AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
VTEL CORPORATION,
VTEL-SUB, INC.
AND
COMPRESSION LABS, INCORPORATED
DATED AS OF JANUARY 6, 1997
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TABLE OF CONTENTS
Page
ARTICLE I -- THE MERGER.......................................................2
Section 1.01. The Merger..........................................2
Section 1.02. The Closing.........................................2
Section 1.03. Effective Time......................................2
Section 1.04. Effect of the Merger................................2
Section 1.05. Certificate of Incorporation........................2
Section 1.06. Bylaws..............................................2
Section 1.07. Directors and Officers..............................2
Section 1.08. Tax Consequences....................................3
Section 1.09. Accounting Treatment................................3
ARTICLE II -- CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...............3
Section 2.01. Merger Consideration: Conversion and
Cancellation of Securities.......................3
Section 2.02. Exchange Agency; Surrender of Certificates..........4
Section 2.03. Stock Transfer Books................................7
Section 2.04. Dissenters' Rights..................................7
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................8
Section 3.01. Organization and Qualification: Subsidiaries........8
Section 3.02. Certificate of Incorporation and Bylaws.............9
Section 3.03. Capitalization......................................9
Section 3.04. Authority..........................................11
Section 3.05. No Conflict: Required Filings and Consents.........11
Section 3.06. Permits: Compliance................................12
Section 3.07. Reports; Financial Statements;
Undisclosed Liabilities.........................13
Section 3.08. Absence of Certain Changes or Events...............14
Section 3.09. Absence of Litigation..............................14
Section 3.10. Employee Benefit Plans; Labor Matters..............15
Section 3.11. Taxes..............................................16
Section 3.12. Affiliates. ......................................17
Section 3.13. Properties. ......................................18
Section 3.14. Intellectual Rights................................18
Section 3.15. Real Property. ....................................19
Section 3.16. Insider Interests; Transactions with Management....19
Section 3.17. Contracts and Agreements...........................20
Section 3.18. Vote Required......................................20
Section 3.19. Brokers............................................20
Section 3.20. Opinion of Financial Advisor.......................20
Section 3.21. Board Recommendations. ...........................20
Section 3.22. Distributors, Customers, or Suppliers..............21
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Section 3.23. Pooling of Interests...............................21
Section 3.24. Rights Plan........................................21
Section 3.25. Disclosure.........................................21
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE VTEL COMPANIES............21
Section 4.01. Organization and Qualification; Subsidiaries.......21
Section 4.02. Certificate of Incorporation and Bylaws............22
Section 4.03. Capitalization.....................................22
Section 4.04. Authority..........................................24
Section 4.05. No Conflict: Required Filings and Consents.........24
Section 4.06. Permits; Compliance................................25
Section 4.07. Reports: Financial Statements......................25
Section 4.08. Absence of Certain Changes or Events...............26
Section 4.09. Absence of Litigation..............................27
Section 4.10. Intellectual Rights................................27
Section 4.11. Transactions with Management.......................28
Section 4.12. Vote Required......................................28
Section 4.13. Brokers............................................28
Section 4.14. Opinion of Financial Advisor.......................29
Section 4.15. Board Recommendations..............................29
Section 4.16. Distributors, Customers, or Suppliers..............29
Section 4.17. Pooling of Interests...............................29
Section 4.18. Disclosure.........................................29
ARTICLE V -- COVENANTS........................................................29
Section 5.01. Affirmative Covenants of the Company...............29
Section 5.02. Affirmative Covenants of VTEL......................30
Section 5.03. Negative Covenants of the Company. ...............31
Section 5.04. Negative Covenants of VTEL.........................35
Section 5.05. Access and Information.............................36
ARTICLE VI -- ADDITIONAL AGREEMENTS...........................................37
Section 6.01. Presentation to Stockholders.......................37
Section 6.02. Registration Statement; Proxy Statement/Prospectus.38
Section 6.03. Appropriate Action: Consents; Filings..............39
Section 6.04. Affiliates; Tax Treatment..........................40
Section 6.05. Public Announcements...............................41
Section 6.06. NASDAQ Listing.....................................41
Section 6.07. State Takeover Statutes............................41
Section 6.08. Charter Amendment..................................42
Section 6.09. Board Seats........................................42
Section 6.10. Options............................................42
Section 6.11. Series C Preferred Stock Warrants. ................43
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Section 6.12. Termination of Convertible Preferred
Stock Purchase Agreement........................43
Section 6.13. Merger Sub.........................................43
Section 6.14. Indemnification....................................43
Section 6.15. Employment Contracts...............................45
Section 6.16. Comfort Letters....................................46
Section 6.17. Sales Under Rule 145 if Applicable.................46
ARTICLE VII -- CLOSING CONDITIONS.............................................47
Section 7.01. Conditions to Obligations of Each Party
Under This Agreement............................47
Section 7.02. Additional Conditions to Obligations
of the VTEL Companies...........................48
Section 7.03. Additional Conditions to Obligations
of the Company..................................49
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER.............................50
Section 8.01. Termination........................................50
Section 8.02. Effect of Termination. ...........................52
Section 8.03. Amendment..........................................53
Section 8.04. Waiver. ..........................................53
Section 8.05. Fees, Expenses and Other Payments..................53
ARTICLE IX -- GENERAL PROVISIONS..............................................54
Section 9.01. Effectiveness of Representations,
Warranties and Agreements.......................54
Section 9.02. Notices............................................55
Section 9.03. Certain Definitions................................56
Section 9.04. Headings...........................................57
Section 9.05. Severability.......................................57
Section 9.06. Entire Agreement...................................57
Section 9.07. Assignment.........................................57
Section 9.08. Parties in Interest................................57
Section 9.09. Failure or Indulgence Not Waiver;
Remedies Cumulative.............................58
Section 9.10. Governing Law......................................58
Section 9.11. Counterparts.......................................58
Section 9.12. Specific Performance...............................58
EXHIBIT A - Stock Option Agreement
EXHIBIT B - Company Affiliate Letter
EXHIBIT C - Acquiror Affiliate Letter
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
January 6, 1997 (this "Agreement"), is by and among VTEL CORPORATION, a Delaware
corporation ("VTEL"), VTEL-SUB, INC., a Delaware corporation and direct wholly
owned subsidiary of VTEL ("Merger Sub"), and COMPRESSION LABS, INCORPORATED, a
Delaware corporation (the "Company"). VTEL and Merger Sub are sometimes
collectively referred to herein as the "VTEL Companies."
WHEREAS, Merger Sub, upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware ("DGCL"), will merge with and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is advisable and is fair to, and in the best interests of, the Company
and its stockholders, has approved and adopted this Agreement and the
transactions contemplated hereby, and has recommended approval and adoption of
this Agreement by the stockholders of the Company;
WHEREAS, the Board of Directors of VTEL has determined that the Merger
is advisable and is fair to, and in the best interests of, VTEL and its
stockholders, has approved and adopted this Agreement and the transactions
contemplated hereby, and its sole stockholder, VTEL, has approved the Merger by
unanimous written consent;
WHEREAS, the Board of Directors of Merger Sub has approved and adopted
this Agreement and the transactions contemplated hereby, and has recommended
approval and adoption of this Agreement by its stockholder;
WHEREAS, it is the intent of the respective Boards of Directors of the
Company and VTEL that the Merger be structured as a strategic combination
involving a "merger of equals" of the Company and VTEL and that the Surviving
Corporation (as defined herein) be governed and operated on that basis;
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the parties intend to cause the Merger to be accounted for as
a pooling of interests pursuant to APB Opinion No. 16, Staff Accounting Series
Release 130, 135 and 146 and Staff Accounting Bulletins Topic Two;
WHEREAS, in furtherance of, and as a requirement of the VTEL Companies
to enter into this Agreement providing for, the Merger, the Company and VTEL
have entered into a Stock
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Option Agreement, dated of even date herewith, in the form attached as Exhibit A
(the "Stock Option Agreement"); and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, at the Effective
Time (as defined in Section 1.03 of this Agreement), Merger Sub shall be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation"). The name of
the Surviving Corporation shall continue after the Effective Time to be
"Compression Labs, Incorporated."
Section 1.02. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
offices of Jenkens & Gilchrist, a Professional Corporation, 1445 Ross Avenue,
Suite 3200, Dallas, Texas 75202-2799, at 9:00 am., local time, on the second
business day immediately following the day on which the last to be fulfilled or
waived of the conditions set forth in Article VII shall be fulfilled or waived
in accordance herewith (other than conditions with respect to actions the
respective parties hereto will take at the Closing), or (b) at such other time,
date or place as VTEL and the Company may agree. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date."
Section 1.03. Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing a Certificate of Merger with the Secretary of State of the
State of Delaware, in such form as is required by, and executed in accordance
with the relevant provisions of, the DGCL (the date and time of the completion
of such filing being the "Effective Time").
Section 1.04. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in Section 259 of the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of Merger Sub and the
Company shall vest in the Surviving Corporation, and all debts, obligations,
liabilities and duties of each of Merger Sub and the Company shall become the
debts, obligations, liabilities and duties of the Surviving Corporation.
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Section 1.05. Certificate of Incorporation. At the Effective Time,
the Certificate of Incorporation of the Company shall be the Certificate of
Incorporation of Merger Sub as in effect immediately prior to the Effective
Time.
Section 1.06. Bylaws. At the Effective Time and without further
action on the part of the Company or VTEL, the Bylaws of the Surviving
Corporation shall be the Bylaws of Merger Sub in effect as of the Effective
Time.
Section 1.07. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
Section 1.08. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code,
and that this Agreement shall constitute a "plan of reorganization" for the
purposes of Section 368 of the Code.
Section 1.09. Accounting Treatment. It is intended that the Merger
shall be treated as a pooling-of-interests for accounting purposes by VTEL and
the Company.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Merger Consideration: Conversion and Cancellation of
Securities. At the Effective Time, by virtue of the Merger and without any
action on the part of the VTEL Companies, the Company or the holders of any of
the Company's securities:
(a) Subject to the other provisions of this Article II, each
share of common stock, par value $.001 per share, of the Company
("Company Common Stock") issued and outstanding immediately prior to
the Effective Time (excluding any Company Common Stock described in
Section 2.01(e) of this Agreement) shall be converted into the right to
receive .46 of one fully paid and nonassessable share of common stock,
par value $.0l per share, of VTEL ("VTEL Common Stock") (the "Common
Stock Conversion Ratio").
