<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-Q
(x) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997 or
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-28432
Boston Communications Group, Inc.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3026859
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Sylvan Road, Woburn, Massachusetts 01801
--------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (617)692-7000
-----------------------------------------------------------------
-----------------------------------------------------------------
(Former name, former address, former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of October 30, 1997 the Company had outstanding 16,156,292 shares of common
stock, $.01 par value per share.
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE NUMBER
<S> <C> <C>
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets.........................................3
Consolidated Statements of Operations...............................4
Consolidated Statements of Cash Flows...............................5
Notes to Consolidated Financial Statements..........................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................8
Certain Factors That May Affect Future Results.....................12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings..................................................14
Item 6. Exhibits and Reports on Form 8-K...................................14
</TABLE>
2
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS December 31, September 30,
1996 1997
---- ----
<S>
Current assets:
Cash and cash equivalents $ 923 $29,099
Short-term investments 20,498 5,068
Accounts receivable, net of allowance for
billing adjustments and doubtful accounts
of $ 1,242 in 1996 and $ 1,197 in 1997 11,060 15,043
Inventory 1,189 2,348
Deferred income taxes 1,334 1,334
Prepaid expenses and other assets 495 1,144
------- -------
Total current assets 35,499 54,036
Property and equipment, net 12,906 35,856
Goodwill, net 3,159 4,219
Other assets 395 470
------- -------
Total assets $51,959 $94,581
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,371 $ 2,263
Accrued expenses 7,205 7,511
Income taxes payable 490 644
Current maturities of capital lease obligations - 1,115
------- -------
Total current liabilities 9,066 11,533
Long-term capital lease obligations - 1,899
Shareholders' equity:
Preferred Stock, par value $.01
per share, 2,000,000 shares authorized,
0 shares issued and outstanding - -
Common Stock, voting, par value $.01 per share,
35,000,000 shares authorized, 12,725,749 and 16,201,812
shares issued in 1996 and 1997, respectively 127 162
Additional paid-in capital 52,738 90,722
Treasury stock (46,420 shares, at cost) (372) (372)
Accumulated deficit (9,600) (9,363)
------- -------
Total shareholders' equity 42,893 81,149
------- -------
Total liabilities and shareholders' equity $51,959 $94,581
======= =======
</TABLE>
3
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Roaming services $ 8,873 $ 9,241 $24,414 $24,301
Teleservices 3,272 4,369 10,422 12,534
Prepaid wireless services 42 2,571 111 4,874
System sales 1,726 1,852 2,959 8,296
------- ------- ------- -------
13,913 18,033 37,906 50,005
Expenses:
Cost of service revenues 9,763 11,954 27,538 32,255
Cost of system revenues 1,076 814 1,666 4,549
Engineering, research and development 957 1,593 2,120 3,790
Sales and marketing 680 1,358 1,875 3,651
Related party management fees - - 252 -
General and administrative 607 833 1,711 2,306
Depreciation and amortization 557 1,534 1,394 3,627
------- ------- ------- -------
Total operating expenses 13,640 18,086 36,556 50,178
------- ------- ------- -------
Operating income(loss) 273 (53) 1,350 (173)
Interest income, net 341 254 260 651
------- ------- ------- -------
Income before income taxes 614 201 1,610 478
Provision for income taxes 283 100 706 241
------- ------- ------- -------
Net income 331 101 904 237
Accretion of dividends on redeemable
preferred stock - - (451) -
------- ------- ------- -------
Net income available to common
shareholders $ 331 $ 101 $ 453 $ 237
======= ======= ======= =======
Net income available to common
shareholders per common share $ 0.03 $ 0.01 $ 0.04 $ 0.02
======= ======= ======= =======
Shares used in computing net income
available to common shareholders
per common share 13,135 15,154 10,601 13,895
======= ======= ======= =======
</TABLE>
4
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1996 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 904 $ 237
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,394 3,626
Deferred income taxes 525 -
Changes in operating assets and liabilities,
excluding effect of business acquisitions:
Accounts receivable (4,164) (3,983)
Inventory (682) (1,159)
Prepaid expenses and other assets (556) (724)
Accounts payable and accrued expenses 1,438 1,198
Income taxes payable (132) 154
-------- --------
Net cash used in operations (1,273) (651)
INVESTING ACTIVITIES
Acquisition of business, net of cash acquired (534) (1,398)
Investment in non-marketable securities (110) -
Purchase of property and equipment (5,378) (23,056)
Sales of short-term investments - 20,817
Purchases of short term investments (21,243) (5,387)
-------- --------
Net cash used in investing activities (27,265) (9,024)
FINANCING ACTIVITIES
Proceeds from exercise of stock options 26 2,227
Proceeds from issuance of common stock 49,792 35,792
Repurchase of redeemable preferred stock (16,347) -
Payment of capital leases (183) (168)
-------- --------
Net cash provided by financing activities 33,288 37,851
-------- --------
Increase in cash and cash equivalents 4,750 28,176
Cash and cash equivalents at beginning of period 253 923
-------- --------
Cash and cash equivalents at end of period $ 5,003 $ 29,099
======== ========
Supplemental disclosure of noncash transactions:
Capital lease obligations $ 1,507 $ 3,182
======== ========
Shares issued in connection with acquisition of
business $ 2,000
========
</TABLE>
5
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements have been prepared by the
Company, without audit, and reflect all adjustments which in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. All adjustments were of a normal recurring nature.
Certain information and footnote disclosures normally included in the annual
consolidated financial statements which are prepared in accordance with
generally accepted accounting principles have been condensed or omitted in
accordance with rules of the United States Securities and Exchange
Commission. Accordingly, the Company believes that although the disclosures
are adequate to make the information presented not misleading, the
consolidated financial statements should be read in conjunction with the
footnotes contained in the Company's Form 10-K for the fiscal year ended
December 31, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standard No. 128, "Earnings Per Share" which simplifies the
calculation of earnings per share (EPS) and creates a standard of
comparability to the recently issued International Accounting Standard No.
33, "Earnings Per Share". Since early application is not permitted, the
Company will adopt this standard in the fourth quarter of 1997. Its adoption
does not have a material effect on the Company's financial position or
results of operations in the first nine months of 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." Both SFAS No. 130 and SFAS No. 131 are effective for fiscal
years beginning after December 15, 1997. The Company believes that the
adoption of these new accounting standards will not have a material impact on
the Company's consolidated financial statements.
2. Inventory
Inventories consisted of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Purchased parts $2,028 $ 984
Work-in-process 320 129
Finished goods - 76
------ ------
$2,348 $1,189
====== ======
</TABLE>
6
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Public Offering
The Company issued three million shares of common stock through a public
offering in August 1997, resulting in net proceeds to the Company(after
deducting expenses) of $35.8 million. The net proceeds are being used for
capital and other expenditures in connection with the expansion of the C2C
Network. $1.3 million of the net proceeds were used to purchase the
remaining 20% interest in Wireless Americas Corp. (WAC). The Company expects
to use the balance of the net proceeds for general corporate purposes,
including working capital.
4. Acquisition of Minority Interest
In August 1997, the Company paid $1.3 million (plus expenses) to purchase the
final 20% interest in WAC and recorded this amount as goodwill, amortizable
over eight years.
5. Capital Lease Obligations
During the third quarter, the Company financed the acquisition of $3.2
million of telecommunications equipment and software through a master lease
agreement which was accounted for as a capital lease. The lease is a three
year obligation, payable in equal monthly installments at an interest rate of
approximately 8.5% per annum.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - September 30, 1996 and 1997
- ---------------------------------------------------
Service and system revenues
- ---------------------------
Total revenues increased 29.5% from $13.9 million in the three months ended
September 30, 1996 to $18.0 million in the three months ended September 30, 1997
and increased 31.9% from $37.9 million in the nine months ended September 30,
1996 to $50.0 million in the nine months ended September 30, 1997.
Roaming service revenues increased 4.1% or $368,000 from the three months ended
September 30, 1996 to the same period ended September 30, 1997. The increase was
primarily due to the addition of AT&T calling cards as a billing method for
users of the roaming services system. Roaming services revenues decreased 0.5%
or $113,000 from the nine months ended September 30, 1996 to the same period
ended September 30, 1997. The decrease in roaming service revenues resulted
from declining trends in industry-wide cellular roaming and the decrease in the
frequency of the suspension of intercarrier roaming agreements due to improved
fraud controls implemented by the carriers, partially offset by the new billing
methods available during the third quarter.
Teleservice revenues increased 33.3% or $1.1 million and 20.2% or $2.1 million,
respectively, for the three month and nine month periods ended September 30,
1997 compared to the same periods in the prior year. The increase resulted
primarily from additional service programs provided to new carrier customers,
the expansion of services provided to existing customers and the addition of
teleservice programs for users of the Company's prepaid wireless services.
Revenues generated from prepaid wireless services increased from $42,000 to $2.6
million and $111,000 to $4.9 million, respectively for the three and nine month
periods ended September 30, 1997 as compared to the same periods in the prior
year. The increases were due to the increase in the number of markets where C2C
prepaid services were commercially available, a corresponding increase in usage
in those markets and implementation fees associated with certain newly deployed
markets. As of September 30, 1997, forty-six C2C Network switches were deployed
in various markets throughout the United States. Of these switches, thirty-four
were fully operational and processing live transactions by the end of the third
quarter.
System sales increased 7.3% or $126,000 from the three month period ended
September 30, 1996 to the same period ended September 30, 1997 and increased
176.7% or $5.3 million from the nine month period ended September 30, 1996 to
the same period ended September 30, 1997. The increases resulted primarily from
the sale of systems to continue the expansion of prepaid wireless systems
throughout Mexico and South America.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - September 30, 1996 and 1997 (continued)
- ---------------------------------------------------------------
Cost of service revenues
- ------------------------
Cost of service revenues consist primarily of cellular network and landline
costs to support both roaming and prepaid wireless services in addition to the
direct labor and benefits associated with operator-assisted roaming service
calls and teleservice calls. Cost of service revenues increased from $9.8
million or 80.3% of service revenues for the three months ended September 30,
1996 to $12.2 million or 74.1% of service revenues for the three months ended
September 30, 1997. Cost of service revenues increased from $27.5 million or
78.8% of service revenues for the nine months ended September 30, 1996 to $32.3
million or 77.5% of service revenues for the nine months ended September 30,
1997. The decreases in cost of service revenues as a percentage of service
revenues were due primarily to a significant increase in prepaid wireless
service revenues that did not have a corresponding increase in costs in addition
to new and existing teleservice programs whose call volume distributions and
program terms resulted in labor efficiencies.
Cost of system revenues
- -----------------------
Cost of system revenues represents the cost of prepaid and voice systems sold.
Cost of system revenues decreased from 64.7% of system revenues for the three
months ended September 30, 1996 to 44.0% of system revenues for the three months
ended September 30, 1997 and decreased from 56.7% of system revenues for the
nine months ended September 30, 1996 to 54.2% of system revenues for the nine
months ended September 30, 1997. The decrease in cost of system revenues as a
percentage of system revenues for the three and nine month periods ended
September 30, 1997, resulted from sales to one customer in the third quarter of
1997 and the reduction of overhead costs as a percentage of sales.
Engineering, research and development expenses
- ----------------------------------------------
Engineering, research and development expenses include primarily the salaries
and benefits for software development and engineering personnel associated with
the development, implementation and maintenance of existing and new services.
Engineering, research and development expenses increased $636,000 or 66.5% from
the three months ended September 30, 1996 to the three months ended September
30, 1997 and increased $1.7 million or 81.0% from the nine months ended
September 30, 1996 to the nine months ended September 30, 1997. The increases
were principally due to the costs associated with the Company's hiring of new
personnel to support the development, implementation and deployment of the C2C
Network and, to a lesser extent, additional personnel to support the expansion
of teleservices. Engineering, research and development expenses are expected to
continue to increase as additional personnel are added to support the growth of
the C2C Network.
Sales and marketing expenses
- ----------------------------
Sales and marketing expenses include direct sales force and product management
salaries and commissions, travel expenses, and the cost of trade shows,
advertising and other promotional expenses. Sales and marketing expenses
increased $678,000 or 99.7% from the three months ended September 30, 1996 to
the three months ended September 30, 1997 and increased $1.8 million or 94.7%
from the nine months ended September 30, 1996 to the nine months ended September
30, 1997. The increase in sales and marketing expenses was primarily due to
additional salaries, commissions, benefits and other expenditures to support the
more sales-intensive prepaid wireless service business. In addition, the
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - September 30, 1996 and 1997 (continued)
- ---------------------------------------------------------------
Sales and marketing expenses (continued)
- ----------------------------------------
acquisitions of Voice Systems Technology Inc. (VST) and WAC in 1996 resulted in
the Company incurring increased expenditures to support system sales globally.
General and administrative expenses
- -----------------------------------
General and administrative expenses include salaries, benefits and other
expenses of personnel that provide administrative support to the Company.
General and administrative expenses and related party management fees increased
$226,000 or 37.2% from the three months ended September 30, 1996 to the three
months ended September 30, 1997. For the nine months ended September 30, 1997
general and administrative expenses increased $343,000 or 17.5% from the same
period in the prior year. The increases resulted principally from the addition
of staff to support the growth of the Company's operations and to a lesser
extent, the costs associated with being a publicly traded company.
Depreciation and amortization expenses
- --------------------------------------
Depreciation and amortization expenses include depreciation of
telecommunications systems, furniture and equipment, leasehold improvements and
goodwill. The Company provides for depreciation using the straight-line method
over the estimated useful lives of the assets, which range from three to seven
years. Goodwill related to the acquisitions of VST and WAC is being amortized
over eight years. Depreciation and amortization expenses increased $977,000 or
175.4% and $2.2 million or 157.1%, respectively, during the three and nine month
periods ended September 30, 1997 compared to the same periods in the prior year.
The increases were due primarily to amortization of goodwill from the Company's
two acquisitions and depreciation of additional telecommunications equipment and
software to support the Company's roaming services, teleservices and prepaid
wireless services. In addition, the expansion of the Company's call centers and
system assembly facility resulted in increased depreciation of furniture and
equipment and leasehold improvements. Depreciation and amortization expenses
are expected to continue to increase due to a full year of goodwill amortization
from the VST and WAC acquisitions and increased depreciation of
telecommunications systems associated with teleservices and the expansion of the
C2C Network.
Interest income, net
- --------------------
Interest income decreased $87,000 and increased $391,000, respectively, for the
three and nine month periods ended September 30, 1997 as compared to the same
periods in the prior year. The Company received net proceeds from an initial
public offering in June 1996 and a public offering in August 1997. The interest
income earned has varied due to the timing of the offerings.
Provision for income taxes
- --------------------------
The Company's effective income tax rate for the three and nine month periods
ended September 30, 1997 reflects an increase from the prior year due to the
non-deductibility of goodwill amortization from the acquisitions of VST and WAC.
The effective income tax rate is expected to continue to be greater than 40% for
the remainder of 1997 due to the impact of non-deductible goodwill.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - September 30, 1996 and 1997 (continued)
- ---------------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997 the Company had cash, cash equivalents and short term
investments of $34.2 million as compared to $21.4 million at December 31, 1996.
The increase is primarily attributable to proceeds received from the Company's
public offering of common stock in August 1997.
Net cash used in operating activities for the nine months ended September 30,
1997 was $651,000 and resulted from an increase of accounts receivable and
inventory partially offset by an increase in accounts payable and accrued
expenses. Accounts receivable increased due to an increase in all service
revenues and the sale of systems to Latin America. Inventory increased to
support the increasing sales of systems. Accounts payable and accrued expenses
increased as a result of increases in capital expenditures and costs associated
with the overall growth of the Company.
Net cash used in investing activities was $9.0 million for the nine months ended
September 30, 1997 and consisted primarily of the purchase of telecommunications
equipment to support the Company's C2C Network and the expansion of the
teleservices business, partially offset by the sales of short-term investments
to complete these purchases.
Net cash provided by financing activities for the nine months ended September
30, 1997 was $37.9 million and consisted principally of the net proceeds from
the Company's August 1997 public offering. The net proceeds are being used, in
part, for capital and other expenditures in connection with the expansion of the
C2C Network. $1.3 million of the net proceeds were used to purchase the
remaining 20% interest in WAC. The Company expects to use the balance of the
net proceeds for general corporate purposes, including working capital.
In July 1997, the Company entered into a Master Equipment Lease Agreement to
finance $3.2 million of telecommunications equipment to expand and enhance its
teleservices and prepaid wireless service businesses. The lease is a three year
obligation, payable in equal monthly installments at an interest rate of
approximately 8.5% per annum.
The Company believes that existing cash balances and funds anticipated to be
generated from operations will be sufficient to finance the Company's operations
and the expansion of the C2C Network for at least the next 12 months.
11
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. A number of uncertainties
exist that could affect the Company's future operating results, including,
without limitation, technological changes in the Company's industry, the ability
of the Company to continue to develop and successfully deploy its C2C Network,
the Company's ability to retain existing customers and attract new customers,
increased competition and general economic factors.
Historically, a significant portion of the Company's revenues in any particular
period has been attributable to a limited number of customers. This
concentration of customers can cause the Company's revenues and earnings to
fluctuate from quarter to quarter, based on the volume of call traffic generated
through these customers, the services being performed pursuant to teleservice
programs or the level of system sales. A significant decrease in business from
any of the Company's major customers, including a decrease in business due to
factors outside of the Company's control, would have a materially adverse effect
on the Company's business, financial condition and results of operations.
The Company has experienced fluctuations in its quarterly operating results and
anticipates that such fluctuations will continue and could intensify. The
Company experienced a significant reduction in its profitability in 1996 and an
operating loss in the first nine months of 1997, due to expenses associated with
the development of its C2C Network. The Company's quarterly operating results
may vary significantly depending on a number of factors, including the timing of
the introduction or acceptance of new services offered by the Company or its
competitors, changes in the mix of services provided by the Company, variations
in the level of system sales, changes in regulations affecting the wireless
industry, changes in the Company's operating expenses, personnel changes and
general economic conditions. Due to all of the foregoing factors, it is
possible that in some future quarter the Company's results of operations will be
below prior results or the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be
materially and adversely affected.
The Company historically has provided all of its services to cellular carriers.
Although the cellular market has experienced significant growth in recent years,
there can be no assurance that such growth will continue at similar rates, or at
all, or that cellular carriers will continue to use the Company's services. In
addition, the prepaid wireless service and PCS markets are in their initial
stages of development, and if these markets do not grow as expected or if the
carriers in these markets do not use the Company's services, the Company's
business, financial condition and results of operations could be materially and
adversely affected.
The Company's future success depends, in large part, on the continued use of its
existing services and systems, the acceptance of new services in the wireless
industry and the Company's ability to develop services and systems that keep
pace with changes in the wireless telephone industry. Further, a rapid shift
away from the use of cellular in favor of other service could affect demand for
the Company's service offerings and could require the Company to develop
modified or alternative service offerings addressing the particular needs of
providers of such new services. There can be no assurance that the Company will
be successful in developing or marketing its existing or future service
offerings or systems in a timely manner, or at all.
12
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company is currently devoting significant resources toward the continued
development and deployment of its prepaid wireless service or systems, including
continued expansion of its C2C Network. There can be no assurance that the
Company will continue to successfully expand the C2C Network or its prepaid
wireless service in a timely fashion, that the market for the Company's prepaid
wireless service and systems will continue to develop, that existing or pending
contracts will be implemented as expected or that the Company's C2C Network will
continue to operate successfully.
Recently, the Company has expanded its operations rapidly, which has created
significant demands on the Company's administrative, operational, development
and financial personnel and other resources. Additional expansion by the
Company may further strain the Company's management, financial and other
resources. There can be no assurance that the Company's systems, procedures,
controls and existing space will be adequate to support expansion of the
Company's operations. If the Company's management is unable to manage growth
effectively, the quality of the Company's services, its ability to retain key
personnel and its business, financial condition and results of operations could
be materially and adversely affected.
The market for services to wireless carriers is highly competitive and subject
to rapid change. A number of companies currently offer one or more of the
services offered by the Company. In addition, wireless carriers are providing
or can provide, in-house, the services that the Company offers. In addition,
the Company anticipates continued growth and competition in the wireless carrier
services industry and consequently, the entrance of new competitors in the
future. An increase in competition could result in price reductions and loss of
market share. Any resulting reduction in gross margins could have a material
adverse effect on the Company's business, financial condition or results of
operations.
The Company's success and ability to compete is dependent in part upon its
proprietary technology. If unauthorized copying or misuse of the Company's
technology were to occur to any substantial degree, the Company's business,
financial condition and results of operations could be materially adversely
affected. In addition, some of the software used to support the Company's
roaming services and prepaid wireless services and systems is licensed by the
Company from single vendors, which are small corporations. There can be no
assurance that these suppliers will continue to license this software to the
Company or, if any supplier terminates its agreement with the Company, that the
Company will be able to develop or otherwise procure software from another
supplier on a timely basis and at commercially acceptable prices.
The Company's operations are dependent on its ability to maintain its computer,
switching and other telecommunications equipment and systems in effective
working order and to protect its systems against damage from fire, natural
disaster, power loss, telecommunications failure or similar events. Any damage,
failure or delay that causes interruptions in the Company's operations could
have a materially adverse effect on the Company's business, financial condition
and results of operations.
13
<PAGE>
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings
In April 1997, the former President and 20% owner of WAC filed suit against
the Company and its 80% subsidiary, WAC. The suit related to WAC's
termination of the plaintiff's employment in March 1997 and asserted
certain rights which the plaintiff may have had to require the Company to
purchase his 20% interest in WAC. In July 1997, the Company and the
plaintiff agreed to settle all claims asserted by the plaintiff and the
Company purchased the plaintiff's 20% interest in WAC for $1.3 million.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The exhibits listed in the Exhibit Index are part of or
included in this report.
b) Reports on Form 8-K
NONE
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Boston Communications Group, Inc.
