VTEL CORP, DEF 14A, 1997-11-12

VTEL CORP
DEF 14A, 1997-11-12
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

Previous: RARE HOSPITALITY INTERNATIONAL INC, 10-Q, 1997-11-12

Next: VTEL CORP, 10-K, 1997-11-12

<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12

VTEL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

NOT APPLICABLE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
(5) Total fee paid:

- --------------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and how it
was determined.

- --------------------------------------------------------------------------------

[ ] Fee paid previously by written preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- --------------------------------------------------------------------------------
(3) Filing Party:

- --------------------------------------------------------------------------------
(4) Date Filed:

- --------------------------------------------------------------------------------
<PAGE> 2

VTEL CORPORATION
108 WILD BASIN ROAD
AUSTIN, TX 78746

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 18, 1997

TO THE STOCKHOLDERS:

You are cordially invited to attend the Annual Meeting of Stockholders of
VTEL Corporation (the "Company") to be held at the Company's offices in Austin,
Texas, at 2:00 p.m., on Thursday, December 18, 1997, for the following purposes:

1. To elect eight directors of the Company to hold office until the next
annual meeting of stockholders or until their respective successors are
duly elected and qualified.

2. To consider and act upon a proposal to approve an amendment to the
Company's Employee Stock Purchase Plan ("ESPP") to increase the number
of shares of the Company's Common Stock issuable under the ESPP upon the
exercise of stock options granted pursuant to the ESPP from 450,000 to
950,000 shares.

3. To consider and act upon a proposal to approve an amendment of the
Company's 1992 Director Stock Option Plan (the "Director Plan") to
increase the number of shares of the Company's Common Stock issuable
under the Director Plan upon the exercise of stock options granted
pursuant to the Director Plan from 100,000 to 150,000 shares.

4. To ratify the Board of Directors' appointment of Price Waterhouse LLP,
independent accountants, as the Company's independent auditors for the
year ending July 31, 1998.

5. To transact such other business as may properly be brought before the
meeting or any adjournment(s) thereof.

Holders of record of the Company's Common Stock at the close of business on
October 30, 1997, will be entitled to notice of, and to vote at, the meeting or
any adjournment(s) thereof.

Stockholders who do not expect to attend the meeting are requested to sign
and return the enclosed proxy, for which a postage-paid, return envelope is
enclosed. The proxy must be signed and returned in order to be counted.

By Order of the Board of Directors,

RODNEY S. BOND
Secretary

Austin, Texas
November 12, 1997
<PAGE> 3

VTEL CORPORATION
108 WILD BASIN ROAD
AUSTIN, TEXAS 78746

PROXY STATEMENT

FOR

1997 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD DECEMBER 18, 1997

SOLICITATION AND REVOCABILITY OF PROXIES

The enclosed form of proxy is solicited by the Board of Directors of VTEL
Corporation (the "Company") to be used at the 1997 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at the Company's
offices in Austin, Texas, at 2:00 p.m., on Thursday, December 18, 1997. This
Proxy Statement and the related proxy are to be first sent or given to the
stockholders of the Company on approximately November 12, 1997. Any stockholder
giving a proxy may revoke it at any time, provided written notice of such
revocation is received by the Secretary of the Company before such proxy is
voted; otherwise, if received in time, properly completed proxies will be voted
at the meeting in accordance with the instructions specified thereon.
Stockholders attending the meeting may revoke their proxies and vote in person.
Mere attendance at the Annual Meeting will not of itself revoke the proxy.

The Company's annual report for the year ended July 31, 1997, is being
mailed herewith to all stockholders entitled to vote at the Annual Meeting. The
annual report does not constitute a part of the proxy soliciting material.

VOTING SECURITIES OUTSTANDING; QUORUM

The record date for the determination of stockholders entitled to notice of
and vote at the Annual Meeting was the close of business October 30, 1997 (the
"Record Date"). At the close of business on October 30, 1997, there were
22,935,226 shares of Common Stock, $.01 par value (the "Common Stock"), issued
and outstanding, each entitled to one vote on all matters properly brought
before the Annual Meeting. There are no cumulative voting rights.

The presence in person or by proxy of the holders of a majority of the
issued and outstanding shares of Common Stock entitled to vote as of the Record
Date is necessary to constitute a quorum at the Annual Meeting. Abstentions and
broker non-votes are treated as present at the meeting and are therefore counted
to determine a quorum. If a quorum is not present, the stockholders entitled to
vote who are present in person or represented by proxy at the Annual Meeting
have the power to adjourn the meeting from time to time, without notice other
than an adjournment at the meeting, until a quorum is present or represented. At
any adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the Annual Meeting as originally
notified.

Directors are elected by a plurality of the votes of the shares present in
person or represented by proxy at the Annual Meeting and entitled to vote on the
election of Directors. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon is required to approve the amendment to the Employee
Stock Purchase Plan ("ESPP"), the amendment to the 1992 Director Stock Option
Plan (the "Director Plan") and to ratify the appointment of independent
auditors.

Abstentions may be specified on all proposals except the election of
Directors. Abstentions, with respect to any proposal other than the election of
Directors, will have the same effect as a vote against such proposal. Broker
non-votes will have no effect on the outcome of the election of Directors or the
other proposals. With regard to the election of Directors, votes may be cast in
favor of or withheld from each nominee; votes that are withheld will be excluded
entirely from the vote and will have no effect.
<PAGE> 4

The Company believes that under the rules of the New York Stock Exchange,
brokers who hold shares in "street name" on behalf of their customers will have
discretion, in the absence of voting instructions from the customer, to vote
such shares concerning all proposals.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company has only one outstanding class of equity securities, its Common
Stock, par value $.01 per share.

The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of September 1, 1997 by
(i) each person who is known by the Company to beneficially own more than 5% of
the Company's Common Stock, (ii) each of the Company's directors and nominees
and Named Executive Officers (as defined in "Executive Compensation" below) and
(iii) all directors and officers as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)(2)
----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ --------- -------
<S> <C> <C>
Intel Corporation........................................... 1,672,846 7.3%
2200 Mission College Blvd.
Santa Clara, CA 95052
F.H. (Dick) Moeller......................................... 357,219(3) 1.5%
Jerry S. Benson, Jr......................................... 250,000(4) 1.1%
Eric L. Jones............................................... 60,353(5) *
John V. Jaggers............................................. 3,190(6) *
Gordon H. Matthews.......................................... 1,203(7) *
Max D. Hopper............................................... 1,666(8) *
T. Gary Trimm............................................... 123,727(9) *
Dr. Arthur G. Anderson...................................... 13,603(10) *
Michael O'Dell.............................................. 103,570(11) *
Rodney S. Bond.............................................. 89,976(12) *
Michael P. Cronin........................................... 5,104(13) *
Frank S. Kaplan............................................. 47,510(14) *
Richard Snyder.............................................. -0- *
All directors and officers as a group (17
persons)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)......... 1,272,422(15) 5.3%
</TABLE>

- ---------------

* Indicates ownership of less than 1% of the Company's Common Stock

(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The persons and entities named in the table
have sole voting and investment power with respect to all shares shown as
beneficially owned by them, except as noted below. Amounts shown include
shares of Common Stock issuable upon exercise of certain outstanding
options within 60 days after September 1, 1997.

(2) Except for the percentages of certain parties that are based on presently
exercisable options which are indicated in the following footnotes to the
table, the percentages indicated are based on 22,874,391 shares of Common
Stock issued and outstanding on September 1, 1997. In the case of parties
holding presently exercisable options, the percentage ownership is
calculated on the assumption that the shares presently held or purchasable
within the next 60 days underlying such options are outstanding.

(3) Consists of 81,350 shares held by Mr. Moeller directly and 275,869 shares
(83,907 of which are subject to repurchase at October 30, 1997 by VTEL at
the optionee's exercise prices pursuant to the option agreements) which Mr.
Moeller may acquire upon the exercise of options within 60 days after
September 1, 1997.

2
<PAGE> 5

(4) Consists of no shares held by Mr. Benson directly and 250,000 shares
(223,959 of which are subject to repurchase at October 30, 1997 by VTEL at
the optionee's exercise prices pursuant to the option agreements) which Mr.
Benson may acquire upon the exercise of options within 60 days after
September 1, 1997.

(5) Consists of 5,686 shares held by Mr. Jones directly and 54,667 shares which
Mr. Jones may acquire upon the exercise of options within 60 days after
September 1, 1997.