(b) Subject to the other provisions of this Article II, each
share of Series C Preferred Stock, par value $.001 per share, of the
Company ("Series C Preferred Stock") issued and outstanding immediately
prior to the Effective Time (excluding any Series C Preferred Stock
described in Section 2.01(e) of this Agreement and any Dissenting
Shares, as herein defined) shall be converted into the right to receive
3.15 fully paid and
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nonassessable share of VTEL Common Stock (the "Series C Preferred Stock
Conversion Ratio").
(c) Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of VTEL Common
Stock or Company Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Common Stock Conversion Ratio and the Series C
Preferred Stock Conversion Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(d) As a result of their conversion pursuant to Section
2.01(a) and Section 2.01(b), all shares of Company Common Stock and
Series C Preferred Stock shall cease to be outstanding and shall
automatically be canceled and retired. Each certificate previously
evidencing Company Common Stock outstanding immediately prior to the
Effective Time (other than Company Common Stock described in Section
2.01(e) of this Agreement) ("Converted Common Shares") shall thereafter
represent, subject to Section 2.02(d) of this Agreement, the right to
receive that number of shares of VTEL Common Stock into which the
shares of Company Common Stock represented by such certificate have
been converted pursuant to subsection (a) of this Section 2.01
determined pursuant to the Common Stock Conversion Ratio and, if
applicable, the right to receive cash pursuant to Section 2.02(d) of
this Agreement ("Common Stock Merger Consideration"). Each certificate
previously evidencing Series C Preferred Stock outstanding immediately
prior to the Effective Time (other than Series C Preferred Stock
described in Section 2.01(e) of this Agreement and any Dissenting
Shares) (the "Converted Series C Preferred Shares" and, together with
the Converted Common Shares, the "Converted Shares") shall thereafter
represent, subject to Section 2.02(d) of this Agreement, the right to
receive that number of shares of VTEL Common Stock into which the
shares of Series C Preferred Stock represented by such certificate have
been converted pursuant to subsection (b) of this Section 2.01
determined pursuant to the Series C Preferred Stock Conversion Ratio
and, if applicable, the right to receive cash pursuant to Section
2.02(d) of this Agreement (the "Series C Preferred Stock Consideration"
and, with the Common Stock Consideration, the "Merger Consideration").
The holders of certificates previously evidencing Converted Shares
shall cease to have any rights with respect to such Converted Shares
except the right to receive the Merger Consideration applicable thereto
and as otherwise provided herein or by law. Such certificates
previously evidencing Converted Shares shall be exchanged for
certificates evidencing whole shares of VTEL Common Stock issued in
consideration therefor upon the surrender of such certificates in
accordance with the provisions of Section 2.02 of this Agreement. No
fractional shares of VTEL Common Stock shall be issued and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.02(d) of
this Agreement.
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(e) Notwithstanding any provision of this Agreement to the
contrary, each share of Company Common Stock or Series C Preferred
Stock held in the treasury of the Company and each share of Company
Common Stock owned by VTEL or any direct or indirect wholly owned
subsidiary of VTEL or of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof
and no payment shall be made with respect thereto.
(f) Each share of common stock, par value $.0l per share, of
Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one newly and validly
issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
Section 2.02. Exchange Agency; Surrender of Certificates.
(a) Exchange Fund. At or prior to the Effective Time, VTEL
shall deposit, or cause to be deposited, with a bank or trust company
designated by VTEL (the "Exchange Agent"), for the benefit of the
holders of Converted Shares, for exchange in accordance with this
Article II, through the Exchange Agent (i) certificates evidencing a
number of shares of VTEL Common Stock equal to the product of the
Common Stock Conversion Ratio multiplied by the number of Converted
Common Shares issued and outstanding immediately prior to the Effective
Time, (ii) certificates evidencing a number of shares of VTEL Common
Stock equal to the product of the Series C Preferred Stock Conversion
Ratio multiplied by the number of shares of Series C Preferred Stock
issued and outstanding immediately prior to the Effective Time, and
(iii) cash in an amount sufficient to provide for the payments to be
made in lieu of issuing any fractional shares of VTEL Common Stock as
provided in Section 2.02(d) of this Agreement. Additionally, subject to
the provisions of subsection (e) of this Section 2.02, VTEL shall, if
and when a payment date has occurred with respect to a dividend or
distribution that has been declared subsequent to the Effective Time,
deposit with the Exchange Agent an amount in cash (or property of like
kind to that which is the subject of such dividend or distribution)
equal to the dividend or distribution per share of VTEL Common Stock
times the number of shares of VTEL Common Stock evidenced by
certificates theretofore representing Converted Shares that have not
theretofore been surrendered for exchange in accordance with this
Section 2.02. The certificates and cash (and property, if any)
deposited with the Exchange Agent in accordance with this Section
2.02(a) are hereinafter referred to as the "Exchange Fund." The
Exchange Agent shall, pursuant to irrevocable instructions, deliver
VTEL Common Stock (and any dividends or distribution related thereto)
and/or cash, as described above, in exchange for surrendered
certificates pursuant to the terms of this Agreement out of the
Exchange Fund.
(b) Exchange Procedures. As soon as practicable after
the Effective Time, VTEL shall cause the Exchange Agent to send to each
record holder of Company Common Stock and Series C Preferred Stock at
the Effective Time (i) a letter of transmittal (which
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shall specify that delivery shall be effected, and risk of loss and
title to the certificates theretofore representing Company Common Stock
or Series C Preferred Stock (the "Certificates") shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such
form and contain such other provisions as VTEL and the Company shall
reasonably determine), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of VTEL Common Stock and any cash in lieu of fractional shares,
into which the shares of Company Common Stock or Series C Preferred
Stock represented by such Certificate or Certificates shall have been
converted pursuant to this Agreement. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor, a certificate representing
that number of whole shares of VTEL Common Stock which such holder has
the right to receive pursuant to the provisions of this Article II and
cash in the amount such holder has the right to receive pursuant to
such provisions, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common
Stock or Series C Preferred Stock which is not registered in the
transfer records of the Company, a certificate evidencing the proper
number of shares of VTEL Common Stock may be issued to the transferee
if the Certificate evidencing the Company Common Stock or Series C
Preferred Stock shall be surrendered to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. Until
surrendered for exchange in accordance with the provisions of Section
2.02 of this Agreement, each Certificate theretofore representing
Converted Shares (other than shares of Company Common Stock and Series
C Preferred Stock to be canceled pursuant to Section 2.01(e) of this
Agreement and any Dissenting Shares) shall from and after the Effective
Time represent for all purposes only the right to receive the
applicable Merger Consideration as set forth in this Agreement. If any
holder of Converted Shares shall be unable to surrender such holder's
Certificates because such Certificates have been lost or destroyed,
such holder may deliver in lieu thereof an affidavit and indemnity bond
in form and substance and with surety reasonably satisfactory to VTEL.
No interest shall be paid on any Merger Consideration payable to former
holders of Converted Shares.
(c) Distributions with Respect to VTEL Common Stock. No
dividends or other distributions declared or made after the Effective
Time with respect to VTEL Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate theretofore representing shares of Company Common Stock or
Series C Preferred Stock with respect to any shares of VTEL Common
Stock evidenced thereby, and no Merger Consideration shall be paid to
any such holders until the holder of such Certificate shall surrender
such Certificate theretofore representing shares of Company Common
Stock or shares of Series C Preferred Stock . Subject to applicable
laws, following surrender of any such Certificate, there shall be paid
to the holder of the certificates evidencing whole shares of VTEL
Common Stock issued in exchange therefor, without interest, (i)
promptly following the surrender of such Certificate and in addition
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to the amount of any cash payable with respect to a fractional share of
VTEL Common Stock to which such holder is entitled pursuant to Section
2.02(d) of this Agreement, the amount of dividends or other
distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of VTEL Common Stock and (ii) at
the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender payable with
respect to such whole shares of VTEL Common Stock.
(d) No Fractional Shares. No certificates or scrip evidencing
fractional shares of VTEL Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share
interests shall not entitle the owner thereof to any rights of a
stockholder of VTEL. In lieu of any such fractional shares, (i) each
holder of a Certificate previously evidencing Company Common Stock or
Series C Preferred Stock, upon surrender of such Certificate for
exchange pursuant to this Article II, shall be paid an amount in cash
(without interest), rounded to the nearest cent, determined by
multiplying (A) the Average Closing Price by (B) the fractional
interest to which such holder would otherwise be entitled (after taking
into account all shares of Company Common Stock or Series C Preferred
Stock held of record by such holder at the Effective Time). "Average
Closing Price" means the average closing sales price of the VTEL Common
Stock on The NASDAQ Stock Market (or such other quotation system or
securities exchange on which the VTEL Common Stock is then quoted or
listed) as reported by the Wall Street Journal for the 20 consecutive
trading days beginning 22 trading days prior to the scheduled Closing
Date as provided in Section 1.02 hereof.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains unclaimed by the former holders of Converted Shares
on the first anniversary of the Closing Date shall be delivered to
VTEL, upon demand, and any former holders of Converted Shares who have
not theretofore complied with this Article II shall thereafter look
only to VTEL for the Merger Consideration and dividends or
distributions to which they are entitled, without any interest thereon.
Neither VTEL nor the Company shall be liable to any former holder of
Converted Shares for any Merger Consideration (or dividends or
distributions with respect thereto) or cash delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Withholding. VTEL (or any affiliate thereof) shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any former holder of Converted
Shares such amounts as VTEL (or any affiliate thereof) is required to
deduct and withhold with respect to the making of such payment under
the Code or any other provision of federal, state, local or foreign tax
law and VTEL agrees to remit to the proper taxing authority such
amounts so withheld. To the extent that amounts are so withheld by
VTEL, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the former holder of the Converted
Shares in respect of which such deduction and withholding was made by
VTEL.
