in consideration of the premises and the agreements,
covenants, representations and warranties herein contained, and subject to the
terms and conditions specified herein, the Company and the Bank hereby agree as
follows:
SECTION A - General. Any term, condition, covenant, agreement or other
--------- -------
provision of the Agreement not expressly and specifically amended hereby or by
any Exhibit hereto shall continue in full force and effect, and all of which are
hereby ratified, confirmed and restated by the Company. Except as expressly
provided or contemplated in this Amendment, nothing herein is intended to or
shall be construed so as to limit, discharge, release, diminish or otherwise
<PAGE>
modify any indebtedness, obligations, liabilities or duties of the Company, or
terminate, release, waive, or otherwise modify any mortgage, security interest,
right, power or remedy of the Bank. Upon execution of this Amendment by the
Company and the Bank, the Agreement, as amended by this Amendment, shall
constitute the single and entire agreement of the parties hereto with respect to
the matters addressed therein and herein.
SECTION B - Amendments to Agreement. The following amendments to the
--------- -----------------------
Agreement shall become effective on the Effective Date:
1. The definitions of "Commitment Amount" and "Revolving Credit
Termination Date" in Section 1.1 of the Agreement are hereby amended in their
entirety to read as follows:
"Commitment Amount" - $3,500,000, or such lesser amount,
including zero, resulting from a termination or reduction of such
amount in accordance with Sections 2.4 or 8.20
"Revolving Credit Termination Date" - August 1, 1997.
2. The definition of "Indebtedness" in Section 1.1 of the Agreement
is hereby amended by adding after each reference therein to the Company the
words: "or the Guarantor, as the case may be,".
3. Section 1.1 of the Agreement is further amended by adding thereto
the following defined terms:
"Guarantor" - View Tech, Inc., a Delaware corporation.
---------
"Guaranty" - The Unlimited Guaranty dated as of November 22, 1996
--------
of the Guarantor in favor of the Bank.
4. Sections 6.11 and 6.12 of the Agreement are hereby amended in
their entirety to read as follows:
6.11. Operating Cash Flow to Total Debt Service. At the end of
-----------------------------------------
each fiscal quarter of the Company, the ratio of Operating Cash Flow
to Total Debt Service shall not be less than 2.0 to 1.
-2-
<PAGE>
6.12. Total Liabilities to Tangible Net Worth. At the end of
---------------------------------------
the Company's fiscal quarter ending March 31, 1997, the ratio of Total
Liabilities to Tangible Net Worth shall not be greater than 5.3 to 1,
and at the end of the Company's fiscal quarter ending June 30, 1997,
the ratio of Total Liabilities to Tangible Net Worth shall not be
greater than 4.75 to 1.
5. Sections 8.1(e), (f) and (g) of the Agreement are hereby amended
by adding therein after each reference therein to the Company the words: "or the
Guarantor".
SECTION C - Conditions Precedent. The Bank's obligations under this
--------- --------------------
Amendment are expressly subject to the satisfaction of the conditions precedent
listed below. The date on which such conditions precedent shall have been
satisfied or waived by the Bank in writing shall be the "Effective Date"
hereunder.