(6) Consists of 1,524 shares held by Mr. Jaggers directly and 1,666 shares
which Mr. Jaggers may acquire upon the exercise of options within 60 days
after September 1, 1997.

(7) Consists of no shares held by Mr. Matthews directly and 1,203 shares which
Mr. Matthews may acquire upon the exercise of options within 60 days after
September 1, 1997.

(8) Consists of no shares held by Mr. Hopper directly and 1,666 shares which
Mr. Hopper may acquire upon the exercise of options within 60 days after
September 1, 1997.

(9) Consists of no shares held by Mr. Trimm directly and 123,727 shares which
Mr. Trimm may acquire upon the exercise of options within 60 days after
September 1, 1997.

(10) Consists of 11,937 shares held by Mr. Anderson directly and 1,666 shares
which Mr. Anderson may acquire upon the exercise of options within 60 days
after September 1, 1997.

(11) Consists of 6,941 shares held by Mr. O'Dell directly and 96,629 shares
(20,790 of which are subject to repurchase at October 30, 1997 by VTEL at
the optionee's exercise prices pursuant to the option agreements) which Mr.
O'Dell may acquire upon the exercise of options within 60 days after
September 1, 1997. Effective October 14, 1997, Mr. O'Dell was no longer
employed with the Company.

(12) Consists of 28,183 shares held by Mr. Bond directly, 1,450 shares owned by
a relative of Mr. Bond of which he disclaims beneficial ownership and
60,313 shares (26,250 of which are subject to repurchase at October 30,
1997 by VTEL at the optionee's exercise prices pursuant to the option
agreements) which Mr. Bond may acquire upon the exercise of options within
60 days after September 1, 1997.

(13) Consists of no shares held by Mr. Cronin directly and 5,104 shares which
Mr. Cronin may acquire upon the exercise of options within 60 days after
September 1, 1997. Effective August 15, 1997, Mr. Cronin was no longer
employed with the Company.

(14) Consists of 1,260 shares held by Mr. Kaplan directly and 46,250 shares
(41,433 of which are subject to repurchase at October 30, 1997 by VTEL at
the optionee's exercise prices pursuant to the option agreements) which Mr.
Kaplan may acquire upon the exercise of options within 60 days after
September 1, 1997.

(15) Includes an aggregate of 2,543 shares held directly or indirectly by Dennis
Egan, Bob Romano, Judy Wallace, Bob Swem, and Charles Denton, collectively,
and 212,758 shares (115,733 of which are subject to repurchase at October
30, 1997 by VTEL at the optionees' exercise prices pursuant to the option
agreements) which such persons, collectively, may acquire upon the exercise
of options within 60 days after September 1, 1997. All options held by the
Chief Executive Officer and the Named Executive Officers were granted under
the VTEL Corporation 1989 Stock Option Plan (the "1989 Plan") or the VTEL
Corporation 1996 Stock Option Plan (the "1996 Plan") (collectively, the
"Company's Plans"). Pursuant to the Company's Plans, all options granted
thereunder are immediately exercisable, however, shares issued upon
exercise are subject to repurchase by VTEL, at the exercise price, to the
extent of the number of shares that have not vested in the event that the
optionees' employment terminates prior to all such optionees' options
becoming vested.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
beneficially own more than 10% of the Company's Common Stock ("10%
Stockholders"), to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Based solely upon information provided to
the Company by individual

3
<PAGE> 6

officers, directors and 10% stockholders, the Company believes that all of these
filing requirements were satisfied by the Company's officers, directors and 10%
stockholders.

ELECTION OF DIRECTORS
(ITEM 1)

The Board of Directors has nominated for directors the eight individuals
named below to be elected at the Annual Meeting to hold office until the next
annual meeting of stockholders, or until their respective successors shall have
been duly elected and shall have qualified. All of the nominees are currently
directors of the Company, except for Richard Snyder. Two of the current
directors, T. Gary Trimm and Dr. Arthur G. Anderson, were elected to serve by
the Board of Directors pursuant to the Agreement and Plan of Merger and
Reorganization by and among the Company, VTEL-Sub, Inc. and Compression Labs,
Incorporated ("CLI"), dated as of January 6, 1997. Proxies cannot be voted for a
greater number of persons than the number of nominees named on the enclosed form
of proxy. A plurality of the votes cast in person or by proxy by the holders of
Common Stock is required to elect a director.

<TABLE>
<CAPTION>
PRESENT
OFFICE(S) HELD DIRECTOR
NOMINEE AGE IN THE COMPANY SINCE
------- --- ------------------------------------ --------
<S> <C> <C> <C>
F. H. (Dick) Moeller........... 51 Chairman and Chief Executive Officer 1989
Jerry S. Benson, Jr............ 41 President and Chief Operating
Officer 1997
Eric L. Jones.................. 62 None 1989
Gordon H. Matthews............. 60 None 1994
Max D. Hopper.................. 62 None 1995
T. Gary Trimm.................. 49 None 1997
Dr. Arthur G. Anderson......... 70 None 1997
Richard Snyder................. 53 None N/A
</TABLE>

The following information regarding the principal occupations and other
employment of the nominees during the past five years and their directorships in
certain companies is as reported by the respective nominees:

F.H. (DICK) MOELLER, age 51, joined the Company as Chief Executive Officer,
President and director in October 1989 and became the Chairman of the Board in
March 1992. From May 1982 to October 1989, Mr. Moeller served as the founder and
President of ProfitMaster Computer Systems, Inc., a computer software firm
specializing in real-time financial management systems for retail point-of-sale
applications. Prior to founding such firm, Mr. Moeller spent 12 years with Texas
Instruments Incorporated during which he held a variety of management positions,
most recently serving as Advanced Systems Manager of its Computer Systems
Division.

JERRY S. BENSON, JR., age 41, joined the Company in May 1997 as President
and Chief Operating Officer. Prior to joining VTEL, Mr. Benson spent 10 years at
NEC Technologies, Inc. ("NEC"), the last two years as President and Chief
Operating Officer of NEC in Chicago, Illinois. NEC is a manufacturer of computer
peripherals and other technology products for the North American market. Mr.
Benson also served in the Office of the Chairman and Board of Directors of NEC
and represented NEC by serving on the Board of Directors of Packard Bell (NEC is
the majority shareholder of Packard Bell). Prior to his role as President and
Chief Operating Officer of NEC, Mr. Benson held a number of significant
operational and general management roles at NEC, including general management
positions in several NEC groups, divisions and Strategic Business Units. Before
his employment with NEC, he held marketing and sales management positions at
Wyse, Amdek, and Ericsson.

ERIC L. JONES, age 62, has served as a director to the Company since June
1989. He also served as the Company's President and Chief Executive Officer from
June 1989 until October 1989 and as the Company's Chairman of the Board from
October 1989 until March 1992. He also serves as chairman and/or director of
several privately-held companies. Since January 1994, he has been a general
partner of SSM Venture

4
<PAGE> 7

Partners, L.P., a venture capital firm. Previously, Mr. Jones has served as Vice
President of Texas Instruments Incorporated, as President of its Data Systems
Group and Vice President of its Geophysical Services Inc. subsidiary.

GORDON H. MATTHEWS, age 60, has served as a director of the Company since
his election to the Board by the other directors in October 1994. Since May of
1992, Mr. Matthews has been the Chief Executive Officer and Chairman of Matthews
Communications Management, Inc., a provider of telephone control systems for
residences and small businesses, and Chairman and President of Matthews
Communication Systems, Inc., a consulting firm providing assistance to
corporations on intellectual property processes. Mr. Matthews' pre-1992
experience includes founding and managing a number of companies in the
electronics industry. Mr. Matthews is a named inventor in over 40 patents,
including the U.S. Patent #4,371,752 for voice mail. Mr. Matthews is the
acknowledged inventor of voicemail.

MAX D. HOPPER, age 62, has served as a director of the Company since May
1995. In January 1995, Mr. Hopper founded Max D. Hopper Associates, Inc., a
consulting firm specializing in creating benefits from the strategic use of
advanced information technologies. He currently serves as its Chief Executive
Officer. Mr. Hopper served as Senior Vice President -- Information Systems for
American Airlines from November 1985 to January 1995 and served as chairman of
The SABRE Group, a unit of AMR Corporation, from April 1993 through January
1995. Mr. Hopper is also a director of the Gartner Group, Worldtalk Corporation,
Computer Language Research, Inc., ProNet Communications, Scopus Technology and
USDATA Corporation.