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Section 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock or Series C
Preferred thereafter on the records of the Company. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the Merger Consideration, deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Article II. Certificates surrendered for exchange by any person
constituting an "affiliate" of the Company for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until VTEL has received a written agreement from such person as
provided in Section 6.04.
Section 2.04. Dissenters' Rights.
(a) The holders of shares of Company Common Stock shall not be
entitled to appraisal rights. Notwithstanding anything in this
Agreement to the contrary, each share of Series C Preferred Stock
issued and outstanding immediately prior to the Effective Time and held
by stockholders who have not voted such shares in favor of the Merger
or consented thereto in writing and qualify under and have complied
with all of the provisions of Section 262 of the DGCL ("Dissenting
Shares") shall not, by virtue of the Merger, be converted into the
right to receive the Series C Preferred Stock Consideration but such
stockholder shall be entitled to receive payment of the appraised value
of such shares of Series C Preferred Stock held by them in accordance
with the provisions of Section 262 of the DGCL; provided, however, that
if any holder of Dissenting Shares (i) subsequently delivers a written
withdrawal of his demand for appraisal rights (with the written consent
of VTEL if such written withdrawal is not made within 60 days after the
Effective Time), or (ii) fails to perfect dissenter's rights as
provided in Section 262 of the DGCL, or (iii) if neither any holder of
Dissenting Shares nor the Surviving Corporation has filed a petition
demanding a determination of the value of Dissenting Shares within the
time provided in Section 262 of the DGCL, the Dissenting Shares held by
such holder or holders (as the case may be) shall thereupon be deemed
to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Series C Preferred Stock
Consideration, as provided in this Agreement without any interest
thereon.
(b) The Company shall give VTEL (i) prompt notice of any
written demands for appraisal, withdrawal of demands for appraisal and
any other instruments served pursuant to Section 262 of the DGCL and
(ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Section 262 of the DGCL. The
Company agrees that prior to the Effective Time, it will not, without
the prior written consent of VTEL, voluntarily make or agree to make
any payment with respect to, or settle or offer to settle, any such
demands.
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(c) Each holder of Dissenting Shares who becomes entitled,
pursuant to the provisions of Section 262 of the DGCL, to payment of
his or its Dissenting Shares shall receive payment therefor after the
Effective Time from the Surviving Corporation (but only after the
amount thereof shall have been agreed upon or finally determined
pursuant to such provisions) and such shares shall be canceled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the VTEL Companies that:
Section 3.01. Organization and Qualification: Subsidiaries. The Company
is a corporation, and each of the Company's subsidiaries (as such term in
defined in Section 9.03 herein) is a corporation or partnership, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and each of the Company and its subsidiaries has
all requisite power and authority to own, lease and operate its properties and
to conduct its business as it is now being conducted and is qualified to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so qualified
and in good standing could not reasonably be expected to have a Company Material
Adverse Effect. The term "Company Material Adverse Effect" as used in this
Agreement shall mean any change or effect that would be materially adverse to
the financial condition, results of operations, business, or prospects of the
Company and its subsidiaries, taken as a whole, at the time of such change or
effect; provided, however, no Company Material Adverse Effect shall be deemed to
have occurred hereunder (i) as a result of customers of the Company deferring or
delaying orders as a result of the announcement of the execution of this
Agreement, (ii) if the financial condition or results of operations of the
Company's business are not materially and adversely different from those
announced with respect to the Company's quarter ended September 30, 1996, or
(iii) as a result of the Company employee departures after the announcement of
the execution of this Agreement. Section 3.01 of the Disclosure Schedule
delivered by the Company to the VTEL Companies concurrently with the execution
of this Agreement (the "Company Disclosure Schedule") sets forth, as of the date
of this Agreement, a true and complete list of all the Company's directly or
indirectly owned subsidiaries, together with (a) the jurisdiction of
incorporation or organization of each such subsidiary and the percentage of each
such subsidiary's outstanding capital stock or other equity interests owned by
the Company or another subsidiary of the Company and (b) an indication of
whether each such subsidiary is a "Significant Subsidiary" as defined in Section
9.03 of this Agreement.
Section 3.02. Certificate of Incorporation and Bylaws. The Company
has heretofore furnished or made available to VTEL complete and correct copies
of the Certificate of Incorporation and the Bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of the Company and each of its Significant Subsidiaries. Neither
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<PAGE>
the Company nor any of its subsidiaries is in violation of any of the provisions
of its Certificate of Incorporation or Bylaws (or equivalent organizational
documents).
Section 3.03. Capitalization.
(a) The authorized capital stock of the Company consists of
25,153,658 shares of Company Common Stock, par value $.001 per share,
and 4,000,000 shares of preferred stock, par value $.001 per share. At
the date hereof, 15,865,178 shares of Company Common Stock were issued
and outstanding, no shares of Company Common Stock were held by the
Company in its treasury or by the Company's subsidiaries and 8,635,185
shares of Company Common Stock were reserved for issuance as follows:
(i) 2,589,866 shares were reserved for issuance upon exercise of stock
options heretofore granted or available for grant pursuant to the
Company's 1980 Stock Option Plan; (ii) 2,506,833 shares were reserved
for issuance upon exercise of stock options heretofore granted or
available for grant pursuant to the Company's 1984 Supplemental Stock
Option Plan; (iii) 176,244 shares were reserved for issuance upon the
purchase of shares under the Company's 1984 Employee Stock Purchase
Plan; (iv) 168,000 shares were reserved for issuance upon exercise of
stock options heretofore granted or available for grant pursuant to the
Company's 1992 Non-Employee Directors' Stock Option Plan (the plans
referred to in clauses (i) through (iv) of this section being herein
collectively called the "Company Option Plans"); (v) 580,000 shares
were reserved for issuance upon the exercise of the warrants (the
"Common Stock Warrants") listed and described in Section 3.03(a) of the
Company Disclosure Schedule; (vi) 2,424,242 shares were reserved for
issuance upon conversion of the Company's Series C Preferred Stock; and
(vii) 3,120,500 shares were reserved for issuance upon exercise of the
Stock Option Agreement. At the date hereof, 350,000 shares of Series C
Preferred Stock were issued and outstanding, no other shares of
preferred stock was issued and outstanding, and no shares of preferred
stock were held by the Company in its treasury or by the Company's
subsidiaries. Except as described in this Section 3.03 or in Section
3.03(a) of the Company Disclosure Schedule, no shares of capital stock
of the Company are issued and outstanding or reserved for issuance for
any other purpose. Each of the issued shares of capital stock of each
of the Company and its subsidiaries is duly authorized, validly issued
and fully paid and nonassessable, and has not been issued in violation
of (nor are any of the authorized shares of capital stock of, or other
equity interests in, the Company or any of its subsidiaries subject to)
any preemptive or similar rights created by statute, the Certificate of
Incorporation or Bylaws (or the equivalent organizational documents) of
the Company or any of its subsidiaries, or any agreement to which the
Company or any of its subsidiaries is a party or is bound. Except as
set forth in Section 3.03(a) of the Company Disclosure Schedule, all
issued shares or other equity interests in the subsidiaries of the
Company owned by the Company or a subsidiary of the Company are owned
free and clear of all security interests, liens, claims, pledges,
agreements, limitations on the Company's or such subsidiaries' voting
rights, charges or other encumbrances of any nature whatsoever.
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(b) No bonds, debentures, notes or other indebtedness of the
Company or its subsidiaries having the right to vote (or convertible
into or exchangeable or exercisable for securities having the right to
vote) on any matters on which stockholders may vote ("Company Voting
Debt") are issued or outstanding. All shares of Company Common Stock
which may be issued upon exercise of stock options granted pursuant to
the Company Option Plans or Common Stock Warrants and all shares of
Company Common Stock which may be issued upon conversion of the Series
C Preferred Stock will, when issued in accordance with the terms of
such stock options, warrants, designations and the related Company
Option Plans, be validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(c) Except as set forth in Section 3.03(a) above or in Section
3.03(c) of the Company Disclosure Schedule, there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or
any of its subsidiaries is a party relating to the issued or unissued
capital stock of the Company or any of its subsidiaries or obligating
the Company or any of its subsidiaries to grant, issue or sell any
shares of capital stock, Company Voting Debt or other equity interests
of the Company or any of its subsidiaries. Except as set forth in
Section 3.03(c) of the Company Disclosure Schedule, there are no
obligations, contingent or otherwise, of the Company or any of its
subsidiaries (i) to repurchase, redeem or otherwise acquire any shares
of Company Common Stock or other capital stock of the Company or the
capital stock of any subsidiary of the Company or (ii) other than
advances to wholly owned subsidiaries in the ordinary course of
business, to provide funds to, or to make any investment in (in the
form of a loan, capital contribution or otherwise), or to provide any
guarantee with respect to the obligations of, any subsidiary of the
Company or any other person. Except (i) as set forth in Section 3.03(c)
of the Company Disclosure Schedule or (ii) for the subsidiaries of the
Company set forth in Section 3.01 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries (x) directly or
indirectly owns, (y) has agreed to purchase or otherwise acquire or (z)
holds any interest convertible into or exchangeable or exercisable for
the capital stock or other equity interests representing five percent
(5%) or more of the capital stock or other equity interests of any
corporation, partnership, joint venture or other business association
or entity. Except as set forth in Section 3.03(c) of the Company
Disclosure Schedule or for any agreements, arrangements or commitments
between the Company and its wholly owned subsidiaries or between such
wholly owned subsidiaries, there are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to
which any person is or may be entitled to receive any payment based on,
or calculated in accordance with, the revenues or earnings of the
Company or any of its subsidiaries. Except as set forth in Section
3.03(c) of the Company Disclosure Schedule, there are no voting trusts,
proxies or other agreements or understandings to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound with respect to the voting of any shares of
capital stock or other equity interests of the Company or any of its
subsidiaries.