-------------------------------------
(Registrant)
Date: November 11, 1997 By: /s/ Paul J. Tobin
-----------------
Paul J. Tobin
Chief Executive Officer
and President
Date: November 11, 1997 By: /s/ Fritz von Mering
--------------------
Fritz von Mering
Vice President, Finance
and Administration (Principal
Financial and Accounting
Officer)
15
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED September 30, 1997
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.35 Master Equipment Lease Agreement between Boston Communications
Group, Inc. and Fleet Capital Corp. dated August 20, 1997
10.36 Distribution Rights Agreement between Voice Systems Technology,
Inc. d/b/a Boston Communications Group and Motorola dated May 15,
1997
10.37 Long Distance Service Agreement between Boston Communications
Group, Inc. and AT&T Corp. dated July 10, 1997
10.38 Purchase Agreement for Remaining 20% Interest in Wireless
Americas Corp. between Boston Communications Group, Inc. and
Robert Sproul dated July 25, 1997
11 Statement RE: Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
16
<PAGE>
Exhibit 10.35
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MASTER EQUIPMENT LEASE AGREEMENT No. 32426
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Fleet
Capital Leasing
LESSOR: FLEET CAPITAL CORPORATION LESSEE: BOSTON COMMUNICATIONS GROUP, INC.
a Rhode Island corporation a MASSACHUSETTS CORPORATION
Address: 50 Kennedy Plaza Address: 100 SYLVAN ROAD
Providence, Rhode Island 02903-2305 WOBURN, MA 01801
1. LEASE OF EQUIPMENT
Subject to the terms and conditions set forth herein (the "Master Lease") and
in any Lease Schedule incorporating the terms of this Master Lease (each, a
"Lease Schedule'"), Lessor agrees to lease to Lessee, and Lessee agrees to lease
from Lessor, the items and units of personal property described in each such
Lease Schedule, together with all replacements, parts, additions, accessories
and substitutions therefor (collectively, the "Equipment"). As used in this
Lease, the term "Item of Equipment" shall mean each functionally integrated and
separately marketable group or unit of Equipment subject to this Lease. Each
Lease Schedule shall constitute a separate, distinct and independent lease of
Equipment and contractual obligation of Lessee. References to "the Lease,"
"this Lease" or "any Lease" shall mean and refer to any Lease Schedule which
incorporates the terms of this Master Lease, together with all exhibits,
addenda, schedules, certificates, riders and other documents and instruments
executed and delivered in connection with such Lease Schedule or this Master
Lease, all as the same may be amended or modified from time to time. The
Equipment is to be delivered and installed at the location specified or referred
to in the applicable Lease Schedule. The Equipment shall be deemed to have been
accepted by Lessee for all purposes under this Lease upon Lessor's receipt of an
Acceptance Certificate with respect to such Equipment, executed by Lessee after
receipt of all other documentation required by Lessor with respect to such
Equipment. Lessor shall not be liable or responsible for any failure or delay
in the delivery of the Equipment to Lessee for whatever reason. As used in this
Lease, "Acquisition Cost" shall mean (a) with respect to all Equipment subject
to a Lease Schedule, the amount set forth as the Acquisition Cost in the Lease
Schedule and the Acceptance Certificate applicable to such Equipment; and (b)
with respect to any item of Equipment, the total amount of all vendor or seller
invoices (including Lessee invoices, if any) for such item of Equipment,
together with all acquisition fees and costs of delivery, installation, testing
and related services, accessories, supplies or attachments procured or financed
by Lessor from vendors or suppliers thereof (including items provided by Lessee)
relating or allocable to such item of Equipment ("Related Expenses"). As used
in this Lease with respect to any Equipment, the terms "Acceptance Date,"
"Rental Payment(s)," "Rental Payment Date(s)," "Rental Payment Numbers," "Rental
Payment Commencement Date," "Lease Term" and "Lease Term Commencement Date"
shall have the meanings and values assigned to them in the Lease Schedule and
the Acceptance Certificate applicable to such Equipment.
2. TERM AND RENT
The Lease Term for any Equipment shall be as specified in the applicable
Lease Schedule. Rental Payments shall be in the amounts and shall be due and
payable as set forth in the applicable Lease Schedule. Lessee shall, in
addition, pay interim rent to Lessor on a pro-rata, per-diem basis from the
Acceptance Date to the Lease Term Commencement Date set forth in the applicable
Acceptance Certificate, payable on such Lease Term Commencement Date. If any
rent or other amount payable hereunder shall not be paid within 10 days of the
date when due, Lessee shall pay as an administrative and late charge an amount
equal to 5% of the amount of any such overdue payment. In addition, Lessee
shall pay overdue interest on any delinquent payment or other amounts due under
the Lease (by reason of acceleration or otherwise) from 30 days after the due
date until paid at the rate of 1 1/2% per month or the maximum amount permitted
by applicable law, whichever is lower. All payments to be made to Lessor shall
be made to Lessor in immediately available funds at the address shown above, or
at such other place as Lessor shall specify in writing. THIS IS A NON-
CANCELABLE, NON-TERMINABLE LEASE OF EQUIPMENT FOR THE ENTIRE LEASE TERM PROVIDED
IN EACH LEASE SCHEDULE HERETO.
3. POSSESSION; PERSONAL PROPERTY
No right, title or interest in the Equipment shall pass to Lessee other than
the right to maintain possession and use of the Equipment for the Lease Term
(provided no Event of Default has occurred) free from interference by any person
claiming by, through, or under Lessor. The Equipment shall always remain
personal property even though the Equipment may hereafter become attached or
affixed to real property. Lessee agrees to give and record such notices and to
take such other action at its own expense as may be necessary to prevent any
third party (other than an assignee of Lessor) from acquiring or having the
right under any circumstances to acquire any interest in the Equipment or this
Lease.
4. DISCLAIMER OF WARRANTIES
LESSOR IS NOT THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT, NOR THE AGENT
THEREOF, AND MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO ANY
MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OF THE
EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS DESIGN OR CONDITION, ITS
CAPACITY OR DURABILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN THE
MANUFACTURE OR ASSEMBLY OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO
THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING THERETO, OR
PATENT INFRINGEMENTS, AND LESSOR HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSOR IS
NOT RESPONSIBLE FOR ANY REPAIRS OR SERVICE TO THE EQUIPMENT, DEFECTS THEREIN OR
FAILURES IN THE OPERATION THEREOF. Lessee has made the selection of each item
of Equipment and the manufacturer and/or supplier thereof based on its own
judgment and expressly disclaims any reliance upon any statements or
representations made by Lessor. For so long as no Event of Default (or event or
condition which, with the passage of time or giving of notice, or both, would
become such an Event of Default) has occurred and is continuing, Lessee shall be
the beneficiary of, and shall be entitled to, all rights under any applicable
manufacturer's or vendor's warranties with respect to the Equipment, to the
extent permitted by law.
<PAGE>
If the Equipment is not delivered, is not properly installed, does not
operate as warranted, becomes obsolete, or is unsatisfactory for any reason
whatsoever, Lessee shall make all claims on account thereof solely against the
manufacturer or supplier and not against Lessor, and Lessee shall nevertheless
pay all rentals and other sums payable hereunder. Lessee acknowledges that
neither the manufacturer or supplier of the Equipment, nor any sales
representative or agent thereof, is an agent of Lessor, and no agreement or
representation as to the Equipment or any other matter by any such sales
representative or agent of the manufacturer or supplier shall in any way affect
Lessee's obligations hereunder.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS Lessee represents and warrants to
and covenants with Lessor that:
(a) Lessee has the form of business organization indicated above and is duly
organized and existing in good standing under the laws of the state listed in
the caption of this Master Lease and is duly qualified to do business wherever
necessary to carry on its present business and operations and to own its
property; (b) this Lease has been duly authorized by all necessary action on the
part of Lessee consistent with its form of organization, does not require any
further shareholder or partner approval, does not require the approval of, or
the giving notice to, any federal, state, local or foreign governmental
authority and does not contravene any law binding on Lessee or contravene any
certificate or articles of incorporation or by-laws or partnership certificate
or agreement, or any agreement, indenture, or other instrument to-which Lessee
is a party or by which it may be bound; (c) this Lease has been duly executed
and delivered by authorized officers or partners of Lessee and constitutes a
legal, valid and binding obligation of Lessee enforceable in accordance with its
terms; (d) Lessee has not and will not, directly or indirectly, create, incur or
permit to exist any lien, encumbrance, mortgage, pledge, attachment or security
interest on or with respect to the Equipment or this Lease (except those of
persons claiming by, through or under Lessor); (e) the Equipment will be used
solely in the conduct of Lessee's business and will remain in the location shown
on the applicable Lease Schedule unless Lessor otherwise agrees in writing and
Lessee has completed all notifications, filings, recordings and other actions in
such new location as Lessor may reasonably request to protect Lessor's interest
in the Equipment; (f) there are no pending or threatened actions or proceedings
before any court or administrative agency which materially adversely affect
Lessee's financial condition or operations, and all credit, financial and other
information provided by Lessee or at Lessee's direction is, and all such
information hereafter furnished will be, true, correct and complete in all
material respects; and (g) Lessor has not selected, manufactured or supplied the
Equipment to Lessee and has acquired any Equipment subject hereto solely in
connection with this Lease and Lessee has received and approved the terms of any
purchase order or agreement with respect to the Equipment.
6. INDEMNITY
Lessee assumes the risk of liability for, and hereby agrees to indemnify and
hold safe and harmless, and covenants to defend, Lessor, its employees, servants
and agents from and against: (a) any and all liabilities, losses, damages,
claims and expenses (including legal expenses of every kind and nature) arising
out of the manufacture, purchase, shipment and delivery of the Equipment to
Lessee, acceptance or rejection, ownership, titling, registration, leasing,
possession, operation, use, return or other disposition of the Equipment,
including, without limitation, any liabilities that may arise from patent or
latent defects in the Equipment (whether or not discoverable by Lessee), any
claims based on absolute tort liability or warranty and any claims based on
patent, trademark or copyright infringement; (b) any and all loss or damage of
or to the Equipment; and (c) any obligation or liability to the manufacturer or
any supplier of the Equipment arising under any purchase orders issued by or
assigned to Lessor.
7. TAXES AND OTHER CHARGES
Lessee agrees to comply with all laws, regulations and governmental orders
related to this Lease and to the Equipment and its use or possession, and to pay
when due, and to defend and indemnify Lessor against liability for all license
fees, assessments, and sales, use, property, excise, privilege and other taxes
(including any related interest or penalties) or other charges or fees now or
hereafter imposed by any governmental body or agency upon any Equipment, or with
respect to the manufacturing, ordering, shipment, purchase, ownership, delivery,
installation, leasing, operation, possession, use, return, or other disposition
thereof or the rentals hereunder (other than taxes on or measured solely by the
net income of Lessor). Any fees, taxes or other lawful charges paid by Lessor
upon failure of Lessee to make such payments shall at Lessor's option become
immediately due from Lessee to Lessor.
If any Lease Schedule is denominated as a "True Lease Schedule," then, with
respect to the Equipment set forth on such True Lease Schedule, Lessee hereby
covenants and agrees that Lessor shall be entitled to the following tax benefits
(the "Tax Benefits"), Lessor will be entitled to cost recovery deductions under
Section 168 of the Internal Revenue Code of 1986, as amended (the "Code"), using
a 200% declining balance method of depreciation switching to the straight line
method for the first taxable year for which such method will yield larger
depreciation deductions, and assuming a half-year convention and zero salvage
value, for the applicable recovery period for such Equipment as set forth in the
True Lease Schedule with respect to such Equipment. Lessee further acknowledges
and agrees that Lessor has entered into such True Lease Schedule on the
assumption that Lessor will be taxed throughout the Lease Term of the True Lease
Schedule at Lessor's federal corporate income tax rate existing on the date of
such Lease Schedule (the "Assumed Tax Rate"). If, for any reason whatsoever,
there shall be a loss, disallowance, recapture or delay, in claiming all or any
portion of the Tax Benefits with respect to the Equipment, or there shall be
included in Lessor's gross income for Federal, state or local income tax
purposes any amount on account of any addition, modification or improvement to
or in respect of any of the Equipment made or paid for by Lessee, or if there
shall be a change in the Assumed Tax Rate (any loss, disallowance, recapture,
delay, inclusion or change being herein called a "Tax Loss"), then thirty (30)
days after written notice to Lessee by Lessor that a Tax Loss has occurred,
Lessee shall pay Lessor a lump sum amount which, after deduction of all taxes
required to be paid by Lessor with respect to the receipt of such amount, will
provide Lessor with an amount necessary to maintain Lessor's after-tax economic
yield and overall net after-tax cash flows at least at the same level that would
have been available if such Tax Loss had not occurred, plus any interest,
penalties or additions to tax which may be imposed in connection with such Tax
Loss. In lieu of paying such Tax Loss in a lump sum, Lessor may require, or
upon Lessee's request, may agree, in Lessor's sole discretion, that such Tax
Loss shall be paid in equal periodic payments over the applicable remaining
Lease Term with respect to such Equipment with each Rental Payment due and
payable with respect to such Equipment. A Tax Loss shall conclusively be deemed
to have occurred if either (a) a deficiency shall have been proposed by the
Internal Revenue Service or other taxing authority having jurisdiction, or (b)
tax counsel for Lessor has rendered an opinion to Lessor that such Tax Loss has
so occurred. The foregoing indemnities and covenants set forth in Sections 6
and 7 of this Master Lease shall continue in full force and effect and shall
survive the expiration or earlier termination of the Lease.
8. DEFAULT
Lessee shall be in default of this Lease upon the occurrence of any one or
more of the following events (each an "Event of Default"):
<PAGE>
(a) Lessee shall fail to make any payment, of rent or otherwise, under any
Lease within 10 days of the date when due, or (b) Lessee shall fail to obtain or
maintain any of the insurance required under any Lease; or (c) Lessee shall fail
to perform or observe any covenant, condition or agreement under any lease, and
such failure continued for 10 days after notice thereof to Lessee; or (d) Lessee
shall default in the payment or performance of any indebtedness or obligation to
Lessor or any affiliated person, firm or entity controlling, controlled by or
under common control with Lessor, under any loan, note, security agreement,
lease, guaranty, title retention or conditional sales agreement or any other
instrument or agreement evidencing such indebtedness with Lessor or such other
affiliated person, firm or entity affiliated with Lessor; or (e) any
representation or warranty made by Lessee herein or in any certificate,
agreement, statement or document hereto or hereafter furnished to Lessor in
connection herewith, including without limitation, any financial information
disclosed to Lessor, shall prove to be false or incorrect in any material
respect; or (f) death or judicial declaration of incompetence of Lessee, if an
individual; the commencement of any bankruptcy, insolvency, arrangement,
reorganization, receivership, liquidation or other similar proceeding by or
against Lessee or any of its properties or businesses, or the appointment of a
trustee, receiver, liquidator or custodian for Lessee or any of its properties
of business, or if Lessee suffers the entry of an order for relief under Title
11 of the United States Code; or the making by Lessee of a general assignment or
deed of trust for the benefit of creditors, or (g) Lessee shall default in any
payment or other obligation to any third party and any applicable grace or cure
period with respect thereto has expired; or (h) Lessee shall terminate its
existence by merger, consolidation, sale of substantially all of its assets or
otherwise; or (i) if Lessee is a privately held corporation, and more than 50%
of Lessee's voting capital stock, or effective control of Lessee's voting
capital stock, issued and outstanding from time to time, is not retained by the
holders of such stock on the date of this Lease; or (j) if Lessee is a publicly
held corporation, there shall be a change in the ownership of Lessee's stock
such that Lessee is no longer subject to the reporting requirements of the
Securities Exchange Act of 1 934, or no longer has a class of equity securities
registered under Section 12 of the Securities Act of 1933; or (k) Lessor shall
determine, in its sole discretion and in good faith, that there has been a
material adverse change in the financial condition of the Lessee since the date
of this Lease, or that Lessee's ability to make any payment hereunder promptly
when due or otherwise comply with the terms of this Lease or any other agreement
between Lessor and Lessee is impaired; or (1) any event or condition set forth
in subsections (b) through (k) of this Section 8 shall occur with respect to any
guarantor or other person responsible, in whole or in part, for payment or
performance of this Lease; or (m) any event or condition set forth in
subsections (d) through (j) shall occur with respect to any affiliated person
firm or entity controlling, controlled by or under common control with Lessee.
Lessee shall promptly notify Lessor of the occurrence of any Event of Default or
the occurrence or existence of any event or condition which, upon the giving of
notice of lapse of time, or both, may become an Event of Default.
9. REMEDIES; MANDATORY PREPAYMENT.
Upon the occurrence of any Event of Default, Lessor may, at its sole option
and discretion, exercise one or more of the following remedies with respect to
any or all of the Equipment: (a) cause Lessee to promptly return, at Lessee's
expense, any or all Equipment to such location as Lessor may designate in
accordance with the terms of Section 1 8 of this Master Lease, or Lessor, at its
option, may enter upon the premises where the Equipment is located and take
immediate possession of and remove the same by summary proceedings or otherwise,
all without liability to Lessor for or by reason of damage to property or such
entry or taking possession except for Lessor's gross negligence or willful
misconduct; (b) sell any or all Equipment at public or private sale or otherwise
dispose of, hold, use, operate, lease to others or keep idle the Equipment, all
as Lessor in its sole discretion may determine and all free and clear of any
rights of Lessee; (c) remedy such default, including making repairs or
modifications to the Equipment, for the account and expense of Lessee, and
Lessee agrees to reimburse Lessor for all of Lessor's costs and expenses; (d) by
written notice to Lessee, terminate the Lease with respect to any or all Lease
Schedules and the Equipment subject thereto, as such notice shall specify, and,
with respect to such terminated Lease Schedules and Equipment, declare
immediately due and payable and recover from Lessee, as liquidated damages for
loss of Lessor's bargain and not as a penalty, an amount equal to the Stipulated
Loss Value, calculated as of the next following Rental Payment Date; (e) apply
any deposit or other cash collateral or sale or remarketing proceeds of the
Equipment at any time to reduce any amounts due to Lessor, and (f) exercise any
other right or remedy which may be available to Lessor under applicable law, or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof, including reasonable attorneys' fees and court
costs. Notice of Lessor's intention to accelerate, notice of acceleration,
notice of nonpayment, presentment, protest, notice of dishonor, or any other
notice whatsoever are hereby waived by Lessee and any endorser, guarantor,
surety or other party liable in any capacity for any of the Lessee's obligations
under or in respect of the Lease. No remedy referred to in this Section 9 shall
be exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity.
The exercise or pursuit by Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise or pursuit by Lessor of any or
all such other remedies, and all remedies hereunder shall survive termination of
this Lease. At any sale of the Equipment pursuant to this Section 9, Lessor may
bid for the Equipment. Notice required, if any, of any sale or other
disposition hereunder by Lessor shall be satisfied by the mailing of such notice
to Lessee at least seven (7) days prior to such sale or other disposition. In
the event Lessor takes possession and disposes of the Equipment, the proceeds of
any such disposition shall be applied in the following order: (1) to all of
Lessor's costs, charges and expenses incurred in taking, removing, holding,
repairing and selling or leasing the Equipment; (2) to the extent not previously
paid by Lessee, to pay Lessor for any damages then remaining unpaid hereunder;
(3) to reimburse Lessee for any sums previously paid by Lessee as damages
hereunder; and (4) the balance, if any, shall be retained by Lessor. A
termination shall occur only upon written notice by Lessor and only with respect
to such Equipment as Lessor shall specify in such notice. Termination under
this Section 9 shall not affect Lessee's duty to perform Lessee's obligations
hereunder to Lessor in full. Lessee agrees to reimburse Lessor on demand for
any and all costs and expenses incurred by Lessor in enforcing its rights and
remedies hereunder following the occurrence of an Event of Default, including,
without limitation, reasonable attorney's fees, and the costs of repossession,
storage, insuring, reletting, selling and disposing of any and all Equipment.
The term "Stipulated Loss Value" with respect to any item of Equipment shall
mean the Stipulated Loss Value as set forth in any Schedule of Stipulated Loss
Values attached to and made a part of the applicable Lease Schedule. If there
is no such Schedule of Stipulated Loss Values, then the Stipulated Loss Value
with respect to any item of Equipment on any Rental Payment Date during the
Lease Term shall be an amount equal to the sum of: (a) all Rental Payments and
other amounts then due and owing to Lessor under the Lease, together with all
accrued interest and late charges thereon calculated through and including the
date of payment; plus (b) the net present value of: (i) all Rental Payments then
----
remaining unpaid for the Lease Term, plus (ii) the amount of any purchase
----
obligation with respect to such item of Equipment or, if there is no such
obligation, then the fair market value of such item of Equipment at the end of
the Lease Term, as estimated by Lessor in its sole discretion (accounting for
the amount of any unpaid Related Expenses for such item of Equipment and, with
respect to any such item of Equipment that has been attached to or installed on
or in any other property leased or
<PAGE>
owned by Lessee, such value shall be determined on an installed basis, in place
and in use), all discounted to net present value at a discount rate equal to the
1-year Treasury Constant Maturity rate as published in the Selected Interest
Rates table of the Federal Reserve statistical release H.15(519) for the week
ending immediately prior to the original Acceptance Date for such Equipment.
Lessee is or may become indebted under or in respect of one or more leases,
loans, notes, credit agreements, reimbursement agreements, security agreements,
title retention or conditional sales agreements, or other documents, instruments
or agreements, whether now existing or hereafter arising, evidencing Lessee's
obligations for the payment of borrowed money or other financial accommodations
("Obligations") owing to FCC, or to one or more affiliated persons, firms or
entities controlling, controlled by or under common control with Lessor
("Affiliates"). If Lessee pays or prepays all or substantially all of its
Obligations owing to any Affiliate, whether or not such payment or prepayment is
voluntarily or involuntarily made by Lessee before or after any default or
acceleration of such Obligations, then Lessee shall pay, at Lessor's option and
immediately upon notice from Lessor, all or any part of Lessee's Obligations
owing to Lessor, including but not limited to Lessee's payment of Stipulated
Loss Value for all or any Lease Schedules as set forth in such notice from
Lessor.
10. ADDITIONAL SECURITY
For so long as any obligations of Lessee shall remain outstanding under any
Lease, Lessee hereby grants to Lessor a security interest in all of Lessee's
rights in and to Equipment subject to such Lease from time to time, to secure
the prompt payment and performance when due (by reason of acceleration or
otherwise) of each and every indebtedness, obligation or liability of Lessee, or
any affiliated person, firm, or entity controlling, controlled by, or under
common control with Lessee, owing to Lessor, whether now existing or hereafter
arising, including but not limited to all of such obligations under or in
respect of any Lease. The extent to which Lessor shall have a purchase money
security interest in any item of Equipment under a Lease which is deemed to
create a security interest under Section 1-201(37) of the Uniform Commercial
Code shall be determined by reference to the Acquisition Cost of such item
financed by Lessor. In order more fully to secure its rental payments and all
other obligations to Lessor hereunder, Lessee hereby grants to Lessor a security
interest in any deposit of Lessee to Lessor under Section 3(d) of any Lease
Schedule hereto. Such security deposit shall not bear interest, may be
commingled with other funds of Lessor and shall be immediately restored by
Lessee if applied under Section 9. Upon expiration of the term of this Lease and
satisfaction of all of Lessee's obligations, the security deposit shall be
returned to Lessee. The term "Lessor" as used in this Section 10 shall include
any affiliated person, firm or entity controlling, controlled by or under common
control with Lessor.
11. NOTICES
Any notices or demands required or permitted to be given under this Lease
shall be given in writing and by regular mail and shall become effective when
deposited in the United States mail with postage prepaid to Lessor to the
attention of Customer Accounts, and to Lessee at the address set forth above, or
to such other address as the party to receive notice hereafter designates by
such written notice.