T. GARY TRIMM, age 49, has served as a director of the Company since May
1997. Previously he was President, Chief Executive Officer and a member of the
Board of Directors of CLI from February 1996 to May 1997 and Principal Financial
Officer from April 1996 to May 1997. From February 1995 to February 1996, he was
President of the North American Division of Scientific-Atlanta, Inc. ("S-A"),
which supplies advanced analog and digital video systems to the cable and
telephone industry. From January 1990 to March 1994, he held the position of
President of the Subscriber Systems Division at S-A, where he had general
management responsibility for S-A's analog and digital settop.

DR. ARTHUR G. ANDERSON, age 70, has served as a director of the Company
since May 1997. Previously, he was a member of the Board of Directors of CLI
from August 1984 to May 1997. He is a consultant on science and engineering
management and a member of the National Academy of Engineering. Dr. Anderson
held various positions with International Business Machines Corporation ("IBM")
from 1951 to 1984, including Director of Research, General Products Division
President, Group Executive and Vice President. He retired from IBM in June 1984.

RICHARD SNYDER, age 53, from 1996 until 1997 was the Senior Vice President
of World Wide Sales, Marketing, Service and Support of Compaq Computer Corp., a
worldwide computer company. From 1995 until 1996, Mr. Snyder was the Senior Vice
President and General Manager, Dell Americas for Dell Computer Corporation, a
computer manufacturer and marketer, and from 1993 until 1995, Mr. Snyder was the
Group General Manager, DeskJet Printer Group for Hewlett Packard Company
("Hewlett"), a designer, manufacturer and servicer of electronic products and
systems. Prior to 1993, Mr. Snyder served as General Manager of the Vancouver
Division of Hewlett.

None of the nominees is related to any other nominee or to any executive
officer or director of the Company by blood, marriage or adoption (except
relationships, if any, more remote than first cousin).

THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" EACH OF THE EIGHT NOMINEES.

5
<PAGE> 8

BOARD OF DIRECTORS AND COMMITTEES

The Board of Directors held eight regularly scheduled meetings and five
special meetings during the fiscal year ended July 31, 1997. In addition, the
Board of Directors acted four times by unanimous consent during the fiscal year
ended July 31, 1997.

The Board of Directors uses working committees with functional
responsibility in the more complex recurring areas where disinterested oversight
is required. Working committees of the Board of Directors include the Audit
Committee, the Compensation Committee and the Nominating Committee.

The Audit Committee is the communication link between the Board of
Directors and the Company's independent auditors. In addition to recommending
the appointment of the independent auditors to the Board of Directors, the Audit
Committee reviews the scope of the audit, the accounting policies and reporting
practices, internal auditing and internal control, compliance with the Company's
policies regarding business conduct and other matters as deemed appropriate. The
Audit Committee held two meetings in fiscal 1997 with the independent auditors
and management. The Audit Committee is currently composed of Messrs. Hopper,
Jaggers and Jones.

The Compensation Committee is responsible for approving the compensation
arrangements of senior management and recommending approval by the Board of
Directors of amendments to the Company's benefit plans. At eight meetings during
the fiscal year ended July 31, 1997, the Compensation Committee approved stock
option awards pursuant to the Company's Plans. The Compensation Committee is
currently composed of Messrs. Hopper, Jones and Matthews.

The Nominating Committee is responsible for continuing studies of the size
and composition of the Board of Directors and for proposing nominees to the
Board. At one meeting during the fiscal year ended July 31, 1997, the Nominating
Committee reviewed information regarding proposed nominees to the Board of
Directors. The Nominating Committee will consider nominees properly recommended
by security holders. In order to make a nomination, the Company's Bylaws
generally require that advance notice of such nomination be provided to the
Company at least 60 days and not more than 90 days prior to the first
anniversary of the preceding year's annual stockholders' meeting, together with
additional information regarding the nominee and the stockholder making such
nominations as called for by the Company's Bylaws. The Nominating Committee is
currently composed of Messrs. Jaggers, Matthews and Moeller.

During the fiscal year ended July 31, 1997, with the exception of one
director who missed one meeting, all directors attended 100% of the total number
of meetings of the Board and the committees on which that Director served.

DIRECTOR COMPENSATION

During fiscal 1997, each nonemployee director was paid a retainer of $1,500
per quarter and $1,000 for each meeting of the Board of directors of the Company
attended by such director. Accordingly, total director fees earned in fiscal
1997 were $60,500.

All Nonemployee Directors participate in the Company's 1992 Director Plan.
Nonemployee Directors elected prior to October 14, 1994 received stock options
to purchase 6,000 shares of the Company's Common Stock, having an exercise price
equal to the market price of the Company's Common Stock on the date of such
grant. Nonemployee Directors elected on or after October 14, 1994 receive stock
options to purchase 12,000 shares of the Company's Common Stock on the same
terms. In addition, Nonemployee Directors will receive options to purchase 6,000
shares of the Company's Common Stock, such options vesting over a three-year
period, at the time that such eligible director's prior options granted under
the 1992 Director Plan become fully exercisable and vested. All such options
shall vest in equal amounts monthly over a three-year period but shall cease
vesting at the time such director ceases to be a director of the Company.

During fiscal 1997, Mr. Jones, in his capacity as a member of the Board of
Directors, devoted special assistance identifying a new Chief Operating Officer
for the Company, and on May 22, 1997 was awarded 3,000 options having an
exercise price equal to the fair market value at the date of grant. During
fiscal 1997,

6
<PAGE> 9

following the Company's acquisition of CLI, the Company terminated Mr. Trimm's
employment contract with CLI and, in accordance with the terms of such contract,
paid Mr. Trimm a severance fee equal to one year's salary, or $250,000, payable
in installments over the remainder of the term of the contract. Under the same
contract, for a period of three years beginning in June 1997, Mr. Trimm is
entitled to monthly payments equal to the greater of $500 or $125 per hour for
consulting services performed. During fiscal 1997, Mr. Trimm received $1,000 in
such consulting fees.

The compensation of employee directors of the Company is discussed at
"Executive Compensation" below.

REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION

As members of the Compensation Committee, it is our duty to administer the
executive compensation program for the Company. The Compensation Committee is
responsible for establishing appropriate compensation goals for the executive
officers of the Company and evaluating the performance of such executive
officers in meeting such goals. The elements of the executive compensation
program described below are implemented and periodically reviewed and adjusted
by the Compensation Committee.

The goals of the Compensation Committee in establishing the Company's
executive compensation program are as follows:

(1) To fairly compensate the executive officers of the Company for
their contributions to the Company's short-term and long-term performance.
The elements of the Company's executive compensation program are (a) annual
base salaries, (b) quarterly and annual performance bonuses, (c) long term
incentives and (d) equity incentives.

(2) To allow the Company to attract, motivate and retain the
management personnel necessary to the Company's success by providing an
executive compensation program comparable to that offered by companies with
which the Company competes for such management personnel.

(3) To provide an executive compensation program with incentives
linked to the financial performance of the Company, and thereby enhance
stockholder value. Under such program, incentive compensation for executive
officers is linked to the financial performance of the Company as measured
by earnings per share.

Base Salaries. The annual base salaries of the Chief Executive Officer and
the other executive officers of the Company are determined based on individual
performance, experience and a comparison with salary ranges and midpoints
reflecting similar positions, duties and levels of responsibility at the
Company's Peer Group and other companies in similar industries and with
comparable revenues. The Company's Peer Group is identified under the heading
"Comparative Total Returns" below and the comparisons to companies in similar
industries with comparable revenues are based on reports published by Radford
Associates, a provider of national compensation surveys.

Quarterly, Annual and Other Bonus. The quarterly and annual bonuses
available to the executive officers, including the Chief Executive Officer and
the Chief Operating Officer, of the Company are based upon the achievement of
certain earnings per share goals for the Company set by the Compensation
Committee prior to the beginning of such measurement period.

The Company achieved certain of the quarterly targets and achieved its
annual target during fiscal 1997. The targets for both the quarterly and annual
bonuses were set and measured considering VTEL as a standalone entity prior to
its merger with CLI (the "Merger"). The bonuses earned during the first three
quarters of the year were paid in the form of a combination of cash and
discounted stock options that became fully vested at a point twelve months from
the end of the quarter in which they were earned. Fourth quarter bonuses earned
were paid in cash.