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<PAGE>
(d) Section 3.03(d) of the Company Disclosure Schedule sets
forth a complete and correct list as of the date hereof of (i) the
number of options to purchase Company Common Stock outstanding and the
number of shares of Company Common Stock issuable thereunder, (ii) the
number of Common Stock Warrants outstanding and the number of shares of
Company Common Stock issuable thereunder, (iii) the exercise price of
each such outstanding stock option and warrant, (iv) the number of
stock options then exercisable, and (v) the number of shares of Company
Common Stock issuable upon conversion of the Series C Preferred Stock
if such Series C Preferred Stock was converted on the date hereof.
Complete and correct copies of the Company Option Plans, all forms of
stock options issued pursuant to the Company Option Plans or otherwise,
and all forms of Common Stock Warrants, including all amendments
thereto, have been made available to VTEL.
Section 3.04. Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement and the Stock Option
Agreement, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby (subject to, with respect to
the Merger, the approval and adoption of this Agreement by the stockholders of
the Company as described in Section 6.01 of this Agreement). The execution and
delivery of this Agreement and the Stock Option Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement and the Stock Option Agreement or to consummate the transactions
contemplated hereby and thereby (subject to, with respect to the Merger, the
approval and adoption of this Agreement by the stockholders of the Company as
described in Section 6.01 of this Agreement). This Agreement and the Stock
Option Agreement have each been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by the VTEL
Companies, constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms.
Section 3.05. No Conflict: Required Filings and Consents.
(a) Except as disclosed in Section 3.05(a) of the Company
Disclosure Schedule, the execution and delivery of this Agreement and
the Stock Option Agreement by the Company do not, and the performance
by the Company of its obligations hereunder and thereunder, including
consummation of the transactions contemplated hereby and thereby, will
not (i) conflict with or violate the Certificate of Incorporation or
Bylaws, or the equivalent organizational documents, in each case as
amended or restated, of the Company or any of its Significant
Subsidiaries, (ii) conflict with or violate any federal, state, foreign
or local law, statute, ordinance, rule or regulation (collectively,
"Laws") in effect as of the date of this Agreement or any judgment,
order or decree to which the Company or any of its subsidiaries is a
party or by or to which any of their respective properties are bound or
subject or (iii) result in any breach of or constitute a default (or an
event that with
CORPDAL:59869.4 22768-00022
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<PAGE>
notice or lapse of time or both would become a default) under, or
impair any of the Company's or any of its Subsidiaries' rights or alter
the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any of
its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its
subsidiaries is a party or by or to which the Company or any of its
subsidiaries or any of their respective properties are bound or subject
(including, but not limited to, any license agreement, contract or
other arrangement of any nature relating to the Company's Intellectual
Property Rights or Third Party Intellectual Property Rights (as those
terms are hereinafter defined)), excluding from the foregoing clauses
(ii) and (iii) any such conflicts, violations, breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation,
payment obligations or liens or encumbrances that individually or in
the aggregate could not reasonably be expected to have a Company
Material Adverse Effect. The Board of Directors of the Company has
approved the Merger, this Agreement and the Stock Option Agreement, and
the transactions contemplated by this Agreement and the Stock Option
Agreement and such approval is sufficient to render the provisions of
Section 203 of the DGCL inapplicable to the Merger, this Agreement and
the Stock Option Agreement, and the transactions contemplated hereby
and thereby. To the best of the Company's knowledge, no other state
takeover statute or similar statute or regulation applies or purports
to apply to the Merger, this Agreement and the Stock Option Agreement,
or any of the transactions contemplated by this Agreement or by the
Stock Option Agreement.
(b) The execution and delivery of this Agreement and the Stock
Option Agreement by the Company does not, and the performance by the
Company of its obligations hereunder and thereunder, including
consummation of the transactions contemplated hereby and thereby, will
not, require the Company to obtain any consent, license, permit,
waiver, approval, authorization or order of, or to make any filing with
or notification to, any governmental or regulatory authority, federal,
state, local or foreign (collectively, "Governmental Entities"), except
(i) for (A) applicable requirements, if any, of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
state securities or blue sky laws ("Blue Sky Laws") and (B) the
pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing
and recordation of appropriate merger documents as required by the
DGCL, and (iii) where the failure to obtain such consents, licenses,
permits, waivers, approvals, authorizations or orders, or to make such
filings or notifications could not, individually or in the aggregate
reasonably be expected to cause a Company Material Adverse Effect or to
materially impair or delay the ability of the Company to perform its
obligations under this Agreement and the Stock Option Agreement or to
consummate the transactions contemplated hereby and thereby.
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<PAGE>
Section 3.06. Permits: Compliance. Except as disclosed in Section 3.06
of the Company Disclosure Schedule, each of the Company and its subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, identification and
registration numbers, approvals and orders (collectively, the "Permits")
necessary to own, lease and operate their properties and to carry on their
businesses as they are now being conducted, except where the failure to possess
such Permits could not reasonably be expected to have a Company Material Adverse
Effect. Section 3.06 of the Company Disclosure Schedule sets forth, as of the
date of this Agreement, all actions, proceedings, or investigations, pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries that could reasonably be expected to result in the loss,
revocation, suspension or cancellation of a Permit held by the Company or a
subsidiary of the Company, except for any suspension, loss or revocation that
could not reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in Section 3.06 of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries is in conflict with, in default under or
in violation of, nor has it received, since December 31, 1993, from any
Governmental Entity any written notice with respect to possible conflicts with,
defaults under or violations of (a) any Law applicable to the Company or any of
its subsidiaries or by or to which any of their respective properties are bound
or subject, (b) any judgment, order or decree applicable to the Company or any
of its subsidiaries, or (c) any of the Permits held by the Company or a
subsidiary of the Company, except for any such conflicts, defaults or violations
that individually or in the aggregate could not reasonably be expected to have a
Company Material Adverse Effect.
Section 3.07. Reports; Financial Statements; Undisclosed Liabilities.
(a) Since December 31, 1993, except as disclosed in Section
3.07 of the Company Disclosure Schedule, the Company has filed all
forms, reports, statements and other documents required to be filed
with the Securities and Exchange Commission (the "SEC"), including,
without limitation, (i) all Annual Reports on Form 10-K, (ii) all
Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to
meetings of stockholders (whether annual or special), (iv) all Current
Reports on Form 8-K and (v) all other reports, schedules, registration
statements or other documents (collectively referred to as the "Company
SEC Reports"). As of their respective dates, the Company SEC Reports
complied in all material respects with the requirements of applicable
Laws (including the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports) and the Company SEC Reports, including,
without limitation, any financial statements or schedules included
therein, did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(b) The Company has heretofore delivered to VTEL
(i) consolidated balance sheets of the Company and its subsidiaries as
of December 31, 1993, December 31, 1994
CORPDAL:59869.4 22768-00022
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<PAGE>
and December 31, 1995 and (ii) consolidated statements of income,
stockholders' equity and cash flows for each of the three years then
ended, certified by KPMG Peat Marwick LLP, reports thereon are included
therewith. The Company has also delivered to VTEL (i) an unaudited
consolidated balance sheet of the Company and its subsidiaries as of
September 30, 1996, and (ii) unaudited consolidated statements of
income, stockholders' equity and cash flows for the nine months then
ended. Such audited and unaudited consolidated financial statements,
including any such financial statements and schedules contained in the
Company SEC reports (or incorporated by reference therein) (i) are in
accordance with the books and records of the Company and its
subsidiaries in all material respects and were prepared in accordance
with the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout
the periods involved (except (A) to the extent disclosed therein or
required by changes in generally accepted accounting principles, (B)
with respect to Company SEC Reports, as may be indicated in the notes
thereto and (C) in the case of the unaudited financial statements, as
permitted by the rules and regulations of the SEC) and (ii) fairly
present in all material respects the consolidated financial position of
the Company and its subsidiaries as of the respective dates thereof and
the consolidated results of operations and cash flows for the periods
indicated (except, in the case of unaudited consolidated financial
statements for interim periods, for the absence of footnotes and
subject to adjustments, consisting only of normal, recurring accruals,
necessary to present fairly such results of operations and cash flows).
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its subsidiaries as of December 31,
1995, including the notes thereto, or in the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996, or other SEC
Report filed prior to the date hereof, neither the Company or any of
its subsidiaries has any liabilities or obligations material to the
Company and its subsidiaries which are not referenced on such balance
sheet or in such Quarterly Report on Form 10-Q or in such other SEC
Report filed prior to the date hereof. Except as set forth in Section
3.07 of the Company Disclosure Schedule or as set forth in the
Company's Current Report on Form 8-K filed with the SEC on October 24,
1996, since the date of the Company's most recently filed Quarterly
Report on Form 10-Q, neither the Company nor any of its subsidiaries
has incurred any liabilities except for (i) liabilities or obligations
incurred in the ordinary course of business and consistent with past
practice, (ii) liabilities incurred in connection with or as a result
of the Merger and (iii) liabilities or obligations which do not have a
Company Material Adverse Effect.
Section 3.08. Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement or as set
forth in Section 3.08 of the Company Disclosure Schedule, since September 30,
1996, the Company and its subsidiaries have conducted their respective
businesses only in the ordinary course and in a manner consistent with past
practice and there has not been (a) any damage, destruction or loss with respect
to any assets of the Company or any of its subsidiaries that, whether or not
covered by insurance, would
CORPDAL:59869.4 22768-00022
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<PAGE>
constitute a Company Material Adverse Effect, (b) any change by the Company or
its subsidiaries in their significant accounting policies, (c) except for
dividends by a subsidiary of the Company to the Company or another wholly owned
subsidiary of the Company, any declaration, setting aside or payment of any
dividends or distributions in respect of shares of Company Common Stock or the
shares of stock of, or other equity interests in, any subsidiary of the Company
or any redemption, purchase or other acquisition of any of the Company's
securities or any of the securities of any subsidiary of the Company, (d) any
material increase in the benefits under, or the establishment or amendment of,
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, performance awards (including, without limitation, the granting
of stock appreciation rights or restricted stock awards), stock purchase or
other employee benefit plan, or any increase in the compensation payable or to
become payable to any of the directors or officers of the Company or the
employees of the Company or its subsidiaries as a group, except for (i)
increases in salaries or wages payable or to become payable in the ordinary
course of business and consistent with past practice or (ii) the granting of
stock options in the ordinary course of business to employees of the Company or
its subsidiaries who are not directors or executive officers of the Company, or
(e) any Company Material Adverse Effect.