12. USE; MAINTENANCE; INSPECTION; LOSS AND DAMAGE
During the Lease Term for each item of Equipment, Lessee shall, unless
Lessor shall otherwise consent in writing: (a) permit each item of Equipment to
be used only within the continental United States by qualified personnel solely
for business purposes and the purpose for which it was designed and shall, at
its sole expense, service, repair, overhaul and maintain each item of Equipment
in the same condition as when received, ordinary wear and tear excepted, in good
operating order, consistent with prudent industry practice (but, in no event
less than the same extent to which Lessee maintains other similar equipment in
the prudent management of its assets and properties) and in compliance with all
applicable laws, ordinances, regulations, and conditions of all insurance
policies required to be maintained by Lessee under the Lease and all manuals,
orders, recommendations, instructions and other written requirements as to the
repair and maintenance of such item of Equipment issued at any time by the
vendor and/or manufacturer thereof; (b) maintain conspicuously on any Equipment
such labels, plates, decals or other markings as Lessor may reasonably require,
stating that Lessor is owner of such Equipment; (c) furnish to Lessor such
information concerning the condition, location, use and operation of the
Equipment as Lessor may request; (d) permit any person designated by Lessor to
visit and inspect any Equipment and any records maintained in connection
therewith, provided, however, that the failure of Lessor to inspect the
-------- -------
Equipment or to inform Lessee of any noncompliance shall not relieve Lessee of
any of its obligations hereunder; (e) if any Equipment does not comply with the
requirements of this Lease, Lessee shall, within 30 days of written notice from
Lessor, bring such Equipment into compliance; (f) not use any Equipment, nor
allow the same to be used, for any unlawful purpose, nor in connection with any
property or material that would subject the Lessor to any liability under any
state or federal statute or regulation pertaining to the production, transport,
storage, disposal or discharge of hazardous or toxic waste or materials; and (g)
make no additions, alterations, modifications or improvements (collectively,
"Improvements") to any item of Equipment that are not readily removable without
causing material damage to such item of Equipment or which will cause the value,
utility or useful life of such item of Equipment to materially decline. If any
such Improvement is made and cannot be removed without causing material damage
or decline in value, utility or useful life (a "Non-Severable Improvement"),
then Lessee warrants that such Non-Severable Improvement shall immediately
become Lessor's property upon being installed and shall be free and clear of
all liens and encumbrances and shall become Equipment subject to all of the
terms and conditions of the Lease. All such Improvements that are not Non-
Severable Improvements shall be removed by Lessee prior to the return of the
item of Equipment hereunder or such Improvements shall also become the sole and
absolute property of Lessor without any further payment by Lessor to Lessee and
shall be free and clear of all liens and encumbrances whatsoever. Lessee shall
repair all damage to any item of Equipment caused by the removal of any
Improvement so as to restore such item of Equipment to the same condition which
existed prior to its installation and as required by this Lease.
Lessee hereby assumes all risk of loss, damage or destruction for whatever
reason to the Equipment from and after the earlier of the date (i) on which the
Equipment is ordered or (ii) Lessor pays the purchase price of the Equipment,
and continuing until the Equipment has been returned to, and accepted by, Lessor
in the condition required by Section 18 hereof upon the expiration of the Lease
Term. If during the Lease Term all or any portion of an item of Equipment shall
become lost, stolen, destroyed, damaged beyond repair or rendered permanently
unfit for use for any reason, or in the event of any condemnation, confiscation,
theft or seizure or requisition of title to or use of such item, Lessee shall
immediately pay to Lessor an amount equal to the Stipulated Loss Value of such
item of Equipment, as of the next following Rental Payment Date.
13. INSURANCE
<PAGE>
Lessee shall procure and maintain insurance in such amounts and upon such
terms and with such companies as Lessor may approve, during the entire Lease
Term and until the Equipment has been returned to, and accepted by, Lessor in
the condition required by Section 18 hereof, at Lessee's expense, provided that
in no event shall such insurance be less than the following coverages and
amounts: (a) Worker's Compensation and Employer's Liability Insurance, in the
full statutory amounts provided by law; (b) Comprehensive General Liability
Insurance including product/completed operations and contractual liability
coverage, with minimum limits of $1,000,000 each occurrence, and Combined Single
Limit Body Injury and Property Damage, $1,000,000 aggregate, where applicable;
and (c) All Risk Physical Damage Insurance, including earthquake and flood, on
each item of Equipment, in an amount not less than the greater of the Stipulated
Loss Value of the Equipment or (if available) its full replacement value.
Lessor will be included as an additional insured and loss payee as its interest
may appear. Such policies shall be endorsed to provide that the coverage
afforded to Lessor shall not be rescinded, impaired or invalidated by any act or
neglect of Lessee. Lessee agrees to waive Lessee's right and its insurance
carrier's rights of subrogation against Lessor for any and all loss or damage.
In addition to the foregoing minimum insurance coverage, Lessee shall
procure and maintain such other insurance coverage as Lessor may require from
time to time during the Lease Term. All policies shall be endorsed or contain a
clause requiring the insurer to furnish Lessor with at least 30 days prior
written notice of any material change, cancellation or non-renewal of coverage.
Upon execution of this Lease, Lessee shall furnish Lessor with a certificate of
insurance or other evidence satisfactory to Lessor that such insurance coverage
is in effect, provided, however, that Lessor shall be under no duty either to
-------- -------
ascertain the existence of or to examine such insurance coverage or to advise
Lessee in the event such insurance coverage should not comply with the
requirements hereof. In case of failure of Lessee to procure or maintain
insurance, Lessor may at its option obtain such insurance, the cost of which
will be paid by the Lessee as additional rentals. Lessee hereby irrevocably
appoints Lessor as Lessee's attorney-in-fact to file, settle or adjust, and
receive payment of claims under any such insurance policy and to endorse
Lessee's name on any checks, drafts or other instruments on payment of such
claims. Lessee further agrees to give Lessor prompt notice of any damage to or
loss of, the Equipment, or any part thereof.
14. LIMITATION OF LIABILITY
Lessor shall have no liability in connection with or arising out of the
ownership, leasing, furnishing, performance or use of the Equipment or any
special, indirect. incidental or consequential damages of any character,
including, without limitation, loss of use of production facilities or
equipment, loss of profits, property damage or lost production, whether suffered
by Lessee or any third party.
15. FURTHER ASSURANCES
Lessee shall promptly execute and deliver to Lessor such further documents
and take such further action as Lessor may require in order to more effectively
carry out the intent and purpose of this Lease. Lessee shall provide to Lessor,
within 120 days after the close of each of Lessee's fiscal years, and, upon
Lessor's request, within 45 days of the end of each quarter of Lessee's fiscal
year, a copy of its financial statements prepared in accordance with generally
accepted accounting principles and, in the case of annual financial statements,
audited by independent certified public accountants, and in the case of
quarterly financial statements certified by Lessee's chief financial officer.
Lessee shall execute and deliver to Lessor upon Lessor's request any and all
schedules, forms and other reports and information as Lessor may deem necessary
or appropriate to respond to requirements or regulations imposed by any
governmental authorities. Lessee shall execute and deliver to Lessor upon
Lessor's request such further and additional documents, instruments and
assurances as Lessor deems necessary (a) to acknowledge and confirm, for the
benefit of Lessor or any assignee or transferee of any of Lessors rights, title
and interests hereunder (an "Assignee"), all of the terms and conditions of all
or any part of this Lease and Lessor's or Assignee's rights with respect
thereto, and Lessee's compliance with all of the terms and provisions hereof and
(b) to preserve, protect and perfect Lessor's or Assignee's right, title or
interest hereunder and in any Equipment, including, without limitation, such UCC
financing statements or amendments, corporate resolutions, certificates of
compliance, notices of assignment or transfers of interests, and restatements
and reaffirmations of Lessee's obligations and its representations and
warranties with respect thereto as of the dates requested by Lessor from time to
time. In furtherance thereof, Lessor may file or record this Lease or a
memorandum or a photocopy hereof (which for the purposes hereof shall be
effective as a financing statement) so as to give notice to third parties, and
Lessee hereby appoints Lessor as its attorney-in-fact to execute, sign, file and
record UCC financing statements and other lien recordation documents with
respect to the Equipment where Lessee fails or refuses to do so after Lessor's
written request, and Lessee agrees to pay or reimburse Lessor for any filing,
recording or stamp fees or taxes arising from any such filings.
16. ASSIGNMENT
This Lease and all rights of Lessor hereunder shall be assignable by Lessor
absolutely or as security, without notice to Lessee, subject to the rights of
Lessee hereunder for the use and possession of the Equipment for so long as no
Event of Default has occurred and is continuing hereunder. Any such assignment
shall not relieve Lessor of its obligations hereunder unless specifically
assumed by the assignee, and Lessee agrees it shall not assert any defense,
rights of set-off or counterclaim against any assignee to which Lessor shall
have assigned its rights and interests hereunder, nor hold or attempt to hold
such assignee liable for any of Lessor's obligations hereunder. No such
assignment shall materially increase Lessee's obligations hereunder. LESSEE
SHALL NOT ASSIGN OR DISPOSE OF ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE
OR ENTER INTO ANY SUBLEASE WITH RESPECT TO ANY OF THE EQUIPMENT WITHOUT THE
EXPRESS PRIOR WRITTEN CONSENT OF LESSOR.
17. LESSEE'S OBLIGATION UNCONDITIONAL
This Lease is a net lease and Lessee hereby agrees that it shall not be
entitled to any abatement of rents or of any other amounts payable hereunder by
Lessee, and that its obligation to pay all rent and any other amounts owing
hereunder shall be absolute and unconditional under all circumstances,
including, without limitation, the- following circumstances: (i) any claim by
Lessee to any right of set-off, counterclaim, recoupment, defense or other right
which Lessee may have against Lessor, any seller or manufacturer of any
Equipment or anyone else for any reason whatsoever; (ii) the existence of any
liens, encumbrances or rights of others whatsoever with respect to any
Equipment, whether or not resulting from claims against Lessor not related to
the ownership of such Equipment; or (iii) any other event or circumstances
whatsoever. Each Rent Payment or other amount paid by Lessee hereunder shall be
final and Lessee will not seek to recover all or any part of such payment from
Lessor for any reason whatsoever.
18. RETURN OF EQUIPMENT
Upon the expiration or earlier termination of the Lease Term with respect to
any Equipment, and provided that Lessee has not validly exercised any purchase
option with respect thereto, Lessee shall: (a) return the Equipment to a
location and in the manner designated by the Lessor within the continental
<PAGE>
United States, including, as reasonably required by Lessor, securing
arrangements for the disassembly and packing for shipment by an authorized
representative of the manufacturer of the Equipment, shipment with all parts and
pieces on a carrier designated or approved by Lessor, and then reassembly
(including, if necessary, repair and overhaul) by such representative at the
return location in the condition the Equipment is required to be maintained by
the Lease and in such condition as will make the Equipment immediately able to
perform all functions for which the Equipment was originally designed (or as
upgraded during the Lease Term), and immediately qualified for the
manufacturer's (or other authorized servicing representative's) then-available
service contract or warranty; (b) cause the Equipment to qualify for all
applicable licenses or permits necessary for its operation for its intended
purpose and to comply with all specifications and requirements of applicable
federal, state and local laws, regulations and ordinances; (c) upon Lessor's
request, provide suitable storage, acceptable to Lessor, for the Equipment for a
period not to exceed180 days from the date of return; (d) cooperate with Lessor
in attempting to remarket the Equipment, including display and demonstration of
the Equipment to prospective purchasers or lessees, and allowing Lessor to
conduct any private or public sale or auction of the Equipment on Lessee's
premises. All costs incurred in connection with any of the foregoing shall be
the sole responsibility of the Lessee. During any period of time from the
expiration or earlier termination of the Lease until the Equipment is returned
in accordance with the provisions hereof or until Lessor has been paid the
applicable purchase option price if any applicable purchase option is exercised,
Lessee agrees to pay to Lessor additional per them rent ("Holdover Rent"),
payable promptly on demand in an amount equal to 125% of the highest monthly
Rental Payment payable during the Lease Term divided by 30, provided, however,
-------- -------
that nothing contained herein and no payment of Holdover Rent hereunder shall
relieve Lessee of its obligation to return the Equipment upon the expiration or
earlier termination of the Lease.
19. RELATED LEASE SCHEDULES
In the event that any Equipment subject to a Lease shall become attached to,
affixed to, or used in connection with Equipment subject to any other Lease
hereunder (each a "Related Lease Schedule"), Lessee agrees that: (a) if Lessee
elects to exercise any purchase option, early termination option, renewal
option, purchase obligation or early purchase option under any Lease; or (b) if
Lessee elects to return the Equipment under any Lease in accordance therewith,
then, in either case, Lessor shall have the right, in its discretion, to require
the same disposition for all Equipment subject to a Related Lease Schedule.
20. MISCELLANEOUS, ENFORCEABILITY AND GOVERNING LAW
The term "Lessee" as used in the Lease shall mean and include any and all
Lessees who sign below, each of whom shall be jointly and severally liable under
the Lease. This Master Lease will not be binding on Lessor until accepted and
executed by Lessor, notice of which is hereby waived by Lessee. Any waiver of
the terms hereof shall be effective only in the specific instance and for the
specific purpose given. Time is of the essence in the payment and performance
of all of Lessee's obligations under the Lease. The captions in this Lease are
for convenience only and shall not define or limit any of the terms hereof.
Any provisions of this Lease which are unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
unenforceability without invalidating the remaining provisions hereof, and any
such unenforceability in any jurisdiction shall not render unenforceable such
provisions in any other jurisdiction. To the extent permitted by applicable
law, Lessee hereby waives; (a) any provisions of law which render any provision
hereof unenforceable in any respect; (b) all rights and remedies under Rhode
Island General Laws Sections 6A-2.1-508 through 522 or corresponding provisions
of the Uniform Commercial Code article or division pertaining to personal
property leasing in any jurisdiction in which enforcement of this Lease is
sought.
THIS LEASE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL
RESPECTS BE GOVERNED BY.AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW.
LESSEE HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF RHODE
ISLAND FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE
TO THE VENUE OF SUCH COURTS. LESSEE HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS LEASE. Any action by
Lessee against Lessor for any cause of action relating to this Lease shall be
brought within one year after any such cause of action first arises.
THIS LEASE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES CONCERNING THE
LEASE OF THE EQUIPMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. LESSEE
ACKNOWLEDGES AND CERTIFIES THAT NO SUCH ORAL AGREEMENTS EXIST. THIS LEASE MAY
NOT BE AMENDED, NOR MAY ANY RIGHTS UNDER THE LEASE BE WAIVED, EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTY CHARGED WITH SUCH AMENDMENT OR WAIVER.
Executed and delivered by duly authorized representatives of the parties hereto
as of the date set forth below.
DATED AS OF: JUNE 26, 1997
-------------
FLEET CAPITAL CORPORATION BOSTON COMMUNICATIONS GROUP, INC.
By: By:
----------------------------- ----------------------------
<PAGE>
Name: Michael P. Marinelli Name: Fritz von Mering
Title: Assistant Vice President Title: VP of Finance & Treasurer
master equipment lease agreement 0081 10/94 Rvsd 11/96
<PAGE>
Fleet PROGRESS PAYMENT RIDER
Capital Leasing
50 Kennedy Plaza
Providence, Rhode Island 02903-2305
This Progress Payment Rider (this "Rider") is attached to and made a part
of that certain Master Equipment Lease Agreement No. No. 32426 dated as of JUNE
----- ----
26, 1997 (the "Agreement"), by and between the undersigned BOSTON COMMUNICATIONS
- -------- ---------------------
GROUP, INC. (hereinafter referred to as "Customer") and Fleet Capital
- ----------
Corporation ("FCC") . All capitalized terms used herein and not defined herein
shall have the meanings set forth or referred to in the Agreement. To the
extent the terms set forth in this Rider differ or conflict with any of the
terms set forth in the Agreement, the terms set forth in this Rider shall
control.
Customer hereby requests FCC to make progress payments (each, a "Progress
Payment") to vendors and suppliers (each, a "Vendor") of the equipment,
described in Schedule A attached hereto (the "Equipment") in an aggregate amount
not to exceed $.5,500,000.00 on or before DECEMBER 26, 1997 (the "Funding
------------- -----------------
Expiration Date") as described below:
Progress Payments shall be evidenced by and repayable to FCC together with
interest and any other amounts due and payable in accordance with the terms
hereof and the terms and provisions of one or more Demand Promissory Notes in
the form attached hereto as Exhibit A (a "Demand Note") which reference this
Rider. Subject to FCC's prior receipt and approval of all Required
Documentation (defined below), and satisfaction of all of the terms and
conditions set forth herein, FCC agrees to make the Progress Payments
contemplated hereby. As used herein, the term "Required Documentation" shall
mean any documentation required of Customer or any third party by FCC from time
to time in its sole and absolute discretion in connection with the Agreement or
any Progress Payment, including but limited to one or more Demand Notes, any
purchase orders or related documents, warranties and agreements with Vendors
(the "Purchase Agreements"), assignments of Purchase Agreements, acknowledgments
and agreements with Vendors confirming FCC's unencumbered ownership of or first
priority lien in and to the Equipment, disbursement authorizations and invoices
concerning the purchase and sale of the Equipment, lease or equipment schedules,
promissory notes, delivery and acceptance certificates, secretary certificates,
guaranties, landlord/mortgagee waivers, disclaimers of interest or intercreditor
agreements from other creditors, legal opinions and UCC financing statements.
Without limiting the generality of the foregoing, Customer hereby represents,
warrants, covenants and agrees that, prior to any advance of a Progress Payment
hereunder, Customer shall have provided FCC with true, correct and complete
copies of all Purchase Agreements satisfactory in all respects to FCC, which
shall in all events accurately identify all Equipment and its component parts,
and accurately and completely describe the total and component costs therefor
and any and all applicable rebates, discounts or refunds available to Customer.
In order to secure the prompt payment and performance when due (by reason
of acceleration or otherwise) of all indebtedness, obligations or liabilities of
Customer and any affiliate, parent or subsidiary of Customer owing to FCC or any
affiliate, parent or subsidiary of FCC, of every kind and description, direct or
indirect, secured or unsecured, joint or several, absolute or contingent, due or
to become due, whether for payment or performance, now existing or hereafter
arising, regardless of how the same arise or by whatever instrument, agreement
or book account they may be evidenced ("Obligations"), including but not limited
to all such Obligations under or in respect of the Agreement or any Demand Note,
Customer hereby grants and conveys to FCC a security interest in all of
Customer's rights, title and interests of whatever kind or description in and to
the Purchase Agreements, the Equipment and all present or future additions,
attachments, or accessories thereto and replacements thereof, all tools,
manuals, service records, software and similar information and materials related
to such Equipment, and the products, proceeds, offspring, rents and profits
therefrom or thereof (collectively, the "Collateral"). Customer represents,
warrants, covenants and agrees that the security interest in the Collateral
granted herein shall have priority over any other security interest granted by
Customer or retained by any Vendor or any other person or entity other than FCC,
and Customer shall, at its own cost and expense, promptly take Such action as
FCC shall deem necessary or advisable to fully discharge all such other liens
and security interests in the Collateral which result from claims against
Customer not related to the transactions contemplated by the Agreement or this
Rider. Customer hereby irrevocably appoints FCC its true and lawful attorney,
with full power of substitution, to take such action as FCC may deem necessary
to protect and preserve its security interest in the Collateral as set forth
above, and waives its rights of notice, demand, dishonor, marshaling of
Collateral, place and time of sale, advertising, statutory method of foreclosure
and all bonds, securities and rights of redemption.
If (a) all of the Equipment has not been delivered to and-accepted by
Customer for any reason under the Agreement on or before the Funding Expiration
Date; (b) Customer shall cancel its order for any of the Equipment or shall
fail to unconditionally accept any of the Equipment upon delivery from Vendor
and execute all Required Documentation; (c) Vendor shall fail and/or be unable
to deliver the Equipment pursuant to any Purchase Agreement or to convey good
and marketable title to the Equipment free and clear of all liens, claims,
security interests and encumbrances as required by the Agreement; or (d) there
occurs an Event of Default, or any event or condition which with notice or the
passage of time or both would constitute an Event of Default under the
Agreement; then (i) Customer shall be deemed to be in default hereunder and
----
shall immediately upon demand pay to FCC the amount of all Progress Payments
made pursuant hereto, plus all accrued and unpaid interest then outstanding
hereunder and under any Demand Note; (ii) FCC shall halve no further obligation
of any kind whatsoever to make any Progress Payments; and (iii) FCC shall have,
in addition to any other rights and remedies available upon default under the
Agreement, all of the rights and remedies of a secured party under the Uniform
Commercial Code in effect in the State of Rhode Island. Demand Notes shall be
payable on demand, and nothing herein shall be deemed or construed to limit or
affect in any way FCC's absolute and unconditional right to require payment by
Customer of all amounts owing under any Demand Note on demand. Interest on all
Progress Payments will accrue from the date each such Progress Payment is made
by FCC through the Acceptance Date for the related Equipment or the repayment in
full of all amounts owing hereunder and under the Demand Notes, whichever shall
occur first.
Demand Notes may also be discharged by FCC's funding of the amounts
contemplated in the Agreement ("Permanent Funding") on or before the Funding
Expiration Date, upon Customer's unconditional acceptance of the Equipment for
all purposes under the Agreement and prior satisfaction of all terms and
conditions deemed necessary or appropriate by FCC, in its sole and absolute
discretion, in connection with such funding and for the
<PAGE>
protection and perfection of FCC's rights and interests in the Equipment,
including but not limited to the execution and delivery of additional documents,
instruments, schedules, security agreements, secretary certificates,
landlord/mortgagee waivers, guaranties, disclaimers of interest and/or
intercreditor agreements from other creditors, acknowledgments, authorizations
and certificates of third parties or public officials, legal opinions of counsel
to Customer and UCC financing statements and related filings, all of which shall
be received by FCC on or before the Funding Expiration Date. FCC has received a
commitment fee of $ n/a , and Customer acknowledges and
-----------------------
agrees that such fee: (i) has been paid to FCC as a commitment fee to compensate
FCC for its agreement to provide the Permanent Funding contemplated herein and
to enter into the transactions contemplated by the Agreement; (ii) has been and
shall be deemed to be fully earned by FCC as of the date hereof irrespective of
whether the Permanent Funding occurs or the transactions contemplated by the
Agreement are concluded; and (iii) shall not be refunded by FCC under any
circumstances or for any reason whatsoever, provided, however, that upon the
--------
completion of the Permanent Funding such fee shall be applied to the first
scheduled payments due under the Agreement.
THIS RIDER AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW.
CUSTOMER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF RHODE
ISLAND FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE
TO THE VENUE OF SUCH COURTS. CUSTOMER HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN
ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS RIDER. Any action by Customer
against FCC for any cause of action under this Rider shall be brought within one
year after any such cause of action first occurs.
Executed and delivered by duly authorized representatives of the parties
hereto as of the date set forth below.
Dated as of: JUNE 27, 1997
--------------
FLEET CAPITAL CORPORATION BOSTON COMMUNICATIONS GROUP, INC.
By: By:
------------------------------- ---------------------------------
Name: Michael P. Marinelli Name: Fritz von Mering
Title: Assistant Vice President Title: VP of Finance & Treasurer
progress payment rider (libor) D422 5/95 Rvsd 4/96
<PAGE>
DEMAND PROMISSORY NOTE
Floating Rate
Fleet
Capital Leasing
$ 5,500,000.00 June 27, 1997
------------------
For value received, the undersigned (jointly and severally if more than
one) (the "Maker") promises to pay to the order of Fleet Capital Corporation
("FCC"), having its principal place of business in Providence, Rhode Island
(together with any other holder of this Demand Promissory Note, hereinafter
referred to as the "Holder"), the principal sum of $5,500,000.00 or so much
thereof as shall be advanced by Holder pursuant to the Rider identified below
and shall be from time to time outstanding hereunder (the "Principal Amount"),
payable ON DEMAND, together with interest thereon as provided herein. This
Demand Promissory Note is a "Demand Note," and the obligations of Maker
hereunder are "Obligations" secured by the "Collateral," as such terms are
defined or referred to in a Progress Payment Rider, dated as of JUNE 27, 1997,
-------------
between FCC and Maker (the "Rider").