Long-Term Value Creation Incentives. Upon completion of the Merger, the
Board of Directors established a Long-Term Value Creation Incentive Plan
("VCIP") to focus on the synergies and opportuni-

7
<PAGE> 10

ties created by the Merger. The VCIP allows selected individual employees to
share directly in any incremental earnings resulting from the Merger.
Accordingly, VCIP performance minimum thresholds were established based on the
performance that the two companies could have achieved independently. The VCIP
bonus pool is based on earnings performance above the minimum earnings per share
threshold. Any incremental performance above the threshold results in the
allocation of a portion of the earnings to the VCIP pool. Awards to the
individuals are based on the performance achieved during the two-year period
occurring following the completion of the Merger. Each employee participating in
the VCIP program is granted shares of the VCIP pool based upon the
pre-determined percentage of the VCIP pool allocated to each individual. The
individual percentage of the total pool remains constant as incrementally higher
performances are obtained. The number of shares granted to each participant is
based on management's and the Board's judgment of the individual's potential
ability to influence the success of the Merger and the profitability of the
combined Company. At the end of each of fiscal 1998 and fiscal 1999, the amount
of pool funding for that year will vest. Upon the completion of fiscal 1999,
one-half of the earned awards will be paid in cash and the other half will be
paid in VTEL restricted stock. The stock restrictions will lapse 50% one year
from grant and 50% two years from grant, which grant occurs upon the completion
of fiscal 1999.

Equity Incentives. Equity incentives other than those described above,
including grants of stock options, are determined based on the Compensation
Committee's assessment of the ability of such officers to positively impact the
Company's future performance and enhance stockholder value as determined by
their individual performances. Stock option grants and other equity incentives
are not awarded annually, but rather as warranted by individual performance and
experience. Option awards vest over a 48-month period. The amount and vesting of
stock options are not contingent on achievement of any performance targets. All
options granted, other than those granted in lieu of cash for earned quarterly
bonuses, will benefit the executive only to the extent that there is
appreciation in the market price of the Common Stock during the option period.

In fiscal 1997, options covering a total of 633,579 shares of Common Stock
at a weighted average exercise price of $6.21 were granted to executives. Of
these options, 59,829 were granted based upon the objectives and goals achieved
by the Company in fiscal 1997, with 270,000 being granted to new executives upon
joining the Company and the remaining 303,750 being the result of a repricing of
options previously granted. See "Executive Compensation -- Stock Option Grants
During Fiscal 1997."

Equity and cash incentives are not limited to executive officers. Grants of
stock options are made to all employees upon joining the Company in amounts
determined by the Compensation Committee and are also made to selected employees
as performance related awards and as awards for certain promotions. The amounts
of such grants are determined based on the individual employee's position with
the Company and his or her potential ability to beneficially impact the
performance of the Company. By giving all employees a stake in the financial
performance of the Company, the Compensation Committee's goal is to provide
incentives to all employees of the Company to enhance the financial performance
of the Company and, thus, stockholder value.

While the Compensation Committee believes that its equity incentive program
has been instrumental in attracting and retaining quality executive officers and
other employees, the incentive feature of such program may become lost when
options are granted at fair market value and subsequently the market price of
the Common Stock falls substantially below the exercise prices of stock options
granted under such program. In 1997, in part due to a significant decline in the
market price/earnings ratios for the video conferencing industry, the market
price of the Common Stock fell substantially. As a result of the drop in market
price of the Common Stock and the fact that a significant number of optionees
are employees who joined the Company through the merger with CLI in May of 1997
and through the acquisition of the ICS division of Peirce Phelps in November of
1995 and, thus, approximately 660 held options having exercise prices
substantially higher than the current market value, over 89% of such holders of
outstanding options granted under the Company's stock option plans held options
that were "out-of-the-money" on May 27, 1997, and approximately 74% of the
outstanding options under the Company's stock option plans were "out-of-the-
money" on such date. Effective as of May 27, 1997, after careful consideration
of the relevant factors, including (i) the decline in the market price of the
Common Stock, (ii) the large percentage of the Company's employees holding
"out-of-the-money" options and (iii) the importance of equity incentives to the

8
<PAGE> 11

Company's overall compensation program for executive officers and employees at
all levels, the Compensation Committee approved an exchange program pursuant to
which all current employees holding options under a VTEL or CLI employee stock
option plan and current directors holding options under the Director Plan would
be given the opportunity to surrender their existing options for new options
having an exercise price of $6.125 per share, the fair market value of the
Common Stock on May 27, 1997. Any vesting accrued under the existing options
would be lost in an exchange under such program; the new employee options vest
ratably over a 48-month period and the director options vest ratably over a
36-month period, commencing on May 27, 1997. Subsequently, 40% of the eligible
options, covering 1,257,338 shares of Common Stock, were repriced pursuant to
this exchange program. See "Ten Year Options/SAR Repricing" for repricing
involving the Company's executive officers.

Omnibus Budget Reconciliation Act of 1993. The Omnibus Budget
Reconciliation Act of 1993 added Section 162(m) to the Internal Revenue Code
("Section 162(m)"). With certain exceptions, beginning with the taxable year
commencing January 1, 1994, Section 162(m) will prevent publicly held
corporations, including the Company, from taking a tax deduction for
compensation in excess of $1 million paid to the Chief Executive Officer and the
four other persons named in the Summary Compensation Table in the proxy
statement. Section 162(m) will not apply to limit the deductibility of
performance-based compensation exceeding $1 million if paid (i) solely upon
attainment of one or more performance goals, (ii) pursuant to a
performance-based compensation plan adopted by the Committee, and (iii) the
terms of the plan are approved by the stockholders before payment of the
compensation.

The Committee has reviewed the Company's compensation plans with regard to
the deduction limitation contained in Section 162(m). The Committee believes
that option grants under the Company's stock option plans meet the requirements
for deductible compensation. The Committee has decided for the present not to
alter the Company's other compensation plans to meet the deductibility
requirements of the regulations promulgated under the Internal Revenue Code. The
Committee will continue to review the issue and its determination under the
regulations under Section 162(m) and monitor whether the Company's compensation
plans should be amended in the future to meet the deductibility requirements.
The Committee does not anticipate that Section 162(m) will limit the
deductibility of any compensation paid in fiscal year 1998. No executive
officers of the Company were affected by such provision in fiscal year 1997.

COMPENSATION COMMITTEE

Max D. Hopper
Eric L. Jones
Gordon H. Matthews

9
<PAGE> 12

EXECUTIVE COMPENSATION

The following table summarizes certain information regarding compensation
paid or accrued during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
-------------------------------------- ------------
SECURITIES
PERIOD ENDING BONUS AND OTHER ANNUAL UNDERLYING ALL OTHER
JULY 31 OR COMMISSIONS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION DECEMBER 31* SALARY($) ($) ($)(2) (#) ($)(3)
- --------------------------- ------------- --------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
F.H. (Dick) Moeller 1997 $216,666 $ 77,250 $ 0 130,302(1) $3,881
Chairman and Chief 1996-7 mos. $115,417 $ 3,623 $ 0 100,000 $3,622
Executive Officer 1995 $195,000 $ 52,750 $ 0 25,000 $3,831
1994 $195,000 $173,187 $ 0 25,000 $1,802
Michael O'Dell 1997 $165,000 $ 59,750 $ 0 19,070(1) $ 392
Senior Vice President- 1996-7 mos. $ 90,000 $ 3,856 $ 0 15,000 $ 172
Product Development 1995 $150,000 $ 40,225 $ 0 10,000 $ 347
1994 $150,000 $116,312 $ 0 10,000 $ 52
Rodney S. Bond 1997 $150,000 $ 69,500 $ 0 28,699(1) $ 357
Chief Financial Officer 1996-7 mos. $ 77,083 $ 4,250 $ 0 15,000 $ 172
Vice President-Finance, 1995 $125,000 $ 44,068 $ 0 10,000 $ 381
Treasurer and Secretary 1994 $112,950 $ 91,296 $ 0 12,000 $ 86
Michael P. Cronin 1997 $140,000 $118,111 $ 0 0 $ 334
Vice President -- North 1996-7 mos. $ 91,778 $ 17,896 $ 0 3,750 $ 172
American Sales 1995 $120,750 $ 56,531 $69,266(4) 15,000 $ 283
1994 $ 16,209 0 $ 0 35,000 $ 0
Frank S. Kaplan 1997 $126,250 $ 90,509 $ 0 61,250(1) $ 294
Vice President- 1996-7 mos. $ 64,167 $ 12,900 $73,087(4) 6,250 $ 172
International Sales and 1995 $ 36,976 0 $ 0 25,000 $ 0
Marketing 1994 NA NA NA NA NA
</TABLE>

- ---------------

* VTEL changed its fiscal year from December 31 to July 31.