1. Delivery of Documents. The Bank shall have received the
---------------------
following, each dated as of the Effective Date, in form and substance
satisfactory to the Bank:
(i) an Amended and Restated Secured Revolving Credit Note duly
executed by the Company, in or substantially in the form
of Exhibit A (the "Amended Note");
---------
(ii) a certificate of the Secretary or Assistant Secretary of
the Company with respect to resolutions of the Board of
Directors authorizing the execution and delivery of this
Amendment and the Amended Note and the transactions
contemplated hereby; identifying the officer(s) authorized
to execute, deliver and take all other actions required
under this Amendment and the Amended Note, and providing
specimen signatures of such officers; and certifying that
the copy of the Company's By-Laws attached thereto is a
true and correct copy thereof and that no amendment
thereto is pending, in form satisfactory to the Bank;
-3-
<PAGE>
(iii) Certificate of Incorporation of the Company and all
amendments and supplements thereto, filed in the office of
the Secretary of State of Delaware, each certified by said
Secretary of State as being a true and correct copy
thereof;
(iv) a certificate of the Secretary of State of Delaware as to
legal existence and corporate good standing in such state
and listing all documents on file in the office of said
Secretary of State;
(v) a certificate of the Treasurer of the Company as to the
Massachusetts tax good standing of the Company;
(vi) an opinion addressed to it from Burns & Levinson LLP,
counsel to the Company in form and substance satisfactory
to the Bank and its counsel;
(vii) payment of the fees and expenses of Sullivan & Worcester
LLP, counsel to the Bank, incurred in connection with this
Amendment and the discussions and negotiations concerning
the performance of the Company prior to the date hereof;
(viii) a confirmation of the Guaranty duly executed by the
Guarantor, in or substantially in the form of Exhibit B;
---------
and
(ix) such other documents, and completion of such other
matters, as counsel for the Bank may deem necessary or
appropriate.
SECTION D - Representations and Warranties. To induce the Bank to enter
--------- ------------------------------
into this Amendment, the Company represents and warrants to the Bank as follows:
1. Reaffirmation of Representations and Warranties. The
-----------------------------------------------
representations and warranties of the Company contained in the original
Agreement as heretofore supplemented are hereby reaffirmed by the Company as
true, correct and complete on the date hereof, except that the Company has been
reincorporated in Delaware as a wholly-owned subsidiary of View Tech, Inc.
-4-
<PAGE>
2. No Conflict. The execution, delivery and performance of this
-----------
Amendment and the Amended Note do not and will not (i) violate the charter
documents or by-laws of the Company, both as amended, or any court order by
which the Company or any of its properties is bound, or (ii) conflict with,
result in a breach of, or constitute a default under any bond, note or other
evidence of indebtedness or any contract, agreement or instrument to which the
Company is a party or by which it or any of its properties may be bound.
3. Valid and Binding Obligations. The Company has the corporate
-----------------------------
power, and has taken all necessary corporate action to authorize it, to execute,
deliver and perform this Amendment. This Amendment and the Amended Note, when
executed and delivered by the Company, will be the legal, valid and binding
obligations of the Company enforceable in accordance with their terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally and except as to the
remedy of specific performance or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
4. Governmental Approvals. The execution, delivery and performance
----------------------
of this Amendment and the Amended Note and the transactions contemplated herein
and therein do not require any approval or consent of, or filing or registration
with, any governmental or other agency or authority, or any other person, except
for governmental approvals which the Company has obtained or completed and which
are in full force and effect as of the date of execution of this Amendment and
will be in full force and effect on the Effective Date.
5. Financial Statements. The balance sheet of the Company as at
--------------------
December 31, 1996 and the related statement of income (the "Financial
Statements") heretofore delivered to the Bank, have
-5-
<PAGE>
been prepared in accordance with generally accepted accounting principles, are
correct and complete and fairly present the Company's financial condition as at
such date and for the period covered. The Company had as of such date no
material liabilities, contingent or otherwise, liability for taxes, unusual
long-term commitments or unrealized or anticipated losses aggregating a material
amount, except as disclosed or reflected in such financial statements. There has
been no material adverse change in the Company's business, prospects, properties
or financial condition since the date of said balance sheet.
6. No Litigation. Except as set forth in the Litigation Schedule
-------------
attached hereto, there are no suits or proceedings pending or, to the knowledge
of the Company, threatened against the Company or its properties, and no
proceedings involving the Company by or before any governmental authority which
bring into question the validity or enforceability of the Agreement, this
Amendment, the Amended Note or the Guaranty or any amendments thereto
contemplated hereby or which, if determined adversely to the Company, would have
a material adverse effect on the Company's properties, financial condition or
business.