Maker shall pay to Holder the entire unpaid Principal Amount, plus all
accrued interest and any and all other amounts due hereunder on DECEMBER 26,
------------
1997, unless earlier demanded by Holder or otherwise due and payable in full (by
- ----
reason of acceleration or otherwise) pursuant to the terms of this Demand Note
or the Rider (in any such case, the "Maturity Date"). Interest shall accrue on
the unpaid Principal Amount of this Demand Note as provided below and shall be
due and payable monthly, in arrears, on the first day of each month (the
"Payment Dates") until the Principal Amount of this Demand Note is paid in full.
The final payment due and payable on the Maturity Date shall in any event be
equal to the entire outstanding and unpaid Principal Amount of this Demand Note,
together with all accrued and unpaid interest, charges and other amounts owing
hereunder and under the Rider. Interest shall accrue on the outstanding
Principal Amount of this Demand Note at a variable rate of interest, adjusted
monthly, equal to the Index Rate (as hereinafter defined) plus 1.00000% per
-------
annum (the "Interest Rate"). The "Index Rate" for any month shall be the one
month London Interbank Offered Rate (LIBOR) as published in the Wall Street
Journal on the fifteenth (15th) day of the preceding month. All interest
hereunder shall be calculated on the basis of a year of 360 days comprised of 12
months of 30 days each.
Time is of the essence in the payment and performance of those Obligations
which are evidenced by this Note. In the event any amount due hereunder is not
paid within ten (10) days of the date when due, Maker agrees to pay an
administrative and late charge equal to the lesser of (a) five percent (5%) on
and in addition to the amount of such overdue amount, or (b) the maximum charges
allowable under applicable law. In addition, Maker shall pay overdue interest
on any delinquent Payment or other Obligation due (by reason of acceleration or
otherwise) from thirty (30) days after the due date thereof through the date of
payment thereof at a rate of interest equal to the lesser of (a) 1.5 % per
month, or (b) the maximum rate of interest allowable under then applicable law.
Each payment hereunder shall be made in lawful money of the United States
and shall be payable to such account or address as the Holder hereof shall from
time to time direct Maker. Whenever any payment to be made under this Demand
Note shall be stated to be due on a Saturday, Sunday or a public holiday, or the
equivalent for banks generally under the laws of the State of Rhode Island, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of the payment of interest. All
amounts received hereunder or in respect of this Demand Note shall be applied
first, to accrued late charges and any other costs or expenses due and owing
- -----
hereunder or under the terms of the Security Agreement; second, to accrued
------
interest; and third, to unpaid principal. It is the intention of Holder to
-----
comply with all applicable usury laws. Accordingly, it is agreed that
notwithstanding anything to the contrary contained herein, in no event shall any
provision contained herein require or permit interest in excess of the maximum
amount permitted by applicable law to be paid by Maker. If necessary to give
effect to these provisions, Holder will, at its option, in accordance with
applicable law, either refund any amount to Maker to the extent that it was in
excess of that allowed by applicable law or credit such excess amount against
the then unpaid principal balance hereunder.
Failure to pay this Demand Note or any installment of interest hereunder on
demand or otherwise promptly when due, or default or failure in the performance
or due observance of any of the terms, conditions or obligations hereunder or
under the Rider or in any other agreement or instrument between Maker (or any
endorser, guarantor, surety or other party liable for Maker's obligations
hereunder, or any other entity controlling, controlled by, or under common
control with Maker) and Holder (or any other entity controlling, controlled by
or under common control with Holder), shall entitle Holder to accelerate the
maturity of this Demand Note and to declare the entire unpaid principal balance
and all accrued interest and other charges hereunder (including prepayment fees
calculated as of the date of default) and under the Rider to be immediately due
and payable, and to proceed at once to exercise each and every one of the
remedies provided in the Rider or otherwise available at law or in equity. This
Demand Note is payable on demand, and nothing herein shall be deemed or
construed to limit or affect in any way Holder's absolute and unconditional
right to require payment by Maker of all amounts owing under this Demand Note on
demand.
Maker and all other parties who may be liable (whether as endorsers,
guarantors, sureties or otherwise) for payment of any sum or sums due or to
become due under the terms of this Demand Note waive diligence, presentment,
demand, protest, notice of dishonor, notice of intention to accelerate, notice
of acceleration and notice of any other kind whatsoever and agree to pay all
costs incurred by Holder in enforcing its rights under this Demand Note or the
Rider, including reasonable attorney's fees, and they do -hereby consent to any
number of renewals or extensions at any time in the payment of this Demand Note.
No extension of time for payment of this Demand Note made by any agreement with
any person now or hereafter liable for payment of this Demand Note shall operate
to release, discharge, modify, change or affect the original liability of Maker
under this Demand Note, either in whole or in part. No delay or failure by
Holder hereof in exercising any right, power, privilege or remedy shall be
deemed to be a waiver of the same or any part thereof; nor shall any single or
partial exercise thereof or any failure to exercise the same in any instance
preclude any future exercise thereof, or exercise of any other right, power,
privilege or remedy, and the rights and remedies provided for hereunder are
cumulative and not exclusive of any other right or
<PAGE>
remedy available at law or in equity. The Holder of this Demand Note may proceed
against all or any of the Collateral securing this Demand Note or against any
guarantor hereof, or may proceed contemporaneously or in the first instance
against Maker, in such order and at such times following default hereunder as
Holder may determine in its sole discretion. All of Maker's obligations under
this Demand Note are absolute and unconditional, and shall not be subject to any
offset or deduction whatsoever. Maker waives any right to assert, by way of
counterclaim or affirmative defense in any action to enforce Maker's obligations
hereunder, any claim whatsoever against the Holder of this Demand Note. This
Note shall be binding upon Maker and its respective heirs, executors,
administrators, representatives, successors, transferees and assigns and the
benefits hereof shall extend to and include Holder and its successors,
representatives, transferees and assigns.
ANY WAIVER OF ANY OF HOLDER'S RIGHTS OR REMEDIES SHALL BE EFFECTIVE ONLY IF
SUCH WAIVER IS IN WRITING SIGNED BY HOLDER AND ONLY IN THE SPECIFIC INSTANCE AND
FOR THE SPECIFIC PURPOSE FOR WHICH IT IS GIVEN. NO FAILURE TO EXERCISE, OR
DELAY IN EXERCISING, ANY RIGHT HEREUNDER SHALL OPERATE AS A WAIVER THEREOF; NOR
SHALL ANY FAILURE TO EXERCISE, OR PARTIAL EXERCISE OR, ANY RIGHT HEREUNDER
PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER
RIGHT. THIS NOTE AND THE LEGAL RELATIONS OF THE UNDERSIGNED AND HOLDER SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW.
MAKER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE
OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND
FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ITS
OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE TO
THE VENUE OF SUCH COURTS. MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE.
IN WITNESS WHEREOF, Maker has caused this Demand Note to be executed by its
duly authorized representative as of the date first above written.
MAKER:
ATTEST/WITNESS: BOSTON COMMUNICATIONS GROUP, INC.
By:
- ------------------------------- --------------------------------
Name: Alan J. Bouffard Name: Fritz von Mering
Title: VP of Finance & Treasurer
Demand promissory note (libor) D423 5/95 Rvsd 5/96
<PAGE>
Fleet
Capital Leasing
SCHEDULE A
Attached to and made a part of the following: Lease Schedule No. 32426-0 1,
Acceptance Certificate,
UCC-1 Financing Statement(s)
with BOSTON COMMUNICATIONS GROUP, INC.
- --------------------------------------------------------------------------------
QTY LOCATION, VENDOR, DESCRIPTION MODEL NO. SERIAL NO.
- --------------------------------------------------------------------------------
LOCATION ( 01 )
Various Communication and Data Processing equipment
WITH ALL STANDARD AND ACCESSORY EQUIPMENT
FLEET CAPITAL CORPORATION BOSTON COMMUNICATIONS GROUP, INC.
BY: BY:
------------------------------ ------------------------------
NAME: Michael P. Marinelli NAME: Fritz von Mering
TITLE: Assistant Vice President TITLE: VP of Finance & Treasurer
<PAGE>
Fleet
Capital Leasing
SCHEDULE A-I
EQUIPMENT LOCATION
Attached to and made a part of the following: Lease Schedule No. 32426-01,
Acceptance Certificate
with BOSTON COMMUNICATIONS GROUP, INC.
LOC.# EQUIPMENT CURRENTLY LOCATED AT:
- ----- -------------------------------
(01) Boston Communications Group, Inc. 100 Sylvan Road Woburn, MA 01801
FLEET CAPITAL CORPORATION BOSTON COMMUNICATIONS GROUP, INC.
BY: BY:
------------------------------------ -------------------------------
NAME: Michael P. Marinelli NAME: Fritz von Mering
TITLE: Assistant Vice President TITLE: VP of Finance & Treasurer
<PAGE>
Fleet LEASE SCHEDULE NO. 32426-00001
Capital Leasing -----------
50 Kennedy Plaza
Providence, Rhode Island 02903-2305
Lessee: BOSTON COMMUNICATIONS GROUP, INC.
Address: 100 SYLVAN ROAD
WOBURN, MA 01801
1. This Lease Schedule No. 32426 - 00001 dated as of AUGUST 20, 1997 is
------------- ---------------
entered into pursuant to and incorporated by this reference, all of the terms
and provisions of that certain Master Equipment Lease Agreement No. 32426 dated
-----
as of JUNE 26, 1997 (the "Master Lease"), for the lease of the Equipment
-------------
described in Schedule A attached hereto. This Lease Schedule shall constitute a
separate, distinct and independent lease of the Equipment and the contractual
obligation of Lessee. References to the "the Lease" or "this Lease" shall mean
and refer to this Lease Schedule, together with the Master Lease and all
exhibits, addenda, schedules. certificates, riders, and other documents and
instruments executed and delivered in connection with this Lease Schedule, all
as the same may be amended or modified from time to time. All capitalized terms
used herein and not defined herein shall have the meanings set forth or referred
to in the Master Lease. By its execution and delivery of this Lease Schedule,
Lessee hereby reaffirms all of the representations, warranties and covenants
contained in the Master Lease, as of the date hereof, and further represents and
warrants to Lessor that no Event of Default, and no event or condition which
with notice or the passage of time or both would constitute an Event of Default,
has occurred and is continuing as of the date hereof.
2. ACQUISITION COST. The Acquisition Cost of the Equipment is-,
$3,043,707.55.
- -------------
3. (a) LEASE TERM. The Lease Term shall commence on the date hereof and
shall continue for a period of 36 months after the Lease Term Commencement Date
--
set forth in the Acceptance Certificate to this Lease Schedule, plus any renewal
or extended term applicable in accordance with the terms of the Lease.
(b) RENTAL PAYMENTS. In addition to interim rent payable pursuant to
Section 2 of the Master Lease, Lessee shall pay Lessor 36 consecutive Rental
--
Payments in the amounts set forth in the schedule below, plus any applicable
sales/use taxes, commencing on the Rental Payment Commencement Date set forth in
the Acceptance Certificate and MONTHLY thereafter for the remaining Lease Term.
-------
Each Rental Payment shall be payable on the same day of the month as the Rental
Payment Date in each succeeding rental period during the remaining Lease Term
(each, a "Rental Payment Date"):
<TABLE>
<CAPTION>
Amount of Each
Number of Rental Payments Rental Payment
--------------------------- --------------
<S> <C>
12 105,454.42
12 100,932.99
12 80,297.27
</TABLE>
(c) ADVANCE RENTAL PAYMENT. Lessee agrees to pay Lessor the first 01
--
and last 0 Rental Payments, due and payable on the Acceptance Date.
-
(d) SECURITY DEPOSIT. Lessee agrees to make a payment in an amount
equal to 0% of the Acquisition Cost of the Equipment, due to payable on the
Acceptance Date, to be held by Lessor as a non-interest bearing deposit to
secure Lessee's performance under the Lease.
4. EQUIPMENT LOCATIONS(S). The Equipment will be located at the
location(s) specified in Schedule A-1 hereto.
<PAGE>
5. Lessor will invoice Lessee for all sales, use and/or personal property
taxes as and when due and payable in accordance with applicable law, unless
Lessee delivers to Lessor a valid exemption certificate with respect to such
taxes. Delivery of such certificate shall constitute Lessee's representation and
warranty that no such taxes shall become due and payable with respect to the
Equipment, and Lessee shall indemnify and hold harmless Lessor from and against
any and all liability or damages, including late charges and interest which
Lessor may incur by reason of the assessment of such taxes.
6. The Rental Payments may change for Equipment accepted after AUGUST 25,
----------
1997,
----
Dated as of: AUGUST 20, 1997
---------------
FLEET CAPITAL CORPORATION BOSTON COMMUNICATIONS GROUP, INC.
By: By:
-------------------------------- ------------------------------
Name: Micheal P. Marinelli Name: Fritz von Mering
Title: Assistant Vice President Title: VP of Finance & Treasurer
lease schedule D104 10/4 Rsvd 4/96
<PAGE>
Exhibit 10.36
-------------
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is made as of May 15, 1997 ("Effective
Date") by and between Motorola, Inc., by and through the Pan American Cellular
Subscriber Group of its Cellular Subscriber Sector ("Motorola"), having its
principal office at 600 North U.S. Highway 45, Libertyville, IL 60048-5343; and
Voice Systems Technology, Inc., d/b/a Boston Communications Group, a corporation
having its principal office at 621 East Fourth Street, Tulsa, OK 74120-3017
("BCG").
WHEREAS, BCG supplies prepaid calling card telecommunications systems and
services; and
WHEREAS, Motorola desires to distribute such systems and services of BCG in the
Territory (as defined below);
NOW THEREFORE, in consideration of the foregoing, and other good and valuable
consideration, the receipt and sufficiency of which both parties acknowledged,
the parties agree as follows:
1. DEFINITIONS
Accepted and Acceptance mean written confirmation in the form of Exhibit C,
signed by BCG and the applicable Service Administrator, or if Motorola so
elects, then Motorola on behalf of such Service Administrator, that the Vision
Platform at a Site is complete and functioning in accordance with the warranties
provided hereunder.
Hardware means the BCG hardware products set forth on Exhibit A, including
replacement components provided by BCG, as Exhibit A may be amended from time to
time by mutual written agreement of the parties hereto.
Initial Platform means the Vision Platform configuration for 240 Ports, as shown
in Exhibit A- 1.
Modification means a revision, new function or minor change to the Vision
Platform intended to correct errors or non-conformance with the warranties
below, and provided as a change in the then-current release of the Vision
Platform.
Port means one voice circuit connected between the Vision Platform and the
cellular switch and/or PSTN; one circuit within a DS1 or E-1 digital circuit
where, in the DS1, the port represents a DS0 or one of twenty-four circuits, and
in an E-1 the port represents one of thirty circuits or an E0.
Prepaid Card Program means the "Motorola Prepaid" prepaid cellular telephone
card program to be offered by Motorola.
Service Administrator means the cellular telephone service provider or cellular
telephone service administrator to which Motorola supplies a Vision Platform at
a Site; Motorola may elect to be the Service Administrator for one or more
Sites.
Site means the geographic location where a Service Administrator's Vision
Platform is installed.
<PAGE>
Software means the software (including firmware) described on Exhibit A and all
Modifications and future releases thereof, as Exhibit A may be amended from time
to time by mutual written agreement of the parties hereto.
Source Code means the original, fully commented form of the Software, on any
media, in the language as delivered by BCG to Motorola, or any translation or
modification of such Software which substantially preserves its original
identity, together with all necessary proprietary information and technical
documentation which will enable reasonably skilled software engineer to maintain
or enhance the Software without the aid of BCG or any other person or reference
to any other materials; maintenance tools (test programs and program
specifications) and proprietary or third party systems utilities (compiler and
assembler descriptions), and a description of the Software's system/program
generation; and, descriptions and locations of hardware and software, if any,
not owned by BCG but required for use and/or support of the Software.
Specifications means the specifications for the Vision Platform as set forth in
Exhibit A.
Term means the period beginning on the Effective Date and ending upon the
expiration or termination of this Agreement as provided in Section 3 below.
Territory means the countries of Central America and South America, and Puerto
Rico.
Vision Platform means BCG Vision hardware and software listed in Exhibit A, as
Exhibit A may be amended from time to time by mutual written agreement of the
parties hereto.
2. PRODUCTS, PRICES, SHIPMENT
2.1 Territory. BCG will offer the Vision Platform to Motorola for resale by
---------
Motorola to potential Service Administrators in the Territory, such right to
include transfer of a license to the Software under the terms provided herein.
2.2 Orders and Shipment. Vision Platform components will be ordered by
-------------------
Motorola and shipped to its designated Site as provided in Exhibit B.
2.3 Pricing.
-------
(a) The prices set forth in Exhibits A and E for the Vision Platform
components, and Exhibit E for Support Services, will not be increased during the
Term of this Agreement. In the event of a price reduction, the prices in
Exhibits A, E or F (as applicable) will be deemed amended to reflect the reduced
price.
(b) If BCG offers the Vision Platform to any other party distributing such
Vision Platform in the Territory, and offers to such other party at a price
lower than that offered to Motorola under this Agreement, then Motorola may
elect by written notice to BCG to incorporate such lower pricing into this
Agreement, provided that such lower pricing will be offered to Motorola only
under substantially the same terms and conditions (excluding unit volume and
dollar volume) as were offered to the other party.
<PAGE>
3. TERM
This Agreement will be effective beginning on the date first written above, will
remain in effect for two years thereafter, unless terminated earlier as
permitted below, and will be automatically renewed for an additional one year
term unless either party gives the other written notice of termination received
not less than 120 days prior to the expiration of the initial one-year period
(collectively, the "Term").
4. DEPLOYMENT AND ACCEPTANCE
4.1 Deployment Process. For each Site, BCG will prepare a written deployment
------------------
plan and acceptance checklist in cooperation with Motorola and the Service
Administrator, in the form Exhibit C. BCG will include with the plan a purchase
price for the Initial Platform for the Service Administrator. which price will
not exceed the rate shown under "Specifications of Vision Platform" in Exhibit
A.
4.2 Acceptance. After installation of the Vision Platform at a Site, the
----------
Service Administrator (with assistance from Motorola as Motorola deems
necessary) and BCG will perform acceptance testing to ensure that the Vision
Platform is properly installed at the Site and is performing substantially in
accordance with the warranties provided herein, such testing to follow the
provisions of Exhibit C. Acceptance of the Vision Platform at a Site will not
relieve BCG of any ongoing obligation to correct warranted defects in the Vision
Platform existing prior to the time of acceptance. If Motorola or the Service
Administrator determine that the Vision Platform is not functioning in
accordance with the warranties herein, it must promptly give written notice to
BCG stating the nature of such defect. BCG will use its best efforts to correct
such defects as soon as commercially practicable after receiving notice of such
defects.
4.3 Later Additions to Vision Platform. The provisions of this Section 4 will
----------------------------------
also apply to the installation of new or replacement Hardware and/or Software on
a pre-existing Vision Platform, except that: (i) BCG and Motorola and/or its
relevant Service Administrator will first test the newly-installed Hardware and
Software and subsequently test the Vision Platform after integration of the
newly-installed items; (ii) Motorola may reject such newly-installed Hardware
and Software in the manner described in Section 4.2 above, except that BCG will
have fifteen (I 5) days to correct any defects revealed in acceptance testing of
such Hardware and Software; and (iv) if BCG fails to correct such defects within
the 15 day period, then Motorola may terminate its obligations with respect to
such additional Hardware and Software within thirty (30) days following
expiration of such fifteen (15) day period, and BCG will refund to Motorola all
fees paid for such newly installed Hardware and Software.
5. EXPANSION AND REDEPLOYMENT
5.1 Expansion. BCG will provide to Motorola a license to use a single copy of
---------
BCG's Vision Traffic Calculator modeling software program used to project
subscriber capacity of a Vision Platform configuration at a Site. Additionally,
BCG will advise Motorola and the applicable Service Administrator from time to
time when BCG believes that end user use of the Vision Platform indicates that
additional Ports be added to the Vision Platform at such Site.
5.2 Redeployment. Motorola may elect to redeploy the Vision Platform at a Site
------------
to another location in the Territory upon written notice to BCG. For such
redeployment, Motorola will pay to BCG: (i) a fixed redeployment fee; (ii) $ per
day per person for BCG personnel assigned to move and install such Vision
Platform, plus their reasonable room, board and travel expenses; and (iii) the
cost of shipping the Vision Platform to the new location. If the redeployment
occurs within 12 months after its acceptance by Motorola
<PAGE>
at its first location, then Motorola will have until 12 months following the
date that the Vision Platform was accepted at its new location to elect whether
to pay the Fixed Fee Purchase Balance or the Variable Purchase Balance, as
described in Section 6.2 below
6. PAYMENTS
6.1 Deposit, Installments and Initial Royalties. For each Service
-------------------------------------------
Administrator deploying the Vision Platform in its service area, Motorola will
pay BCG the Deployment Fee and Deposit payments shown in Exhibit D, due and
payable upon delivery of the order. Subsequently, Motorola will pay three
Installment Payments shown in Exhibit D due, one due upon delivery in country of
the Platform, the second due 120 days thereafter, and the third due another 120
days later. After the Initial Platform has successfully passed Acceptance
Testing for the Site, the Service Administrator will pay the Initial Royalty
shown on Exhibit D. Royalty payments will be paid to BCG's designated account in
the United States, provided that if payment direct to a United States account is
not reasonably possible due to laws or regulations of the Service
Administrator's country, then BCG and Motorola will mutually agree on another
method of payment.
6.2 Purchase Balance. Motorola may elect to pay the balance due for purchase
----------------
of the Vision Platform at a Site by paying either a Fixed Fee Purchase Balance
or a Variable Purchase Balance, each as shown in Exhibit D, in either case due
to BCG not later than 12 months after the date that the Vision Platform at the
Site successfully completed Acceptance Testing, or event of redeployment then at
such later date as provided in Section 5.2 above. If Motorola elects to pay the
Fixed Fee Purchase Balance, then the royalty due thereafter will remain at the
Initial Royalty rate. If Motorola elects to pay the Variable Purchase Balance,
then the royalty rate will increase to the Option Royalty rate shown in Exhibit
D.
6.3 Expansion Payment. If Motorola elects to expand capacity of the Vision
-----------------
Platform at a Site, Motorola will pay to BCG the Expansion Fee shown in Exhibit
D, due upon delivery of the order.
6.4 Royalty Payment Guarantee. If any Service Administrator fails to pay any
-------------------------
Royalty within 10 days after the due date for such payment, and BCG is not then
in breach under this Agreement, BCG may require Motorola to pay such royalty
amount then due by giving written notice to Motorola.