(1) Effective as of May 27, 1997, the Compensation Committee approved an
exchange program pursuant to which all current employees holding options
under a VTEL or CLI employee stock option plan and current directors holding
options under the Director Plan were permitted an opportunity to exchange
their options outstanding under the Company's stock option plans for new
options having an exercise price of $6.125, the fair market value of the
Common Stock on May 27, 1997. The new options issued to employees pursuant
to this program vest ratably over a 48-month period commencing on May 27,
1997. The new options issued to directors pursuant to this program vest
ratably over a 36-month period commencing on May 27, 1997. Subsequently, 40%
of the eligible options, representing options covering 1,257,338 shares of
Common Stock were reissued pursuant to this exchange program. Of the option
awards shown in the above table, 125,000 options granted to Mr. Moeller,
25,000 options granted to Mr. Bond, 15,000 options granted to Mr. O'Dell,
and 46,250 options granted to Mr. Kaplan in 1997 were the result of a
repricing of options previously granted.

(2) Includes perquisites and other personal benefits if value is greater than
the lesser of $50,000 or 10% of reported salary and bonus.

10
<PAGE> 13

(3) Represents the dollar value of any insurance premiums paid by the Company
during the covered fiscal year with respect to term life insurance and long
term disability insurance for the benefit of the Chief Executive Officer or
Named Executive Officer.

(4) Consists of relocation expenses paid by the Company.

STOCK OPTION GRANTS DURING FISCAL 1997

The following table sets forth information with respect to grants of stock
options to purchase Common Stock pursuant to the Company's Plans to the Chief
Executive Officer and the Named Executive Officers reflected in the Summary
Compensation Table above. No stock appreciation rights (SARs) were granted
during fiscal 1997 and none were outstanding as of July 31, 1997.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED ANNUAL
RATES OF STOCK PRICE
INDIVIDUAL GRANTS(1) APPRECIATION FOR OPTION TERM(2)
------------------------------------------------------- ----------------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS/SARS IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 0%($) 5%($) 10%($)
---- ------------ ------------ ------------ ---------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
F.H. (Dick) Moeller... 2,646 0.13 4.062 08/28/06 10,751 24,271 45,014
656 0.03 4.094 02/01/07 2,685 6,063 11,245
2,000 0.10 2.688 05/01/07 5,374 12,135 22,507
125,000 6.32 6.125 05/27/07 0 413,340 1,014,917
Michael O'Dell........ 2,031 0.10 4.062 08/28/06 8,252 18,630 34,552
504 0.03 4.094 02/01/07 2,063 4,658 8,640
1,535 0.08 2.688 05/01/07 4,125 9,313 17,274
15,000 0.76 6.125 05/27/07 0 57,780 146,425
Rodney S. Bond........ 1,846 0.09 4.062 08/28/06 7,500 16,933 31,404
458 0.02 4.094 02/01/07 1,875 4,233 7,851
1,395 0.07 2.688 05/01/07 3,748 8,464 15,698
25,000 1.26 6.125 05/27/07 0 96,299 244,042
Michael P. Cronin..... 0 N/A N/A N/A N/A N/A N/A
Frank S. Kaplan....... 15,000 0.76 9.938 12/20/06 0 93,737 237,560
46,250 2.34 6.125 05/27/07 0 178,154 451,477
All employee
options............. 1,976,703 100.00 6.552(3) N/A 407,359 8,552,398 21,048,488
All stockholders(4)... N/A N/A N/A N/A N/A 94,246,605 238,839,400
Optionee gains as % of
all stockholder
gains............... N/A N/A N/A N/A N/A 9.07% 8.81%
</TABLE>

- ---------------

11
<PAGE> 14

(2) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the 5%
and 10% annual rates prescribed by the Securities and Exchange Commission
("SEC") and therefore are not intended to forecast possible future
appreciation, if any, of the price of the Company's Common Stock.

(3) Weighted average grant price of all stock options granted to employees in
fiscal 1997.

(4) Appreciation for all stockholders is calculated using the average exercise
price for all employee optionees ($6.552) and using the number of shares of
the Company's Common Stock outstanding on July 31, 1997 (22,872,516).

AGGREGATED STOCK OPTION/SAR EXERCISES DURING FISCAL 1997 AND STOCK OPTION/SAR
VALUES AS OF JULY 31, 1997

The following table sets forth information with respect to the Chief
Executive Officer and the Named Executive Officers concerning the exercise of
options during fiscal 1997 and unexercised options held as of July 31, 1997:

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES(1)

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
SHARES YEAR END(#) FISCAL YEAR END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
F.H. (Dick) Moeller.... 67,100 372,165 179,941 95,928 $465,730 $20,593
Michael O'Dell......... 0 0 71,931 24,698 $ 38,317 $12,715
Rodney S. Bond......... 5,000 24,125 29,905 30,408 $ 29,927 $12,534
Michael P. Cronin...... 0 0 26,822 21,824 $ 0 $ 0
Frank S. Kaplan........ 0 0 1,926 44,324 $ 0 $ 0
</TABLE>

- ---------------

(1) All options held by the Chief Executive Officer and the Named Executive
Officers were granted under the 1989 Plan or the 1996 Plan. Pursuant to each
of the 1989 Plan and the 1996 Plan, all options granted thereunder are
immediately exercisable, however shares issued upon exercise are subject to
repurchase by the Company, at the exercise price, to the extent of the
number of shares that have not vested in the event that the optionee's
employment terminates prior to all such optionee's option shares becoming
vested. The amounts under the headings entitled "Exercisable" reflect vested
options as of July 31, 1997 and the amounts under the headings entitled
"Unexercisable" reflect option shares that have not vested as of July 31,
1997.

12
<PAGE> 15

TEN YEAR OPTION/SAR REPRICING

The following table sets forth information with respect to the Company's
Chief Executive Officer and the Named Executive Officers and all former
executive officers concerning the repricing of options under the Company's stock
option plans whereby all employees and directors with options under the
Company's stock option plans were permitted an opportunity to exchange their
options outstanding under the Company's stock option plans for new options
having an exercise price of $6.125, the fair market value of the Common Stock on
May 27, 1997. For a discussion of the repricing of options under the Company's
stock option plans see "Board of Directors and Committees -- Report from
Compensation Committee Regarding Executive Compensation."

TEN YEAR OPTION/SAR REPRICING

<TABLE>
<CAPTION>
NUMBERS OF MARKET PRICE
SECURITIES OF STOCK AT EXERCISE PRICE LENGTH OF
UNDERLYING TIME OF AT TIME OF ORIGINAL TERM
OPTIONS/SARS REPRICING OR REPRICING OR NEW REMAINING AT
REPRICED OR AMENDMENT AMENDMENT EXERCISE DATE OF REPRICING
NAME DATE AMENDED(#) ($) ($) PRICE($) OR AMENDMENT
---- ------- ------------ ------------ -------------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
F.H. (Dick) Moeller...... 5/27/97 25,000 6.125 11.00 6.125 7 years 263 days
5/27/97 100,000 6.125 9.00 6.125 9 years 44 days
Rodney S. Bond........... 5/27/97 10,000 6.125 11.000 6.125 7 years 263 days
5/27/97 15,000 6.125 12.250 6.125 8 years 361 days
Michael O'Dell........... 5/27/97 15,000 6.125 12.250 6.125 8 years 361 days
Frank S. Kaplan.......... 5/27/97 15,000 6.125 9.938 6.125 9 years 207 days
5/27/97 25,000 6.125 24.125 6.125 8 years 111 days
5/27/97 6,250 6.125 12.250 6.125 8 years 361 days
William T. Clayton....... 5/5/93 5,000 4.000 6.750 4.000 8 years 241 days
Glenn A. Pierce.......... 5/5/93 236,250(1) 4.000 9.000 4.000 8 years 299 days
Clayton A. Reed.......... 5/5/93 75,000 4.000 8.250 4.000 9 years 149 days
Bob R. Swem.............. 5/5/93 20,000 4.000 8.250 4.000 9 years 148 days
</TABLE>

- ---------------------

(1) Includes 33,750 options that were canceled on December 31, 1993 due to
certain 1993 revenue and earnings per share goals not being met.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee is or has been an officer or
employee of the Company or any of its subsidiaries or had any relationship
requiring disclosure pursuant to Item 404 of SEC Regulation S-K. No member of
the Compensation Committee served on the compensation committee, or as a
director, of another corporation, one of whose directors or executive officers
served on the Compensation Committee of or whose executive officers served on
the Company's Board of Directors.

PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES UNDER THE
VTEL CORPORATION EMPLOYEE STOCK PURCHASE PLAN
(ITEM 2)

The Board of Directors has amended the VTEL Corporation Employee Stock
Purchase Plan (the "ESPP") in order to increase the number of shares of Common
Stock available for issuance thereunder from 450,000 to 950,000. The Board of
Directors increased the number of available shares under the ESPP because as of
October 1, 1997, only 65,227 shares of Common Stock remained available for
purchase by the Company's employees. By increasing the number of shares
available under the ESPP, the Board of Directors believes that the ESPP will
continue to be a useful stock-related benefit program for attracting and
retaining employees and providing additional incentive for all employees to
promote the success of the Company, thereby continuing the purpose of the ESPP.

13
<PAGE> 16

The Company intends to register the 500,000 additional shares of Common
Stock issuable under the ESPP under the Securities Act, assuming the
shareholders approve the proposal to increase the number of available shares.
Shares purchased pursuant to the ESPP after the effective date of such
registration could immediately be sold in the open market subject, in the case
of affiliates (as defined in Rule 144 under the 1933 Act), to compliance with
the provisions of Rule 144 other than the holding period requirement.

The proposed amendment requires the approval of the shareholders of the
Company pursuant to the terms of the ESPP. Assuming the presence of a quorum,
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present and voting at the Annual Meeting in person or by proxy is
necessary to approve the above described amendment to the ESPP. Proxies will be
voted for or against such approval in accordance with the specifications marked
thereon and, if no specifications are made, will be voted in favor of such
approval.

DESCRIPTION OF VTEL CORPORATION EMPLOYEE STOCK PURCHASE PLAN

General

The VTEL Corporation Employee Stock Purchase Plan was adopted, subject to
stockholder approval, by the Company's Board of Directors on April 29, 1993. The
ESPP authorizes as of October 1, 1997 the issuance of up to 450,000 shares of
Common Stock.

The purpose of the ESPP is to assist eligible employees of the Company and
its subsidiaries in acquiring a stock ownership interest in the Company through
regular payroll deductions and cash contributions and thereby encourage them to
remain in the employ of the Company or its subsidiaries. The ESPP allows
participants to purchase shares of Common Stock at a price equal to the lesser
of: (a) 85% of the fair market value of the Common Stock on the date of grant of
the option or (b) 85% of the fair market value of the Common Stock at the time
of exercise. See "-- Exercise Price" below.

The ESPP is not subject to the qualification requirements of Section 401 of
the Code, nor is the ESPP subject to any provisions of ERISA.

No maximum period of duration has been established for the ESPP. The Board
of Directors of the Company, however, has the power to suspend or terminate the
ESPP at any time, provided such suspension or termination does not affect
outstanding options granted under the ESPP.

Eligibility and Participation

Any individual who is customarily employed by the Company or its
subsidiaries for more than 20 hours per week and more than five months in a
12-month period is eligible to participate in the ESPP for one or more offering
periods, provided that such individual is an employee on the first day of such
offering period or periods. In no event may options be granted under the ESPP to
an employee who immediately after the granting of the option would own capital
stock of the Company (including capital stock of the Company which the
individual may purchase under outstanding options) possessing more than 5% of
the total combined voting power or value of all classes of stock of the Company
or any of its affiliates. In addition, no option may be granted which would
permit an employee's rights to purchase stock under the ESPP and all other
employee stock purchase plans of the Company and its affiliates to accrue at a
rate which exceeds $25,000 of the fair market value of such stock (determined at
the time such option is granted) for each calendar year or portion thereof in
which such stock option is outstanding.

An eligible employee may become a participant by completing and returning
to the Company a written stock purchase agreement indicating the employee's
desire to participate in the ESPP and the amount in cash and/or payroll
deductions which the employee wishes to contribute under the ESPP in each
offering period. Such agreement shall become effective on the first day of such
offering period and shall remain effective for subsequent offering periods
unless the employee's participation in the ESPP has terminated.

14
<PAGE> 17

A participant may increase or decrease the rate of contribution to the ESPP
by amending his or her authorization for payroll deductions or cash
contributions. An amended authorization must be filed at least two weeks prior
to the commencement date of the offering period for which it is to become
effective.

Administration

The ESPP is administered by the Compensation Committee of the Board of
Directors of the Company. The Compensation Committee has full authority to
administer the ESPP, including authority to interpret and construe any provision
of the ESPP and to adopt such rules and regulations for administering the ESPP
as it may deem advisable. Decisions of the Compensation Committee are binding on
all participants.

All expenses of establishing and administering the ESPP are paid by the
Company without charge to participants.

Shares and Amounts Subject to Plan

The maximum number of shares of Common Stock of the Company which may be
issued under the ESPP cannot exceed 450,000 shares, subject to adjustment in
certain circumstances.

To prevent dilution or enlargement of the rights of participants under the
ESPP, adjustments in the number of shares subject to the ESPP, the number of
shares subject to outstanding options, the maximum number of shares for which
options may be granted to any one employee, and option exercise prices are to be
made in the event of merger, consolidation, reorganization, recapitalization,
stock split, stock dividend in excess of 2% or other change in the corporate
structure of the Company. Upon dissolution or liquidation of the Company, other
than in connection with a reorganization, merger or consolidation in which the
surviving corporation prior to or concurrent with its succession to the business
of the Company assumes and continues the restated ESPP by substituting its
common stock for the Company's Common Stock underlying the options granted
thereunder, all options granted under the ESPP shall terminate; provided,
however, that each optionee shall have the right to exercise his or her
outstanding options at any time prior to or concurrently with the consummation
of such merger, consolidation or reorganization to the full extent not
theretofore exercised.

If the number of shares for which options are to be exercised on any date
exceeds the number of shares then remaining available under the ESPP, the
Compensation Committee will make a pro rata allocation of the remaining
available shares in a manner as nearly uniform as shall be practicable.
Participant contributions not applied to the purchase of Common Stock will be
returned without interest.

No person shall have any rights as a stockholder with respect to any shares
of Common Stock covered by an option prior to the date of issuance of a stock
certificate for such shares. No adjustments will be made for dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.

Terms of Options -- Method of Payment

The maximum number of shares for which options may be granted to any
participant during any single offering period shall not exceed 1,200 shares. The
Compensation Committee has the power, exercisable at any time prior to the
commencement of an offering period, to increase or decrease the maximum number
of shares for which an option may be granted to each participant for that
offering period. There is no minimum number of shares for which options may be
granted to an employee.

Each participant may contribute up to 15% of base pay, at the rate of
contribution elected prior to the commencement date of an offering, through (i)
regular payroll deductions in multiples of $5, or (ii) lump sum cash payments
made not later than two weeks before the last day of an offering period. The
amount of each participant's contribution is held by the Company in a special
account, but the Company has no obligation to pay interest on account balances.

Base pay is defined in the ESPP as regular straight-time earnings for an
offering period plus sales commissions, bonuses and other incentive payments for
the three-month period immediately preceding such offering period.

15
<PAGE> 18

Offering Periods

The initial offering period under the ESPP had a duration of three months
and commenced on July 1, 1993 and ended on September 30, 1993. Subsequent
offering periods are for successive three-month periods commencing on October 1,
January 1, April 1, and July 1 and ending on the December 31, March 31, June 30
and September 30, respectively. Except as hereafter provided, a participant's
option is automatically exercised on the last day of the offering period by
applying the funds then in the participant's account to the purchase of the
Company's Common Stock. If any money remains in the participant's account which
is less than the price of one share of the Company's Common Stock, then the
money is held for purchase of shares in the next offering period. Money
remaining in the participant's account by reason of the limitation on the
maximum number of shares purchasable in a single offering period is refunded
without interest promptly after the close of the offering period. If a
participant does not desire to have an option exercised, the participant must so
notify the Company in writing at least two weeks prior to the last day of the
offering period. As soon as reasonably practicable after receipt of such notice,
the Company may deliver to such participant a cash payment equal to the total of
the contributions credited to his or her account during such offering period. No
interest shall be paid on such contributions. The non-exercise of an option
shall not affect the participant's ability to participate in the ESPP for
subsequent offering periods, and the participant's stock purchase agreement
shall remain in force.