Section 3.09. Absence of Litigation. Except as set forth in Section
3.09 of the Company Disclosure Schedule, there is no claim, action, suit,
litigation, proceeding, arbitration or, to the knowledge of the Company,
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries or any properties or
rights of the Company or any of its subsidiaries, and neither the Company nor
any of its subsidiaries is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of the Company, continuing investigation by, any Governmental Entity,
or any judgment, order, writ, injunction, decree or award of any Governmental
Entity or arbitrator, including, without limitation, cease-and-desist or other
orders.
Section 3.10. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program,
arrangement, contract, employment agreement, stock option, bonus,
incentive or similar plan (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by the Company or any of its subsidiaries, or with
respect to which the Company or any of its subsidiaries could
reasonably be expected to incur liability under ERISA (the "Company
Benefit Plans"), the Company has delivered or made available to VTEL a
true and correct copy of (i) such Company Benefit Plan, (ii) each trust
agreement, if any, relating to such Company Benefit Plan, (iii) the
most recent summary plan description of each Company Benefit Plan for
which a summary plan description is required, and (iv) the most recent
determination letter issued by the IRS with respect to any Company
Benefit Plan that is intended to be qualified under Section 401 of the
Code.
CORPDAL:59869.4 22768-00022
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Section 3.10 of the Company Disclosure Schedule contains a complete
list of all Company Benefit Plans.
(b) Each of the Company Benefit Plans that are subject to
ERISA is in compliance with ERISA, and except as set forth in Section
3.10 of the Company Disclosure Schedule, no Company Benefit Plan has an
accumulated or waived funding deficiency within the meaning of Section
412 of the Code. Except as set forth in Section 3.10 of the Company
Disclosure Schedule, none of the Company Benefit Plans is a
"multiemployer plan," as defined in Section 3(37) of ERISA. Neither the
Company nor any trade or business which together with the Company would
be deemed a "single employer" within the meaning of ERISA (an "ERISA
Affiliate") has incurred, directly or indirectly, any material
liability (including any material contingent liability) to or on
account of a Company Benefit Plan pursuant to Title IV of ERISA to
which the Company or an ERISA Affiliate made, or was required to make,
contributions during the five (5) years ending on December 31, 1995. As
of the date of this Agreement, no condition is known by the Company to
exist that presents a material risk to the Company or an ERISA
Affiliate of incurring such a material liability. No proceedings have
been instituted to terminate any Company Benefit Plan that is subject
to Title IV of ERISA and no "reportable event," as such term in defined
in Section 4043(b) of ERISA, is known to have occurred with respect to
any Company Benefit Plan which has not been reported.
(c) Except as set forth in Section 3.10 of the Company
Disclosure Schedule, the current value of the assets of each of the
Company Benefit Plans that are subject to Title IV of ERISA, based upon
reasonable actuarial assumptions, equals or exceeds the present value
of the accrued benefits under each such Company Benefit Plan and all
contributions or other amounts payable by the Company and each of its
subsidiaries as of the date of this Agreement with respect to each Plan
in respect of current or prior plan years has been either paid or
accrued on the latest balance sheet included in the Company's most
recent SEC Report on Form 10-Q or accrued since September 30, 1996.
There are no pending, or, to the best knowledge of the Company and each
of its subsidiaries, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the
Company Benefit Plans or any trusts related thereto.
(d) There are no collective bargaining or other labor union
contracts to which the Company or its subsidiaries is a party and no
collective bargaining agreement is being negotiated by the Company or
any of its subsidiaries. There is no pending or, to the knowledge of
the Company, threatened labor dispute, strike or work stoppage against
the Company or any of its subsidiaries.
(e) No Company Benefit Plan provides retiree medical or
retiree life insurance benefits and neither the Company nor any of its
subsidiaries is contractually or otherwise obligated to provide life
insurance and medical benefits upon retirement or termination of
employment of employees.
CORPDAL:59869.4 22768-00022
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(f) Neither the Company nor any of its subsidiaries
contributes to or has an obligation to contribute to, or has within six
years prior to the date of this Agreement contributed to or had an
obligation to contribute to, an employee benefit plan that is or was
subject to Title IV of ERISA or Section 412 of the Code.
Section 3.11. Taxes. Except as set forth in Section 3.11 of the
Company Disclosure Schedule:
(a) (i) all returns and reports ("Tax Returns") of or with
respect to any material Tax (as defined in Section 9.03 of this
Agreement) which are required to be filed on or before the date hereof
by or with respect to the Company or any of its subsidiaries have been
duly and timely filed, (ii) all items of income, gain, loss, deduction
and credit or other items required to be included in each such Tax
Return have been so included and all information provided in each such
Tax Return is true, correct and complete in all material respects,
(iii) all material Taxes which have become due with respect to the
period covered by each such Tax Return have been or will be timely paid
in full, (iv) all withholding Tax requirements imposed on or with
respect to the Company or any of its subsidiaries have been satisfied
in all material respects, and (v) no material penalty, interest or
other charge is due with respect to the late filing of any such Tax
Return or late payment of any such Tax .
(b) Section 3.11 of the Company Disclosure Schedule lists all
federal and other material Tax Returns filed with respect to the
Company and any of its subsidiaries for taxable years ending on or
after December 31, 1992. The Company has delivered to VTEL correct and
complete copies of all such Tax Returns.
(c) There is no material claim against the Company or any of
its subsidiaries for any amount of Taxes, no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return
of or with respect to the Company or any of its subsidiaries, and no
material Tax Return of or with respect to the Company or any of its
subsidiaries has been, or is being, audited by the Internal Revenue
Service or any state, local or other taxing authority other than those
disclosed (and to which are attached true and complete copies of all
audit or similar reports) in Section 3.11 of the Company Disclosure
Schedule.
(d) The total amounts set up as liabilities for current and
deferred Taxes in the financial statements referred to in Section 3.07
of this Agreement are sufficient to cover the payment of all Taxes,
whether or not assessed or disputed, which are, or are hereafter found
to be, or to have been, due by or with respect to the Company and any
of its subsidiaries up to and through the periods covered thereby.
CORPDAL:59869.4 22768-00022
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(e) Except for statutory liens for current Taxes not yet due
and for Taxes being contested in good faith which have been disclosed
in Section 3.11 of the Company Disclosure Schedule and for which
adequate provisions have been made in the financial statements referred
to in Section 3.07, no material liens for Taxes exist upon the assets
of any of the Company or any of its subsidiaries.
(f) Neither the Company nor any of its subsidiaries has waived
any statute of limitations in respect of material Taxes or agreed to
any extension of time with respect to a material Tax assessment or
deficiency.
(g) Neither the Company nor any of its subsidiaries has made
an election under Section 341(f) of the Code. Except as disclosed in
Section 3.11 of the Company Disclosure Schedule, neither the Company
nor any of its subsidiaries has made any payments, is obligated to make
any payments, or is a party to any agreement that under the
circumstances could obligate it to make any payments that will not be
deductible under Sections 162(m) or 280G of the Code.
(h) Neither the Company nor any of its subsidiaries has taken
or agreed to take any action that would prevent the Merger from
constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code.
(i) Neither the Company nor any of its subsidiaries (i) has
ever been a member of an Affiliated Group (as defined in Section 1504
of the Code) other than a group the common parent of which was the
Company or (ii) has any liability for the Taxes of any person (other
than the Company or any of its subsidiaries) under Treas. Reg. ss.
1.1502-6 (or any similar provision under state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
(j) Except for the Merger, there has been no "ownership
change" (as defined in Section 382(g) of the Code) with respect to the
Company during the "testing period" (as defined in Section 382(i) of
the Code) that ends on the day on which the "owner shift" (as defined
in Section 382(g) of the Code) occurs as a result of the Merger.
Section 3.12. Affiliates. Section 3.12 of the Company Disclosure
Schedule identifies all persons who, to the knowledge of the Company, may be
deemed to be affiliates of the Company within the meaning of that term as used
in Rule 145 promulgated pursuant to the Securities Act, including, without
limitation, all directors and executive officers of the Company.
Section 3.13. Properties. Except as set forth in Section 3.13 of the
Company Disclosure Schedule or specifically described in the Company SEC
Reports, the Company and its subsidiaries have good and marketable title, free
and clear of all liens, to all their properties and assets whether tangible or
intangible, real, personal or mixed, reflected in the Company's consolidated
financial statements contained in the Company's most recent SEC Report on Form
10-Q as being owned
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<PAGE>
by the Company and its subsidiaries as of the date thereof, other than (a) any
properties or assets that have been sold or otherwise disposed of in the
ordinary course of business since the date of such financial statements, (b)
liens disclosed in the notes to such financial statements and (c) liens arising
in the ordinary course of business after the date of such financial statements.
Section 3.14. Intellectual Rights.
(a) The Company owns, or is licensed or otherwise possesses
legally sufficient rights to use, all patents, trademarks, trade names,
service marks, copyrights, maskworks and any applications therefor,
technology, know-how, video and audio compression algorithms, computer
software programs or applications (in both source code and object code
form) and tangible or intangible proprietary information or material
that are used or proposed to be used in the business of the Company as
currently conducted. Section 3.14 of the Company Disclosure Schedule
lists all current patents, registered and material unregistered
copyrights, maskworks, trade names and any applications therefor owned
by the Company (the "Intellectual Property Rights"), and specifies the
jurisdictions in which each such Intellectual Property Right has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Section
3.14 of the Company Disclosure Schedule includes and specifically
identifies all material third-party patents, trademarks, copyrights
(including software) and maskworks (the "Third Party Intellectual
Property Rights"), to the knowledge of the Company, which are
incorporated in, are, or form a part of, any Company product, excluding
any such intellectual property rights that are available on a commodity
basis (such as "shrink wrap" licenses) and which are non-exclusive,
terminable and available at a standard fee. Section 3.14 of the Company
Disclosure Schedule lists (i) all material licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to
which any person is authorized to use any of the Company's Intellectual
Property Rights, or any trade secret material to the Company or any of
its subsidiaries; and (ii) all material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which the
Company is authorized to use any Third Party Intellectual Property
Rights, or other trade secret of a third party in or as any product,
and includes the identity of all parties thereto, a description of the
nature and subject matter thereof and the term thereof.