6.5 Taxes. Motorola will pay all applicable fees, custom duties, assessments
-----
or taxes (collectively, "Taxes") which may be assessed or levied by the
government of any applicable jurisdiction and any departments and subdivision
thereof, on the payments due to BCG hereunder and the products supplied by BCG
hereunder, excluding any Taxes measured by BCG's net income or Taxes based on
BCG's gross receipts or based on BCG's franchise, and excluding any Taxes for
which Motorola provides a valid certificate or other documentation to establish
exemption from such Taxes.
7. SUPPORT SERVICES
7.1 Technical Support from BCG. For each Site, BCG will provide the technical
--------------------------
support services described in Exhibit E. In event of termination of this
Agreement by BCG for any reason, BCG agrees that it will continue to offer such
services direct to the then-current Service Administrators on terms no less
favorable than those offered hereunder for not less than three months following
the date of termination.
7.2 Marketing Support from Motorola. Motorola will support advertising and
-------------------------------
marketing to promote the Prepaid Card Program using the Vision Platform in the
amount shown in Exhibit A-1, such amounts to be applied as Motorola and/or the
Service Administrator may elect from time to time.
<PAGE>
8. WARRANTIES
8.1 Product Warranties. BCG warrants the Vision Platform at each Site as
------------------
described in Exhibit F, provided that: (i) BCG will be responsible for return of
Vision Platform components to BCG headquarters if necessary, with shipping costs
paid by Motorola; and (ii) the Limited Software Warranty shall not supersede any
obligation by BCG to maintain and upgrade the Software as provided hereunder;
and (iii) the Limitation of Liability provided in such Exhibit F shall apply
only to claims under such warranty.
8.2 Compliance with Laws. The Vision Platform is and will be produced and
--------------------
delivered in accordance with all applicable laws, rules and regulations,
including but not limited to those laws, rules and regulations governing product
safety. BCG agrees that it will take all actions required by law in order to
ensure that all employees are authorized to work in the United States of America
in accordance with the Immigration Reform and Control Act of 1986, as amended.
Executive Order #1 1246, as amended relative to Equal Employment Opportunity and
all other applicable laws, rules and regulations including Title VII of the
Civil Rights Act of 1964, are incorporated herein. In addition all laws, rules
and regulations applicable to the hiring of disabled veterans of the Vietnam Era
and to the hiring of individuals with physical or mental handicaps are
incorporated herein by this specific reference.
8.3 Warranty Beneficiaries. The foregoing warranties will run to Motorola and
----------------------
each of its Service Administrators.
9. FURTHER DEVELOPMENT
BCG will use commercially reasonable efforts to modify the Vision Platform to
optimize it for operation on cellular telephone switches manufactured by the
Cellular Infrastructure Group of Motorola, Inc. Motorola will assist BCG by
obtaining for BCG a package of specifications to assist BCG in its modification
efforts, and will cause the Cellular Infrastructure Group personnel to provide
reasonably requested assistance for such efforts.
10. TERMINATION
10.1 Right to Terminate. either party may terminate this Agreement upon
------------------
written notice of the other if:
(i) the other party breaches a material obligation under this Agreement
and such breach continues uncured for a period of thirty (30) days after
the breaching party receives written notice of such breach;
(ii) The direct or indirect ownership or control of the other party that
exists on the date of this Agreement changes in any material manner that
adversely affects the rights of the terminating party, including the
acquisition of ownership or control of the other party by a competitor of
the terminating party, in which event the parties shall cooperate with
each other to conduct an orderly termination of the Agreement.
(iii) The other party ceases to conduct business in the normal course,
becomes insolvent, enters into suspension of payments, moratorium,
reorganization or bankruptcy, makes a general assignment for the benefit
of creditors, admits in writing its inability to pay debts as they mature,
suffers or permits the appointment of a receiver for its business or
assets, or avails itself of or becomes subject
<PAGE>
to any other judicial or administrative proceeding that relates to
insolvency or protection of creditors' rights.
10.2 Rights and Obligations at Termination by Either Party. Upon expiration or
-----------------------------------------------------
termination of this Agreement for any reason:
(i) Each party will promptly cease using and destroy or return to the
other party all items that contain any Confidential Information (as defined
herein) of the other party, excluding Vision Platform components in the
possession of Motorola and/or the Service Administrators, and except that
Motorola may retain one copy of Confidential Information for the sole and
express purpose of supporting then-existing Service Administrators.
(ii) Motorola may sell any of its then existing inventory of Hardware
originally purchased from
BCG.
(iii) Service Administrators shall continue to have the right to use the
Software in object code form associated with the Vision Platform sold
hereunder, in accordance with the license granted by BCG shown in Exhibit
F.
(iv) BCG shall invoice Motorola for any outstanding sums which may be
owing from any order hereunder, unless Motorola terminates for material
breach as set forth herein in which event Motorola shall have the right to
offset any damages against any sums owing to BCG.
(v) In the event of a termination that results in BCG discontinuing, in
whole or in part, the support services on the terms described in Exhibit E,
BCG shall cause Motorola to receive the Source Code in accordance with the
terms of Sections 14.2 and 14.3 below.
(vi) Upon termination at the end of the Term, including any renewal
thereof, or upon termination for any reason other than BCG's total
cessation of business, BCG shall be obligated to provide or cause to be
provided support services as set forth in Exhibit E attached hereto, for a
period of three months after the date of termination at rates in effect for
such services at the time of termination.
11. INDEMNIFICATION
BCG represents and warrants that it has the right and authority to grant the
Software license granted hereunder, and that the exercise of such license by
Motorola and the Service Administrators and use of the Vision Platform as
described herein will not infringe any third party rights. BCG will defend all
actions, claims and suits against Motorola and any Service Administrator
alleging that any portion of the Vision Platform furnished hereunder infringes
any United States patent or copyright, and will pay all damages and costs which
by final judgment may be assessed against Motorola and such Service
Administrator(s) on account of such infringement, provided that BCG: (i) shall
have had immediate written notice of any claim of such infringement or suit and
full opportunity and authority to assume sole defense of and to settle such
suit; and (ii) shall be furnished, upon BCG's request, all information and
assistance available to Motorola and the applicable Service Administrator(s)
relating to such defense. If the use of the Vision Platform in any such suit is
held to constitute infringement and the use of said Vision Platform is enjoined,
BCG will either procure for Motorola and the Service Administrators the right to
continue using the Vision Platform, or replace it with a non-infringing product
or modify it so that it becomes non-infringing, in each case without materially
impairing the performance of the Vision Platform as originally provided.
<PAGE>
12. LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM USE OR INABILITY TO USE THE
VISION PLATFORM OR OTHERWISE ARISING UNDER OR RELATING TO THIS AGREEMENT, EVEN
EF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ADDITIONALLY,
BCG SHALL HAVE NO LIABILITY FOR THE LOSS OF ANY INFORMATION CONTAINED IN THE
VISION PLATFORM AT ANY TIME.
13. NONDISCLOSURE
Each party will maintain the confidentiality of information disclosed to it here
under by the other party under the terms of the Non Disclosure Agreement
executed between the parties as of October 24, 1996 (the "NDA"). The NDA is
incorporated herein by reference, and the parties agree that it will remain in
effect until the later to occur of the date of expiration or termination of this
Agreement or the expiration date stated in the NDA. Expiration or termination
of this Agreement will not affect those provisions of the NDA that, by the terms
of the NDA, are intended to survive the NDA's expiration or termination.
14. LICENSE OF VISION PLATFORM; TITLE TO SOFTWARE
14.1 License Grant. BCG grants Motorola (i) the right to use the Software in
-------------
accordance with the license terms of Exhibit F; and (ii) the right to transfer
to Service Administrators a license granted by BCG to use the Software in
association with the Vision Platform, all in accordance with the terms of
Exhibit F. In event of termination or expiration of this Agreement for any
reason, the Software licenses granted hereunder shall remain in effect for each
licensee for so long as such licensee continues to pay the applicable Initial
Royalty or Option Royalty.
14.2 Source Code License. In event of exercise of the Source Code escrow
-------------------
described in Section 14.3 below, BCG grants Motorola a perpetual, non-exclusive,
non-transferable, royalty-free license to use, reproduce, have reproduced, edit,
merge, translate, enhance, or otherwise modify the Source Code of the Software,
including the right to copy, modify, reproduce and distribute copies, all in
accordance with the terms of Section 14.4(a) below.
14.3 Source Code Escrow. BCG will make Motorola a party to the Source Code
------------------
escrow in place with the Bank of Oklahoma, N.A. on the terms of Exhibit G. BCG
expressly agrees to promptly comply with the foregoing obligations of this
Section 14.4 and agrees that Motorola will be entitled to an injunction for
specific performance of such obligation in the event BCG's representative,
including any trustee in bankruptcy, refuses to comply with the foregoing
obligations. In the event of bankruptcy, the parties acknowledge that Motorola
and the Service Administrators will be entitled to the full protection provided
to licensees of intellectual property rights specified in 11 U.S.C. (S) 65.
14.4 Ownership of Intellectual Property.
----------------------------------
(a) All patents, copyrights, mask works, circuit layout rights, design rights,
trade secrets and other proprietary rights in the Vision Platform and BCG's
Confidential Information are and will remain the exclusive property of BCG or
its licensor. All patents, copyrights, mask works, circuit layout rights,
design rights, trade secrets and other proprietary rights in Motorola's
Confidential Information are and will remain
<PAGE>
the exclusive property of Motorola or its licensors. BCG will not integrate or
merge any Motorola Confidential Information into the Vision Platform, in whole
or in part, unless expressly directed in writing by Motorola. Any intellectual
property rights resulting from an addition or change to either the Software or
the Source Code if made exclusively by Motorola will be the exclusive property
of Motorola, after receipt of the Software and Source Code under terms of the
Source Code Escrow Agreement.
(b) Except as otherwise provided in this Section 14, the parties agree that any
and all inventions, improvements, discoveries or know-how, whether patentable or
not (hereinafter called "Inventions"), conceived or reduced to practice in the
performance of work under this Agreement by employees of one party shall be the
property of that party.
(c) Except as otherwise provided in Section 14, title to Inventions conceived
or reduced to practice jointly by employees of each party hereto in the
performance of work under the Agreement, and any and all patents issuing
thereon, shall be joint and each party shall have the right to license third
parties thereunder without an accounting to the other party. With respect to
any joint Inventions, all expenses incurred in obtaining and maintaining patents
thereon shall be shared equally by the parties, provided however, that where one
party elects not to file a patent application thereon in any particular country
or not to share equally the expenses thereof, the other party shall have the
right to file such an application at its own expense and shall have full control
of the prosecution and maintenance thereof, even though title to any patent
issuing shall be joint as previously stated.
(d) Neither party shall be liable for any payments to employees of the other
party who conceive or reduce to practice inventions.
(e) Except as otherwise provided in this Section 14, no license by either party
to the other party or its subsidiaries under any patents now owned or hereafter
obtained is granted or implied either by this Agreement or by the furnishing of
any information to that party.
15. TRADEMARKS, TRADE NAMES AND SERVICE MARKS
15.1 In conjunction with the distribution and sale of the Vision Platform, BCG
warrants that it is authorized to license Motorola to use, and grants Motorola
the right to use all trademarks, trade names, logos, service marks, quality
designations and any other proprietary words and symbols of BCG (collectively,
"BCG Trademarks") associated with the Vision Platform in proposal and
promotional activities. Motorola will comply with all reasonable rules and
regulations furnished to Motorola by BCG with respect to the use of each such
BCG Trademark. Except as otherwise provided herein, Motorola will not use any
trademarks, trade names, logos, service marks, quality designations and any
other proprietary words and symbols of BCG without BCG's prior written consent.
15.2 BCG will not use any Trademarks of Motorola, or any word or symbol likely
to be confused with any Motorola Trademark, either alone or in any combination
with another word or words, without prior written consent of Motorola.
16. ASSIGNMENT
Neither party may assign its rights or delegate its obligations hereunder
without the prior written consent of the other party, provided that: (i)
Motorola may distribute the Vision Platform through one or more subsidiaries
(defined as an entity in which Motorola, Inc. owns, directly or indirectly, more
than 50% of the
<PAGE>
voting interest of such entity) and that Motorola remains liable to BCG for such
subsidiaries' compliance with the terms of this Agreement; and (ii) Motorola may
sell, assign or otherwise transfer its Prepaid Card Program business, in which
event BCG shall continue to provide the support services, warranties, escrow and
other goods and services provided hereunder to Motorola, all on the same terms
and conditions as provided in this Agreement.
17. NOTICES
Any notices required hereunder will be given in writing (whether by overnight
courier or via fax), and will be deemed to have been given on the earlier of the
date that the party actually receives the notice or the next business day after
such notice was sent or transmitted. Notices to each party will be sent to the
addresses above, in the case of Motorola to the attention of Vice President and
General Manager, Latin America Division, fax no. 847-523-8829; and in the case
of BCG to Vice-President and General Manager, Systems Division, fax no. 918-582-
8782. Either party may change its address for receiving notice by giving notice
as described above.
18.GENERAL
18.1 Applicable Law. This Agreement will be governed by and interpreted in
--------------
accordance with the laws of the Commonwealth of Massachusetts, without regard to
choice of law principles of the Commonwealth.
18.2 Dispute Resolution. The parties agree that any claims or disputes
------------------
hereunder will be submitted to non-binding mediation prior to initiation of any
formal legal process provided, however, that this provision will not preclude
either party from resorting to judicial proceedings if: (i) good faith efforts
to resolve the dispute under mediation are unsuccessful; or (ii) the claim or
dispute relates to intellectual property rights; or (iii) interim relief from a
court is necessary to prevent serious and irreparable injury to the party or to
third parties.
18.2 Interpretation. This Agreement, together with any exhibits or attachments
--------------
hereto, and any subsequent amendments hereto, and nondisclosure agreements
entered into between the parties, contains the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior negotiations and representations by or between them, whether oral or
written, including but not limited to the Memorandum of Understanding between
the parties dated as of March 20, 1997, and all prior or contemporaneous
agreements, whether oral or written. This Agreement may be amended from time to
time by written agreement signed by both parties. The headings used in this
Agreement are for the convenience of the parties and are not deemed to be part
of this Agreement.
18.3 Severability. If any portion of this Agreement is found to be invalid or
------------
unenforceable, the parties agree that the remaining portions will remain in
effect. The parties further agree that in the event such invalid or
unenforceable portions is an essential part of this Agreement, they will
promptly commence negotiations for its replacement.
18.4 Waiver. No delay or omission to exercise any right or remedy accruing to
------
either party hereunder upon any breach or breaches by the other party will
impair any right or remedy on subsequent breach of default by such other party.
18.5 Scope. Nothing contained herein will be construed to constitute the
-----
parties hereto as partners, joint venturers or as agents of each other, but the
relationship will be one of independent contractors with BCG
<PAGE>
providing the goods and services described hereunder to Motorola for the
consideration set forth in this Agreement and any attachments hereto.
18.6 Benefit. This Agreement is solely for the benefit of the parties hereto,
-------
their successors and permitted assigns. No third person will acquire any rights
or claims by reason of or under this Agreement, except as both parties hereto
will agree in writing, or in cases where substantially all of the assets of a
party hereto are purchased by a third party.
18.7 Force Majeure. Neither party will be held liable for any delay or failure
-------------
to perform due to any cause beyond its reasonable control except the obligation
to pay money when due. The delivery schedule will be considered extended by a
period of time equal to the time lost because of any excusable delay.
18.8 Survival of Terms. The terms, provisions, representations and warranties
-----------------
contained in this Agreement that by their sense and context are intended to
survive the performance thereof by either or both parties will so survive the
completion of performances and termination of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the dates under their signatures below.
MOTOROLA, INC., VOICE SYSTEMS TECHNOLOGY, INC.
by and through its Pan American Cellular d/b/a Boston Communications Group
Subscriber Group of its Cellular
Subscriber Sector
By: By:
------------------------------- -------------------------------
Name: Frank Wapole Name: Fritz von Mering
Title: Corporate Vice President & Title: Treasurer
General, Manager, Pan American
Cellular Subscriber Group
By:
-------------------------------
Name: Paulino Barros
Title: Vice President and General Manager
Latin America Division, Pan American
Cellular Subscriber Group
List of Exhibits:
- -----------------
Exhibit A Vision Platform and Specifications
Exhibit A-1 Initial Platform
Exhibit B Order and Shipping Terms
Exhibit C Acceptance Checklist
Exhibit D Payments Schedule
Exhibit E Support Services
Exhibit F Warranties
Exhibit G Source Code Escrow
<PAGE>
EXHIBIT A
VISION PLATFORM AND SPECIFICATIONS
A. Hardware
--------
[To come from BCG]
B. Software
--------
[To come from BCG]
C. Specifications of Vision Platform
---------------------------------
Purchase Price........ $
System specifications:
[To come from BCG]
<PAGE>
EXHIBIT A-1
INITIAL PLATFORM
A. Configuration
-------------
[To come from BCG]
B. Initial Platform Price
----------------------
$
<PAGE>
EXHIBIT B
ORDER AND SHIPPING TERMS
A. Lead Time; Cancellation. The lead time for shipment of orders will not
-----------------------
exceed 6O days after BCG's receipt of an order hereunder. Motorola may cancel
all or a portion of any order placed hereunder. In the event of a cancellation
(except for orders canceled by reason of an event of force majeure or due to
breach of this Agreement by BCG), BCG may invoice Motorola for a cancellation
charge as BCG's sole and exclusive remedy for cancellation of the order.
Motorola will pay 10% of the total order purchase price for orders cancelled
between 30 and 60 days prior to the requested ship date, and 50% of the total
order purchase price for orders cancelled less than 30 days prior to the
requested ship date.
B. Packaging.
---------
1. Packing List. Two copies of a complete packing list containing order
number, bill of lading, factory order number, BCG's part number, BCG's serial
numbers, quantity and date shipped, and BCG's invoice number will be attached to
each shipment.
2. Markings. BCG will mark all packages with necessary shipping information
including order number, part number, quantity shipped, addresses of BCG and the
applicable Service Administrator or its designee, and other requirements agreed
upon between Motorola and BCG.
3. Packaging. All Vision Platform components will be packaged in such a manner
to prevent physical damage (including damage from electrostatic discharge), or
degradation of, the packaged units during shipment and delivery assuming
customary and normal standards of handling. Warning markings will be placed on
the exterior packing if special handling procedures are required. BCG will
remain liable for any damage which occurs as a result of any mishandling, abuse,
or failure to properly prepare and package any Vision Platform component for
shipment. Any concealed damage occurring to all or any portion of the Vision
Platform prior to shipment (for which a damage claim cannot be collected from
the carrier because of the hidden or concealed nature of the damage), will be
corrected by BCG at BCG's expense. Motorola will notify BCG in writing of any
concealed damage within thirty (30) days of receipt by the Service
Administrator. Freight and insurance associated with the shipment of any
replacement or repaired Vision Platforms to the Service Administrator or its
designee will be the responsibility of BCG.
C. Delivery.
---------
1. Delivery Date. The delivery date will be the date on which BCG transfers
the applicable equipment to the carrier designated by Motorola ("Delivery
Date"). Title to such equipment shall pass to Motorola upon delivery to the
carrier. Motorola will receive 100% on time delivery of Vision Platforms to the
Service Administrators. As soon as BCG becomes aware that any delivery is
likely to be late, BCG will promptly notify Motorola and the applicable Service
Administrator and keep Motorola informed about the circumstances causing the
delay. In the event BCG fails to make delivery on time, Motorola will give BCG
notice of such delinquency, allowing BCG a reasonable time to cure. In no event
will such cure period exceed ten (10) days from the Delivery Date. In the event
BCG fails to deliver the ordered Vision Platform during
<PAGE>
such period, Motorola, at its option, may cancel its order for said Vision
Platform, at no cost to Motorola or the Service Administrator.
2. Freight Costs. If BCG ships Vision Platform components by a transportation
method other than that specified on the Motorola order, BCG will be liable for
the difference, if any, between the cost of freight incurred and cost of freight
which would have been incurred had BCG complied with the order's shipping
instructions. All items will be shipped in the manner specified herein or as
specified in the separate orders issued hereunder. In the event any shipment
will not meet the Delivery Date (except as provided herein), routing may be
changed to premium transportation at Motorola's request. In that event, BCG
will bear the expense of any difference in freight cost for the premium
transportation. BCG will, at Motorola's request, drop ship product directly to
the Service Administrators.
3. Partial-Shipments. Neither Motorola's acceptance of partial shipments nor
provision for delivery of Vision Platforms in installments will relieve BCG of
its obligations under this Agreement.
4. Import/Export Assistance. Motorola will use commercially reasonable efforts
to secure for BCG assistance from each Service Administrator to obtain export
licenses and other governmental authorizations necessary to ship the Vision
Platform components to the applicable Site, provided that BCG will remain solely
responsible for fulfilling requirements (if any) of such governmental entities
regarding design of the Vision Platform.
<PAGE>
EXHIBIT C
ACCEPTANCE CHECKLIST
[Attach form of basic acceptance checklist]
<PAGE>
EXHIBIT D
PAYMENTS SCHEDULE
For each Vision Platform deployed at a Site, BCG will receive the following
payments:
Deployment Fee $
Deposit $
Installments Three installments, each of $
Initial Royalty The greater of (i) $ or (ii)
Expansion Fee $
Fixed Fee Purchase Balance $
Variable Purchase Balance $
Option Royalty The greater of (i) $ (ii) $
<PAGE>
EXHIBIT E
SUPPORT SERVICES
A. On Site BCG Personnel. BCG will assign at least one BCG employee, agent or
---------------------
contractor to be located at the Site or, in the case of multiple Sites in a
country, at a centrally convenient location as the Service Administrator and BCG
may agree. Each such BCG employee, agent or contractor will be trained and
qualified to provide all maintenance, upgrade and repair services that may be
required for the Vision Platform deployed at such Sites.
B. Support by BCG. BCG shall provide support to Motorola and the Service
--------------
Administrators as follows:
1. Problems will be classified as one of the following four (4) types:
. Service Affecting Defect - one which makes substantially unavailable
to end users a Vision Platform feature or function that is to be
available to end users.
. Serious Defect - one which impairs, but does not necessarily make
unavailable, a Vision Platform feature or function that is to be
available to end users.
. Administrative Defect - one which affects the Service Administrator,
but not the overall performance of the Vision Platform regarding
service to end users or the Service Administrator's ability to
process calls and generate reports.
. Cosmetic Defect - one which causes an inconvenience to the Service
Administrator, but does not affect the overall performance of the
Vision Platform.
2. BCG will provide "Hot Line" telephone support twenty-four (24) hours per
day, seven days a week. Such services will be provided for each Service
Administrator in the native language of the country in which the
applicable Administrator Site is located. BCG will provide and maintain
for Motorola and the Service Administrators an up-to-date listing of
technical support personnel (and include, at a minimum, for each
individual, a "Hot Line" number, a pager number, an alternative or back-
up telephone number). In addition, BCG will provide Motorola with a
list of telephone numbers of management personnel who can be contacted
by Motorola if the "Hot Line" support is unavailable.