Exercise Price

The purchase price of the Common Stock covered by each option is equal to
the lesser of: (a) 85% of the fair market value of the Common Stock on the date
of grant of the option (the first day of the offering period) or (b) 85% of the
fair market value of the Common Stock at the time of exercise (the last day of
the offering period). The fair market value is deemed to be equal to the mean of
the high and low reported sales prices of the Common Stock on the NASDAQ
National Market System (or such other quotation system or stock exchange) on
which the Company's Common Stock is traded on the date such value is to be
determined.

Withdrawal -- Termination of Employment -- Death

An employee's participation in the ESPP will be terminated when the
participant voluntarily withdraws from the ESPP upon written notification to the
Compensation Committee, when the participant's employment terminates or upon the
death of the participant. Within 30 days after an employee's participation in
the ESPP is terminated, all funds in the employee's account will be returned
without interest. A voluntary withdrawal from the ESPP will not affect a
participant's ability to participate in the ESPP for any subsequent offering
period provided the participant files a new stock purchase agreement and payroll
deduction authorization with the Compensation Committee at least two weeks prior
to the commencement of such offering period.

Each participant may designate a beneficiary or beneficiaries of the
participant's interest in the ESPP. Upon the participant's death, any balance in
the participant's account will be distributed to such beneficiary or
beneficiaries, or in the absence of such designation, to the executor or
administrator of the participant's estate.

Transferability -- Delivery

Options granted pursuant to the ESPP may not be transferred by a
participant and are exercisable only during the participant's lifetime. After
the exercise of options at the end of each offering period, the Company will, as
expeditiously as possible, deliver to each participant certificates evidencing
the shares of stock purchased through such exercise. The Company may, however,
postpone delivery of shares for such period as may be required for it to comply
with applicable requirements of law or quotation system or stock exchange on
which the Company's Common Stock is traded.

Termination or Amendment

The Company's Board of Directors may at any time, with respect to any
shares not at the time subject to outstanding options, suspend or terminate the
ESPP. The Board may also amend the ESPP from time to time as it deems advisable,
but no amendment shall, without prior stockholder approval, (i) increase the
maximum

16
<PAGE> 19

number of shares subject to the ESPP or the maximum number of shares for which
options may be granted to any one employee (other than adjustments to prevent
dilution or enlargement of participant rights in the event of fundamental
changes to the Company), (ii) materially increase the benefits accruing to
participants, (iii) materially modify the eligibility requirements for ESPP
participation, or (iv) modify the terms of any option granted under the ESPP so
as to render such options unqualified for special tax treatment under Section
423 of the Internal Revenue Code of 1986, as amended (the "Code").

Certain Federal Tax Income Consequences

The following discussion of the federal income tax consequences of
participation in the ESPP for typical optionee is only a summary, does not
purport to be complete and does not cover, among other things, state and local
tax treatment of participation in the ESPP. Furthermore, differences in
individual optionees' financial situations may cause federal, state and local
income tax consequences of participation in the ESPP to vary.

The ESPP is intended to be an "employee stock purchase plan" within the
meaning of Section 423 of the Code. Under a plan that so qualifies, no taxable
income will be reportable by a participant by reason of the grant of the option
or its exercise. A participant will recognize taxable income in the year of
disposition of the stock acquired under the ESPP or in the year of death if the
participant dies while still owning the stock. Generally, a disposition for this
purpose includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer into joint ownership if the
participant remains one of the joint owners, a pledge or a transfer by bequest
or inheritance.

If the participant disposes of stock within two years from the date the
underlying option was granted, the participant will realize ordinary income in
the year of disposition equal to the amount by which the fair market value of
the stock on the date the option was exercised exceeded the exercise price. In
such instances, the amount of the ordinary income will be added to the
participant's basis in the stock, and any additional gain or any loss recognized
on the disposition will be a capital gain or loss. The gain or loss will be
long-term if the stock has been held for more than eighteen months.

If the participant disposes of stock more than two years after the date the
underlying option was granted, the participant will realize ordinary income in
the year of disposition equal to the lesser of (i) the excess of the fair market
value of the stock at the time of disposition over the exercise price for such
stock, or (ii) the excess of the fair market value of the stock at the time the
option was granted over the exercise price for such stock. The amount of any
ordinary income will be added to the participant's basis in the stock, and any
gain recognized upon the disposition will be a long-term capital gain. If the
fair market value of the stock on the date of disposition is less than the
exercise price, there will be no ordinary income and any loss recognized will be
a long-term capital loss.

If the participant still owns the stock at the time of death, the lesser of
(i) the excess of the fair market value of the stock at the time of death over
the exercise price for such stock, or (ii) the excess of the fair market value
of the stock at the time the option was granted over the exercise price for such
stock will constitute ordinary income in the year of death.

If a share is disposed of within two years after the date the underlying
option was granted, then the employer corporation will be entitled to a
deduction in the year of disposition equal to the amount of ordinary income
realized by the participant as a result of the disposition. In all other cases,
no deduction is allowed.

Required Vote and Recommendation

The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Annual Meeting is needed to approve this
proposal. Under Delaware law, an abstention would have the same legal effect as
a vote against this proposal, but a broker non-vote would not be counted for
purposes of determining whether a majority had been achieved. The shares
represented by proxies solicited by the Board of Directors will be voted as
directed on the form of proxy or, if no direction is indicated, will be voted
"FOR" the approval of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.

17
<PAGE> 20

PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES UNDER THE
VTEL CORPORATION 1992 DIRECTOR STOCK OPTION PLAN
(ITEM 3)

GENERAL

In order to attract and retain nonemployee Directors for the Company,
effective October 20, 1992, the Board of Directors adopted, subject to
stockholder approval, the Company's 1992 Director Stock Option Plan (the
"Director Plan"), pursuant to which an aggregate of 100,000 shares of Common
Stock may be issued upon the exercise of options granted under the Director
Plan.

In general, the Director Plan provides for the automatic grant of an option
to purchase 12,000 shares of Common Stock, having an exercise price of the fair
market value of the Common Stock at the date of grant, to each nonemployee
Director upon initial election or appointment, such options vesting over a
three-year period, and further provides that each nonemployee Director shall
receive additional options to purchase 6,000 shares of the Company's Common
Stock, such options vesting over a three-year period, at the time that such
eligible Director's prior options granted under the Director Plan become fully
exercisable and vested.

The Board of Directors has authorized an amendment to the Director Plan,
subject to stockholder approval, to increase the number of shares of the
Company's Common Stock available for issuance under the Director Plan from
100,000 to 150,000 shares. This amendment is necessary in order to cover future
grants of options under the Director Plan, because as of the date hereof, only
14,501 shares remain available for grant under the Director Plan. Furthermore,
as a result of the Merger, two additional members were added to the Board of
Directors, thereby resulting in a need for additional shares under the Director
Plan. The amendment, if approved, will enable the Company to continue the
purposes of the Director Plan, by providing additional incentives to attract and
retain qualified nonemployee directors.

If approved by the stockholders of the Company at the Annual Meeting, the
following amendment shall be made to the Director Plan:

Section 4(a) will be amended in its entirety to provide as follows:

The maximum number of shares which may be issued under the Plan shall be
150,000 shares of Common Stock, subject to adjustment as provided in Section 9
of the Plan.

The following table sets forth information with respect to options received
by or allocated to each indicated individual or group listed therein pursuant to
the Director Plan in fiscal 1997.

<TABLE>
<CAPTION>
NUMBER
NAME AND POSITION OF OPTIONS
----------------- ----------
<S> <C>
F.H. (Dick) Moeller......................................... -0-
Chairman and Chief Executive Officer
Michael O'Dell.............................................. -0-
Senior Vice President -- Product Development
Rodney S. Bond.............................................. -0-
Chief Financial Officer, Vice President --
Finance, Treasurer and Secretary
Michael P. Cronin........................................... -0-
Vice President -- North American Sales
Frank Kaplan................................................ -0-
Vice President -- International Sales and Marketing
All current executive officers as a group................... -0-
All nonemployee Directors as a group........................ 24,000
All employees including all current officers, who are
not executive officers, as a group........................ -0-
</TABLE>

18
<PAGE> 21

DESCRIPTION OF THE COMPANY'S 1992 DIRECTOR STOCK OPTION PLAN

Under the provisions of the Director Plan, Non-Qualified Stock Options may
be granted to the nonemployee Directors of the Company. Pursuant to the Director
Plan, upon the initial election or appointment of a person who is not an
employee of the Company as Director of the Company, such person will be granted
an option to purchase 12,000 shares of Common Stock at the fair market value of
Common Stock on the date of grant. At the time the initial grant and each
subsequent grant are fully vested (i.e., after 36 months), each nonemployee
director is entitled to an additional grant of options covering 6,000 shares,
such options to become exercisable over a 36-month period and having an exercise
price equal to the fair market value on the date of grant.