(b) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any license, sublicense or
agreement described in Section 3.14(a) of the Company Disclosure
Schedule. No claims with respect to the Company's Intellectual Property
Rights, any trade secret material to the Company, or Third Party
Intellectual Property Rights to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property
Rights by or through the Company, are currently pending or, to the
knowledge of the Company, are threatened by any person, nor does the
Company know of any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or
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<PAGE>
use of any product as now used, sold or licensed or proposed for use,
sale or license by the Company infringes on any copyright, maskwork,
patent, trademark, service mark or trade secret; (ii) against the use
by the Company of any trademarks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how, video and audio
compression algorithms, or computer software programs and applications
used in the Company's business as currently conducted or as proposed to
be conducted by the Company; (iii) challenging the ownership, validity
or effectiveness of any of the Company's Intellectual Property Rights
or other trade secret material to the Company; or (iv) challenging the
Company's license or legally enforceable right to use of the Third
Party Intellectual Rights. To the Company's knowledge, all material
patents, registered trademarks, maskworks and copyrights held by the
Company are valid and subsisting. To the Company's knowledge, there is
no material unauthorized use, infringement or misappropriation of any
of the Company's Intellectual Property by any third party, including
any employee or former employee of the Company or any of the its
subsidiaries. Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries
(i) has been sued or charged in writing as a defendant in any claim,
suit, action or proceeding which involves a claim or infringement of
trade secrets, any patents, trademarks, service marks, maskworks or
copyrights and which has not been finally terminated prior to the date
hereof or been informed or notified by any third party that the Company
may be engaged in such infringement or (ii) has knowledge of any
infringement liability with respect to, or infringement by, the Company
or any of its subsidiaries of any trade secret, patent, trademark,
service mark, maskwork or copyright of another.
(c) Each employee of the Company has executed a
confidentiality, invention and copyright agreement with the Company in
the forms previously delivered to VTEL.
Section 3.15. Real Property. Section 3.15 of the Company
Disclosure Schedule lists all real property that is owned or leased by the
Company (other than sales offices and shared distribution space).
Section 3.16. Insider Interests; Transactions with Management. Except
as set forth in Section 3.16 of the Company Disclosure Schedule, no officer or
director of the Company or holder of more than five percent of the Company
Common Stock currently outstanding has any interest in any material property,
real or personal, tangible or intangible, including, without limitation, any
computer software or Company Intellectual Property Assets, used in or pertaining
to the business of the Company or any subsidiary of the Company, except for the
ordinary rights of a stockholder or employee stock option holder. Except as
disclosed in the Company SEC Reports, no executive officer, director or
stockholder of the Company or any of its subsidiaries has, since December 31,
1994, engaged in any business dealings with the Company or any of its
subsidiaries, other than such business dealings as would not be required to be
disclosed in such documents or reports pursuant to the Securities Act and the
rules and regulations promulgated thereunder. No executive officer or director
of the Company or any of its subsidiaries (except in
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<PAGE>
his capacity as such) has any direct or indirect material interest in (a) any
competitor, customer, supplier or agent of the Company or any of its
subsidiaries, or (b) any person which is a party to any contract or agreement
which is material to the Company or any of its subsidiaries.
Section 3.17. Contracts and Agreements. The contracts and agreements
listed in Section 3.17 of the Company Disclosure Schedule or filed as exhibits
to any of the Company SEC Reports constitute all of the written and material
oral contracts, commitments, leases, and other agreements (including, without
limitation, promissory notes, loan agreements, and other evidences of
indebtedness) to which the Company or any of its subsidiaries is a party or by
which any of their properties are bound with respect to which the obligations of
or the benefits to be received by the Company or any of its subsidiaries,
individually or in the aggregate, could reasonably be expected to have a value
(i) in the case of liabilities, in excess of $250,000, and (ii) in the case of
benefits, $1,000,000, in any consecutive 12-month period (each a "Material
Contract"). Except as set forth in Section 3.17 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries are and, to the best
knowledge of the Company, no other party thereto is in default (and no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default) under any Material Contract, and neither the Company nor
any of its subsidiaries have waived any material right under any Material
Contract. Neither the Company nor any of its subsidiaries have received any
notice of default or termination (other than, in the case of notices of
termination, such termination arising out of the expiration of any Material
Contract by lapse of time or completion of performance in accordance with the
terms thereof) under any Material Contract and neither the Company nor any of
its subsidiaries has assigned or otherwise transferred any rights under any
Material Contract.
Section 3.18. Vote Required. The only votes of the holders of any class
or series of Company capital stock necessary to approve the Merger and this
Agreement are the affirmative votes of the holders of at least a majority of the
outstanding shares of the Company Common Stock. The provisions of Article Sixth
of the Company's Certificate of Incorporation do not impose any super majority
voting requirement on the transactions contemplated hereby.
Section 3.19. Brokers. No broker, finder or investment banker (other
than PaineWebber Incorporated) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. Prior to
the date of this Agreement, the Company has made available to VTEL a complete
and correct copy of all agreements between the Company and PaineWebber
Incorporated pursuant to which such firm will be entitled to any payment
relating to the transactions contemplated by this Agreement.
Section 3.20. Opinion of Financial Advisor. The Board of Directors of
the Company has received the written opinion of PaineWebber Incorporated to the
effect that, as of the date of this Agreement, the Merger Consideration to be
paid to the holders of the Company Common Stock is fair, from a financial point
of view, to such holders. The Company will promptly deliver a copy of such
opinion to VTEL.
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<PAGE>
Section 3.21. Board Recommendations. By a unanimous vote of the
directors present at a meeting of the Company's Board of Directors (which
meeting was duly called and held and at which a quorum was present at all
times), the Board of Directors of the Company (a) approved and adopted this
Agreement, including the Merger and the Stock Option Agreement and the other
transactions contemplated herein and therein, and determined that the Merger is
fair to the stockholders of the Company, and (b) resolved to recommend approval
and adoption of this Agreement, including the Merger and the other transactions
contemplated herein, by the stockholders of the Company.
Section 3.22. Distributors, Customers, or Suppliers. The Company is not
aware that any major distributor, customer or supplier to or of the Company or
its subsidiaries intends to cease doing business, or to alter materially the
amount of business done, with the Company or its subsidiaries after the
Effective Time, due to consummation of the transactions contemplated hereunder
or any other reason, that would result in a Company Material Adverse Effect.
Section 3.23. Pooling of Interests. As of the date of this
Agreement, the Company has no reason to believe that the Merger will not qualify
as a "pooling of interests" for accounting purposes.
Section 3.24. Rights Plan. The Company has taken all action (including
amending the Company's Rights Plan, as defined in Section 5.01(h) hereof) so
that the entering of this Agreement and the Stock Option Agreement and the other
transactions contemplated hereby and thereby do not and will not result in the
grant of any rights to any person under the Company's Rights Plan or enable or
require any rights thereunder to be exercised, distributed or triggered.
Section 3.25. Disclosure. No representation or warranty hereunder
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE VTEL COMPANIES
The VTEL Companies hereby, jointly and severally, represent and warrant
to the Company that:
Section 4.01. Organization and Qualification; Subsidiaries. Each of the
VTEL Companies is a corporation, and each of VTEL's other subsidiaries is a
corporation, duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and each of the VTEL Companies and
each of VTEL's other subsidiaries has all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification
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<PAGE>
necessary, other than where the failure to be so duly qualified and in good
standing could not reasonably be expected to have a VTEL Material Adverse
Effect. The term "VTEL Material Adverse Effect" as used in this Agreement shall
mean any change or effect that would be materially adverse to the financial
condition, results of operations, business, or prospects of VTEL and its
subsidiaries, taken as a whole, at the time of such change or effect; provided,
however, no VTEL Material Adverse Effect shall be deemed to have occurred
hereunder (i) as a result of customers of VTEL deferring or delaying orders as a
result of the announcement of the execution of this Agreement, (ii) if the
financial condition or results of operations of VTEL's business are not
materially and adversely different from those announced with respect to VTEL's
quarter ended October 31, 1996, or (iii) as a result of the Company employee
departures after the announcement of the execution of this Agreement. Section
4.01 of the Disclosure Schedule delivered by VTEL to the Company concurrently
with the execution of this Agreement (the "VTEL Disclosure Schedule") sets
forth, as of the date of this Agreement, a true and complete list of all of
VTEL's directly or indirectly owned subsidiaries, together with (a) the
jurisdiction of incorporation or organization of each such subsidiary and the
percentage of each such subsidiary's outstanding capital stock or other equity
interests owned by VTEL or another subsidiary of VTEL and (b) an indication of
whether each such subsidiary is a "Significant Subsidiary" as defined in Section
9.03 of this Agreement.
Section 4.02. Certificate of Incorporation and Bylaws. VTEL has
heretofore furnished or made available to the Company complete and correct
copies of the Certificate of Incorporation and Bylaws, in each case as amended
or restated to the date hereof, of VTEL and Merger Sub. Neither VTEL nor any of
its subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws (or equivalent organizational documents).
Section 4.03. Capitalization.