3. At BCG's sole cost and expense, BCG agrees to correct any defects in
accordance with the following priority classification: (i) BCG will use
its best efforts to correct any Service Affecting Defect within twelve
(12) hours after receiving notice of such defect; (ii) BCG will use its
best efforts to correct any Serious Defect within one day after
receiving notice of such defect; (iii) BCG will correct any
Administrative Defect as promptly as is commercially reasonable, but in
no event later than in the next Software release or Hardware update; and
(iv) BCG will correct any Cosmetic Defect in the next Software release
or Hardware update. BCG's technical support personnel will work
continuously (24 hours a day, 7 days a week) until a Service Affecting
Defect or Serious Defect is resolved.
<PAGE>
C. Hardware. During the 24 month warranty period, the services described in
--------
this Exhibit E with respect to Hardware shall be performed without charge by
BCG. After the warranty period, Motorola shall reimburse BCG, in accordance
with the pricing terms in Exhibit A.
D. Software. During the 12 month warranty period, the services described in
--------
this Section 2 and Section 14 of the Agreement are included in the Software
Licensing Fees; there shall be no additional charge by BCG. BCG will identify
all Software updates and futures releases according to standard industry
numbering practices.
E. Support Services Fees. Initial Royalty or Option Royalty, as shown in
---------------------
Exhibit D.
<PAGE>
EXHIBIT F
WARRANTIES
[Attach Limited Hardware Warranty and Software Warranty]
<PAGE>
BOSTON
COMMUNICATIONS
GROUP
SYSTEMS DIVISION
VISION Platform
CC 5000-201
January 1997
- --------------------------------------------------------------------------------
Standard
Warranty and
Licensing
Agreement
- --------------------------------------------------------------------------------
<PAGE>
Standard Warranty and Licensing Agreement CC 5000-201 Contents
- --------------------------------------------------------------------------------
Contents
Limited Hardware Warranty 1
Software Warranty 3
Overview 3
Limited Software Warranty 3
Limitation Of Liability 4
Summary 5
Warranty Summary 5
BCG, Systems Division Contact Information 5
- --------------------------------------------------------------------------------
BCG, Systems Division January, 1997 i
<PAGE>
Copyright (C) 1997 Boston Communication Group, Systems Division. All rights
reserved. No part of this document may be reproduced in any form or by any
means, electronic, mechanical, magnetic, optical, chemical, manual, or other-
,vise, or used to make any derivative work- (such as translation,
transformation, or adaptation), nor be transmitted, transcribed, or stored in
retrieval systems, without permission of Boston Communication Group, Systems
Division.
Boston Communication Group, Systems Division reserves the right to revise this
documentation and to make changes in content from time to time without
obligation on the part of Boston Communication Group, Systems Division to
provide notification of such revision or change.
Boston Communication Group, Systems Division provides this documentation without
warranty of any kind, either implied or expressed, including, but not limited
to, the implied warranties of merchantability and fitness for a particular
purpose. Boston Communication Group, Systems Division assumes no liability for
any errors or omissions, nor for any damages resulting from the application or
use of this information. Boston Communication Group, Systems Division may make
improvements or changes in the product(s) and/or the program(s) described in
this document at any time.
Boston Communication Group, Systems Division welcomes customer input on
corrections and suggestions for improvements to this manual.
VISION(TM) is a trademark of Boston Communication Group, Systems Division. All
other trademarks, service marks and registered trademarks are the property of
their respective owners.
Boston Communication Group, Systems Division
621 East Fourth Street
Tulsa, Oklahoma, USA 74120-3017
(918) 582-8781
<PAGE>
Standard Warranty and Licensing Agreement CC 5000-201 Limited Hardware Warranty
- --------------------------------------------------------------------------------
Limited Hardware Warranty
------------------------------------------------------------
NOTE: Please read these terms and conditions before using
the Vision Platform voice processing system. Use of the
system signifies your acceptance of the license agreement.
------------------------------------------------------------
BCG, Systems Division warrants that for a period of twenty-
four (24) months after installation, the hardware will be
free from defects in workmanship or material under normal
use and service. The hardware must be plugged into a
functioning Uninterruptible Power Supply which provides
battery back-up and surge/ spike protection, or the warranty
is voided.
BCG, Systems Division's obligation under this warranty does
not arise until you return the product to BCG, Systems
Division headquarters in Tulsa, Oklahoma, or to an
authorized BCG, Systems Division distributor. Upon receipt,
BCG, Systems Division shall, at its option, repair or
replace without charge any defective component part of such
products and return the product, shipping prepaid and
billed.
- --------------------------------------------------------------------------------
BCG, Systems Division January, 1997 Overview . 1
<PAGE>
Standard Warranty and Licensing Agreement CC 5000-201 Software Warranty
- --------------------------------------------------------------------------------
Software Warranty
- --------------------------------------------------------------------------------
Overview
BCG, Systems Division software, including its documentation, is
copyrighted by BCG, Systems Division, which owns all rights and
title to the product. You are receiving a license to use the
software, but not the title to it. Under the copyright laws, the
software and its documentation may not be duplicated or copied,
in whole or in part, without the written permission of BCG,
Systems Division, except for the normal use of the software, or
to make backup archival copies. The same proprietary and
copyright notices must be affixed to any permitted copies as were
affixed to the original. This exception does not allow copies to
be made for any other. Under the law, copying includes
translating into another language or format.
BCG, Systems Division will provide you with notice of significant
software corrections made in the program for twelve (12) months
after the date this license begins, you will also be entitled to
obtain advice and service directly from BCG, Systems Division or
its authorized distributors for problems or errors you discover
in the program in accordance with standard BCG, Systems Division
service policies.
- --------------------------------------------------------------------------------
Limited Software Warranty
BCG Systems Division warrants that each BCG, Systems Division
software program shall conform to current published documentation
applicable to such program. For a period of twelve (12) months
from the date of installation of the BCG, Systems Division
software, BCG, Systems Division or its authorized distributor
will resolve or provide a solution for software faults at no
charge to you, providing you have documented the symptoms of the
fault. This warranty will not apply to problems which cannot be
replicated by BCG, Systems Division.
- --------------------------------------------------------------------------------
BCG, Systems Division January, 1997 Overview . 3
<PAGE>
Standard Warranty and Licensing Agreement CC 5000-201 Software Warranty
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Limitation Of Liability
BCG, SYSTEMS DIVISION'S WARRANTY OBLIGATIONS SHALL IN NO EVENT
INCLUDE ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, RESPONSIBILITY FOR DAMAGE RESULTING FROM
ACCIDENT, TRANSPORTATION, NEGLECT, MISUSE, MODIFICATION WITHOUT
BCG, SYSTEMS DIVISION'S PRIOR CONSENT, UNAUTHORIZED ATTEMPTS TO
REPAIR, OR FAILURE OF ELECTRICAL POWER OR ENVIRONMENTAL CONTROL.
IN NO EVENT WILL BCG, SYSTEMS DIVISION OR ITS DISTRIBUTORS BE
LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES RESULTING FROM YOUR USE, OR INABILITY TO
USE THE PRODUCT, BASED UPON ANY DEFECT IN THE PRODUCT OR ITS
DOCUMENTATION, EVEN IF BCG, SYSTEMS DIVISION HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. IN PARTICULAR, BCG, SYSTEMS
DIVISION SHALL HAVE NO LIABILITY FOR THE LOSS OF ANY INFORMATION
CONTAINED WITHIN THE SYSTEM AT ANY TIME.
THE MAXIMUM LIABILITY OF BCG, SYSTEMS DIVISION FOR ANY CLAIM,
INCLUDING BUT NOT LIMITED TO BCG, SYSTEMS DIVISION'S NEGLIGENCE,
SHALL BE LIMITED TO THE REPAIR OR REPLACEMENT OF THE DEFECTIVE
PRODUCT.
- --------------------------------------------------------------------------------
4 . Limitation of Liability January, 1997 BCG, Systems Division
<PAGE>
Standard Warranty and Licensing Agreement CC 5000-201 Summary
- --------------------------------------------------------------------------------
Summary
- --------------------------------------------------------------------------------
Warranty Summary
The warranty and remedies set forth above are exclusive and in
lieu of all others, oral or written, expressed or implied. No
BCG, Systems Division dealer, distributor, agent, or employee is
authorized to make any modification, extension, or addition to
this warranty.
- --------------------------------------------------------------------------------
BCG, Systems Division Contact Information
BCG, Systems Division
621 E. 4th St.
Tulsa, OK 74120-3017
(918) 582-8781 (Phone)
(918) 582-8782 (Facsimile)
- --------------------------------------------------------------------------------
BCG, Systems Division January, 1997 Warranty Summary . 5
<PAGE>
EXHIBIT G
SOURCE CODE ESCROW
[May be able to use existing BCG escrow, if available]
<PAGE>
ESCROW AGREEMENT
----------------
1. This is an escrow agreement by Boston Communications Group, a corporation
(BCG) and Bank- of Oklahoma, N.A., a national banking association with
principal offices in Tulsa County, Oklahoma, for the benefit of MOTOROLA,
Inc. ("MOTOROLA").
2. RECITALS: Whereas,
2.1 BCG has entered into a certain agreement with MOTOROLA described as
Distribution Agreement, dated May 15, 1997.
2.2 Such agreement provides that BCG will protect MOTOROLA by placing, a
copy of certain software covered by that agreement in escrow so that
MOTOROLA would have access thereto during the term and any extensions
of such agreement in the event that BCG ceases doing, business and
MOTOROLA had an appropriate need pursuant to the contract for access
to Such software for the continued use of the system;
2.3 AND, WHEREAS, BCG has designated and appointed Bank of Oklahoma, N.A.
(BOK) as Escrowee for these uses and purposes, that BOK has accepted
such appointment and the parties have agreed upon the consideration
for and terms of such escrow, all as the same are next described.
3. CONSIDERATION. The consideration for this agreement includes the sum of One
-------------
Dollar ($1.00) cash in hand paid by these parties each to the other, and the
additional consideration of the mutual covenant and promises hereafter
exchanged.
4. Appointment of Escrowee-duties and limitations.
----------------------------------------------
4.1 (Designation of Escrowee). BCG hereby nominates and appoints BOK as
-------------------------
Escrowee for the uses and purposes hereinafter described.
4.2 (Acceptance of escrow). BOK hereby accepts the escrow subject to the
----------------------
conditions and limitations hereafter described.
4.3 (Term). The term of this escrow shall be for five (5) years from the
------
effective date hereafter set forth.
5. Conditions. The conditions of this escrow are as follows:
----------
5.1. BCG is depositing a software program (the "Software") with BOK
("Escrowee") for the use and benefit of MOTOROLA;
1
<PAGE>
5.2. BCG represents this is a duplicate of the Software in that system
covered by that certain Distribution Agreement between BCG and
MOTOROLA hereinabove described;
5.3. in this connection, Escrowee shall have no responsibility to test,
investigate or authenticate such Software, its identity or condition,
and is entitled to rely upon the foregoing representation of BCG;
5.4. except upon an act of default ("Default"), Escrowee shall continue to
hold the Software until the termination of this escrow agreement and
shall then return the same to BCG, its successors or assigns.
5.5. In the event of any non-litigation dispute between BCG and MOTOROLA,
this Escrowee shall have no responsibility to become a part), to such
dispute, to evaluate or determine the rights or liabilities of either
BCG or MOTOROLA to any extend whatsoever. In any such instance,
Escrowee shall simply retain the Software here placed in escrow and
shall not be responsible for any alleged damage suffered or claimed
either by BCG or MOTOROLA as a result of their dispute or as a result
of Escrowee continuing to hold and safekeep such Software. In any such
instance, the role of Escrowee is really to continue to hold the
Software until (i) both parties have furnished a joint letter of
instruction, of (ii) Escrowee shall have been furnished with a final,
unappealed order of a court of competent jurisdiction adjudicating the
dispute of BCG and MOTOROLA and making disposition of the said
Software now placed in escrow with BOK.
5.6. In the event of litigation between DCG and MOTOROLA, Escrowee shall
not be obligated to enter into such litigation or to incur any
expenses whatsoever with respect thereto. In the event the Escrow
Agent becomes involved in litigation in connection with this escrow,
the parties jointly and severally agree to indemnify and save the
Escrow Agent harmless from all loss, cost, damages, expenses and
attorney's fees suffered or incurred by the Escrow Agent as a result
thereof.
5.7. If Escrowee shall still retain the Software in its hands upon the
termination of this escrow agreement five (5) years after the
effective date hereof, then Escrowee shall return such Software to BCG
and be without further liability whatsoever in the premises. The
agreed purpose of this escrow is to extend protection to MOTOROLA for,
and only for, the stated term of five (5) years and not thereafter.
If, therefore, MOTOROLA shall not have obtained the Software under the
provisions hereof by the termination of this agreement, MOTOROLA shall
have no further rights nor protection hereunder whatsoever, either
express or implied.
2
<PAGE>
6. Interpleader. Notwithstanding anything to the contrary hereinabove, Escrowee
------------
at any time may avail itself of the interpleader statutes of Oklahoma when
(i) BCG and MOTOROLA, their successor or assigns, have litigation pending
with respect to their agreement above described, or (ii) any litigation is
threatened or impending between said parties with respect to their said
agreement. In either of such instances, Escrowee shall be entitled to then
deposit the Software with the Clerk of the Court, be awarded reasonable costs
and fees and be discharged from any liability hereunder whatsoever.
7. (Default and delivery of Software).
----------------------------------
7.1 (Acts of default-defined). For purposes of this escrow agreement, BCG
-------------------------
shall be deemed to be in default if during the term of this contract
it shall cease doing business. The cessation of business shall consist
of the following:
7.1.1 liquidation of the corporation: or,
7.1.2 the adjudication as a bankrupt in either voluntary or
involuntary bankruptcy proceedings:
7.1.3 and not otherwise.
By way of clarification, the shifting of operations to any subsidiary or
affiliated company or sale of any divisions shall not constitute a
cessation of business,
7.2 (Proof of default). If BCG shall have ceased doing business as
------------------
aforesaid, then MOTOROLA shall be entitled to have and receive the
Software placed in escrow herewith. Upon the delivery of the Software,
Escrowee shall be without further responsibility whatsoever. Any of
the following shall be deemed to be proof of the cessation of business
of BCG sufficient to authorize Escrowee to deliver the Software:
7.2.1 a letter from BCG stating the cessation of business; or,
7.2.2 an affidavit from an officer or director of BCG to that same
effect; or,
7.2.3 a properly certified and authenticated order from a
bankruptcy court showing the final adjudication of BCG as a
bankrupt in either voluntary or involuntary proceedings; or,
7.2.4 a properly certified and authenticated copy of Articles of
Dissolution of BCG from the Secretary of State of Delaware.
3
<PAGE>
7.3 (Notice and demand from BCG). For the protection of Escrowee and
----------------------------
of BCG, MOTOROLA, must request and demand for the Software, as
follows:
7.3.1 by furnishing proof of the cessation of business executed by
an officer of director of BCG as above described; and,
7.3.2 by furnishing MOTOROLA's affidavit to Escrowee representing
that MOTOROLA is still using the BCG system and is still
current in its obligation thereunder; and,
7.3.3 by stating therein that MOTOROLA has mailed to BCG (a) a copy
of the letter of request and demand for Software and, (b)
copies of the proof of cessation of business, and (e) a copy
of its affidavit as last described.
8. (Time of delivery of Software). If BCG does not deliver notice to Escrowee
------------------------------
to continue holding the Software within twenty (20) days that Escrowee shall
have received the foregoing, then Escrowee shall deliver the Software to
MOTOROLA and be without further responsibility in this matter. If, however,
DCG shall contest the right of MOTOROLA to have the Software, they shall
deliver notice to Escrowee within such twenty (20) day interval to continue
holding such Software, then Escrowee shall hold such Software for safekeeping
until the earlier of the following events:
(a) the expiration of the five (5) year term; or,
(b) receiving written instructions jointly executed by both MOTOROLA and
BCG; or,
(c) an adjudication as to the rights and obligations of BCG and MOTOROLA
to the Software from a court of competent jurisdiction.
9. (Limitation on responsibility of BOK: standard escrow agreement
---------------------------------------------------------------
incorporated). In no event shall BOK be required to interpret the respective
-------------
rights and obligations of the parties, the validity or meaning of their
agreement aforedescribed nor the entitlement of either one to the Software.
The sole responsibility of Escrowee shall be to exercise reasonable care in
holding this Software for the term of this agreement unless there is an
earlier default (as above described) or earlier joint written instructions or
an earlier order from a court of competent jurisdiction as to the disposition
of such Software. The standard form escrow agreement of BOK is attached
hereto as "Exhibit A" and it shall control with respect to any conflict as to
the duties, responsibilities and limitations of responsibilities of BOK.
Notwithstanding anything else hereunto the contrary, BOK, as Escrowee, shall
have no obligations whatsoever to or on behalf of MOTOROLA following, the
termination of this agreement, the sole responsibility of BOK as being to
return the Software to BCG as aforesaid.
4
<PAGE>
The Escrow Agent shall be protected in acting upon any written notice,
request, waiver, consent, certificate, receipt, authorization, power of attorney
or other paper or document which the Escrow Agent in good faith believes to be
genuine and what it purports to be.
The Escrow Agent may consult with legal counsel in the event of any dispute
or question as to the construction of any of the provisions hereof or its duties
hereunder, and it shall incur no liability and shall be fully protected in
acting in accordance with the opinion and instructions of such counsel.
In the event of any disagreement between the Parties to this agreement, or
between them or either of any of them and any other person, resulting in adverse
claims or demands being made in connection with the subject matter of the
escrow, or in the event that the Escrow Agent, in good faith, is in doubt as to
what action it should take hereunder, the Escrow Agent may, at its option,
refuse to comply with any claims or demands on it, or refuse to take any other
action hereunder, so along as such disagreement continues or such doubt exists,
and in any such event, the Escrow Agent shall not be or become liable in any way
or to any person for its failure or refusal to act, and the Escrow Agent shall
be entitled to continue so to refrain from acting until (1) the rights of all
parties shall have been fully and finally adjudicated by a court of competent
jurisdiction, or (2) all differences shall have been adjusted and all doubt
resolved by agreement among all of the interested person, and the Escrow Agent
shall have been notified thereof in writing signed by all such persons. The
rights of the Escrow Agent tinder this paragraph are cumulative of all other
rights which it may have by law or otherwise.
10. (Counterparts). This agreement may be executed in counterparts by these
--------------
parties and when all parties have executed counterparts ( and not
necessarily executed the same original or duplicate original), then such
counterparts shall form a single agreement and be binding upon all of the
signatories as if they had in fact executed the same original or duplicate
original.
11. (Effective date). Notwithstanding the date or dates of subscription hereof,
----------------
the effective date of this escrow agreement shall be as of May 15, 1997.
All communications by, between and among these parties shall be as follows:
Boston Communications Group
Systems Division
Attn: Peter T. Zuyus, President/General Manager
621 East 4th Street
Tulsa, OK 74120
5
<PAGE>
Boston Communications Group
Attn: General Counsel
100 Sylvan Road
Woburn, MA 01801
MOTOROLA, Inc.
Attn: Stephen Spears
600 North U.S. Highway 45
Libertyville, IL 60048
Bank of Oklahoma, N.A.
Attn: Corporate Trust
P.O. Box 880
Tulsa, OK k74101-0880
12. The Escrow Agent shall receive a fee for its services payable by VST/BCG in
the amount of Two Hundred Fifty Dollars ($250.00) annually.
BOSTON COMMUNICATIONS GROUP
By:
-------------------------------------
Vice President
BANK OF OKLAHOMA, N.A.
By:
-------------------------------------
Vice President
MOTOROLA . Inc.
By:
-------------------------------------
Authorized Agent
6
<PAGE>
Exhibit 10.37
-------------
SECTION 0: SIGNATURE PAGE
--------------
THIS CARRIER AGREEMENT ("Agreement") is made and entered into by and
between AT&T Corp., a corporation organized and existing under the laws of the
State of New York and having an office at 295 North Maple Avenue, Basking Ridge,
New Jersey 07920 ("AT&T") and Boston Communications Group Inc., having an office
at 100 Sylvan Rd., Woburn, MA 01801 ("Customer"). The terms and conditions
herein constitute an offer by Customer as of the date of Customer's signature
below which may be accepted only by AT&T's signature below. This Agreement
shall become effective when signed by both parties.
AT&T and Customer, acting through their duly authorized representatives,
hereby agree to the terms set forth in Sections 1 through 6 of this Agreement as
attached hereto.
CUSTOMER AT&T CORP.
By By
------------------------------ ----------------------------
Robert J. Sullivan David Karlin
- --------------------------------- -------------------------------
Printed or Typed Name Printer or Typed Name
Vice President Senior Sales Manager
- --------------------------------- -------------------------------
Title Title
7/10/97 7/14/97
- --------------------------------- -------------------------------
Date Date
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SECTION 1: GENERAL TERMS AND CONDITIONS
----------------------------
1.A. Assignment. Customer may not assign this Agreement in whole or in part
-----------
without the prior written consent of AT&T, which shall not be unreasonably
withheld. AT&T may, in its discretion, condition its consent to such
assignment upon the posting of an appropriate deposit by the assignee
pursuant to Paragraph 4.D. of this Agreement. AT&T reserves the right to
deny or revoke its consent to such assignment at any time if the assignee
proves unwilling or unable to meet the eligibility requirements of this
Agreement, in which event the Customer shall remain or again become
responsible for performance of all terms of this Agreement. This provision
shall not affect the Customer's right to resell Service. Further, any
resale or assignment shall not release the original Customer from its
obligations under this Agreement.
1.B. Combination with Other Services or Offers. This AT&T Carrier Agreement
------------------------------------------
may not be used in conjunction with any other AT&T Carrier Agreement, AT&T
Contract Tariff, or promotions for any AT&T Services.
1.C. Independent Parties. The relationship established by this Agreement shall
--------------------
in no way constitute AT&T (or its agents or employees) as a partner, agent
or fiduciary of Customer. The relationship established by this Agreement
shall in no way constitute the Customer (or their agents or employees) as
a partner, agent or fiduciary of AT&T. The provision of Service described
in this Agreement does not establish any joint undertaking, joint venture,
or fiduciary relationship between AT&T and Customer.
1.D. Acknowledgment of Right to Compete. Customer acknowledges and understands
-----------------------------------
that it remains at all times solely responsible for the success and
profits of its business, and that AT&T makes no promises, warranties or
representations regarding the Customer's business success or prospects of
business success in connection with the provision of service pursuant to
this Agreement, Customer acknowledges and understands that AT&T will
continue to market AT&T services directly to the public and that such
marketing may from time to time bring AT&T into direct or indirect
competition with Customer, and that AT&T may also market its services to
competitors of Customer. Customer acknowledges and understands that
nothing in this Agreement diminishes or restricts in any way the fights of
AT&T to engage in competition with Customer or to market its services to
competitors of Customer.
1.E. Use of Proprietary Information. In the event that either Customer or
-------------------------------
AT&T, in the course of performance of their obligations to each other
under this Agreement, obtains or receives proprietary information from the
other, it agrees to use such information only for the purpose of complying
with its obligations under this Agreement and not to use such information
for its own marketing purposes, Customer acknowledges that AT&T may use
for its own marketing purposes any and all information that it obtains
from sources other
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than Customer, including but not limited to information that AT&T may have
regarding Customer's End-Users as a result of the past or present sale or
provision by AT&T of telecommunications services or equipment to said End-
Users.