Pursuant to the terms of the Director Plan, each option becomes exercisable
on a cumulative basis as to one-thirty-sixth of the shares subject to such
option on each monthly anniversary of the date of grant of such option. In the
event an optionee ceases to serve as a Director, options granted under the
Director Plan may be exercised by the optionee (or, in the event of his death,
by his administrator, executor or heirs) at any time within 12 months after the
optionee ceases to serve as a Director, to the extent such option was
exercisable at the time of such cessation of service. Each option shall expire
after the expiration of 10 years from the date of the grant. An option granted
under the current Director Plan is not transferable by the optionee except by
will or by the laws of descent and distribution.

The Director Plan is administered by the Board of Directors, which under
the provisions of the Director Plan has the authority to (i) issue options
granted in accordance with the formula set forth in the Director Plan to
eligible Directors and (ii) prescribe the form or forms of instruments
evidencing awards.

The Director Plan is not required to be qualified under Section 401(a) of
the Code, nor is it subject to the provisions of ERISA.

As of October 27, 1997, options to purchase a total of 68,667 shares of
Common Stock were outstanding under the Director Plan. A total of 16,832 shares
have been issued under the Director Plan.

THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.

19
<PAGE> 22

COMPARATIVE TOTAL RETURNS

PERFORMANCE GRAPH

The following Performance Graph shows the changes over the past five year
period in the value of $100 invested in: (1) the Company's Common Stock, (2) the
CRSP Total Return Index for NASDAQ Stock Market (U.S. Companies) (the "NASDAQ
Composite Index"), (3) the Common Stock of the Peer Group (as defined below) of
companies whose returns are weighted according to their respective market
capitalization. The values with each investment as of the beginning of each year
are based on share price appreciation and the reinvestment with dividends on the
respective ex-dividend dates. The Peer Group for periods preceding the Company's
fiscal year ended July 31, 1997 consists of the following companies whose
business, taken as a whole, resembles the Company's activities: PictureTel
Corporation and CLI. Effective May 23, 1997, CLI merged with a wholly-owned
subsidiary of the Company. The Peer Group for the period ended July 31, 1997
consists solely of the following company whose business, taken as a whole,
resembles the Company's activities: PictureTel Corporation.

[GRAPH]

This graph above assumes $100 invested on April 6, 1992 in the Common Stock of
the Company, the NASDAQ Composite Index and the Peer Group, and was plotted
using the following data:

<TABLE>
<CAPTION>
APRIL 6, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JULY 31, JULY 31,
1992 1992 1993 1994 1995 1996 1997
-------- ------------ ------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NASDAQ............... $100.00 $114.00 $130.00 $127.00 $180.00 $186.00 $274.00
VTEL................. $100.00 $ 89.00 $ 58.00 $ 74.00 $164.00 $ 61.00 $ 51.00
Peer Group........... $100.00 $ 62.00 $ 50.00 $ 53.00 $181.00 $177.00 $ 47.00
</TABLE>

RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 4)

Pursuant to the recommendation of the Audit Committee, the Board of
Directors has appointed Price Waterhouse, LLP, independent accountants, to audit
the consolidated financial statements of the Company for the year ending July
31, 1998. The Company is advised that no member of Price Waterhouse LLP has any
direct financial interest or material indirect financial interest in the Company
or any of its subsidiaries or, during the past three years, has had any
connection with the Company or any of its subsidiaries in the capacity of
promoter, underwriter, voting trustee, director, officer or employee.

20
<PAGE> 23

Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting.

A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting of Stockholders, will have the opportunity to make a statement if
such representative desires to do so and will be available to respond to
appropriate questions.

While stockholder ratification is not required for the selection of Price
Waterhouse LLP since the Board of Directors has the responsibility for the
selection of the Company's independent auditors, the selection is being
submitted for ratification at the Annual Meeting with a view toward soliciting
the stockholder's opinion thereon, which opinion will be taken into
consideration in future deliberations.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION BY THE
STOCKHOLDERS OF THIS APPOINTMENT.

STOCKHOLDER PROPOSALS

Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock of the Company intended to be presented to the Annual Meeting of
Stockholders of the Company to be held in 1998 must be received by the Company,
addressed to Rodney S. Bond, Secretary, 108 Wild Basin Road, Austin, Texas
78746, no later than July 14, 1998 to be included in the Company's proxy
statement and form of proxy relating to that meeting.

With respect to business to be brought before the Annual Meeting, the
Company has not received any notices from stockholders that the Company is
required to include in this Proxy Statement.

GENERAL

As of the date of this proxy statement, the management of the Company has
no knowledge of any business to be presented for consideration at the meeting
other than that described above. If any other business should properly come
before the meeting, it is intended that the shares represented by proxies will
be voted with respect thereto in accordance with the judgment of the persons
named in such proxies.

The cost of any solicitation of proxies by mail will be borne by the
Company. Arrangements may be made with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of material to and solicitation of
proxies from the beneficial owners of Common Stock held of record by such
persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out of pocket expenses incurred by them
in connection therewith. In addition to the proxy solicitation material mailed
to stockholders, the Company has also retained the services of McCormick & Pryor
Ltd. New York, New York, to assist in the solicitation of proxies for a fee
estimated at $3,500 plus out-of-pocket expenses. Brokerage houses and other
custodians, nominees and fiduciaries will, in connection with shares of Common
Stock registered in their names, be requested to forward solicitation material
to the beneficial owners of such shares and to secure their voting instructions.
The cost of such solicitation will be borne by the Company.

The information contained in this Proxy Statement in the sections entitled
"Election of Directors -- Report From the Compensation Committee Regarding
Executive Compensation" and "Comparative Total Returns" shall not be deemed
incorporated by reference by any general statement incorporating by reference
any information contained in this Proxy Statement into any filing under the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
except to the extent that the Company specifically incorporates by reference the
information contained in such sections, and shall not otherwise be deemed filed
under the Securities Act or the Exchange Act.

By Order of the Board of Directors,

RODNEY S. BOND
Secretary

Austin, Texas

21
<PAGE> 24
VTEL CORPORATION ANNUAL MEETING CONTINUED FROM OTHER SIDE
DECEMBER 18, 1997

THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDERS(S). IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES UNDER PROPOSAL 1 AND
FOR PROPOSAL 2, PROPOSAL 3 AND PROPOSAL 4.

1. Proposal to elect as directors of the Company the following persons to
hold office for the terms specified in the Company's 1997 Annual Proxy
or until their successors have been duly elected and have qualified.

[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed below
below)

F. H. (Dick) Moeller Max D. Hopper Eric L. Jones
Jerry S. Benson, Jr. Richard Snyder Gordon H. Matthews

T. Gary Trimm
Dr. Arthur G. Anderson

(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)

-------------------------------------------------------------------------

FOR AGAINST ABSTAIN
--- ------- -------

2. Proposal to increase the number of [ ] [ ] [ ]
authorized shares under the VTEL
Corporation Employee Stock Purchase
Plan.

3. Proposal to increase the number of [ ] [ ] [ ]
authorized shares under the VTEL
Corporation 1992 Director Stock
Option Plan.

4. The ratification of the appointment by [ ] [ ] [ ]
the Board of Directors of Price
Waterhouse LLP as independent public
accountants for the Company for the
fiscal year ending July 31, 1998.

5. In their discretion, the proxies are [ ] [ ] [ ]
authorized to vote upon such other
business as may properly come before
the meeting or any adjournment(s)
thereof.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

- ------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
- ------------------------------------------------------------------------------
<PAGE> 25
VTEL CORPORATION ANNUAL MEETING PROXY NO. SHARES
DECEMBER 18, 1997 IN YOUR NAME

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints F.H.(Dick) Moeller and Rodney S. Bond, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and vote, as designated on the reverse side
hereof, all of the shares of the Common Stock of VTEL CORPORATION (the
"Company") held of record by the undersigned at the close of business on
October 30, 1997, at the Annual Meeting of Shareholders to be held on
December 18, 1997, and any adjournment(s) thereof.

Dated ,1997
-----------------------------------

---------------------------------------------
Signature

---------------------------------------------
Signature, if Held Jointly

Please execute this Proxy as your name
appears hereon. When shares are held by
joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
If a corporation, please sign in full
corporate name by the president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.

Please mark, sign, date and return this Proxy promptly using the enclosed
envelope.