(a) The authorized capital stock of VTEL consists of
25,000,000 shares of VTEL Common Stock, par value $.01 per share ("VTEL
Common Stock"), and 10,000,000 shares of preferred stock, par value
$.01 per share ("VTEL Preferred Stock"). As of December 1, 1996,
13,940,567 shares of VTEL Common Stock were issued and outstanding,
407,848 shares of VTEL Common Stock were held by VTEL in its treasury,
and 2,951,915 shares of VTEL Common Stock were reserved for issuance as
follows: (i) 1,973,471 shares were reserved for issuance upon exercise
of stock options heretofore granted or available for grant pursuant to
VTEL's 1989 Stock Option Plan; (ii) 700,000 shares were reserved for
issuance upon exercise of stock options heretofore granted or available
for grant pursuant to VTEL's 1996 Stock Option Plan; (iii) 195,276
shares were reserved for issuance upon the purchase of shares under the
VTEL Employee Stock Purchase Plan; and (iv) 83,168 shares were reserved
for issuance upon exercise of stock options heretofore granted or
available for grant pursuant to the VTEL 1992 Director Plan (the stock
option plans referenced in clauses (i) through (iv) of this section
being herein collectively called the "VTEL Option Plans"). No shares of
VTEL Preferred Stock are issued or outstanding. Except as described in
this Section 4.03 or in Section 4.03(a) of
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<PAGE>
the VTEL Disclosure Schedule, no shares of capital stock of VTEL are
reserved for issuance for any other purpose. Each of the issued shares
of capital stock of, or other equity interests in, each of VTEL and its
subsidiaries is duly authorized, validly issued and, in the case of
shares of capital stock, fully paid and nonassessable, and have not
been issued in violation of (nor are any of the authorized shares of
capital stock of, or other equity interests in, VTEL or an of its
subsidiaries subject to) any preemptive or similar rights created by
statute, the Certificate of Incorporation or Bylaws (or the equivalent
organizational documents) of VTEL or any of its subsidiaries, or any
agreement to which VTEL or any of its subsidiaries is a party or is
bound, and, except as set forth in Section 4.03(a) of the VTEL
Disclosure Schedule, all issued shares or other equity interests in the
subsidiaries of VTEL owned by VTEL or a subsidiary of VTEL are owned
free and clear of all security interests, liens, claims, pledges,
agreements, limitations on VTEL's or such subsidiary's voting rights,
charges or other encumbrances of any nature whatsoever.
(b) No bonds, debentures, notes or other indebtedness of VTEL
having the right to vote (or convertible into or exchangeable or
exercisable for securities having the right to vote) on any matters on
which stockholders may vote ("VTEL Voting Debt") are issued or
outstanding. All shares of VTEL Common Stock which may be issued upon
exercise of stock options granted pursuant to the VTEL Option Plans
will, when issued in accordance with the terms of such stock options
and the related VTEL Option Plans, be validly issued, fully paid and
nonassessable and not subject to preemptive rights
(c) Except as set forth in Section 4.03(a) above or in Section
4.03(c) of the VTEL Disclosure Schedule, there are no options, warrants
or other rights (including registration rights), agreements,
arrangements or commitments of any character to which VTEL or any of
its subsidiaries is a party relating to the issued or unissued capital
stock of VTEL or any of its subsidiaries or obligating VTEL or any of
its subsidiaries to grant, issue or sell any shares of capital stock,
VTEL Voting Debt or other equity interests of VTEL or any of its
subsidiaries. Except as set forth in Section 4.03(c) of the VTEL
Disclosure Schedule, there are no obligations, contingent or otherwise,
of VTEL or any of its subsidiaries (i) to repurchase, redeem or
otherwise acquire any shares of VTEL Common Stock or other capital
stock of VTEL or the capital stock of any subsidiary of VTEL or (ii)
other than advances to wholly owned subsidiaries in the ordinary course
of business, to provide funds to, or to make any investment in (in the
form of a loan, capital contribution or otherwise), or to provide any
guarantee with respect to the obligations of, any subsidiary of VTEL or
any other person. Except as set forth in Section 4.03(c) of the VTEL
Disclosure Schedule, neither VTEL nor any of its subsidiaries (x)
directly or indirectly owns, (y) has agreed to purchase or otherwise
acquire or (z) holds any interest convertible into or exchangeable or
exercisable for the capital stock or other equity interests
representing 5% or more of the capital stock in equity interests of any
corporation, partnership, joint venture or other business association
or entity. Except as set forth in Section 4.03(c) of the VTEL
Disclosure Schedule or for any agreements,
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arrangements or commitments between VTEL and its wholly owned
subsidiaries or between such wholly owned subsidiaries, there are no
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any person is or may be entitled to
receive any payment based on, or calculated in accordance with, the
revenues or earnings of VTEL or any of its subsidiaries. Except as set
forth in Section 4.03(c) of the VTEL Disclosure Schedule, there are no
voting trusts, proxies or other agreements or understandings to which
VTEL or any of its subsidiaries is a party or by which VTEL or any of
its subsidiaries is bound with respect to the voting of any shares of
capital stock or other equity interests of VTEL or any of its
subsidiaries.
(d) The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, par value $.0l per share ("Merger Sub
Common Stock"). An aggregate of 1,000 shares of Merger Sub Common Stock
are issued and outstanding and held by VTEL, all of which are duly
authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights created by statute, Merger Sub's
Certificate of Incorporation or Bylaws or any agreement to which Merger
Sub is a party or is bound.
(e) The shares of VTEL Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute,
VTEL's Certificate of Incorporation or Bylaws or any agreement to which
VTEL is a party or is bound.
Section 4.04. Authority. Each of the VTEL Companies has all requisite
corporate power and authority to execute and deliver this Agreement and the
Stock Option Agreement to which it is a party and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Stock Option
Agreement by each of the VTEL Companies and the performance by each of the VTEL
Companies of its obligations hereunder and thereunder, including the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of either of the VTEL Companies are necessary to authorize this
Agreement and the Stock Option Agreement or to consummate the transactions
contemplated hereby and thereby (subject to, with respect to the Merger, the
approval and adoption of this Agreement by the stockholders of VTEL as set forth
in Section 6.01 of this Agreement). This Agreement and the Stock Option
Agreement have been duly executed and delivered by each of the VTEL Companies
and, assuming the due authorization, execution and delivery hereof by the
Company, constitute the legal, valid and binding obligation of each of the VTEL
Companies, enforceable against each of the VTEL Companies in accordance with
their terms.
Section 4.05. No Conflict: Required Filings and Consents.
(a) Except as otherwise disclosed in Section 4.05(a) of
the VTEL Disclosure Schedule, the execution and delivery of this
Agreement and the Stock Option Agreement
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<PAGE>
by each of the VTEL Companies which are parties thereto do not, and
performance by each of them of their obligations hereunder and
thereunder, including the consummation of the transactions contemplated
hereby and thereby, will not (i) conflict with or violate the
Certificate of Incorporation or Bylaws, or the equivalent
organizational documents, in each case as amended or restated, of VTEL
or any of VTEL's Significant Subsidiaries, (ii) conflict with or
violate any Laws in effect as of the date of this Agreement or any
judgment, order or decree to which VTEL or any of VTEL's subsidiaries
is a party or by or to which any of their properties are bound or
subject or (iii) result in any breach of or constitute a default (or an
event that with or without notice or lapse of time or both would become
a default) under, or impair any of VTEL's or any of its Subsidiaries'
rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of
a lien or encumbrance on any of the properties or assets of VTEL or any
of VTEL's subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract agreement, lease, license, permit, franchise or
other instrument or obligation to which VTEL or any of VTEL's
subsidiaries is a party or by or to which VTEL or any of VTEL's
subsidiaries or any of their respective properties is bound or subject
(including, but not limited to, any license agreement, contract or
other arrangement of any nature relating to VTEL Intellectual Property
Rights or VTEL Third Party Intellectual Property Rights (as these terms
are hereinafter defined), excluding from the foregoing clauses (ii) and
(iii) any such conflicts, violations, breaches, defaults, events,
rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that could not reasonably be
expected to have a VTEL Material Adverse Effect.
(b) The execution and delivery of this Agreement and the Stock
Option Agreement by each of the VTEL Companies which are parties
thereto does not, and the performance by each of the VTEL Companies of
its respective obligations hereunder and thereunder, including
consummation of the transactions contemplated hereby and thereby, will
not, require either of the VTEL Companies to obtain any consent
license, permit, waiver, approval, authorization or order of, or to
make any filing with or notification to, any Governmental Entity,
except (i) for (A) applicable requirements, if any, of the Securities
Act, the Exchange Act, and Blue Sky Laws, and (B) the pre-merger
notification requirements of the HSR Act, (ii) the filing and
recordation of appropriate merger documents as required by the DGCL,
and (iii) where the failure to obtain such consents, licenses, permits,
waivers, approvals, authorizations or orders, or to make such filings
or notifications could not individually or in the aggregate reasonably
be expected to cause a VTEL Material Adverse Effect or to materially
impair or delay the ability of either of the VTEL Companies from
performing their respective obligations under this Agreement and the
Stock Option Agreement.
Section 4.06. Permits; Compliance. Except as disclosed in Section
4.06 of the VTEL Disclosure Schedule, each of VTEL and its subsidiaries
is in possession of all Permits necessary to own, lease and operate
their properties and to carry on their businesses as they are now being
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<PAGE>
conducted except where the failure to possess such Permits could not reasonably
be expected to have a VTEL Material Adverse Effect. Except as disclosed in
Section 4.06 of the VTEL Disclosure Schedule, as of the date of this Agreement,
there are no actions, proceedings, or investigations pending or, to the
knowledge of VTEL, threatened against VTEL or any of its subsidiaries that could
reasonably be expected to result in the loss, revocation, suspension or
cancellation of a Permit held by VTEL or a subsidiary of VTEL, except for any
suspension, loss or revocation that could not reasonably be expected to have a
VTEL Material Adverse Effect. Except as disclosed in Section 4.06 of the VTEL
Disclosure Schedule, neither VTEL nor any of its subsidiaries is in conflict
with, or in default under or violation of, nor has it received, since December
31, 1993, from any Governmental Entity any written notice with respect to
possible conflicts with, defaults under or violations of (a) any Law applicable
to VTEL or any of its subsidiaries or by or to which any of their respective
properties are bound or subject, (b) any judgment, order or decree applicable to
VTEL or any of its subsidiaries or (c) any Permits held by VTEL or a subsidiary
of VTEL, except for any such conflicts, defaults or violations that individually
or in the aggregate could not reasonably be expected to have a VTEL Material
Adverse Effect.