1.F. Force Majeure. Neither party nor its affiliates, subsidiaries,
--------------
subcontractors, or parent corporation shall be liable in any way for
delay, failure in performance, loss or damage due to any of the following:
fire, strike, embargo, explosion, power blackout, earthquake, volcanic
action, flood, war, water, the elements, labor disputes, civil or military
authority, acts of God, acts of the public enemy, inability to secure raw
materials, inability to secure products, acts or omissions of carriers, or
other causes beyond its reasonable control, whether or not similar to the
foregoing.
1.G. Severability. If any portion of this Agreement shall be found to be
-------------
invalid or unenforceable, such portion shall be void and of no effect, but
the remainder of the Agreement shall continue in full force and effect
unless the Agreement fails of its essential purpose without the voided
portion.
1.H. Notices. All notices, identifications, formal requests or other formal
--------
communications required or desired to be given in connection with this
Agreement, shall be in writing and shall be effective when delivered in
person, mailed by registered or certified post or sent by Telex or
facsimile ("FAX") to the recipient party, unless the parties otherwise
agree in writing. Notice shall be addressed to the following:
If to AT&T: Senior Sales Manager
AT&T Corner Solutions
4513 Western Avenue, Room 121
Lisle, IL 60532
If to Customer: 100 Sylvan Road
Woburn, MA 01801
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1.I. Modification And Waiver. This Agreement may be modified only by a writing
-----------------------
signed by both parties. The failure of a party to enforce any right under
this Agreement at any particular point in time shall not constitute a
continuing waiver of any such right with respect to the remaining term of
this Agreement, or the waiver of any other right under this Agreement.
1.J. Compliance with Laws. Each party is responsible for its own compliance
--------------------
with all laws and regulations affecting its business, including but not
limited to the collection and remittance of all taxes and other levies
imposed by law.
1.K. Choice of Law. The domestic law of the State of New York, except its
-------------
conflict-of-laws rules, shall govern the construction, interpretation, and
performance of this Agreement.
1.L. Confidentiality. The Terms, conditions, and rates contained in this
----------------
Agreement are confidential, and shall remain so unless and until it shall
be determined by AT&T that the Communications Act of 1934 (or any
subsequent legislation) and the regulations promulgated thereunder require
the filing of this Agreement with the Federal Communications Commission
("Commission"), or unless the Commission orders the filing of this
Agreement pursuant to authority granted to the Commission by law or
regulation. In such event, AT&T shall file the Agreement within thirty
days of its execution, or upon such determination that filing is required,
or upon being ordered by the Commission to do so (whichever is later),
provided, that AT&T nonetheless shall keep the identity of Customer
confidential unless required by law, regulation or the Commission to
disclose such identity. Absent such a filing requirement, neither party
shall disclose the terms or conditions of this Agreement to any third
party, nor issue any public statements relating to this Agreement without
the written consent of the other party, unless such disclosure or
statement is reasonably believed by the party to be compelled by
governmental authority. A disclosing party shall furnish reasonable prior
notice to the other party before making the statement or disclosure unless
prohibited by law from doing so.
1.M. Dispute Resolution. If a dispute arises out of or relates to this
-------------------
Agreement, or its breach, the parties agree to submit the dispute to a
sole mediator selected by the parties or, at any time at the option of a
party, to mediation by the American Arbitration Association ("AAA"), to be
held in Morristown, New Jersey, If not resolved by mediation, it shall be
referred to a sole arbitrator selected by the parties within thirty (30)
days of the mediation or, in the absence of such selection, to AAA
arbitration which shall be governed by the United States Arbitration Act
and judgment on the award may be entered in any court having jurisdiction.
The arbitrator may not limit, expand or otherwise modify the terms of this
Agreement. The parties, their representatives, other participants and the
mediator and arbitrator shall hold the existence, content and results of
mediation and arbitration in confidence.
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1.N. Trade Names, Trademarks, Service Marks and Registered Marks Neither
-----------------------------------------------------------
Customer nor AT&T shall use the other's trade names, trademarks or service
marks ("Marks") without the prior written approval of the other party.
Neither shall display or use the other's Marks, nor pen-nit the same to be
displayed or used by third parties. Nothing in this Agreement creates in a
party rights in the Marks of the other.
1.O. Entire Agreement. This Agreement constitutes the entire agreement of the
-----------------
parties with respect to the subject matter hereof and supersedes all prior
written or oral agreements, proposals or understandings.
1.P. Definitions. As used in this Agreement, the definitions set forth in AT&T
-------------
Tariff F.C.C. Nos. 1, 2, 9 and 11 shall apply except to the extent that
they are modified or supplemented as follows:
1.P.1. End-Users: Those persons or entities to which Customer provides
---------
service as a telecommunications common carrier utilizing the service
provided to Customer by AT&T pursuant to this Agreement,
1.P.2. Dispute: Any controversy or claim between the parties under this
-------
Agreement or which relates directly or indirectly to this Agreement or the
services provided hereunder, whether based on contract, product liability,
statute, tort (including negligence or strict liability) or other legal or
equitable theory, whenever brought, between the parties or any of their
employees or agents.
1.P.3. CISD: The date for commencement of installation of Service
----
established pursuant to Paragraph 3.B. of this Agreement.
1.P.4. Customer Premises: An IXC Switch location as specified in Section
-----------------
6.C.1. of this Carrier Agreement.
1.P.5. Tariffs: As used in this Agreement, the term "tariffs" "Applicable
-------
Tariffs," or any variation thereof shall mean AT&T Tariff F.C.C. Nos. 1,
2, 9, and 14, in effect on the effective date of this Agreement and any
subsequent revisions to such AT&T tariff services provided pursuant to
this Agreement.
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SECTION 2: REQUIREMENTS AND CERTIFICATION OF ELIGIBILITY
---------------------------------------------
2.A. Eligibility. The rates, terms and conditions herein are expressly
-----------
conditioned upon the Customer's meeting the following eligibility
requirements. Customer is an interexchange telecommunications common
carrier which certifies as follows:
2.A.1. Customer has obtained the required operating authority in all states in
which it conducts business, as well as all authority required by the FCC
for resale of telecommunications services, including but not limited to
authority required pursuant to Section 214 of the Communications Act of
1934, 47 U.S.C. (S)214.
2.A.2. Customer complies and will continue to comply at all times with all
federal and state laws and regulations applicable to the sale and
provision of service to its customers, including but not limited to
those laws and regulations applicable to the authorization and proof of
authorization necessary to convert an End-Users former service to
Customer's service as the End-User's Primary Interexchange Carrier.
2.A.3. Customer has and uses its own carrier identification code ("CIC") in
connection with the origination of all traffic routed via Service
provided under this Agreement. Customer is solely responsible for
installation of its CIC in all access provider end offices (including
Local Exchange Carrier end offices), and for the payment of all charges
associated therewith, including but not limited to charges for
transmission of Customer's CIC to AT&T.
2.A.4. Customer has had a consistent on-time payment record with respect to all
telecommunications service to which it has subscribed with AT&T and all
other telecommunications common carriers for at least 24 consecutive
months prior to the execution of this Agreement. This requirement
includes affiliates, parents, subsidiaries, predecessors and successors
of Customer and any entity owned 20% or more by any person or entity
which also has an ownership interest of 20% or more in Customer on the
Effective Date.
2.A.5. Customer will utilize the Service offered hereunder only for lawful
purposes, including but not limited to resale of the Service or
components thereof. In the event that Customer resells the Service
provided hereunder, it will do so only under its own names, tradenames,
logos, trademarks or servicemarks. Customer will not publish or use any
advertising, sales promotions, press releases, or other publicity
matters which use AT&T's corporate or trade names, logos, trademarks,
service marks, trade dress, or other symbols that serve to identify and
distinguish AT&T from its competitors (or which use confusingly similar
corporate or trade names, logos, trademarks, service marks, trade dress
or other symbols), and will not conduct business under AT&T's
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corporate or trade names, logos, trademarks, service marks, trade dress,
or other symbols that serve to identify and AT&T from its competitors
(or under any confusingly similar corporate or trade names, logos,
trademarks, service marks, trade dress or other symbols). Customer
(including its agents, representatives and independent contractors) will
not indicate or imply to any person or entity that it is AT&T which is
selling or providing service to Customer's end-users, or that it is
affiliated or authorized by AT&T to sell or provide such service to them
or that it is selling or providing such service to them jointly or in
collaboration or partnership with AT&T, or as the agent of AT&T.
2.A.6. Customer has had no complaints or proceedings brought against it, within
two months prior to its execution of this Agreement, by the FCC, by any
state public utilities commission, by any state Attorney General, or by
any other federal or state authority charging Customer with
misrepresenting its affiliation or relationship to AT&T or to any other
carrier whose service it has resold, and no such complaints or
proceedings are pending as of Customer's execution of this Agreement.
2.B. Termination for Lack of Eligibility. If at any time during the term of
-----------------------------------
this Agreement Customer fails to comply with any requirement for
eligibility contained in Paragraphs 2.A.1 through 2.A.6., above, such
failure shall constitute a material breach of this Agreement which shall
entitle AT&T to terminate this Agreement and the Service provided
hereunder on thirty (30) days written notice. Customer shall have the
opportunity to cure such failure during the thirty (30) day period
following such notice, and, if such cure is demonstrated to the
satisfaction of AT&T, no termination pursuant to this Paragraph shall
occur. In the event of such termination, Customer shall indemnify,
defend and hold harmless AT&T from any and all complaints, causes or
action or other claims brought against AT&T by any of Customer's End-
Users due to said termination.
2.C. Default. If at any time during the term of this Agreement either party
-------
shall commit an act of bankruptcy within the meaning of the United
States Federal Bankruptcy Act, or bankruptcy, receivership, insolvency,
reorganization, dissolution, liquidation, or other proceedings shall be
instituted by or against either party or all or any substantial part of
its property under an applicable law of the United States or any state
thereof, and such proceeding shall not be dismissed within ninety (90)
calendar days, the non-defaulting party shall have the right to
terminate this Agreement.
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SECTION 3: RESPONSIBILITIES OF AT&T
------------------------
3.A. Provision of Service. Subject to its Correspondent Agreements and
--------------------
regulation by Federal and state authorities, AT&T shall provide Service in
accordance with its standard practices and procedures for the operation of
its network. Service shall be available 24 hours per day, seven days per
week. AT&T is responsible for the provision of Service from station to
station, but is not responsible for the quality of transmission or
signaling on the Customer's side of the interface at a Customer's
premises. Service is furnished subject to the availability of the service
components required. AT&T will determine which of those components shall
be used and make modifications to those components at its option.
3.B. Installation. Upon execution of this Agreement AT&T shall establish a due
------------
date for commencement of installation of Service and confirm said date
with the Customer (CISD). A Customer may delay said due date for
commencement of installation when the Customer's written request for said
delay is received by AT&T at least five (5) business days prior to said
due date, provided that the delay of said due date shall not exceed 30
cumulative calendar days. AT&T will make every reasonable effort to
commence installation of Service by the due date, but Customer
acknowledges that in some cases a delay in commencement of installation
may be unavoidable. If commencement of installation is delayed for more
than 45 days beyond the due date, and such delay is not requested or
caused in whole or in part by the Customer, the Customer may cancel its
order for Service pursuant to this Agreement and shall not thereby be
considered to have breached this Agreement; such cancellation shall he
Customer's sole remedy for such delay.
3.C. Maintenance. AT&T shall maintain Service in conformity with its standard
-----------
network operating procedures.
3.D. Limitation of Liability. AT&T (INCLUDING ITS SUBSIDIARIES, AFFILIATES,
-----------------------
PREDECESSORS, SUCCESSORS AND ASSIGNS) MAKES NO WARRANTIES, EXPRESS OR
IMPLIED, AND SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO SERVICES OR PRODUCTS
PROVIDED PURSUANT TO THIS AGREEMENT. AT&T'S LIABILITY FOR SERVICE
INTERRUPTIONS FOR ANY SERVICE PROVIDED PURSUANT TO THIS AGREEMENT SHALL
NOT EXCEED AN AMOUNT EQUAL TO A PRO-RATED PORTION OF THE RECURRING CHARGES
PROVIDED FOR UNDER THIS AGREEMENT FOR THE SERVICE AFFECTED FOR THE
PERIOD(S) DURING WHICH SAID SERVICE WAS AFFECTED. THIS LIMITATION OF
LIABILITY SHALL APPLY REGARDLESS OF THE FORM OF ACTION, WHETHER IN
CONTRACT, TORT, WARRANTY, STRICT LIABILITY, OR NEGLIGENCE (INCLUDING
WITHOUT LIMITATION
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ACTIVE AND PASSIVE NEGLIGENCE). IN NO EVENT SHALL AT&T BE LIABLE FOR
CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES OR LOST PROFITS SUSTAINED BY
REASON OF ITS PERFORMANCE OF THIS AGREEMENT, OR FOR ANY FAILURE,
BREAKDOWN, OR INTERRUPTION OF SERVICE, WHATEVER SHALL BE THE CAUSE, OR
HOWEVER LONG IT SHALL LAST, AND REGARDLESS OF WHETHER ANYONE HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. AT&T SHALL HAVE NO LIABILITY
FOR DAMAGES CAUSED (1) BY CUSTOMER'S FAILURE TO PERFORM ITS
RESPONSIBILITIES UNDER THIS AGREEMENT, OR (2) BY THE ACTS OF THIRD PARTIES
(INCLUDING WITHOUT LIMITATION CUSTOMER'S USERS OR END USERS). AT&T DOES
NOT GUARANTEE OR MAKE ANY WARRANTY WITH RESPECT TO THE SERVICE PROVIDED
PURSUANT TO THIS AGREEMENT WHEN USED IN AN EXPLOSIVE ATMOSPHERE. THIS
AGREEMENT DOES NOT CREATE ANY CLAIM OR RIGHT OF ACTION, NOR IS IT INTENDED
TO CONFER ANY BENEFIT ON ANY THIRD PARTY, INCLUDING BUT NOT LIMITED TO ANY
USER OR END-USER OF CUSTOMER. THE LIMITATIONS OF LIABILITY SET FORTH IN
THIS AGREEMENT SHALL SURVIVE FAILURE OF AN EXCLUSIVE REMEDY.
3.F. Service, Channels or Equipment of Others. AT&T is not liable for damages
----------------------------------------
associated with service, channels, or equipment that it does not furnish.
AT&T does not provide Customer equipment.
3.G. No Patent or Software License. No license under patents or software
-----------------------------
copyrights (other than the limited license to use) is granted by AT&T or
shall be implied or arise by estoppel, with respect to Service offered
under this Agreement.
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SECTION 4: RESPONSIBILITIES OF CUSTOMER
----------------------------
4.A. Placement of Orders and Compliance with Regulations. Customer is
----------------------------------------------------
responsible for placing any necessary orders and for assuring that it, its
Users and its End-Users comply with the provisions of this Agreement and
with all applicable federal and state laws and regulations.
4.B. Billing; Responsibility for Payment. Customer is liable for all amounts
------------------------------------
due to AT&T hereunder, subject to the following. AT&T will provide to
Customer a single monthly bill for each of the Services provided under
this Agreement, or at AT&T's option a single monthly bill for all of the
Services provided under this Agreement. Said bill or bills will be sent to
one Customer location designated by the Customer. Payment of charges is
due upon presentation of a bill unless a different due date appears on the
face of the bill, in which case payment shall be due on said date.
Customer shall be solely responsible for rendering of bills to and
collection of charges from its end-users. Failure of Customer to bill and
collect charges from its end-users shall not excuse in whole or in part
Customer's responsibilities to AT&T under this Agreement, including but
not limited to the responsibility to render to AT&T timely payment of
charges. Customer shall reimburse AT&T for reasonable attorneys fees and
any other costs associated with collecting delinquent payments from
Customer. At AT&T's option, interest charges may be added to any
undisputed adjudged past due amounts at the rate of one and one-half
percent (1 1/2%) per month, unless such interest rate exceeds the maximum
allowed by applicable law, in which case interest shall be at the maximum
lawful rate.
4.C. Interfacing and Communicating with End-Users. Interfacing and
---------------------------------------------
communicating with End-Users shall be the sole responsibility of Customer
with respect to any use that Customer may make of the service provided
pursuant to this Agreement to in turn provide service to other persons or
entities. Such interfacing and communicating shall include without
rotation installation of service, termination of service, placing of
orders, billing and billing inquiries, reporting of service outages and
problems, collection of charges and handling and resolution of all
disputes.
4.D. Deposits. AT&T may require the Customer, prior to or during the provision
--------
of service pursuant to this Agreement, to tender a deposit in an amount to
be determined by AT&T in its reasonable discretion to be held by AT&T as a
guarantee for the payment of charges (including but not limited to
shortfall charges attributable to Customer's failure to comply with any
revenue or volume commitment or any monitoring condition in this
Agreement). To determine the financial responsibility of Customer and/or
the specific amount of any deposit required, AT&T may rely upon
commercially reasonable factors to assess and manage the risk of non-
payment, including but not limited to payment history for
telecommunications service (including such service purchased from AT&T),
number of years in business, bankruptcy or insolvency history, current
AT&T account treatment
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status, financial statement analysis, and commercial credit bureau rating.
It shall be Customer's responsibility to provide to AT&T upon request such
information as is necessary for AT&T to determine the financial
responsibility of Customer, including but not limited to Customer's tax
returns, audited or unaudited financial statements and loan applications.
A deposit does not relieve Customer of the responsibility for the prompt
payment of bills on presentation or the due date appearing on the face of
the bills. In lieu of a cash deposit, AT&T will accept Bank Letters of
Credit and Surety Bonds which have been approved by AT&T. Interest will be
paid to a Customer for the period that a cash deposit is held by AT&T. The
interest rate used will be simple interest at the rate of six percent
annually unless a different rate has been established by the appropriate
legal authority in the state where the Service offering is located. The
failure of Customer to post a deposit as required by AT&T pursuant to this
paragraph shall constitute a material breach of this Agreement by Customer
which shall entitle AT&T to terminate this Agreement and the service
provided hereunder upon five (5) days written notice to Customer. When the
service for which the deposit has been required is discontinued, the
deposit will be applied to the final bill and any credit balance will be
refunded to the Customer with applicable interest accrued.
4.E. Customer's Use of Service. Customer may use the services provided
--------------------------
pursuant to this Agreement for any lawful purpose consistent with the
transmission and switching parameters of the telecommunications network,
and may resell its use (or the use of any part thereof) to a third party
in the normal course of the Customer's business, subject to the
following-.
4.E.1. Abuse - The abuse of Service is prohibited. The Following
-----
activities constitute abuse:
4.E.1.A. Using Service to make calls that might reasonably be expected to
frighten, abuse, torment, or harass another, or
4.E.1.B. Using Service in such a way that it interferes unreasonably with
the use of Service or AT&T's network by others.
In any instance in which AT&T believes in good faith that there is abuse
of Service as set forth above, AT&T may, upon 5 days prior written notice
to the Customer, and without liability on the part of AT&T, restrict,
suspend or discontinue providing Service, unless Customer cures such abuse
to AT&T's reasonable satisfaction within such period.
4.E.2. Fraudulent Use. The fraudulent use of, or the intended or
--------------
attempted fraudulent use of, Service is prohibited. The following
activities constitute fraudulent use:
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4.E.2.A. Using Service to transmit any message or code, locate a
person, or otherwise give or obtain information, without payment for
Service, or
4.E.2.B. Using or attempting to use Service with the intent to avoid
the payment, either in whole or in part, of any charges by any means
or device, or
4.E.2.C. Using Service to carry calls that originate on the network
of a facilities-based interexchange carrier other than AT&T and
terminate disproportionately to locations for which the cost to AT&T
of terminating switched access is above the average cost of
terminating switched access, based on the published access tariffs of
local exchange companies.
In any instance in which AT&T believes in good faith that there is
fraudulent use of Service as set forth above, AT&T may, immediately
and upon written notice to the Customer, and without liability on the
part of AT&T, restrict, suspend or discontinue providing Service.
4.E.3. Interference, Impairment or Improper Use. Customer may not use
----------------------------------------
Service in any manner that subjects AT&T personnel or non-AT&T personnel
to hazardous conditions or results in immediate harm to the AT&T network
or other AT&T services. In any instance in which AT&T believes in good
faith that Service is being used in such manner, AT&T may immediately
restrict Service on a temporary basis. In such cases, AT&T will make a
reasonable effort to give the Customer prior notice. In the event that
Customer does not provide to AT&T within five (5) business days of the
temporary restriction of service acceptable proof that said use has ceased
and that appropriate measures have been taken to prevent its recurrence,
AT&T may immediately and without further notice terminate service.
4.F. Access to Customer's Premises. The Customer is responsible for arranging
-----------------------------
premises access at any reasonable time so that AT&T personnel may install,
repair, maintain, inspect or remove Service components. Premises access
must be made available at a time mutually agreeable to the Customer and
AT&T.
4.G. Loss. The Customer is liable to AT&T for the replacement cost of AT&T-
----
provided equipment installed at the Customer's premises in the event of
loss of said equipment for any reason, including but not limited to theft.
4.H. Duty to Indemnify and Defend. Customer shall indemnify, defend, and hold
----------------------------
harmless AT&T and its directors, officers, employees, agents, parent,
subsidiaries, successors, and assigns from all claims, damages and
expenses (including reasonable attorneys' fees) arising out of or
resulting from, in whole or in part, the acts or omissions of Customer or
its End-Users, their employees, agents or contractors affiliated companies
and their employees, agents or contractors, including but not limited to
claims for libel, slander,
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invasion of privacy, or infringement of copyright arising from any
communication and claims for patent infringement arising from combining or
using services or equipment furnished by AT&T in connection with services
or equipment furnished by others. Customer shall also indemnify, defend
and hold AT&T harmless for all causes of action, claims, liabilities or
expenses asserted or incurred by any of Customer's Users or End-Users
arising out of any failure, breakdown, or interruption of service provided
to Customer by AT&T or to End-Users by Customer. Customer shall indemnify,
defend and hold AT&T harmless for all causes of action, claims, liabilities
or expenses asserted or incurred by Customer's End-Users due to Customer's
marketing efforts, including but not limited to Customer's violation of
laws and regulations applicable to the authorization and proof of
authorization necessary to convert an End-User's former service to
Customer's service as the End-User's Primary Interexchange Carrier, AT&T
shall be indemnified, defended, and held harmless by the Customer, Users
and End-Users against all claims, losses, or damages by any person relating
to such Service when used in an explosive atmosphere.
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<PAGE>
SECTION 5: SERVICES AND SERVICE DESCRIPTIONS
---------------------------------
5.A. Domestic Interstate and International Services. The following domestic
-----------------------------------------------
interstate and international services are provided pursuant to this
Agreement:
5.A.1. AT&T MEGACOM(reg) Service - Domestic and International Calling
Capability as described and defined in AT&T Tariff F.C.C. No. 1, as
amended from time to time.
5.A.2. AT&T MEGACOM(reg) 800 Service (Domestic) as described and defined
in AT&T Tariff F.C.C- No. 2, as amended from time to time.
5.A.3. AT&T ACCUNET(reg) T1.5 Access Connections as described and defined
in AT&T Tariff F.C.C. No. 9, as amended from time to time.
5.A.4. AT&T Terrestrial 1.544 Mbps Local Channel service as described and
defined in AT&T Tariff F.C.C. No. 11, as amended from time to time.