7. No Default. The Company is not in default and no event has
----------
occurred and is continuing and no condition exists which constitutes or, after
notice or lapse of time or both, would constitute a default or event of default,
under any order or decree of any court or governmental authority or under any
agreement or other instrument to which it is a party, or by which it or its
properties are bound, and the Company is complying with all applicable statutes
and regulations of each governmental authority having jurisdiction over it or
its business except where such default or the failure to so comply would not
have a material adverse effect on the Company's properties, financial condition,
or business. No event has occurred and is continuing and no condition
-6-
<PAGE>
exists which constitutes or, after notice or lapse of time or both, would
constitute a breach of, default or Event of Default by the Company under the
Agreement or any Note, as heretofore waived in writing by the Bank.
8. Subsidiary of Guarantor. The Company is a wholly owned subsidiary
-----------------------
of Guarantor, and the Guarantor's Guaranty is in full force and effect and has
not been rescinded by Guarantor.
9. No Untrue Statements. No document, certificate or statement
--------------------
furnished by the Company to the Bank in connection herewith contains any untrue
statement of a material fact concerning the Company.
10. The Company's Information. All data, certificates, reports,
-------------------------
statements, opinions of counsel, documents and other information furnished to
the Bank by or on behalf of the Company or the Guarantor on or prior to the date
hereof were, at the time the same were so furnished, complete and correct in all
material respects to the extent necessary to give the Bank true and accurate
knowledge of the subject matter thereof and did not contain any untrue statement
of a material fact.
11. Survival of Representations and Warranties, etc. All statements
------------------------------------------------
contained in any certificate, financial statement or other instrument delivered
by or on behalf of the Company pursuant to or in connection with this Amendment
shall constitute representations and warranties made under the Agreement.
Wherever a representation and warranty made under this Amendment refers to an
Exhibit or amended Exhibit, it shall be deemed to refer to the Exhibit attached
hereto or, if one or more amended Exhibits have been furnished, the amended
Exhibit most recently so furnished prior to the date as of which the
representation and warranty is made, and the later delivery of an amended
Exhibit shall not effect a correction of any representation and warranty which
was incorrect or untrue when made.
-7-
<PAGE>
SECTION E - Miscellaneous.
--------- -------------
1. Expenses. The Company shall pay on demand all costs and expenses
--------
of the Bank incurred in connection with this Amendment, including, without
limitation, all reasonable attorneys' fees and disbursements, appraisal costs,
environmental review expenses and all recordation and filing fees.
2. Defined Terms. Unless otherwise expressly defined herein, terms
-------------
used as defined terms in this Amendment shall have the meanings given to them in
the Agreement.
3. Severability. The paragraph headings used herein are for
------------
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
4. Governing Law. This Amendment shall be governed by, and construed
-------------
and interpreted in accordance with, the laws of the Commonwealth of
Massachusetts.
5. Counterparts. This Amendment may be executed by one or more of
------------
the parties hereto in any number of counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
6. Incorporation by Reference. All Exhibits and Schedules to this
--------------------------
Amendment shall be integral parts hereof and are hereby incorporated herein by
reference.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed and delivered as of the date first above written.
USTELECENTERS, INC.
By:________________________________
Name:
Title:
-8-
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By:________________________________
Name:
Title:
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTERLY
REPORT ON FORM 10-Q FOR THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,027,097
<SECURITIES> 0
<RECEIVABLES> 10,389,075
<ALLOWANCES> (467,572)
<INVENTORY> 2,164,783
<CURRENT-ASSETS> 13,681,228
<PP&E> 6,355,870
<DEPRECIATION> (3,516,638)
<TOTAL-ASSETS> 18,546,410
<CURRENT-LIABILITIES> 11,205,857
<BONDS> 0
0
0
<COMMON> 635
<OTHER-SE> 6,763,607
<TOTAL-LIABILITY-AND-EQUITY> 18,546,410
<SALES> 10,011,986
<TOTAL-REVENUES> 10,011,986
<CGS> 4,568,209
<TOTAL-COSTS> 10,365,941
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,142
<INCOME-PRETAX> (438,097)
<INCOME-TAX> (912)
<INCOME-CONTINUING> (439,009)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (439,009)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