Section 4.07. Reports: Financial Statements.
(a) Since December 31, 1993, VTEL and its subsidiaries have
filed all forms, reports, statements and other documents required to be
filed with the SEC, including, without limitation, (i) all Annual
Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii)
all proxy statements relating to meetings of stockholders (whether
annual or special), (iv) all Current Reports on Form 8-K and (v) all
other reports, schedules, registration statements or other documents
(collectively referred to as the "VTEL SEC Reports"). As of their
respective dates, the VTEL SEC Reports complied in all material
respects with the requirements of applicable Law (including the
Securities Act or the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to the VTEL SEC
Reports) and the VTEL SEC Reports, including, without limitation, any
financial statements or schedules included therein, did not at the time
they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) VTEL has heretofore delivered to the Company (i)
consolidated balance sheets of VTEL and its subsidiaries as of December
31, 1993, December 31, 1994 and December 31, 1995 and as of July 31,
1996 and (ii) consolidated statements of income, stockholders' equity
and cash flows for each of the three years and seven months then ended
certified by Price Waterhouse LLP, reports thereon are included
therewith. VTEL has also delivered to the Company (i) an unaudited
consolidated balance sheet of VTEL and its subsidiaries as of October
31, 1996, and (ii) unaudited consolidated statements of income,
stockholders' equity and cash flows for the three months then ended.
Such audited and unaudited consolidated financial statements, including
any such financial
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statements and schedules contained in the VTEL SEC reports (or
incorporated by reference therein) (i) are in accordance with the books
and records of VTEL and its subsidiaries in all material respects and
have been prepared in accordance with the published rules and
regulations of the SEC and generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except
(A) to the extent disclosed therein or required by changes in generally
accepted accounting principles, (B) with respect to the VTEL SEC
Reports filed prior to the date of this Agreement, as may be indicated
in the notes thereto and (C) in the case of the unaudited financial
statements, as permitted by the rules and regulations of the SEC) and
(ii) fairly present in all material respects the consolidated financial
position of VTEL and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for
the periods indicated (except, in the case of unaudited consolidated
financial statements for interim periods, for the absence of footnotes
and subject to adjustments, consisting only of normal, recurring
accruals, necessary to present fairly such results of operations and
cash flows).
(c) Except as and to the extent set forth on the consolidated
balance sheet of the VTEL and its subsidiaries as of December 31, 1995,
including the notes thereto, or in the Company's Annual Report Form
10-K for the transition period ended July 31, 1996, or in VTEL's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1996,
neither VTEL or any of its subsidiaries has any liabilities or
obligations material to VTEL and its subsidiaries which are not
referenced on such balance sheet or in such Annual Report on Form 10-K.
Except as set forth in Section 4.07 of the VTEL Disclosure Schedule
since the date of the VTEL's Transition Report on Form 10-K for the
seven month transition period ended July 31, 1996, neither VTEL nor its
subsidiaries has incurred any liabilities except for (i) liabilities or
obligations incurred in the ordinary course of business and consistent
with past practice, (ii) liabilities incurred in connection with or as
a result of the Merger and (iii) liabilities or obligations which do
not have a VTEL Material Adverse Effect.
Section 4.08. Absence of Certain Changes or Events. Except as disclosed
in the VTEL SEC Reports filed prior to the date of this Agreement or as set
forth in Section 4.08 of the VTEL Disclosure Schedule, since December 31, 1995,
VTEL and its subsidiaries have conducted their respective businesses only in the
ordinary course and in a manner consistent with past practice and there has not
been (a) any damage, destruction or loss with respect to any assets of VTEL or
any of its subsidiaries that, whether or not covered by insurance, would
constitute a VTEL Material Adverse Effect, (b) any change by VTEL or its
subsidiaries in their significant accounting policies or (c) any VTEL Material
Adverse Effect.
Section 4.09. Absence of Litigation. Except as set forth in Section
4.09 of the VTEL Disclosure Schedule, there is no claim, action, suit,
litigation, proceeding, arbitration or, to the knowledge of VTEL, investigation
of any kind, at law or in equity (including actions or proceedings seeking
injunctive relief), pending or, to the knowledge of VTEL, threatened against
VTEL or any of its subsidiaries or any properties or rights of VTEL or any of
its subsidiaries, and
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neither VTEL nor any of its subsidiaries is subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of VTEL, continuing investigation by, any Governmental
Entity, or any judgment, order, writ, injunction, decree or award of any
Governmental Entity or arbitrator, including, without limitation,
ceaseand-desist or other orders.
Section 4.10. Intellectual Rights.
(a) VTEL owns, or is licensed or otherwise possesses legally
sufficient rights to use, all patents, trademarks, trade names, service
marks, copyrights, maskworks and any applications therefor, technology,
know-how, video and audio compression algorithms, computer software
programs or applications (in both source code and object code form) and
tangible or intangible proprietary information or material that are
used or proposed to be used in the business of VTEL as currently
conducted. Section 4.10 of the VTEL Disclosure Schedule lists all
current patents, registered and material unregistered copyrights,
maskworks, trade names and any applications therefor owned by VTEL (the
"VTEL Intellectual Property Rights"), and specifies the jurisdictions
in which each such Intellectual Property Right has been issued or
registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Section
4.10 of VTEL's Disclosure Schedule includes and specifically identifies
all material third-party patents, trademarks, copyrights (including
software) and maskworks (the "VTEL Third Party Intellectual Property
Rights"), to the knowledge of VTEL, which are incorporated in, are, or
form a part of, any VTEL product, excluding any such intellectual
property rights that are available on a commodity basis (such as
"shrink wrap" licenses) and which are non-exclusive, terminable and
available for a standard fee. Section 4.10 of the VTEL Disclosure
Schedule lists (i) all material licenses, sublicenses and other
agreements as to which VTEL is a party and pursuant to which any person
is authorized to use any VTEL Intellectual Property Rights, or any
trade secret material to VTEL or any of its subsidiaries; and (ii) all
material licenses, sublicenses and other agreements as to which VTEL is
a party and pursuant to which VTEL is authorized to use any VTEL Third
Party Intellectual Property Rights, or other trade secret of a third
party in or as any product, and includes the identity of all parties
thereto, a description of the nature and subject matter thereof and the
term thereof.
(b) VTEL is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any license, sublicense or agreement
described in Section 4.10(a) of the VTEL Disclosure Schedule. No claims
with respect to VTEL Intellectual Property Rights, any trade secret
material to VTEL, or VTEL Third Party Intellectual Property Rights to
the extent arising out of any use, reproduction or distribution of such
VTEL Third Party Intellectual Property Rights by or through VTEL, are
currently pending or, to the knowledge of VTEL, are threatened by any
person, nor does VTEL know of any valid grounds for any bona fide
claims (i) to
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the effect that the manufacture, sale, licensing or use of any product
as now used, sold or licensed or proposed for use, sale or license by
VTEL infringes on any copyright, maskwork, patent, trademark, service
mark or trade secret; (ii) against the use by VTEL of any trademarks,
trade names, trade secrets, copyrights, maskworks, patents, technology,
know-how, video and audio compression algorithms, or computer software
programs and applications used in VTEL's business as currently
conducted or as proposed to be conducted by VTEL; (iii) challenging the
ownership, validity or effectiveness of any VTEL Intellectual Property
Rights or other trade secret material to VTEL; or (iv) challenging
VTEL's license or legally enforceable right to use of the VTEL Third
Party Intellectual Rights. To VTEL's knowledge, all material patents,
registered trademarks, maskworks and copyrights held by VTEL are valid
and subsisting. To VTEL's knowledge, there is no material unauthorized
use, infringement or misappropriation of any VTEL Intellectual Property
by any third party, including any employee or former employee of VTEL
or any of the its subsidiaries. Except as set forth in Section 4.10(b)
of the VTEL Disclosure Schedule, neither VTEL nor any of its
subsidiaries (i) has been sued or charged in writing as a defendant in
any claim, suit, action or proceeding which involves a claim or
infringement of trade secrets, any patents, trademarks, service marks,
maskworks or copyrights and which has not been finally terminated prior
to the date hereof or been informed or notified by any third party that
VTEL may be engaged in such infringement or (ii) has knowledge of any
infringement liability with respect to, or infringement by, VTEL or any
of its subsidiaries of any trade secret, patent, trademark, service
mark, maskwork or copyright of another.
(c) Each employee of VTEL has executed a confidentiality,
invention and copyright agreement with VTEL in the forms previously
made available to the Company.
Section 4.11. Transactions with Management. Except as disclosed in the
VTEL SEC Reports, no executive officer, director or stockholder of VTEL or any
of its subsidiaries has, since December 31, 1994, engaged in any business
dealings with the Company or any of its subsidiaries, other than such business
dealings as would not be required to be disclosed in such documents or reports
pursuant to the Securities Act and the rules and regulations promulgated
thereunder.
Section 4.12. Vote Required. The only votes of the holders of any class
or series of VTEL capital stock necessary to approve the Merger and this
Agreement are the affirmative votes of the holders of not less than a majority
of the outstanding shares of VTEL Common Stock.
Section 4.13. Brokers. No broker, finder or investment banker
(other than Bear, Stearns & Co. Inc.) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of VTEL.
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Section 4.14. Opinion of Financial Advisor. VTEL has received the
written opinion of Bear, Stearns & Co. Inc. to the effect that, as of the date
of this Agreement, the Merger Consideration to be paid by VTEL is fair, from a
financial point of view, to the holders of VTEL Common Stock. VTEL will promptly
deliver a copy of such opinion to the Company.
Section 4.15. Board Recommendations. By a unanimous vote of the
directors present at a meeting of VTEL's Board of Directors (which meeting was
duly called and held and at which a quorum was present at all times), the Board
of Directors of VTEL (a) approved and adopted this Agreement and the other
transactions contemplated herein, and determined that the Merger is fair to the
stockholders of VTEL, and (b) resolved to recommend approval and adoption of
this Agreement, including the Merger and the other transactions contemplated
herein, by the stockholde