5.B. Domestic Intrastate Services. The following intrastate services are
-----------------------------
provided pursuant to AT&T's state tariffs governing such service:
5.B.l. AT&T MEGACOM Service - Domestic as described and defined in AT&T
Tariff F.C.C. No. 1, as amended from time to time.
5.B.2. AT&T MEGACOM 800 Service (Domestic) as described and defined in
AT&T Tariff F.C.C. No. 2, as amended from time to time.
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<PAGE>
SECTION 6: SERVICE RATES, TERMS AND CONDITIONS
-----------------------------------
6.A. Service Term. The term of this Agreement is 12 months beginning with the
-------------
first day of the first full billing month within 30 days of the effective
date of this Agreement (hereinafter referred to as the Customer's Initial
Service Date, or ("CISD") for the Services provided under this Carrier
Agreement. There is no renewal option.
6.B. Minimum Volume Commitments
--------------------------
6.8.1.
6.C. Usage Rates. AT&T reserves the right to increase from time to time the
-----------
rates for the Services Provided under this Agreement, regardless of any
provisions in this Agreement that would otherwise stabilize rates or limit
rate increases, as a result of charges imposed on AT&T stemming from an
order, rule or regulation of the Federal Communications Commission or a
court having competent jurisdiction relating to compensation of payphone
service providers. If necessary, revisions will be filed in this Agreement
to reflect the actual rates. The Contract Prices for the Services Provided
pursuant to this Agreement are as follows:
6.C.1. The Contract price for the AT&T MEGACOM Service provided under this
Agreement is the same as the undiscounted Recurring and Nonrecurring Rates
and Charges specified for said Service in AT&T Tariff F.C.C. No. 1, as
amended from time to time, except that the following usage rate, and the
discounts specified in Section 6.D. of this Agreement, applies for AT&T
MEGACOM Service-Domestic Interstate calls which originate at an IXC
Switch: The Contract Price for AT&T MEGACOM Service- Domestic Interstate
Service is for the initial 18 seconds and for each additional 6
seconds or fraction thereof for all day parts and mileage bands. An IXC
Switch is a telecommunications switch with the following characteristics
(a) it is owned and operated by the Customer; (b) it has the capability to
be used for the transmission of calls that are routed by a Local Exchange
Carrier to the IXC Switch using Feature Group D access; (c) it is capable
of interconnecting circuits or transferring calling between circuits; (d)
it has a capacity of at least 100,000 access lines; and (e) it is used by
Customer to provide Common Carriage service to end-users.
6.C.2. The Contract price for the AT&T MEGACOM Service - International
Calling Capability provided under this Agreement is the same as the
undiscounted Recurring and Nonrecurring Rates and Charges specified for
said Service in AT&T Tariff F.C.C. No. 1, as amended from time to time.
6.C.3. The Contract price for the AT&T MEGACOM 800-Domestic Interstate
Service provided under this Agreement is the same as the undiscounted
Recurring and
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<PAGE>
Nonrecurring Rates and Charges specified for said Service in AT&T Tariff
F.C.C. No. 1, as amended from time to time, except that the following
usage rate, and the discounts specified in Section 6.D. of this Agreement,
applies for AT&T MEGACOM 800 Service-Domestic Interstate calls which
originate at an IXC Switch: The Contract Price for AT&T MEGACOM 800
Service-Domestic Interstate Service is $ per hour for all day parts and
mileage bands. An IXC Switch is a telecommunications switch with the
following characteristics: (a) it is owned and operated by the Customer;
(b) it has the capability to be used for the transmission of calls that
are routed by a Local Exchange Carrier to the IXC Switch using Feature
Group D access; (c) it is capable of interconnecting circuits or
transferring calling between circuits; (d) it has a capacity of at least
100,000 access lines; and (e) it is used by Customer to provide Common
Carriage service to end-users.
6.C.4. The Contract Price for ACCUNET T1.5 Access connection is the same
as specified in AT&T Tariff F. C. C. No. 9, as amended from time to time.
6.C.5. The Contract Price for AT&T Terrestrial 1.544 Mbps Local Channel
Service is the same as specified in AT&T Tariff F. C. C. No. 11, as
amended from time to time.
6.D. Discounts. Volume discounts applicable to the services provided pursuant
---------
to this Agreement are as follows:
6.D.1. The customer will receive one of the following tiered monthly
discounts for AT&T MEGACOM Service - domestic gross usage in lieu of any
other term plan or discounts.
Monthly Domestic Gross Revenue Discount
------------------------------ --------
6.D.2. AT&T MEGACOM Services International Calling Capability as provided
under this Agreement: The customer will receive the following monthly
discounts for AT&T MEGACOM Services -International Calling Capability
gross usage in lieu of any other term plan or discounts.
Monthly International Gross Revenue Discounts
----------------------------------- ---------
6.D.3. The customer will receive one of the following tiered monthly
discounts for AT&T MEGACOM 800 Service - domestic gross usage in lieu of
any other term plan or discounts.
Monthly Domestic Gross Revenue Discount
------------------------------ --------
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<PAGE>
6.E. Additional Discounts, Credits, Waivers.
--------------------------------------
6.E.1.
6.E.2.
6.E.3.
6.F. Classifications, Practices and Regulations. Except as otherwise
-------------------------------------------
provided in this Agreement, the terms, conditions, regulations and charges
for AT&T MEGACOM Service and International Calling Capability as set forth
in AT&T Tariff F. C. C. No 1; for AT&T MEGACOM 800 Service as set forth in
AT&T Tariff F. C. C. No 2, for Service Access Connections as w forth in
AT&T Tariff F. C. C. No. 9; and for AT&T Terrestrial 1.544 Mbps Local
Channel Service as set forth in AT&T Tariff F. C. C. No 11 apply, as these
tariffs may be amended from time to time.
6.F.1. The Customer may include usage from multiple Customer Premises to
satisfy its volume commitments and qualify for discounts.
6.G. Monitoring Conditions. The Customer must satisfy the following Service
----------------------
Requirements which will be monitored on each anniversary of the CISD. The
Monitoring Period is the 12 months immediately preceding each anniversary
of the CISD.
6.G.1. At least % of the Customer's AT&T MEGACOM Service and AT&T
MEGACOM 800 Service domestic usage provided under this Agreement,
following CISD, must be interstate minutes of use.
6.G.2. The Customer must have an Average Length of Call (ALOC) of at least
minutes each for AT&T MEGACOM Service and AT&T MEGACOM 800 Service calls.
If the Customer, during the Monitoring Period, has failed to satisfy any
of the above Monitoring Conditions, AT&T will notify the Customer in
writing of the specific failure(s) and the Customer will be billed and
shall pay within 30 days an amount equal to 20% of all usage billed for
the service to which each unfulfilled Monitoring Condition is applicable
during the Monitoring Period.
6.H. Discontinuance - In lieu of any Discontinuance With or Without Liability
---------------
provisions that are specified in the AT&T Tariff F.C.C. Nos. 1, 2, 9, 11
and 14 the following provisions shall apply.
6.H.l. Discontinuance Without Termination Liability. The Customer may
--------------------------------------------
discontinue this Agreement without incurring a Termination Charge as
defined in Paragraph 6.I., below, prior to the end of the Agreement Term,
provided the Customer
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<PAGE>
replaces this Agreement with another AT&T Carrier Agreement for AT&T Tariff
F.C.C. Nos. 1 and 2 Services or equivalent services with revenue
commitments greater than commitments under this Agreement and with a term
equal or greater than the remaining term of this Agreement.
6.H.2. Termination Charge for Discontinuance Prior to End of Agreement
---------------------------------------------------------------
Term. If the Customer discontinues this Agreement prior to the expiration
-----
of the Agreement Term, or if AT&T terminates this Agreement or the service
provided pursuant to this Agreement due to Customer's breach of this
Agreement, prior to the expiration of the Agreement Term, the Customer will
be billed for and shall pay within 30 days a Termination Charge. The
Termination Charge will be an amount equal to 100% of the waived
nonrecurring charges provided for in this Agreement at the time of
discontinuance. Payment is due within 30 days.
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<PAGE>
SCHEDULE A
================================================================================
International Usage Rates - AT&T MEGACOM Service-International Calling
- -------------------------
Capabilities
1. Mexico Rate Schedule - This schedule applies to Customer dialed calls to
stations in Mexico from the U.S. Mainland.
(a). The following rates for calls between the U.S. Mainland and the point
of connection at the international boundary apply for all days of the week
including holidays.
The rates for Customer Dialed Person (DP), Operator Placed Station (OS) and
Operator Placed Person-to-Person (OP) calls, (as defined in Section 24.1.2.B.
2.(a) of AT&T Tariff F.C.C. No. 27) between the point of connection at the
international boundary and Mexico are as specified in Section 24.1.2.B.2. of
AT&T Tariff F.C.C. No. 27.
The rates for calls between the point of connection at the international
boundary and Mexico are as specified in AT&T F.C.C. Tariff No. 1, Section
3.2.4.L.5, as amended from time to time.
2. All Other Countries - This schedule applies to Customer dialed calls to
stations in All Other Countries from the U.S.
Mainland.
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<PAGE>
Exhibit 10.38
-------------
SETTLEMENT AGREEMENT AND RELEASE
--------------------------------
AGREEMENT and RELEASE made this 25th day of July, 1997, by and between
Robert B. Sproul, Boston Communications Group, Inc., and Wireless Americas Corp.
DEFINITIONS
-----------
As used herein, the following terms are defined as follows:
a. "Mr. Sproul" means the individual named Robert B. Sproul.
b. "BCG" means Boston Communications Group, Inc., a corporation organized
and existing under the laws of the Commonwealth of Massachusetts with its
principal place of business in Woburn, Massachusetts, and its officers,
directors, employees, stockholders and agents (except Mr. Sproul).
C. "WAC" means Wireless Americas Corp., a corporation organized and
existing under the laws of the State of Delaware with its principal place of
business in Coral Gables, Florida, and its officers, directors, employees, and
agents (except Mr. Sproul).
d. "Litigation" means the lawsuit entitled Sproul v. Boston
----------------
Communications Group, Inc. and Wireless Americas Corp., Case No. 97 8671 CA02,
- -----------------------------------------------------
presently pending in the Circuit Court of the Eleventh Judicial Circuit for Dade
County, Florida;
e. "Interpleader Action" means the lawsuit filed by Citibank, F.S.B., as
plaintiff/interpleader against BCG and WAC entitled Citibank, F.S.B. v. Wireless
----------------------------
Americas Corp., and Boston Communications Group, Inc. presently pending in the
- ----------------------------------------------------
Circuit Court of the Eleventh Judicial District, in and for Dade County,
Florida.
f. "WAC Stock" means shares of the Common Stock of Wireless Americas
Corp.
g. "Interest" means simple interest at an annual rate of 8%.
h. "Settlement Agreement" means this Settlement Agreement and Release.
WITNESSETH:
-----------
WHEREAS, the parties to this Settlement Agreement are parties to the
Litigation.
WHEREAS, Mr. Sproul's claims against BCG and WAC in the Litigation involve,
inter alia, certain claims of fraudulent inducement, breach of contract,
- ----------
wrongful termination, and certain prayers for declaratory judgment.
WHEREAS, BCG and WAC have specifically denied such allegations.
<PAGE>
WHEREAS, BCG and WAC have counterclaimed against Sproul alleging, inter
-----
alia, certain claims of fraudulent inducement and breach of contract.
- ----
WHEREAS, Mr. Sproul has specifically denied such allegations.
WHEREAS, the parties believe that it is in their mutual best interests to
avoid further costly litigation and have reached an agreement with respect to
the settlement of the Litigation without admitting the truth of any allegation
made or defense asserted in that Litigation.
WHEREAS, BCG is willing to purchase the shares in WAC that it does not
already own and which are presently owned by Mr. Sproul and which constitute 20%
of the outstanding shares of WAC.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other valuable consideration, the receipt of which is hereby acknowledged,
the parties to this Agreement hereby agree as follows:
1. BCG shall pay Mr. Sproul $1,300,000 (one million three hundred thousand
dollars) (the "Purchase Amount") in exchange for the sale by Mr. Sproul to BCG,
on or before August 25, 1997, of all WAC Stock owned by Mr. Sproul.
2. BCG shall pay the Purchase Amount to Mr. Sproul as follows: BCG shall
pay the Purchase Amount to Mr. Sproul, on or before August 25, 1997, in
immediately available funds, plus any Interest accumulated on the Purchase
Amount from July 22, 1997 until the date of payment.
3. In consideration for the payment described above in Section 2 Sproul
will cause his entire ownership interest in WAC to be transferred to BCG or its
designee, and Mr. Sproul agrees to execute any and all necessary documents,
including customary representations and warranties, required to effectuate such
transfer. Specifically, Mr. Sproul represents that he owns 20% of all
outstanding WAC stock free and clear, and without any lien, encumbrance or
impairment other than that which may exist in favor of BCG or WAC as a result of
the Litigation.
4. Mr. Sproul agrees to execute any and all documents, as required by
either WAC or BCG or any other party, to resolve any matter or dispute involved
in or related to the Interpleader Action.
5. Mr. Sproul represents and warrants that he has undertaken an honest and
good faith search of all of his possessions and documents and has returned to
BCG and WAC all equipment and all documents, business records or other materials
of BCG or WAC including, without limitation any documents, business records,
computer media or other materials constituting or containing proprietary
information of BCG or WAC, and all copies thereof. If Mr. Sproul subsequently
discovers in his possession any BCG or WAC equipment or any documents
constituting or containing proprietary information of BCG or WAC, which Mr.
Sproul has failed to return to BCG or WAC at the time of the execution of this
Settlement Agreement, Mr. Sproul will return such subsequently discovered
equipment or documents and shall not use such equipment or documents, or
information contained therein, for any purpose.
<PAGE>
6. Mr. Sproul hereby releases and forever discharges BCG and WAC and all
past and present officers, directors, agents, stockholders, attorneys, assigns,
indemnitees, and employees thereof, of and from all debts, demands, actions,
causes of action, suits, accounts, covenants, contracts, agreements, and any and
all claims, demands, and liabilities whatsoever of every name and nature,
whether domestic or international, known or unknown, both at law and in equity,
which against BCG or WAC he now has or ever has had from the beginning of the
world to this date including, without limitation, any claims or allegations
which were raised or could have been raised in the Litigation.
7. BCG and WAC each hereby release and forever discharge Mr. Sproul and
his attorney from all debts, demands, actions, causes of action, suits,
accounts, covenants, contracts, agreements, and any and all claims, demands, and
liabilities whatsoever of every name and nature, whether domestic or
international, known or unknown, both at law and in equity, which BCG or WAC now
have or ever have had against Mr. Sproul from the beginning of the world to this
date including, without limitation, any claims or allegations which were raised
or could have been raised in the Litigation.
8. Simultaneously with execution of this Settlement Agreement, Mr. Sproul,
BCG and WAC, by their attorneys, will execute a Stipulation of Dismissal in the
form attached as Exhibit A hereto and will file the executed Stipulation of
Dismissal with the Circuit Court of the Eleventh Judicial Circuit for Dade
County, Florida.
9. a. Mr. Sproul covenants and agrees not to sue or bring any cause of
action as a plaintiff against BCG or WAC or otherwise arising from any of the
facts, events, circumstances or omissions alleged or otherwise raised, or
asserting claims raised, in the Litigation or which could have been asserted or
raised in the Litigation.
b. BCG and WAC each covenant and agree not to sue or bring any cause
of action as plaintiff(s) against Sproul or otherwise arising from any of the
facts, events, circumstances or omissions alleged or otherwise raised, or
asserting claims raised, in the Litigation or which could have been asserted or
raised in the Litigation.
10. This Agreement supersedes and merges all prior agreements and
understandings between Mr. Sproul and BCG or WAC regarding any subject matter
and represents the entire agreement of Mr. Sproul, BCG and WAC including,
specifically (but without limitation) the following agreements (and any
amendments thereto):
a. Option Agreement, dated May 14, 1996, between BCG, WAC and SNC Corp.;
b. Agreement, dated October 23, 1996, between BCG, WAC and Mr. Sproul;
c. Amended and Restated Employment Agreement, dated October 23, 1996,
between WAC and Mr. Sproul;
d. Amended and Restated Option Agreement, dated October 23, 1996, between
BCG, WAC and Mr. Sproul; and
<PAGE>
e. Stockholders' Agreement, dated November 1, 1996, between WAC, Mr.
Sproul and BCG.
11. This Agreement may be amended only upon written agreement by Mr.
Sproul, BCG and WAC.
12. Mr. Sproul agrees that the terms and contents of this Settlement
Agreement, and the contents of the negotiations and discussions resulting in
this Settlement Agreement, shall be maintained as confidential. He agrees that
he will not discuss or disclose, or authorize his agents or attorneys to discuss
or disclose, directly or indirectly, orally or in writing, spontaneously or in
response to inquiry, to any entity or person, the facts, allegations or merits
of the Litigation or of his claims or potential claims, or the terms of the
settlement thereof.
13. All communications, notices, payments, and the like required or given
pursuant to any provision to this Settlement Agreement, shall be deemed to have
been properly made or given when deposited, postage pre-paid by first-class
mail, addressed as follows:
If to Sproul: Robert B. Sproul
520 Marmore Avenue
Coral Gables, Florida 33146
and
Michael R. Josephs, Esq.
Josephs, Jack & Gaebe, P.A.
P.O. Box 345118
Coral Gables, Florida 33114-5118
If to BCG Alan Bouffard, Esq.
Boston Communications Group, Inc.
100 Sylvan Road
Woburn, Massachusetts 01801
and
Peter J. Macdonald, Esq.
Hale and Dorr, LLP
60 State Street
Boston, Massachusetts 02109
If to WAC Alan Bouffard, Esq.
Boston Communications Group, Inc.
100 Sylvan Road
Woburn, Massachusetts 01801
and
Peter J. Macdonald, Esq.
Hale and Dorr, LLP
<PAGE>
60 State Street
Boston, Massachusetts 02109
14. This Agreement shall be binding upon and shall inure to the benefit of
the assignees, licensees, heirs, successors and transferees of the entities and
persons released hereunder, whether by license, sale, merger, reverse merger,
sale of stock, insolvency, sale of assets, operation of law or, without
limitation, otherwise.
15. If any of the terms or provisions of this Agreement are found to be
invalid or unenforceable, the remainder of the Agreement shall not be affected
thereby, and the parties shall endeavor in good faith to replace such provision
with a valid and enforceable one which accomplishes the same general purpose to
the maximum extent possible.
16. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The signature of either party may be transmitted
by electronic facsimile for the purposes of execution, with the original of such
signature to be forwarded to the other party as soon practicable thereafter.
17. The waiver by any party to this Agreement of any breach or default
hereunder shall not constitute the waiver of any subsequent breach or default.
18. By their signature hereto, the parties declare, warrant and represent
that they have agreed on terms of the Agreement and have the authority to enter
into this Agreement on behalf of themselves and/or their respective principals.
19. The parties to this Agreement understand and agree that their entering
into this Agreement does not constitute any admission of liability or wrongdoing
on the part of any of the parties hereto.
20. This Agreement shall be construed and interpreted in accordance with
the laws of the Commonwealth of Massachusetts, without regard of its choice of
law rules. Any disputes arising out of or related to the Agreement shall be
resolved exclusively in the courts of the State of Florida.
21. The parties hereto acknowledge that this Agreement releases, disposes
of and gives up claims and rights each of them may have, including, without
limitation, the right to have a jury decide the issues raised in the litigation.
By entering this Agreement such rights and claims are extinguished forever. All
of the parties hereto further acknowledge that they have been represented in
this matter by their own lawyers and have had a full opportunity to talk about
these issues before entering into this Agreement.
<PAGE>
IN WITNESS WHEREOF, Mr. Sproul, BCG and WAC have caused this Settlement
Agreement to be executed on the day and year first written above.
ROBERT B. SPROUL BOSTON COMMUNICATIONS GROUP, INC.
By:
- -------------------------------- -------------------------------------
Robert B. Sproul Fritz von Mering
Title: Treasurer
Reviewed As To Form: WIRELESS AMERICAS CORP.
By:
- -------------------------------- -------------------------------------
Michael R. Josephs, Esq. Fritz von Mering
Josephs, Jack & Grebe, P. A. Title: Treasurer
P.O. Box 345118
Coral Gables, Florida 33114-5118 Reviewed As To Form:
(305) 666-6006
Counsel to Mr. Sproul
-----------------------------------------
Peter J. Macdonald
Hale and Dorr, LLP
60 State Street
Boston, MA 02109
Counsel to BCG and WAC
<PAGE>
Exhibit 11
----------
BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1997 1996 1997
---- ---- ---- ----
NET INCOME PER COMMON SHARE - PRIMARY
<S> <C> <C> <C> <C>
Net income $ 331 $ 101 $ 453 $ 237
======= ======= ======= =======
Primary income per share:
Average common shares outstanding 12,587 14,372 6,864 13,284
Dilutive options and warrants 524 774 524 483
Other (1) - - 3,205 -
------- ------- ------- -------
Average common and common
equivalent shares outstanding 13,111 15,146 10,593 13,767
======= ======= ======= =======
Net income per common
share - Primary $ 0.03 $ 0.01 $ 0.04 $ 0.02
======= ======= ======= =======
<CAPTION>
NET INCOME PER COMMON SHARE - FULL DILUTION
<S> <C> <C> <C> <C>
Net income $ 331 $ 101 $ 453 $ 237
======= ======= ======= =======
Fully diluted income per share:
Average common shares outstanding 12,587 14,372 6,872 13,284
Dilutive options and warrants 548 782 548 611
Other (1) - - 3,205 -
------- ------- ------- -------
Average common and common
equivalent shares outstanding 13,135 15,154 10,601 13,895
======= ======= ======= =======
Net income per common
share - Full Dilution $ 0.03 $ 0.01 $ 0.04 $ 0.02
======= ======= ======= =======
</TABLE>
(1)Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common Stock and stock options issued during the twelve-month period
preceding the date of the initial filing of the registration statement with an
exercise price below the initial public offering price of $14.00 per share have
been included in the calculation of common equivalent shares, using the Treasury
stock method, as if they were outstanding for all periods presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 29,099 29,099
<SECURITIES> 5,068 5,068
<RECEIVABLES> 15,043 15,043
<ALLOWANCES> 1,197 1,197
<INVENTORY> 2,348 2,348
<CURRENT-ASSETS> 54,036 54,036
<PP&E> 35,856 35,856
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 94,581 94,581
<CURRENT-LIABILITIES> 11,533 11,533
<BONDS> 0 0
0 0
0 0
<COMMON> 162 162
<OTHER-SE> 80,987 80,987
<TOTAL-LIABILITY-AND-EQUITY> 94,581 94,581
<SALES> 18,033 50,005
<TOTAL-REVENUES> 18,033 50,005
<CGS> 12,768 36,804
<TOTAL-COSTS> 18,086 50,178
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (254) (651)
<INCOME-PRETAX> 201 478
<INCOME-TAX> 100 241
<INCOME-CONTINUING> 101 237
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 101 237
<EPS-PRIMARY> 0.01 0.02
<EPS-DILUTED> 0.01 0.02
</TABLE>
